Saturday, November 15, 2008

Rod Williams discusses avoiding mortgage foreclosure

On Thursday November 13, I appeared live on the Tennessean's web cast "Lunch Money." I was interviewed by Tennessean Business Editor Randy McClain and discussed the mortgage crisis and how homeowners can work with their mortgage company to get a work out. I outlined the various work out options. It is a 30 minute web cast. Click here to view the program: Link

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Why Bear Stearns but not GM

I reluctantly supported the bailouts in the financial sector but oppose the proposed bailout of the auto industry. I say I “reluctantly” supported the bank bailout because I would have really liked to let those large financial institutions that created the foreclosure crisis pay the price for their greed and bad decision-making and go belly-up. Unfortunately, a financial melt down would not be contained to the financial sector. If credit dries up, the economy grinds to a halt. I think the bank bailouts were necessary but that doesn't mean I liked it.

I know the argument of those who support the proposed auto industry bail out is that if we can bail out the fat cats of Wall Street we ought to bail out the industries that keep American laborers working. If Wall Street deserves a bailout so does Detroit, they will argue. Bailing out the auto industry is keeping Americans working and the economy humming. We need to support the autoworkers and save American jobs.

The counter argument is that the Government is not a rich uncle whom we can keep going back to for more and more money every time we get in trouble. The government cannot bail out everyone. There are limits. If we bail out the auto industry, the airlines, appliance manufacturers, tractor makers, farmers, miners, commercial fishermen, and boat builders will be next in line for us to save their jobs. It has to come to stop somewhere. Stop it now.

I am persuaded by the second argument, but still feel that there is a more fundamental reason why the bail outs in the financial sector may have been proper and the bailouts in the auto industry are wrong. I think it comes down to this: Banking is a more legitimate government concern than manufacturing.

Monetary policy is a basic government function except in the minds of the most extreme market purist. Among the powers given Congress by the Constitution are the powers: “To borrow money on the credit of the United States; To regulate commerce with foreign nations, and among the several states, and with the Indian tribes; To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures; To provide for the punishment of counterfeiting the securities and current coin of the United States.”

That is long way from saying it is a function of government to prop up AIG or Bear Sterns, but nevertheless it seems that “money” is a government responsibility. To ensure liquidity and prevent a collapse of the banking system appears to me to be a legitimate government function and is fundamentally different than producing goods and services.

In addition to a concern about the legitimate roll of government, it seems that funding the auto industry puts government into the business of picking winners and losers in the economy and makes the government a competitor with everyone who is not getting a government subsidy. GM is not only competing with Toyota for the consumer dollar but they are competing for that dollar against everything else in the market. To prop up GM appears counterproductive to bringing about efficiencies, innovations, and creating wealth. If, when the auto began to replace the horse and buggy, the government had moved in to protect the buggy whip makers, I suspect the government would still be subsidizing the production of buggy whips. If the Big Three cannot produce vehicles American want, why should the government prop them up?

I think ensuring a proper functioning system of money and banking is an appropriate government function; owning the means of production and making decisions about what is produced is not.

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Wednesday, November 12, 2008

Honor all our Veterans

" Is there something wrong with being a Muslim in this country? The answer’s no, that’s not America. Is there something wrong with some seven-year-old Muslim-American kid believing that he or she could be president?" ~ Colin Powell, Meet the Press, Oct. 19, 2008.

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Tuesday, November 11, 2008

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Sunday, November 09, 2008

Would you like to help Veronica get her hot water heater fixed?

Greeting Friends and Family,

A couple years ago several of you contributed money to help me help other people who are in need. I have exhausted all money in this fund and have been keeping it going with my own contributions. If you contributed when I first set up this fund, I am writing to see if you would like to contribute again. If this is the first time I have asked you or if you are reading this on my blog and you feel led to help, I would appreciate it.

Right now I am trying to raise money to help Veronica H___. Every single penny of the money you contribute goes to the person who needs it. There is no administrative cost. About three years ago, I was instrumental in helping put Veronica in a home of her own. Veronica and her two lovely young daughters were living in a public housing project here in Nashville. The apartment she lived in backed up to a row of apartments where just a few weeks before she moved out a young girl was killed when a stay bullet penetrated the wall of the apartment. The young girl who was killed was not a resident of public housing but had went home from school with a class mate and was visiting. A drug deal gone bad resulted in a shoot out and the visiting young girl was killed by a stray bullet.

This was the environment that Veronica H and her daughters lived in. Veronica’s only income is SSDI. Veronica surfers from bi-polar disorder and can not work. Veronica was able to get her home through a grant provided by the Federal Home Loan Bank of Cincinnati. We have had this grant program for three years and have put nine families in homes through this program. The FHLB of Cincinnati provides the money to Pinnacle Bank. My employer, The Woodbine Community Organization, is the non-profit partner with Pinnacle Bank in administering this grant.

This grant program is one of those niche grant programs and is only for people with mental illness. Under this grant, the homeowner is awarded $36,000 toward the purchase of a home. The client must qualify for a first mortgage. They must meet standard underwriting guidelines for housing affordability, debt affordability and credit. The financing must be a 30 year fixed-rate loan and the interest rate must not exceed current FHA rates. Clients enroll in a Homebuyers Club and must attend class for once a month for a year prior to being eligible for the grant.

In the Homebuyers Club the client learns improved money management skills and must repair their credit and save money to contribute at least 1% of the homes value as a down payment. During the time Veronica was a member of the Homebuyers Club, I taught the class.
Veronica would catch a bus to get to the Homebuyers Club and bring her daughters with her. The trip involved a bus transfer. By the time the class was over, the connecting bus was no longer running so I began taking her home. It was only about three miles out of my way, so I did not mind doing it. Over time I got to know Veronica and her daughters.

For those of you have never been to a housing project, it can be another world. One time, I took her home and as I pulled into her street it was like pulling into a war zone. People were running for cover and a police helicopter was circling overhead. There had been another shoot-out. Veronica was kind of nonchalant about it and said there was always something going on.

Veronica was able to qualify for a $40,000 first mortgage, the house payment equaling 32% of her monthly income. She was able to buy a three-bedroom, one-bath brick home in a modest but quite neighborhood. The home was only two blocks form a bus line and she was tingled to death. Her daughters are doing well in school and they attend a local church. Veronica has not been late on a house payment one single time since she moved in. There have been times when her phone was disconnected, but she always pays her house payment.

This grant has made all the difference in the world in Veronica’s life and the life of her children. The problem is that after she pays her house payment and utility bills, and normal living expenses, there is nothing left over for emergencies.

Veronica called me last Wednesday and told me that her hot water heater was leaking and her bathroom sink was stopped up and her washing machine had broken. She has been washing clothes by hand, and I told her she may just have to do that for a while but that I would see that we got the sink unstopped and see if I could raise the money to help her repair the water heather.

I had my friend Mark Thompson, a professional handy man, go take a look at it and see what it would cost to fix the water heater. The water heater must be replaced and will cost $550. If no one else contributes, I will pay for the water heater and Mark will provide the labor for free. However, Veronica is only one of the people that I help in this way.

I have established a fund to help people like Veronica. The fund I have created has been used on other occasions to keep families from losing their home. Those who know me know that I am frugal. I am only going to give money to those who really need it. I am not going to give money to those who are trifling. I am not going to simply subsidize one’s poor choices. I am not going to give money to a lost cause. If giving money to someone simply delays a foreclosure by a month there is no point, but if a small amount of money can keep a family form losing their home and being homeless, I try to do it. The decision of who to help is mine. If you choose to contribute, you can be assured the money will not be wasted or spent frivolously. If you would like to be part of helping Veronica get her water heater repaired and help others like Veronica who are in dire circumstance, I would welcome your contribution.

If you would like to contribute please make your check payable to “The Woodbine Community Organization”. Be sure and write on the check, “Rod Williams Fund”. Mail it to WCO, 222 Oriel Ave, Nashville, TN, 37210. On the outside of the envelope write “Attention Rod Williams.”

WCO is a 501(C) 3 organization. Any contribution you make will be tax deductible. Thank you and God bless you.

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The 1% Difference

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It could have been worse

The day after the election the media talked about Obama’s landslide. Some spoke about Omaba’s “mandate.” Many are talking about this election as being a repudiation of the past and a political realignment.

In 1936, FDR beat Alf Landon and won 61% of the popular vote and 98% of the electoral vote. That was a landslide. LBJ beat Barry Goldwater, winning 61% of the popular vote and 90% of the electoral vote. That was a landslide! In the election of 1972, Richard Nixon beat George McGovern winning 61% of the popular vote and 97% of the electoral vote. In 1984 Ronald Reagan beat Walter Mondale winning 59% of the popular vote and 98% of the electoral vote. That was a landslide! Barack Obama won 52% of the popular vote and 67% of the electoral vote. That is not a landslide.

Obama won by a comfortable majority. He did not win a broad mandate from the public. Democrats increased their lead in both houses of Congress but did not win the super majority necessary to ram through a radical legislative agenda. It could have been a lot worse. Republicans must use it judiciously and rarely, but the ability to filibuster can moderate the Senate Democratic majority.

In the House, the Republicans lost seats, but the fiscally conservative Blue Dog Democrats increased their number. Together the Republicans and Blue Dogs can block a lot of the most irresponsible Democratic spending proposals.

I do not see that there was a major ideological shift this election. I think President Bush has been such a poor President that many people simply were voting against the Republican Party as a means of showing their displeasure with Bush. The American public did not suddenly wake up and renounce all they had previously believe and vote for a far left agenda. Certainly, Obama advocated, “spreading the wealth”, but he also promised tax cuts for 95% of the public. Middle class tax cuts is hardly a left-wing agenda item. Despite Obama’s liberal voting record and radical associations, he did not present himself as a revolutionary figure. He presented himself as a steady, moderate, pragmatic, centrist. That is what the public was voting for.

Obama talked about “change” but offered no radical proposals and never defined change. Even his health care proposal is not that radical. He does not call for a single-payer system or nationalization of health care. His health care proposal is to build upon the same system we have now. He would expand health care coverage but would continue the current system of employer provided insurance. While I think he is going to take us further down the wrong road, the public was not voting for a radical departure from what we have now.

His position on the war was not that radical. He promised to be out or Iraq in sixteen months. Unless there is reversal of current trends, most American combat roles would have been completed in sixteen months anyway. The Obama position on the war is a much less radical position than what some of his Democratic primary opponents were offering. Obama did not run on a peace platform. He promised a more aggressive war in Afghanistan, has said he would violate Pakistan’s national sovereignty by pursuing Al Qaeda across the border, and has said he would not permit Iran to obtain nuclear weapons.

While part of his agenda is certainly radical, such as re-imposing the anti-free speech “fairness doctrine”, ended the secret ballot in union votes, and passing several gay agenda provisions, these issues received little prominence during the election. Most people probably did not even care about these issues and were not even aware of Obama’s position.

Given the low popularity of the sitting Republican president, an unpopular war, and the economic meltdown, it is a wonder that Obama did not win by a massive landslide. Prior to the economic collapse in Mid September, McCain was actually leading in the polls. I found that amazing. Obama ran a brilliant campaign and out-raised and out-spent McCain by almost two to one. The surprise in this election is not that Obama won, but that he did not win by the biggest majority in history.

If Obama actually governs as a centrist, I suspect that he will have a successful term in office and his popularity will remain relatively high. However, I suspect that even if he governs as a centrist, his popularity will never again be as high as the day he takes office. I also would not be surprised if Republicans do not retake one or both houses of Congress in two year or at least substantially cut into the Democratic lead.

One of the reasons Obama won by the margin that he did is because of all the newly registered Black voters and young voters. They were swept up in the enthusiasm of being part of a movement and electing the country’s first Black president. They turned out to vote for Obama in large numbers, and a Democratic Congress was elected on the strength of Obama’s coattails. Two years from now it will be difficult to get these new voters back to the polls to reelect the Democratic Congress. It will simply not be as gratifying to vote for your boring congressman as it was to make history and vote for the charismatic Barack Obama.

The other reason, I suspect that the Democratic lead will not hold is that many people voted the way they did because they blamed current office holders for the country’s economic woes and just wanted “change.” I do not think we will have a miraculous economic recovery. The country’s economic problems will not be solved in two years. The President is not Commander in Chief of the economy and the economy does not turn on a dime. I suspect things will get worse before they start getting better and in two years we will probably be in an economic recovery period. However, the public will not be satisfied by the modest improvements and will again blame current office holders. The “throw the bums out” sentiment will again be in play in 2010.

This election was certainly a defeat for Republicans and while there is little to be happy about, I think things could have been much worse. Republicans have a challenge ahead to rebuild the party but I do not think this election spells the end of the Republican Party and I do not think this election represents any kind of radical political sea change.

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