Archive for May, 2011

Could Uncle Sam get a mortgage?

My credit-minded boss posed an interesting question to me this week: Could the U.S. government obtain a home loan given its current financial situation?

To find out, I invited Uncle Sam into my lending office for an interview. (Note: The numbers I use are rounded off to reflect figures an actual borrower might give. Add seven zeroes to all figures for actual amounts.)

KT: Good morning, Sam. It’s a pleasure to meet you. I’ve admired you for a long time. I understand you’d like a mortgage. Let me start by asking how much you make.

US: $216,000 a year.

KT: Pretty nice income. What are your annual expenses?

US: $346,000.

KT: Whoa. Okay. How much money do you owe to lenders right now?

US: $960,000.

KT: What is that debt secured by?

US: Uhhh. What do you mean?

KT: Nevermind. What assets do you own?

US: Tanks, space shuttles, mountains, canyons. You know, the usual stuff.

KT: What about liquid assets? And I’m not talking Great Lakes or coastal waters.

US: You bet. I own two mints. One’s in Denver; the other’s in Philly. Have you ever taken a tour?

KT: Umm, no. Regarding the $960,000 that you owe, what are your principal and interest payments every year?

US: My loans are “interest-only” and the rates are really low right now. I pay only $22,000 in interest each year. That number will go up soon as interest rates rise, but it sure is nice right now.

KT: What if your creditors started requiring principal reductions instead of just interest payments?

US: The average maturity on my loans is about 5 years so I guess I’d pay about $195,000 per year in principal.

KT: And you only make $216,000? Do you have any other debt besides what we’ve discussed?

US: Well, I borrowed $460,000 from my grandparents, but they’re not pushing me to pay it back anytime soon.

KT: What? Let me make sure I have everything correct: You owe $960,000 to creditors and $460,000 to family. You make $216,000 a year and spend $346,000, including $22,000 in interest.

In addition, you conservatively should be making $195,000 in annual principal payments to lenders and, if we amortized your family debt similarly, $94,000 in annual principal payments to your grandparents, not to mention interest.

When I add all that up, your annual debt service to income ratio is 144%. Our policy max is 40%. Plus, you have negative net worth. I’m sorry, we’re not going to be able to help you.

US: Did I mention that I own 2 mints? Perhaps I could print some dollars to secure the loan with.

KT: Unfortunately, we can’t take as collateral an asset that is declining in value.

US: No problem. My great aunt will finance the home. Do you know Fannie Mae?

[Notes: Lender debt = securities held by individuals or institutions; Family debt = intragovernmental borrowing such as from the Social Security Trust Fund; Sources: U.S. Treasury Department, Government Accountability Office, Congressional Budget Office]

Kevin Thompson is a lender at Texas Heritage Bank and a political columnist for The Boerne Star. He can be reached at www.kwt.info.

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Perry for President?

I don’t listen to Rush Limbaugh everyday. I have mouths to feed, after all, and he airs from 11 a.m. to 2 p.m. His show notes do grace my inbox each afternoon, though they rarely push me to a transcript.

A line from Wednesday’s email caught my eye, however, and hooked me to the complete text of the show.

Limbaugh stated, “If Rick Perry decides to get in this, folks, then you can wipe away all the conventional wisdom that’s out there heretofore and to date, ’cause it’s a brand-new day, and it starts all over again.”

I’ve heard Governor Perry called many things in his ten years at the state helm. “National Game Changer” isn’t one of them. But that is essentially what Limbaugh called him before his umpteen million listeners coast to coast.

Some observers are calling the field of Republican presidential contenders an unexciting collection of has beens and unknowns. Romney and Gingrich represent the former group and carry varying degrees of personal and political baggage.

Pawlenty, Santorum and Bachmann represent the latter and may have difficulty building a national campaign operation. Better knowns (i.e., those with television shows) Trump and Huckabee, have chosen to forego the race. Others, like Indiana Governor Mitch Daniels, are still toeing the water.

Limbaugh firmly believes that President Obama is vulnerable next year. He also believes that a feebly principled, Beltway-type RINO won’t get us any closer to defeating Obama in 2012 than McCain came in 2008.

The talk show host is hungry for a candidate who trusts so deeply in the efficacy of conservatism that she doesn’t have to mince words or parse principles. He wants a candidate with a stellar leadership résumé and a 14-inch part in his full-bodied hair. Like him or not, Perry fits the part, no pun intended.

Limbaugh has not endorsed a Perry candidacy by any stretch. He has, however, penned a glowing 117-word endorsement of Perry’s book, Fed Up: Our Fight to Save America From Washington.

Limbaugh likes Perry’s decade-long stand against over-taxing and its evil twin, over-spending. He likes his unequivocal stance for conservative social values and a limited federal bureaucracy.

Many Texans have never thought of Gov. Perry as presidential. They have thought him cocky, perhaps even a bit dim. (He is an Aggie, after all. Hook ‘em.)

But I don’t care how red a state is, you don’t get elected by three landslides to run for 14 years a state called home by 26 million very diverse people without having talent, skill, principle and sense.

And I don’t care how strong the fundamentals of a state’s economy are, you don’t stay at the level Texas has stayed over the past decade of economic tumult without capable leadership at the top.

Two more things Perry has going for him: (1) He is the current chairman of the nationally-networked Republican Governors Association; and (2) he once was a Democrat.

I can hear it now, “I made the switch when my party stopped representing my values. You can, too.”

Presidential Surprises

The overnight raid of Osama Bin Laden’s lair lured me back to the George W. Bush era.

Not to the “enhanced interrogation techniques” at Guantanamo Bay that likely made the attack possible.

Not to Bush’s stubborn resolve to keep pursuing our enemies in the middle east despite mounting opposition at home.

Not to the “unilateral” nature of the Abbottobad mission, a concept demonized by the left during the Bush presidency.

Not even to Bush’s warning in September 2001 that the war on terror would not be swift or easy, that “the course of this conflict is not known, yet its outcome is certain…We’ll meet violence with patient justice.”

My mind went to November 2003 when, against the better judgment of the Secret Service no doubt, George W. Bush authorized a clandestine midnight mission to the Middle East. It was Thanksgiving and he wanted to celebrate with his troops on the ground in Iraq.

He slipped out of his Crawford ranch under the cover of night, boarded Air Force One in Waco and flew around the world to personally thank our service personnel.

The details mesmerized me. The idea. The secrecy. The risk. The execution. The success.

It could have ended badly. A radical with a rocket-propelled grenade. A suicide bomber in a green zone. A mysterious crash over the north Atlantic. Cooler heads surely suggested the safer option. Bush chose the heroic one.

The Navy Seal operation against Bin Laden was a surprise of historic proportions. It was a victory for the United States of America. It, too, could have ended badly.

The attack took courage, though one could argue that President Obama hardly had a choice. (“You had convincing evidence of the world’s most wanted’s whereabouts and you didn’t try to get him?”)

Nevertheless, I commend President Obama and the years of military and intelligence diligence that led to the successful operation.

President Obama made a heroic choice that didn’t necessarily match up with his previous words and deeds. Closing interrogation facilities; trying terrorists as civilians; quasi-apologizing for American strength and exceptionalism; these aren’t exactly conducive to locating and eliminating radical Islamists.

But even less conducive to maintaining military and intelligence superiority is the broader social agenda which Mr. Obama has pushed at home.

Once upon a time, Europe’s armies and armadas dominated land and sea. They were the most prolific in the world. Today, European nations spend less on defense as a percentage of their GDP than the U.S. It shows.

Could any other country have commandeered Bin Laden like we did? Not a chance, even if he was sitting in their own backyard, which he was.

Alarmingly, our defense spending has steadily decreased over time. In the early 1960s, our budget was split evenly between defense and non-defense spending. By 2009, it was 80% non-defense.

In Europe, the burgeoning welfare state has eaten away at military prowess. If the U.S. continues toward a cradle to grave entitlement society, our military and reconnaissance resources will decline, as well.

This week, we all have enjoyed having military and intelligence proficiency. But as our friends in the Old World have shown us, we can’t have Obamacare and Osama snared, too.


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