Tuesday, December 21, 2010

Foreclosure is not the end

Foreclosure is not the end of a lender's rights with respect to defaulted home loans. In most states if the foreclosure's sale price doesn't fully repay the lender- and it never does- the borrower still owes the balance, known as the deficiency.

After all, the borrower did sign the note and got the money. As a matter of law, in most states, the borrower isn't off the hook for what they owe just because the lender got the inadequate collateral (in this case a house whose value is less than the debt) through foreclosure.

I point this out for two reasons.

First, most people probably aren't even aware of this continuing obligation of borrowers to the banks. Most people think foreclosure is the end; but they would be wrong, at least in theory.

Second, why haven't lenders pursued these deficiencies still owed personally by the borrower against the borrower and it's other assets? It's not because they are soft hearted I assume.

In addition, having not pursued their rights, for whatever reason, why haven't the banks gotten "credit" in the eyes of the public, press and politicians? The reasons are pretty obvious, given the current toxic atmosphere, the banks can do no right.

Conversely , aren't the bank's shareholders unhappy that they are not trying hard enough to recover the bank's (some would still say taxpayers) money? Apparently they are afraid as well.

There are basically two reasons why banks have not been pursuing borrowers personally for the amounts still owed. One good reason and the other somewhat problematic.

The good reason is that it is often not cost justified. The cost to sue the borrower personally and collect can be greater than the expected recovery. This would apply to most poorer people.

The problematic reason is more optics and fear. Just think what the media and the politicians would do if the banks, as is their right and perhaps their obligation, went after borrowers personally for these deficiencies? Pitchforks and torches anyone?

Many people (especially investor owners) can afford to pay these deficiencies. Why don't the banks go after them?

By the way, a lot of people have been gaming the system, living rent free for a long time; some of whom can pay, but have chosen not to because their houses are "underwater". Why hasn't that been reported? The banks probably never will go after them. Why hasn't that been reported as well.

So just losing a house in a foreclosure isn't really the end, but apparently that is only in theory.

Sorry for throwing out this "live grenade" but that's why blogs are fun.


Tuesday, December 7, 2010


Whether you agree with what was done or not, it was good to see President Obama finally lead instead of having to clean up behind the mess made by the Dem. leadership. That's how I remember Presidents doing things--leading-- but somehow Barrack decided to defer to his party's congressional leadership instead of leading them. Didn't work out so well at the polls.

I didn't have a big problem with raising taxes on the rich, and even the so-called rich, but I didn't see how that was going to help the short term economic malaise and actually create jobs, and it was amusing hearing liberals talk like deficit hawks (I didn't think many of them even knew what the word deficit means).

Frankly I'm surprised and pleased the Republicans went along. Their policy of "Just Say No" was working pretty well and their efforts ( which I thought bordered on treason) not to agree to do anything that would make Obama look good and therefore more re-electable, even if it was in the best interests of the country, also seemed to be working. Maybe they, correctly, were worried about over playing their hand. However I won't give them that much credit.

Let the progressives scream (in truth they got what they wanted, but only didn't get to take away what others had), we finally got our President back.

Tuesday, November 2, 2010

Public employees unions?

I asked the following question of two of my labor law partners. I thought the question itself would make a good post:

"As you may know I have blog which I use to vent about things. I have a topic I'd like to write on but feel inadequately conversant with the facts.

Why do we have public employee unions in the first place?

It seemed to me that unions arose to counteract owner/ capitalists. The goal of the owners is to maximize profits, even at the expense of the workers. Union wanted the workers to at least benefit from those profits as well.

The government is not in the business of making profits. And as to the demands of the public workers who is on the "owner" side? Unlike the private sector where executives have large shareholdings, money paid to public worker don't personally come from the pubic officials who grant their demands. It doesn't appear that the taxpayer is being very aggressively represented. In fact the public worker are also taxpayers, so there is that quirk as well.

Accordingly the same dynamic doesn't seem exist with respect to contract negotiations in the public sector as in the private sector. I assume that is the reason that public sector unionization is growing and ever more powerful , unlike the private sector. Has there ever been a case where public employees have gotten rid of their union? There appears to be no concept of non-union alternatives for the consumer/taxpayer.

Sorry if I sound uninformed and naive but the thought just hit me the other day, with Greece and all."

I'll follow up with their answers, but what are yours?


Monday, November 1, 2010

Washington was right

For those of you who are students of American history, you may recall that George Washington strongly opposed the formation of political parties. He believed they would become destructive and divisive and thus not serve the best interests of our country. The parties would come to care more about winning elections and personal power than acting in the best interests of the country as a whole. Now his views might be viewed as quaint and old fashion, even naive; however our recent elections have proven more and more that his point should be quite well taken.

What is best for the country takes a decided back seat to what is best for the Democratic or Republican parties respectively. Both of their primary goals is to be in power-- sadly, mostly for power's sake alone. Oh sure they have agendas for the country , but their most important agenda is to be in power, plain and simple.

In this, and so many other things, George was right.

While George and I may agree, unfortunately neither of us had, or have, an alternative-- we have to govern ourselves some way and Athenian democracy would be even worse.

Any suggestions?

I recently heard about the idea of having open primaries where the two candidates who received the most votes( from any party, or no party) would run off in an election for each particular office. It won't fully solve the problem but it could save us from having some of the ridiculous choices we are faced with in this election due to the current primary system, which as we know , are run exclusively by the same two political parties.


Thursday, September 23, 2010

Child's Play

Remember when you were a child and you and another child were going to split a piece of cake? Your mother said one of you can cut the cake and the other gets the first pick of which piece to take.

I suggest we do a variation of that idea for the next stimulus/job creation bill. The party in power, the Democrats, should come up with how much to spend, and the Republicans can choose how to spend it. No tax cuts for the really rich allowed.

As I recall, the biggest problem with the last stimulus bill is that the Republicans thought while the country needed a boost, the funds were being spent on pet Democratic social programs with little boost for the economy. The Democrats also thought that the economy needed a boost and so what if it went for things they had wanted for some time( I think they call that a "two-fer").

By forcing them to "split the cake" in this way maybe , they will start acting like adults.


Friday, September 3, 2010

Rut Buster

What we really need to get the economy going again is a form of "TARP II". I know that's an inflammatory term, and as such I used it on purpose. However a TARP- like solution is about the best we could do in these times of slow growth and rising deficits.

Should we stimulate with more spending or should we rein in the deficit?

What I propose is something completely different which would stimulate without much spending (actually none, if it was successful), and therefore not increase the deficit. If it failed, it would be costly, but as you will see, if we are careful it shouldn't fail to any significant degree. The money in a spending stimulus on the other hand would be gone, whether it worked or failed.

Let me explain what it would be and why it makes sense now. The economy is stuck in a rut and needs a boost to prevent any more backsliding, let alone a double dip recession. Everyone says a stimulus is out of the question either, or both, because it doesn't work to create private sector jobs or that it will add to the deficit. Same for tax cuts, albeit from a different political perspective.

Banks aren't lending or businesses are not borrowing; take your pick. All I know is that we appear to be stuck in a rut.

Enter my TARP- like solution. The Federal government should offer to provide credit support to lenders who make loans to businesses to stimulate growth which in turn would lead to creation of jobs.

Right now things are at an impasse. Lenders have become so conservative ( twice burned?) and are reluctant to make even marginally risky loans. A degree of credit support from the government could put "close" but still too risky deals over the top and enable business to get much needed financing for growth. Since the credit support would be in the form of some level of guaranty to the lender, there would be no cash outlay by the government. The banks would be lending the money, the government would just be partially guarantying the borrower's repayment.

If these loan are as good as everyone who bemoans the banks reluctance to lend says they'd be, the government would never have to pay off on it's guaranty. Of course there would be some losses, but likely not very much. That's what happened with TARP; the government got all of its money back, plus a significant return, from the TARP loans to the banks.

In my scenario the government would not even have to make any loans to the banks; rather provide credit support (for a modest fee even) for credit worthy loans; just to break the current economic stalemate. If all went even reasonably well, there would be no increase in the deficit since no money would be put out and this kind of "pump priming" just might get the economy going again and reverse the viscous negative cycle in which we find ourselves .

Sadly our leaders and the media have so demonized anything that even seems like TARP, that this probably could never happen. We need to reverse the "big lie" that TARP was a government giveaway for the Fat Cats Bankers on Wall St. that did nothing for Main St.

It's a shame that as a result of demagoguery and political and media distortion this kind of low cost solution has become too "radioactive " to be used to get us out of this economic quagmire.


Tuesday, August 17, 2010

Market reactions

I don't know much about the US stock market and I generally don't like to comment on matters that I don't have at least a passing expertise, but I am an observer of things and I am perplexed enough to seek guidance on the following observations of the market's reactions to events:

1. When the dollar was weak , that was bad. But when the dollar got stronger that was bad too.
2. When the price of oil was high, that was bad. But when the price of oil dropped that was bad too.
3. When the EU economy was strong, that was bad. But when the EU got weaker, that was bad too.
4. When China's economy was strong and growing rapidly , that was bad. But when China started to slow it's economic growth, that was bad too.
5. If interest rates rise, that's bad. But if interest rates stay low, that's bad too.
6. The US economy is clearly weak and in trouble, yet the rate of interest on our Treasury bills is extremely low ( which is usually an indicia of economic strength) because we are the strongest and safest country in the world in which to invest.
7. US consumers didn't save enough and that was bad. US consumers now save too much, and that's bad.
8. Banks were justly criticized for making too many loans to less than credit worthy borrowers. Bank are now being criticized for not making enough loans to less than credit worthy borrowers.
9. We want banks to lend more, yet we pass laws and regulations which make it harder and less profitable for banks to lend more.

We all know that the one thing we can agree on is that the jobless rate is too high and that's certainly bad. However, I won't be surprised that once the jobless rate goes down by a significant amount that will be bad too.

Can someone out there enlighten me, please.

It seems to me that the market has a mind of it own and interprets data to fit whatever scenario in its wisdom it wants. Of course the market is not a person, so you may ask how does it have a mind, or wisdom, at all. Not going there, yet.

However, I've noticed that all market analysis takes place after the market does it's daily thing; never before. I guess if I could do it before , I won't have to worry about what the market is going to do and I'd be a very rich man.


Saturday, July 24, 2010


What ever happened to thinking. Recently a report was leaked that TARP pay czar Ken Feinberg was going to criticize bonuses paid by Banks that received TARP funds as " ill advised". The story on the report went on to say that these bonuses couldn't be recovered by the taxpayers because they were paid out before restrictions on bonuses were enacted. The media and the politicians were outraged

While it's perfectly appropriate for Feinberg to criticize those bonuses as "ill advised" (and I too think bonuses in this sector are over the top); what came next was crazy. Calls went out to get that taxpayer money back whether or not anything illegal or improper had been done. Why oh why can't we get that taxpayer money back many have lamented. Yet another example of the Banks taking taxpayer money with full impunity. Do they know no shame.

Well the problem with getting that taxpayer TARP money back from the Banks who paid out those "ill advised" bonuses is that THE BANKS HAVE ALREADY PAID BACK THEIR TARP FUNDS SO THERE IS NOTHING FURTHER FOR THOSE BANKS TO PAY THE TAXPAYER BACK.

Is anybody thinking out there? Or, as Emily Latella used to say, "never mind".

By the way , even after that was pointed out , nobody's minds were changed on the issue. They still wanted the bonus money back.

I despair.


Friday, June 18, 2010

Congressional TARP Fall Out

Yes I'm going to write about TARP again, but not to defend the Banks, but rather to voice my outrage and concern at the fall out that has, and will continue to, hit members of Congress who had the good sense and courage to vote for this extremely effective program.

As a result of demagoguery ( some of it coming from members of the very administration who had promoted the program) and misguided populism, including the demonization of the Banks, members of Congress have lost, and will continue to lose, their jobs by getting voted out of office because they committed the sin of voting for TARP.

My real fear is that next time members of Congress are called upon to do something sensible and courageous like this to save our economy, they will be scared off ,and we all will suffer as the result.

No matter what anyone tells you, TARP has been probably one of the most successful program the government has ever instituted. It was like a smart investor who bought in a down market and made a killing.

Not only did the government support its citizens, by supporting our financial system in a time of panic and need (which is what governments are supposed to do), but it's making a profit doing it to boot. As if saving the financial system that you and I depend on wasn't enough; no we saved it and made money doing it . Where are the kudos to the government?

And what is the reward for our good members of Congress for doing this prudent and ultimately profitable thing -- they're getting their asses voted out of office. What a country.

I'm sure most of you missed it, but there was a piece in Wall St Journal last Friday, and a teeny tiny blurb in the New York Times the same day, announcing that more TARP money had been repaid than had been paid out.

I've written before about how the Banks have paid back all of their TARP loans, plus interest and warrants worth billions of dollars. The only ones who haven't paid the money back, with interest, aren't Banks, but rather are the auto companies and AIG. Recall when I am referring to Banks , I'm talking about just the Big Banks everyone loves to hate. You know the guys they hauled before Congress. Some of those Banks where told by the government that if they didn't agree to take TARP loans they weren't going to be let out of the room they had been summoned to by the government. There were some smaller banks (you know how we all love small banks) who haven't repaid the TARP, but the Big Banks have paid back so much money that the taxpayers got that money back as well. Even AIG and the auto companies appears to be on track to pay back their TARP funds. What will people say if that happens?

Not only didn't the TARP money loaned to the Banks cost the taxpayer a single penny , but we made an handsome profit as well. As I stated in an earlier post,if we had more programs like TARP we could pay off the Deficit!

But no matter; anyone who voted for that $700 Billion given away to the Banks must be voted out of office by those same citizens they saved. Of course it wasn't given to the Bank , it was a loan that has been paid back; and it never exceeded even half the $700 Billion figure that everyone still refers to. The pundits and the protesters refuse to acknowledge the facts and great benefit of TARP. Sadly its detractors, including people in the administration like Elizabeth Warren, perpetuate the myths and refuse to acknowledge the success of this program.

Why, I don't understand. Unless the record is set straight, we will suffer in the long run when another crisis is upon us. I have no illusions that that will ever happen, or that if it does, it will change very many people's minds-- like all Big Lies, this has become too ingrained into the nation's psyche.

How many government programs can you name where the government puts out taxpayer money to help the economy or some others valuable societal purpose and actually gets the money back with interest and other profits? Yes much government spending is needed and beneficial, but how often, if ever, do we actually get the money spent back, with interest? Think Defense, Social Services, Foreign Aid,Health Care, Roads, Education, Environment, Farmers and the many other subsidized Private Industries --- all valuable,and money perhaps well spent; but has the Pentagon or the Farmers paid us back in cash lately?

I know this is starting to sound a little silly, but I'm trying to make a point here that no one wants to hear. Its' bad enough that we are beating up on our financial institutions over this to our continuing detriment (to be discussed in a later post), but if courageous members of Congress are losing their jobs for doing the right thing for our country, next time they won't be so courageous and we all will suffer the consequences.

By the way, what ever happened to that $700 Billion that we aren't out?


Thursday, June 10, 2010

A Modest Proposal

I have avoided commenting on my blog on Israeli Palestinian matters for several reasons; not the least of which is that I'm not much of an expert (not that that stops most people) on the subject.

I'm quite discouraged about Israel, but my views won't add much except to emphasize the double standard to which Israel is held. However, I would recommend Tony Judt's Op Ed in the NY Times today , which was pretty good for someone who is constantly critical of Israel.


Having recently visited the area, what really hit me was that it's tough when you live in a country where your neighbors want to kill you and most of the rest of the world ( including the Left in the US) hates you. I chose my words carefully and I don't feel they are an exaggeration. I don't think there is a solution on any reasonable time horizon and that is why I am discouraged.

Clearly Israel needs to make a change. Here's a modest proposal--- I think Israel should call Hamas' bluff. Agree to lift the blockade on Gaza in exchange for a simple statement that Israel has the right to exist. Nothing more simple than that. It would be a good start.

Who could object to the right to exist?

If Hamas rejects that , what will the so called "peace activists" say? Of course they won't bat an eye, but at least the rest of the world might see that Hamas doesn't want peace and a two state solution. It's hard to clap with one hand.


Wednesday, May 12, 2010

More Bad Loans

Amazingly the Senate voted down a measure today to the Financial Reform Bill which would have required home buyers to put down at least 5% when taking out a home loan. That's right just 5% down, not 20% that used to be the norm and is what is required in Canada. Again, the Democrats voted down 5%.

The Senator who tried to get this passed was told by the party in power and community and housing advocacy groups that the 5% requirement was too draconian. Wow , as Ronald Reagan once said in another context, "There they go again". I know he may not be the best guy to quote, but this travesty just cries out for a great quote from someone.

So it looks like when things get better, lenders will start making bad loans again. I believe they already are; I saw a recent ad for home loans with only 3 1/2% down.

Will we never learn?

As I wrote in my last post, if bad loans weren't allowed to be made all of this other financial reform stuff won't really matter all that much. However,the Democrats have chosen to go the other way. Allow bad loans and just try to "cushion " the fall out to the economy when they fail. I think there is joke there somewhere about "turning the ladder, instead of unscrewing the light bulb".


Thursday, April 29, 2010


I have been following the financial reform bill and the debate via the media as best I can. The shape of the bill appears to be quite comprehensive, with one very fundamentally large exception. The bill appears to focus on absorbing the losses resulting from another financial panic or meltdown so the whole economy is not imperiled to the same degree. Things like "too big to fail", enhanced capital requirements, lower leverage limits, regulation of derivatives, executive compensation, and even the bank tax, are all well and good (perhaps), but they don't address the issue of actually preventing a future crisis.

In fact the one thing that's not covered is the prevention of making bad loans, or least an attempt to so. If the loans were good loans, no amount of leverage, securitization, derivatives, out sized compensation, or other opaque complexities or side bets, would have been a problem.

Why hasn't the emphasis been, as far as reasonably possible, to prevent lenders from making bad loans.

There is a lot of talk about a Consumer Protection Agency when what we really need is a Lender's Protection Agency. I know the optics don't look very good, but that's what's really needed. We need to protect lenders from making bad loans.

You say that sounds silly, well it's not so silly and here is why. I'll start with a story about a piece I saw on 60 Minutes. They interviewed a subprime lender in California (he seemed like a pretty smart guy) and asked how could he make loans to people who not only put no money down, but didn't even go through a credit check (income , job, assets etc-NINJA loans.) These were also known as liars loans. He said that he knew that he should have required all of the basic underwriting stuff , but that if he did so, his customers would just go down the street to another lender who won't require it, and in a few months he would be out of business. He was caught in a trap, even if one of his own doing, and he couldn't stop unless his competitors did as well. The only way to have put a stop to this insanity would be for the government to stop everyone from making these bad loans. That's what they do in Canada; no home loans without putting 20% down and customary credit underwriting.

Not so long ago our banks were "required" under banking regulations to use "safe and sound lending practices" to properly underwrite loans. Clearly the so called NINJA loans won't qualify. Implementing such a rule again would protect the banks from themselves and as a result protect all of us. I don't know when that all went away , but at the very least we should bring it back and apply it to all lenders of any kind. These shaky, some say shady, loans not only hurt the borrowers but in the end hurt the lenders as well; as we have so painfully seen.

So let's add a Lender's Protection Provision to the financial reform bill to protect lenders against making bad loans. Of course, you can't eliminate all bad loans, but we could go a long way in that direction and then we wouldn't have to worry so much about all that other stuff everybody talks about, but was not the root cause of the financial crisis. The root cause was BAD LOANS.

I'll discuss why lenders were allowed to make these bad loans in a subsequent post.


Tuesday, April 27, 2010

The Wall St. Full Employment Act

It seems to me that one of the consequences of the financial reform efforts (unintended, I assume) is the benefits which may redound to Wall St. As I see what could happen, these efforts could be called The Wall St. Full Employment Act.

Let's start with getting our definitions straight. Wall St. refers to investment banks; firms like Goldman Sachs, Morgan Stanley, Merrill Lynch( now owned by Bank of America), Lehman Bros. (gone) and Bear Stearns (now owned by JP Morgan Chase). They all are (or were) headquartered in the Wall St area of New York City; ergo the name.

Big Banks are large commercial financial institutions that used to just basically take deposits and makes loans. They don't even primarily reside in Wall St, but rather are headquartered in Charlotte, San Francisco, Minneapolis, Pittsburgh and Mid-Town Manhattan.

As a result of the financial crisis, investment banks also became commercial banks because it entitled them to many of the government benefits employed to fight the financial panic. It was the smart thing to do, and it was allowed since the repeal of Glass Steagall.

Commercial banks, also as a result of that repeal, have been allowed, for some time, to act as investment banks.

If Glass Steagall is repealed, they will have to choose sides. The true investment banks will just drop their bank charters. They really don't care much about taking deposits and making loans. Have you ever seen a Morgan Stanley branch bank or a Goldman ATM? Me neither.

For the commercial banks, it's not so easy. If they are forced to leave investment banking, the field will be wide open for Wall St. to capture all of that business (very profitable albeit risky) the commercial banks will be required to abandon.

Talk about unintended consequences. In one fell swoop, Wall St. will have eliminated it's strongest competition. They will have to scramble to handle all of the new business.

By the way, I'm not sure allowing the Banks to do just non-proprietary investment banking will solve this problem in the long run.

All in all, getting rid of Glass Steagall may be bad for Banks, but great for Wall St.


Tuesday, April 13, 2010

Time Out --Part II

In David Brook's op-ed "Relax, We'll Be Fine" in the Tuesday, April 6,2010 New York Times, he picks up on the optimism for America's future of my post "Time Out" . Here are a few choice quotes:

"despite all the problems, America's future is bright."

"Over the next 40 years... the US population will surge by an additional 100 million people...The population will be enterprising and relatively young. In 2060, only a quarter will be over 60, compared with China at 31 percent and 41 percent in Japan."

"The demographic growth is driven partly by fertility. The American fertility rate is 50 percent higher than Russia, Germany or Japan, and much higher than China."

"In addition , the US remains a magnet for immigrants. Global attitudes about immigration are diverging , and the US is among the best at assimilating them (while China is exceptionally poor). As a result, half of the word's skilled immigrants come to the U.S."

" between 1990 and 2005, immigrants started a quarter of the new venture- backed public companies"

"the US leads the world in scientific and technological development. The US now accounts for a third of the world's research and development spending ... The average American worker is nearly 10 times more productive than the average Chinese worker, a gap that will close but not go away in our lifetimes."

There is a lot more to his column and I urge you to find it. I particularly liked his conclusion that " In sum , the US is on the verge of a demographic, economic and social revival, built on its historical strengths".

It's also very interesting to note, in light of some of the anti-immigration hysteria, how critical immigration is to our future economic success.


Tuesday, April 6, 2010

O Canada-Why Not?

I have been following the efforts in the Congress to enact financial reform. I agree with strengthening regulations regarding increased capital requirements and less leverage.

I definitely agree that the so called "shadow banking" sector must be included in the regulatory scheme.

Frankly, I think credit default swaps should be banned, unless you also hold the underlying asset(the so called naked swaps) or treated as insurance, with reserves set aside like any other insurance. But I'm sure there are decent arguments on the other side of that one.

I'm not sure why we need a separate Consumer Protection Agency other than to make sure bankers do what they should always do which is to make loans based on "safe and sound" underwriting principles.

Of course it's just silly to levy a tax on banks which can only cost consumers and create additional moral hazard ( whatever that really is). I really don't get why you tax banks for TARP losses arising from making loans to car companies and an insurance holding company. They better pass that tax quick before GM,Chrysler and AIG pay back the money they got, maybe even with a profit to the taxpayer.

However, what we really need is a ban, as exists in Canada, on subprime lending of the kind that got us into this mess in the first place.

Why is it that no one talks about eradicating the root cause of the financial meltdown-- abusive subprime loans. How in the world did the government allow subprime lending, especially the kind made with no money down and no proof of income, assets or even a job. The so called "no docs" loans that were made to anyone with a pulse.

As Paul Krugman pointed out it is against the law in Canada to make home loans with less than 20% down. Even with low interest rates and too big to fail banks, Canada didn't have much of a housing bubble problem. The reason was no subprime lending. The same was true of NYC where co-op boards certainly didn't allow subprime financing.

Why can't we just do that in the US? I really don't understand why no one talks about that. Everything else deals with how best to absorb the consequences of future problems. I think we also should do something to actually help prevent future problems. Securitization didn't cause the loans to go bad. Even credit default swaps didn't create those scandalously poorly underwritten loans. What's the old computer cliche "Garbage In , Garbage Out". The subprime loans were mostly garbage and no Volker Rule or other regulatory reform would change that.

All the other catastrophic problems followed from having made crappy loans in the first place. What am I missing here? All the other reforms do not address eliminating this root cause of the meltdown. Who is against eliminating subprime lending and why?


Friday, April 2, 2010

Pol Taxes

I have read and heard various numbers that anywhere from 35% to 60% of eligible taxpayers pay NO Federal Income Tax. When I discussed this with one of my more progressive friends and queried why the Republicans weren't making a big deal out of this, he said something that "blew my mind" ( sorry for the '60s jargon). The Republicans don't want to bring this issue up because so many of their constituents ( i.e. Tea Party type people) are among those who pay no,or very little, Federal Income Tax.

They think they are overburdened with Federal Income Taxes, but in reality they are not . If it were brought to their attention that they don't really pay very much Federal Income Taxes, Republicans might lose a lot of their most active and vocal base. The top 5% percent pay 60% of the Federal Income Taxes, but I'm guessing that a whole lot of those folks at Tea Party rallies are not in that top 5%.

Now let's be clear about this. I'm only talking about Federal Income Taxes; not Social Security Taxes ( which hopefully people will get back at least the money they paid) or Medicare Taxes ( which most people will use in the future to pay medical costs).

Of those who pay Federal Income Taxes, the top 10% of income earners pay over 72% of the taxes and the bottom 50% pay less than 3% of taxes paid.

Both parties really don't want people to hear too much about these figures. You almost never see articles or prominent stories about this in the mainstream or fringe media.

The Democrats, of course, believe the rich are under taxed and the middle class is overburdened, and facts like this are very inconvenient. Why is it , according to the Democrats apparently ,that only people making less than $250,000 come from hard working, tax paying, families? Are the rest just free loaders? The numbers don't bear that out; but those higher earners don't have as many votes.

The Republicans want to keep as many people as they can "riled up" about how they are overtaxed, so they can get elected. Whipping up the top 5% just won't bring out much of a crowd. Therefore it helps the Republicans to perpetuate the illusion that we are all overburdened with Federal Income Taxes.

Neither party care much about the facts.


Monday, March 29, 2010

Market Shrink

The root cause of of the Great Recession, and indeed most all such phenomena, is human nature. I know , what a shock. And as humans maybe we need professional help. By "we" I mean the "market" because the market is just made up of humans after all.

When things went wrong from the excesses of subprime lending made by non traditional lenders to people who never should have gotten the loans in the first place, people/markets panicked. The panic, which itself may have been irrational, however lead to real problems, which had rational negatives consequences. If just the subprime market went down,the economy could have rather easily absorbed the losses. The subprime mortgage market was only a small fraction of all home mortgages, and even they didn't all go into default, at least at first.

Of course the unregulated credit default swap market really fed the hysteria. The rumor mill went wild with headlines abut CDS exposure which approached the value of all of the world's markets combined! The best example is Lehman Brothers who was rumored to have $800 Billion Dollars of CDS exposure. The reality, which came out in bankruptcy proceedings where the trades were all sorted out ( by net outing the trades and ignoring the massive multiple counting of the same single trade), turned out that Lehman's real exposure was $2 Billion Dollars--- oops, but too late. Yes $2 Billion is still a lot of exposure, but maybe its problems could have been dealt with better and bankruptcy avoided.

Why do people/markets panic? Where are "the cooler heads" who should have "prevailed?" What is it about human nature that we are prone to excesses and irrational behavior? People might respond by saying look the market was right and the economy did in fact collapse. But was that just a cascading self-fulfilling prophesy? What would have happened had people/ markets not panicked? We'll never know, as we dig ourselves out of the mess we're in.

Because of the panic, market prices sank, which lead to a perceived reduction in wealth, which lead to a reduction in buying, which lead to a fear of reduction in business profits, which lead to jobs cuts, which lead to further reduction in buying etc, etc. That's what happens when companies cut back, stop hiring ,lay off workers, cut back on travel and investments and so on and so on -- people who have lost their jobs stop shopping and traveling and so on and so on-- you get the picture.

Lately there have been basically 4 types of workers out there. (1) Those who have lost their jobs;(2) Those who are worried they will lose their jobs;( 3) Those who may have jobs they won't lose, but are worried about the success of their companies and therefore their jobs; and (4) Those who are so well off they have no real worries. None of this leads to a great economic recovery because everyone is cutting back on their spending, including #4 above . For example, a friend of mine related to me a comment made by a billionaire friend's wife --- She said "I've cut back on my spending by half because it just feels so unseemly in these hard economic times to keep on spending like I was." Wow are we in trouble.

Sure we had gone to excess. We were over leveraged and living on borrowed funds more than we should have. Yes we needed to modify our behavior, but come on, why a full fledged nervous breakdown? How did so much of these values just vanish? Maybe they weren't there in the first place?

Experts thought it could never happen, but the problem is the experts were thinking rationally. What happened ,at least at first, wasn't rational. Sadly however it became all to real.

You have to ask yourself , are we crazy now or were we crazy before and have just realized how crazy we were?

What we really need is a Chief Shrink, or Czar in current parlance, who can talk us down from our panic before the panic turns into a real live rationally based crisis.

I read somewhere about a developing science of analyzing ,and of course benefiting from, this sort of market mass psychosis. The problem is that people and markets don't always act rationally, and the trick is not to think in a rational way but rather in an emotionally based way.

At the time of the subprime loan panic, the default rate for commercial mortgages (CMBS) was .4% (that's right point 4% not 4%) and stayed that way for many months. There was no rational reason to panic just because less credit worthy borrowers who may have been "tricked" or certainly enticed into taking out loans they couldn't afford to repay began to default on their mortgages. Nevertheless the market value of CMBS securities plunged because residential(RMBS) subprime loans began to default. Of course once the value of the securities plunged and the recession began those commercial loans are now increasingly going into default. But what came first?

I remember listening to a story at the time the CMBS default rate was .4% but the subprime crisis was in full stride. This story was recounted by the chief economist for Wachovia. He told me about a Swiss debt trader who approached his boss about an opportunity to buy mortgage back securities at an attractively discounted price. His boss said absolutely not. The trader persisted and said that the pool of securities in question had no subprime loans of any type in them. The boss emphatically said no again. When the trader again pointed out that not only were there no subprime mortgages but that there were no residential mortgages at all in the pool, the boss asked whether the word "mortgage" was in the name of the securities. When the trader replied that yes these were commercial mortgages, the boss ended the conversation by saying if you bring me any investment again with the word "mortgage " in its name you are fired!

Of course, the boss turned out to be right because once everyone stopped buying anything with the word "mortgage" its name the whole market value for those securities crashed. Eventually this lead to the crash of the whole market which lead to the slow down in business activities which lead to the lay offs of millions of workers which lead to a real recession which in turn lead to the impending crash of the commercial real estate market with the result that CMBS default rate is now predicted to go to 8.5% by June.

Either that boss in Switzerland was very very smart or understood what can happens in a panic or was just lucky in avoiding the consequences of the crash he helped create. In any event how do you "calm" the markets before the panic takes over? Maybe we need a shrink to tell us "just because something bad happens that the world isn't falling apart and if we only refrain from panicking everything will be just fine". Since rationality and logic didn't seem to work--- remember those commercial properties were just fine - full of busy workers who received pay checks which they used to buy things and travel and the like - until a group of home buyers with less than stellar credit began defaulting on their crazy mortgages they were "tricked " into getting, that the government should never allowed to be made in the first place. As the guy from Saturday Night Live would say --- What's Up with That?

Who knows maybe a Psychiatrist-in-Chief or a Shrink Czar is what we really need.


Tuesday, March 2, 2010

On second thought

In light of AIG's sale of it's Asian subsidiary to Prudential UK for $35.5 B and its expected deal to sell another US subsidiary to Met Life for $15B, the government has sharply reduced its estimate of TARP losses.

However, the thing that caught my eye in reading an article on this subject today was the following:

"The unlikely stars of the bailouts are the US Banks, which have paid back their capital infusions faster than many analysts anticipated when TARP was launched in 2008." One analyst noted that "everyone loves to bash the banks, but that is not where the problem is." He called the return on the government's investments in the Banks a "home run".

Even when things like this make the press, and even when people read or hear the facts; nevertheless, taking their cue from politicians and the press, they still talk about all the money we just gave the Banks. It's as if they just got to keep it for free (like other government programs).

If it sounds like I'm a cheerleader for the Banks, you haven't read all my posts. There is no doubt we are suffering through the greatest economic recession I have ever seen. Some of the conduct of some financial entities share significantly in the blame , but this crisis was brought on by more than just the Banks.

As I wrote in the beginning, my intent in doing this blog is to reveal facts that are overlooked because they don't fit conventional popular views. Unfortunately, so many of those unpopular facts these days relate to Banks.


Friday, February 5, 2010

Time Out

We all hear the negatives about our country everyday in the press and from our critics, politicians and protesters. Economic inequality, crime, costly wars, discrimination and intolerance, lack of qualified honest political leaders, rapacious capitalists who manipulate and distort our free market economy, too much debt at all levels of society, housing crisis, damage to the environment, poverty, safety of our food supply, homelessness, lack of affordable health care for all, deficient education system below college level, infrastructure in dire need of repair, poor mass transportation, partisan politics and distrust of government and institutions.

In these economically troubled times, while taking all of our many flaws as a given which needs to be remedied , let's take a moment to recount our assets and consider our economic future in the world light of these assets.

Our assets,in no particular order:

Large agriculturally rich and fertile land,

Vast natural resources,

Fresh water in abundance,

Large, diverse, growing population; appropriate for the size of our land mass,

Greatest number of world class universities and colleges,

Free and open democratic process which is relatively corruption free,

Freedom and equality for women and minorities,

Relatively tolerant and expansive attitude towards legal immigration

Economy created and sustained by innovative, entrepreneurial and hard working citizens who have an optimistic belief in our future,

Leadership and innovation in scientific and technology research and development,

Open and relatively transparent bond and equities markets,

Vast and deep capital markets,

US Treasuries still considered world's safe haven,

Dollar as world's reserve currency,

Strong military under unquestioned civilian control,

Common language,

Absence of sectarian strife,

Comparatively high standard of living, even for the poorest among us,

Absence of real hunger,

First class health care system for the vast majority,

Vibrant commitment to the arts and culture, along with a dynamic entertainment industry,and

Importantly, the rule of law which underpins our freedoms, including the freedoms embodied in our Constitution, protected by an independent judiciary and effective law enforcement.

Let's compare our assets to other major nations of the world at this time in history. I was going to do a whole matrix-like chart, but it takes too much time and would be at least somewhat controversial. I think you all can "do the math in your head" to see how we compare.

Again in no particular order :

1. China

2. India

3. Germany

4. Japan

5. France

6. England/UK

7. Brazil

8. Canada

9. Australia

10. Nigeria

11. Iran

12. Middle East

13. Scandinavia

14. Russia

15. Italy

16. Spain

17. South Africa

18. Mexico

19. Venezuela

20. Indonesia

21. Southeast Asia

22. Turkey

23. Israel

Our resources are within our borders, unlike Ancient Rome and Imperial England, and therefore we are not dependent on others (even oil if we really had to). I'm sure I left out many other assets, so let me know.

Our country has many strengths and virtues which will get us through these difficult economic times and beyond. It's good to take time and remember that every once in a while.


Wednesday, February 3, 2010

Krugman and Me

I was pleased to read Paul Krugman's January 31, 2010 Op Ed piece in the NYT on lessons learned from Canadian Banks. He explored the reasons why Canadian Banks have held up well in this crisis . I don't usually agree with Paul, so I was very surprised about what he said in that article.

First, he dispelled the notion that our financial crisis was caused by low interest rates. Canada's rates were low as well.

Second , contrary to Paul Volcker's view about size and scope of US financial institutions, the problem was not that our banks were "too big to fail". He noted that essentially there are only 5 banks in Canada and they are all too big to fail. I hope he remembers these points when he starts bashing Big Banks again.

No, he stated the problem was rooted in lax regulation of mortgage lending and noted that Canada had "sharply restricted subprime type lending".

The list is growing-- Bernanke, Blair and now Krugman all agree that subprime lending, which was not done by Big Banks, was the trigger that set off the financial crisis which lead to the Great Recession.

The question now turns to why subprime lending in this country was not (to borrow a phrase from Krugman's description of the Canadian experience) " sharply restricted"?

One clue comes from what I heard Tina Brown say on Morning Joe today. She observed how the politicians had done such a wonderful job of deflecting the economic crisis from them to the Big Banks. Wow, Tina Brown said that?

Yes , it was the government that allowed this crisis to occur and it wasn't because Big Banks pushed subprime lending. There were other politically powerful interest groups beyond Wall St. who promoted subprime lending and fought against restricting it as the Canadians did.

It was the "American dream" that everyone should own a home, even if your credit was not good enough to get a properly underwritten loan. In Canada home loan borrowers must put down at least 20%. Some of our unregulated "fly by night" mortgage lenders not only didn't require anything down, but often offered loans in excess of the purchase price. Also, I'm sure Canadian banks didn't allow "liar loans" or loans to people with no incomes, no jobs and no assets.

So what we really need is more regulation and enforcement of rules governing the riskiest thing banks do --- make loans.

As a finance attorney I know that once the money goes out the door to the borrower the biggest risk the lender has is getting its money back. That's where our regulatory efforts need to be focused. Unfortunately, as another guest on Morning Joe said this morning--- that will mean it will be harder to get loans and that won't be so great for the economy.

However to paraphrase Aristotle--All things in moderation.


Thursday, January 28, 2010

Change we need

Change we really need. -- Change Congressional leadership of both parties

Why can't we get new leaders in Congress? The antiquated seniority system by which Congressional leadership is chosen stands in the way of change. Reid and Pelosi along with their Republican counterparts are certainly not about change. They are standing in the way of any attempts for bi-partisanship building. Let's face it, they hate each other.

Let's get new leadership in Congress and maybe something can get done for the good of the country.


Thursday, January 21, 2010

Missed it?

Why do I only see these article in the Financial Times ( of London), as headline articles, and not in US newspapers:

Today it was reported that the Obama administration made $4 Billions dollars on the sale of warrants in banks with groups led by Goldman Sachs paying over the market rate.

Yesterday it was reported that "The Federal Reserve is sitting on billions of dollars of paper profits from its controversial effort to unwind credit default swaps AIG provide to banks like Goldman Sachs".

If it was reported, I guess I ( and most of the rest of the country ) missed it. It certainly didn't make the headlines.

Don't get me wrong, I think the unregulated CDS market really was the "weapon of mass destruction " that help bring us down; but good news is good news and shouldn't be hidden from the American public.


Wednesday, January 20, 2010

Inconvenient Truths

Let's sum up my prior posts and try to make some sense of this whole thing with the Banks. By Banks, I mean large commercial banks like JP Morgan Chase, Citi, Wells Fargo, Bank of America and US Bank; you know the guys the government wants to tax to get back the TARP money lost by GM, Chrysler and AIG. I have referenced my prior post if you want to check back.

1. We now know that the Banks did NOT make subprime loans. Neither did Investment Banks. Those loans were made by unregulated or loosely regulated companies that are now all out of business. See Bernanke and Me and Who Dropped the ball? Posts.

2. The Banks did NOT sell those loans to Wall St. Same guys who made the loans did and they are now gone.

3. The Banks, along with Investment Banks, did engage in the issuance of securities that were backed by those mortgages; HOWEVER, it was the Banks and Investment Banks who actually BOUGHT those "toxic assets" based on ratings of AA and AAA, and thereafter LOST billions of dollars on them when the housing market crashed. The Banks were encouraged to buy them by government regulations. See discussion of Recourse Rule from Basel I

4. Quite clearly executive compensation ( which I too believe is way too high) had nothing to do with causing the whole financial crisis. The Banks have become the "whipping boy " for politicians and pundits who either don't know ( most politicians) or choose to ignore(some pundits like NTY) the facts. Further punishing them can only punish ourselves. See Bonus Madness post

5. Now we can't tax the housing industry.

6. The guys who made and sold the subprime loans are out of business, so we can't tax them.

7. Most of the guys who securitized the mortgages are also out of business-- Lehman Brothers, Bear Stearns, Merrill Lynch, Wachovia, Washington Mutual and Countrywide -- all gone or taken over at a fraction of their one- time value.

8. So let's tax the Banks and the Investment Banks who suffered all those losses to the point that the government had to step in and support them with loans, which have all been PAID BACK with interest and warrants.

9. In fact (hold on to your hats) an argument can be made that the Banks were actually victims in this crisis. While victims is too strong of a word, as I have learned in my reading, the Banks bought the mortgage backed securities at the "urging" of the government. Since they were rated AA or AAA ( Recourse Rule in Basel I)they were given favorable treatment by the regulators for purposes of capital and leverage. Oops !! When the "shit hit the fan" on subprime loans, the housing market crashed and the value of those "safe" securities plunged. The Banks lost Billions, at least on paper. So began the downward spiral That's what the Morgan Stanley guy so graphically and inartfully was tying to say when he said" we ate our own cooking and it choked us". See "Skin in the Game" post.

The Obama administration, The New York Times, among many others, feel the Banks and Investment Banks should be taxed, and taxed some more, because they caused this terrible crisis we are all suffering through. I know it feels good.

My problem is that they have assumed their conclusion. They are correct if their conclusion is correct. However, they assume that the actions of the Banks( the ones they want to tax) caused this crisis. As set out above, that's far from clear. I believe, as does Ben Bernanke and Shelia Bair , that the crisis was caused by SUBPRIME LENDING and the failure of regulators to enforce EXISTING regulations.

The crisis went viral because of the UNREGULATED Credit Default Swap market. As an aside Credit Default Swaps were illegal until the Clinton administration ( with Republican help) made them legal and did not allow them to be regulated. Recall as well that AIG isn't a Bank.

Too bad we can't tax the government.

Let's all remember that "saving" the banking system actually saved the economy, including most importantly main street, from an even deeper recession. Image if the Fed and the government had not taken the action it did. See Are You Happy Now? post.

While we definitely need regulatory reform that improves (not impairs) the banking system, it won't be accomplished by taxing big Banks and taxing won't create jobs.

By the way, as this goes to press, Bank of America and Citicorp announced Billion Dollar losses. Where are the wind fall profits to tax?


Friday, January 15, 2010

Who dropped the ball?

The head of the FDIC, Shelia Baird said in her congressional testimony yesterday that "much of the crisis may have been prevented" had the Fed dealt with subprime mortgages seven years before it did. As you know, that it is my view as well, and as you recall Fed Chairman Bernanke said the same things a few days ago. Of course he didn't blame the failure to take action to rein in subprime mortgages on the Fed. Not sure who he blamed.

This "exchange" by regulators may be even more instructive than their joint determination that subprime lending was the spark that set off the financial crisis which in turn has lead to the real recession we find ourselves still in.

In baseball we call that the Old Alphonse Gaston Act. Meaning each outfielder thought the other outfielder was going to catch the ball, but neither did. It sounds like Bair and Bernanke ( and Schiller) agreed on the cause, they just thought the other (or someone else) was supposed to "catch the ball". If regulatory reform is needed maybe we should start there.


Thursday, January 14, 2010

Bonus Madness

It appears that I need to clarify my own views to my "audience" on the issue of compensation. I have always believed that traders, investment bankers and top executives have become wildly overpaid ( this does not include regular real commercial bankers).

On the other hand, I don't believe their compensation was the root cause of this crisis. Take a look at my early posts and the ensuing comments. The collapse was caused by the bursting of the housing bubble which happened as a result the failure of government to enforce existing regulations applicable to subprime mortgages and unregulated credit default swaps.

Nevertheless, it is my view that the extremely high levels of senior executive compensation has been harmful, and particularly destructive for my industry, the law, as equally "smart" lawyers attempt to keep up with their business clients. The things law firms have done to keep up with their business counterparts have done great harm to what once was a learned and collegial profession. The practice of law now is more just like another bottom line business. I blame high corporate compensation to a large degree ( not just in banking-- look at CEO and other senior exec comp). We felt we had to keep up.

Regular bankers never used to be very highly paid. They did fine, but it was never considered a high paying job. Rather being a banker was thought to be a stable job with good but not great pay, with good retirement benefits and tenure. Interesting how that has gotten completely turned around.

Investment bankers were the guys who got the big bucks, but back then at least they owned their firms as true partners. Therefore they were risking their own capital and if they reaped the benefits, at least they took the risk/losses as well. Needless to say they were a lot more careful.

How did this all change? First investment banks went public, so they were now in large part risking "other peoples money". In addition since they were no longer partners and couldn't earn profits, they got paid extremely high bonuses from gross profits ( before the net profits were finally given to the shareholders). If they lost money, no matter; that hit the shareholders ( which often included themselves - but they still got their compensation in all events). There is a great article by Michael Lewis in November 2008 where he interviewed the former head of Salomon Brothers who made that very point.

Second, as I said, regular commercial bankers never made that much money. Recall how modestly profitable the core business of banking is. However when Glass Steagall ended ( and even before, using good lawyers), commercial banks got into investment banking. They too starting paying themselves mega bucks just like investment bankers did.

Of course, this all begs the questions as to why any of them are entitled to such out sized compensation. It's all very incestuous with boards and consultants and the like, but my guess is it's the shareholders who, as always, were asleep at the switch. Remember who would get all that bonus money if it doesn't go to the executives--- to the shareholders or to build up capital. However , I read somewhere that shareholders who had widely diversified portfolios wanted the bankers to take big risks so they could make big profits ( even after paying out big bonuses) and felt that as long as they were diversified they could absorb whatever losses might arise. Of course that was before the Great Recession.

Can we turn the clock back? Do we want to?


Tuesday, January 12, 2010

Happy Now?

Here's a future news story that should make the American public, pundits and politicians happy:

"Banks announce record losses today and cancellation of all bonuses.

The Dow Jones plunged to below 4,000 with resulting massive losses in all 401(k)s, employee pension funds and other pubic investment vehicles.

Housing prices dropped another 40% with complete shutdown of lending by weaken banks.

Jobless rate approaches 20%."

At last the public, pundits and politicians are happy because they really socked it to Wall St and those Bankers. Boy does that feel good.


Friday, January 8, 2010

Show Trials

What really bothers me about treating these terrorists as criminals, rather than enemy combatants, is that it debases our legal system and sets us up for ridicule. It is clear to me from comments made by the Attorney General and progressive members of Congress, who prefer the criminal law approach, that this process will be correctly viewed as "show trials" and as such does more harm to our system than dealing with this as war.

When asked about what would happened if Sheik Khalid Muhammad et.al. were found not guilty,or if the case was dismissed because their rights were violated, Eric Holder responded by saying "Don't worry we have lots of other things to charge them with, they'll never be let go". That sounds like this is going to be a show trial to me and does us no honor.

A progressive NYC Congressman said "Let's try them and then we'll kill them". That too sounds like something from what we hoped was the distant past ( or different geographic location) and certainly doesn't uphold our legal principles.

Just recently the conviction of the so called 19th 9/11 hijacker was upheld on appeal. What would have happened if it wasn't upheld? Does anyone think we would have let him go.

Let's do away with this charade ( which actually does hurt us in the short run when they have the right to remain silent, etc) and recognize this for what it is--war. As such we have the Geneva Convention, but I as wrote previously, a third way is needed. I'm not so sure Military Tribunals are the answer either, but the answer sure isn't treating them are ordinary criminals and giving them show trials that the world will readily see through as such.

Also let's remember the basic philosophy of our criminal justice system. We believe that it is worse ( meaning harmful to society) to convict an innocent person than to let a guilty person go free. That's why the standard is guilty beyond a reasonable doubt, and we have strict rules regarding admissibility of evidence, impartial jury of one's peers and the right to remain silent.

Does that overriding principle apply to foreign (or domestic) enemy combatants? Sure they need to have the right to counsel and a hearing, but mostly to ascertain that we have captured the right guy and not someone who was mistakenly picked up or was out and out framed. Applying our rules of evidence and other procedures, and our very strict standards for conviction, just doesn't work; unless the trial becomes a "show trial" complete with a "hanging judge and jury".

I'd like to hear your views.


Tuesday, January 5, 2010

Bernanke and Me

In New York Times' front page article, January 4, 2010, captioned "Lax Oversight Caused Crisis", Fed Chairman Bernanke is quoted as saying "Borrower's chose, and were extended , mortgages that they could not be expected to service in the longer term." Bernanke concluded that poor underwriting ( think NINJA/no docs loans ) and lax regulatory supervision ( the rules were there , just not applied ) was the cause of the housing bubble that lead to the financial panic which in turn lead to the real recession we are suffering through.

Likewise according to the Financial Times the same day, Bernanke said "exotic new mortgages and lending to borrowers who could not hope to repay their loans were the chief causes of the sharp increase in home prices that ran from the late 1990's until 2006 and whose collapse hurt millions of Americans."

With all due modesty , I believe that was what I said in my first posting about subprime loans being the spark that set off the conflagration. Of course we could both be wrong.

Now if he will just tell us why that was allowed to happened. Why didn't the government crack down on this kind of irresponsible lending? My theory is that it was more than just greed, although greed certainly played a part.


Monday, January 4, 2010

Prescription Drug Ads and Your Doctor

Drug ads and prescriptions drugs. How is this allowed? Only doctors can prescribe these drugs in the first place, so why are these ads directed to the general public, instead of the doctors?

If your doctor thought you needed it, they would prescribe it. I know what they are trying to do and I think it is wrong. They are trying to have the patients put pressure on their doctor to take their drugs.

They say "ask your doctor" , of course, they are the only ones who can prescribe medications! Talk about someone "getting in between you and your doctor". These are medical decisions and not a proper subject for general advertising.

Let me hear it from you doctors out there.