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Archive for the ‘Wall Street Journal’ Category

From the WSJ:

J.P. Morgan Chase & Co. launched an ambitious plan Friday to modify the terms of $70 billion in mortgages for borrowers who are behind on their payments or soon could be.

The move by the New York bank will cover as many as 400,000 borrowers. They’ll be moved into loans carrying lower interest rates, smaller principal amounts or other more-affordable terms.

This is great news…They must have figured that these high yielding, Option Adjustable Rate Mortgages aren’t worth too much if the borrowers default on the mortgage. Option ARM’s are particularly toxic since they allow the borrower to make a minimum payment which may not even cover the due interest – resulting in a higher loan balance (which accrues more interest over time).

The changes will particularly focus on a type of loan structured in such a way that the borrower’s outstanding balance sometimes grows month after month. J.P. Morgan inherited $54 billion of such loans with its takeover of the beleaguered thrift Washington Mutual Inc. in September.

The article goes on to point out that Wachovia had $120 billion worth of these exposures from their purchase of Golden West Financial, and that they had initiated the process of restructuring the terms of the loans. It is a smart step in making sure that home owners will be able to eventually pay down their principle; the last thing these banks want is an increase in mortgage defaults – therefore reducing mortgage interest rates is necessary in preventing this from happening. Now that the Government has replenished some of the lost capital in the banking system, giving the bigger banks as much as $25 billion, don’t be surprised to see Bank of America, Wells Fargo, and Citi follow JP Morgan’s footsteps.

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There is an article in the Journal today, which at first glance didn’t seem so farfetched…

“A four-year college degree, seen for generations as a ticket to a better life, is no longer enough to guarantee a steadily rising paycheck.

Just ask Bea Dewing. After she earned a bachelor’s degree — her second — in computer science from Maryland’s Frostburg State University in 1986, she enjoyed almost unbroken advances in wages, eventually earning $89,000 a year as a data modeler for Sprint Corp. in Lawrence, Kan. Then, in 2002, Sprint laid her off.”

However the opening of this article is just completely absurd. First of all, this author talks about “Frostburg State” like I should have heard of it. Secondly, if you decide to read the rest of this horrendous article, you’ll see he makes no reference to the fact that 2002 was one of the most severe years of the tech bubble recession, which subsequently bottomed in 2003. On top of that, this individual was let go by Sprint of all places, a company which witnessed its stock price go from a high of $80 a share to $7.25 in a little over 2 years (guess when that price bottom occurred?) Finally, are we supposed to trust that this “Bea Dewing” was at all competent at her job? Maybe Sprint, a dying cell phone company, figured this person was overpaid for her skill set…

The crux of it all is that what happened to this woman is not out of the ordinary, which is why it contributes very little to the bottom line of this article; this is an exhibit of the principle of cyclical unemployment, which is a natural part of the business cycle, especially in a recession.

When I saw this headline, I was hopeful that the author would comment more about how the average median American salary hasn’t come close to shadowing the rate of inflation in this country (even with a college degree), and less on this woman, who monopolizes the article. *Perhaps this is why we as a country have become so dependent on credit and borrowing against our houses to create imaginary wealth*

What I found to be most entertaining about this article, was the thought of how much this type of authorship would really piss off my Economics professor from last year (Please chime in if I’m wrong, Casey). He used to write an excellent blog, and he once wrote about how a college education is an investment in your own human capital, in addition to your future earnings potential. He was considering the value of college education in the context of student loans, and his post is way better than this b.s. article in the Journal. I insist you read it, as its very informative.

To be somewhat even keeled, this article was at least in the “Personal Journal” section, which is supposed to be a section of lighter reading. I do, however have to question this article’s agenda…maybe this guy “Greg Ip” has 3 young kids he will eventually have to send through college, and is trying to spark lower college tuition costs.

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