Bring Back Griffey- and not for the reasons you think!

The brand, “Seattle” is a very strong global brand today, yet the brand, “Puget Sound” means little to anyone outside of the Vancouver to Portland corridor. When I talk to visiting delegations or travel (rarely) on business outside of the aforementioned corridor, I have to refer our region as the Metropolitan Seattle Region or risk blank stares and a constant drone of, “so, where are you from?” However, here at home I am very careful to refer to us as the Central Puget Sound Region for reasons primarily related to political correctness and job security.

It is worth remembering (and yes I’m ready for the hate mail from Everett and Redmond) that most people in the world think that Boeing and Microsoft are headquartered in Seattle.

The Rise and Rise of Nyhus Communications

I want to make it clear that there are a lot of talented communications/public affairs firms in the Metropolitan Seattle region with whom we work.  That said the recent 2009 Mayor’s Small Business Award given to Nyhus Communications caused me to reflect on why I am seeing these folks grow quickly despite a tough economy.

The Mortgage Professor

Jack Guttentag (a.k.a. the Mortgage Professor) has a piece today entitled, Saving the Banks Without Breaking the Bank. It basically argues that we should be focused on consumer rescue rather than institutional rescue because the only way to stop the slide in real estate prices is to help those underwater not be forced into bankruptcy thus limiting the erosion in value of the institution’s assets.

What do you think?

Wall Street’s Sick Psychology of Entitlement

Of course, smart people are very good at rationalizing their fantasies, especially when the fantasy serves to make them money.

Wall Street’s Sick Psychology of Entitlement hit home to me. Do we all act this way in some form or another?

Regardless, we all need to think about how we can contribute in a productive manner to rebuilding our economic engine. And it may be that we have to all personally sacrifice to make it happen!

Redmond- the Video Game Capital of the World

With the Nintendo Wii and Xbox 360 leading the Sony PS3 in holiday sales, it looks like Redmond is fast becoming the video game capital of the world.

Now if Sony would only move their video game headquarters to Washington State (preferably to King, Pierce, Snohomish or Kitsap counties) they might be able to get back in the game- oh and they should look at their pricing strategy.

Pay Option ARMs- the Sign of a Banking Apocalypse

My last post referenced a type of home loan called the pay option arm. It was also known as the pick a payment loan because you could pay just the interest, the interest and principal, or less than the monthly interest. The total bill you could run up by not paying the entire interest due that month was usually capped at 115% or in some cases 125% of the initial loan value. As long as the terms were understood clearly this type of loan could benefit some consumers- particularly those with irregular cash flow situations.

These loans were also often offered with extremely low initial rates such as 1.99% but with a short 1-month or 6-month period before the loan started to adjust. In addition, these loans were often approved with limited or no documentation of income and assets.

Consider this scenario, you make $45,000 a year and have approximately $2500 a month in take home pay. A $500,000 home comes up for sale near your apartment. You think wouldn’t that be amazing to live there, I’ve always loved that house. So you ask your friend who happens to be a mortgage broker what it would cost to buy that house and he comes back with- $1245 a month with no money down. And oh by the way you can borrow 103% of the loan amount so you will have a cushion in case things get a little rough. Well since you are paying $1050 a month in rent anyway and you’ve seen how much homes are appreciating in value you think, “lets go for it!”

Six months later when the 1.99% rate resets to LIBOR plus 5 or say 7.02% your minimum payment will grow 7.5% (a typical limit for the maximum payment increase at each reset) to around $1338 a month and you are paying even less of the total monthly interest! You suddenly realize you are in way over your head because at the rate you are going you will reach your 115% cap in 14 months. Oh, and home values are declining so you can’t sell your home without filing bankruptcy.

Now is it surprising that all but two of the pay option ARM lenders have failed or been bought out in the financial bloodbath? In the end the advent of the pay option ARM may have been the sign of the banking apocalypse.

Lower the FDIC Insurance Levels?

Congress looks likely to temporarily raise the FDIC insurance cap on deposits from $100,000 to $250,000. I am sure this is welcomed with open arms by many of our nations retirees and those close to retirement with significant financial resources in one bank or credit union. However, there is another side to this!

As pointed out here, FDIC (and to a lesser extent NCUA) insurance promotes risky lending practices by financial institutions. By letting the government bailout individuals who have their funds in banks with risky lending practices, don’t we encourage the risky activity? Would you leave your money in a bank making subprime pay option arm home loans if you knew that the government wouldn’t bail you out if the bank failed?

When the financial storm clears maybe should we look at lowering the FDIC cap? Comments?

The U.S.- an oil exporter?

Great post for stimulating discussion from Autoblog: Could the U.S. become a net exporter of gasoline? I for one am skeptical this will come to fruition before we have moved beyond fossil fuels as a major energy component, but I would like to hear your thoughts!

Danish Energy Independence

Today’s column by Thomas Friedman, “Denmark is flush with energy” is a worthy read.

The most chilling comment comes at the end when Ditev Engel, the President of Vestas- now the world’s largest wind turbine company-points out he can’t understand why the U.S. Congress didn’t extend the production tax credits for wind production. As a result 35 competitors for Vestas have emerged in China in the past 18 months and none from the U.S.

Tanker Re-Re-Re-Bid Today

For the third time the Pentagon will rebid the tanker replacement contract. Let’s hope third time is a charm!

Does this really help Boeing?

House defense appropriators on Wednesday fully funded the Air Force’s troubled mid-air refueling tanker, which has been at the center of a bitter lobbying fight between Boeing and Northrup Grumman/ EADS/ Airbus.

But the $893 million appropriation for the tanker comes with a caveat: The Pentagon will have to consider how the project will impact U.S. jobs and the defense industrial base in its evaluation criteria for contractors.

Now this might be seen as a win for Boeing- but you have to ask yourself- is the defense industrial base impacted positively by giving Northrup Grumman/ EADS/ Airbus a facility for expanding their contracting presence and creating a more competitive defense environment?

Some background on this: Airbus and Northrup Grumman have hinted that aircraft other than the tanker would be assembled in Alabama. Also, while Boeing claims that the contract would create 44,000 jobs in the U.S., Northrup Grumman/ EADS/ Airbus revised their estimates to say the contract would create 48,000 jobs in the U.S.

Timeline for Federal Energy Bill- September or Later…

Senate Democrats and Republicans declared an impasse on energy legislation and said they will have to wait until September to try again. GOP senators on Wednesday blocked a vote on renewable energy tax credits which led to Democrats saying that a bill will have to wait until September. Democrats have been trying to focus the debate on oil speculation and tax credits for renewable energy, while Republicans want the legislation to include expanded oil drilling.