The End of the Beginning
Posted by: Teresa Shuff Trujillo | 09/29/2008 3:18 PM
Our country and our households have arrived at a period of financial reckoning. This didn't occur overnight, but over a thirty year period of time where we collectively decided to see no financial evil, hear no warnings on bad credit, or speak the truth when it came to leveraging our lives.
The President's bailout plan failed. This emergency legislation was not the end of this crisis. It is, at best, the end of the beginning of the crisis. The failed bailout plan was to help the big players on Wall Street. Congress watches out for the big contributors and Wall Street has been some of the biggest contributors to campaign coffers. I think President Bush thought this bailout was a real winner--but the constituents can't understand why the taxpayers have to bailout bad decisions in the financial sector.
The failed bailout left the rest of us to fend for ourselves as the economic crisis deepens. And it will deepen--no matter what happens in Washington D.C.
The failed plan forwarded by Treasury Secretary Henry Paulson has little or no benefit for the average taxpayer or individuals in financial crisis. In fact, each man, woman, and child in this country would have been responsible for over $3,000.00 in guarantees to Wall Street. Wall Street plans to use the bailout money to cover their losses first. Strengthening the economy will be a distant second on their horizon. This is how these financial institutions have always worked, and it is the way they will continue to operate.
Nothing in the failed legislation changes the "me first" attitude on Wall Street.
It would be nice if Congress gave each one of us $3,300.00 to spend as we please. It would kick started the economy just as well. Congress may have chosen to let the giants fall and the public pick the meat and marrow from their bones. There is a bailout coming, but the question is what form will it take?
If every household used a $3,300 government grant per person to pay their debt, the big financial institutions would have had the same short term benefit--but the general public would have had a better long term benefit. Each family could have invested this in the future of our choosing.
Change is coming. Call it the Impending Financial Climate Change. It is time for the "average American" to take stalk of their financial position in a contracting market. Credit markets will tighten, they have to tighten to fend off continuing market instability. The man and woman on the street should expect their credit card limits to be lowered without warning. Even those with stellar credit and payment histories will be receiving letters or statements lowering their ability to borrow money using plastic.
Expect minimum payments on credit cards to rise with little or no warning from the card issuers. Those consumers who like to live life "maxed out" will find that they are no longer able to finance a lifestyle beyond their means.
Expect that mortgages will be hard--if not impossible--to secure without substantial down payments and solid gold credit. Sub-prime, Zero Amortization, and Alt-A mortgages will cease to exist as options for low income and no documentation borrowers who will be virtually excluded from the marketplace. Many of these borrowers should never have been granted loans in the first place. There will be a great deal of noise from the community organizers and groups like ACORN and the ACLU as tighter credit requirements will exclude low income purchasers from the marketplace.
More sellers will have to help finance the purchase of their existing homes if they want to move. The upside is that homeowners who can do this will have an income stream they can count on--or a piece of collateral that they can recoup.
Home prices will continue to drop to a point where those entering the market can afford the necessary 10%-20% down payment and monthly payments on conventional 30 or 40 year loans. Great news for buyers is disastrous to those who thought that their home was an investment with limitless potential.
Expect that small businesses will find credit isn't available. Small business won't have access for capital to grow and prosper--but many smart small businesses will find niches where they can prosper. If a small business fits a specific target group it might be able to secure a loan with a Small Business Administration guarantee.
More banks will fail and be absorbed by other banking institutions. There will be fewer lenders in the marketplace and this alone will tighten credit.
Individuals and businesses need to become more self-sufficient in the marketplace.
Financing the $30,000.00 fairy tale wedding is a thing of the past. It is time to settle for a smaller, more intimate gathering. The upside of a smaller event is these smaller weddings are called environmentally friendly and green!
Maxing out the credit cards for that dream vacation is not an option for many consumers anymore. The media spent the summer promoting "staycations" and encouraging viewers to stay at home or within a few hours of home.
Car buyers shouldn't expect the manufacturers to extend credit to everyone. Buyers need to be prepared with a substantial down payment or valuable trade-in. Or better yet, drive a dependable car for 100,000 miles and get the full value from your purchase. The California car culture is a tremendous drain on household finances. I had 135,000 miles on my 2000 Ford Focus before it had to be replaced in 2006. I received a great deal of value from my economy car.
Expect government services to be cut and/or eliminated entirely. As credit tightens and consumers stop purchasing goods and services sales taxes will be substantially reduced and state services will be reduced and user fees will be required or raised for many of the things we take for granted.
Expect jobs in the service sector to begin evaporating. Restaurants are already feeling the pinch, tourism is down, Starbucks is closing stores. If Christmas retail sales are down, expect to see many retailers begin closing their stores after the first of the year. Luxury goods will be the hard hit as gift giving turns practical. Instead of purchasing high end electronics, a gift of new tires might be more appropriate.
The market for big boy toys--boats, recreational vehicles, off road bikes, etc., is already contracting. These are luxuries and extras that just don't fit in the household budget anymore.
Last week I heard a plastic surgeon report that his business was down 60% as home refinancing ground to a halt. He reported that most of his patients took out home equity loans to pay for breast implants and facelifts. Beauty is an expensive luxury. I guess there is a benefit that more of us will just have to get comfortable in the body God gave us.
The best advice that I can give anyone is to get out of debt as quickly as possible and refuse to get any deeper in debt than you already are. Pay cash for goods and services you need. Defer buying what you want but don't really need until you can afford to pay cash. Think of delayed gratification as a gift to yourself.
Take a deep seat for a long and bumpy ride.
The President's bailout plan failed. This emergency legislation was not the end of this crisis. It is, at best, the end of the beginning of the crisis. The failed bailout plan was to help the big players on Wall Street. Congress watches out for the big contributors and Wall Street has been some of the biggest contributors to campaign coffers. I think President Bush thought this bailout was a real winner--but the constituents can't understand why the taxpayers have to bailout bad decisions in the financial sector.
The failed bailout left the rest of us to fend for ourselves as the economic crisis deepens. And it will deepen--no matter what happens in Washington D.C.
The failed plan forwarded by Treasury Secretary Henry Paulson has little or no benefit for the average taxpayer or individuals in financial crisis. In fact, each man, woman, and child in this country would have been responsible for over $3,000.00 in guarantees to Wall Street. Wall Street plans to use the bailout money to cover their losses first. Strengthening the economy will be a distant second on their horizon. This is how these financial institutions have always worked, and it is the way they will continue to operate.
Nothing in the failed legislation changes the "me first" attitude on Wall Street.
It would be nice if Congress gave each one of us $3,300.00 to spend as we please. It would kick started the economy just as well. Congress may have chosen to let the giants fall and the public pick the meat and marrow from their bones. There is a bailout coming, but the question is what form will it take?
If every household used a $3,300 government grant per person to pay their debt, the big financial institutions would have had the same short term benefit--but the general public would have had a better long term benefit. Each family could have invested this in the future of our choosing.
Change is coming. Call it the Impending Financial Climate Change. It is time for the "average American" to take stalk of their financial position in a contracting market. Credit markets will tighten, they have to tighten to fend off continuing market instability. The man and woman on the street should expect their credit card limits to be lowered without warning. Even those with stellar credit and payment histories will be receiving letters or statements lowering their ability to borrow money using plastic.
Expect minimum payments on credit cards to rise with little or no warning from the card issuers. Those consumers who like to live life "maxed out" will find that they are no longer able to finance a lifestyle beyond their means.
Expect that mortgages will be hard--if not impossible--to secure without substantial down payments and solid gold credit. Sub-prime, Zero Amortization, and Alt-A mortgages will cease to exist as options for low income and no documentation borrowers who will be virtually excluded from the marketplace. Many of these borrowers should never have been granted loans in the first place. There will be a great deal of noise from the community organizers and groups like ACORN and the ACLU as tighter credit requirements will exclude low income purchasers from the marketplace.
More sellers will have to help finance the purchase of their existing homes if they want to move. The upside is that homeowners who can do this will have an income stream they can count on--or a piece of collateral that they can recoup.
Home prices will continue to drop to a point where those entering the market can afford the necessary 10%-20% down payment and monthly payments on conventional 30 or 40 year loans. Great news for buyers is disastrous to those who thought that their home was an investment with limitless potential.
Expect that small businesses will find credit isn't available. Small business won't have access for capital to grow and prosper--but many smart small businesses will find niches where they can prosper. If a small business fits a specific target group it might be able to secure a loan with a Small Business Administration guarantee.
More banks will fail and be absorbed by other banking institutions. There will be fewer lenders in the marketplace and this alone will tighten credit.
Individuals and businesses need to become more self-sufficient in the marketplace.
Financing the $30,000.00 fairy tale wedding is a thing of the past. It is time to settle for a smaller, more intimate gathering. The upside of a smaller event is these smaller weddings are called environmentally friendly and green!
Maxing out the credit cards for that dream vacation is not an option for many consumers anymore. The media spent the summer promoting "staycations" and encouraging viewers to stay at home or within a few hours of home.
Car buyers shouldn't expect the manufacturers to extend credit to everyone. Buyers need to be prepared with a substantial down payment or valuable trade-in. Or better yet, drive a dependable car for 100,000 miles and get the full value from your purchase. The California car culture is a tremendous drain on household finances. I had 135,000 miles on my 2000 Ford Focus before it had to be replaced in 2006. I received a great deal of value from my economy car.
Expect government services to be cut and/or eliminated entirely. As credit tightens and consumers stop purchasing goods and services sales taxes will be substantially reduced and state services will be reduced and user fees will be required or raised for many of the things we take for granted.
Expect jobs in the service sector to begin evaporating. Restaurants are already feeling the pinch, tourism is down, Starbucks is closing stores. If Christmas retail sales are down, expect to see many retailers begin closing their stores after the first of the year. Luxury goods will be the hard hit as gift giving turns practical. Instead of purchasing high end electronics, a gift of new tires might be more appropriate.
The market for big boy toys--boats, recreational vehicles, off road bikes, etc., is already contracting. These are luxuries and extras that just don't fit in the household budget anymore.
Last week I heard a plastic surgeon report that his business was down 60% as home refinancing ground to a halt. He reported that most of his patients took out home equity loans to pay for breast implants and facelifts. Beauty is an expensive luxury. I guess there is a benefit that more of us will just have to get comfortable in the body God gave us.
The best advice that I can give anyone is to get out of debt as quickly as possible and refuse to get any deeper in debt than you already are. Pay cash for goods and services you need. Defer buying what you want but don't really need until you can afford to pay cash. Think of delayed gratification as a gift to yourself.
Take a deep seat for a long and bumpy ride.
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