Issue link: https://www.epageflip.net/i/7806
Dear Terry: (This is an excerpt from a note posted on my blog.) We are grate- ful to have wonderful jobs and don't ever want to be viewed as complainers. However, I have to admit I am frustrated and perplexed at what I am hearing lately in terms of the financial behavior of some associ- ates, even family. I know of people walking away from their mort- gages and pocketing the monthly cash in anticipation of a foreclo- sure. I have seen people run up extremely irresponsible credit-card debt and declare bankruptcy, yet retain their home and cars and have money for vacations and investments. I dutifully pay off my debt, and in spite of a terrible year for my hus- band's company, we still pay all of our bills. I almost feel like a fool watching other people play the sys- tem (legally) and walk away in better shape financially. Can you cheer me up? -- Patty Yes, I think I can cheer you up -- because I have a basic belief in both the intel- ligence and the moral com- pass of the American peo- ple. Personal responsibility is at the heart of a democracy. We know that self-interest ensures survival. If a society creates perverse incentives, individuals are certain to be motivated to act in their own best interest. So we must fix the financial incentives to make sure that self-interest and social responsibility once again coincide. Let me give you one quick example of a very perverse incentive. Let's assume you are one of mil- lions who has a mortgage and are barely making the payments. You'd like to refi- nance at today's lower rates, but your house is worth less than the mortgage. You want to do the morally and financially correct thing: keep paying your mortgage and keep your home. Yet when you go to the bank, you run directly into the most perverse incentive. The bank says you have to be behind at least three months in your payments before it'll consider refi- nancing your loan. But if you comply, once you've ruined your credit to get the bank's attention, there's no guarantee you'll get a new, more affordable loan. And then, because you're behind on your payments, you might get foreclosed out of your home. Even worse, those per- verse incentives to walk away from personal respon- sibility demoralize people like you. No one wants to feel like a sucker. These perverse incen- tives apply on a national scale, as well. In fact, they're what created the housing bubble in the first place. When Congress decided to subsidize low-rate mort- gages through Fannie Mae and Freddie Mac, it was not surprising that mortgages were pushed out the door to all who applied, regardless of qualifications. After all, any losses would be "insured" by these "quasi- governmental" agencies that had lines of credit with the Treasury. Why did Congress take it upon itself to push home ownership to such new heights? You don't have to be cynical to understand that the illusion of prosperi- ty buys votes. With Freddie and Fannie throwing money at the mortgage market, brokers got huge commissions to find borrowers, banks made money-selling loans in the secondary markets, and Wall Street made money securitizing the loans and selling them to investors. And ratings agencies made money giving junk mort- gages top ratings. The incentives to expand home ownership worked -- until the bubble inevitably burst. Let's look at Wall Street's bad behavior. Much of it has been spurred by the same perverse incentives. Wall Street climbed aboard the mortgage boom, created by a Congress that urged Fan- nie and Freddie to make mort- gage loans avail- able to less-quali- fied buyers in the name of "com- munity reinvest- ment." These invest- ment banks that securitized those mortgages knew they were "too big to fail" -- until one of them, Lehman, did fail. Then they imme- diately rushed overnight to become "tradi- tional banks" instead of invest- ment banks. Thus they were covered by FDIC insurance -- and the government could not let them fail. That perverse incentive of "too big to fail" has underwritten their current risky activities, making today's huge bonuses possi- ble. The incentives are sim- ply too powerful to resist -- even though the profits and bonuses must be embarrass- ing to them. Our government created those misleading incentives that have resulted in activi- ties that destroy our econo- my. So perhaps we should be asking, "What are the incentives for our govern- ment?" You don't have to look far to find those incentives. They're in the money that comes from special-interest groups and campaign con- tributions that "buy" their votes -- on both sides of the aisle. Maybe our founding fathers anticipated this problem. They gave each and every one of us some- thing more powerful than money. They gave each of us a vote. And that's why I can offer optimism. Americans have not lost our moral compass. We recognize the perversity of so many pro- posals coming out of Washington. We have big hearts and a gen- erous spirit. But we also have an enlightened self- interest that will not accept the theft of our hard work for any immoral pur- pose. If enough Americans of all political persua- sions are moral- ly outraged by our govern- ment's actions, we will gather that outrage and vote them all out. Looking around at the mess they've made, I think we finally have that incentive. And that's The Savage Truth. Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She can be reached at www.terrysavage.com. She is the author of the new book, "The New Savage Number: How Much Money Do You Really Need to Retire?" Arrests •Wendell Andrew Esea, 53, Anderson, was arrested Wednesday morning at Sierra Pacific Industries by the TCSD on suspicion of commit- ting lewd or lascivious acts with a child under the age of 14. Bail was set at $1,000,000. •James Martin Daniel, 24, Corning, was arrested Wednesday night on Blue Heron Court by the CPD on suspicion of commit- ting lewd or lascivious acts with a child under the age of 14. Bail was set at $75,000. Student An 11-year-old Ever- green Middle School stu- dent reportedly came to class Wednesday with a lighter, a pen turned into a smoking device and a tea bag. Vandalism •Javier Martinez reported Wednesday afternoon that front and rear vehicle windows had been smashed on Alame- da Drive. Damage was $250. •The Lake California Owners Association reported Wednesday the front gate has been con- tinually vandalized. The damage is estimated to be $150. Crash • Cody Carter, 20, of Anderson was uninjured in a crash at 12:20 a.m. Thursday on northbound Interstate 5, north of Bowman Road. Carter was driving north on I-5 about 60 mph when due to his level of intoxication he allowed his vehicle to veer off the road and onto the right shoulder where it hit a large wooden sign post. Carter was arrested on suspicion of driving under the influence of a controlled substance. His vehicle received moderate damage. Friday, March 12, 2010 – Daily News – 3A Andrea's Therapeutic Massage Andrea Strege C.M.T. Deep Tissue • Relaxation Pain & Stress Relief Now Offering 1 Hour massage Only $ 45.00 15 minutes $15.00 30 minutes $25.00 Red Bluff Health & Fitness walk-ins welcome 530-776-8201 GIFT CERTIFICATES AVAILABLE "Your neighborhood pharmacy since 1952" We've got you covered • Healthcare Including Prescriptions & Non-Prescriptions • Wide Variety of Gifts, Cards & Picture Frames • We Deliver Locally Jerome Wells, Pharmacist PRICE'S PHARMACY 1322 Solano St., Corning 530.824.3495 Fax 530.824.9227 530-528-8120 10 Gilmore Rd. Red Bluff Corner of Antelope & Gilmore 530-528-8120 10 Gilmore Rd. Red Bluff Corner of Antelope & Gilmore Limited time offer expires March. 31, 2010. Other conditions and restrictions may apply. See store for full details. Offer valid only at NorCal AT&T Authorized Retailer stores. Rebate debit card offer. Price before mail-in rebate is $149.99. M u s t p u r chase BlackBerry Unlimited Plan and sign new 2 year service agreement ot qualify for discounted pricing and rebate. Retail price Blackberry Pearl 8110 is $399.99. RAIN OR SHINE 3 or more pet discount CASH ONLY SATURDAY, MARCH 13 TH RED BLUFF Reynolds Ranch & Farm Supply 501 Madison, Red Bluff 12:00-2:00 MOBILE PET VACCINATIONS (916) 983-4686 (Not affiliated with any other vaccine clinic) PRESCRIPTION FLEA PREVENTION ALSO AVAILABLE LOW COST VACCINE CLINIC Mobile Pet Vaccinations DOGS ON LEASH Distemper/Parvo (6-in-1) and Rabies............. $ 15 Distemper/Parvo (6-in-1) Corona, Rabies & Bordetella....... $ 25 Distemper/Parvo (6-in-1)............. $ 10 Rabies Only.... $ 7 CATS IN BOX Feline Distemper (3-in-1) and Rabies ............. $ 15 Rabies Only .... $ 7 Leukemia......... $ 12 All Three .......... $ 25 Local Calendar FRIDAY, MARCH 12 Red Bluff Al-Anon, 6 to 7 p.m., Presbyterian Church, Jefer- son and Hickory Celebrate Recovery, 6:15 p.m., Vineyard Christian Fellowship, 738 Walnut St. 527-2449 Knit for Kids, 9:15 to noon, Presbyterian Church, 838 Jefferson St., 527-0372 Little League Opening Night Ceremony, 5 p.m., ceremony at 6:30 p.m., Jackson Heights Little League facilities The Magic of Movies Tom Hanks Film Series: Turner and Hooch, 7 p.m. State Theatre, 333 Oak St. $7 adults, $5 ages 12 and under. Proceeds benefit PAWS Corning Adult Wood Carving Class, 10 a.m. to noon, Corn- ing Senior Center, 1015 Fourth Ave, 824-5669 Spanish Adult Education, 8:30 a.m. and 1:30 p.m., Corning Family Resource Center, West and South streets, 824-7670 SATURDAY, MARCH 13 Red Bluff Decorative Brushes of No. California, 10 a.m., Red Bluff Community Center, 1500 S. Jackson St. Tehama County Democratic Central Committee Quarterly Coffee Klatch, noon to 4 p.m., 1015 Lake- side Drive Tehama County Resource Conservation District Gardening Workshop, 8 a.m. to 2 p.m., Jr. Arts Build- ing, Tehama District Fairground, 527-3013, Ext. 3 SUNDAY, MARCH 14 Red Bluff Diabetes Education Class, 5 p.m., St. Peter's Episcopal Church, 510 Jefferson St., 527-5205 MONDAY, MARCH 15 Red Bluff Al-Anon, 6 p.m., Presbyterian Church, Jefferson and Hickory Gastric Bypass Support Group, 6 p.m., St. Eliza- beth Community Hospital, Columba room, 529-3066 Gerber Elementary School Board, 6 p.m., Gerber School, 23014 Chard Ave. HIRE (Head Injury Recreational Entity), 10 a.m., St. Elizabeth Community Hospital, Coyne Center, Rusty, 529-2059 Key to Life, 6 p.m., Red Bluff Family Resource Center, 220 Sycamore St. Suite 101, 528-8066 Red Bluff Community Band, 6:45-8:45 p.m., Red Bluff Community and Senior Center, 1500 S. Jackson St., 527-3486 Retired and Active Federal Employees, 11:30 a.m., Elks Lodge, 585-2494 Sun Country Quilters Community Service Group, 9 a.m. to 3 p.m., Red Bluff Family Resource Center, 220 Sycamore St. Suite 101, 528-8066 Corning Kirkwood School Board, 5 p.m., 2049 Kirkwood Road Narcotics Anonymous, 7 p.m., 815 First St., 385- 1169 or 566-5270, meetings are daily through Satur- day, noon Mondays and no meeting the third Wednes- day Sewing group, 9 a.m., Corning Family Resource Center, West and South streets, 824-7670 Spanish Adult Education, 5 p.m., Corning Family Resource Center, West and South streets, 824-7670 Strategies for Success, Life Skill classes, 1:30 p.m., Corning Family Resource Center, West and South streets, 824-7670 Los Molinos Senior Dance, 7 p.m., Los Molinos Sr. Social Club, Los Molinos Senior Center, Josephine St. Gerber Gerber Union Elementary School Board, 6 p.m., 23014 Chard Ave. Flournoy Flournoy Elementary School Board, 6 p.m., 16850 Paskenta Road TUESDAY, MARCH 16 Red Bluff City Council, 7 p.m. City Hall, 555 Washington St. Diabetic Education, 12:30 p.m. St. Elizabeth Com- munity Hospital, Columba Room, 529-8031 Police reports Washington stuck us with the wrong incentives Terry Savage The Savage Truth on Money