Monday, December 29, 2008
The following is intended as a practical solution to the “credit” crisis. I have been trying in my limited time to think through the problem, this solution, and the consequences of doing it this way. I mentioned it briefly in an earlier post and since then I haven’t been able to come up with major practical flaws in it. Politically it may be a different story but we seem to have entered upon times where maybe, just maybe, good old American practicality will trump the ridiculous ideological wars of the past generation.
First, the problem with the economy is not a credit problem as described in the mainstream media and by the still “in charge” administration. A lack of flowing credit is not the problem but in fact an over-abundance of credit is what created the problem. Too much went to too many for too long and it was secured by too little. The problem is that there is not now and likely never will be enough value to meet the obligations that have been made against it. Our assets are nowhere near as much as our debt. That is the definition of bankrupt. This nation is bankrupt and needs to act accordingly. But the means must be such so that once the plan is in place, it doesn’t relegate us to a second-rate risk for the rest of time. Here’s my plan:
Assuming most of the problem arises from the housing market, the idea is pretty simple. It’s time to reboot. The real estate market went haywire sometime between 2001 and 2003 and pretty much everything after that promises that can never be kept. A house bought in 2002 for $150,000 topped out in value around 2006 or so at maybe $300,000. That level of appreciation is insane and the reaction is that the values are plummeting back down. But it’s happening at such a pace that it’s hard to tell when (or if) it will ever stop and what the value will be when it does.
I suggest deploying an army of appraisers and determining the value of effectively the entire housing market, neighborhood by neighborhood, then offering everyone --- yes everyone --- the chance to refinance (or renegotiate if you prefer) the actual principle of their current loans. Whether they are upside down or not, whether they are in default or not, whether it’s a second home or an investment property or not.
We are not making value judgments on the character of the people who took out the loans, we are not investigating if they committed fraud when they took them out. We will check to see if they have the ability to pay the loan at the new value now and if so, they can have it without any recourse for the difference. It cannot be allowed to affect their credit histories or the plan will not succeed in rebooting the economy.
People who cannot afford a loan at the new value should immediately sign over a Deed in Lieu of Foreclosure to preserve whatever creditworthiness they have, or be foreclosed on and take the usual consequences. The recent notion that everyone in America should own a home is just plain wrong. Everyone is not well-placed, for any number of reasons, to own their own home and theirs nothing wrong with that.
On its face this is a very simple plan and it’s the simplicity that concerns me. On the other hand, the simplicity should make it easy to criticize but I haven’t been able to generate any yet other than that it seems too simple to be viable. But sometimes a simple solution is the best one. Hopefully putting it out here will start a discussion that can either knock this thing into better shape, deem it in good shape as-is, or knock it out altogether. Here are the consequences as I see it so far:
1.It puts appraisers back to work;
2.It sets a floor on the plummeting values;
3.It allows the banks to get back in the business of quality loaning;
4.More people will need to be hired to handle the enormous, legitimate business at the banks;
5.Title companies, surveyors, lien search companies, assorted couriers, and any other business connected with assuring the quality of ownership will shift into high gear with heavy hiring going on;
6.The tax base of cities, counties, and states can stabilize, assuring that services can be maintained and people don’t lose good jobs;
7.At reasonable prices, houses can be bought and sold again between people who can afford to do so. Teachers, firemen, nurses, and cops can live near the communities they serve. And it has a further bolstering effect on the local tax base.
8.When homeowners can lower their mortgage payment, they will end up with more money in their pockets, which will inevitably be spent even if some folks have been spooked into actually saving by this crisis. The economy will still improve with the return of disposable income;
The obvious missing piece here is: what happens to the missing debt obligations? Who takes the hit when a $300,000 mortgage gets knocked back to $150,000? There is the challenge and I suspect the answer that isn’t being discussed yet. Someone with better access to the figures and a better handle on the math than me can do the calculations. I’m guessing though, that the before and after difference will contain somewhere in the neighborhood of the number of zeros which have been flung around for the past few months saving the guys near the top of the pyramid in this giant Ponzi Scheme that the world economy had become. Accordingly, if fairness is folly enough to be included in this scenario, then it only makes sense to throw a similar load of cash out to directly assist the folks on the so-called Main Streets of the nation. And this plan makes it a relatively quick transition from total fear to complete relief and back to (smart) business as usual.
So I guess what I’m saying is that all of us together, by way of our government absorb some of the loss. But if the upside of it is that our economy strengthens and we are all able to pay the national debt down because of it then there’s another benefit.
The banks themselves must take a substantial piece of it as well. Here is a point where someone more knowledgeable than I can help. I feel like some change in accounting rules must be possible so that the losses sustained can be spread out over time instead of taken all at once. That way the loss can eventually be met by the actual returns on the now-safe loans out there generating interest that is being reliably paid back.
Finally, we’ve been led to believe that by far the largest part of the national debt exposure at this point is held by China. Well guess what? China is going to have to eat some of it too. Everyone here is taking the hit to an extent and my view is that they can either go along with this and lose some of their investment, or refuse to participate in some loan forgiveness and thereby end up losing it all. Their economy is not nearly mature enough to absorb domestically the consumer goods they currently ship here. Not that we need more lead painted train sets or melamine flavored dog chew toys, but they have nowhere else to sell it. And if we sink we take pretty much all of the developed world with us anyway.
Perhaps Bono can go to China and lend his voice to our cause…
Friday, December 12, 2008
Thursday, December 11, 2008
The Depression demonstrated the extreme consequences of leaving the markets to operate without controls on extreme behavior. Additionally, tax policy after WWII encouraged wealth creation up to a point, then made it more beneficial for the wealthy to keep money in the stream of commerce rather than in their pockets. Finally, labor policy assured that workers had enough money in their pockets to buy the products they made. These factors effectively created the modern middle class, a class which requires stability and reliability in economics in order to flourish.
That system began to loosen a bit during the Nixon years, with the resultant economic distress of the 70s. The trend towards reversing tax and regulation policy back to a 19th century model accelerated during the Reagan years, a period which also saw the denigration of the average worker by attacking the unions which had built the relationship between management and labor enabling the growth of the middle class. At the same time though, credit availability expanded. That trend continued until the GW Bush administration at which time all regulations were removed or went unenforced, and credit availability exploded. Fake money based on no standards flooded the economy and now that the credit has dried up we are seeing what that flood has washed away.
A generation of conservative economic policy has destroyed what controlled liberalism built two generations before. It is no longer safe to be big much less possible at the moment to grow that big. Until the controls are put back in place and the mess cleaned up, we will become a shadow of our former economic selves. If we don’t pull it together faster than other nations we will become a second-rate power. And we have no one but ourselves to blame for it. We will be the shame of our children. Size won’t matter in a place that can’t be relied upon to manage it properly.
Wednesday, December 10, 2008
The banking industry, the auto industry, certain sectors of the insurance industry, and others like them which are all on the verge of self-immolation have to be given enough cash to buy time to attempt a genuine restructure because they are so big, employ so many people, and are the source of the livelihoods of so many more people that to allow them to fail will plunge the nation and the world into an economic tailspin which would make the Great Depression seem like just a bad day at the office. We could be looking at the start of a New Dark Ages.
This is the peril of uncontrolled Capitalism. Free Marketeers like to talk about the concept of “the invisible hand” and the “magic of the market” as if these concepts, frequently but incorrectly cited as core principles laid out by Adam Smith, function perfectly when no government intervention is allowed. The suggestion is that a perfect balance of supply and demand will only be disrupted if an outside force intervenes. The outside force generally blamed for messing up an economy in a capitalist society is the government. The charge often made, usually from right wingers or other misguided conservatives, is creeping liberalism, socialism, or communism. We started to hear such desperate cries towards the end of the campaign when Barry suggested to poor old Joe the Plumber that tax policy should be restructured in order to assure the wealth of the country could be spread around a bit more fairly. Heavens to Betsy!!
Let me make a distinction right here: Capitalism is an economic system, one which I would argue is the natural state of humanity. Socialism, Communism, and for purposes of this blog, Liberalism, are political systems which seek only to control the excesses of Capitalism. Capitalism can function perfectly well within any of the political systems and has for time immemorial.
Free Marketeers are as blinded by their delightful academic philosophy as are Communists. On a chalkboard in a classroom the graphs and supply lines for both look beautiful and elegant. The poetic language of both magic markets and to each according to his needs is elegant to the point of poetry. They are ideals that each ignores one very important reality – human nature.
Generally speaking humans are decent enough creatures. For the most part we are kind to and generous with our friends and family, the people we work with and for, and random strangers we come across on a daily basis. But not everyone behaves this way. Some are greedy and selfish, some mean and hateful, some plain crazy, psychotic and sociopathic. It doesn’t take too many of those bad folks to wreak an incredible amount of havoc in the world. Just look at what a couple of Arab loons in Afghanistan managed to do by convincing 19 half educated dead-enders to use planes as missiles to see my point. For that reason, to control the folks on the far end of the behavior spectrum, we create laws that lead to punishment for such behavior. In the world of commerce it’s the same. The most aggressive types of people will break or bend the rules of morality and legality to achieve their ends of being the best and the biggest. Sometimes that behavior can lead to incredible risk taking and successful innovation as a result. A fair amount of the country was conceived in that manner by those types of people. But those same people also engaged in the worst kinds of abuse and greed and immoral behavior to accomplish those feats. When too many go too far and then fail, we all suffer as a consequence whether we were in their game or not.
That is why at the beginning of the 20th century, government officials led by that symbol of rock solid Republicanism, Theodore Roosevelt, decided a lot of rules were necessary to protect the public from the abuses of the corporate class. Later his cousin Franklin Roosevelt instituted rules to assure that business worked in a controlled manner without undue risk. In the past 8 years a lot of those rules were thrown out in order to let the invisible hand work its magic. The obvious result is that we are all getting the finger from a handful of people who took untold billions, maybe trillions out of the system leaving us with nothing more than the printing presses to throw more cash into the stream of commerce. And as I said above, we have little real choice but to cut down a few forests to get it out there.
There is an alternative which was suggested during the period that the Roosevelts bookended. Louis Brandeis, Harvard law professor and later Supreme Court Justice advocated for the breakup of all large business conglomerates. He worried about the consequences of bigness in business. It is indeed true that the bigger a business is, the better able it is to benefit from economies of scale, to produce and to sell its products efficiently, widely, and cheaply. This is truly a phenomenon that works in the real world given the opportunity. But the failure of a big concern has ripple effects that extend well beyond the risk taking of the bosses of the company.
Average people, working people are that way because they don’t take the risks that the big boys take and that’s fine. We need people to work the assembly as much as we need them to come up with big ideas and put them into practice. Brandeis advocated for a less risky system that discouraged large companies and instead encouraged many small companies to exist. The wealth might not be as big for the folks at the top, the prices for goods might be a little more than it would be otherwise, but variety can be preserved, regional preferences can flourish, and market stability can be considered more reliable. In the case that some business should fail as indeed they would, the effects could be easily contained.
When a big company is still relatively young and successful, it can seem as if the gravy train can roll on forever. However what we’re seeing in the case of the auto industry for instance, is that with a few generations under its belt, the big three (GM, Ford, Chrysler) thought they were sure how the world works so never questioned their methods when international upstarts entered their market with a different variety of products and manufacturing methods. The men occupying the top of the corporate culture of the Big Three, who had nothing to do with the innovations that made the companies big, failed to innovate in order to compete in a world with competition. And so they are about to fail. That is the true nature of capitalism; not to carry on inevitably but to innovate or die or get eaten by the competition. Competition does not exist for the sake of competition but to destroy the competition til the winner stands alone. It's a brutal world and that can't likely be avoided. But it can be tempered. Only government wields the power to dictate terms that can temper the brutality of the market. And government needs to do that now. To allow the auto industry and any other giant industry to fail now is to simply allow the worst economic disaster to occur. If the government tries, at least there’s a chance of avoiding the worst. Throw out the current management for creating the mess, throw the cash in to get the current bills paid and do it long enough to get a new set of plans rolling quickly to keep people working, continue to get them paid, and to get a good product out. Anything less assures we all end up with nothing except guns and religion to cling to. And next time checks are written to the banks, it has to be done so with a requirement that it immediately moves through the system and into the stream of commerce.
All of this is just a finger in the dyke. The real work is to repair and strengthen the dyke. More about that soon.
Sunday, December 7, 2008
Wednesday, December 3, 2008
The last this and that are starting to happen as regards the George W. Bush administration and as you can guess, for me, they can’t happen fast enough. I will never understand how average, well-meaning Americans could have ever thought this horrible person should have ever been allowed to wield power with anything stronger than a weed whacker in his soon to be former Crawford ranch. But they did and soon it will be over.
I just finished watching the excerpts of Charlie Gibson’s ABC News exit interview with the acting-President. His only real recurrent regret is that the intelligence on
When asked by Charlie Gibson what he hopes people will think about him, acting-President Bush said he hoped people recognized that he never wavered from his principles. What a jerk. He truly and deeply believes that whatever it is he calls principles outweigh the force of law, the Constitution, and most of the time, common sense. He champions consistency over correctness at every turn and will drive straight into the side of a mountain if he thinks he ought to be driving straight to get where he’s going.
I don’t think George W. Bush is quite as stupid as most people seem to think he is. If he was stupid, I mean real stupid, like Darwin Award winner stupid, then I could forgive that. That sort of stupid is built into the brain and can’t be improved upon. I don’t begrudge a genuinely stupid person for being stupid. But if someone who isn’t genuinely stupid chooses to act stupidly, again and again and again, out of principle, then that person is arrogant or, if it results in harm to others, evil. In this case, I won’t call Bush evil (see Dick Cheney to note the distinction), but he has engaged in willful stupidity so often and with such intent that the result has, in too many cases, resulted in evil in the name of the
But for George W. Bush, it is a point of pride that he never wavered, never second-guessed, never did something differently when given a chance, never even so much as admitted that a decision he made was his fault. The closest he comes is to suggest that going into
He is arrogant beyond a fault. Thousands upon thousands of people are dead because of his steadfast principles. Thousands more have been broken in body and spirit. Families are destroyed. Life savings, life’s works, are rendered to dust. An entire city and a big chunk of the gulf coast are still wrecked. The world economy is on the brink of complete collapse. This small man has failed at everything he has ever done in his life and his record remains perfect because he never wavers from his principles.
I have refrained from a lot of harsh language in this blog so far, but you know what??
Fuck you George W. Bush.
Sunday, November 30, 2008
We Americans love our symbols. Sometimes we take it too far, as do Republicans when they pretend their childlike vision of the 1950s ever actually existed, and sometimes we don’t take it far enough, as when we talk about the ideals and values represented by our flag when really we mean the Constitution, and then fail to live up to them when it gets inconvenient. Politically we swing back and forth, symbolically like a pendulum in a clock, but also like a clock we manage somehow to continue to move in some symbolic forward direction like the time marked by the swinging pendulum.
Right now we are collectively experiencing an extreme moment of positive national symbolism wrapped up fairly completely in the person of the incoming president, Barack Hussein Obama. He embodies so many symbolic places because of his background that it is sometimes hard to keep track. He’s a black man by appearance though his father was African meaning his forebears never experienced slavery as did the forebears of most people in
And he hasn’t done a damn thing yet. It’s all symbolic.
The whole world remains impressed and hopeful with the
Very often we forget that it requires work to improve and that even figuring out what to improve isn’t so easy. Of course agreeing how to go about that process is even more difficult but that is the inherent messiness of a system that allows everyone to express and work to promote their opinions.
And this place is a mess right now because we are leaving a period where an important part of our society thought the symbols we strive to embody thought eternal vigilance wasn’t necessary. That it was just an article of faith. We know better now though. We were raised better than that. And we will be better for that as a result. The whole world is depending on us as WE THE PEOPLE to form a more perfect union. It’s time to turn the symbols into reality.
Wednesday, November 26, 2008
President-Elect Obama (I’ll call him Barry because I consider him a friend even though I have never met him) has held three press conferences in three days which I think triples the number the current acting president has held this year (you fact checkers out there can check that fact but I exaggerate to make a point). The point is that he’s out there getting it together in a fairly public manner so that once the parties end on Jan 20, the noses collectively hit the grindstone on Jan 21. But there’s quite a bit more than that going on here.
The obvious is that he’s bringing out the functionaries of the administration in order to show he’s got some good heads getting in the game at a time when good thinking is sorely needed. By doing so, the assorted strata of the economic world can begin to get a sense of what they might be able to expect when these folks can finally get to work. Business folk in a panic as they are now like it when they can get a sense of what’s up ahead so they can plan poorly for it by hoarding more money away from middle class folks.
But besides the intended confidence building in the public eye, several other items are being attended to which are much more stealthy and in some ways much more important over the long-term for how the administration will function and hopefully succeed both for itself and the nation.
First, Barry is getting a hang for being the point guy. He’s getting in front of the press at a time when they are still a pretty fawning bunch. Considering that they have been cowed for much of the past eight years, the process of re-specinization to something approaching responsible members of the fourth estate is probably inevitable so it’s best for Barry to start the honeymoon as early as possible because the morning after will be at hand soon enough. I sense that the press will feel it needs to grow hairy cohones again before long to make up for their failures of the GW Bush years. By the time that happens though, Barry will have mastered the art of live press manipulation and will be ready for the arrows inevitably thrown his way when something fails to go exactly according to plan.
Second, we are getting used to seeing him out there talking about the actual policies that will be proposed to deal with real time situations, all which are major crises, as opposed to hearing them as semi-vague campaign promises not applied to anything. We will be very comfortable with Barry as Leader by the time Jan 21 rolls around, surely looking forward to the immediate impact of the plans to come. Which leads right to,,,,
Third, since we will be comfortable with Barry and aware of his plans and the people to implement them, the newly powerful democratic Congress will have a very hard time bucking against anything the president proposes without being instantly seen as obstacles to getting the country back on track. And the same will be true of the republican rump who will need to find a way to say something useful after the damage they’ve countenanced during their time in the spotlight. Once the policy proposals start coming out in any specific way, I’ll be very curious to see if any noteworthy reactions are sought from Nancy Pelosi or Harry Reid.
So it seems to me that from a political standpoint, unless or until a major policy stumbles, my friend Barry may very well be looking at unprecedentedly smooth sailing as he gets to work while the rest of us recover from our inauguration day hangovers. For me I expect it will be with a smile through the headache and tummy rumbles.
We still have a couple months of this to go through but I presume since this is Thanksgiving weekend we won’t be seeing anymore of news conferences this week. But keep an eye out early next week for the foreign affairs team to get rolled out with a final word on the latest Hillary sweepstakes. And I’m just guessing here, but what a big splash it would be if the last cabinet post named is Department of Energy featuring our old friend Al Gore, eh?
Monday, November 24, 2008
Ah now here is a topic that makes my liberal heart sing. I firmly believe that the past 8 years have been the culmination of everything the conservative revolution ever hoped to stand for. And I further firmly believe that the election of Barack Obama as president stands as the verdict on the results of 40 years of conservative ideology. Having spent 40 years fairly systematically acting to dismember the good name, good character, and good money of this country, I now hope the Republican Party and the conservatives it houses spend the next 40 years attempting to reformulate a realistic opposition to liberality rather than the irrational mythology they have pimped on well-meaning citizens all this time.
In 1964, the last man to hold the Senate seat currently occupied by John McCain was even more soundly thumped in the presidential election. Granted, a fair amount of the credit for Lyndon Johnson’s victory over Barry Goldwater could be laid at the dead feet of John F. Kennedy but between the two candidates stretched a yawning gulf between modern liberality and the then nascent conservative movement spawned only a few years earlier primarily by William F. Buckley. As Buckley derived and expounded his ideology by founding The National Review, he focused essentially around the principles of fiscal restraint and social libertarianism. In other words, government should take and use little money and then should leave everyone alone.
At a basic level there is little that anyone can really argue with about those principles. But as is usually the case with such apparently simple concepts, the details and consequences of the application can be a bit more difficult to contend with. But the ideas are indeed so attractively simple that they lend themselves very easily to the spoken word. Over the course of decades, that capacity for easy explication became the hallmark of conservatives and the Republican Party in general. It’s very easy to say you want to keep money in your pocket until the pothole in front of your home doesn’t get fixed fast enough or if your kid has a second-rate teacher because s/he receives second-rate pay and the smart folks who would like to share their knowledge can make (a lot) better money elsewhere. It’s easy to say individuals should be left alone to live their lives unless god forbid it’s two guys kissing each other with love or some hippie at home sparking up a joint after a day’s work instead of slamming a six-pack. We Americans have always been very good at spouting out our principles while failing utterly to live up to them when inconvenient realities challenge us to evolve our personal judgments. And boy oh boy have conservatives ever been good at failing to live up to the ideals they espouse so eloquently.
During the most liberal political years of the 60s, LBJ took FDR’s New Deal and very nearly completed the task with The Great Society. But his ego got in the way and allowed
Their religious fervor was the key to their success. Anyone who can gain the support of a gigantic group of people who otherwise bring little to the table but faith and obedience can go a long way with not much. Hence the GOP since 1980. Buckley and crowd tried valiantly to get ahead with their well-formed ideology but they needed a mouthpiece and found it with Ronald Reagan. He had a well-formed philosophy based on a never-existing mythological land that sort of looks like some new 1950s suburbs with a dose of cowboy thrown in. Fine for an actor who grew up with a mean drunk for a father and he was usually pretty good at delivering his lines. He was especially enjoyable after Jimmy Carter stopped smiling. But Reagan carried with him the unholy coalition of old Wall Street money, southern aristocrats and related thinly-veiled property-grasping race-baiters who were then able to use time-honored rabble-rousing to bring middle-class white-folks along with them as a religious matter, and a small but growing group of the sons of former 1930s American Stalinists turned rightward by the failure of Communist ideology but enamored of the tactics for their cause. A strange crew to be sure but connected by their belief in the righteousness of their cause and disdain for any in their midst who disagreed with them.
Reagan was eventually followed by Newt Gingrich who lowered and continues to lower the intellectual bar from the top end, and then came George W. Bush who did so from the bottom, a genuine empty suit ready to be stuffed by what had become a fully mean-spirited pure power grab completely bereft of any further real world consideration to any policy it promoted or action it took. The past eight years have seen the Constitution ignored in as complete a manner as could be imagined by any of the framers who wrote it to avoid such abuse.
We’re close to the end of dealing with them. Hopefully for a good long while. Even Buckley himself recognized that the movement he started had effectively destroyed itself with the behavior of the GW Bush administration. As a man of faith himself, he probably would not have any trouble with the notion of spending a good long time in the desert in order to confront one’s mortality and identity. And so it shall be for the conservatives and Republican Party in general.
Conservatism is a decent enough way to run one’s life. But not a nation as big, complex, varied, factionalized, open, hopeful, and grasping as ours. Liberalism and liberty come from the same root for a reason. And the openness necessary to succeed in a nation such as ours can’t run our politics on anything other than true root of those words.
[I know that a lot of the statements made above are pretty loaded and not backed up… yet. I’m in no rush to lay it all out now, but it is my long term intention here to pick out many of the phrases from above and work them out in greater detail. Right now it’s a bare skeleton. Meat’s a-comin’. Just starting to tease out the notion of conservativism as an unworkable and hopefully now, discredited ideology. But I’ll stretch out just a bit more to give a sense of where I’m at and where I’m going.]
Saturday, November 22, 2008
My thought here returns to my last blog about poker playin' Obama. What he has set up here, though being promoted as such by the Mainstream Media (MSM), is not a team of rivals, but is intended to be a team of Americans. Politicians of distinct philosophical persuasions are being brought together for a particular purpose, to engage in the process of first pulling this country out of the perfectly complete mess the Bush administration has put it, and then charting a course forward which has been many years in the waiting as a result.
Obama has made it clear at least in public that he intends to welcome the disparate opinions because the problems we face are immense and complex, and they require deep thought to consider the many ways to get out of them. A lot of roads exist to drive out of the ditch that single-mindedness got us into, a fair number which have never been driven on before, especially in the current conditions we're in. It takes a driver with the good sense to ask for directions before deciding where to go.
And there's the technique to it politically. My guess is the backroom meetings to come will be pretty fascinating affairs. Not just the sheer ego power that will be in the room during these moments but the approaches to the issues they'll address, and the need to consider how it will all interact with the new landscape in Congress.
Cases in point, back to Hillary and Joe the Schmuck. Contrary to what I thought in my last blog, as I write this one, it appears that Hillary will accept the job of Secretary of State. As an advisor, she will jockey for position with Joe Biden, Jim Jones, and no doubt John Kerry in the Senate who will be filling Biden's former post as head of the Foreign Relations Committee, among many others from defense to commerce and energy (not yet named but can you intone the magic words "Al Gore"?). I can't imagine at this point that she thinks she can get away with the shenanigans that all in the MSM are already looking forward to. She will be the prime public standard bearer for the administration's policies --- the Obama administration.
The arguing and posturing and representing one's own interests and agenda happens inside the conference room. Each player must represent their position fiercely at that time. But once the boss makes the decision, the arguing ends and fierce representation of that position rules all. I suspect that the first person who strays very far from the party line on such matters will get slapped down pretty quickly. The first time the rebuke may be made not too publicly but after that it's the Obama hammer (probably in the person of Rahm Emanuel). Hillary will seek to establish her bona fides as a team player fast to cool down the speculation of her as a loose canon. My problems with her are not really of that sort. I think she will have some problems managing her own department squabbles but when she's told what to do, is as disciplined as they come. Off-message Bill is another story altogether and I hope one that remains in a niche of his own ongoing creation. If I'm right and she toes the line, I just hope the MSM gets on to other subjects and seeks conflict and controversy elsewhere. I'm really tired of the Clinton circus.
Unless Franken wins in Minnesota and Martin wins in Georgia, Joe the Schmuck is Obama's chew toy. Unless he is the 60th vote, Joe the Schmuck will be tested time and again to show he really is with the democrats as a vote and possibly even a voice in strong support of just about anything the administration wants. If he is not a reliable supporter now, there will be no further reason to allow him to stay in his positions of influence on committees or even nominally in the party. Time to dance Joe the Schmuck, and you ain't leadin'.
So for now, Obama appears to be forgiving and is the big man in every way. To some on the religious right I hope it gives the appearance that positive Christian principles are in play. To me though it still looks like a martial art where all opponents are invited to expose themselves before the master decides whether to dance or discard at will. Forgiveness lasts as long as one behaves in a forgivable manner. Rivals are not rivals anymore. These politicians are all Americans and have to chart a positive path or we will be doomed slide into our own manufactured oblivion. I remain optimistic that these characters know the difference between campaigning and governing in ways the Rovian Republicans never did.
Tuesday, November 18, 2008
In the past few days, my man has offered up the job of Secretary of State to Hillary Clinton and assured that Joe Lieberman retains all the perks of his position in the Senate as if he still deserved it after his behavior during the campaign. The big talk throughout all this is that Obama is patterning himself after Lincoln as described in Doris Kearns Goodwin's Team of Rivals. Now, I haven't read that book and my trust in the punditry on the accuracy of that comparison is suspect at best. Another good line being used is the one from LBJ that "it's better to have [people] inside the tent pissing out than it is to have [them] outside pissing in." That might work as far as it goes with Joe the Schmuck, but as for Hillary, well, I think she would be more likely to squat, so this one won't work. In any event, the idea is that Obama is strong-minded and self-aware enough to be surrounded by widely ranging opinions and approaches to issues around him without being unduly swayed away from his own true course once he's taken it all in. That may be true but I don't think that is why he has taken the approach he has with these two wily politicians.
Hillary is not State Department material. She isn't presidential material either. She isn't a leader, and it has not a thing to do with her matching X chromosomes. She is a policy wonk and an inside player. She has spent her entire adult life playing second banana to the biggest banana in the bunch, and at age 60, it's way too late in the game to play a different role. She can handle a small staff beholden only to her but when things get large and unwieldy, with competing egos, differing agendas, hidden ambitions, and a need for a final authority to oversee it all, unlike Obama, she's just out of her depth. All the evidence one ever needs happened in almost plain view when the presidential nominating process which was designed for her to sleepwalk through turned out to be something she nearly DID sleepwalk through. She is absolutely perfectly suited to be a senator. She should turn down the offer of State and return to the Senate and become the distinguished leader in that chamber which she will be capable of becoming. In an Obama administration, she will chafe dually under the requirements of a foreign policy she doesn't endorse as well as her big banana as he continues to cavort and blather across the globe. If she stands back, she will be a great stateswoman while Bill will become an international ambassador without portfolio. And then someone more appropriate for the role at State, my choice is Bill Richardson, can wield that banner.
Joe the Schmuck. Oy. The best thing that ever happened to Obama (besides winning), is that the Democrats haven't clinched 60 seats in the Senate. (The Senate requires a vote of 60 to end debate and get to a vote, so as a practical matter, if a party doesn't have 60 votes, they have to always compromise with the opposition to get things done.) If that happens (which would require them to sweep the remaining unfinished elections in Alaska, Minnesota, and Georgia, a fairly tough set of odds at this point), Joe Lieberman becomes potentially the most powerful man in the Senate. As a nominal independent who caucuses with the dems, he becomes vote 60 and can use his vote to extract almost anything he wants unless some wayward Republican can be brought over (can you say Olympia Snowe?). The more likely scenario has the Dems falling a vote or two short. Such a situation means Joe has to stand up and be counted as a good American to get things done or be the one guy on whom all derision for inactivity can fall. Droopy Dog will come to heel or he will be put down with the rest of the mangy republican curs. Without 60, the Dems in congress can't go overboard with their agenda and swing the country too far to the left. They will have to take Obama's policies and convince a few stragglers (Joe the Schmuck, a re-Mavericked McCain, the aforementioned Snowe, and maybe doughface Lidsay Graham) to do the right thing.
So for now, Obama has given these two giant egos, Clinton and Lieberman the means by which to step up or step out. Absent the trifecta in the undecided seats, these folks will need to demonstrate loyalty to administration and the power of the bully pulpit of the presidency if they wish to remain viable in big game of American politics. As long as Obama's decisions work once he's finally in office, they better follow or they will be pushed out of the way very quickly. The not-yet-president is playing a very high stakes game with an angle on pulling the best out of his people however he can get it. They are smart people and for all of our sakes they'd best not call his bluff. He ain't bluffing.
Monday, November 17, 2008
I’ve heard all manner of potential solutions and short term stopgaps to address the problems in the housing market. None of them make a whole lot of sense, most of them draw very arbitrary lines which tend to give relief to the most egregious offenders of sound market practices on all sides of the issue, and none of them address the real problem. First and foremost, the mortgage crisis, foreclosure crisis, credit crisis, bad paper, etc etc etc, are all misnamed and as a result are not being attended to properly.
The problem is not credit and the consequences of its unavailability. It was the opposite of that which caused the crisis. Too much credit was extended inappropriately on collateral (houses) which do not have the value to meet the obligation if the borrower can’t pay. This is and has been from the start a VALUE crisis. There is simply not enough value in the property to cover the debt. And for at least any time in the even distantly foreseeable future, there won’t be. The mortgages used to back these houses are garbage from end to end and pretty much have been, at least in south Florida, where I am, by my estimation, since sometime around early to mid-2004. The result of that reality is that values have sunk back to that level and because of downward pressure from over supply and no demand is pushing them below those past levels.
How to really address it? Allow EVERYONE to renegotiate/refinance their loans based on something approaching real values from 2004 if not earlier. Loosen lending rules somewhat to allow folks in homes to stay, but VERIFY THEIR INCOMES (as opposed to what went on without verification, assuring foreclosures in the first place at any value). People who really can’t pay at any rate have to go and shouldn’t have been there in the first place. Not everyone should own a home (how’s that for non-bleeding heart liberalism?).
Banks takes their losses up front. Maybe some adjustments can be made in accounting rules to allow it to be spread out over time and stay in business. Meantime, the foreclosure rate drops dramatically, values becomes realistic, bargains are available on vacant properties, allowing real buyers to step in, and before long, normal value increases can start up again in a legitimate real estate market. Community tax bases stabilize. Cops, firemen, teachers, and nurses can move into the neighborhoods they work in again.
Focus can shift to investigating fraudulent deals (banks, mortgage brokers, borrowers). The big hit will be taken by the folks at the top, but they already have their bailout money in hand. The Chinese I suppose might take issue with this plan, but I suspect they are gonna get screwed at some point no matter what. Serves ‘em right for sending lead-based chew toys for our dogs and children.
And by the way, for the sake of full disclosure, I stand professionally at the nexus of a lot of this mess so I’ve had kind of a bird’s eye view of it all as it was happening, hence my particular perspective. So naturally I would stand to make a ton of money doing title insurance for all these deals. But my point here is not to promote a plan that would make me money, I have plenty of other avenues to earn a living available to me. My intent is as an American interested in seeing us do better. ALL of us and there’s the Mighty Liberal part. The plans proposed so far only apply, and not very well, to the top dogs who caused a lot of this and are not taking the hits they should for the trouble.
Wednesday, November 12, 2008
Well it seems it may be back to business as usual for the remainder of the Bush administration. One of my big fears which I referred to in my last post was that somehow or other Bush and friends were going to find a way to arrange for their band of corporate cronies to legally abscond with the bulk of the $700 billion bailout before skipping town on January 19th. Today anyway, that may not be the case after all. What appears to be the case instead is that they will do what they’ve always done, nothing.
Hank Paulson announced today that, contrary to the initial pitch, the bank bailout funds will not be used to buy the bad paper that has been the apparent cause of the current economic meltdown. For now the money will be used only for stock purchases to provide operating capital for the participating institutions. As might be expected, the stock market today took another nose dive after the news was announced. At the same time, Congress has made it clear that they won’t be able to come up with a new stimulus package, and even if they did, Bush wouldn’t approve it unless it was coupled with a trade bill. And Obama already said he wants stimulus and trade kept separate.
In other words, all efforts made to this point to bolster the economy were intended to hold off complete disaster until the election. Now that Obama trounced McCain, once it became clear that Johnny Mac was right a few years ago when he was still a straight-talker that he doesn’t know anything about economics, the reins have been released and the complete slide can take place.
As much as I don’t like it, I think this was kind of unavoidable. The so-called “credit crunch” is just a symptom of the real problem. Credit has ceased to flow not because of an absence of cash, but because a lack of value to back up the credit. Since Reagan came into office Americans have not seen much in the way of any increase in real wages (adjusted for inflation) but we all have a lot more “stuff” now than we did in 1980. That’s because some things have gotten cheaper (electronics for example) but more because the amount of credit we all carry has expanded at an unbelievable rate. And that credit expansion exploded after the Bushies came into office because they encouraged banks to lend money for real estate to just about anyone who could at least partially fill out a mortgage application.
As an aside, to those who want to include the
Once so many people started getting loans so easily, prices started to rise and the race was on. In south
On top of it, the full implications of the same situation in commercial real estate, in addition to credit cards which aren’t secured by anything at all, have yet to be felt completely. There is not enough value to match what we all owe. Printing up more cash in medium-sized batches here and there isn’t going to change that. We have a good way left to fall before it all can start to settle and recoup. And I believe that Bush admin really wants to just pack up and slink out, and I wish they would but we’re stuck with them til January 20.
My honest opinion for now is that $700 billion doesn’t come close to what’s really needed. This is a plan similar to what was done by
It took 10 times or so the same relative amount of spending to end the Depression, and
Monday, November 10, 2008
There's that $700 billion to be disbursed and I wonder how much will get flushed out before the grown-ups and responsible citizens can get control. All sorts of paramilitary incursions seem to be escalating in countries we aren't already directly occupying and at some point I would guess the lovely people who run those countries will start to take offense at that activity.
But my fave is that the Russkies, rather than congratulating Obama on his victory like every other nation's leaders, civilized and otherwise, instead pulled out a dusty old tactic from 1960 and announced they were moving missiles towards the Polish border. What could the Russians possibly gain by that move? They don't have to defend an ideological border anymore; there are no separatist movements in that region; the Poles are too busy building up their own country to worry about the Russians building theirs. I'm sure declining petrodollars has something to do with it. But politically -- and that is always how I think of Russians when they do anything except drink -- is that maybe, since the missile defense system (aka Star Wars) was mentioned as a reason, it's a means to goad George into some last rash act, or to put the screws to Obama to get the system removed while he's still a rookie. I suspect it's equal parts both because if they can't get Obama to back the system out early, they'll have to negotiate with him. And then they may have to actually work since I have a feeling Obama knows nearly as much about Russian political negotiating style as KGB trained Putin, and as he did in the campaign, will have all the patience in the world to stare him down no matter how deep into Putin's soul he has to look to see anything.
And of course, there's Osama in his Pakistani villa. Reports are coming out that al Qaeda has something big planned. On the one i suspect those creatures always have something planned but on the other, I wonder what is the point? I never really subscribed to the notion that the destruction of the US was al Qaeda's goal, only as a response to continued US incursion into Muslim sacred areas. If that's correct, the infinitely patient radicals should wait to see if we really do start to withdraw from Iraq and the rest of the region to see if they get what they want. On the other hand, there's little chance of any change in Afghanistan and escalation in Pakistan seems likely no matter who is in the White House, soooooooooo,,,,,,,,,,
Sunday, November 9, 2008
I believe the US was designed by the founders to be liberal in its orientation. Despite efforts of conservatives of various stripes to alter that course throughout our history, I think the conservatives consistently overreach and inspire renewal by the natural liberal tendencies which are central to a people who in one form or another are constantly on the move and like it that way. For the past 8 years we have allowed ourselves to get stuck in the mud of our political distractions and are now about to start washing ourselves off and move forward again. Contrary to some recent writing and some Sunday punditry, I reject the notion that this country is fundamentally center-right in orientation. I believe we are fundamentally center-left. We've just been so far to the right for the past 8 years that nearly any course correction back towards the middle will seem more leftist than it is and returning to a center-left orientation downright radical.
Obama's election earlier this week is about a lot more than putting a man of color into the White House. I would argue that of all possible things, although race is the most immediately obvious thing about him and the most celebrated at the moment, it's surely the least important thing about him as he starts to put together his administration and prepares to engage on the biggest job laid before an elected official probably since World War II.
Why fundamentally center-left? The folks who made the difference in this election, post-baby boomers, generally don't give a rip about issues of race. They stand on the shoulders of parents and grandparents who lived through the last brutally open fights on the issue and believe it's now time to really put it behind us. It should be an issue moved primarily to the stories told by our elders and history books to be learned about and remembered. Sure there are still a lot of folks over the age of 50 in this country and they still and ought to have plenty to say about things but on this one, their kids have made their first major statement as full-fledged and involved citizens of this country. Get over it and let's move forward. A lesson taught by the kids to their parents.
So liberality then, what is it? Classically and as intended by the founders it's about opening. Opening the mind, opening the spirit, opening the playing field. Liberation. Freedom. The capacity for anyone to engage in the process of being. No result is guaranteed by engaging in the process for any individual but everyone gets a shot. The idea behind it is that by doing so honestly and openly, together we will seek quality -- some might say be blessed with it -- to the benefit of all in some way. From the beginning living up to the notion of liberality has been a difficult fight, generally against those who call themselves conservative and who I think feel like they don't have to engage in any process which might question their behavior, their means of acquiring property, or what they do with it once they have it. Liberality in America is also centrally entwined with the concept of personal property ownership, a concept I believe in as strongly as the founders did, so I hope to avoid the standard tag that we saw recently regarding knee-jerk labels of socialism, Marxism, or communism. If that's your critique of anything I might post, you're barking up the wrong tree here.
Simply summed up, American liberalism relates to opening things up. Everyone has an equal chance to engage in the process of and exercising the ownership and use of property. Property includes stuff, includes places, includes rights, includes thoughts. A Mighty Liberal works hard to be a part of that process and works hard to make sure everyone else can to the best of their abilities (which is no guarantee that the abilities are all that good), and to the best of their character (same) with the consequences that go along.