30 September 2008

Roots

Deep roots make for strong and durable trees, shallow root systems are what the ficus trees in my neighborhood have. Every time we have a tropical system, trees in our neighborhood are damaged. During Hurricane Wilma, most of the trees here were either knocked down or lost most of their limbs. Ficus trees are a pain; their shallow roots can make them dangerous and difficult to deal with. On the other hand, they're beautiful, regrow quickly and are easy to remove when they become diseased or over-topped.

The roots of the current economic crisis are multiplicitous. To listen to media and political rants over the previous few days, this crisis has eight to ten-year old roots. We hear that it began with the evil and to-be-maligned Pres. Bush first took office, or possibly when the GOP took control of the House and Senate, or when greedy Wall Streeters convinced the aforementioned evil-doers to shake of the regulatory yoke. These assumptions are certainly easy and self-comforting, and do nothing to either solve the problems or understand them. Most strong fiscal conservatives blame Pres. Clinton (the Community Reinvestment Act, 1977 was expanded under his administration) and the Democratic Congress (I have a link on a previous post from 2004 showing Barney Frank and others vehemently arguing against tighter regulation of Fannie Mae and Freddie Mac, and of course Sen. Obama is the second-largest Congressional recipient of money from these institutions). These arguments may also be too facile. While it's true that many of the Democrats who stood preened in front of the cameras yesterday took money and argued vehemently for looser lending standards, the CRA asset thresholds were adjusted again in 2007 (http://www.ffiec.gov/cra/default.htm).

I think the roots run deeper than either of these perspectives would have us believe, and that a failure of personal responsibility are part of those roots. It's true that greed exists on Wall Street, and that without certain regulatory checks in place, that greed can over-run common sense. It's also true that widespread individual greed exists, and that it can frequently over-run all bounds. How many of us had to have the latest car, a bigger house, the newest t.v., etc.? How many of us bought these on credit, without any real plan to pay off the bill in a timely manner (after all, we only owe a minimum each month)? How many of us (be honest) felt bad (or guilty) for people who live in small apartments in under-served areas, and pushed for the government to 'do something' by making housing 'more affordable?' It's so easy to push issues off on our respective 'bad guys,' and much harder to examine our own actions. The same kind of blame-game begins every time there's a large and growing crisis; climate change comes to mind.
We have to get away from a cycle of blaming everyone when we do not look at ourselves. If we fail to take ownership for some of these roots, we'll never deal successfully with the tree.

As to the 'Rescue' package, I see two options. Either we accept the plan (or a variant thereof), and hope that it works to stabilize credit and liquidity in global markets, and that stabilization ensures that small and medium-sized banks and businesses are able to conduct 'business as usual.' If we agree, as a nation, to do this, we also need to accept both personal and corporate responsibility and change that business as usual. We need to stop demanding credit for nothing, loans without the knowing how we'll pay them, and always having the biggest and best. Government needs to accept that ensuring that people have a safe place to raise their families does not necessarily mean an equal footing in all areas. Many people won't be able to have a house, buy a car, etc. There needs to be better problem-solving than insisting that under-served neighborhoods deserve looser standards due to their legacy of racism and poverty. These are no excuse for foolish decision-making. Investment banks need to accept limits on their ability to grow. All markets reach a saturation point, beyond which growth occurs only in small increments if at all. One of the reasons so many of these banks are facing collapse is their insistent demand on providing new growth opportunities - like security bundles that included bad mortgages. Finally, we all need to take a deep breath and stop the panic. Unemployment numbers look to edge into the high 6% range next week. While painful, this number is not even where we were in the mid-90s. A credit freeze would probably bump us in the 8% range - about where we were at times during the 1970s. This is not the Great Depression writ large (or even small).

The other option? Let the chips fall where they may. We (and the global economy) will probably take a major hit. Credit and lending will dry up. Many small and medium (and some large) businesses will fail, and the United States will lose its leadership position in the global economy for at least several years. This would be very painful, make no mistake. But, it might just lead us to a stronger position after a number of years. And it might lead us to a more rational, ethical and, yes, less-greedy, business-as-usual. We have survived many grave threats as a nation before, and not by relying on others to fix our problems. It may be time for us to survive this one, and emerge the wiser for it.

28 September 2008

Roots of a crisis

This first link will take you to the side-by-side comparisons from Rep. Blunt's office of the bailout package changes: http://www.dcexaminer.com/opinion/blogs/TapscottsCopyDesk/Comparison_of_original_Paulson_bailout_to_compromise_proposal.html

The second link is for House hearings from 2004 where the GOP was calling for new and stiffer regulation of Frannie & Freddie and the Dems were defending them against all comers:
http://www.youtube.com/watch?v=_MGT_cSi7Rs

Remember, Sen. Dodd - #1 recipient of money from Freddie & Fannie. Sen. Obama - #2 with only 2 years in the Senate. Frank Raines is now on Obama's staff.

How many times will we allow them to mess with our markets and our money?

A first look at a bailout (and potential fallout)

I think I have just as many concerns as I did at the beginning of last week. It looks very much like a plan for Congress and the Administration to avoid their responsibilities in the crisis (including the failure to agree to change the regulatory structure of Fannie & Freddie that Sen. McCain pushed for two years ago), and to protect businesses that failed to meet their fiduciary responsibilities, and to protect individuals from facing their own personal responsibilities. Here's the link (http://www.foxbusiness.com/pdfs/rescuebill_First%20Draft.pdf). You decide.

Wading through Fed. financial rescue plan will take a while, but here's a first look at some sections that jumped out at, and concerned, me.

(5) ensuring that all financial institutions are
16 eligible to participate in the program, without dis17
crimination based on size, geography, form of orga18
nization, or the size, type, and number of assets eli19
gible for purchase under this Act;
20 (6) providing financial assistance to financial
21 institutions, including those serving low- and mod22
erate-income populations and other underserved
23 communities, and that have assets less than
24 $1,000,000,000, that were well or adequately cap25
italized as of June 30, 2008, and that as a result
14
O:\AYO\AYO08C04.xml
1 of the devaluation of the preferred government-spon2
sored enterprises stock will drop one or more capital
3 levels, in a manner sufficient to restore the financial
4 institutions to at least an adequately capitalized
5 level;

Hmmm, there's a good argument to be made that insistence on the part of Congress that financial institutions provide easy-credit mortgages to under-served communities is part of the root of the current problem. Of course, there's also a good argument to be made that individual homeowners should have known better than to take out loans with payment terms that exceeded their income. Either way, should we be bailing out everyone and their brother?

22 (a) ESTABLISHMENT.—There is established the Fi23
nancial Stability Oversight Board, which shall be respon24
sible for—
23 (b) MEMBERSHIP.—The Financial Stability Over24
sight Board shall be comprised of—
16
O:\AYO\AYO08C04.xml
1 (1) the Chairman of the Board of Governors of
2 the Federal Reserve System;
3 (2) the Secretary;
4 (3) the Director of the Federal Home Finance
5 Agency;
6 (4) the Chairman of the Securities Exchange
7 Commission; and
8 (5) the Secretary of Housing and Urban Devel9
opment.
10 (c) CHAIRPERSON.—The chairperson of the Financial
11 Stability Oversight Board shall be elected by the members
12 of the Board from among the members other than the Sec13
retary.

Excellent - a new gov't agency to suck in money and find new ways to spend it.

8 (a) STANDARDS REQUIRED.—The Secretary shall
9 issue regulations or guidelines necessary to address and
10 manage or to prohibit conflicts of interest that may arise
11 in connection with the administration and execution of the
12 authorities provided under this Act, including—
13 (1) conflicts arising in the selection or hiring of
14 contractors or advisors, including asset managers;
15 (2) the purchase of troubled assets;
16 (3) the management of the troubled assets held;
17 (4) post-employment restrictions on employees;
18 and
19 (5) any other potential conflict of interest, as
20 the Secretary deems necessary or appropriate in the
21 public interest.

Does this mean Sen. Dodd and Sen. Obama can no longer get money from Fannie Mae and Freddie Mac. Given that they were number 1 & 2 in accepting funding, and that Sen. Obama has the disgraced former head of Freddie on his team, it might be advisable to look at conflicts of interest among Congress.

1 SEC. 109. FORECLOSURE MITIGATION EFFORTS.
2 (a) RESIDENTIAL MORTGAGE LOAN SERVICING
3 STANDARDS.—To the extent that the Secretary acquires
4 mortgages, mortgage backed securities, and other assets
5 secured by residential real estate, including multifamily
6 housing, the Secretary shall implement a plan that seeks
7 to maximize assistance for homeowners ...

9 (c) CONSENT TO REASONABLE LOAN MODIFICATION
10 REQUESTS.—Upon any request arising under existing in11
vestment contracts, the Secretary shall consent, where ap12
propriate, and considering net present value to the tax13
payer, to reasonable requests for loss mitigation measures,
14 including term extensions, rate reductions, principal write
15 downs, increases in the proportion of loans within a trust
16 or other structure allowed to be modified, or removal of
17 other limitation on modifications.

What, no limits on who gets assistance? Encouraging renegotiation of basic loan terms? I have no problem with limiting packages to departing CEO's who failed to manage their firms and assets well, but this sounds like tough love on one level and a love fest on the other. There's enough blame and responsibility to go around, and everyone should be willing to swallow their medicine. I think we won't do that however. Given the likelihood that we will do something, we all need to read this proposal and give out input to our respective representatives and senators. At least the House and Senate GOP leadership is now talking about their acceptance of the proposal, and taxpayer protections.

Bailout plan and bipartisanship

Having just watched the Pelosi-Reid show live on Fox, I'm a little stumped as to how bipartisan this deal really is. I noticed that the Republican leadership was nowhere in site. I also know noticed that although Sen. McCain has been given credit by his fellow Republicans in bringing them onboard (to a certain extent), he gets no credit from the Democratic leadership or Sen. Obama (not really a surprise). I'm trying to download the plan now to look at it, but I wonder how close we really are to a deal, and whether or not it's worth it. Stay tuned.

Truth squads and the Obama machine

Sen. Obama seems to think that the truth is a commodity, and that he's cornered the market on it. The Obama campaign has sent 'Truth Squads' to MO to combat any 'lies' told about him or his campaign. They also intend to use law enforcement to ensure that no lies or distortions are broadcast about him. Please! When he dares to wear the bracelet of a fallen soldier, claiming it for his own, although the family has asked him not to and he can't even remember the name, SGT Ryan David Jopek (http://blogs.abcnews.com/politicalpunch/2008/09/bracelet-wars.html; http://michellemalkin.com/2008/09/26/debate-video-obama-cant-remember-the-soldiers-name-on-his-bracelet/). When he claims that Sen. McCain gleefully supported the Rumsfeld plan for the war in Iraq, when in fact McCain was one of the few Republicans to insist that Gens. Shinseki and Powell were correct. When he said, just today, that he and Sen. Biden were the early and loan voices against the bailout plan, when in fact he remained mute until the last possible second and then prevaricated. One wonders if the Obama 'Truth Squads' will do anything suggested by their name. Maybe then, Sen. Obama will learn how to speak truth.

http://www.youtube.com/watch?v=XIenDGSAdPA

26 September 2008

Debate Comment 3: Mulling It All Over

How did the debate go? I have to agree with Brooks and Shields on PBS - the debate was stylistically a tie. Brooks just said, "Obama was best in those interpersonal issues, and McCain was best on security [knowledge] and experience." Frankly, I'd rather have someone whose better on the knowledge and experience rather than interpersonal issues. I have a degree in Interpersonal Communications, and a background in marketing and P.R., and certainly understand in detail what interpersonal relationships mean. But interpersonal relationships will take one only so far. They're certainly important. One can't negotiate without them, but one can't lead with them. Sen. Obama was also reduced to defending himself, his record and his words several times, which is never good. I have a feeling, though, that tonight will change few minds.

Debate Comment 2: Sitting and talking

Sen. McCain questioned Sen. Obama's statement in two debates during the primary season that he would sit and meet with Iran, Venezuela, etc. without pre-condition. Sen. Obama essentially said that was he meant was 'preparation,' and then went on to claim that Sec. Kissinger recommended the same policy. Sen. McCain corrected Sen. Obama, stating that Sec. Kissinger would never recommend Presidential talks without precondition, only Ambassadorial-level talks. Sen. Obama then said, "of course." Sen. McCain then made it clear how much more knowledgeable he is on security and international relations when they moved on to Russia. Sen. Obama said we should make sure that both Georgia and Russia didn't act extremely, and that he would tell Russia not to act that way. When he essentially gave the same response for dealing with Iran, Sen. McCain replied with a - "please!" McCain laid out geography of the Georgian pipeline and port that Russia was really after, and the stakes in Iran, repeatedly going after Obama's naivete. Sen. Obama ended up claiming he's the one who warned Pres. Bush that Russian 'peacekeepers' were on the ground in Georgia last Spring. As Sen. McCain said: please!

Debate Comment 1: Strategy and Tactics

Wow! The boldest claim I've ever heard from Sen. Obama was just made: "I absolutely understand the difference between strategy and tactics." Really? He keeps calling a plan to achieve peace and victory in Iraq a tactic, and a failed one at that. He denies that he's refused to acknowledge the success of the troop surge, and keeps trying to discuss why he thinks we shouldn't have gone in in the first place. He then goes on to say that he stood up and opposed the war
"... when it was politically dangerous to do so." He probably did - as a state senator. Standing up as a state senator was never politically dangerous, and would it no way have impacted him, particularly as Illinois was leaning liberal at the time, and he was from Chicago (home of the Daley machine). Sen. Obama, by the way, here are some general definitions of strategy vs. tactics that you should learn just in case you do become Commander-in-Chief:

Strategy is the overarching mission statement that states what we want to achieve, and why.
Tactics are the tools employed to achieve strategic success.

Maybe it would be better to understand our strategic goals, and the tactics employed to achieve them first. Maybe then you would be able to acknowledge success when it occurs and give our troops not just a pat on the back, but the recognition that they have succeeded.

17 September 2008

Agent of Change

Sen. Obama has claimed to be the one who would change Washington, bring change to the country, bring change to the world. And yet ... what would he change and how? He refused to help even encourage change in the Illinois State legislature (http://www.realclearpolitics.com/articles/2008/09/obama_sidesteps_
reform_in_illi.html); having lived there for some time, I genuinely wish he would. He has accomplished no change in the U.S. Senate since arriving there two years ago. He has not sponsored, co-sponsored or authored any legislation to enact real reform. Sen. Obama's campaign has mocked Sen. McCain for having 'current' (in fact, they're all former) lobbyists on the campaign payroll, while ignoring the many lobbyists who are volunteers on his. Sen. Biden's son just resigned his position as a paid-lobbyist, having cosily achieved favorable regulation and funding for firms he lobbied for that his father signed off on. Sen. McCain has a clear record of working hard for change in Washington. Following the S&L crisis in '88 (looking at this is a good way to put the current bank failures in perspective), he began a 20-year campaign against earmarks and lobbyist perks. He has sponsored and co-authored several pieces of legislation aimed at limiting lobbyist influence. He has religiously campaigned against earmarks, to the point of voting against legislation he would normally favor to protest the pork. So who will bring the change? It'll be the one whose actually done it already.

The Importance of Contribution

While older than most of my fellows, I'm a graduate student. In general, we pinch pennies wherever we can. Many of my fellow students tell me that yes, they support Sen. McCain, love Gov. Palin, will definitely vote for them, etc., but ... . they don't want to or can't commit money, time, thought, recruiting effort, etc. With an election as close as this one is, no one can afford to sit back. So, do you have two hours? Go to your local McCain election headquarters (for those of you near me, there's one on Yamato and Dixie and one in W. Palm off Okeechobee), and phone bank for awhile. I've had a blast talking to new voters, young voters, old voters and everyone in between. Volunteer to put up some road signs, hold a sign up on a street corner, or do a walk with other McCain supporters to encourage registered Republicans to vote. Do you have $10 or even $5 a week that you spend on coffee? Take a week to spend that money on the campaign. I'll even make it easy for you. You can donate through my MyMcain space: http://bullmoosegal.johnmccain.com/GetInvolved/Campaign.aspx?guid=f177450d-1f24-4d58-83e4-ce69493ce84e.
Do you believe in service? Then serve! Volunteer to drive people to the poles on election day. Sign up for the Peace Corps, Americcorps or the military (my strong preference obviously, but all service is good). Put the words of Sen. McCain's nomination acceptance, which were powerful and true, into action.

If you're looking for interesting reading on the campaign and media coverage, I've posted links to some interesting articles below that I've read recently:
http://www.tnr.com/politics/story.html?id=27ab9fbc-6e71-4795-8608-5875a0ce6fb6&k=55049
http://www.realclearpolitics.com/articles/2008/09/what_states_are_really_in_play.html
http://www.miamiherald.com/news/front-page/story/687993.html
http://www.realclearpolitics.com/articles/2008/09/the_political_lying_game.html
http://article.nationalreview.com/?q=NzI3ZDUzOTE0ZThlMTU3MTY0MDI4ZTY0MTZhY2I2MGY=
http://www.commentarymagazine.com/viewArticle.cfm?id=12720
http://www.philly.com/inquirer/opinion/20080914_Obama_s_change_could_cost_big_bucks.html?adString=inq.news/opinion;!category=opinion;&randomOrd=091408085900
http://www.realclearpolitics.com/articles/2008/09/november_lineup_obama_vs_obama.html
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