Long-term, buying builds equity. But short-term, renting has some advantages.
To make a comparison, take the cost of rent over a few years and the cost of home ownership. For the home, add up the down payment, the monthly mortgage payment, how much you expect the home to go up in value, the costs of maintenance and insurance, the tax savings because mortgage interest is deductible and the cost of selling the home in the future. You can compare all this to what you would earn if you'd put all that money into investments.
While it's tempting to go online and use one of the many rent vs. buy calculators, you should not take their results as the complete answer. That's because national averages for property taxes and insurance that are built into these calculators are likely to underestimate what South Floridians actually pay.
It's probably best to do the math yourself. Check with property tax assessors and insurers to get realistic estimates.
Then you could use the online calculators as a model for the items you should consider. Three sites that have rent vs. buy calculators are www.dinkytown.net, www.ginniemae.gov and www.bankrate.com.
— Harriet Johnson Brackey
SOURCE: sun-sentinel.com
Saturday, December 8, 2007
How to Reduce 'Purchase Anxiety'
Make visitors feel more comfortable buying from your site with these 8 tips.
You know that moment when you're thinking about buying something, but you're just not sure if you should pull out your wallet? That's "purchase anxiety." Most people feel it at some point, especially when they're buying a big-ticket item. Or when they're buying something over the internet.
Online shoppers tend to suffer from purchase anxiety more than offline shoppers. After all, when you buy something over the internet, it's often a product you've never seen before sold by a person you've never met before.
Here are some very simple elements you can add to your site that will reassure your visitors you're a reputable business offering a quality product--and that will get them to click that order button.
1. Include proof that you value and protect their privacy. Identity theft and credit card theft are the two biggest fears that limit and even prevent people from shopping online, according to the market research firm TNS. Make sure you include a privacy policy on your site, reassuring people that you will never share their personal information with anyone.
In addition, process all purchases through a secure server, so that no other computers are ever able to access any of your purchase information. You can go even further and include "security seals" on your site, reassuring visitors that you have done everything possible to protect their site from hackers. Some of the more popular security seals are VeriSign, TRUSTe and Hacker Safe.
2. Add testimonials to your site. Nothing reassures visitors like testimonials from real people who can vouch for the quality of your product. And yet so few business sites actually have testimonials.
Why? Because they don't ask for them. It can feel awkward to ask people to say nice things about your product or service. But testimonials have so much trust-building power that you should go out of your way to get them.
When you request a testimonial, ask if it's OK for you to include as much information about the testimonial provider as possible. Along with the testimonial, include the person's:
* first name;
* last name;
* city;
* picture, if possible; and
* URL, if possible.
However, this much personal information isn't necessary for every industry. For example, if your business helps people dealing with alcoholism, eating disorders or similar problems, then your testimonial providers won't want to reveal that much information about themselves. In that case, a first name and initial is probably good enough. Stick with the conventions within your industry.
If you want to know more, here's an earlier column with details about adding testimonials to your site.
3. Be specific. When talking about statistics or results, always be as specific as possible. It makes your copy seem more credible.
For example, if you sell a weight-loss product, don't say that it helped one client lose "more than 100 pounds." Say that it helped her lose 107 pounds.
The more accurate you are, the more realistic your claims will be.
4. Citing a statistic? Include your source. If you include statistics or other forms of industry information to back up the claims in your copy, be sure to cite your source of that information.
Let's say you sell natural fiber carpets, and you recently read an article in the American Journal of Public Health about childhood asthma being aggravated by indoor pollutants. Include that information on your site--and cite the American Journal of Public Health as the source of that information.
When you cite a reputable source of information, you borrow their credibility. And that builds your own credibility.
5. Include your contact information. Imagine that you go to a website and find a product you want to buy, but you have a few questions you want to ask about it first. Then when you look for some way to get in touch with the business owner, all you can find is an e-mail address. Nothing screams "shady" like a lack of contact information.
Be sure to include your full name, street address, phone number and e-mail address--and link to that information from every single page on your site. You might even want to invest in a 1-800 number. By showing you're willing to pay for people to call, you prove that you'll do whatever it takes to address their concerns.
6. Include certification from reputable organizations. If you belong to any professional or business organizations, such as the Better Business Bureau, include prominent mention on your "About Us" page. Just make sure you don't feature only local organizations; the internet is a global medium, and if you want to sell to international visitors, you have to come across like an international business.
7. Let your customers know who you are. People want to buy from someone, not something. So help them get to know you. Your visitors want to know something about you that relates to your industry. How long have you been in this business? What made you get into it? Why do you enjoy it?
Also be sure to include a photo of yourself on your "About Us" page, as well as a photo of your employees or the office where you work. The effort you put into making yourself seem more real to your visitors will definitely pay off.
8. Follow up after the purchase. Purchase anxiety doesn't end with the purchase. There's another syndrome called "post-purchase anxiety." You can alleviate it by keeping your customers informed until your product is in their hands.
Your order confirmation page, confirmation e-mail, shipping information and receipt are all opportunities to let the customer know that you're on the case.
Even better, you can use each of these to reassure customers that they've made a smart purchase. You can re-state the benefits of the product or give them further information about it. Include your contact information again and state that you'll answer all questions.
If you don't already have these elements on your site, add them as quickly as you can. The shoppers are out there in full force right now. Online retail buying is expected to account for 22.7 percent of all holiday shopping this year, according to eMarketer.com. So make sure when shoppers get to your site, they feel confident they can buy from you.
SOURCE: msnbc.msn.com
You know that moment when you're thinking about buying something, but you're just not sure if you should pull out your wallet? That's "purchase anxiety." Most people feel it at some point, especially when they're buying a big-ticket item. Or when they're buying something over the internet.
Online shoppers tend to suffer from purchase anxiety more than offline shoppers. After all, when you buy something over the internet, it's often a product you've never seen before sold by a person you've never met before.
Here are some very simple elements you can add to your site that will reassure your visitors you're a reputable business offering a quality product--and that will get them to click that order button.
1. Include proof that you value and protect their privacy. Identity theft and credit card theft are the two biggest fears that limit and even prevent people from shopping online, according to the market research firm TNS. Make sure you include a privacy policy on your site, reassuring people that you will never share their personal information with anyone.
In addition, process all purchases through a secure server, so that no other computers are ever able to access any of your purchase information. You can go even further and include "security seals" on your site, reassuring visitors that you have done everything possible to protect their site from hackers. Some of the more popular security seals are VeriSign, TRUSTe and Hacker Safe.
2. Add testimonials to your site. Nothing reassures visitors like testimonials from real people who can vouch for the quality of your product. And yet so few business sites actually have testimonials.
Why? Because they don't ask for them. It can feel awkward to ask people to say nice things about your product or service. But testimonials have so much trust-building power that you should go out of your way to get them.
When you request a testimonial, ask if it's OK for you to include as much information about the testimonial provider as possible. Along with the testimonial, include the person's:
* first name;
* last name;
* city;
* picture, if possible; and
* URL, if possible.
However, this much personal information isn't necessary for every industry. For example, if your business helps people dealing with alcoholism, eating disorders or similar problems, then your testimonial providers won't want to reveal that much information about themselves. In that case, a first name and initial is probably good enough. Stick with the conventions within your industry.
If you want to know more, here's an earlier column with details about adding testimonials to your site.
3. Be specific. When talking about statistics or results, always be as specific as possible. It makes your copy seem more credible.
For example, if you sell a weight-loss product, don't say that it helped one client lose "more than 100 pounds." Say that it helped her lose 107 pounds.
The more accurate you are, the more realistic your claims will be.
4. Citing a statistic? Include your source. If you include statistics or other forms of industry information to back up the claims in your copy, be sure to cite your source of that information.
Let's say you sell natural fiber carpets, and you recently read an article in the American Journal of Public Health about childhood asthma being aggravated by indoor pollutants. Include that information on your site--and cite the American Journal of Public Health as the source of that information.
When you cite a reputable source of information, you borrow their credibility. And that builds your own credibility.
5. Include your contact information. Imagine that you go to a website and find a product you want to buy, but you have a few questions you want to ask about it first. Then when you look for some way to get in touch with the business owner, all you can find is an e-mail address. Nothing screams "shady" like a lack of contact information.
Be sure to include your full name, street address, phone number and e-mail address--and link to that information from every single page on your site. You might even want to invest in a 1-800 number. By showing you're willing to pay for people to call, you prove that you'll do whatever it takes to address their concerns.
6. Include certification from reputable organizations. If you belong to any professional or business organizations, such as the Better Business Bureau, include prominent mention on your "About Us" page. Just make sure you don't feature only local organizations; the internet is a global medium, and if you want to sell to international visitors, you have to come across like an international business.
7. Let your customers know who you are. People want to buy from someone, not something. So help them get to know you. Your visitors want to know something about you that relates to your industry. How long have you been in this business? What made you get into it? Why do you enjoy it?
Also be sure to include a photo of yourself on your "About Us" page, as well as a photo of your employees or the office where you work. The effort you put into making yourself seem more real to your visitors will definitely pay off.
8. Follow up after the purchase. Purchase anxiety doesn't end with the purchase. There's another syndrome called "post-purchase anxiety." You can alleviate it by keeping your customers informed until your product is in their hands.
Your order confirmation page, confirmation e-mail, shipping information and receipt are all opportunities to let the customer know that you're on the case.
Even better, you can use each of these to reassure customers that they've made a smart purchase. You can re-state the benefits of the product or give them further information about it. Include your contact information again and state that you'll answer all questions.
If you don't already have these elements on your site, add them as quickly as you can. The shoppers are out there in full force right now. Online retail buying is expected to account for 22.7 percent of all holiday shopping this year, according to eMarketer.com. So make sure when shoppers get to your site, they feel confident they can buy from you.
SOURCE: msnbc.msn.com
Can Making Money Really Be This Easy?
The other day some spooky woman appeared on CNBC and predicted that the stock market is going to crash. Frankly, her charts, graphs, and foreboding appearance got me a little nervous.
But is a crash really imminent?
Honestly, I have no idea.
One thing I do know ...
On Oct. 19, 1987, the market did crash, delivering a sucker punch to the stomachs of investors everywhere -- like my father, who spent the entire day sitting on the couch in a suit, silently staring at the television.
Even seasoned pros on the exchange floors stood around dumbfounded, their arms akimbo and eyes wide with disbelief. Janna Sampson, co-chief investment officer at OakBrook Investments, recently told The Wall Street Journal, "I can remember standing in front of a Quotron machine in a crowd of people and mouths were just hanging open."
That's certainly frightening. But get a load of the very next line of the Journal article: "Most investors today have little if any memory of the crash."
Money heals even the deepest wounds
After all, investors who didn't stampede the exits haven't just recovered their losses -- they've made absolute fortunes. Of the 16 companies that have remained a part of the Dow Jones Industrial Average since "Black Monday" ...
* All 16 have at least tripled in value.
* 15 are at least six-baggers.
* 11 have gained 1,000% or more, turning every $10,000 investment into at least $110,000.
You're probably familiar with some of these 10-baggers:
Dow Component
Gain Since Black Monday
Merck (NYSE: MRK)
1,068%
American Express (NYSE: AXP)
1,376%
McDonald's
1,572%
Altria (NYSE: MO)
3,340%
As of Dec. 4, 2007, with dividends reinvested.
So what?
Sure, that kind of performance could just be a fluke, or some sort of investing anomaly affecting only Dow stocks. But what if the real reason is that great companies' stocks invariably grow over long periods of time, despite dips, dives, and crashes?
I decided to look at the stocks David and Tom Gardner have recommended to their Motley Fool Stock Advisor subscribers. After all, the Gardner brothers are renowned for their belief that the surest way to build wealth over time is to buy and hold great companies.
As expected, the top half of their scorecard sported plenty of winners and big gainers, as well as a smattering of laggards -- causing the skeptic in me to smirk slightly. But by the time I got to the bottom, that smirk had faded. Of the 24 picks they made during their first year (April '02 to April '03):
* 23 of 24 are (or were sold) in positive territory.
* 11 have at least tripled in value.
* Three are up more than 500% -- turning every $10,000 invested into at least $60,000 in just five short years.
Talk about a testament to the power of investing over time! And even though none of those 24 is part of the Dow, you'll certainly recognize many of them:
Company
Gain Since Stock Advisor Recommendation
Costco Wholesale (Nasdaq: COST)
90%
Activision (Nasdaq: ATVI)
276%
Marvel Entertainment (NYSE: MVL)
714%
Can it really be that easy to make money?
Well, yes and no. Investing in great companies over the long haul certainly has unparalleled wealth-building power, but finding those great companies is no easy task. Equally as challenging is learning to not let yourself be talked out of the market by some mystic prophesizing doom on cable television.
A trusted resource like David and Tom's Motley Fool Stock Advisor can help you uncover life-changing investments. As for the other part ... well, that's up to you.
I'm going to keep on investing, but if you don't, look me up in 20 years. I'd be curious to know how that works out for you.
SOURCE: fool.com
But is a crash really imminent?
Honestly, I have no idea.
One thing I do know ...
On Oct. 19, 1987, the market did crash, delivering a sucker punch to the stomachs of investors everywhere -- like my father, who spent the entire day sitting on the couch in a suit, silently staring at the television.
Even seasoned pros on the exchange floors stood around dumbfounded, their arms akimbo and eyes wide with disbelief. Janna Sampson, co-chief investment officer at OakBrook Investments, recently told The Wall Street Journal, "I can remember standing in front of a Quotron machine in a crowd of people and mouths were just hanging open."
That's certainly frightening. But get a load of the very next line of the Journal article: "Most investors today have little if any memory of the crash."
Money heals even the deepest wounds
After all, investors who didn't stampede the exits haven't just recovered their losses -- they've made absolute fortunes. Of the 16 companies that have remained a part of the Dow Jones Industrial Average since "Black Monday" ...
* All 16 have at least tripled in value.
* 15 are at least six-baggers.
* 11 have gained 1,000% or more, turning every $10,000 investment into at least $110,000.
You're probably familiar with some of these 10-baggers:
Dow Component
Gain Since Black Monday
Merck (NYSE: MRK)
1,068%
American Express (NYSE: AXP)
1,376%
McDonald's
1,572%
Altria (NYSE: MO)
3,340%
As of Dec. 4, 2007, with dividends reinvested.
So what?
Sure, that kind of performance could just be a fluke, or some sort of investing anomaly affecting only Dow stocks. But what if the real reason is that great companies' stocks invariably grow over long periods of time, despite dips, dives, and crashes?
I decided to look at the stocks David and Tom Gardner have recommended to their Motley Fool Stock Advisor subscribers. After all, the Gardner brothers are renowned for their belief that the surest way to build wealth over time is to buy and hold great companies.
As expected, the top half of their scorecard sported plenty of winners and big gainers, as well as a smattering of laggards -- causing the skeptic in me to smirk slightly. But by the time I got to the bottom, that smirk had faded. Of the 24 picks they made during their first year (April '02 to April '03):
* 23 of 24 are (or were sold) in positive territory.
* 11 have at least tripled in value.
* Three are up more than 500% -- turning every $10,000 invested into at least $60,000 in just five short years.
Talk about a testament to the power of investing over time! And even though none of those 24 is part of the Dow, you'll certainly recognize many of them:
Company
Gain Since Stock Advisor Recommendation
Costco Wholesale (Nasdaq: COST)
90%
Activision (Nasdaq: ATVI)
276%
Marvel Entertainment (NYSE: MVL)
714%
Can it really be that easy to make money?
Well, yes and no. Investing in great companies over the long haul certainly has unparalleled wealth-building power, but finding those great companies is no easy task. Equally as challenging is learning to not let yourself be talked out of the market by some mystic prophesizing doom on cable television.
A trusted resource like David and Tom's Motley Fool Stock Advisor can help you uncover life-changing investments. As for the other part ... well, that's up to you.
I'm going to keep on investing, but if you don't, look me up in 20 years. I'd be curious to know how that works out for you.
SOURCE: fool.com
Teaching Teamwork, but With Real Money
“The first time children make decisions together about significant wealth, it is usually sometime around settling the parents’ estate,” said Mr. Rogerson, the director of family wealth services at BNY Mellon Wealth Management. “That is a bad time for siblings to learn about making decisions as a group.”
Mr. Rogerson, 51, the father of two girls and two boys, has them off to an early start. Six years ago, when they ranged in age from 5 to 15, he and his wife decided to entrust them with $5,000 each year. The children were to invest the money, which would be used for the family’s summer vacation. If the fund prospered, they might “go to Disney World,” he said. “If it stayed flat, we would go around the country and visit family members,” he added. “If the investment fell, there was always a camping trip.”
The family’s investing adventure has included camping trips as well as less spartan vacations — and it has given the children some basic education in finance and in teamwork, Mr. Rogerson said.
The point of the experience — learning to work together to make intelligent decisions about money — is an important one, and not just for wealthy families, several experts said.
Ted Beck, president of the National Endowment for Financial Education, for example, said he and his wife have had their children run several garage sales, mainly to teach them to work together in handling money. People with family businesses may want to have their children work in them part time to gain real-world experience. Merely talking about teamwork and money isn’t enough, Mr. Beck said. “Tying the educational moments to an actual event is when it really sinks in,” he said. “Otherwise, it is way too theoretical.”
It is important to explain how both stocks and bonds work and to teach the art of working together in an emotionally laden family setting, several experts said. “We encourage financial literacy for youth to help lay a foundation for them to learn to manage money and ensure financial stability,” said Jeanette A. Tucker, professor of family economics at the Louisiana State University Agricultural Center. “The teamwork concept helps to strengthen strong families and prevents lots of hurt feelings.”
Such lessons are useful for a family regardless of its financial status, said Joline Godfrey, author of “Raising Financially Fit Kids.”
“It does not matter if the families are eking it out or if they are prosperous,” she said. “Any teaching that goes on for several years gives a clear message that it takes time to build a financial base.” She added: “It is also valuable to be explicit about your values. Otherwise, the kids will adopt the culture of their peers, and that is all about consumption.”
She described Mr. Rogerson’s approach as “a financial Outward Bound.” Faced with a challenge, she said, “they have to try it” and will pick up valuable lessons along the way.
Mr. Rogerson turned his kids into investing guinea pigs in 2001 — a bad year for the domestic stock market, as it turned out. “The kids knew nothing,” he recalled. “They bought stocks like Apple and Hasbro and all these penny stocks at high-tech and toy companies. Their pile went down from $5,000 to $2,000.” That year, he said, “we went camping.”
During the second year, the children were so nervous about “putting Mom and Dad back in a tent again that they eventually put all the money in money market accounts,” he said. “They made $50,” he added. “That year we drove down to Florida to visit family.
“Since we were six people, we stayed at Holiday Inns along the way. We spent the money on motels, food and entertainment. My father lived in Daytona and my wife’s mother lives in Naples. Along the way, the kids made decisions about what kinds of restaurants we could go to.”
BY the third year, the investing bug had bitten, and the children wondered, “How do we invest so maybe we can do something more fantastic?” he said. They had stocks that were more conservative: a diversified portfolio that included large-capitalization stocks. They also had fixed-income investments like bonds. The young investors earned $600 on their $5,000 that year, and the family rented a catamaran and went boating near Mystic, Conn. (choosing it over Disney World). “I would love to tell you they loved it, but it rained all week,” recalled Mr. Rogerson, who is based in Boston.
Mr. Beck said he and his wife, a former banker, were determined to talk to their children about finances at their individual paces, but the couple also wanted them to work together. They settled on garage sales.
“It was interesting to see how they divided up their roles,” Mr. Beck recalled. At an early sale, one daughter, Katherine, then in junior high school, handled pricing because she had already gone to garage sales with friends; she took a leading role in the project.
“What really struck us was that the kids knew each other’s strengths better than we did,” he said. “They split the $100 that they earned, but they agreed not to split it equally because Katherine had done the most.” Mr. Beck was quick to add that projects like this one wouldn’t necessarily interest all children equally. While his children all participated and cooperated well, he said, only Katherine showed real interest in business. She is now majoring in marketing in college.
Of course, convincing children to work together when they are young is no guarantee they will do so as adults. The hurdles are far higher, Mr. Rogerson said. Spouses may complicate matters, and insidious rivalries can grow out of envy and mistrust. But he is convinced that early sibling partnerships, as he calls them, can help counteract those tendencies.
Like Mr. Beck, Mr. Rogerson said that the effort has helped them discover their own aptitudes. “We found that one boy showed great leadership and the other one was great with spreadsheets and tracking information,” he said. “Each had a different focus.”
SOURCE: nytimes.com
SRC="http://kona.kontera.com/javascript/lib/KonaLibInline.js">
Mr. Rogerson, 51, the father of two girls and two boys, has them off to an early start. Six years ago, when they ranged in age from 5 to 15, he and his wife decided to entrust them with $5,000 each year. The children were to invest the money, which would be used for the family’s summer vacation. If the fund prospered, they might “go to Disney World,” he said. “If it stayed flat, we would go around the country and visit family members,” he added. “If the investment fell, there was always a camping trip.”
The family’s investing adventure has included camping trips as well as less spartan vacations — and it has given the children some basic education in finance and in teamwork, Mr. Rogerson said.
The point of the experience — learning to work together to make intelligent decisions about money — is an important one, and not just for wealthy families, several experts said.
Ted Beck, president of the National Endowment for Financial Education, for example, said he and his wife have had their children run several garage sales, mainly to teach them to work together in handling money. People with family businesses may want to have their children work in them part time to gain real-world experience. Merely talking about teamwork and money isn’t enough, Mr. Beck said. “Tying the educational moments to an actual event is when it really sinks in,” he said. “Otherwise, it is way too theoretical.”
It is important to explain how both stocks and bonds work and to teach the art of working together in an emotionally laden family setting, several experts said. “We encourage financial literacy for youth to help lay a foundation for them to learn to manage money and ensure financial stability,” said Jeanette A. Tucker, professor of family economics at the Louisiana State University Agricultural Center. “The teamwork concept helps to strengthen strong families and prevents lots of hurt feelings.”
Such lessons are useful for a family regardless of its financial status, said Joline Godfrey, author of “Raising Financially Fit Kids.”
“It does not matter if the families are eking it out or if they are prosperous,” she said. “Any teaching that goes on for several years gives a clear message that it takes time to build a financial base.” She added: “It is also valuable to be explicit about your values. Otherwise, the kids will adopt the culture of their peers, and that is all about consumption.”
She described Mr. Rogerson’s approach as “a financial Outward Bound.” Faced with a challenge, she said, “they have to try it” and will pick up valuable lessons along the way.
Mr. Rogerson turned his kids into investing guinea pigs in 2001 — a bad year for the domestic stock market, as it turned out. “The kids knew nothing,” he recalled. “They bought stocks like Apple and Hasbro and all these penny stocks at high-tech and toy companies. Their pile went down from $5,000 to $2,000.” That year, he said, “we went camping.”
During the second year, the children were so nervous about “putting Mom and Dad back in a tent again that they eventually put all the money in money market accounts,” he said. “They made $50,” he added. “That year we drove down to Florida to visit family.
“Since we were six people, we stayed at Holiday Inns along the way. We spent the money on motels, food and entertainment. My father lived in Daytona and my wife’s mother lives in Naples. Along the way, the kids made decisions about what kinds of restaurants we could go to.”
BY the third year, the investing bug had bitten, and the children wondered, “How do we invest so maybe we can do something more fantastic?” he said. They had stocks that were more conservative: a diversified portfolio that included large-capitalization stocks. They also had fixed-income investments like bonds. The young investors earned $600 on their $5,000 that year, and the family rented a catamaran and went boating near Mystic, Conn. (choosing it over Disney World). “I would love to tell you they loved it, but it rained all week,” recalled Mr. Rogerson, who is based in Boston.
Mr. Beck said he and his wife, a former banker, were determined to talk to their children about finances at their individual paces, but the couple also wanted them to work together. They settled on garage sales.
“It was interesting to see how they divided up their roles,” Mr. Beck recalled. At an early sale, one daughter, Katherine, then in junior high school, handled pricing because she had already gone to garage sales with friends; she took a leading role in the project.
“What really struck us was that the kids knew each other’s strengths better than we did,” he said. “They split the $100 that they earned, but they agreed not to split it equally because Katherine had done the most.” Mr. Beck was quick to add that projects like this one wouldn’t necessarily interest all children equally. While his children all participated and cooperated well, he said, only Katherine showed real interest in business. She is now majoring in marketing in college.
Of course, convincing children to work together when they are young is no guarantee they will do so as adults. The hurdles are far higher, Mr. Rogerson said. Spouses may complicate matters, and insidious rivalries can grow out of envy and mistrust. But he is convinced that early sibling partnerships, as he calls them, can help counteract those tendencies.
Like Mr. Beck, Mr. Rogerson said that the effort has helped them discover their own aptitudes. “We found that one boy showed great leadership and the other one was great with spreadsheets and tracking information,” he said. “Each had a different focus.”
SOURCE: nytimes.com
SRC="http://kona.kontera.com/javascript/lib/KonaLibInline.js">
States' Investment Strategy Scrutinized
NEW YORK (AP) — State treasurers from Florida to Maine to Montana have found themselves in the awkward position this past week of having to explain why they parked taxpayer money in some of the most opaque investments on Wall Street.
More than a dozen state-run cash pools that manage money for local governments have some exposure to mortgage-related and other high-risk holdings that roiled credit markets this past summer, according to rating agency Standard & Poor's.
The fear now is that the same subprime-mortgage turmoil that triggered multi-billion-dollar writedowns for Wall Street's biggest banks might trickle down to teachers, civil servants and even the vendors delivering supplies to schools because of the way public funds were invested.
Troubles first emerged as Florida officials disclosed their $27 billion investment pool had about $2 billion sunk into subprime-tainted debt — and $725 million of that had already defaulted. Local governments rushed to withdraw about $13 billion from the battered fund, and there are worries similar runs might happen elsewhere.
State finance officials that did invest in mortgage-related instruments say they were lured by the sterling credit ratings of the issues and a promise of a 2 percentage point or higher return than could be earned on three-month U.S. Treasury bills, which now yield about 3 percent.
"We relied on professional advice from our brokers and rating agencies," said Maine State Treasurer David Lemoine. "And then there's an unprecedented collapses of a super-highly rated investment almost overnight."
Lemoine called it "inconceivable until it happened." He invested about $20 million, or 3 percent of Maine's $725 million cash pool, in commercial paper issued by what are known as structured investment vehicles, or SIVs. Though no money has been lost so far, Lemoine said it could take months to unravel what was originally intended to be a short-term investment.
Maine — and others like Connecticut, Florida, Montana and King County in Washington — were drawn to the highly rated commercial paper issued by an SIV called Mainsail II that was operated by British hedge fund Solent Capital Partners. Mainsail's commercial paper offerings were later downgraded to junk by rating agencies because of concerns about whether the SIVs could repay the money it owed.
SIVs are typically offshore investment vehicles created by banks and other firms to sell commercial paper, a form of low-yielding short-term debt that typically comes due every 30 to 90 days and is typically rolled over into new issues by those holding them. The cash generated from those sales was used the proceeds to buy higher-yielding mortgage securities.
These paired transactions were profitable as long as the SIVs collected more on the mortgage investments than they paid to borrow. But that breaks down if SIVs are unable to continue borrowing money, which could force them to sell the underlying mortgage-related securities at fire sale prices. In worst-case scenarios, that could leave commercial paper buyers holding the bag, since the SIVs could only pay them back a portion of the money they are owed.
Likewise, state funds facing a run on their deposits also could be forced to liquidate some of their holdings at a loss. To salvage the fund, Florida walled off $2 billion of the weakest investments and slapped restrictions to limit withdrawals that would drain coffers.
What makes the situation more daunting is that nobody on Wall Street is exactly sure how many investment pools have money tied into SIVs or other subprime exposure. Rating agencies monitor investments in less than 100 government-run cash pools, and there are hundreds of others that go unrated.
California's $61 billion Pooled Money Investment Account is the largest fund that doesn't carry ratings, though managers say it has little subprime exposure. There are also hundreds of others — from tiny municipalities to local water districts — that operate under the radar.
"We see a good sampling of the market and don't think it is run for the exits time as everyone in the market thinks," said Peter Rizzo, an analyst with Standard & Poor's. "There could be hundreds and hundreds of them out there, but most aren't as sophisticated and invest money in a prudent fashion."
S&P rates 75 investment pools across 26 states and as of mid-November, only 17 of them held investments in asset-backed commercial paper. The average exposure was about 13.5 percent. Only nine of the cash pools had investments in SIVs, with the average exposure at about 3 percent.
State officials in all 50 states were contacted by The Associated Press and all that operate investment funds said they expect to avoid what is happening in Florida.
Montana, West Virginia, New Hampshire, Massachusetts, and Connecticut are among those holding SIV investments, but representatives from each said their exposure is limited. Many rely on managers like MBIA Inc. to guarantee investments, or have more control over their funds as to prevent unwanted withdrawals.
For instance, Montana has about $525 million of its $2.3 billion fund invested in SIVs. Carroll South, executive director of Montana's Board of Investments, said all but $90 million of its SIV investments are top-grade paper backed by major banks.
His main worry isn't losses, but that local agencies which make up a bulk of the cash pool begin to panic and withdraw money. Local governments, which under state law are guaranteed the ability to withdraw, have pulled out some $321 million already from the Montana fund.
"These are buy and hold investments, they are held on the books until such point and time there's a definite action that we won't get all of our principal back," he said.
The losses, he said, come when fund participants begin to withdraw money to such an extent that the state is forced to sell assets at a discount. He took steps to prevent this since August by shortening the maturities on the fund's investments to guarantee liquidity.
"Time will fix some of these underlying assets," South said.
Others — like Alaska, New Mexico, Tennessee, Indiana, and Arizona — said they have no investments in SIVs. Some are even mandated by investment policies to avoid risky securities.
Brian Andrews, deputy commissioner of the Alaska Department of Revenue, said he's his office has had to resist calls from some state lawmakers to chase higher returns. The fund, he said, is conservative and is worth between $750 million and $1 billion depending on the day.
"Most people realize it's not worth the risk and the political embarrassment of losing money," he said.
SOURCE: The Associate Press
SRC="http://kona.kontera.com/javascript/lib/KonaLibInline.js">
More than a dozen state-run cash pools that manage money for local governments have some exposure to mortgage-related and other high-risk holdings that roiled credit markets this past summer, according to rating agency Standard & Poor's.
The fear now is that the same subprime-mortgage turmoil that triggered multi-billion-dollar writedowns for Wall Street's biggest banks might trickle down to teachers, civil servants and even the vendors delivering supplies to schools because of the way public funds were invested.
Troubles first emerged as Florida officials disclosed their $27 billion investment pool had about $2 billion sunk into subprime-tainted debt — and $725 million of that had already defaulted. Local governments rushed to withdraw about $13 billion from the battered fund, and there are worries similar runs might happen elsewhere.
State finance officials that did invest in mortgage-related instruments say they were lured by the sterling credit ratings of the issues and a promise of a 2 percentage point or higher return than could be earned on three-month U.S. Treasury bills, which now yield about 3 percent.
"We relied on professional advice from our brokers and rating agencies," said Maine State Treasurer David Lemoine. "And then there's an unprecedented collapses of a super-highly rated investment almost overnight."
Lemoine called it "inconceivable until it happened." He invested about $20 million, or 3 percent of Maine's $725 million cash pool, in commercial paper issued by what are known as structured investment vehicles, or SIVs. Though no money has been lost so far, Lemoine said it could take months to unravel what was originally intended to be a short-term investment.
Maine — and others like Connecticut, Florida, Montana and King County in Washington — were drawn to the highly rated commercial paper issued by an SIV called Mainsail II that was operated by British hedge fund Solent Capital Partners. Mainsail's commercial paper offerings were later downgraded to junk by rating agencies because of concerns about whether the SIVs could repay the money it owed.
SIVs are typically offshore investment vehicles created by banks and other firms to sell commercial paper, a form of low-yielding short-term debt that typically comes due every 30 to 90 days and is typically rolled over into new issues by those holding them. The cash generated from those sales was used the proceeds to buy higher-yielding mortgage securities.
These paired transactions were profitable as long as the SIVs collected more on the mortgage investments than they paid to borrow. But that breaks down if SIVs are unable to continue borrowing money, which could force them to sell the underlying mortgage-related securities at fire sale prices. In worst-case scenarios, that could leave commercial paper buyers holding the bag, since the SIVs could only pay them back a portion of the money they are owed.
Likewise, state funds facing a run on their deposits also could be forced to liquidate some of their holdings at a loss. To salvage the fund, Florida walled off $2 billion of the weakest investments and slapped restrictions to limit withdrawals that would drain coffers.
What makes the situation more daunting is that nobody on Wall Street is exactly sure how many investment pools have money tied into SIVs or other subprime exposure. Rating agencies monitor investments in less than 100 government-run cash pools, and there are hundreds of others that go unrated.
California's $61 billion Pooled Money Investment Account is the largest fund that doesn't carry ratings, though managers say it has little subprime exposure. There are also hundreds of others — from tiny municipalities to local water districts — that operate under the radar.
"We see a good sampling of the market and don't think it is run for the exits time as everyone in the market thinks," said Peter Rizzo, an analyst with Standard & Poor's. "There could be hundreds and hundreds of them out there, but most aren't as sophisticated and invest money in a prudent fashion."
S&P rates 75 investment pools across 26 states and as of mid-November, only 17 of them held investments in asset-backed commercial paper. The average exposure was about 13.5 percent. Only nine of the cash pools had investments in SIVs, with the average exposure at about 3 percent.
State officials in all 50 states were contacted by The Associated Press and all that operate investment funds said they expect to avoid what is happening in Florida.
Montana, West Virginia, New Hampshire, Massachusetts, and Connecticut are among those holding SIV investments, but representatives from each said their exposure is limited. Many rely on managers like MBIA Inc. to guarantee investments, or have more control over their funds as to prevent unwanted withdrawals.
For instance, Montana has about $525 million of its $2.3 billion fund invested in SIVs. Carroll South, executive director of Montana's Board of Investments, said all but $90 million of its SIV investments are top-grade paper backed by major banks.
His main worry isn't losses, but that local agencies which make up a bulk of the cash pool begin to panic and withdraw money. Local governments, which under state law are guaranteed the ability to withdraw, have pulled out some $321 million already from the Montana fund.
"These are buy and hold investments, they are held on the books until such point and time there's a definite action that we won't get all of our principal back," he said.
The losses, he said, come when fund participants begin to withdraw money to such an extent that the state is forced to sell assets at a discount. He took steps to prevent this since August by shortening the maturities on the fund's investments to guarantee liquidity.
"Time will fix some of these underlying assets," South said.
Others — like Alaska, New Mexico, Tennessee, Indiana, and Arizona — said they have no investments in SIVs. Some are even mandated by investment policies to avoid risky securities.
Brian Andrews, deputy commissioner of the Alaska Department of Revenue, said he's his office has had to resist calls from some state lawmakers to chase higher returns. The fund, he said, is conservative and is worth between $750 million and $1 billion depending on the day.
"Most people realize it's not worth the risk and the political embarrassment of losing money," he said.
SOURCE: The Associate Press
SRC="http://kona.kontera.com/javascript/lib/KonaLibInline.js">
How Banks Secretly Create Money
Dollar deception: How banks secretly create money
By Ellen Brown
The creation of money has been privatised, usurped from Congress by a private banking cartel. Most people think money is issued by fiat by the government, but that is not the case. Except for coins, which compose only about one one-thousandth of the total US money supply, all of our money is now created by banks. Federal Reserve Notes (dollar bills) are issued by the Federal Reserve, a private banking corporation, and lent to the government.1 Moreover, Federal Reserve Notes and coins together compose less than 3 percent of the money supply. The other 97 percent is created by commercial banks as loans.2
Don’t believe banks create the money they lend? Neither did the jury in a landmark Minnesota case, until they heard the evidence. First National Bank of Montgomery vs. Daly (1969) was a courtroom drama worthy of a movie script.3 Defendant Jerome Daly opposed the bank’s foreclosure on his $14,000 home mortgage loan on the ground that there was no consideration for the loan. “Consideration” (“the thing exchanged”) is an essential element of a contract. Daly, an attorney representing himself, argued that the bank had put up no real money for his loan. The courtroom proceedings were recorded by Associate Justice Bill Drexler, whose chief role, he said, was to keep order in a highly charged courtroom where the attorneys were threatening a fistfight. Drexler hadn’t given much credence to the theory of the defense, until Mr. Morgan, the bank’s president, took the stand. To everyone’s surprise, Morgan admitted that the bank routinely created money “out of thin air” for its loans, and that this was standard banking practice. “It sounds like fraud to me,” intoned Presiding Justice Martin Mahoney amid nods from the jurors. In his court memorandum, Justice Mahoney stated: Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.
The court rejected the bank’s claim for foreclosure, and the defendant kept his house. To Daly, the implications were enormous. If bankers were indeed extending credit without consideration – without backing their loans with money they actually had in their vaults and were entitled to lend – a decision declaring their loans void could topple the power base of the world. He wrote in a local news article: This decision, which is legally sound, has the effect of declaring all private mortgages on real and personal property, and all US and State bonds held by the Federal Reserve, National and State banks to be null and void. This amounts to an emancipation of this Nation from personal, national and state debt purportedly owed to this banking system. Every American owes it to himself . . . to study this decision very carefully, for upon it hangs the question of freedom or slavery.
Needless to say, however, the decision failed to change prevailing practice, although it was never overruled. It was heard in a Justice of the Peace Court, an autonomous court system dating back to those frontier days when defendants had trouble traveling to big cities to respond to summonses. In that system (which has now been phased out), judges and courts were pretty much on their own. Justice Mahoney, who was not dependent on campaign financing or hamstrung by precedent, went so far as to threaten to prosecute and expose the bank. He died less than six months after the trial, in a mysterious accident that appeared to involve poisoning.4 since that time, a number of defendants have attempted to avoid loan defaults using the defense Daly raised; but they have met with only limited success. As one judge said off the record: If I let you do that – you and everyone else – it would bring the whole system down. I cannot let you go behind the bar of the bank. We are not going behind that curtain! 5
From time to time, however, the curtain has been lifted long enough for us to see behind it. A number of reputable authorities have attested to what is going on, including Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920s. He declared in an address at the University of Texas in 1927: The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin. Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.
Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta in the Great Depression, wrote in 1934: We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.6.
SOURCE: dailytimes.com
SRC="http://kona.kontera.com/javascript/lib/KonaLibInline.js">
By Ellen Brown
The creation of money has been privatised, usurped from Congress by a private banking cartel. Most people think money is issued by fiat by the government, but that is not the case. Except for coins, which compose only about one one-thousandth of the total US money supply, all of our money is now created by banks. Federal Reserve Notes (dollar bills) are issued by the Federal Reserve, a private banking corporation, and lent to the government.1 Moreover, Federal Reserve Notes and coins together compose less than 3 percent of the money supply. The other 97 percent is created by commercial banks as loans.2
Don’t believe banks create the money they lend? Neither did the jury in a landmark Minnesota case, until they heard the evidence. First National Bank of Montgomery vs. Daly (1969) was a courtroom drama worthy of a movie script.3 Defendant Jerome Daly opposed the bank’s foreclosure on his $14,000 home mortgage loan on the ground that there was no consideration for the loan. “Consideration” (“the thing exchanged”) is an essential element of a contract. Daly, an attorney representing himself, argued that the bank had put up no real money for his loan. The courtroom proceedings were recorded by Associate Justice Bill Drexler, whose chief role, he said, was to keep order in a highly charged courtroom where the attorneys were threatening a fistfight. Drexler hadn’t given much credence to the theory of the defense, until Mr. Morgan, the bank’s president, took the stand. To everyone’s surprise, Morgan admitted that the bank routinely created money “out of thin air” for its loans, and that this was standard banking practice. “It sounds like fraud to me,” intoned Presiding Justice Martin Mahoney amid nods from the jurors. In his court memorandum, Justice Mahoney stated: Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.
The court rejected the bank’s claim for foreclosure, and the defendant kept his house. To Daly, the implications were enormous. If bankers were indeed extending credit without consideration – without backing their loans with money they actually had in their vaults and were entitled to lend – a decision declaring their loans void could topple the power base of the world. He wrote in a local news article: This decision, which is legally sound, has the effect of declaring all private mortgages on real and personal property, and all US and State bonds held by the Federal Reserve, National and State banks to be null and void. This amounts to an emancipation of this Nation from personal, national and state debt purportedly owed to this banking system. Every American owes it to himself . . . to study this decision very carefully, for upon it hangs the question of freedom or slavery.
Needless to say, however, the decision failed to change prevailing practice, although it was never overruled. It was heard in a Justice of the Peace Court, an autonomous court system dating back to those frontier days when defendants had trouble traveling to big cities to respond to summonses. In that system (which has now been phased out), judges and courts were pretty much on their own. Justice Mahoney, who was not dependent on campaign financing or hamstrung by precedent, went so far as to threaten to prosecute and expose the bank. He died less than six months after the trial, in a mysterious accident that appeared to involve poisoning.4 since that time, a number of defendants have attempted to avoid loan defaults using the defense Daly raised; but they have met with only limited success. As one judge said off the record: If I let you do that – you and everyone else – it would bring the whole system down. I cannot let you go behind the bar of the bank. We are not going behind that curtain! 5
From time to time, however, the curtain has been lifted long enough for us to see behind it. A number of reputable authorities have attested to what is going on, including Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920s. He declared in an address at the University of Texas in 1927: The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin. Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.
Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta in the Great Depression, wrote in 1934: We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.6.
SOURCE: dailytimes.com
SRC="http://kona.kontera.com/javascript/lib/KonaLibInline.js">
Mortgages: So What's the Plan?
The plan to freeze "teaser rates" on subprime mortgages due to reset to higher rates within the next two years is a complicated one that won't help everyone. Here are some key questions and answers, with many details yet to be worked out.
Q: What's the gist of the plan?
A: It's a private sector plan brokered by the government that aims to prevent a wave of expected foreclosures. It would do that by allowing troubled homeowners facing interest rate hikes in the form of resets in the next two years to keep their lower introductory, or "teaser," rates for up to five more years. The rate freeze plan would apply to mortgage borrowers with loans taken out between the start of 2005 and July 30 of this year, and with rates scheduled to rise between Jan. 1, 2008 and July 31, 2010. Anyone whose rate has already reset is stuck with the higher payment.
Q: Are there conditions?
A: Absolutely. Lenders and mortgage servicers get a lot of discretion to decide who's in and who's out. And remember, the whole thing is voluntary for both sides (in fact, 16% of lenders aren't participating at all). To begin with, anyone already in arrears by more than a month is ineligible. Others will qualify only if lenders and mortgage servicers determine both that they can continue to pay current rates and that they cannot pay the reset rates. Homeowners now in the foreclosure process or those who have already refinanced are also ineligible. Only homes occupied by owners are eligible.
Q: How many will it help?
A: Estimates vary widely, and it'll take a while to really know. The Bush administration says that as many as 1.2 million of the 1.8 million facing rate resets over the next two years will be eligible to apply. Probably far fewer will qualify -- perhaps only a couple of hundred thousand.
Q: Is this a bailout? What will it cost the taxpayer?
A: That depends on what you mean by "bailout." Let's leave that to the politicians to debate and just say that the government won't put any money into this. Although the Treasury Department is spearheading the effort, private industry groups -- from lenders to Wall Street firms -- are footing the bill, largely because it's in their interest to do so. The cost of renegotiating loan terms, for example, is less than the cost associated with a foreclosure.
Q: So who will pay the tab?
A: Investors, for starters. Those holding complex mortgage-related securities will get a smaller return because the freeze lowers expected monthly payments. These investors range from mutual funds to pension funds to overseas hedge funds. That won't sit well with many of them, meaning that shareholder lawsuits are likely to emerge. Treasury Secretary Henry Paulson describes the litigation risk as "manageable."
Q: Why is the government doing this?
A: Two main reasons. The first is an economic one. The administration and many others worry that the mortgage mess will hurt the economy. They want to do "just enough" to keep huge numbers of homeowners from foreclosure, short-circuiting a bigger crisis. Still, everyone involved realizes that this plan is no silver bullet. Many think it's the first of several steps that will be necessary. In addition, no one is sure it will do much to alleviate the credit crunch or boost consumer confidence and spending. But it's not insignificant, either.
The second reason is political. Elected officials want to help and to be seen helping. They hope this plan does that. The administration and other Republicans also hope it will keep Democrats from taking more radical action that will involve a much greater government role. But some Republicans -- both officeholders and rank-and-file voters -- are already upset that it goes too far. And many Democrats say much more is needed.
SOURCE: Kiplinger.com
Q: What's the gist of the plan?
A: It's a private sector plan brokered by the government that aims to prevent a wave of expected foreclosures. It would do that by allowing troubled homeowners facing interest rate hikes in the form of resets in the next two years to keep their lower introductory, or "teaser," rates for up to five more years. The rate freeze plan would apply to mortgage borrowers with loans taken out between the start of 2005 and July 30 of this year, and with rates scheduled to rise between Jan. 1, 2008 and July 31, 2010. Anyone whose rate has already reset is stuck with the higher payment.
Q: Are there conditions?
A: Absolutely. Lenders and mortgage servicers get a lot of discretion to decide who's in and who's out. And remember, the whole thing is voluntary for both sides (in fact, 16% of lenders aren't participating at all). To begin with, anyone already in arrears by more than a month is ineligible. Others will qualify only if lenders and mortgage servicers determine both that they can continue to pay current rates and that they cannot pay the reset rates. Homeowners now in the foreclosure process or those who have already refinanced are also ineligible. Only homes occupied by owners are eligible.
Q: How many will it help?
A: Estimates vary widely, and it'll take a while to really know. The Bush administration says that as many as 1.2 million of the 1.8 million facing rate resets over the next two years will be eligible to apply. Probably far fewer will qualify -- perhaps only a couple of hundred thousand.
Q: Is this a bailout? What will it cost the taxpayer?
A: That depends on what you mean by "bailout." Let's leave that to the politicians to debate and just say that the government won't put any money into this. Although the Treasury Department is spearheading the effort, private industry groups -- from lenders to Wall Street firms -- are footing the bill, largely because it's in their interest to do so. The cost of renegotiating loan terms, for example, is less than the cost associated with a foreclosure.
Q: So who will pay the tab?
A: Investors, for starters. Those holding complex mortgage-related securities will get a smaller return because the freeze lowers expected monthly payments. These investors range from mutual funds to pension funds to overseas hedge funds. That won't sit well with many of them, meaning that shareholder lawsuits are likely to emerge. Treasury Secretary Henry Paulson describes the litigation risk as "manageable."
Q: Why is the government doing this?
A: Two main reasons. The first is an economic one. The administration and many others worry that the mortgage mess will hurt the economy. They want to do "just enough" to keep huge numbers of homeowners from foreclosure, short-circuiting a bigger crisis. Still, everyone involved realizes that this plan is no silver bullet. Many think it's the first of several steps that will be necessary. In addition, no one is sure it will do much to alleviate the credit crunch or boost consumer confidence and spending. But it's not insignificant, either.
The second reason is political. Elected officials want to help and to be seen helping. They hope this plan does that. The administration and other Republicans also hope it will keep Democrats from taking more radical action that will involve a much greater government role. But some Republicans -- both officeholders and rank-and-file voters -- are already upset that it goes too far. And many Democrats say much more is needed.
SOURCE: Kiplinger.com
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