Saturday, December 24, 2005

Hard to expose the American public to the really tough questions

above photo--copywrite 2005. Mark Klein. All rights reserved.

Submitted the below shareholder proposal to Bank of America and JP Morgan Chase. Today received Bank of America's request to the SEC to keep me off the proxy. Heaven forbid the shareholders get exposed to the real consequences of the housing bubble funded by unsound mortgage lending practices. Working on my response which I'll post when completed.

To protect and enhance the health and general welfare of children and adults the shareholders recommend BANK OF AMERICA not issue first mortgage home loans, except as required by law, greater than four times the borrower’s gross income.


As a mature man in my mid-60s, a physician and psychiatrist, a father and grandfather, and a seasoned, very successful investor, I believe the physical and emotional health of adults and children are closely linked to a satisfying family life which in turn depends upon the availability of affordable housing.

I believe today’s housing price inflation is primarily driven by unsound lending practices, commonly referred to as non-conforming mortgages, which promote excessive speculation by pumping too much money into the real estate market. Just Economics 101 supply and demand theory: Too many dollars chasing scarce housing resources drive up prices.

The most pernicious non-conforming mortgage loan practice is issuing first mortgage loans in excess of four times the borrower’s gross income. Loans above that level are imprudent for the borrower and unsound for the lender.

Sky high housing costs destabilize marriage. Financial distress is a major cause of marital collapse, child abuse and neglect.

Burdened by excessive debt couples are forced to work excessive hours leaving little time to nurture their marriages much less derive pleasure from them.

Spending too much time away from home creates unnecessary opportunities for unfaithfulness which recent studies suggest at least 40% per cent of married men and women do.

Divorce commonly causes mental and physical illness for the partners and their children.
The heightened divorce risk notwithstanding, excessive work hours caused by excessive mortgage debt is a major contributing factor to today’s exploding obesity driven diabetes epidemic. With too many moms and dads working long hours in lieu of regular balanced, portion controlled, home cooked meals too many children subsist mostly on junk food.

As a physician and a father it’s personally heartbreaking to see so many overweight children knowing of the suffering they will face and the likelihood of shortened lives.

Overworked adults also succumb to obesity leading to diabetes because restaurant food and takeout are usually overloaded with fats and carbohydrates with little protein.

There is more to life than making a buck. As an investor, I don’t own shares in companies which intentionally and knowingly prey upon human weakness and/or damage individuals and society, e.g., gambling, hard liquor, tobacco, and fast foods.

I believe the adoption of my proposal might over the short term negatively affect Bank of America’s earnings and dividend growth. No doubt we’ll anger some customers and other banks will continue their unsound practices.

A parent’s a parent until their very last breath. We owe it to our children, and to all Americans, to jettison unsound mortgage lending practices rather than continue them just because “Johnnie’s parents let him do it”.

For further discussion of this issue, please read my 2005 blogs dated October 17, 24, 25, 28 and November 6, 9, 16, 19.

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