The Blog Of The Securities Industry Professional Association


Its time to Unleash the Brokers

I’ve had it with Washington! Enough already with your games, policies, deals, budgets, summits, partisan plans, jobs bills, debt deals, ENOUGH! You are all morons who have absolutely no idea how to create a job or wipe your ass without appropriating a sub committee to review the environmental effects of the toilet paper while appropriating funds for after wiping counseling for those who get diaper rash or a hemorrhoid. The madness must stop and its time somebody stepped up to the plate for the 600,000 brokers in this country who are ready willing and able to rebuild it, if only you dinosaurs in Washington would shut up and get out of the way. The other day the great and powerful Wizard of Fed unveiled “operation twist” in which the Fed will sell 400 Billion in bonds in an effort to lower interest rates even further. The plan is simple: Sell 400 billion in bonds, buy 400 billion in other bonds, give 3 more speeches, call Warren Buffet, buy some calls and Puts, print money, loan to Europe, buy some Greek Bonds, sell some Portuguese paper, take over Bank America, lower the debt while increasing the debt and say a prayer there is not another tsunami and PRESTO..The economy will surely be saved.

Mr. Bernanke is either trying out for a role in “Dumb ad Dumber part II” or he is so out of touch with main street America that he has no clue how hard it is to raise capital or get a simple loan. Interest rates have been at historic lows for years now Benny, the problem is that the banks are not lending to anyone because they are so busy suckling from the Fed Reserve teat that it makes no sense to loan to the rest of the United States when they can borrow at ¼ of one percent from you and then turn around and buy 2.5% Treasuries from your counterpart in “Dumb and Dumber “, Tim Geitner.

The SIPA will give you four things that will create millions of jobs, not ten years from now but ten days from now.

1) Open up lending directly to Americans:

Banks don’t want to lend so take away this free money and allow any applicant with a 700 or better credit score and a job to access a loan if they need it to buy a new home, a second home, a pool loan, a car loan, a business loan, a capital loan. Banks are advertising 3.5% fifteen year fixed loans that are more eye candy then reality. Allow a current homeowner with good credit to apply on line and offer them 3% fixed loans for 15 years. Think about how many Pools, home additions, improvements would start overnight. The beauty of it is that banks would now have incentive because applications would drop at all these cartel banks across the country. You would see construction and related supplier jobs surge in a matter of days not years. You would also have banks come off their high horse and realize they are not getting free money anymore and they may have to make money the old fashioned way and earn it. In addition to job creation, you would also see a surge in home sales as homeowners with good credit and a home would be willing to buy the foreclosed homes sitting around them and maybe rent them or fix them up (more jobs) and sell them for a capital gain in a few years. Now some of you might be wondering how the government would handle giving out loans but years ago there were these quasi Government entities known as Freddie and Fannie Mae. We get it, they screwed up but are we going to sit idly by and have them do nothing? This brings us to our second novel idea regarding the disaster that is our economy.

2) Change Short Sale rules immediately

Banks sitting on all these foreclosed properties need to crap or get off the pot. I have personally watched in our neighborhood foreclosed homes sit empty and decaying as the banks take six to nine months to decide if the short offer is acceptable. In one instance the bank rejected $260,000 on the short sale and now a year later they are listing the home for $199,000! This is insanity and must be stopped now. Let’s use human nature for a second to look at the problem and how it affects our economy. An empty home produces nothing. No electricity, no property taxes, no water bills, phone bills and no HOA fees. If we make borrowing money EASIER (not CHEAPER) these homes will not only be occupied but millions and millions of homes across the country will need to buy curtains, rugs, appliances, wall paper, paint, phones, new plasma tv’s , stereos, household cleaners, lawn products, pool products, screening, central air or heat…the list goes on. Imagine millions of people descending on the shopping malls to get couches and new beds and other furniture. Most of these short sale properties have a government guarantee built in there that allows a home that has a loan outstanding for 400k to be offset by the TARP program. That program needs to end asap and when banks get a legitimate offer for 260K the should be warned that any further decline is now their responsibility. The US guaranteed them protection on the 440k mortgage so if they choose to ignore a $260k offer the government is now locked in at $140k. In the a fore mentioned scenario the bank that rejected $260 would now be liable for over $60k in additional losses not the US tax payer. We cannot allow them to hold these homes vacant and play the downside on the tax payer’s dollar. Also, the short sale process needs to be sped up to 30 days or less. This notion that they are so swamped with short sales is a crock. They sit and sit on the paperwork hoping that 6 months from today the housing market will recover and they can hedge their decision. It’s been four years of this and it is clearly not working.

3) Unleash the greatest sales force in the history of man:

Stock brokers are by far the greatest sales men and women to walk this earth and I have been privileged to be one of them and today there are nearly 600,000 brokers sitting on their hands instead of raising capital. For those of you who think a used car salesman is even in the same sentence as a stockbroker consider this: You go to a lot, you see the car, you drive it and then negotiate a deal with the dealer and than drive away with the car. A Stock broker calls you, introduces himself over the phone and convinces you to send tens of thousands of dollars across the country to buy a company you never heard of and in the morning all you have is a stock quote of the company on your YAHOO! page. Case closed. The problem we have in this country is that capital is not being raised due to brokers and firms sitting on their hands being tangled up in constant regulatory red tape and compliance barbed wired. Fantastic new companies and ideas are not being funded because the amount of legal and compliance cost has made it nearly impossible for a broker to work on the deal. They want to raise the capital and get these small companies funded so they can in turn hire engineers, programmers, marketing people, manufacturers and more but instead the greatest sales force in history is on the sideline and more and more are moving into registered investment advisors (RIA) and collect a steady fee without the headaches. This is similar to having Michael Jordan on your team and having him pass to a bench player for the final shot in the NBA finals. We have this fantastic sales force that can also rebuild America’s infrastructure by selling bond offerings for municipalities across the country but instead they have abandoned the insanity of regulation and are taking the easy ( and correct) route and opening up Advisory accounts at Schwab and buying mutual funds for 1% fee per year. Its time to let them rebuild America and to let them do so without the constant fear of a regulatory assault.

4) President Obama needs to shut his mouth:

I respect the office of the Presidency of the United States, but seriously someone needs to pull him aside and let him know that he is in fact the PRESIDENT OF THE UNITED STATES and he cannot go around saying the things he says. Its one thing for rhetoric to be issued by House and Senate members, must people are accustomed to that, however the President is supposed to lead our country and getting into tit for tat rhetoric with the members of congress makes him look small, menial and out of touch. What is even more scary is his constant bell ringing that ‘The rich do not pay their fair share” or that “I want to raise taxes and have the wealthy pay their fair share”. Even before he barked up this tree Obama was out telling the world that we would default on all our obligations if the debt deal wasn’t reached and that Social Security checks may not go out. Mr. President you are casting doubt, concern, fear and trepidation to anyone who is in a position to create jobs. Small businesses are petrified to hire or expand because every other day you give a speech telling everyone that these individuals are not paying enough in taxes. Ironically last week he gave a stirring speech to a bunch of college kids (most of whom are not even employed or paying taxes) that the rich are not paying their fair share and all the kids were hooting and hollering support. Our President needs to grow up and realize that class warfare will not create jobs but will have the opposite effect. When speeches like this are made, businesses are most likely dialing China or India and trying to figure out how to lower their labor cost and outsource to cheaper alternatives to offset potential higher taxes and health care costs. Our President needs to understand how to be a leader, even if in perception only. For instance we know that Obama is not a big fan of the military, but would he give a speech in which he acknowledges we are woefully week on the Afghan front and are very vulnerable to RPG attacks in Iraq? Hopefully not but in a way that is what he is doing with his assault on the rich along with his puppet master friend Warren Buffet who continues to mislead the President. The fact that the President is so chummy with a man who just lost his CEO to insider trading is puzzling to say the least. Investors and businesses want to hear our President say our Economy will grow, our markets will rise and our businesses are free to hire and expand. Instead all we get is a wagging finger from our President telling job creators you are scum and are not paying your fair share. Mr. President, please for the good of our country, shut your pie hole for a couple months.

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September 23rd, 2011


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