Rusty Law

Stretching the TARP

Bank of America repaid its $45 billion debt, an action expected to prompt other banks to repay their bailout money, and now the Treasury Department will extend the Troubled Asset Relief Program beyond Christmas and New Year’s Eve, past Easter straight through to Halloween of 2010.  

Just as homeowners face new requirements in the extended version of the first-time home buyer tax credit, TARP will be striped with updates to its coverage.  While TARP is now projected to cost less over a 10 year period, it will be limited to foreclosure prevention and providing capital to small banks and businesses, hoping to shade business and consumer loans from the sun of a harsh economy.  

It may not be a new bank holiday, but the Treasury Department vows to give out goodies into Fall of 2010.  

Last Minute Shopping

Fiscal fitness through the holidays is nearly as difficult as dieting.  ‘Tis the season to go shopping!  Keep in mind, though, that credit cards are plastic band aids on purchases which can result in substantial debt over long-term interest rates.  Your horoscope may not say “avoid credit card debt,” but your credit score will.  

If you are going to use credit cards on holiday purchases, stack the deck in your best interest.  Use lower interest rate cards first before you rely on higher interest rate cards.  This will help reduce cost of debt over time.  

How you handle debt affects your purchasing power for Christmas-yet-to-come, and other days as well.  Everything piles up on your credit report, which can affect your ability to buy a house, a car, a student loan, a lot of things.  You decide if your credit score is going up or down for the holidays.  Last minute shopping can create long-term debt.  As you rush on final impulses, beware of what you pile on your cart and credit card balance.  

Cyber Monday Sales

Online versus in line is appealing to consumers, especially those stuck in a snowstorm.  People can navigate a website rather than a phone tree or icy roads, and for retail sales, the consumer can zoom straight to the product instead of wading through the whole mall.  

The Monday after Thanksgiving has been designated “Cyber Monday.”  Online sales tend to be spread over the holiday season instead of being tied to a particular day, as with Black Friday, but Cyber Monday gets its own name anyway, as well as tracking which showed that sales rose by 5% over last year’s figure.  Consumer spending makes up 70% of America’s gross domestic product, and online sales account for 5-7% of retail sales.  

Optimists have cited heavy use of Google as hopeful for the economy because unlike its competitors, Yahoo and AOL, Google carries more consumer ads.  In other words, what is good for Google is good for revolving credit.  Indeed, the number of online shoppers increased 6% Cyber Monday; however, the amount spent per customer decreased 2%, indicating that shoppers are still cash-strapped.  (Consumers spent $102.19 per person online Cyber Monday.)  Maybe they would have spent more if discounts had not dropped by more than 3% from last year.  Still, Americans spent $887 million on November 30.  Now, if we can only get non-revolving credit moving…and maybe the airports and highways along the east coast.  

Home for the Holidays

Fiscal fitness is a matter of life and debt.  The holidays are a horrible time to contemplate foreclosure on your home, but they are a great time to make resolutions to shape up your finances.  Set goals that will help you achieve the financial picture you would like to present this time next year.  

One size fits all does not apply to home financing.  A mortgage payment that is too big is not flattering.  It takes over the identity of who you truly are.  And cinching in your belt on a balloon mortgage just does not work.  

If the mortgage crisis has hit home, go shopping—find out what programs are available and which one would best suit you.  There are a number of solutions, and a foreclosure defense attorney can help you review the options so you can make an informed decision.  Take control of your life and where you want to be.  

No one should be alone during the holidays, and no one should go through foreclosure alone.  

Are We Alone?

Of the alien planets capable of sustaining real estate, Gilese 581e makes the short list.  It is relatively Earth-like and right next door to planet 581d, which may host liquid water.  Gilese 581e is a comfortable 20 light-year commute from the nearest foreclosure sale on our home planet.  

Foreclosure can seem like a demoralizing situation, but it is not the apocalypse.  It is not the creation of a new heaven and a new earth; it is just business.  

Ninety-five percent of Floridians losing their homes in foreclosure do not have legal representation, most of them because they feel they cannot afford it.  No one should go through foreclosure alone.  Contact the St. Johns County Legal Aid office at (904) 827-9921, or you are welcome to contact my office at (904) 829-6600 to learn more about your financial options in foreclosure legal defense.  

Economic Paradigm Shift

Science and economics are the same species when we discuss “survival of the fittest” and “market selection,” using biological phrases to describe economic phenomena.  While economic testing may not take place in the rigors of a sterile environment, these phrases are useful descriptions, and it seems we are ready to borrow another term from the science glossary:  “paradigm shift.”  I shift paradigms without a clutch.  Thomas Kuhn wrote about paradigm shift in the 1960’s.  Of course he was applying his idea to scientific theory where “is” does not imply “ought,” just like in economics.  

With great crisis comes great change; however, according to Kuhn, a paradigm shift will not occur as a response to crisis unless another theory is available.  Congress and the Federal Reserve meet to forge just such a new paradigm; meanwhile, we can look to the skies.  Economic forecasts are as reliable as the weather:  when it rains, it pours, no matter what the report said.  

Trump Card

Beal’s Conjecture states that if two addends and sum are positive integers with positive integer exponents each greater than two, then the addends and sum must have a common prime factor.  What Beal did not count on was Donald Trump dropping out of the equation.  

Andrew Beal is a Texas banker, a college drop-out, but with a math theory named for him, and a big stakes gambler who just got Trumped.  Donald Trump is…Donald Trump.  The two of them were partners in a triad of casinos, trying to bluff their way through bankruptcy court.  The bondholders made progress over the summer and managed to gain leverage on the Trump-Beal stronghold.  Depositions were underway and Beal was none the wiser when Trump announced publically that he had joined forces with the bondholders.  Et tu, toupee?  

The quality of mercy lies in the lesson to be learned:  All is fair in love in bankruptcy.  Or don’t do business with a bad hairpiece (no doubt there is a clever Latin phrase for that).  Never was there a friendship of less zeal than that of Donald Trump and Andy Beal.  

Burst v. Bust

“Boom” used to be a good word, meaning an increase in economic prosperity, but Fed Chairman Ben Bernanke recently said booms were “perhaps the most difficult problem for monetary policy this decade.”  Thus too much money becomes not so desirable.  

To burst or to bust, that is the question Congress and the Federal Reserve wrestle regarding financial bubbles.  The Fed’s traditional laissez-fare has become bad fare.  Will the new regulations mount the Fed on pins and needles, ready to hem the economy while stuffing its pincushion with ammunition against future bubbles?  Or will the new economy be nudged along with interest rate control?  

Beyond the bubble, the downside to adding oversight to the Federal Reserve is increasing reaction time to market circumstances, and introducing a pox of politics to interest rates.  Interest rates in this issue—everyone is interested!  

Either way, Ben Bernanke’s bust is rendered in gold value.  

Big Bad Wolf

Once upon a time there was a foreclosure sale that was threatened to be overturned.  And this is the crazy, scary story of how such a thing could happen.  

Mr. Man and Mrs. Woman lived in a brick house right next door to a very untidy property which had a house of sticks in disrepair and two straw homes which were dilapidated and destroyed.  The untidy property went into foreclosure, and Mr. Man and Mrs. Woman rode to the courthouse steps to buy it.  Mr. Bank opened with a bid of $100, which was always his opening bid.  Mr. Man bid $10,000 and the deal was done.  

Mr. Man and Mrs. Woman then rode home, had their supper, and began to tidy up the very untidy property next door.  They got rid of the dilapidated straw homes, they cleaned up the yard, and they began to rehabilitate the stick house to the glory of their self-satisfaction and rising property value of their own home.  

After they had done much work and spent $40,000 in repairs, Mr. Man and Mrs. Woman received a letter from Mr. Bank’s attorney, who was called Mr. Wolf.  Mr. Wolf huffed and he puffed and he threatened to blow the foreclosure sale down because the bid was too low.  Even though it was a good faith error, Mr. Wolf was seeking to have the sale overturned.  

Mr. Man and Mrs. Woman were very not happy.  They discontinued the marvelous work they had begun, and they ran back to their brick house from which they could call a lawyer to defend their interest against the big bad Wolf.  

The case law on this issue says that if the plaintiff makes an error, or if the buyer does anything wrong, there is reason to overturn.  Also, if the plaintiff makes a mistake, for instance bids too low, that is reason to overturn the sale as well.  

This story lacks an ending.  It is an ongoing case in Putnam County and neither side has been awarded an unhappily ever after.  So far, however, this story acts as a cautionary tale that justifies the need for title insurance, even on a foreclosure property.   

Bank of America Emerges from TARP

It is not April 15, but Bank of America is ready to pay Uncle Sam.  These are not taxes, though; this is the $45 billion loan Bank of America received through the Troubled Asset Relief Program or TARP.  

Prior to mergers and acquisitions, Bank of America was the Bank of Italy (country of the cradle of banking) and was founded in San Francisco in 1904 by A. P. Giannini.  It dominated banking in the United States and has gone through many changes to be nearly unrecognizable except by its namesake.  Regardless, when it recently became too big to fail, the Federal Reserve bailed it out first with $25 billion in October 2008, then an additional $20 billion in January when Bank of America took over the Merill Lynch mob.    

Bank of America will be the first of seven companies owing big money to the Fed to peek out from underneath the TARP.  The bank’s action should prompt the other six to repay the government with a debt of gratitude and at a good rate of return.  

Once the debt is repaid, Bank of America executives can enjoy their lunch out from underneath the bailout stigma.  Without compensation restrictions, they anticipate an easier time recruiting and retaining key personnel.  

Not everyone is ready to repay his or her loan.  If you are seeking shelter in a foreclosure case, and you are not a billion-dollar bank, you may wish to consider a legal defense or other legal options to help you get back on firm financial footing.  Put a foundation in place which you can stand on, and rebuild your assets.  I encourage you to seek your options.  No one should go through foreclosure alone.