You may have heard that the Democrats have a bill to “regulate” the financial services industry. But did you know that their bill will almost certainly create more government bailouts of Wall Street?

http://gopleader.gov/News/DocumentSingle.aspx?DocumentID=181716

Here is how it would work: In exchange for new regulations, some of the biggest players on Wall Street (like Goldman Sachs) would get access to a pre-existing bailout fund. As the article notes:

“The FDIC, as the resolution agency for too-big-to-fail firms, would be given wide latitude to use resources to make payments to anyone in any amounts, at their own discretion.”

So if you didn’t like the Bush bailouts, just wait until you see the coming Obama bailouts if this bill passes.

One year ago, the federal government took steps to keep the credit market open. Billions of dollars in money were delivered to Wall Street in the hope that the money would then be lent to borrowers.

Instead, most of the financial institutions receiving the money simply paid down their own debt. You and I didn’t get any of it.

This week I’ve been writing about how banks are now only financing projects that are revenue-producing. Yet your taxdollars were sent to financial institutions precisely so that they would lend it back to you. What an outrage that financial institutions aren’t doing that.

This is another example of how government solutions are often worse than the problems. And it’s another example of how the recession we are in is nowhere near being done.

Today, our series on America’s economic crisis continues by focusing on the next wave of real estate challenges: commercial properties.

http://www.time.com/time/business/article/0,8599,1893125,00.html

As the article above notes, we are facing a “ticking time bomb.” Why?  Because some $1.3 trillion in mortgage loans to commercial properties will come due between now and 2013.  Deutsche Bank estimates that some 50% of these loans won’t qualify for re-financing. And when the owners inevitably default, it could lead to losses of at least $200 billion.  That’s billion with a “b”.

How are we poised for another real estate disaster?

Here is how.  The way the mortgage market for commercial real estate works is this: they are structured as 5-to-10-year loans, after which re-financing takes place. But since property values have dropped, owners will not be well-positioned for re-financing.

And keep in mind that the height of the mortgage boom took place from 2004-2007. Many of the commercial real estate mortgages created during this time were set with trigger interest rates that will begin to accelerate at 36 to 60 months from the date of the loan’s closing. I’m no math expert but that tells me we’re not out of the woods yet. With fuel prices going back up, and a potential commercial real estate collapse combining with the ongoing residential real estate crisis, we could soon hit the trifecta of economic crises.

If any of you are thinking about buying a new house, ranch or commercial property, hold on! I think things are going to get real cheap. And as we all know “cash again is going to be king.”

This week we learn that the price of oil has begun to slip:

http://apnews.myway.com/article/20090602/D98IG75O0.html

As I’ve previously written on this blog, I think oil is overpriced and will eventually come down.  This is a small example.  What’s interesting is why the price is down: investors fear that inflation is on the horizon.  And they may be right.  The projected Obama budget during the next few years is expected to add more to the national debt than all the other presidents combined from Washington to Bush.  Now, I’m not a mathematician.  But that sounds like a lot of money.

Inflation is another good reason why we need to invest in renewable energy.  Energy sources like biomass are affordable and effective…and can help get us off our oil addiction.

Check out my website for more information on how our new Advanced Trailer for Biomass is changing the energy industry.

When I read about the automakers’ plea for more money and the president’s response to them, my first thought was: a plague on both your houses.

http://www.cnbc.com/id/29956752

No one looks good in this. First, here are the automakers begging for more taxdollars so that they can pay outrageous labor contracts that make them uncompetitive with foreign carmakers. Second, here is the president agreeing to give over the money if one of the automakers will fire its CEO.

What is going on here? Why are we giving automakers all this money and why is the government firing a private company’s CEO? This is why it’s a bad idea for government to be in the middle of business. The cold, hard fact is: companies that can’t make it on their own shouldn’t make it. Their failure will open the door for another company. It will be painful in the short term, but beneficial in the long term. This is market economics 101.

Sadly, that seems to be a class that the president and the automaker executives never took in college.

Remember when President Bush and Congress passed a $700 billion bailout package last fall?  Do you know where the money went?  You don’t?  Well, you’re not alone. The government doesn’t know either. Or at least it’s not telling.

The original plan was for the government to provide assistance to financial institutions so that credit would again become available.  But a new report from a government watchdog agency raises questions about how banks are using the money:
http://apnews.myway.com/article/20090109/D95JKCI80.html

Elizabeth Warren, a Harvard professer and the head of the Congressional Oversight Panel, announced that the Treasury Department did not fully cooperate with her investigation of where the money has gone.  When her committee asked specific questions about the money, Treasury “did not provide complete answers to several of the questions….”  Warren added: “For Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence Treasury seeks to restore.”

But don’t just blame Treasury.  Why didn’t Congress insist on reporting requirements when it loaned the money?  This is basic business.  If you loan someone money, you do so for a specific purpose, and you have guidelines on how and when the loan will work.

Why did Washington think that writing a $700 billion check with no transparency was a good idea?  Has anyone there ever worked in the business world? I guess that question answers itself.
-Randy Hill