One of my favorite quotes

“To laugh often and love much; to win the respect of intelligent persons and the affection of children; to earn the approbation of honest citizens and endure the betrayal of false friends; to appreciate beauty; to find the best in others; to give of one’s self; to leave the world a bit better, whether by a healthy child, a garden patch or a redeemed social condition; to have played and laughed with enthusiasm and sung with exultation; to know even one life has breathed easier because you have lived—this is to have succeeded.”

― Bessie Anderson Stanley,

Do-It-Yourself Pest Control Tips

A pest is not just a word that’s used to describe an annoyance; in fact, it’s also the term given to a destructive animal that destroys crops, food and even livestock. Whether you have a garden that has become a hot spot for neighborhood pests or you simply want to keep them from entering your home, it’s important to keep in mind several do-it-yourself pest control tips.

One of the most attractive places for a pest is that which is filled with food. Ants love anything sweet, including sugar, so make sure that any spills are cleaned up completely. It’s equally important to keep your food containers and bags sealed properly to avoid a problem.

If you have weeds in your lawn, remove them to avoid attracting pests. Additionally, pay close attention to the plants and/or flowers that you use in your landscaping as certain types tend to attract pests, while others repel them. For specifics, ask a local gardening professional or a representative from your local home improvement gardening center.

Nobody likes mosquitoes, but they are still a part of life and it’s important to deal with them. You may not be able to rid your entire yard of these nuisances, but you can make it a place where they are not welcome. One way of doing this is to remove anything that could result in standing water, which attracts mosquitoes. Remove old flower pots, tires or anything else that could be a place for water to gather. Not only is this a health concern as mosquitoes often carry diseases, but it’s also a good way to clean up the yard.

If you know that pests are getting into your home, the next logical step is to find out how. Once you locate the entry point, repair the area so that it no longer allows for outside intruders to enter your home. If you notice cracks, holes or other needed repairs, make sure that they are corrected to prevent future pests from setting up shop in your space.

In some cases, homeowners are forced to deal with pests by using products designed specifically for the purpose of pest control. These products, which are commonly available at any retail and/or home improvement store, should be used as directed in order to prevent harm to yourself, your family and your pets. It’s important to keep all pest control products locked in a cabinet and out of reach of children.

Fate of GSE’s

Bank of America Merrill Lynch has jumped full on into the debate over the future of Fannie Mae and Freddie Mac (the GSEs). With a recent article from its rates research staff titled “GSE profitability changes the reform landscape” the company joins a very small contingent advocating for a less precipitous approach to determining the fate of the GSEs.

Freddie Mac and Fannie Mae have been in federal conservatorship since August 2008 during which time they have drawn a combined total of $187 billion in government support. Dividends to the Treasury total $146 billion to date, none of which has counted against the debt. Recent changes to the agreement between the GSEs and the Treasury Department guarantee that the GSEs cannot build cash reserves but instead must return all but a small buffer of their net worth each quarter to the Treasury. In the meantime the two companies have returned to profitability, posting several record and near record quarterly earnings and requiring no Treasury draws for over a year. During the conservatorships they have provided the bulk of the country’s mortgage liquidity and completed several million foreclosure interventions.

Merrill Lynch Rates Strategists Ralph Axel and Priya Misra say that these results provide two key takeaways:
1.the GSEs function well as government-run entities, and
2.the infrastructure of mortgage finance is not in need of major reform.

While the current debate among stakeholders over housing finance reform presents arguments for and against government guarantees of mortgages, the ownership, management, and structure of a new securitization platform, and the role and regulation of the private sector there is one nearly universal area of agreement, the GSEs must go.

Most bills awaiting Congressional action contain this provision, as did the President’s recent Phoenix speech on housing; most other stakeholders seem to assume it as the starting point for their own proposals. The debate is not if, only when; whether they should be wound down over a five-year time frame or placed in more or less immediate receivership.

But Merrill Lynch says it is “time to separate useful reform from unnecessary reform.” Designing and implementing reform is not without cost or risk and there are already huge resources being devoted to it while the risk involves the possibility of a significant pullback in both home prices and credit availability. Yet, the paper says, the benefits are questionable.

Senate Majority Leader Harry Reid recently “fired the first shot” against major change but the President’s recent speech, while basically restating the administration’s position from a 2011 White Paper, seemed “heavier” because his call for winding down of the GSEs comes as Congress is actually considering it. In calling for an end to the dual government/non-government role of the companies the President said “For too long, (they) were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag.”

As the two continue to produce strong earnings, Merrill Lynch says, “the bag taxpayers are holding is quickly filling up with cash,” and that could eventually persuade taxpayers to change their outlook on the fate of the GSEs.

Looking back at the housing crisis, the authors say they see what needs to be done:

· Price credit risk fairly to account for long-term losses;

· Manage risk carefully, especially when home prices are rising;

· Hold appropriate capital to manage economic downturns smoothly;

· Recognize that a government guarantee must be explicit and that, even without such a guarantee, government will be the ultimate backstop.

The failures of the GSEs in the above areas were not theirs alone and the private sector did not prove any more able to handle the risk nor did they have the capital to do so. “The implicit government backing had some benefits and some drawbacks, but in our view it is a relatively easy fix that does not require an entirely new model of mortgage finance.” The first two items on its list have already been essentially accomplished the paper says, it only remains to capitalize the agencies and recognize the explicit government backing.

According to the authors, GSE earnings are strong, their business model looks sound, and return on the taxpayers investment is around the corner. Over the course of 2014 payments to the government will likely exceed the taxpayers investment and over the following few years taxpayers could benefit not just from the credit channel but from increased net government revenues. This comes at the cost of increased credit risk, something the taxpayers would probably face anyway, even if the model were privatized.

One of the problems of the old GSE model was their funding of rapidly growing portfolios funded by thin capital levels. This posed a large liquidity risk and required access to rolling over maturing debt, not possible in the summer of 2008. Because of the implicit guarantee the GSEs had enjoyed favorable debt funding giving them a strong incentive to focus on this non-mission critical but highly profitable business. By contrast the insurance side of the business generated the bulk of the losses ($173 billion from 2008 through 2013) and contributed least to revenues over the years.

As GSE portfolios wind down the GSEs are becoming monoline insurance companies. They have tightened credit risk standards while mitigating losses on the rapidly shrinking pre-2008 book of business. While profits will taper, capital requirements will not be as intense and government backing likely will not be applied to non-core functions. “This is very important reform that is already underway and will take about five more years to complete.”

The authors ask if large-scale reform is in the best interests of taxpayers and answer that as the GSEs produce strong results and provide the backdrop for industry recovery “a complete overhaul of the mortgage finance model becomes increasingly difficult to justify” Completely eliminating the GSEs and replacing them is complex and risky. The infrastructure currently in place is substantial while the size and efficiency of the agency credit market is unparalleled and may be difficult to improve upon. With “the required principles in place for successful mortgage securitization…small improvements may prove more beneficial than large changes.’

The questions that remain in the view of the authors are the issues of the government guarantee and ownership/capitalization. The first as they see it is not an option; private markets cannot be asked to provide crisis backstops and the value of the nation’s housing stock cannot be allowed to go into free fall. The government can own the enterprise or sell part or all to private investors while maintaining oversight and receiving compensation for the backstop. The taxpayers’ investment should be recouped within a year and then a portion of future earnings can be used to develop and maintain a backstop fund. New machinery and infrastructure is not required for this. Private capital, junior to taxpayer capital, can be layered in because the enterprises are profitable and well run. The government footprint can continue to be debated as credit standards and fees an be adjusted to modify it as desired.

The authors conclude that, in retrospect the recent crises provided an extreme test of the system, and while some obvious changes are needed the key reforms are already underway. Reid’s comments may lead to growing support for small tweaks rather than a full overhaul of the existing system.