"I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character."- Martin Luther King, Jr.
This week in a public school in America, a girl was called racist for wearing a t-shirt supporting the white candidate. What would Martin Luther King Jr say? He was dreaming of a world where no one judges anyone by the color of their skin. Where the guy running for president is either elected or not elected based on his quality of his character not on the color of his skin.
I could care less if he was white...or brown...or yellow...or red...I wouldn't vote for Obama if he was the only one running. I wouldn't vote for anyone who has Momar Quadaffi's support. Nor would I want to vote for anyone who went to the racist, anti American church of Reverend White, or who has supported the dictator Odinga of Kenya.
This whole thing confuses me....how this election has become about race for too many people. I believe that racism is when you judge someone (either positively or negatively) based on skin color.
King's dream is not about having a black president voted in on the basis of his blackness but his dream is about a day when his blackness or whiteness wouldn't even be an issue.
I can't stand this year's election choices now that Ron Paul is out of the race. I may do that which I never thought I'd do: hold my nose and vote republican just to keep that friend of terrorists and dictators out of office.
Thursday, October 16, 2008
Uncertainty and In Whom do YOU Trust?
When I write my books and articles, it is always off of a combination of research and things the Lord taught me. I don't want to just rehash the same stuff to you, my readers. That would be pointless. I want to share with you what God taught me, and what I personally know to work...not just the same thing you read in every money management book.
Well, a few years ago when I wrote my book, Thriving on One Income, I got some emails saying things like,
There are no sure things.
My point wasn't that faith means not investing or not saving. As I wrote in an earlier post, and even in my book itself, I have invested too. However, I was making the point that we all make decisions based on what is important to us.
If you sit down with some of these financial guru people, they will scare the wits out of you making you think you need to put asside hundreds or even thousands of dollars per month towards retirement and college for the still infant children who need their mommies right now. When we had 4 young children, one of these guys came over to our house, and had us convinced that we needed to double our income just to save enough for college for all four as well as for our retirement savings. He left and we felt really down and low.
Is that God? Is He not our provider? You save what you can save...that was my point.
So, I wonder...how's that working out for those who have put the babies in daycare so they could work towards a goal some 18 or even 30 years into the future?
We got our 401K statement in the mail yesterday...as of last week Wednesday we have 50% less than what we had before.
I wish I would have just taken the money and blown it on something fun. I can say that right? I'm human...if money is going to be wasted I wish I was the one who blew it on something I at least got to enjoy.
That's not just money that was lost but also time...my husband's valuable time with his family went up in flames because of the bozos who invested in the bad mortgage loans (as I said, without a fancy Ivy League degree in finance I don't think I will ever understand the illogical decisions made that caused this to happen).
Wanna hear the real shocker?...neither one of us said, as we read it together, "Gee I wish you would have stayed employed so that we could have had even more in that 401K when it imploded." No in fact we both expressed regret that we put all of his last raise directly into the 401K when we could have better used it in the day to day operation of our home.
We have to be wise about these things...we have to save what we are able, and wisely manage what God gives us, and trust in Him for the outcome.
Coming soon: a Recession Supplement for Thriving on One Income, as well a Workbook/Study Guide! (Pray for me).
Well, a few years ago when I wrote my book, Thriving on One Income, I got some emails saying things like,
"I think you are wrong to say that if you can't save towards retirement right now, don't sweat it! I work just so we can have a retirement! Don't you realize how much you are going to need...."
"I feel like I am right to work to save towards my children's college education. I want it to be there for them in 18 years, and if I start now, and invest, it will be a sure thing. I don't want my children to not be able to go to college or to start college in debt" (For the record, I am very much against debt for college, because that is what started my husband and I off on the wrong foot too)
There were more but that was the jist of it.
There are no sure things.
My point wasn't that faith means not investing or not saving. As I wrote in an earlier post, and even in my book itself, I have invested too. However, I was making the point that we all make decisions based on what is important to us.
If you sit down with some of these financial guru people, they will scare the wits out of you making you think you need to put asside hundreds or even thousands of dollars per month towards retirement and college for the still infant children who need their mommies right now. When we had 4 young children, one of these guys came over to our house, and had us convinced that we needed to double our income just to save enough for college for all four as well as for our retirement savings. He left and we felt really down and low.
Is that God? Is He not our provider? You save what you can save...that was my point.
So, I wonder...how's that working out for those who have put the babies in daycare so they could work towards a goal some 18 or even 30 years into the future?
Wilt thou set thine eyes upon that which is not? for riches certainly make themselves wings; they fly away as an eagle toward heaven. (Proverbs 23:5)
"Charge them that are rich in this world, that they be not highminded, nor trust in uncertain riches, but in the living God, who giveth us richly all things to enjoy; (1 Timothy 6:17)
We got our 401K statement in the mail yesterday...as of last week Wednesday we have 50% less than what we had before.
I wish I would have just taken the money and blown it on something fun. I can say that right? I'm human...if money is going to be wasted I wish I was the one who blew it on something I at least got to enjoy.
That's not just money that was lost but also time...my husband's valuable time with his family went up in flames because of the bozos who invested in the bad mortgage loans (as I said, without a fancy Ivy League degree in finance I don't think I will ever understand the illogical decisions made that caused this to happen).
Wanna hear the real shocker?...neither one of us said, as we read it together, "Gee I wish you would have stayed employed so that we could have had even more in that 401K when it imploded." No in fact we both expressed regret that we put all of his last raise directly into the 401K when we could have better used it in the day to day operation of our home.
We have to be wise about these things...we have to save what we are able, and wisely manage what God gives us, and trust in Him for the outcome.
Coming soon: a Recession Supplement for Thriving on One Income, as well a Workbook/Study Guide! (Pray for me).
Wednesday, October 15, 2008
Master or Servant? Tech in Balance (Part Two)
To read part one, click here
About three months ago, I lost my cell phone while at the grocery store. I had been talking on the phone, and put it down, and apparently forgot it in the shopping cart. I know. Pretty stupid. I was panic stricken as I called the grocery store, and they didn't find it but took my number down. I finally just took a deep breath, prayed, and trusted God would work it all out. I hated the thought of costing our family more money due to negligence. When I got home, my husband told me that he had tried to call me on my cell phone because he had just gotten an interesting email. Apparently since I had my cell phone for so long and my model of cell phone was so old, I was being given a HUGE credit towards an upgrade. Seriously? Woo hoo! Praise God. I was pretty geeked up to say the least, given the fact that I had deliberately ignored the latest tech in the area of cell phone paraphernalia to guard my heart.
Off my hubby and I went to the cell phone paraphernalia shop (my kind of date night :-)), where I got to spend my upgrade credits....and low and behold, of all the blessings that could have befallen me, there was a BlackBerry Curve on sale for just $9 above the amount of the credit after rebate. I almost wondered at this point if it wasn't a dream. I wanted a BlackBerry (a perfect mesh of my obsessions with both planners and with tech), but I knew it was out of the question at the normal price...but lo and behold, here it was in my reach. Woo Hoo and Praise God again.
Well, my vote is in. I love my BlackBerry. I love it so much that for my birthday I got an 8GB microSD card because I had used up most of my memory with my entire music collection, writing new ebooks on my phone, keeping track of recipes, my shopping list, address book, an entire Bible, and I even have Pac Man on there for when I'm bored, to say nothing of the fact that I can answer email while waiting in line at Walmart. I especially love that it beeps to remind me of upcoming appointments on my calendar. That was the fatal flaw of paper planners. You had to look at them and remind yourself, and I'm not always so disciplined.
But, there's also a danger here. My BlackBerry does so much for me I could stay absorbed in it for hours or days if I didn't deliberately pull myself away. As I said in my last post...tech in and of itself is not evil....but allowing something to be your master is not pleasing to God. Just because you can do something doesn't mean you should.
In this world we live in, with everyone plugged in to their bluetooth devices, walking around Walmart like a bunch of crazy people talking to themselves, the irony is that this telecommunications revolution has brought a disconnect in the area of face to face relationships.
Do you notice the lady at the checkout? Do you smile to her or do you just continue to talk on the phone while checking out?
Are you open to being a blessing to those God brings across your path?
Do you unplug your headphones long enough to hear the Lord?
Make your tech your servant and not your master.
About three months ago, I lost my cell phone while at the grocery store. I had been talking on the phone, and put it down, and apparently forgot it in the shopping cart. I know. Pretty stupid. I was panic stricken as I called the grocery store, and they didn't find it but took my number down. I finally just took a deep breath, prayed, and trusted God would work it all out. I hated the thought of costing our family more money due to negligence. When I got home, my husband told me that he had tried to call me on my cell phone because he had just gotten an interesting email. Apparently since I had my cell phone for so long and my model of cell phone was so old, I was being given a HUGE credit towards an upgrade. Seriously? Woo hoo! Praise God. I was pretty geeked up to say the least, given the fact that I had deliberately ignored the latest tech in the area of cell phone paraphernalia to guard my heart.
Off my hubby and I went to the cell phone paraphernalia shop (my kind of date night :-)), where I got to spend my upgrade credits....and low and behold, of all the blessings that could have befallen me, there was a BlackBerry Curve on sale for just $9 above the amount of the credit after rebate. I almost wondered at this point if it wasn't a dream. I wanted a BlackBerry (a perfect mesh of my obsessions with both planners and with tech), but I knew it was out of the question at the normal price...but lo and behold, here it was in my reach. Woo Hoo and Praise God again.
Well, my vote is in. I love my BlackBerry. I love it so much that for my birthday I got an 8GB microSD card because I had used up most of my memory with my entire music collection, writing new ebooks on my phone, keeping track of recipes, my shopping list, address book, an entire Bible, and I even have Pac Man on there for when I'm bored, to say nothing of the fact that I can answer email while waiting in line at Walmart. I especially love that it beeps to remind me of upcoming appointments on my calendar. That was the fatal flaw of paper planners. You had to look at them and remind yourself, and I'm not always so disciplined.
But, there's also a danger here. My BlackBerry does so much for me I could stay absorbed in it for hours or days if I didn't deliberately pull myself away. As I said in my last post...tech in and of itself is not evil....but allowing something to be your master is not pleasing to God. Just because you can do something doesn't mean you should.
In this world we live in, with everyone plugged in to their bluetooth devices, walking around Walmart like a bunch of crazy people talking to themselves, the irony is that this telecommunications revolution has brought a disconnect in the area of face to face relationships.
Do you notice the lady at the checkout? Do you smile to her or do you just continue to talk on the phone while checking out?
Are you open to being a blessing to those God brings across your path?
Do you unplug your headphones long enough to hear the Lord?
Make your tech your servant and not your master.
Tuesday, October 14, 2008
Master or Servant? Technology in Balance (part one)
We all have our areas of weakness which normally get us off track or "coveting" after things we don't yet have, and for me this has been mostly high tech things and art supplies for most of my life. When I was 14 I saved up all of my pennies (and dollars, and so forth) until I could buy my own Commadore 64 personal computer, which my parents of course thought was ridiculous, but I just had to have it. Since that time, I have had to have a selection of other cool toys...the stereo...the huge record collection (just saying that no doubt reveals I am pushing 40)...being one of the first people to study Computer graphics at our college of art and design (learning, as I have said before, things my 9 year old daughter Isobel now does as a matter of course...my degree is a teensy bit out of date)...I also have a problem with planners. I have a plethora of planner books, and I have always diligently kept a journal and planner, and have been on the prowl for the ultimate planner that would make me organized (since, by nature, I'm just not at all there in this area of orderliness).
From time to time, in an effort to break the chains that bind me (namely, my covetousness problem relating to high tech gadgetry and office supplies), I have done tech fasts. I also live a fairly old fashioned lifestyle by choice: I'm a stay at home mom, I have a big garden, I can my own food, I am paranoid of cooking with a microwave, I own a whirly pop (and use it!), I make my bread by hand, and sew quite a bit, among other things. I'm also, while living in a rural homestead, a freelance web and graphic designer (often working on my laptop, with my canning apron on, standing up in my kitchen, surrounded by bushels of tomatoes to peel, if you can only picture it).
Because God, in His providence, allowed me graciously to be born for such a time as this, my view has been to use that which is available to me in this decade for His glory, rather than, as some, to long for the Little House on the Prairie days. Although living a slower life would be a blessing, starting my chicken dinner with catching a chicken, killing, and plucking it would not be. There are some modern conveniences I would rather not do without...but the key is using these modern conveniences to be better able to give God glory in whatever God has called us to...whether as a keeper at home, mother of many, student, or what have you.
As I was thinking and praying, and studying the Word recently, I came across a familiar passage...one that actually influenced me greatly when I was a new Christian. That verse is this: "All things are lawful unto me, but all things are not expedient: all things are lawful for me, but I will not be brought under the power of any." (1 Corinthians 6:12) The problem is not technology. Technology is a tool that can be super helpful in enabling us as we serve the Lord in any way He call us. The trick is to remember who is the master and who is the servant here. Tech makes a great servant but a lousy master.
From time to time, in an effort to break the chains that bind me (namely, my covetousness problem relating to high tech gadgetry and office supplies), I have done tech fasts. I also live a fairly old fashioned lifestyle by choice: I'm a stay at home mom, I have a big garden, I can my own food, I am paranoid of cooking with a microwave, I own a whirly pop (and use it!), I make my bread by hand, and sew quite a bit, among other things. I'm also, while living in a rural homestead, a freelance web and graphic designer (often working on my laptop, with my canning apron on, standing up in my kitchen, surrounded by bushels of tomatoes to peel, if you can only picture it).
Because God, in His providence, allowed me graciously to be born for such a time as this, my view has been to use that which is available to me in this decade for His glory, rather than, as some, to long for the Little House on the Prairie days. Although living a slower life would be a blessing, starting my chicken dinner with catching a chicken, killing, and plucking it would not be. There are some modern conveniences I would rather not do without...but the key is using these modern conveniences to be better able to give God glory in whatever God has called us to...whether as a keeper at home, mother of many, student, or what have you.
As I was thinking and praying, and studying the Word recently, I came across a familiar passage...one that actually influenced me greatly when I was a new Christian. That verse is this: "All things are lawful unto me, but all things are not expedient: all things are lawful for me, but I will not be brought under the power of any." (1 Corinthians 6:12) The problem is not technology. Technology is a tool that can be super helpful in enabling us as we serve the Lord in any way He call us. The trick is to remember who is the master and who is the servant here. Tech makes a great servant but a lousy master.
Monday, October 13, 2008
Happy Thanksgiving to my Canadian Friends
...as well as to those who celebrate Thanksgiving in other lands.
My blog post today is on just that topic...but it isn't found here...it's at TEACH Magazine's Publisher's Blog...right here!
My blog post today is on just that topic...but it isn't found here...it's at TEACH Magazine's Publisher's Blog...right here!
Thursday, October 09, 2008
Confused? Maybe this will help...or make it worse ;)
Maybe this doesn't really fall under the category of things that are specifically for moms, but I have had a few readers of my book, Thriving on One Income ask me what this whole banking situation was about, and later on an egroup this was discussed. Using the questions I have been asked, I am going to try to explain this in such a way that hopefully you will have a better understanding.
The thing is (1) I am not an accountant or stock broker...but I do like to read up on this stuff and invest the Lord's money as wisely as possible. (2) everyone involved seems to be giving a different story and pointing the finger all around, so some may contradict what I write here...no problem, I'm not claiming to be an insider with vast knowledge on this topic. (3) this situation is occurring in an election year and thus many of the "facts" are tainted with political mud slinging and blame shifting.
I have tried to cite my sources as much as is possible for further reading.
Ultimately though, keep in mind, God is bigger than all of this scary stuff. He is in control. He owns the cattle on the thousand hills (and doesn't need AIG to insure it! LOL). God can take care of us, and meet our needs, and may even use this awful situation to bring some badly needed revival to our lands. Our God is a recession-proof God. God is faithful.
Julie wrote,
Julie, I don't understand all of it to the most minute detail but I have kept up with this and understand most of it. Friends and I had a huge discussion on this just this weekend, and I feel I have a pretty good understanding now...In a very, very basic nutshell here is what happened.
In the 1990s, the government put pressure on Fannie Mae (A government backed mortgage enterprise that makes and guarantees mortgages via our tax dollars--Freddie Mac is the other government enterprise which is similar) to make home ownership for everyone...by lowering the standards and "not discriminating". These loans are "sub prime" because the people who took out the loans (1) didn't have good credit (2) didn't have reliable employment or good income and (3) the home usually was mortgaged to 100% or 120%...on the faulty gamble that home values would always go up (not when you are giving poor people with a track record of poor money management skills mortgages!!!! Now everyone's savings and home values are in the toilet..but more on that later.). There has always been "sub prime" (high risk) loans but this was ramped up to a new level with the influx of new home buyers with bad money management skills.
This created a sort of bubble...an insulated cocoon in which home values have gone up at insane rates because pretty much anyone qualified for a mortgage of some sort (even if it was at 14% ARM--meaning the rate would go up when the fed raised interest rates). More home buyers, meant more competition when buying a home, which meant the prices went up.
In the later Clinton years and in the Bush years, various policies and different circumstances caused the manufacturing sector (people who work in factories) to start to falter...and a few people started to default on their mortgages, and fewer people were buying new cars...causing the factories to lay people off, causing more home mortgage defaults...and this huge cycle was put in motion in which people couldn't pay their bills if they were maxed out, or were paying late, and after a while they couldn't even sell their home to move due to job changes because the value of the home had dropped so dramatically (this happened to us, in fact, in 2005 when my husband was laid off, got a job out of state, but our house wouldn't move, and appraised for quite a bit lower even after we made improvements). Some incomes stagnated and others went down, which meant foreclosures, bad credit, etc.
Sure, they claim more jobs were created, and that the workers just needed new training, but let's face it: a daddy working 50+ hours per week in a skilled trades job trying to support his family with no other job skills is hooped if his job is outsourced, because he can't take time off from working and supporting his family to take some class and learn a new skill, even if that class is "free". Not everyone is flexible in their career choices. Single moms, breadwinners, etc....it's not like you can just stop paying your bills while learning a new skill only to have to start over again at entry level wages.
A house's appraised value (what a mortgage underwriter feels it is worth) is based on a number of things including the value of "comparables" (similar houses that have sold in the area recently). This caused many problems....for example, when my husband lost his job in Michigan and was working in Ohio, we couldn't sell our house because all of our comparables that had sold recently were foreclosures that sold for 1/3rd of what we owed on our mortgage! Nice, huh? So, we couldn't sell our house because (1) no one would pay full price for ours when there was a few foreclosed bargains up the road and (2) the house would not likely appraise high enough for a mortgage even though we had done some improvements to it. So we were stuck, not that I wanted to move to Ohio (I didn't). So, for someone who, say, couldn't get another job in that area, that caused HUGE problems...and more foreclosures. We have foreclosed houses all around us right now. It's bargain shopping time in Michigan...if you can find a job.
Why did banks do it? They could justify higher than normal interest for one, and they could also count on people who get sub prime mortgages not being smart enough to read the fine print, or understand what an Adjustable rate mortgage was, or understand that it is NOT a good thing to have your house mortgaged to 120% it's appraised value (the best is to only mortgage 80%...putting a 20% down payment down). This whole Fannie Mae thing "generously" allowed people to buy houses without downpayments, and sometimes borrowing on equity that they gambled would be in the house in a few years. Ie, say a house is worth $100,000. Because values were climbing at a certain rate, the bank allowed people to borrow $120,000 for a mortgage (keeping the $20,000 for moving costs, home repairs, or whatever), and so now they owed $120K on a $100K house...with the assumption that the house would climb in value, and be worth way more than that in the future. This was true...for awhile...but isn't anymore.
Add to this the fact that even my not-quite-16-year-old daughter gets credit card pre approvals, and most Americans are in debt up to their eyeballs...we have done what the banks did, but on a smaller scale...spread ourselves too thin financially. This also contributed to the present situation.
Through all of this AIG, an insurance company, was insuring these loans for the banks, and making a killing...but they were also creatively balancing their checkbooks, and didn't actually have enough money to make good on the promises they were making in their insurance policies. They were promising bankers that they would pay for a loan where the person defaulted...and 10 years ago that was a safe bet, because few defaulted, home values consistently went up, and they were making lots of money. But, it was a house of cards. AIG didn't have enough money to pay the banks if too many people defaulted....and too many people did default.
Now these banks are crying poverty and those of us who pay our bills on time are getting rewarded by having to pay this bill.
Picture two columns on a spread sheet. One has a plus over it and one has a minus. The minus is money the bank has to pay (to keep the place open, to pay dividends on investments and deposits, etc.), and the plus is money that is coming into a bank (people paying the bank interest for loans it is giving out, for example). The bank is not going to make money by just charitably holding onto other people's money for nothing, and in fact if often owes people who have deposits, due to interest dividends they receive (for example, I have some money in a CD right now that is earning 5.05% interest...that is money that costs the bank something...so it needs to earn money somehow to pay me when it comes time to get my dividend come November). The money has to be put to work for them while they are holding onto it. Loaning it all out to Joe Blow who is already maxed out on his credit cards is RISKY, but the higher the risk, the higher the potential return (profit)...though the higher the potential loss too. Instead it looks for ways to invest that money so that it can make some money for itself while it holds onto it for you. The problem is those risky loans make way more money in interest, because you can charge more interest to someone who is higher risk...though if you do that too much, and too many default...you are in serious trouble. Thankfully those kind folks at AIG insure these risky loans so that the banks don't have to worry .... er, until the day AIG files bankruptcy! Whoops.
Imagine a bank is buying up a bunch of mortgages made to people who shouldn't have been given them in the first place ("subprime"), and earning all of that interest, but just in case, he needs to insure this investment, against people defaulting on them, so he goes to an AIG guy, and buys some insurance for this investment. If all of this sound surreal, it's because it is completely whacked. Without a fancy Ivy League degree in finance, I am pretty sure that normal people like us will never understand why banks thought investing huge percentages of their money into very risky loans was a good thing, or why no one bothered to ask if AIG could really back all of these loans.
On our ficticious 120,000 mortgage, the banker is paying some percentage rate based on the likihood of the mortgage holder defaulting (let's say, 2%) to insure the loan and thus the AIG guy gets $2400 a year with a promise that if the person who was given a loan without being able to manage their money defaults on the loan, then AIG promises to pay the bank whatever this person still owes on the loan. The big problem was that AIG made this promise way more than it could actually BACK the promise. It simply didn't have enough money to back all of these risky loans and no one really noticed (or they noticed, but didn't care).
Here is the problem. In a secured loan, you have to put down collateral. That means, you insure it with something real. you don't just get a $120,000 loan with a handshake and a smile. The problem is that these transactions were "unregulated" and AIG didn't have to prove to anyone that it had enough money to back up these presumptous promises it was making. It was promising to pay these banks all of this money for all of these loans if these people defaulted...counting on them not defaulting, of course...but it was allowed to write up these contracts and make these promises to the banks without proving to anyone that it could back up the promises (with capital...namely what it owned...what it was worth...the money it personally had in the bank)
Now the Fed is reaching into our wallets now to pay for their day to day operations (supposedly...I wouldn't be surprised if someone is also lining their pockets with some of this green too)...because they are having to be far more cautious and conservative with investing money, and so less is coming in...and they have to pay those who have deposited money....like me with my CD that is coming due in November. Essentially, the banks are not earning enough money on a day to day basis anymore (because they can't invest) and so now their cost of operations, in addition to what they owe depositors, is coming out of the pockets of we the people. Don't you love how the CEO of AIG gets a 15 Million Dollar Severance package after running the company into the ground and WE get the bill?.
I'm glad God is in control, and that even in this situation, He can work, frustrating as it is for the rest of us.
The thing is (1) I am not an accountant or stock broker...but I do like to read up on this stuff and invest the Lord's money as wisely as possible. (2) everyone involved seems to be giving a different story and pointing the finger all around, so some may contradict what I write here...no problem, I'm not claiming to be an insider with vast knowledge on this topic. (3) this situation is occurring in an election year and thus many of the "facts" are tainted with political mud slinging and blame shifting.
I have tried to cite my sources as much as is possible for further reading.
Ultimately though, keep in mind, God is bigger than all of this scary stuff. He is in control. He owns the cattle on the thousand hills (and doesn't need AIG to insure it! LOL). God can take care of us, and meet our needs, and may even use this awful situation to bring some badly needed revival to our lands. Our God is a recession-proof God. God is faithful.
Julie wrote,
THIS MAKES ME FEEL SO DUMB. I SO WANT TO UNDERSTAND WHAT IS REALLY GOING ON IN THIS FINANCIAL CRISIS (AND TEACH IT TO MY KIDS).
Julie, I don't understand all of it to the most minute detail but I have kept up with this and understand most of it. Friends and I had a huge discussion on this just this weekend, and I feel I have a pretty good understanding now...In a very, very basic nutshell here is what happened.
In the 1990s, the government put pressure on Fannie Mae (A government backed mortgage enterprise that makes and guarantees mortgages via our tax dollars--Freddie Mac is the other government enterprise which is similar) to make home ownership for everyone...by lowering the standards and "not discriminating". These loans are "sub prime" because the people who took out the loans (1) didn't have good credit (2) didn't have reliable employment or good income and (3) the home usually was mortgaged to 100% or 120%...on the faulty gamble that home values would always go up (not when you are giving poor people with a track record of poor money management skills mortgages!!!! Now everyone's savings and home values are in the toilet..but more on that later.). There has always been "sub prime" (high risk) loans but this was ramped up to a new level with the influx of new home buyers with bad money management skills.
This created a sort of bubble...an insulated cocoon in which home values have gone up at insane rates because pretty much anyone qualified for a mortgage of some sort (even if it was at 14% ARM--meaning the rate would go up when the fed raised interest rates). More home buyers, meant more competition when buying a home, which meant the prices went up.
In the later Clinton years and in the Bush years, various policies and different circumstances caused the manufacturing sector (people who work in factories) to start to falter...and a few people started to default on their mortgages, and fewer people were buying new cars...causing the factories to lay people off, causing more home mortgage defaults...and this huge cycle was put in motion in which people couldn't pay their bills if they were maxed out, or were paying late, and after a while they couldn't even sell their home to move due to job changes because the value of the home had dropped so dramatically (this happened to us, in fact, in 2005 when my husband was laid off, got a job out of state, but our house wouldn't move, and appraised for quite a bit lower even after we made improvements). Some incomes stagnated and others went down, which meant foreclosures, bad credit, etc.
Sure, they claim more jobs were created, and that the workers just needed new training, but let's face it: a daddy working 50+ hours per week in a skilled trades job trying to support his family with no other job skills is hooped if his job is outsourced, because he can't take time off from working and supporting his family to take some class and learn a new skill, even if that class is "free". Not everyone is flexible in their career choices. Single moms, breadwinners, etc....it's not like you can just stop paying your bills while learning a new skill only to have to start over again at entry level wages.
A house's appraised value (what a mortgage underwriter feels it is worth) is based on a number of things including the value of "comparables" (similar houses that have sold in the area recently). This caused many problems....for example, when my husband lost his job in Michigan and was working in Ohio, we couldn't sell our house because all of our comparables that had sold recently were foreclosures that sold for 1/3rd of what we owed on our mortgage! Nice, huh? So, we couldn't sell our house because (1) no one would pay full price for ours when there was a few foreclosed bargains up the road and (2) the house would not likely appraise high enough for a mortgage even though we had done some improvements to it. So we were stuck, not that I wanted to move to Ohio (I didn't). So, for someone who, say, couldn't get another job in that area, that caused HUGE problems...and more foreclosures. We have foreclosed houses all around us right now. It's bargain shopping time in Michigan...if you can find a job.
Why did banks do it? They could justify higher than normal interest for one, and they could also count on people who get sub prime mortgages not being smart enough to read the fine print, or understand what an Adjustable rate mortgage was, or understand that it is NOT a good thing to have your house mortgaged to 120% it's appraised value (the best is to only mortgage 80%...putting a 20% down payment down). This whole Fannie Mae thing "generously" allowed people to buy houses without downpayments, and sometimes borrowing on equity that they gambled would be in the house in a few years. Ie, say a house is worth $100,000. Because values were climbing at a certain rate, the bank allowed people to borrow $120,000 for a mortgage (keeping the $20,000 for moving costs, home repairs, or whatever), and so now they owed $120K on a $100K house...with the assumption that the house would climb in value, and be worth way more than that in the future. This was true...for awhile...but isn't anymore.
Add to this the fact that even my not-quite-16-year-old daughter gets credit card pre approvals, and most Americans are in debt up to their eyeballs...we have done what the banks did, but on a smaller scale...spread ourselves too thin financially. This also contributed to the present situation.
Through all of this AIG, an insurance company, was insuring these loans for the banks, and making a killing...but they were also creatively balancing their checkbooks, and didn't actually have enough money to make good on the promises they were making in their insurance policies. They were promising bankers that they would pay for a loan where the person defaulted...and 10 years ago that was a safe bet, because few defaulted, home values consistently went up, and they were making lots of money. But, it was a house of cards. AIG didn't have enough money to pay the banks if too many people defaulted....and too many people did default.
Now these banks are crying poverty and those of us who pay our bills on time are getting rewarded by having to pay this bill.
Picture two columns on a spread sheet. One has a plus over it and one has a minus. The minus is money the bank has to pay (to keep the place open, to pay dividends on investments and deposits, etc.), and the plus is money that is coming into a bank (people paying the bank interest for loans it is giving out, for example). The bank is not going to make money by just charitably holding onto other people's money for nothing, and in fact if often owes people who have deposits, due to interest dividends they receive (for example, I have some money in a CD right now that is earning 5.05% interest...that is money that costs the bank something...so it needs to earn money somehow to pay me when it comes time to get my dividend come November). The money has to be put to work for them while they are holding onto it. Loaning it all out to Joe Blow who is already maxed out on his credit cards is RISKY, but the higher the risk, the higher the potential return (profit)...though the higher the potential loss too. Instead it looks for ways to invest that money so that it can make some money for itself while it holds onto it for you. The problem is those risky loans make way more money in interest, because you can charge more interest to someone who is higher risk...though if you do that too much, and too many default...you are in serious trouble. Thankfully those kind folks at AIG insure these risky loans so that the banks don't have to worry .... er, until the day AIG files bankruptcy! Whoops.
Imagine a bank is buying up a bunch of mortgages made to people who shouldn't have been given them in the first place ("subprime"), and earning all of that interest, but just in case, he needs to insure this investment, against people defaulting on them, so he goes to an AIG guy, and buys some insurance for this investment. If all of this sound surreal, it's because it is completely whacked. Without a fancy Ivy League degree in finance, I am pretty sure that normal people like us will never understand why banks thought investing huge percentages of their money into very risky loans was a good thing, or why no one bothered to ask if AIG could really back all of these loans.
On our ficticious 120,000 mortgage, the banker is paying some percentage rate based on the likihood of the mortgage holder defaulting (let's say, 2%) to insure the loan and thus the AIG guy gets $2400 a year with a promise that if the person who was given a loan without being able to manage their money defaults on the loan, then AIG promises to pay the bank whatever this person still owes on the loan. The big problem was that AIG made this promise way more than it could actually BACK the promise. It simply didn't have enough money to back all of these risky loans and no one really noticed (or they noticed, but didn't care).
Here is the problem. In a secured loan, you have to put down collateral. That means, you insure it with something real. you don't just get a $120,000 loan with a handshake and a smile. The problem is that these transactions were "unregulated" and AIG didn't have to prove to anyone that it had enough money to back up these presumptous promises it was making. It was promising to pay these banks all of this money for all of these loans if these people defaulted...counting on them not defaulting, of course...but it was allowed to write up these contracts and make these promises to the banks without proving to anyone that it could back up the promises (with capital...namely what it owned...what it was worth...the money it personally had in the bank)
Now the Fed is reaching into our wallets now to pay for their day to day operations (supposedly...I wouldn't be surprised if someone is also lining their pockets with some of this green too)...because they are having to be far more cautious and conservative with investing money, and so less is coming in...and they have to pay those who have deposited money....like me with my CD that is coming due in November. Essentially, the banks are not earning enough money on a day to day basis anymore (because they can't invest) and so now their cost of operations, in addition to what they owe depositors, is coming out of the pockets of we the people. Don't you love how the CEO of AIG gets a 15 Million Dollar Severance package after running the company into the ground and WE get the bill?.
I'm glad God is in control, and that even in this situation, He can work, frustrating as it is for the rest of us.
Wednesday, October 08, 2008
Walking Away?
Just when you thought you had heard it all, well...you haven't. I haven't.
First we had the safe haven laws. These laws, basically, were created under the assumption that some scared teenager could drop off a newborn at a "Safe place" like a hospital, police station, etc. with no questions asked and no consequences, instead of dumping the baby in the garbage as has happened in the past. Nebraska, however, worded it wrong, referring not to a baby but to a "child", and not defining child.
Some sorry excuse for a human being dropped off her 14 year old daughter. Elsewhere I have read of people dropping off other children of different ages, including apparently many pre-teen and teenagers. One "father" (let's use that term loosely) dropped off 9 children. Say What?
As I read that, here I was in my dining room...with my five children all working more or less quietly on different projects at our table....children that include a 15 year old and a 13 year old...and I felt so sick inside of this. I know many people have joked (I think they were joking) with me about "just wait till they are all teenagers" but honestly, some things seem to just get better with age...like parenting. I like my kids. I enjoy being a mom to teenagers. I know, what a shocker. Way more fun than breastfeeding, not sleeping, and changing diapers.
What makes some "parent" drop off their kid (or 9 kids)? Here are the reasons cited:
1. "They were tired of their parenting role"
2. "child behavioral problems"
Maybe parenting for some of these folks is kinda like getting a puppy...they're cute while they're little, huh? ....As if it wasn't bad enough that people drop off once-cute puppies off to shelters when they get to be out of control dogs that they had failed to train, or cats that they didn't spay that are now breeding like tribbles, now they are allowing people to do this with HUMAN BEINGS?
I guess I can't fathom it, "I can't control my brat, so here you go. Take them off my hands, please. I'm tired of being a parent."
...and nothing happens to them.
They walk away from scarred-for-life children and teens with no consequences. I've always found it appalling that we don't have a "mandatory sterilization with your third abortion" law for those repeat customers down at planned parenthood, or a "dump your baby, lose an ovary" law for people who put newborns in garbage cans (or leave them at safe havens for that matter)....but I can't even come up with a suitable punishment for the emotional damage these people have done to their children.
Remember to pray for these poor young people who have faced the ultimate rejection: being walked out on by their own parents.
First we had the safe haven laws. These laws, basically, were created under the assumption that some scared teenager could drop off a newborn at a "Safe place" like a hospital, police station, etc. with no questions asked and no consequences, instead of dumping the baby in the garbage as has happened in the past. Nebraska, however, worded it wrong, referring not to a baby but to a "child", and not defining child.
Some sorry excuse for a human being dropped off her 14 year old daughter. Elsewhere I have read of people dropping off other children of different ages, including apparently many pre-teen and teenagers. One "father" (let's use that term loosely) dropped off 9 children. Say What?
As I read that, here I was in my dining room...with my five children all working more or less quietly on different projects at our table....children that include a 15 year old and a 13 year old...and I felt so sick inside of this. I know many people have joked (I think they were joking) with me about "just wait till they are all teenagers" but honestly, some things seem to just get better with age...like parenting. I like my kids. I enjoy being a mom to teenagers. I know, what a shocker. Way more fun than breastfeeding, not sleeping, and changing diapers.
What makes some "parent" drop off their kid (or 9 kids)? Here are the reasons cited:
1. "They were tired of their parenting role"
2. "child behavioral problems"
Maybe parenting for some of these folks is kinda like getting a puppy...they're cute while they're little, huh? ....As if it wasn't bad enough that people drop off once-cute puppies off to shelters when they get to be out of control dogs that they had failed to train, or cats that they didn't spay that are now breeding like tribbles, now they are allowing people to do this with HUMAN BEINGS?
I guess I can't fathom it, "I can't control my brat, so here you go. Take them off my hands, please. I'm tired of being a parent."
...and nothing happens to them.
They walk away from scarred-for-life children and teens with no consequences. I've always found it appalling that we don't have a "mandatory sterilization with your third abortion" law for those repeat customers down at planned parenthood, or a "dump your baby, lose an ovary" law for people who put newborns in garbage cans (or leave them at safe havens for that matter)....but I can't even come up with a suitable punishment for the emotional damage these people have done to their children.
Remember to pray for these poor young people who have faced the ultimate rejection: being walked out on by their own parents.
Monday, October 06, 2008
Joyful Momma at TEACH Magazine Today
It's Monday and I'm blogging over at TEACH again today. You can read by post at Lorrie's Blog.
Also, TEACH Magazine and Joyful Momma Publishing are BOTH now on Facebook! You can go to each page, you can join our blog networks, and who knows what else.
Also, TEACH Magazine and Joyful Momma Publishing are BOTH now on Facebook! You can go to each page, you can join our blog networks, and who knows what else.
Friday, October 03, 2008
Mountains and Valleys
I enjoy reading, among other things, Oswald Chambers book "My Utmost for His Highest" each day. Great little devotional book. Sometimes it makes me smile that how a book, written a century ago, seems to have things in it on just the right day relating to what I am going through on that day, or maybe a word in season to share with and encourage a friend who is going through a situation addressed. Strange how that happens.
Yesterday's entry (which I read this am LOL) was especially good. I hate it when you get to the mountain spiritually, only to come down and hit a very low spot. I've been trying to cheer a girlfriend going through just such a season...hanging out in the valley after having an amazing mountain top experience. Oh, bother. But listen to Mr. Chambers:
We don't go to the mountain to live up there...but to retank for life in the valleys.
Yesterday's entry (which I read this am LOL) was especially good. I hate it when you get to the mountain spiritually, only to come down and hit a very low spot. I've been trying to cheer a girlfriend going through just such a season...hanging out in the valley after having an amazing mountain top experience. Oh, bother. But listen to Mr. Chambers:
The height of the mountain top is measured by the drab drudgery of the valley; but it is in the valley that we live for the glory of God.
Oswald Chambers, My Utmost for His Highest, October 2
We don't go to the mountain to live up there...but to retank for life in the valleys.
Wednesday, October 01, 2008
Have You Text-Messaged Your Hubby Today? (A Midweek Marriage Moment)
So, have you sent your hubby a text message lately? Using a cell phone at work is not always possible or easy for a guy because bosses tend to frown on employees taking personal phone calls and that sort of thing...but it's super easy to send a text message just to say you're thinking of him or to tell him how thankful you are for him? It can be nice and quick, and he can look at it over and over again during his stressful day.
Not sure how to send a text? Using your cell phone, go to the address book. Select his cell phone number. Hit the option button that lets you choose what to do with the number (this is usually located next to the call button on most phones...but you may need to play around to figure out how to use yours). This is usually called a "Text Message" or an SMS Message (if you are a blackberry user like me). type a brief message using your thumbs on the keypad, and then hit send. Texting usually costs a few cents per text message (or is free if you have a texting plan with your cell phone service). Added bonus: it doesn't require you to have great service or all of your bars to send a text. At my house, out in the boonies, we don't get cell phone service good enough to have a phone conversation, but I can text quite easily.
You may also send a text via your computer by typing in the email address for the cell phone if that comes with your plan (usually the email addy is the cell phone number @ your server provider). Again, check out the user manual.
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