Revolted Colonies

U.S. Politics and Culture

Category: Main Street

Beltway Media, Are You Listening?

Despite all the self-flagellation over  missing the story of the 2016 Presidential election, the pundits of the Beltway still don’t seem to get it.  Last night, the President gave a speech to – or past – a joint session of Congress.  Past, because it was not really intended for the members.  He spoke of American greatness and American destiny, which have been forfeited by the Obama administration.  Trump, in effect, gave an update of his stump speech. Then, former Kentucky Governor, Steve Beshear, followed with the Democratic response, from a diner in Lexington, Ky. Surrounded by a few customers presumably or hostages, perhaps,   Beshear, elderly, dressed in a cardigan, a Mr. Rogers for the People, peered at the camera with his pale blue eyes and grandfatherly smile, telling the President and the audience that, in spite of the Presidential breast-beating, in the first month of the new administration, nothing has been done to help working families.  

The pundits pounded away on both Trump and Beshear. Trump brought nothing new, no detail.  Apart from a Justice Department task force on violence, which is not targeting hate crimes, he proposed no steps to curb the racial and anti-Semitic violence he finally condemned.   The rest of the speech was aspirational, laying out his agenda and asking for a bipartisan Congress to act on it.  “Act on what?” cried the pundits, who pointed out that Trump peppered his statement with 51 misstatements of fact during a 60-minute speech.  

Beshear, they complained, was a dumb choice; a Bobby Jindal moment for the Democrats, who should have pushed forward one of their young Turks: Christopher Murphy, one of the Castro brothers, even Chuck Schumer for crying out loud!  Beshear is a slow, old tub, when what they need is a turbo-charged speedboat.

As Archie Bunker would have said, “Wrong again, Maude!”  Beshear and Trump were both speaking over the heads of the pundits and politicians, going straight to the heart of mid-America.  Beshear won’t be running for President, but he was there to remind folks that Democrats also live in the heartland, and they are watching out for their neighbors and fellow worshippers.  Before rolling out Democrat 2018, they are trying to claw back some of what they lost in 2016.  Beshear was there to say that the Democrats care, just like a friendly Grampa, not like that Wall Street-loving plutocrat in the White House.

The Beltway media need to get out a little more and talk to somebody besides each other.  The two parties know where control of power lies, and they are reaching out to connect to Uncle Henry and Auntie Em.  The pundits are fact-checking when they should be minding the storm-cellar.

Opening Move

Following his inauguration, President Trump signed two executive orders. One of them canceled an upcoming premium cut on borrower’s insurance for FHA mortgages. The premium cut, of 25 basis points, would have lowered borrower’s costs at a time when mortgage rates are rising. For the borrower, the premium cut would have held down overall monthly costs on new loans. For the FHA, however, the cut would’ve reduced the amount of the insurance fund held by the government to cover borrower defaults.

The fund must be at least 2% of the government’s mortgage obligations. The insurance fund right now stands at 2.32%, slightly more than the minimum. By canceling the premium cut that was to take effect next Friday, the administration has made a conservative move to increase reserves against defaults.

For the new homeowner, rising rates will push up the entry cost of home ownership. The homeowner will have less buying power with a higher mortgage rate and no reduction in the insurance premium.

This is not a sexy issue, not the kind of thing that ever would’ve been discussed during the campaign, even if the campaign had been normal. It reflects conservative thinking about government-backed obligations. It may reflect administration thinking about the strength of the housing market and the underlying strength of employment. By canceling the cut on the mortgage insurance premium, Trump has provided the government with a greater cushion against defaults by borrowers. You would expect this move to have a slight dampening impact on new home purchases. On the other hand, if you believe that new home sales were artificially stimulated by keeping costs down, this move would prevent a bubble in housing starts.

Because the insurance rate can be cut later, this move does not figured to be a very big deal. It reflects conservative thinking about government obligations relative to the minimum requirement And the rate environment. If employment figures remain strong and real wages hold or increase, a cut in the insurance premium rate could be warranted in the future. As a lender or a guarantor, there is no reason for the federal government to cut its cushion to the minimum.

A buyer would be wise to put borrow less — buy a less expensive home or put up a higher down payment. That would lower the carrying cost, making the loan less risky from a lender’s point of view.

Hoosier Daddy? Carrier Will Keep Half of Jobs Slated to End

CarrierLater today, P/E Trump and Carrier will announce that 50% of the 2,000 jobs set to be outsourced to Mexico will be retained. There are no details available yet, but there appears to be a defense-budget stick used on United Technologies, the corporate parent, and some Hoosier carrots, delivered by Indiana. VP/E Pence remains the Governor. Kudos to Trump for saving these jobs.  

There are special factors at play here: the defense contract tie-in, Pence’s ties to the state, and the fact that keeping the jobs will mean only $.02 on Carrier’s profits of $6.50, less than half of 1%. In other words, the Carrier “deal” is a one-off. 

The jobs saved are high-paying, with hourly rates in excess of $20.00. Even with high-paying labor costs, Carrier shares are earning $6.50. Carrier is profitable without moving any of the jobs. 

 So why the impetus to move?  Wall Street earnings, competition, the lack of effective collective bargaining.  All but forgotten is the fact that disappearing jobs mean disappearing consumers. But that is beyond the horizon of the next quarterly earnings forecast. No need for this manufacturer to think about it. 

 

 

 

Randolph and Mortimer Sit This One Out



Paramount Pictures 
The infamous Duke Brothers of the eponymous Philadelphia commodities firm will not be endorsing Republican nominee Donald Trump, according to a press release issued by the firm and read aloud this morning by Curtis Biddle Rittenhouse IV, the firm spokesperson.  “Mr. Randolph and Mr. Mortimer have decided that they do not like the cut of Mr. Trump’s jib.  In fact, they wonder if he even has a jib.  Accordingly,” the release continued, “the firm of Duke & Duke cannot in good conscience support or endorse Mr. Trump.”  In responding to a follow-up question, Mr. Rittenhouse  was unable to recall when either of the Dukes last had done anything in good conscience.  “They seem to be quite serious about this, however.  They were refining their announcement over brandies.”
The Dukes decided that a Trump Presidency would be “déclassé.  Furthermore, Mr. Trump presents a threat to the survival of the Republic, perhaps a greater one than we do ourselves.”  The Dukes, who shorted the subprime mortgage market “quite by accident,” according to Mr. Mortimer’s memoir, were able to recoup a portion of their catastrophic losses from the Frozen Orange Juice Hoax of 1982, working their way up from rock bottom due to the charity of a visiting African Prince. “Damned lucky, that,” Mr. Mortimer was quoted at the time.  They were able to parlay the small sum of $10,000.00 into a portfolio estimated at $850 million, considerably less than their original stake but enough to pay up their dues at the Union League.
The Dukes had been unaware of the Trump candidacy, or of Trump himself, until a Biddle nephew informed them that the Harvard Republicans had spit the bit. Mr. Randolph, stumbling into the press conference while looking for the men’s room, joined in briefly. “Chip Biddle, Grace’s boy, is working in the firm this summer,” he said in reference to Charles Rittenhouse Biddle II. “Well now, he let slip that their little campus club had had a serious talk about this Trump fellow.  They don’t like him one bit. A Wharton man, it turns out.” Trump is a graduate of Philadelphia’s Wharton School but does not hold its prestigious M.B.A.  “It wouldn’t have changed a thing,” Mr. Randolph added. Only 10% of Harvard GOPs are supporting Trump.  The Dukes are paired off with the 90% who have decided not to vote for either party.
“We’d asked Mitt to give it another try but he thought we were just chatting him up. Then we had lunch with that nice Grover Norquist.  He suggested that we become familiar with this Fiscal Cliff fellow, but we declined.  We don’t know the family.”
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