Wednesday, May 04, 2016

Don't fret: either way Wall Street's gonna be fine and you're going to continue to worry about everything.

So it looks like Trump vs. Hillary, and right now Real Clear Politics has the "spread" at 6.2 because politics is just a game right? It is, and like every other major sporting event, the presidential election goes on too long and has zero impact on real life because every president is just like every other president and the middle class continues to get squeezed.

If you think campaign contributions foreordain policies, as I do -- and I am coming around to rethinking my political contributions stance -- Hillary is bad news. While her top contributor right now is Emily's List, a PAC that helps elect women politicians, Hillary's other top 10 are a rogue's gallery of Too Big To Fail Banks: Citigroup, JPMorganChase, Goldman Sachs and Morgan Stanley, among them.Those banks, with DLA Piper, a multinational law firm, are the top 5 after Emily's List.

DLA Piper's average profit per equity partner last year was $1,400,000. Per partner.  Just thought I'd mention that before going on to the list of banks bailed out and subsequently contributing to Hillary.

Morgan Stanley got $10,000,000,000 in the fall of 2008, in the form of a government stock purchase. The government eventually received that money back, in June 2009, and it seems the deal will net the government about $1,100,000,000 in profits (through dividends paid; dividends are paid when a company is profitable and shares those profits with stockholders.)  JPMorgan got $25,000,000,000, paid it back and made the government $1,753,000,000.

Government bailouts are good business, for government, a unique situation engineered under a Republican congress and a supposedly-liberal president. Government bailouts mostly happen to big businesses. Over the last five years, the government has loaned a total of $83,000,000,000 to small businesses. Of course, not only is that number less than the big banks got in six months in 2008-9, but most of it comes from smaller banks and lenders, not the government. Under SBA loans, banks make the loans and the government guarantees a percentage (usually 85%) of the loan if the business doesn't pay it back. The banks still have some risk so those loans are tough to get.

Meanwhile, over the past 24 years there have been 16 years of Democrat presidents and 8 of Republican, with Congress about roughly divided in control (although now solidly in Republican hands and likely to stay that way as Hillary monopolizes money meant to help elect state and congressional Dems).

In 1993 the median household income (1/2 of America earned more, 1/2 earned less) was $50,421. That climbed steadily to a high of $57,843 in 2000, where it stayed until roughly 2008, when it began dropping each year until 2013. It rose slightly in 2014, and the last measure was that it was $53,657.

While Hillary and the Dems will no doubt take credit for the 1993-2000 rise, the Democrats were in charge of Congress for much of the Bush era and income was stagnant for that period.

Not only that, but because the cost of living rose faster than incomes, an income of $57,000 in 2000 was equal to an income of $46,000 in 1992: A person whose income actually tracked the national averages, going from $50,000 a year in 1992 to $57,000 a year in 2000, would be worse off despite earning $7000 more. ($50k to $57k is, after all, a net increase of only 3.5% over 7 years.)

AND, in 1994, under Clinton 1.0, the government loosened restrictions and regulations over banks and allowed Fannie Mae to begin buying "subprime" mortgages. Clinton and the GOP congress then eliminated capital gains taxes on sales of expensive homes ($250,000-$500,000),  and allowed the process of securitization of mortgage loans (remember that? It was once talked about and now has been banished to the recesses of the public consciousness, but is happening with auto loans right now.)

In 1998 the Clinton-led government bailed out "Long Term Capital Management", a hedge fund (hedge funds are ripoffs, according to Business Insider) and Clinton's administration helped broker a bailout by private banks including many that would just 9 years later get their own bailouts. Also in 1999 Fannie Mae helped Countrywide (remember them?) get a deal to make it the biggest lender in the history of America, with a system that encouraged Countrywide and other lenders to pay no attention to whether a borrower could pay a loan; and the Clinton Adminstration helped pass "Gramm-Leach-Bliley" - note that government largesse bills never have catchy names like "PATRIOT act"-- a bill that allowed banks to become 'too big to fail.'

Got all that? Clinton 1.0 set the stage for the crash, allowing banks to become overleveraged, deregulating mortgage lending, and normalizing government bailouts. Mortgage fraud began increasing in 1997, 5 years into Clinton 1.0.

Hillary's plans are short on specifics. She wants to offer a $2,500 tax cut to help students afford college. The average cost of a semester at a state college is $4700 for in-state students. The average cost of college on a whole has almost doubled, from $9700 in 1992 to $17000 in 2013, the last year averages are available. Her plans for student loans would save, on average, $200 per year -- less than a dollar a day-- for most lenders. She wants to invest $350,000,000 to help students attend college in their home state without borrowing to pay tuition, but this plan requires families to "do their part" to contribute. Remember, 'kids' who attend college are 'adults' everywhere else in the world, and can marry, join the army, vote, and own property. So Hillary will lower costs for college, for the 'kids' by expecting the parents to pay more.

So we can all enjoy another 8 years of stagnant wages, higher costs of living, irrational student, auto, and housing loan policies, difficult credit, lowered support for social services and infrastructure, and eventually another economic collapse.

The good news?

For me personally, I make my living defending people against debt collectors, big banks, and corporations. When those companies act illegally, people get to pay me rather than them. Over the past 14 years 100% of my income has been earned by money which was required or allowed to be paid to me because companies violated the law. So long as they don't entirely legislate me out of existence, as there are sporadic attempts to do, consumer protection attorneys will survive, if not thrive.  (It's hard to thrive when your clients can't make enough to pay their own expenses, and you have to fight for years to get companies to pay up, but it's worth doing anyway.)

For the country? The last time we had a series of sustained booms and busts it led to the Great Depression and a change of attitudes that helped move us towards a more fair country that actually cared about people, at least for a little while.  Before that, demagogues and the rich who demonstrated callous indifference to the poor were beheaded.

So we can dream.

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