Q: How can our nation continue to let the actions of our government carry on considering the following: "according to Article 1, Section 8 of the Constitution which happens to be the inviolable law of the land. The article states that Congress shall have the power to coin (create) money and regulate the value thereof. In 1935, the US Supreme Court ruled the Congress cannot constitutionally delegate its power to another group or body. The Congress thus acted in violation of the Constitution it's sworn to uphold and in so doing created the Federal Reserve System" The Federal Reserve System is ILLEGAL, so why is Obama giving them MORE POWER!?!?

Submitted by Cathlene Hatzenbuile from Beaverton, OR

A: You are on your on this one. The Federal Reserve exists and it isn't going away anytime soon. Thanks for sharing your thoughts.

Answered 06/18/09 18:29:54 by Kevin Hall and Tony Pugh

Q: The answer to the correction of the regulatory system lies in how they treat an auditor during the first discovery of irregular behaviour, there is NO protection for the auditor in either the CPA Arena nor the Gov't arena, because there is always a supervisory auditor above the primary auditor who was not supposed to let this happen. Whistleblower reform is necessary within the regulators and audit firms themselves? No.?

Submitted by Howard Mann from Kennewick WA

A: Very good point and I hope our readers see this. This was certainly the history with Enron and countless of others, whether it was blowing the whistle on non-bank lenders encouraging weak lending etc, those who spoke out were always punished by those higher up. Tx for reminding on the importance of such reform.

Answered 06/18/09 18:28:54 by Kevin Hall and Tony Pugh

Q: Watching the questioning of Ken Lewis by members of congress, I started wondering - regardless, of what their level of participation was, is there a difference between the non transparent way that the government involved itself in the Bank of America/Merril Lynch merger and any other nontransparent involvement they have had with other financial institutions? Thank you for your answer.

Submitted by sherry mysak from cedar rapids IA

A: The closest example was the sale of Bear Stearns. A very good book, out recently, called House of Cards recounts the final days of that investment bank as the feds brokered its sale to JP Morgan Chase and many of the strongarm tactics taken with Bank of America were employed with JP Morgan too. Treasury Secretary Paulson actually suggested JP bid even lower than its lowball offer, and then pressured JP to up it... in a scenario where a JP hired attorney made a mistake and the only way to clarify it, since govt left JP out to dry, was to agree to a higher per share purchase of Bear Stearns in exchange for fixing the technical mistake in the agreement.

Answered 06/18/09 18:27:36 by Kevin Hall and Tony Pugh

Q: What are the chances of asking my mortgage holder, Wells Fargo, for a 2 month break on paying mortgage until I get some more money from selling a very valuable set of furniture at auction? it would be paid up after money is received. i have never been late before.

Submitted by Suzanne gartz from Monroe, MI

A: You can try but my experience is that lenders are generally unwilling to work with you until you are late. It's a perverse situation and encourages non payment, but I have been on the phone with people as they try to modify mortgages and recently contacted one mortgage servicers who refused to entertain any change while the borrower was still making payments. Never hurts to try, you never know when you'll get lucky, I'm not sure Iw ould say why you will be able to pay in two months, I would say exigent circumstances have arisen and see if they will work with you for a couple of months.

Answered 06/18/09 18:25:03 by Kevin Hall and Tony Pugh

Q: Is it true that obama is thinking about cutting Social Security by 70%

Submitted by Shirley from Sikeston

A: No.

Answered 06/18/09 18:22:54 by Kevin Hall and Tony Pugh

Q: If the credit default swaps are a form of insurance on debt or risk then why aren't they regulated as insurance? Were they invented to get around the regulations on insurance and the required capital to back the insurance? Can just changing what you call something make it unregulated?

Submitted by Rick from Tulsa,OK

A: I wouldnt say they were invented to get around insurance rules, more an expansion of the concept of insurance into financial markets to mitigate risk. These swaps provide a way of protecting yourself against debt you have issued, loans you have extended etc. But it was grew into naked swaps, where parties with no relation to the underlying asset can bet on its success or failure, and this has been disruptive. for example, WSJ had a very good piece showing how credit-default swaps were hampering the ability of Ford and Six Flags, the latter now in bankruptcy, to renegotiate its debt. Holders of CDS stood to gain if the companies went to into bankruptcy, and to hell with the workers, suppliers and anyone else affected. That's why many people find CDS unsavory, though they clearly also have a function in managing risk.

Answered 06/18/09 18:22:47 by Kevin Hall and Tony Pugh

Q: How is the dollar amount of security (used to be gold bullion @ $35 an ounce) determined today with respect to not exceeding that maximum monetary amount that can be printed? Who determines what the maximum monetary amount that can be printed is?

Submitted by Duane Steil from Rancho Murieta, CA

A: There is no such reference today to the gold bullion example you gave. The Federal Reserve determines the money supply, in accordance with its dual mandate of combating inflation and deflation (price stability) and promoting maximum employment. While the Fed is autonomous and has these powers, it publishes data and since this data is public record it leads to scrutiny and even an autonomous entity but pay attention to both market and political sentiment about how it does its job. In the case of what you asked, the money supply, if the Fed were just to print willy nilly -- something short-handed as monetizing the debt -- there would be all kinds of repercussions. The Fed has been creative in how it has tried to step in amid a credit crunch and try to keep these markets functioning, but it has done so cautiously, limiting the risk it is taking on its own balance sheet for fears of losing credibility and thus its power to persuade.

Answered 06/15/09 13:01:58 by Kevin Hall and Tony Pugh

Q: prove marginal cost goes through the minaimal of avg total cost? I have to write one full page can you get me started?his is economic question

Submitted by carla Logan from Camden SC

A: Perhaps this link will help.... http://www.unc.edu/depts/econ/byrns_web/ModMicro/MM08_Costs/Interm_MICRO_08.pdf and this one... http://www.unc.edu/~straines/econ10/lecture%208.pdf

Answered 06/15/09 12:34:56 by Kevin Hall and Tony Pugh

Q: The Fed has been giving both FDIC insured banks and investment banks 0% or very low interest rate loans since about April 2008 after the Bear Stearns bankruptcy, at least $3 trillion out so far. As you have noted in the past, traditionally these loans have required highly rated collateral. Isn't the Fed now taking the CDO products as collateral, the same instruments that no one knows how to value and are the crux of the problem? Also, one sees estimates of the US "values" of these CDOs anywhere from 20-60 trillion dollars, and internationally up to 160 trillion. What is your estimate. It is no wonder the banks want to get out of TARP money with strings. They can get free money and get rid of their bad assets, since there is no time frame for repaying these loans. Even the US government can't buy up this much garbage. Won't we eventually be back in the same hole we started in when the dollar fails internationally, with no savior?

Submitted by Terry Clark from Lexington, KY

A: I dont have an estimate for the value of CDO's, and I inherently distrust most of them because we dont know of what they are comprised. The Fed is taking only triple A rated CDO's and if my memory serves right one of the reason why was to try to create some sort of reference price in the marketplace for these things. The Fed has some pretty steep haircuts, and the banks haven't received free money, there are interest rates attached, and the FDIC provided loan guarantees for a lot of stuff, at a cost to the banks. So I'd disagree that it has been free, in the case of the TARP money there were stock warrants, dividends and onerous (by banking standards, not real business standards) executive compensation rules and a number of other things that make the govt a business partner you'd rather not have.

Answered 06/15/09 12:28:17 by Kevin Hall and Tony Pugh

Q: I own common shares of GM. It's not clear to me if my shares will be worth anything AFTER bankruptcy proceedings are completed. If a "new" GM emerges after bankruptcy, will my share positions once again have value as "new" GM stock? Or, do I lose all my stock value immediately when GM goes into bankruptcy with no possibility of recovering any value as "new" GM stock? Thanks.

Submitted by Brad Doyle from Fall River, MA

A: My understanding, and I could be wrong, is that equity holders are wiped out. GM won't be a publicly traded company for another 18 months, by most bets. Perhaps they can find a way to honor old GM obligations, but the whole purpose of bankruptcy is to shed those obligation and emerge with a leaner, debt-free company so my guess is there won't be a lot of appetite for protecting former GM stockholders.

Answered 06/15/09 12:21:50 by Kevin Hall and Tony Pugh

Q: Do you think congress will extend the first time homebuyer credit for 2010? If so, do you think it would have the same terms as right now? Thanks!

Submitted by eric from ky

A: Hard to say. I think there are two conflicting desires. One is to stimulate the housing market, and the credit has been helpful for those first timers, but offsetting that desire is the rising anger with mounting debt and deficits, and there is a lot of pressure to pull back on government spending precisely at the time it is most needed to ensure we dont slide deeper into recession.

Answered 06/15/09 12:20:02 by Kevin Hall and Tony Pugh

Q: How can anyone with modest means ever get out of debt when the government permits outrageous "usary" charges? The high cost of money is bankrupting everone, even our own federal government. Their must be laws enacted to STOP these LEGAL LOANSHARKS from preying upon the public. From interest up front mortages to payday loans to overdraft fees to 36% credit card interest and "fee gimics". You, the congress, have the power to LIMIT USARY costs. Do you job, stop this constant flow of cash from the have nots to the "money for nothing and chicks are free investment gang"!

Submitted by larry hardin from elizabethton TN

A: Thanks for your comments. Not much to add, banks and other lenders are in self preservation mode and are not lending unless there is a risk premium attached. They're not lending cheaply to those with good or bad credit alike, and it won't pick up I think until the unemployment rate peaks and the economy starts adding jobs. Sadly we have many tough months ahead still.

Answered 06/15/09 12:18:38 by Kevin Hall and Tony Pugh

Q: My warranty is set to expire this month and I was going to purchase an entended warranty for approx $2000.00 Will the New GM honor this warranty or will the government or will it be worthless. Thank You

Submitted by Bill Brennan from Sommerville, N.J.

A: I answered this in a personal email but for those reading this Q and A, the government backstop on warranties does not include extended warranties, just the original ones or the ones given on new cars being purchased. That said, the Treasury Dept expects Chrysler and GM to honor extended warranties, but it is not mandated.

Answered 06/15/09 12:16:30 by Kevin Hall and Tony Pugh

Q: In your story about potentially high oil prices, I beileve that you are neglecting the very true facts surrounding peek oil. There are far fewer wells capable of producing the much sought after "Texas Sweet". This highest priced, largest energy return oil is becoming scarce throughout the world. There is no doubt that demand will climb again, that production and exploration have declined due to price, and that the very unfortunate choice of drilling in sensitive areas will become a serious environmental debate. So, I say to you and your article, we must not be so narrow as to only look at the "undiscovered oil" to supply energy. Alternatives now. Would you agree

Submitted by Larry from Ojai, Ca

A: I'd agree that now is the time to work for real alternatives and that there are a number of things we can do that collectively will help reduce dependence on oil, regardless of where that oil comes from. I am not a believer in the peak oil theory but would agree that the era of easy to find and produce oil is over. And at a higher cost structure, that gives a great opening for alternatives to take off.

Answered 06/15/09 12:15:06 by Kevin Hall and Tony Pugh

Q: From: Why low oil prices now may mean higher oil prices later - "Before the big run-up in prices, deepwater drilling in the Gulf of Mexico and complex refining of western Canada's oil sands needed oil prices of $40 a barrel to break even. But as prices soared, so did production costs, and that break-even point stands somewhere between $60 and $80 a barrel." What is the connection between rising prices and rising costs?

Submitted by Jeff Forbes from Falmouth, ME

A: Well in today's environment they are somewhat disconnected. But as the price of oil rose, it triggered more exploration and production. With all these projects going on, the cost to produce oil went up -- oil-field inflation -- as everything from offshore oil workers to jack rigs and other drilling equipment were in short or shorter supply. My understanding is that these prices have fallen back about 15 percent, which is far less than the rising costs at the peak last summer. Many of the harder to reach oil fields have higher costs, for example the deep water drilling involves sophisticated, costly technology so the cost of extracting oil goes up. The oil sands in Canada literally involve boiling oil out of tar-like deposits in sands. This too costs far more than drilling a hole and have oil gush out as it did a century ago.

Answered 06/15/09 12:11:15 by Kevin Hall and Tony Pugh

Q: Do you think the economy is in such a bad condition that people are losing their homes.

Submitted by ANbintou Doumbia from Detroit MI

A: Yes. clearly many people are losing their homes. We have had a credit crisis that brought the U.S. economy to the brink of a depression, and then now on top of that are the jobs-related foreclosures that are being piled atop the foreclosures related to the shoddy mortgages, mostly in the subprime sector.

Answered 06/15/09 12:06:44 by Kevin Hall and Tony Pugh

Q: Would the banks that need revenue not be able to generate large amounts by letting business refinance at a lower interest rate through buying down the rate? I, myself, have several properties that I would be willing to expend funds for a more reasonable rate.

Submitted by Bob from Bellingham, WA

A: In some cases yes, but remember that so much of lending was securitized, the loan or mortgage sold into a secondary market where it was pooled and packaged into a bond or some form of security. That limits the flexibility, especially in the case where properties both residential and commercial are now worth less in many cases than the actual mortgage.

Answered 05/27/09 13:53:30 by Kevin Hall and Tony Pugh

Q: Wouldn't it make more sense and be more beneficial to the economy to give incentive for new corporations to build business in America instead of scaring them away? I think lower taxes for business would bring new jobs and in turn people would be employed and could pay their bills and spend money. Lower payroll taxes would give more money to the consumer to spend. It seems to me that giving money to failing banks and other companies is only prolonging the inevitable of failing. Wouldn't it be best to let them fail instead of throwing away taxpayers dollars. Look at Chrysler, if they had no tax payers money given to them maybe they would have filed bankruptcy, reorganized and they would not be government owned or union owned. People cannot afford to buy cars because they are out of work , so how did the gov. think giving them money was going to help? Wouldn't it make more sense to get people back to work so they can buy cars?

Submitted by Betty from Jerome, Mi

A: It was, is and will be all about jobs. Once unemployment gets back in the 6 percent range then the economy as a whole will be breathing a lot easier.

Answered 05/27/09 13:51:22 by Kevin Hall and Tony Pugh

Q: Why is everybody focusing on $17 Billion of "cuts" in the president's budget? Where's the focus on the $3.4 BILLION? Most all media outlets I read led off with headlines noting the "cuts" (which in the next breath they said were not likely to make it through Congress, were tiny in the scheme of things, and any savings would be diverted to new spending, so they weren't actually cuts.) Do all media take direction from the same sheet of paper? Why would one news outlet cover the Billion number when Trillion is so much larger? It's like a first grader question.

Submitted by Kevin Gaydosh from United States

A: I dont think the accusation is fair. You have to lay out what was announced, x number of cuts. Then you say that in reality it doesnt amount to much. I think our congressional correspondent David Lightman hit this issue pretty hard, here is his story from a few weeks back: http://www.mcclatchydc.com/242/story/67737.html

Answered 05/27/09 13:50:29 by Kevin Hall and Tony Pugh

Q: Since Obama was inaugurated, how many private sector job losses have occurred. What is the change in federal government employement (non-military/DOD)?

Submitted by Dave Ogilvy from Tucson, AZ

A: Non farm payroll employment fell by 539,000 positions in April. The Bureau of Labor Statistics, in the most recent report, revised calculations for February and March, the two prior full months in which Obama has been on the job. February job losses were 681,000 and March 699,000. Govt hiring posted a net gain of 66,000 jobs in April. It was plus 22,538 in March and plus 22,572 in February.

Answered 05/27/09 13:47:26 by Kevin Hall and Tony Pugh