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Michael: Welcome to the Velocity of Money you are listening to KFNX 1100 and once again one of
my favorite guests Mr. Brett Fallon. Brett thanks for being here
Brett: thanks for having me.
Michael: Brett has brought with him some updates on the economy and how things are changing theses
days and he brought some great information to discuss with you. We talk about all these different
things in the economy and let's be honest there are a lot of problems out there no one can dispute that the
unemployment rate is the highest it's been in many year with Fannie Mae, Freddie Mac AIG being
taken over by the government Lehman brothers Bear Sterns, WAMU, Countrywide all gone, banks
and insurance companies getting their bailout the auto industry is the next one to get a bailout we're
already working on our second stimulus package. 95% of the people according to President elect
Obama are going to be getting a tax cut soon. Where is all of the money for all of this going to
come from? It just seems to be a downward spiral. Brett's got some great insight on this that he wants'
to talk about and some more unfortunately a little bit more dismal news, just want you to know before
you drive off a cliff there is light at the end of the tunnel We are going to talk about that so Brett, why
don't you share a little information if you could.
Brett: Yeah, I would be happy to, you mentioned a couple of things in your opening comments and one
was about the market seems to be anticipating bad news and it certainly surprising it was a pretty
significant down day on wall street again today, most of that was attributed to two things. Retailers
such as Best Buy and Macy's came out with their projections for consumer spending. Best Buy
actually said something to the effect that it is the lowest level of consumer spending that they have
ever experienced in the history of their business.
Michael: and Best Buy is actually one of those that is going to stick it out
Brett: and Best Buy is actually one that hopefully will stick it out as we know Circuit City is filling
for bankruptcy. The other thing that you mentioned was jobless rate has climbed the number has
definitely increased the NEBR is the government agency that is responsible for reporting when a
recession begins and when it ends. They call it. They officially have not called one but I think every
reasonable person believes that we have been in one and probably have been in one for some time already.
Michael: so right supposedly there is some technical factor that says this is a recession that
doesn't mean that we flip the switch and boom here we are out of the recession is that right?
Brett: That is absolutely right and in hindsight is how they judge that time of when it started and
when it comes to an end and it's usually several months after the fact, but it remains to be seen We
believe we are in a recession but we are going to talk about a couple of things that people are feeling
this economic crunch and what they can do about it. Specifically as it is regarding their home ownership
and their mortgaging a couple of interesting things that came out, Secretary of the Treasury Hank
Paulson today made an announcement this morning regarding a change in the governments, they call it a
rescue plan. Others call it a bailout
Michael: that's the 700 billion dollar thing right?
Brett: That's the 700 hundred billion dollar thing, yes
Michael: that most people are not happy with
Brett: Yes, and apparently Wall Street is unhappy with the changes that took place, pretty significant
The idea at the time this legislation was passed in congress and ultimately signed by President Bush
into law was to use the funds to buy the bad assets mortgage backed assets from banks and lending
institutions they changed that and recanted that today, Hank Paulson specifically announced that
they are no longer going to be using those funds that The current plan calls for 250 billion dollars of the
700 billion to be used to buy stock of those banks and financial institutions
Michael: Question for you Mr. Fallon, Does Hank Paulson does he need to get approval for this?
Brett: One of the things that have been discussed all week long has been was the fact that that as this
legislation was passed and approved is that he has full power to make these types of decisions without
the benefit of it being discussed through congress and those traditional channels. He is currently the
most powerful man in the world
Michael: He has the whole checking account to himself to decide what the best distribution of those
funds is.
Brett: It certainly appears that way and apparently he changed his mind and announced it today.