Shoutingatmytv.com

Stewart Does It Again

The Daily Show finished off an evening of great political TV. William Kristol was the guest last night, and he did the best impression of Baghdad Bob of the political season. Reruns are on at 2:00 and 8:00 PM today, and they’re worth finding time to watch, either on TV, or on the website, if you don’t get Comedy Central.

The Kristol interview was funny, but the rest of the show was even better.

Go Kay Hagan!

Wednesday, Elisabeth Dole aired an ad attacking the faith of her opponent in the race for Senator from North Carolina, and saying that she was supported by and had attended a secret fund raising meeting of an atheist group called Godless Americans Pac (here’s a clip of the ad and of Campbell Brown giving it the scorn it richly deserved on CNN Wednesday night).

There’s one problem here. As Brown noted in her piece, Kay Hagen is sufficiently convinced of the existence of God to be an elder and teach Sunday school in the Presbyterian Church she’s belonged to all her life. It’s also probably important that the meeting in question, as it turns out, was an ActBlue meeting, not one having anything to do with Godless Americans. Two of the many hosts of the meeting belong to both organizations, but that was the only connection.

Now, being an atheist myself, I would have no particular problem with Hagan attending a Godless Americans fundraiser if she had, and I think this whole attack smacks of a bigotry and intolerance that is spectacularly un-American. I would think that whether it were true or not, but since it’s unlikely that I could be elected dog catcher in North Carolina, none of that matters as much as I'd like it to. What does matter is that this ad is a shameless lie that could be incredibly damaging for Hagan if unanswered.

Which is why it was a great pleasure to see that Brown roasted Dole for it, and that Hagan sued Dole for defamation and libel and then put up an ad last night taking her to task in no uncertain terms for “bearing false witness against fellow Christians”.

The lawsuit is entirely justified, and I hope Hagan pays a lot of campaign bills with the proceeds, but the ad is a masterpiece, and it’s a counterpunch that more Democrats need to be good at making when Republicans resort to such lies.

Apparently, Ms. Hagan is Lawton Chiles’ niece, and it looks like she has a good shot at following in her uncle’s footsteps. And at the risk of getting all Martha Stewart, that’s looking more and more like a good thing.

Update: Dole doubled down on Friday, airing another ad accusing Hagan of secretly taking money from and having connections with Godless Americans, and asking "If Godless Americans threw you a party, would you go?" Hagan is up 5% in the polls, a slight increase since the ads started running. Let's hope she stretches that lead, because Dole deserves a solid beating for this tactic!

No Drama

After her interview of Barack Obama, Rachel Maddow made a couple of remarks on her show about her sense of Obama’s mood. Her conclusion? Obama is preternaturally calm, so calm that Maddow seemed really surprised by it. She observed that this is a guy in the last days of a two year long campaign that is still close enough to preclude his being entirely relaxed, and that in such circumstances, a presidential candidate is bound to be wildly overscheduled and to have every second of his day so intensively managed that he is bound to become a little frantic.

Despite these pressures, she said that Obama shows no signs of being anxious, and she seemed inclined to credit him with an innate calm that enables him to resist that fog of anxiety in his environment. He may well be innately that calm, and it might be the whole story, but there are two other reasons that seem likely to me to have played a big part. First, even if complacency is still a mistake, he’s doing pretty well. Second (and more important) is that Obama obviously has an advance staff that is so good that they can keep him on schedule and speaking to the people he’s supposed to speak to without imparting much of that frenzy to their candidate. Having huge piles of cash is certainly useful, but the calm demeanor of the candidate in nervous times is worth tens of millions by itself.

…And it may say something important about an Obama administration. It is true that one of the primary qualifications for being president is the ability to get elected, and part of that ability is the capacity to select campaign staff that can get the job done, under what are bound to be trying circumstances. Obama not only seems to have managed that feat (“seems” because we won’t know for sure until next Tuesday or Wednesday), but to have picked a staff that allows him to maintain his cool while doing it. That doesn’t just say good things about Obama, but about the people who are likely to surround him in office. Both candidate and staff appear to be very good at holding up under pressure, and considering the pressure that any president sees (and that this one may well see pressures that are well beyond the norm), that’s a very hopeful sign.

Maddow also asked a question about why Obama doesn’t take on the Republican party per se for the failure of the ideology that they have been foisting on the country for the last several years (i.e., more than just George Bush’s term). She observed that Republicans have spared no effort to demonize not just Obama himself, but his party in general, and in the same way that they have been demonizing Democrats for years. That being the case, she asked, why didn’t he push back with a critique of the Republicans making those attacks?

Obama gave a sensible answer, even to someone who would love to see a pound or two of flesh extracted from the Republican party for its slights of the half of the country that has disagreed with it. He said that if he started out with an attack on the Republican party as a whole, he would immediately alienate the many Republicans who have been just as disgusted with the hijacking of their party by incompetent ideologues. He noted that he was winning, and that’s a pretty good argument, but he also made the case that he needed to build a governing coalition as well.

As long as that doesn’t translate into the sacrifice of the essential principles that have brought him his support, sacrificing some of that pound of flesh would be worth it. The times are pretty bad, and we have a lot of work to do.

It was an interesting interview, and it’s worth a look.

Here's the Right Idea...

The Financial Times has an op-ed by the Conservative Party's shadow transport secretary that argues against adding another runway at Heathrow and for adding another high speed rail line instead.

Smart move, and for all the right reasons. Some of those reasons are a bit less compelling here than in Britain, but that's going to change, and soon.

Stimulus: Spending vs. Tax Cuts

It seems to be increasingly apparent that some form of additional stimulus is going to be necessary to juice up the "Main Street" economy, in addition to the spending we've had to do to salvage the credit markets. (The primary result of the stimulus checks that were sent out earlier this year was that people paid down debt and saved the money, which was a nice thing for those who wanted to get rid of that debt, but did nothing to stimulate the economy).

The orthodoxy we've been hearing (from both presidential candidates and both sides of the aisle in Congress) is that they propose to provide more stimulus with more tax cuts, but as good as the idea of tax cuts sounds to taxpayers, they are the least effective way to give the economy a boost, which is particularly important if the government has to borrow the money to provide them. It seems to me that the only sort of tax cuts that are worth borrowing money to put in place are targeted tax credits for making private investments in public goods (like private energy efficiency/conservation investments).

The Economic Policy Institute has produced a great chart about the returns to the economy of various types of economic stimulus. It's worth a look.

Regular readers will remember that I've been riding the hobbyhorse of stimulating the economy by making infrastructure investments (particularly rebuilding the energy grid and the public transportation system) pretty hard, so it's gratifying to see some support for the idea that that will be a more effective stimulus than cutting taxes.

(hat tip to Kevin Drum, lately of Mother Jones, for posting this)

Libertarianism

As attractive as it is as a philosophy, Libertarianism often seems to be a primarily aesthetic project, not so carefully grounded in the real world. When it does appear in the real world, it all too often appears as the pretty face of a Hobbesian hell.

Here is an interesting critique of Libertarianism, in, of all places, the American Conservative. Some of the particular criticisms it aims at Libertarianism are similarly true of much conservative thinking, so it's an odd place to find the critique, but the world is a messy place, I guess.

Oops - writing elsewhere

I've been neglecting my posting for the last few days, partly because I've had another busy weekend, but also partly because I've been having a couple of lengthy e-mail exchanges, which I figured I would post here, mostly because I put more into them than I want to see disappear into the wind.

One is below, the other is awaiting the permission of the participants (the one already posted was not a private conversation in any sense from the start. Accordingly, I didn't wait to post it, but I did preserve the anonymity of the participants).

For those who find this boring, my apologies, but here we go...

Conversations - 2

Would the Last Honest Reporter Please Turn On the Lights?
By Orson Scott Card
Editor's note: Orson Scott Card is a Democrat and a newspaper columnist, and in this opinion piece he takes on both while lamenting the current state of journalism.

An open letter to the local daily paper — almost every local daily paper in America:

I remember reading All the President's Men and thinking: That's journalism. You do what it takes to get the truth and you lay it before the public, because the public has a right to know.

This housing crisis didn't come out of nowhere. It was not a vague emanation of the evil Bush administration.

It was a direct result of the political decision, back in the late 1990s, to loosen the rules of lending so that home loans would be more accessible to poor people. Fannie Mae and Freddie Mac were authorized to approve risky loans.

What is a risky loan? It's a loan that the recipient is likely not to be able to repay.

The goal of this rule change was to help the poor — which especially would help members of minority groups. But how does it help these people to give them a loan that they can't repay? They get into a house, yes, but when they can't make the payments, they lose the house — along with their credit rating.

They end up worse off than before.

This was completely foreseeable and in fact many people did foresee it. One political party, in Congress and in the executive branch, tried repeatedly to tighten up the rules. The other party blocked every such attempt and tried to loosen them.

Furthermore, Freddie Mac and Fannie Mae were making political contributions to the very members of Congress who were allowing them to make irresponsible loans. (Though why quasi-federal agencies were allowed to do so baffles me. It's as if the Pentagon were allowed to contribute to the political campaigns of Congressmen who support increasing their budget.)

Isn't there a story here? Doesn't journalism require that you who produce our daily paper tell the truth about who brought us to a position where the only way to keep confidence in our economy was a $700 billion bailout? Aren't you supposed to follow the money and see which politicians were benefiting personally from the deregulation of mortgage lending?

I have no doubt that if these facts had pointed to the Republican Party or to John McCain as the guilty parties, you would be treating it as a vast scandal. "Housing-gate," no doubt. Or "Fannie-gate."

Instead, it was Senator Christopher Dodd and Congressman Barney Frank, both Democrats, who denied that there were any problems, who refused Bush administration requests to set up a regulatory agency to watch over Fannie Mae and Freddie Mac, and who were still pushing for these agencies to go even further in promoting sub-prime mortgage loans almost up to the minute they failed.

As Thomas Sowell points out in a TownHall.com essay entitled "Do Facts Matter?" ( http://snipurl.com/457townhall_com] ): "Alan Greenspan warned them four years ago. So did the Chairman of the Council of Economic Advisers to the President. So did Bush's Secretary of the Treasury."

These are facts. This financial crisis was completely preventable. The party that blocked any attempt to prevent it was ... the Democratic Party. The party that tried to prevent it was ... the Republican Party.

Yet when Nancy Pelosi accused the Bush administration and Republican deregulation of causing the crisis, you in the press did not hold her to account for her lie. Instead, you criticized Republicans who took offense at this lie and refused to vote for the bailout!

What? It's not the liar, but the victims of the lie who are to blame?

Now let's follow the money ... right to the presidential candidate who is the number-two recipient of campaign contributions from Fannie Mae.

And after Freddie Raines, the CEO of Fannie Mae who made $90 million while running it into the ground, was fired for his incompetence, one presidential candidate's campaign actually consulted him for advice on housing.

If that presidential candidate had been John McCain, you would have called it a major scandal and we would be getting stories in your paper every day about how incompetent and corrupt he was.

But instead, that candidate was Barack Obama, and so you have buried this story, and when the McCain campaign dared to call Raines an "adviser" to the Obama campaign — because that campaign had sought his advice — you actually let Obama's people get away with accusing McCain of lying, merely because Raines wasn't listed as an official adviser to the Obama campaign.

You would never tolerate such weasely nit-picking from a Republican.

If you who produce our local daily paper actually had any principles, you would be pounding this story, because the prosperity of all Americans was put at risk by the foolish, short-sighted, politically selfish, and possibly corrupt actions of leading Democrats, including Obama.

If you who produce our local daily paper had any personal honor, you would find it unbearable to let the American people believe that somehow Republicans were to blame for this crisis.

There are precedents. Even though President Bush and his administration never said that Iraq sponsored or was linked to 9/11, you could not stand the fact that Americans had that misapprehension — so you pounded us with the fact that there was no such link. (Along the way, you created the false impression that Bush had lied to them and said that there was a connection.)

If you had any principles, then surely right now, when the American people are set to blame President Bush and John McCain for a crisis they tried to prevent, and are actually shifting to approve of Barack Obama because of a crisis he helped cause, you would be laboring at least as hard to correct that false impression.

Your job, as journalists, is to tell the truth. That's what you claim you do, when you accept people's money to buy or subscribe to your paper.

But right now, you are consenting to or actively promoting a big fat lie — that the housing crisis should somehow be blamed on Bush, McCain, and the Republicans. You have trained the American people to blame everything bad — even bad weather — on Bush, and they are responding as you have taught them to.

If you had any personal honor, each reporter and editor would be insisting on telling the truth — even if it hurts the election chances of your favorite candidate.

Because that's what honorable people do. Honest people tell the truth even when they don't like the probable consequences. That's what honesty means . That's how trust is earned.

Barack Obama is just another politician, and not a very wise one. He has revealed his ignorance and naivete time after time — and you have swept it under the rug, treated it as nothing.

Meanwhile, you have participated in the borking of Sarah Palin, reporting savage attacks on her for the pregnancy of her unmarried daughter — while you ignored the story of John Edwards's own adultery for many months.

So I ask you now: Do you have any standards at all? Do you even know what honesty means?

Is getting people to vote for Barack Obama so important that you will throw away everything that journalism is supposed to stand for?

You might want to remember the way the National Organization of Women threw away their integrity by supporting Bill Clinton despite his well-known pattern of sexual exploitation of powerless women. Who listens to NOW anymore? We know they stand for nothing; they have no principles.

That's where you are right now.

It's not too late. You know that if the situation were reversed, and the truth would damage McCain and help Obama, you would be moving heaven and earth to get the true story out there.

If you want to redeem your honor, you will swallow hard and make a list of all the stories you would print if it were McCain who had been getting money from Fannie Mae, McCain whose campaign had consulted with its discredited former CEO, McCain who had voted against tightening its lending practices.

Then you will print them, even though every one of those true stories will point the finger of blame at the reckless Democratic Party, which put our nation's prosperity at risk so they could feel good about helping the poor, and lay a fair share of the blame at Obama's door.

You will also tell the truth about John McCain: that he tried, as a Senator, to do what it took to prevent this crisis. You will tell the truth about President Bush: that his administration tried more than once to get Congress to regulate lending in a responsible way.

This was a Congress-caused crisis, beginning during the Clinton administration, with Democrats leading the way into the crisis and blocking every effort to get out of it in a timely fashion.

If you at our local daily newspaper continue to let Americans believe — and vote as if — President Bush and the Republicans caused the crisis, then you are joining in that lie.

If you do not tell the truth about the Democrats — including Barack Obama — and do so with the same energy you would use if the miscreants were Republicans — then you are not journalists by any standard.

You're just the public relations machine of the Democratic Party, and it's time you were all fired and real journalists brought in, so that we can actually have a news paper in our city.

This article first appeared in The Rhinoceros Times of Greensboro, North Carolina, and is used here by permission.

Interesting read!
-    D

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Hi D –

Yes, interesting. If, by “interesting”, you mean wildly distorted and completely at odds with the testimony offered to the House Oversight Committee today by… Wait for it… Alan Greenspan!

Fannie and Freddie didn’t lead the secondary mortgage market into investments in sub-prime paper, they followed it, after other players (Bear Sterns, Lehman Bros., IndyMac, etc.) began to grab huge chunks of their market (a market share Fannie and Freddie never regained, by the way). The groundwork for that grab began when the Gramm-Leach-Bliley Act overturned the regulations and separations instituted by the Glass-Steagall Act in 1933 (after the last crash caused by unregulated speculation on Wall Street), and the grab itself began when the debt-equity ratios required of the banks were reduced in 2004 by regulators. (Whose administration did those regulators work for again?) Gramm-Leach-Bliley was signed into law by Bill Clinton, and had some support from Democrats, so there’s plenty of short-sightedness to go around here, but to call a deregulation bill authored by Phil Gramm when he was head of the Senate Banking Committee a Democratic project is either stunningly ignorant or just a bald-faced lie.

Both Frank and Dodd tried to stop the loosening of those requirements, but were stopped by a Republican Congress with the same ideological fetish for deregulation that Greenspan was victim to, the one he admitted today that he was “shocked” to discover was wrong (this is the risk you run when your philosophical mentor is Ayn Rand). Incidentally, it may be of some interest in this discussion that the stated purpose of both Fannie and Freddie, when they were founded (Fannie in 1938 and Freddie in 1970), was to increase lending to lower-income borrowers, so to claim that they were doing something improper when they worked to do that is misleading. That they did it badly, and joined the rest of the market in marketing paper with the value of Monopoly money is true, but that’s not the same thing as saying they caused the crisis.

Greenspan himself, in February 2004, at the beginning of the housing bubble’s most explosive growth, actually made several speeches encouraging borrowers to refinance their loans from fixed-rate mortgages (at historically low rates) to adjustable-rate mortgages, the triggering of which on millions of mortgages at once as home prices began to decline was a primary cause for the staggering speed with which the house of cards collapsed. Moreover, Greenspan vehemently opposed any regulation of the derivative market, including the market in MBS paper, which was the direct cause of the recent collapse and credit crisis. So much for Thomas Sowell’s article, which is unadorned poppycock.

By “Freddie” Raines, I assume Card means Franklin Raines, who has never been a regular advisor to the Obama campaign of any kind, official or otherwise. He apparently had a couple of conversations with some Obama staffers about housing policy, but no more  than that. The story that he was more is a direct copy from a McCain ad, which was in turn drawn from a Washington Post story that said that Raines was “in Obama’s political circle” (an interesting point, considering that the point of the article is that unprincipled journalists are ignoring the “facts”). The author of that story called the ad a “stretch”, and nobody in any position to know has said Raines was ever a regular advisor to the campaign on any subject. Raines’ predecessor Jim Johnson was, but Raines was not.

There’s more fact fudging throughout the piece, but I’ll stop with a brief mention of the “precedents” that Card mentions, the reporting of the Bush administration’s distortion of the facts in the prelude to the invasion of Iraq. In view of what we now know (from a variety of principals) about the systematic falsification of evidence and cherry-picking of intelligence leading up to the invasion, and about the steady drumbeat of false implications connecting Iraq and Al Qaeda, as well as the lies placing WMD in Iraq, directly by VP Cheney and then NSA Rice, and indirectly by Bush himself, the ridiculously careful parsing of Bush’s sentences to infer that he didn’t say what he plainly and intentionally implied is just laughable, Orson, buddy, that ship has long since sailed.

Card is a gifted science fiction writer, and he should stick to what he knows. Or maybe he has, because this letter is hogwash from start to finish.

Best Regards,
-    John

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John:
I’m glad that you at least admit that Fannie and Freddie ‘did it badly.’  And it really isn’t much of a stretch to say that because they did it so badly, that fact (therefore Fannie and Freddie) did, in reality, cause the crisis.  Also, what is the point about Franklin Raines being, or not being, an advisor to the Obama campaign?  The fact that he is either an out-and-out crook or a greedy scum bucket is the issue, and he should be investigated and probably jailed.  His mismanagement of Fannie seems to be completely overlooked as another possible cause of why Fannie was the critical instrument in causing the crisis.  A case in point is that Enron was not founded to bilk investors out of their life savings, it was a very influential and viable energy company, until the wrong guys got a hold of it and turned it completely upside down.  So no one is blaming Fannie’s and Freddie’s founding in 1938 and 1970 and their underlying principles, anymore than they condemn the energy company that was Enron when founded. 

It’s the people that screw it up.  None of the liberals ever want to solve the problem and get the real bad guys (unless they are Republicans), they just want to argue inconsequential points and blame the Republicans in general. 

The fact that Fannie and Freddie ‘followed’ the other financial players because they were grabbing huge chunks of their market,’ if true, is absurdity and mismanagement on the part of whomever was running Fannie and Freddie.  If your competitor decides to take on all the bilge water, that doesn’t mean you should sink your own boat with the same garbage.  Beside Fannie and Freddie were apparently several orders of magnitude larger than these other guys put together (and were too big, to boot!).  They could have done with a little paring down, since all they were giving up were the subprime loan “investment packages’ that anybody in the business (including their management) knew were garbage in the first place and would eventually start to smell.  However, apparently Franklin, Johnson, and all the other Democrat appointees that were hangers-on or heads of Freddie and Fannie, got bigger personal bonuses if they grabbed more of this business, garbage or not! 

I’m also glad to see that you acknowledged that Bill Clinton signed the G-L-B bill into law.  However, you imply that it really didn’t have any real Democratic support.  Not that I follow this stuff that closely, but I’m not aware that the Reid-Pelosi Congress has repealed that law yet, now that they have control of Congress.

It is also interesting that you champion that Frank and Dodd both tried to stop things from getting out of control but were stopped by a Republican Congress, and completely overlook the fact that Bush tried the same thing, and was stopped by a Democratic Congress.  And as far as name dropping of Alan Greenspan, whoever said that he was omnipotent?  Certainly not Greenspan!  And that Greenspan was ‘victim to’ a deregulation fetish seems ‘stunningly ignorant’ to quote a phrase.  Greenspan was not infallible by any means, but he certainly wasn’t stupid either, and deregulation (meaning government gets out of the way) works quite well in most cases, or at least it has for the last couple of hundred years.

No liberal ever seems to want to define, or admit to the difference between regulation and oversight.  Given human nature, deregulation without oversight can be disastrous.  However, regulation is much more likely to always be stifling and counterproductive.  Reagan had a phrase that applies very well to deregulation, “Trust, but verify!” 

What most liberals are really saying when you come to the bottom line is, ‘give us all the control, including your money, because we know how to protect you from yourself, and you don’t.’  Nothing elitist in that mentality!

T

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T –

Sorry, I think it is an unconscionable stretch to say that because they did it badly, they caused the crisis. Please see again notes about the timing, The GSEs (Fannie and Freddie) followed the market, they didn’t lead it. They did the same thing that bank holding companies, investment banks, and some insurance companies were already doing, dealing in increasingly shaky loan paper. They shouldn’t have, but were pressured into doing so by their shareholders, who wanted not to lose the profits on the lucrative secondary paper market that was rapidly disappearing from their books.

Should they have succumbed to that pressure? No, clearly not. Would their managements have survived resisting it and kept their jobs while their secondary mortgage market share tanked? I’d guess the answer to that is also clearly not, but we’ll never know. In any case, all three officials who testified yesterday (Greenspan, SEC Chair Chris Cox, and former Treasury Secretary John Snow) said that while the GSEs were part of the problem, they didn’t cause it. It’s probably worth noting that all of the players in this game appear to have believed that they were “too big to fail” and would ultimately be indemnified by the taxpayers for their gambling. It’s also worth noting that with the exception of Lehman, they were right. “Too big to fail” may be a characteristic that needs to be prevented from recurring in future regulations.

I have no brief for Franklin Raines, who seems to be a prize snake (though hardly the only one at this party). My only reason for mentioning him was to counter Card’s fiction that he is affiliated with Obama’s campaign, which he’s not.

There have been four bills that proposed to deal with this problem, and Bush opposed three of them, The fourth was opposed by the Democrats in Congress in 2007, the first three were put before a Republican controlled Congress and the first two of those died in committee, as I understand it. I didn’t say Democrats were blameless, they’re not. What I said was that attempts to pin the whole mess on the Democratic Congress are frauds. I agree that the problem should have been solved by the Democratic Congress since 2006, but it should have been seen coming long before that (it was, in some quarters), and I expect you’ll see some more regulation pretty soon, now that they are unlikely to have to gather a veto-proof majority to succeed. As to the “Democrat appointees” who mismanaged Fannie and Freddie, from 1968 until this summer the two companies were privately held and privately run – no appointees from anyone for forty years.

Finally, in regard to: “…deregulation (meaning government gets out of the way) works quite well in most cases, or at least it has for the last couple of hundred years.”,  that’s true, except when it’s not. Running across the freeway is a quick way to get to the other side too, as long as you don’t get hit by a car. Once you do get hit, though, it’s not such a good bet any more. Please see:

Panic of 1797
Depression of 1807
Panic of 1819
Panic of 1837
Panic of 1857
Panic of 1873 (Followed by the “Long Depression”, from 1873-1896, including another panic in 1893)
Panic of 1907
Panic of 1929 (Followed by the “Great Depression”)

That’s just in the US. All of these panics were caused at least in part by crises of confidence in the banking system that caused bank runs. Since 1933, we’ve had four crises in the markets in which recessions have arguably been prevented from turning into panics by the regulations put in place by FDR, in 1953, 1957, 1973, and 1987. We have also held up the markets of several other countries by having a stable banking system ourselves, and have become a repository of much of the world’s savings by providing assurances that those savings are safe. Those assurances have come into serious question over this crisis, and if you think that’s not going to have important consequences, think some more.

The answer to your question about the difference between regulation and oversight is that they are two parts of the same protection – regulation is law, oversight is enforcement. Without regulation, oversight has no purpose, and without oversight, regulation is toothless. We have discarded both in the name of free market ideological purity, and we’ll need to get both back (and put reliable valuations on a whole lot of currently mysterious loan assets) before confidence in our markets is truly restored. As to your sneering about “liberals” and “elitists”, it would be a lot more convincing if the government you’re so fond of attacking hadn’t just had to bail out the free market you’re so eager to defend to the tune of a trillion dollars.

Regards,
-    John

--------------------------

John:
I don’t usually reply to group email, much less someone individually.  People who do tend to get high-handed and long winded --- clearly in the last couple of days, me included.  For the other unfortunates on the list, slogging through unsolicited opinions can be tedious, at best.  For good reason though, the Card article seems to have struck a note, triggering a lot of “analysis” among many people.  Unfortunately, it still seems that many continue to miss Card’s real point in writing the letter (or perhaps they got it, and I missed it).  All the quite ‘in-depth’ analysis is what Card is saying is the job of the ‘journalists’ and reporters, and they have failed miserably at it (and not just on the economic situation).  Perhaps in The Economist, in some article or two, the kind of analysis carried in these few response emails exists, …but it certainly doesn’t in the main stream media.

You give the impression that the Wall Street Group, Lehmann Bros., et al, are the ONLY culprits here, and that Freddie and Fanny were just the Lemmings ‘doing their thing’ of following the crowd off the cliff.  Thankfully you admit that they shouldn’t have followed the garbage trucks just to save their jobs, but the righteous argument about ‘not the cause’ trails off when you get to the point of ‘what if they hadn’t jumped in the trough?’  Answer: perhaps their ‘management’ would have lost their jobs or their inflated bonuses, but maybe the whole country’s economic system would not have come tumbling down as it did, with Freddie and Fannie up to their eyeballs in the muck.

Trying to be reasonably objective, my conclusion is that the ‘proximate’ cause of the crisis was the loaning of large sums of money to large numbers of people who had no ability to repay it in order for them to buy things of value, …whose value was correctly and properly determined by the application of the mark-to-market rule, since they were physical tangible assets, i.e., houses and other real estate properties, that do trade in an ‘open market.’

Another ‘proximate’ cause in the lineage is the deregulation, or more precisely, the repeal of some regulations or laws that had previously been used to curtail certain activities brought about by the actual ‘responsible cause’ of the crisis.

As far as our discussion goes, you may have a point, that Fannie and Freddie are not the ‘most responsible’, but they definitely fall into the ‘proximate cause’ category no matter how ‘unconscionable’ you may think that is.  They were leveraged up to their noses with all those bogus, high yield’ security packages, and they knew it.  And nowhere do you mention the fact that the ‘mark to market rule,’ when applied to these ‘items’ for which there really is no ‘market,’ is pure absurdity, and was said to be such by many leading economist years ago (including the European Union economic council).  They predicted the negative reinforcement effect that rule would have on even a slight housing down turn that would cause major economic problems, including bank failures and sinking of financial institutions.  Obviously they were correct. So, I ask, why are Democrats so unwilling to see Chris Dodd, Barney Frank, Franklin Raines, Jim Johnson, Nancy Pelosi, Harry Reid, and yes, Bill Clinton, for the people they really are!  And their total complicity in a disaster that could have been, and should have been prevented.  And, you may ask, do I think there are there Republicans at fault?  Only every last one of them in the Congress and the White House!  They couldn’t muster enough gumption to tell the public what was going to happen, even if they couldn’t get a fix through Congress (which they should have been able to do).  The fact that Bush tried three times doesn’t cut it!  In this case, trying was not enough, even if he had to go out on his shield in the process.  Something should have been done.  Talk about fiddling while Rome burns.

While that may be just one of the sorry truths, the actual ‘responsible cause’ of the crisis is human greed.  Surprise, surprise!  This primary cause was being practiced by the highest level executives in the financial companies (definitely including Fannie and Freddie), as well as the cognizant members of the Congress, and all the way down the chain, including the mortgage brokers, the real estate agents, and the home buyers who saw a good way to get rich quick, without any thought to responsible actions.  These people all the way down justified the lending/borrowing practice, even though they knew it was not ‘right,’ by saying that the underlying value of the purchased goods would support the investment regardless of whether the loan went sour.  Unfortunately the mark-to-market rule applied, and because of the new property and foreclosure glut, the underlying value sank in the near term, …but not as badly as feared.  However, the packaged securities based on these loans and their anticipated high interest revenues were non-tangible assets, and were several layers removed from the physical reality of the property.  Thus applying the mark-to-market rule here, where there was, and is, no open market for such ‘goods,’ is not a smart thing, and led to exactly the consequences, panic, and negative reinforcement predicted by, and known to the high level practitioners, both in private and government practice.

Greenspan, as mentioned before, is/was no infallible guru (even though many gave him that title and bowed at his altar).  So yes, his fiscal policies, as successful as they were for many years, did sow the seeds of today’s excesses.  But to jump into your ‘freeway’ analogy, …because you allow your teenage son to take the car out tonight to go to a friend’s house, where he decides to get drunk, drive, and kills somebody, does not make him less culpable, just because it was the parent’s car and they gave him the keys expecting him to act responsibly as he had a previous habit of doing.   The ‘regulation’ that would have prevented such an occurrence would be to never let your son take the car, …period!   Greenspan even stated that he never expected the financial community to act in its own self destructive manner.  He could not even imagine that intelligent, trained specialists in finance, could do this!  Hmm!  Another reason to not let people who may be accomplished and astute in their special fields make all the judgments. 

You are semantically correct about “no political appointees” in Fannie and Freddie, but you are flat out wrong about how these people got the jobs, and why they got the jobs, in these ‘private’ firms.  And if you believe that Fannie and Freddie were classic definition private firms for the last forty years and until Congress just took them over in the last few months, you must live on a different planet than most every knowledgeable person I have ever heard discuss them.  They have been quasi-government institutions since their beginnings, and were staffed at the high levels (in recent years particularly) by people with the ‘right’ political ties to the government and particularly the Democratic Party.  Franklin Raines was obviously there for six of the last few years, and came straight from the Clinton administration entourage, as did all the other big names now currently under scrutiny there.  And if you won’t admit to these facts, there is little hope for any rational discussion about ‘the problem’ and how to fix it.  And if you think Raines has no ties to Obama, or better yet vice-versa, you are definitely drinking or smoking something I’m not.  Just because Raines name is not listed on the official roster means absolutely nothing in politics, and never has with regard to who is behind whom or advising whom. 

And as far as the parting sarcastic shot about the wonderful ‘government you attack’ having to bail out the ‘free market you defend,’ there are a number things you seem to be missing:  a) the ‘bailout’ has done nothing for the market yet, that we can see, b) many very smart people were, and still are, opposed to it, c) there is no guarantee whatsoever that it has anything to do with fixing the underlying root problem, d) it may in fact exacerbate the long term recovery, e) for all the press BS, the economy of the U.S. is not in ruins, and f) if Washington had not authorized the bailout (or better yet, if Washington closed tomorrow), the people would still exist and the markets would recover.  And they might even do it better and faster, as many astute financial people, as well as many ordinary people, have predicted.  And you are wrong, regulation and oversight are not necessarily two parts of the same thing.  Regulation IS law, and that is the trouble with it.  It necessarily limits and confines.  And so far, or it would have been done by Greeks or some much earlier civilization, no one has been able to codify human nature such that everything is covered and we don’t need to do anything more except ‘follow the regulations.’  Oversight as I define it, is not just ‘enforcement.’  Appears that’s what it means to you, but I think rational human beings can oversee progress of unpredictable and unregulated events and situations and react properly without restricting and confining from the get-go. 

Not that rules and regulations are not necessary and effective when applied properly, but they are not the all-encompassing answer to controlling human behavior.  Without a society made up of principled, disciplined, moral and ethical individuals, one cannot have a country with such characteristics, no matter how many laws are passed and how vigorous the enforcement may be.  The unprincipled human beings will always find a way around these roadblocks to personal greed and ambition, and the more Draconian the regulation to prevent this, the more it penalizes the good members of society who do meet their responsibilities.  A case in point being all the mortgage holders who are meeting their payments and didn’t succumb to the siren song of something for nothing, are now having to pay for those who made the bad decisions, many of whom in the top echelons got rich in the process (Raines, Johnson, et al.).  All thanks to a ‘bailout,’ which literally may have no more effect than just to reward such bad behavior and decision making, since it admittedly does nothing to fix the problem.

The one essential ‘regulation’ that was suspended in the pursuit of this Golden Calf (or Golden Parachute, as the case may be), was the somewhat non-codified, common sense practice of qualifying borrowers before making the loan.  Whether that is the fault of Alan Greenspan or ‘helicopter’ Ben Bernanke because of their Fed policy, or the Democratic party in its pursuit of social engineering, or the Republican party because of its alleged corporate nepotism, is certainly a valid point for discussion.  But the notion that there is now no money for loans at all (unless the government prints more) because perhaps 8% of the nation’s home owners can’t pay their agreed upon mortgage (if it is even that high), is wrong.  There is more than enough money to loan for those qualified to borrow it (meaning having a rational expectation of repayment).

The next question, predicated by the fact that people are the real issue, is who, if any, may be the most culpable for the disaster, and therefore what steps should be taken with the culpable individuals and classes of individuals responsible in order to prevent another such problem in the future, …and punish their wrongdoing where possible?

Conventional wisdom advises in such pursuits, “Follow the money!”  Somehow, and in the case of Enron, World Com, and other “non-responsible-for-the-problem” institutions in our recent past history for ‘privately run public company’ disasters, it has led to the people then in control of the institutions.  And they were deemed ‘responsible.’  Not the institution, as correctly and semantically pointed out, but the people in charge.  They were punished by being stripped, where possible, of the ill-gotten financial gains, and jailed in addition.

Who fostered the pursuit of the initially cited proximate cause, and who benefited most from such action?  Unquestionably it is the individual ‘leaders’ of the involved institutions, and, in the circles of government, the Democratic party foremost, with the Republicans not far behind.  As mentioned, ‘follow the money!’  And the Democratic party is the one that even cites their express intent and successful efforts to ignite and further that initial proximate cause of making unrecoverable loans (all in the cause of fairness, of course).  Unfortunately however, politicians in our country have almost reached the ‘nirvana’ of any high level decision maker, which is to never be held accountable and suffer the consequences associated with their bad decisions (or out-and-out wrong doing), even when there is overwhelming hard evidence and human consensus that such is, and was, a bad decision, knowingly made (and perhaps for personal gain).

After the election, particularly if Barack is elected, nothing will actually change much except the hue and cry of the media will go from “woe is me, the sky has fallen,” to “isn’t life grand now that you are being taken care of!”  The media reminds me of that depicted in the novel 1984 by Orwell.  And when the government starts controlling media (for our own good), because they wouldn’t really want to panic the folks for no good reason when Washington is going to handle all problems and needs properly, we will then have arrived.  I hope there are some real leaders among our offspring and their offspring, because some will be sorely needed in the coming years.

All in all, it’s good that the discussion has been fomented.  Let’s thank D for sending around Card’s article in the first place.  However, all I have to say on the subject has been said, and probably to excess.  In any event, as voters, we all have our say in 2 weeks.  Not about the facts of or the long term solutions to the issues discussed herein, but as to which individual and party they believe will best meet the challenge to handle them over the long-term, and for the greater good of the masses.  In the end, we do get what we pay for or, in this case, vote for.  I encourage everyone to consider carefully.
T

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John,

This came to me from a friend in Colorado...
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Yesterday on my way to lunch at Doe's,   I passed one of the homeless guys in that area, with a sign that read 'Vote Obama, I need the money.   Once in Doe's, my waiter had on a 'Obama 08' tee shirt.

When the bill came, I decided not to tip the waiter and explained to him while he had given me exceptional service, that his tee shirt made me feel he obviously believes in Senator Obama's plan to redistribute the wealth. I told him I was going to redistribute his tip to someone that I deemed more in need--the homeless guy outside. He stood there in disbelief and angrily stormed away.

I went outside, gave the homeless guy $3 and told him to thank the waiter inside, as I had decided he could use the money more. The homeless guy looked at me in disbelief but seemed grateful.

As I got in my truck, I realized this rather unscientific redistribution experiment had left the homeless guy quite happy for the money he did not earn, but the waiter was pretty angry that I gave away the money he did earn.

Well, I guess this redistribution of wealth is going to take a while to catch on, with those doing the work.

Cheers...

Brian

- D

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D -

I like that, it’s very funny. Since we’re doing hyperbole, I’ll try one too…
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Yesterday, on my way to lunch at the country club, I passed a guy who was moving out of his house because the bank had just foreclosed on his mortgage. He had lost his job at the local factory when it was closed and moved to Indonesia, and he had bought the house with an ARM that he could no longer afford to pay, since the interest rate had quadrupled when the bank realized it had a liquidity problem.

I asked him how he was doing, and he said his investment savings had vanished over the last few weeks, and his pension had disappeared a few years ago when his employer used it as collateral for an LBO and then the loan note had been called. He was a little anxious from trying to figure out how he was going to provide food and shelter for his kids (other than hanging around outside a local restaurant waiting for somebody to make a clever point with his tip money).

He was pretty angry that his grandchildren would still be paying taxes on the bill for the bailout of the Wall Street firms that negligently, if not criminally mismanaged their risk exposure, and he was particularly salty that he was forced to undertake this tax burden because the people whose malfeasance he was rewarding held what little was left of the financial system hostage.

I got to the country club and enjoyed nice bottle of wine and a pleasant lunch, over which we discussed the fact that several of us might have to get rid of our second houses, since our diminished bonuses left room only for college tuition payments, and of course upkeep on the Bentley. Some were even going to have to cut their ski vacations down to only one week in Gstaad, but we agreed that we all have to make sacrifices in such trying times.

Then we considered how much bigger a fence we would have to build around our gated community to keep out all the undesirables that were sure to come around bothering us looking for handouts and stealing dog food from our pets. One guy showed us some pictures of his house in Sao Paulo, and suggested that his fence was about the right size, as long as we were sure to include the razor wire on top. Good thing that bailout saved us from losing everything, or we wouldn’t be able to afford the fence. Or the armed guards.

Even better than that, though, we avoided redistributing any wealth!

Cheers,

-    John

Dross for Success?

Sarah Palin's shopping sprees at Nieman Marcus and Saks have gotten a lot of play over the last couple of days, and it's true that on the surface, it's certainly titillating that the "hockey Mom" who's so fond of "Joe Six-pack" allusions has spent more in the last six weeks on clothes than most of us have spent in a lifetime. It puts a bit of a dent in the "everywoman" image that Palin has been so carefully crafting, and gratifies our inclination to schadenfreude.

In reality, though, I think Palin's getting a bad rap for the shoppergate story, and one that won't ultimately wash. For one thing, it's RNC or campaign money that she's spending, and even though a good deal of it is taxpayer money (since the campaign is taking public funding), I'm not aware that there are any restrictions about how she can spend it. If she wants to spend it on clothes, makeup, and hair care, that's between her and the campaign. I'm sure the campaign has decided that they'd rather have her stylishly turned out for her public appearances than dressed up in some jeans and a sweatshirt, and she probably didn't have as complete a wardrobe as she needed for the steady stream of campaign stops.

Second, I don't know if the Joe Six-packs of the world will be so unfavorably impressed by Palin's inclination to go on a spending spree with the new found resources at her disposal. There's a little mall rat in all of us, and we have elevated shopping to a semi-sacred duty in this country.

Finally, it's a lot of money for clothes, but as a fraction of what the campaign spends on her every day to get her to these events (or what the taxpayers pay to have her protected by the Secret Service), it's a pittance. I don't know the exact charter fee for the 98 passenger Embraer ERJ190 she gets ferried around the country in, but I guarantee you it makes the clothing allowance look like a rounding error. Just having it painted in McCain-Palin livery likely cost more than the clothes, and it's flying every day. In the face of expenses like that, I'm finding it hard to get too outraged about some clothes, particularly when half the TV commentators who are getting exercised about this have clothing budgets from their employers that would also curl the average American's hair.

There's really only one thing that bugs me about Palin's clothing allowance. It would clearly have been better spent on a copy of the Constitution and a civics tutor. (Must...Not...Make...References...to...Lipstick...and...Pigs.)

Now Read This!

Sen. Bernie Sanders (S-VT) (!) has a post up on Huffington Post that deserves a read. If it sounds familiar to readers of this blog, it should, and it's gratifying to see a sitting US Senator talking the talk. Now we'll see (I hope) if an incoming Obama administration can muster the political will to implement Sanders' recommendations.