October 16, 2013-Groundhog Day in Washington, D.C.

by Richard H. Frank

The politicians in Washington D.C., especially Barack Obama, Harry Reid and Nancy Pelosi, are marking October 16, 2013 as a victory over Republicans in the House of Representatives with the passage of an extension to the CR and the debt limit extension until after the first of the year. In reality, the Senate Bill accomplished absolutely nothing and was a replay of the 2011 budget crisis. Just as in the movie “Groundhog Day” every American can prepare for a replay of the same old “crap” – just another day.

The only accomplishment of this legislation is to incur an additional $1 trillion of debt over the next 60 days for Obama to spend and redistribute as he deems appropriate.

I seem to remember his statements and vote against the debt limit increase in 2006 as such actions would be irresponsible and un-American. Now he has the audacity to proclaim that extending the debt limit does not increase our debt by a single dime. I wonder where he studied money and banking. Obviously not in the Wharton School of Economics. I also seem to remember he appointed the Simpson Bowles Commission to study and make recommendations on how to bring Government spending under control and eventually balance the Federal budget.

Because the Commission recommendations addressed entitlement reform, Obama immediately rejected the recommendations out of hand and for the past four years has ignored his own Commission’s findings.

Following the loss of control in the House by Democrats in the 2010 mid-term election, Obama’s solution to our economic woes was to appoint a Super Committee charged with solving the ongoing problems of continuing deficits and structuring a “grand bargain” that would raise revenues without reducing the current out of control spending.

To assure success of the Super Committee, Obama and his administration championed the creation of the “Budget Control Act” passed and signed into law in 2011 that contained a provision for across the board spending cuts in every branch of government known as the “Sequester.” When the Super Committee failed to reach agreement and eventually disbanded, Obama and his administration freaked out as sequester took over and they predicted Armageddon for the nation. Two years have passed and the spending reductions have been implemented without Armageddon taking place.

The government shutdown of 2013 began on October 1, 2013 with the furlough of some 700,000 non-essential government employees. If my math and understanding of the English language is correct, that means approximately one-third of the Federal Government is non-essential; then it seems to reason that one-third of the Federal budget should be scrutinized for elimination.

One-third of our current spending in a $3.2 trillion budget equates to $1 trillion in reductions that brings the Federal budget close to balancing. However, Congress would never consider addressing the obvious as some special interest might be put at risk when logic prevails over politics.

The real answer to the Government’s spending problem is to rid Congress of the professional politicians through strict term limits that would rid the Government of those who put personal advancement over doing the work and will of “We the People.”

Unfortunately, this would require that someone sponsor a Constitutional Amendment to achieve that end. This, along with a Balanced Budget Amendment, although talked about, are much like the mythical unicorn – beautiful to imagine but far from reality.

So following October 16, 2013, another groundhog day, our nation is taking a giant step along the path to becoming Greece.

May God have mercy on our children and grandchildren who are destined to bear the burden of debt thrust upon them by a Federal bureaucracy concerned only with their ideology and egos.

Should we fail to fundamentally alter the makeup of Congress in the 2014 mid-term and put a stop to the devastating regulation of our economy and redistribution ideology held by Barack Obama and his minions, he will have achieved his stated goal to “fundamentally change America” to become a European-style democracy and cease as a Representative Republic.

Rick Perry’s Distortion of Venture Capital

by Richard H. Frank

Rick Perry needs a lesson in economics and the role of venture capital and private equity firms with regard to growth of our free enterprise system.

Private equity companies such as Bain Capital are in business to make a profit for their shareholders from the capital they invest in private enterprise.  Their mission is simply to “create value” through the free market system and eventually divest of their interests via a sale or IPO (initial public offering) in an effort to recoup their original investment at a profit.

Rick Perry would have you believe Bain Capital uses predatory means to acquire ailing companies for the sole purpose of looting their assets, destroying their capacity to produce at a profit and forcing them to liquidate through bankruptcy.  Any person with an ounce of business sense would consider Governor Perry’s explanation of venture capital as the height of stupidity.

With regard to Bain Capital I think I am more qualified than Rick Perry to talk about the process they employ for making a decision whether to invest in a particular company or enterprise as I actively participated with the Bain Capital process from 1995-1999.  Venture capital or private equity firms conduct exhausting due diligence investigations before making any decisions regarding a potential investment.  They are provided with hundreds of prospectuses from companies seeking venture capital.  Not all of these companies are distressed and facing eventual bankruptcy.  In fact, the opposite is true for many institutions seeking additional capital.  Many small companies that are profitable need new capital to expand, to increase market share, create new employment opportunities and create lasting value for their shareholders.  Others find themselves participating in a market that is over capacity and struggling to achieve a profit on their limited market share.  For these companies, buying out competition to make better use of existing capacity and eliminating duplication of overhead becomes their only road to survival and private equity firms play a larger role in achieving the objective of consolidation in some particular industry or market.  In the long term, this consolidation helps keep jobs in America.

Buying losers for the sake of bankrupting them in no way creates value in the market place nor a profit for investors.

The marketplace and potential growth is the ultimate criteria upon which companies such as Bain Capital make their decisions for investment.

My experience in dealing with Bain Capital proved to be both educational and rewarding.  The due diligence process extended over a period of four months and assessed every aspect of our business including our market segments and prospects for growth, financial performance for past years and future projections, strength of the management team, reputation with our customers and of utmost importance the ability to manage growth and change.

Between 1995 and 1999 with the financial backing of Bain Capital our business grew from  $300 million in sales to $1.2 billion.  The phenomenal growth came from a combination of acquisitions and organic market growth.  The process of consolidating capacity and elimination of duplicate overhead structures impacted approximately 300 positions across 5 states and 10 manufacturing locations while establishing upwards of 5000 highly paid positions for both union and non-union people.

Were it not for private equity firms such as Bain Capital, the industrial consolidation process in this Country would have been considerably more painful and much slower.

To be sure, Bain Capital had an exit strategy when they first invested in our industry.  That strategy included creating value for present and future shareholders from their initial investment, supporting growth through new capital from the sale of bonds and/or a future IPO.  And finally, divesting of their holdings at a profit when it appeared feasible to do so without impacting the company negatively.

According to Rick Perry, this is a portrait of “vulture capitalism.”  From my prospective, it is a portrait of the free enterprise system in action rewarding those who take a risk on the initiative and expertise of the American worker.

The Politics of the Destruction of America

by: Richard H. Frank

The latest crisis created by the Washington, D.C.  elites is the impending default on the National Debt, which according to the Obama Administration would put the world’s financial system into irreversible  collapse.  Having  reached the existing debt limit of $14.3 trillion established by Congress, Barack Obama has resorted to the fallback tactic of “fear” to frighten seniors and military personnel in hopes they will call upon their representatives to increase the debt limit by $2.5 trillion.

Barack Obama’s statement that he could not guarantee payments to Social Security recipients and military personnel is ridiculous and Congress should call his bluff by drafting legislation that forces prioritizing payments for interest on the national debt first followed by the military and Social Security in this order with all other program priorities established in order of importance by the Department of the Treasury.

Passage of such legislation in the House of Representatives will insure the  nation’s priorities are established and assure the full faith and credit of the nation.  If  either the Senate or the President refuses to pass and sign this legislation, the public will become acutely aware of where the political priorities of the Administration may be found.

To quote Paul Ryan “We don’t have a revenue problem, we have a spending problem!”  Barack Obama states that he will support a “big picture” program that cuts $4 trillion from spending over the next 10 years while increasing taxes on the rich.  The rich are those Americans earning $200,000 annually.  His proposal has no specifics as to what programs will be cut to avert the crisis but insists Congress must increase the debt limit by $2.5 trillion now so he can save $4 trillion over the next 10 years.  Where are the savings (spending cuts) to come from Mr. President?

The House of Representatives has identified $2.5 trillion in cost cuts over 10 years.

Consider a sampling of 55 programs and question why they are included in the budget in the first place.

  • Eliminate duplicate education programs.  HR 2274 removes 68 at a savings of $1.3 billion annually.
  • Amtrak subsidies $1.6 billion  annually.
  • National Endowments for The Arts – $167.5 million annually, and Humanities $1.675 million annually.
  • Corporation for Public Broadcasting subsidies $445 million annually
  • Legal  Services corporation $420 million annually
  • Community Development Fund $4.5 billion annually
  • Federal Travel Budget – Cut by 1/2  – $7.5 billion annually
  • Department of Energy Grants to States – $530 million annually.
  • Title Xx Family Planning – $318 million annually.
  • Federal Office Space Acquisition – $864 million annually.
  • Repeal of the David-Bacon Act – $1 billion annually.
  • Repeal of Obamacare – $1.0 billion annually

Elimination of Government wasteful spending in itself could eliminate the need to extend the Nation’s debt limit.  Instead of forcing the President to cut spending, Senate Mitch McConnell is suggesting that Congress support increasing the limit by $2.5 trillion through the 2012 elections.  This action in essence is unconstitutional and gives that authority(the power of the purse) to the Executive  Branch, instead of Congress, and to his Majesty Barack Obama.

The President is using the budget and debt limit crisis as his ticket to re-election and furthering the transition fo America from a democratic Representative Republic  to a European Socialist style democracy.  The artificial deadlines set by Obama are a mythical drop-dead date made to make him appear as in control of a situation which he has no conception of how to solve.

Congress must stand firm and accept no increase in the debt limit without substantial cost cutting to specific programs coupled with a Balanced Budget Amendment, and no increases in taxes; anything short of these major  reforms will ultimately lead to the Destruction of America.

Time For Obama’s Actions to Reflect his Words!

By: Richard H. Frank

Barack Obama’s address to the White House press corps this morning concerning the release of his birth certificate, which was a distraction (his words) to his efforts to solve America’s problems, puts him on the spot to seriously solve the nations economic ills.

So now Mister President let’s get serious (again your words) and take the initiative to address the following National issues:

  • Adopt a cohesive, comprehensive energy policy that takes the initiative against the Mideast oil cartels to manipulate oil prices. Lift the moratorium against exploration and drilling in the U.S., and issue permits currently held up in bureaucratic agencies immediately.
  • Stop vilifying any individual, political party or private organization that takes issue with your agenda. Demonizing  the Oil, Gas and Coal industries, and calling political opponents like Donald Trump a sideshow carnival barker in lieu of a debate of the issues is less than presidential.
  • Adopt a budget plan, or legislation, that assures fiscal responsibility for the future national budgets including addressing entitlements, tax reform and deficit spending.
  • Stop the use of and repeal executive orders that circumvent Congress and are not authorized under the Constitution that impose onerous regulations on “We the People” in support of any political ideology.
  • Restore the Constitutional authority guaranteed to every State under the 10th Amendment to the Constitution and limit the size and scope of the Federal Government to those powers enumerated in the Constitution.
Mr. President, these are the issues affecting the very existence of our Republic and the well-being of every American. You are now on record again as of 9:45 am, April 27, 2011 to address the above issues and get serious about their solutions.
Once again America has heard his rhetoric, but we won’t hold our breath waiting for leadership to come from our neophyte President, Barack Obama. After all he is above such detailed analysis and solutions and will just delegate the problems to one of his Czars to come up with some progressive, Marxist pipe dream to tax our way out of these problems  and  the next crisis.

The “Real” Reason Not to Re-Elect Barack Obama!

by Richard H. Frank and Jayne D. Frank

News reports state that President Obama is about to announce his candidacy to run for re-election in the 2012 national Presidential elections.  The announcement is purported to be coming to the electorate in the form of a video that will highlight the accomplishments of his Administration over the past two years.

Somehow the Obama spin doctors will attempt to convince Americans that the politics of “hope and change,” coupled with the greatest level of Government transparency in history, has saved this nation from certain disaster.  The Obama “war chest” (campaign funding) is reportedly approaching $1 billion that will be spent inundating the public with a nonstop barrage of political ads proclaiming his Administration’s accomplishments.  A taped video will have a number of advantages for him:  1) He can immediately place this on Facebook and other social media sites and seduce the young uninformed voters that foolishly voted for him in large numbers in 2008 predicated on undefined “Hope and Change”, 2) It will enable his “handlers” to get his body language right on tape  and ensure that any lies are edited out, and 3) It will once again make sure he is only speaking off his teleprompters to avoid any extemporaneous answers to hard questions.  You can expect the following myths to be the cornerstone of President Obama’s Presidential Re-election campaign:

  • The Affordable Health Care Law.  Arguably “Unconstitutional” in that it forces every American to buy insurance or face a fine under this law.
  • Stimulus spending that has saved or created up to 3 million American jobs
  • Nationalization of GM and Chrysler in order to preserve the American auto industry
  • TARP spending that saved the American financial system from the brink of disaster
  • His declaration that 85% of the Nation’s energy needs will be provided by green technology in 2035

Each of these programs has been presented as being the most transparent in our nation’s history.  Transparency is a most interesting term for use by a politician.  The American Heritage Dictionary uses some of the following definitions to describe how the term might be applied:  1) The quality or state of being transparent; guileless, candid, 2) Guileless refers to being free from treachery, cunning, deceit or trickery, 3) Candid means straightforward, free from prejudice and impartial.

Notice none of the above definitions is so crass so as to use the term “liar,” and therefore allows politicians to walk the very narrow line between the “truth and nothing but the truth” and outright “lying.”

A closer look at the Obama Administration’s signature accomplishments in view of transparency shows the following statements do not meet the definition for transparency:

The Affordable Health Care Law does not or will not achieve the President’s proclamations as follows:

  • If you like your plan you can keep it
  • The average family will save $2500/yr
  • The plan will insure 30 million currently uninsured
  • Services will not be rationed and  fraud and waste will be eliminated
  • The plan is fully paid for and will not add to the deficit

Stimulus spending has saved or created up to 3 million jobs.

  • If 3 million jobs were saved or created and we spent $816 billion in stimulus funding, each job cost the American taxpayer $272,000.
  • There were no shovel-ready projects according to a recent admission by Barack Obama.
  • Private sector jobs were not created by stimulus spending but Government-sector jobs increased by 1 million which must be paid by private sector taxation which experienced no growth and contracted by more than six million over the past two years.

The American automotive industry has been saved by Obama’s forced bankruptcy and redistribution of assets between Government, the unions and special interests.

  • GM has repaid all the Government loans ahead of schedule and is a monumental success.  Congressional oversight reports it estimates the taxpayer will be out $25 billion and when sweetheart tax exemptions are included we may expect the total cost to taxpayers to be  $84 billion dollars.  If this equals success for the Obama Administration, I would hate to know what constitutes failure.

TARP spending saved the nation’s financial system from certain disaster.

  • Major banks were bailed out by taxpayers with the promise that troubled assets would be addressed through refinancing debt or mortgage modifications.
  • The real estate market has collapsed and banks are doing nothing to support individual  home loan modification programs as touted by the Obama Administration.
  • Thirteen percent of residences are vacant or abandoned across the nation with values forecast to plunge an additional 25% over the coming year, bringing down the average home value and destroying equity for most of the remaining occupied homes for decades to come.
  • Currently more than six million homes are either in or facing foreclosures.
  • Continued deterioration in the real estate market caused by Government over-manipulation may be the precurser to a double-dip recession.

Green technology to account for 85% of the Nation’s energy needs by 2035 is unrealistic and unachievable since there is no known technology other than nuclear power with the capacity to replace fossil fuels.  Obama and his Administration has been anti-development of fossil fuels in the United States through regulations, and moratoriums against exploration in Anwar as well as offshore on the Continental Shelf.   He has continually circumvented the will of the Congress and the Will of the People with the creation of more than 35 Czars charged with creation and implementation of onerous regulations that stifle energy independence and ultimately economic growth for the country.

The past two years under the Obama Administration has presented the potential opponents with a plethora of video sound bites with which to mount a effective campaign against his re-election.  President Obama’s and the Democratic Party’s own words create the best case against their re-election in 2012.  All the soaring rhetoric and empty promises of hope and change will not erase the reality of his record and pain being felt across this country.

Nonetheless, there will remain a segment of the electorate that will continue to drink the Koolaid of mutual destruction of the nation and vote for Barack Obama.

Unfortunately, these uninformed individuals have no knowledge or understanding of the values and principles upon which this great country was built.

The greatest gift Obama could give his Party and the nation would be to follow the good sense shown by Lyndon Johnson and change his upcoming announcement to say that “he would not seek, nor would he accept, the nomination of his Party for President of the United States,” for a second term.

Then again, we can dream, can’t we?

Obama’s Shame: The Affordable Home Loan Modification Program

by Richard H Frank

It appears as though the U S. Housing market is about to enter a double dip with forecasted values to drop an additional 25% for existing homes.  Add this impact to potential sales and existing mortgages under water, now estimated to be 23% and 6 million verging on foreclosure, and the perfect storm for destruction of an industry is in place.  The average number of vacant properties in the United States stands at 13% with states likes Florida, Michigan and Arizona experiencing 50% abandoned properties.  We must ask what happened to TARP and the highly touted Obama Affordable Home Loan Modification Program?

When the banks were bailed out and extended hundreds of billions of taxpayer dollars to find ways to protect “troubled assets,” part of those funds were targeted for home loan modification programs.  The general rules for qualification to receive a modification were:

  • A major change in income status
  • Mortgage principal and interest, taxes and insurance payments to exceed 31% of income
  • A hardship must be present stemming from health, marital status or other catastrophic condition.

The program was initiated in December, 2009 and to date of the 2.5 million applicants, only 1 in 4 have been granted some sort of modification.  The total TARP funding for the program was $75 billion and to date only $1 billion has been appropriated.  The banking industry continues to sit on $74 billion and continues to stonewall applicants at every opportunity.

Tactics employed by the banks include:

  • Not including a request for all documentation required upon application
  • Claiming submissions are incomplete when evidence shows all criteria has been met
  • Requiring re-submission of documents over and over again under the guise that Federal requirements have changed
  • The response to monthly follow-ups is that the application is in process
  • The application is in Underwriting, although no contact information is available
  • Referral to the “Hope Department” to assure all documentation as been received
  • Being advised that the only modifications being granted are in the case of death of spouse or divorce

The above process takes from 12-15 months while the homeowner is being advised to keep making payments in order to avoid foreclosure.

Oddly, the Foreclosure Department and the Loan Modification Departments do not communicate as late notices, letters of intent to accelerate and requests to sign a Deed in Lieu of Foreclosure continue to be received by the homeowner.  Bank representatives arrive, unannounced, at your home to prove occupancy and assure the premises has not been abandoned, giving the confused homeowner hope that the bank might be forthcoming with an affordable modification.

Following 15 months of frustration, the homeowner receives a boilerplate notice of rejection for either being current or not being qualified as to meeting requirements of the program.

“The Affordable Home Loan Modification Program” is just another sham like cash for clunkers and stimulus cooked up by the Obama Administration  with the help of the banks who received TARP, characterized by understaffing at the banks for administration, overloading underwriters with applications and sloppy or intentional mismanagement of documentation in an effort to reject otherwise legitimate claims.

Perhaps the impending double-dip recession in the home real estate market will bring the banks to their senses.  Keeping people in their homes and receiving lower interest payments in the short term until the market recovers is a good business decision and seems to make more logical sense than forcing up to 50% of mortgages into foreclosure and/or bankruptcy.  When the market recovers, be it in 5 or even 10 years, the mortgage holder will be made whole when the property (today’s “troubled asset”) finally sells.  That property will have been maintained and hold its value as opposed to having been abandoned.

As for the 600,000 mortgages that have been modified, this will be the only salvageable “talking point” that the Administration and the banks will have.  Unfortunately, there are 2.1 million applicants, many of whom are better able to maintain their mortgage under modification, than those that have been approved that are in peril of losing the largest investment of their lives.  Where are Obama and all the politicians that bailed out the banks to come to their aid?  Perhaps the Government should demand the return of the $74 billion in TARP funds that the banks are withholding from the program.  After all, that money belongs to “We the Tax-Paying People”.

I doubt that even a further deterioration in the housing market and leading to a total collapse will wake the mortgage holders to the peril they face by mismanaging the Modification Program.

Obama’s Agends is America’s Tsunami!

By: Richard H. Frank

 Over the past four years, beginning with the Presidential Campaign for the 2008 election we have listened to both political parties proclaim that the economy and job creation was the number one priority for their administration should they be elected. The American public was forced to listen to the hollow promises of “Hope and Change” that would fundamentally change America and the world should Obama’s liberal progressive agenda be adopted. Since that time (2009) what have we endured as a nation?

  • Average retail price of gasoline has increased 100% from $1.83 in 2009 to $3.66 today.
  • Crude Oil price/barrel increased 135% and we still lack a cohesive energy policy.
  • Unemployment rate continues to hover between 9 and 10% even with the government’s alteration in the method for calculating the number.
  • Number of food stamp recipients increased by 22% and rising.
  • Number of long term underemployed 146.2% increase.
  • Government’s solution to spend our way to recovery has increased the national debt by 32.2% to reach $14.0 trillion.
  • Over 6 million homes currently in foreclosure in spite or TARP monies given to the banks to implement mortgage loan modification programs.
  • Our health care industry costs continuing the upward spiral out of control due to the liberal progressives ramming the unpopular legislation dubbed “Obama care” down the throats of Americans over their overwhelming objections.

The travesty to all of these situations is that they are the result of our Federal Government overstepping the enumerated powers defined in our Constitution. The first 5 items listed above could be immediately impacted and reversed if the Federal Government and its agencies would get out of the way of the free enterprise system and develop a comprehensive energy policy for America that does not change with every congressional and presidential election. Energy independence for America will result in establishing a free market price for oil and not that controlled by Mideast cartels.

The $816 billion that was spent on stimulus by the Administration and the 111th Congress accomplished just one thing. That was to create a 2% increase in government sector jobs; jobs which must be paid for with the sweat of those Americans working in the private sector.

Today, the announcement was made that the housing market reached its lowest level in the past 9 years. The resulting loss in equity to those seniors that have invested in their homes while raising their families in order to provide for a return after retirement find themselves facing a future without an equity nest-egg with which to supplement retirement and in many cases foreclosure as the banks refuse to respond to their request for loan modifications.

Lastly, we now are finding out what is in the “Affordable Health Care Law” forced upon every American as part of the “Hope and Change” agenda of this administration. Each and every argument set forth in opposition to this law is now proving to be true. Twenty-six states are suing the Federal Government for the law either being unconstitutional or for its violation of the 10th Amendment provision upholding States sovergnity.

The mid-term elections of 2010 expressed the will of the people against continued uncontrolled spending and limiting the size of the Federal Government. Yet, just four short months following that election, Congress and the President, act as though the election never took place and are conducting business as usual.  There are 31% of Americans that approve of the Presidents management of our economy. The remaining 69% are tired of his unending platitudes and proclamations that jobs and the economy are his number one priority and that we must stop spending when he continues to proceed without a budget for 2011 and has the nerve to present a $3.7 trillion proposal to Congress for 2012 that contains an additional $1.6 trillion deficit.

If stupidity, or doubletalk, could be considered a high crime or misdemeanor we would have cause to remove this unqualified novice from office. Unfortunately, we must rely upon the 112th Congress to keep him in check.  Many will say that we are destined for gridlock as long as Harry Reid sets the agenda in the Senate. I would gladly endure the next two years of gridlock until we can replaced Obama, Reid, Pelosi and RINOs who refuse to take the hard decisions to address the budget and unsustainable entitlements that have bankrupted this once great nation, and elect men of principle to put America on a course to true recovery.