Entries from February 2009 ↓

Today the new Treasury Secretary Timothy Geithner outlined a plan to “restore stability to our financial system”. The speech and its contents are on a new website at FinancialStability.gov.  I seriously thought that it was a joke, and here is why.

First of all, the cost of the plan is up to $2 trillion.  To borrow a quote  from Senate Minority Leader Mitch McConnell, “if you started the day Jesus Christ was born and spent $1 million every day since then, you still wouldn’t have spent $1 trillion.”  Senator McConnell was speaking about the huge bloated stimulus bill, and now Geithner proposes a plan that costs 2 to 3 times of that monstrosity.  I have no idea how this is possible.

Second, the new administration is heralding Geithner’s plan as a completely new idea.  If you drill down into the fact sheet and read what he plans to do, then you will see that it is not so different from Paulson’s rhetoric of buying up bad bank assets.  They did add initiatives to drive more consumer and business lending, but the method is the same as before.  Basically, they want to provide more capital to the banks. After billions of dollars already injected into the nations largest banks, they are still doing business as usual and actually making more profit than ever since they are borrowing at the lowest costs in decades and lending out at similar rates as before.  The banks are doing just fine, and I doubt that giving them more money will compel them to lend at better terms to consumers.  They will just profit further because that is the goal of a bank.

Finally, there is more language about preventing “avoidable foreclosures”.  I am not sure if Geithner read the old news that modifying mortgages for people who cannot pay just does not work.  One of the biggest problems facing the entire country right now is the rising unemployment rate, and that is fueling more foreclosures.  There is no point in trying to prevent these foreclosures through loan modification because what people need are sources of income.

Obviously,  I am not the only one who has no confidence in this plan because the stock market took a huge dip today.  Perhaps the Treasury should change their website’s name from FinancialStability.gov to FinancialDisaster.gov because that would at least instill some panic into people’s hearts just like how Obama is campaigning for the stimulus bill by using the “politics of fear“.

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In this economy everyone is trying to save a few bucks, and one tool many people have used over the years is the Entertainment Book. This is basically a book of coupons that you can purchase and it contains many buy one get one free coupons for restaurants, services, and entertainment in your area. One of my friends have used it in the past and he saved quite a bundle eating out with his wife while they were dating. Basically 2 to 3 coupons from the book would cover the price of the book. So I was pretty happy when Entertainment Book offered me a free review copy and one to give away to my readers.

Today I received my Entertainment Book for the San Francisco/San Mateo area. This book is a bit smaller than the East Bay version because I guess not as many merchants participate. Nevertheless, I found quite a few buy one get one free coupons for local restaurants. Additionally, there are coupon codes to use at online retailers like Borders and ProFlowers. There are also $5 off coupons for Longs Drugs and Safeway. I am organizing all the coupons I can use during the year and I think I could save at least $300 at the restaurants and shops I already frequent with my husband. This coupon book is definitely an excellent deal for couples because essentially you are paying half price for many meals.

So now for the best part. You can win a copy of the 2009 Entertainment Book for your area for just commenting on this post. Give your best money saving tips or link to a blogpost where you saved money with coupons. Winners will be chosen randomly on 2/14/2009 and you will have to give your contact information to Entertainment Book’s marketing folks to claim your prize. I want the winner to start using the book as soon as possible!

Sorry I forgot to update this, but the winner is comment #6!  The winner has been notified and they will be receiving a copy of the Entertainment Book!

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Recently I read that Senate Republicans are proposing an amendment to the Obama stimulus plan which calls for 4% mortgage rates for all credit worthy borrowers who want to refinance. I think this could potentially be a true stimulus to the economy, and here is why.

First of all, I think very few people have a 4% fixed mortgage right now. That rate is pretty much unheard of since mortgage products were invented. This means that a lot of people stand to save money month over month. For a person who has a 6% rate, a refinance to 4% means that they would save 33% on their mortgage. For a typical mortgage in California consumers can save anywhere from $200 to $500 a month, and that is a much better boost than a one time $500 or $600 tax rebate. That extra money can go into savings or be spent on other things. Since prices have come down on many items in this economy, it is likely consumers will spend their money if they have it.

Second, banks can definitely afford to lend out at 4% because the government already cut the interbanking lending rates drastically. In fact, they are pulling in more profits than ever even when they lend more than 5%. Historically, the difference between the 30 year mortgage rate and the 10 year treasury rate is 1.7 percent. Now it is around 3.3%, so banks can afford to cut the rate and still be profitable. It is pretty unfair that these banks are getting all of the benefits of the current mess even though they created, and perhaps they should do their part in helping consumers now.

Finally I like the plan because it rewards responsibility. If people with good credit can refinance at the low rates then it encourages good personal finance behavior. Instead of letting all the bailouts go to those who spent too much too fast, maybe it is time to help those who are working hard and being accountable to their own debts.  The economy can be really stimulated if people have trust in the financial system again and start investing and spending, and I think this would be a good start.

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