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By Jim Walberg
From his blog: Caribbean Real Estate: U.S. Financial Crisis Has Created Great Fear Throughout The Islands!!!
In the midst of the biggest financial meltdown since the 1930s some hard questions are being asked of Jim Walberg this week.
My email box is overflowing and the phone has been ringing off the hook. The people who have an interest in the Caribbean real estate markets are afraid. They are asking some very hard questions that need to be immediately addressed by our Federal government as to how a further financial collapse can be averted. You may recall my past article about the mantra of a sailor as he sets off on a voyage – Do Not Be Fearful! Well, it is a challenge to get to that place when the walls or the U.S. financial structure seem to crumbling down before our very eyes. There is no getting around the fact it is a historic financial mess. My focus is to always get to “what is” as fast as possible, and start making lemonade out of the truck load of lemons that has just been dumped on our front porch.
When I want some well-thought-out ideas on National financial issues I call my REALTOR® friend in Naples, Florida. His name is Mike Lissack. He is one of the smartest financial minds that I know. He came to real estate from a long and successful career on Wall Street where he was named by Worth Magazine as one of “Wall Street’s 25 Smartest Players”, and is one of the top 100 Americans who have influenced “how we think about money.” Before he retired from money management he directed more than $25 billion of investments, supervised their financial reporting, and assisted in the design of their risk management and investment operations.
So we have been corresponding about the financial meltdown that is surrounding all of us. He has some pretty interesting ideas as to what he would do if he was in charge of the direction our Nation takes next, regarding making sure these events never happen again. I felt it was important for you to also review what he has been proposing to me. Here are his latest thoughts, given the events of the last few days. Mike’s view on the financial solutions of our current crisis is we need someone in our government to take proactive action NOW! Here are some more of his suggestions for your consideration, and those of my Caribbean friends asking some very hard questions:
Now that all of Americans again “own” another financial institution because a bailout was required – AIG – and the Feds have stepped in and are claiming they will finally fix the financial mess that our country finds itself in, there are further urgent steps that are needed now:
1) Remove the FDIC cap or raise it to $250k (we do not need any runs on the bank)
2) Nationalize the rating agencies – they do not do their assigned task – they rated junk bonds “AAA”, and then their reversals of these ratings led to the present financial meltdown. Ratings are a utility that needs to be performed by competitive institutions who answer to investors – not issuers and NOT bankers.
3) Establish a “swaps” clearinghouse and prohibit implicit leverage on “swaps” by legislating that no position can be swapped or hedged more than once without a prior trade being offset.
4) Prohibit “third order and higher” derivatives. There is an underlying transaction, it spans derivatives. Then there are derivatives which rearrange the first set of derivatives. At that point, enough is enough!!! The system cannot deal adequately with the complexities of continuing to dilute and issue more derivatives using the same bundle of “AAA bonds” that are actually junk.
5) Write down 90 percent of current appraised value guarantee on Fannie and Freddie mortgages.
6) Announce a national shared equity appreciation fund into which the excess of the 90 percent of current appraised value loans can be dumped.
This is a summary of his second round of suggestions for me to consider. His first email addressed the Fannie Mae and Freddie Mac mess. Let me know your thoughts. Also, if you want to contact him directly, go to www.Lissack.com. We will always figure out a way to make lemonade out of lemons with this financial mess. Do you know why? BECAUSE WE DON’T HAVE A CHOICE! Until next time… fair winds to you in the midst of a BIG storm!!!
Jim Walberg is the co-Broker/Owner of The Bay Area Team, the most-successful team at Keller Williams Realty-Danville. He is also a member of the global Luxury Real Estate network. Jim is an exceptional blogger, as you can see by visiting his blogs, East Bay Real Estate and Caribbean Islands Realty, and reading his great blog entries like the one above. He is the master of fractionals and other luxury homes in the Bay Area and the Caribbean, and he always has a lot of great opportunities to share. This whole situation makes me sick. The fear is practically palpable and we are right on the edge of crumbling… why? Are there fewer workers, fewer skills, reduced demand or anything like that? No. The big problem is greed and pride. Honestly, it’s very hard for me to find anything positive in this current situation. Dishonesty has become so rampant that the truth is becoming harder to find. Why should we fall? My heart is filled with sorrow and disgust. I am not a negative person, but it seems to me that the foolishness of a few people has led to the destruction of much that good people have built up. How can we let this stand?
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