Mortgage/Credit Crisis Doesn't Spur Change in Banks' Ability to Hide Assets

We can almost guarantee that you didn't pause as you passed by this New York Times headline, "Accounting Board Delays an Asset Rule." That's truly a bummer. We wish this important article had this headline, "Companies Still Allowed to Hide Assets in Wake of Credit Crisis." We think that would have caught your attention.

Here's why you care: Read the article and ask yourself if this is the type of regulation that will help bring confidence to investors - and thus more investors back to Wall Street?

So now that you're asking yourself - why on earth are the Banks getting a pass for another year? The answer is essentially this: If banks had to account for all of their assets this year given how bad the market is, it would force them to raise even more cash when they are all trying to do that just to get buy.

The Washington Post has interesting quotes from the folks that decided to let the banks get by for another year. What's most interesting is how conflicted and angst ridden their comments are.

Here's another reason why you care: If it is a big deal to the reluctant rule makers, it should be a big deal to you.

Reading the Tea Leaves of the Power Players

We think the one article that you probably didn't read but really should is the New York Times story about an investment firm (Lone Star Funds) taking advantage of a down market to buy mortgages at bottom basement prices. Lone Star Funds is interesting for a couple reasons: 1) They bought Merrill Lynch's mortgages at fire sale prices; and 2) they made money during the Savings and Loan debacle years ago.

Here's why you care: As we've said before, right now is like an after Christmas sale for the financial and real estate inclined. That can mean Lone Star Funds, or other firms we've pointed to in the past. What they all have in common is that they saved their pennies, and didn't get soaked when the bubble burst. If more of these actors are coming on the stage then hopefully it means things are getting back on track.

A sign they are not? Well, that would be the Federal Reserve's move to extend until January the ability of Wall Street firms to get emergency overnight loans. Basically, this is what the Fed did because of Bear Stearns. (We pointed out a great explainer piece on the Fed the other day). They say if things get better before January, then they'll pull back. Why you care is because it helps Wall Street feel a little more confident given the trouble waters.

And here's why you care again: If you have investors picking up the scraps, and the Fed helping the banks - those are both good signs given your property value.

Obama, Bernanke and 16%

As Why You Care noted for you last week, three times as many people say the economy should be the government's first priority over terrorism. That's why both Sen. Barack Obama and Sen. John McCain are out and about talking everything from jobs to oil. We noted that you'll see more of this. The Wall Street Journal reports that Sen. Obama is meeting with Federal Reserve Board Chairman Ben Bernanke today.

Here's why you care: First come the meetings, then come the policy statements. Get ready for lots of coverage of Sen. Obama's - and Sen. McCain's - economic game plans. That's good, we just want clear details so we can have something to analyze. And remember, this is all within the context of a report showing that home prices drop almost 16% from this point last year. (Even more interesting is the market to market analysis - that's why you care about this report).

The Warning Sign: Lending Pendulum Changes Course - How Extreme Will it Get?

Chances are you actually saw this article today given it was on the front page of the New York Times. We just hope you took a moment and didn't dismiss it as, "If it is Monday, there must be another bank related headline".

Here's why you care: The Times perfectly lays out just why the tightening of credit (aka the ability for a business to get a loan) is creating financial constipation. The squeeze on the small business owner means he can't get the loan to do his next thing. That next thing means expanding and hiring another worker. That means one more person who could have had money in his pocket. And so on, and so on...

There are those that say, nah, don't worry about the business, they'll take care of their own. We say, nah, don't ignore the warning signs. The lending pendulum swings both ways, and this story illustrates the flip side of not having money available.

In other words, we're talking about all of our collective jobs.

Three Times As Many People Say the Economy Should be Priority #1 for the Government as Terrorism

What a difference a housing crisis makes. The latest Wall Street Journal/NBC poll out today shows that three times as many people say the federal government should make jobs and the economy the first priority as terrorism. The numbers have been trending that way for a while, but wow.

If you dig into the poll you'll see that jobs/economy had 23% to terrorism's 8%. What's more eye opening is that if you combine jobs/economy with the next highest response which was energy/gas price at 20% then you end up at 43%. That's over five times more than terrorism.

Here's why you care: You may say, ok yeah, but polls are polls. Nah, the poll is about you, but why you care is because of who reads the polls: Politicians. They are reading and they are listening. That's why former Navy pilot/Senator/Republican Presidential Candidate, John McCain gets treated in the Politico to this headline: "McCain Struggles to Overcome Economy Gap".

In short, there will be many stump speeches from both Sen. McCain and his Democratic rival Sen. Barack Obama on the issue of economy. The key will be to look past the headlines, and really consider the outcomes of their proposed policies. Why You Care is looking forward to more details from both of their camps.

You can count on us parsing the verbiage. In the meantime, look at the both of the pending VP picks and ask - hmmmm, did concern over the economy play into this?

Not Only is Your House Worth Less, You're Gonna Pay Higher Taxes (for Everything)

Do you feel a squeeze? You probably said, yeah. Well, what you may not realize is the domino effect the mortgage mess has on everything else connected to your wallet. The Wall Street Journal has a terrific explanation as to how the first domino of the mortgage mess kicks off a cycle.

Step one: Defaulting mortgages bring down home prices.
Step two: Consumers pull back on spending for fear of rising prices and or their jobs.
Step Three: Less homes sold, cars sold, etc. means less tax collected by the states.

Here's why you care: The states HAVE TO make up that money as the Wall Street Journal rightly points out because many of them have to balance their government checkbook.

THAT MEANS they take a multiple choice test:
A) Raise taxes
B) Raise prices on the things your state does for you (like transportation or community college).
C) Cut back on things the state provides (everything from the Park Ranger to health care).

But there's something that is going to make it feel like a double whammy. That something is those bonds we talked about a week or so ago and pointed to another Wall Street Journal article that deserved more attention.

Why you care is because when the state wants to do things it gets a bond. When the market is tight that means the state pays more. And, if the state has less money, but paying more over the long haul it is the equivalent of the state taking a credit card balance and pushing on a new card with a higher rate but over a longer period. In other words, it will cost more money. That's your money, and you'e gonna pay for it either in choice A, B, or C.

Now do you feel squeezed?

The Two Stories You Shouldn't Miss Today: Is Calif. the Mortgage Canary in a Coal Mine? And Fortune Explains the Fed.

Stunning news out of California as more homes were foreclosed on in a three-month period since 1992. The LA Times has the full write amidst the backdrop of the legislation wrangling that gets the bigger headlines today. BUT, there's something else here that requires further watching - California's mortgages just might be the indicator everyone has been looking for in the search for the bottom.

Here's why you care : Buried in the article is this, the "latest figures contained one surprise: defaults -- the first step toward foreclosure -- rose by just 6.6% in the second quarter, down from a 39% spike the previous period." Wow. The LA Times rightly points out that the reason is unclear... Completely overwhelmed processors slowing down under the avalanche? Or the bottom? Who knows - but this is why you need to watch that market. It will ultimately put you ahead of the curve.

Meanwhile, as the angst and teeth gnashing continue for investors and home owners, Fortune's senior editor at large, Allan Sloan, has gone and written a terrific, short, clear explanation as to why the Federal Reserve in fact does not set your interest rate. In addition, he offers an explanation that despite any further bailouts the Fed isn't about to run out of money.

Why You Care salutes Fortune for doing this amidst the chaos. You should take a moment and read it if you don't already know the answers. Knowledge is power.