Too Big To Succeed

Folks,
Before you read yet another wonderful article by J.Michael, just take a look at this 1932 Cartoon. This spoof speaks much. Although this portion of cinematic art is satire, the truth is that diligence really does pay off while haste yeilds waste.

According to Proverbs 21:5, "The plans of the diligent lead surely to plenty, but those of everyone who is hasty, surely to poverty.” Words from the WORD, the Holy Bible -- brought to you here courtesy of CADIPS PRESS.

Now, the satire:


"Too BIG to Succeed"
by J. Michael Sharman

We have constantly been hearing that the reason taxpayers must spend hundreds of billions to bail out a few financial institutions is because they were “too big to allow them to fail.”

As more accurate information about the causes of the economic collapse comes to light, we are learning that in actuality, those banking giants were probably too big to succeed.

The FDIC says that 98% of its 8,300 banks are well-capitalized. And even though the big banks decreased their lending in 2008, the smaller banks picked up the slack and because of their efforts, overall lending increased last year by 12%.

Of the 8,300 banks insured by the FDIC, 8,000 are the smaller, community banks. The chief economist of the Independent Community Bankers of America, Paul Merski, said, “Community banks went into this downturn in far better shape. They didn’t do subprime lending or credit default swaps. Their banking model is much more conservative.”

“I think there are banks out there that are healthy,” agrees investment adviser Veena Kutler, of Garnet Group LLC of Bethesda, Md. “There are banks that are much more plain-vanilla which are continuing to make loans. Smaller banks tend to hold on to the loan rather than securitizing them.”

Got that? Now read these two sentences from the lead paragraph of a research report by University of Virginia professor William Lucy and then read them again: “National housing price declines and foreclosures have not been as severe as some analyses have indicated, and they are not as important as financial manipulations in bringing on the global recession. … In fact, 66 percent of potential housing losses in 2008 and subsequent years may be in California, with another 21 percent in Florida, Nevada, and Arizona, for a total of 87 percent of national declines in these four states.”

Only those top four states had particularly high foreclosure rates: Nevada 4.10%, California 2.57%, Arizona 2.26%, and Florida 1.99%. And in the vast bulk of the rest of the nation, in 38 of the 50 states, foreclosure rates were below less a half percent.

The staff at USA TODAY crunched those numbers down even finer and made two additional startling discoveries: one-half of all foreclosures occurred in just thirty-five (yes, 35) counties; and foreclosure rates have actually declined in 650 other counties!

Prof. Lucy then explains why the financial problems of those few states have hurt all the rest of us so much. It is a packed paragraph, but it sure changes a lot of misconceptions:

“Potential housing value losses from 2008 foreclosures in 50 states, if values decline to year 2000 levels, were less than one-third of the $350 billion that has been provided to banks and insurance companies to cope with losses in mortgage backed securities. Damage to the balance sheets of large banks and AIG occurred not mainly from losses on foreclosed residential mortgages, but because of borrowing short-range to buy long-range derivatives and from selling credit default swaps insuring derivatives backed by mortgage payments. These financial manipulations had high speed forward gears, but when the housing bubble burst, the banks and AIG discovered they had neglected to create a reverse gear with which they could separate foreclosed properties from some forms of mortgage backed securities. Obstacles to disentangling toxic components of mortgage backed securities magnified many times the actual housing value declines.”

In banking and in Congress, taking quick action without waiting for the critical information can lead to long-term disaster, or, as the Bible phrases it: “The plans of the diligent lead to profit as surely as haste leads to poverty.”

The Bible really does help us to make good public policy. As George Washington told the first Senate, it is in our national interest to: “acknowledge and adore the Great Arbiter of the Universe by whom empires rise and fall.”