They Just Don't Understand

You might be old enough to remember Will Smith when he was a singer and had that hit "Parents Just Don't Understand," which helped propel him to where he is today.

Well, after Tuesday's election of Scott Brown, it's clear the Democrats don't understand. Though they've been all over the news channels saying "Okay, we get it now," you can tell from their actions already that they truly don't.

Voters in Massachusetts -- and New Jersey and Virginia last year -- weren't just repudiating health care. Yes, that was a large component of their anger because it was the most prominent issue. They don't want the government getting rid of United Healthcare (UNH), by replacing it with government insurance. They didn't want Tenet Healthcare (THC) to collapse because the government was telling them how to run their hospitals.

That was part of it, but it wasn't the only thing they were protesting. In reality, it was a rejection of government. Not just big government, with its attendant backroom deals, crushing debt, and sky-high taxes, but government interference at all levels. The so-called "tea party" rallies weren't just sniping at one item, it was channelling the ire of people at all levels of government intrusion. And that's what Democrats don't get.

How else can we explain their decision to still press forward on some form of government health care? What can we make of their now focusing on attacking Bank of America (BAC), Goldman Sachs (GS), and Citigroup (C)? We weren't asking them to wage war on Wall Street.

The people are fed up with the government having given their money to GM and Chrysler. They're upset with money given to the banks. They're pissed about American International Group (AIG) going back into their pockets time an time again for more money. Obama and the Democrats are going about exactly the wrong remedy for what the people have said.

But this just isn't a screed against the Democrats. The Republicans have shown themselves fairly tone deaf when it comes to responding to the will of the people. They squandered enormous amounts of goodwill when they held the reins of power because they embarked on a spending program that tried to out do Democrats. And they paid the price.

I mean, just listen to Scott Brown ruminating on his election win. He specifically said he favors health insurance for all. He favors the government getting involved. It proves he was just the beneficiary of an irate populace that was directing its anger at those in power. Even he doesn't get it! What makes anyone think there's anyone in Congress right now -- maybe Ron Paul -- who understands that it wasn't a Republican/Democrat thing in Massachsetts; it wasn't a huge government-run healthcare plan versus a much smaller government-involved healthcare plan. It was a repudiation of government as the solution to every bit of adversity in our lives.

The Democrats don't get it, that's for sure. But neither do the Republicans.

Credit Card Reform Will Be in Your Wallet

We know what's in your wattet: the government's hand. But there's nothing to take credit for in the credit card reform bill. Sure, it's tough to sympathize with the credit card industry, but to hear President Obama tell it, you'd think they were as bad as -- gasp! -- those evil hedge funds that held out on Chrysler's bailout.

Still, the reforms wending their way through Congress are pretty much pointless. They virtually mirror new regulations imposed by the Federal Reserve last year but which take effect in July 2010. Since the congressional proposals would go into effect nine months after they're approved, that means they'll happen maybe six months earlier. This is change we can believe in?

The banking lobby says the new regs will limit consumers' access to credit, but it's not like we really need our own backstage VIP pass anymore. It was the easy terms Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM) previously showered on us like baubles at Mardi Gras that got us into the financial mess we find ourselves.

Although I'm a firm believer in the slippery slope effect of government regulation -- what you allow the government to do today is not nearly as bad as what it will do down the road using today's actions as precedent -- I'm not quite so sure what the credit card industry is upset about.

The regulations and legislation would both essentially do the following:

·       Bring back the grace period. You'd be able to drop your payment in the mail on the day it was due and not be considered late because the credit card company didn't receive or process it till several days later.

·       Pay down higher interest balances first. Currently you pay off the lowest cost debt first before tackling higher interest rate debt. That would flip when the new rules took effect.

·       Limit student borrowing. The promos that litter most college campuses these days would be restricted. Under-21 students would need to prove they have an income or would need a cosigner.

·       Prohibit universal default. This one's up for debate as the Senate comprise bill eliminated it, but if you miss a payment on your Visa (V) bill Mastercard (MA) won't be able to raise your rates too, even though you might now be a higher risk to them.

Not that the regulations or laws are good, because it will lead to limited credit and when the economy improves we're going to sorely miss it, but with the two versions fairly similar complaining about the one but not the other is disingenuous.

Then again, why is Congress acting to be redundant? I'm sure it has nothing to do with one-third of the Senate being up for reelection next year and Banking Committee Chairman and prime credit card bill sponsor Chris Dodd facing his toughest campaign in years. Taking on the straw men of the industry makes a good campaign foil, though some of the more outlandish ideas Dodd had injected into his original version -- forbidding any rate increases, any time, ever, for example -- were stripped out.

But we certainly won't find weak-kneed congressmen standing tall with the credit card companies against this measure. After all, many of the issuers are the same banks that put taxpayers on the hook for billions of dollars when they got their bailouts: BoA, Citi, and Morgan all have substantial credit card business.

While the industry may have greased the skids for us sliding deeper into debt, the regulations, the legislation, and even the President's speech don't put enough of the blame where it really belongs: on us!

Capital One Financial (COF) and American Express (AXP) may have given us the means, but there was no one forcing us to run up our cards to the limit. Now that the good times have gone, and everyone is reeling and scaling back on what they charge (and allow us to charge), we're tilting the scales in favor of one group and against the other.

We've badgered the financial institutions to hand out money willy nilly to people who couldn't afford it, and now that they're pricing the debt we have based on the risk we represent, we excoriate them for that too.

It's not necessary for us to love the moneylenders, though when we want the flat-screen TV and shiny new set of wheels we're all too ready to forgive them any sins. But we shouldn't vilify them either for taking the steps necessary to ensure that the greatest amount of credit is available to the greatest number of people who are able to pay it back. Expedience from politicians is expected, but that does not mean we should support them when it rears its ugly head.  

I do not have a financial position in any of the stocks mentioned in this article.

Executive Greed Will Sink Chrysler Financial

Executives at Chrysler Financial are just plain greedy. So just why did we bail them out? It's okay for the taxpayers to pony up money but they won't accept pay cuts. That's the exact reason these government bailouts are a joke. We're putting the taxpayer at risk and those who ran the company into the ground don't want to shoulder any.

But Chrysler Financial's maneuvers aren't so unique. General Motors (GM) finance arm, GMAC, was given a free pass to convert to a bank holding company. So did American Express (AXP). But those conversions were done before the pay cap rules were passed so they didn't need to rein in corporate excess.

And that's just fine. Chrysler Financial was looking for another handout, though. $750 million worth, and their execs didn't want a pay cut. Seems to me they're not so bad off if the bosses don't think they need to reduce their pay to save the company. And if they're not so bad off then they shouldn't get the money. Nor should they have gotten the TARP money to begin with. 

So they've lined up private financing they say and can make do without the government's assistance. That's as it should be. But it also points out just how greedy these people really are and why they should have been allowed to fail if it came to that. Greed will ultimately sink Chrysler Financial.

I have no financial position in any of the companies mentioned in this article.