America is committing suicide!

September 30, 2008

I can’t believe this is happening. I am literally watching democracy fail at a time of critical need. What’s tragic is I’m seeing people act against their own interests, when they think they’re defending them.

I’ve been listening to Wall Street analysts for a couple weeks now. They have all said that we are facing something big (as in “really bad”) in a few months if the federal government does not act immediately to enact a rescue plan. Cramer on CNBC has used the term “depression” several times to describe what’s coming if the plan is not enacted. He’s also said there will come a point in time where the rescue plan won’t make a difference. It needs to be enacted before that point, or it will be for naught. Time is of the essence. The 700-point drop in the stock market we saw yesterday is a sign that the window of opportunity is closing. The very legitimacy of our market is at stake. Foreign investment is a huge part of our economy. If faith is lost in our market, that money will flee this country, and interest rates will rise.

The above paragraph is immediately going to turn most readers off, because they think I’m falling for snake oil. I’ve heard it from some of my friends: “This is the Wall Street cronies who caused this mess trying to fool you into recovering their losses for them!” I’ve even heard it compared to how we got into the Iraq war. Here’s the thing though. Even if it’s true that cronies will benefit, if the rescue package is not enacted we are going to be facing the prospect of millions of people losing their jobs, on top of the jobs we’ve already lost this year, businesses collapsing in droves because they can’t borrow money to even make payroll, and it’s going to become much more difficult for people and businesses to borrow money. In other words, it’s going to hurt us a lot.

If your credit history is less than stellar, you can forget about getting a car loan, or a mortgage, or a student loan. If you or your parents can’t afford the tuition, sorry. You won’t be able to get an education. Maybe the government will get back into the student loan business. In my opinion that wouldn’t be so bad, actually.

Get used to having a hard time finding a job, any job. Get used to renting (if you have a job that will pay it) and riding the bus, or putting up with your old car (if you’re going to be able to afford gas). In all likelihood you won’t be able to buy any of these items even if you manage to hold on to a job, unless you can pay for them in cash outright. Or hey, ride a bike. It’ll save the planet! (shudder)

I am incredulous that the public is totally misreading the situation, and what’s tragic is their misperception could come back to bite them REAL HARD!

To allay the fears of the suspicious, I do not work for a bank. I do not work for the government, and I’ve never worked on Wall Street. I am saying the following based on what I have learned about this issue from experts in the field.

It’s time for a little financial education. What happened as a result of the financial meltdown caused by Fannie Mae and Freddie Mac is that the credit markets have seized up. Today, you cannot get a car loan, a mortgage, or a student loan without perfect credit. Even then you may not be able to get one. The reason being that banks do not know whether other banks are holding on to bad mortgage bonds that are acting like ticking time bombs. So they are lending money to each other at high interest rates, or they have stopped lending altogether. Therefor, it’s difficult for you to get credit for high ticket items right now.

Our economy runs on credit. Most of our currency is based on credit (in the form of government treasuries). The only reason we have money in the economy at all is that banks have lent it out. That’s the truth. It’s been true since the 1970s when we got off of the gold standard. If banks don’t lend, the economy will collapse get smaller by attrition as people who can pay off their debts return money to the banks. The Fed is propping up a select number of major banks and major corporations with credit to restore liquidity in those institutions. While they are important to the functioning of the economy, these measures alone will not sustain it. The reason being that a large portion of the economy is small business. The Fed isn’t helping them out, are they. No, small business depends on banks–the ones that are being very tight with their lending.

Just to set the record straight, please, PLEASE, PLEASE LISTEN! The goal of the rescue package that was voted down by the House yesterday is to BUY the bad mortgage bonds from the banks that currently own them. This will take these time bombs off of their books, hopefully restore TRUST in the banking system so that credit can flow again, and make it possible for the economy to recover. The economy CANNOT recover with the current state of affairs. This package is aimed at benefitting all of us, not just a few. THIS HAS NOTHING TO DO WITH RECOVERING LOSSES FOR SHYSTERS!

What the government plans to do with the bad bonds is hold on to them until the real estate market recovers, and then sell them at a profit. The idea is the government will make its money back, and then some, with the idea of “benefitting taxpayers”. This type of scheme has worked out well with past bailouts.

The bailouts of Fannie Mae and Freddie Mac happened a few weeks ago. The government took control of AIG two weeks ago. There have been bailouts of other banks earlier via. mergers with healthy banks that the Fed is now protecting at all costs. THIS HAS NOTHING TO DO WITH THEM. They’re doing this for US!

Yes, the government made a very bad mistake promoting bad loans which have created these ticking time bombs. I am angry at them for doing this, but so far as I can see the government is the only one that can clean up its own mess. It’s a matter of resources. For the love of God please understand this! If you do not heed these words I do not want to hear millions say after they have lost their jobs, their homes, their cars, and their families that the government didn’t do enough. The truth is they tried, but you held a gun to their heads telling them to not do the very thing that would have given you a chance to survive this.

I understand that many of you probably are not feeling the effects of this now. What I’m asking you to perceive is a future reality–one we can change. It’s within our grasp if we will not be fooled into thinking this opportunity is a threat.

Please. Don’t believe the lies that are being told about this package. Understand the truth, and tell your congressmen to vote for it. Tell them to quit their dallying and put out the fire before it burns the house down on top of all of us. To tell you the truth I would prefer that they would just pass the 4-page Paulson proposal as-is NOW, and worry about changing the administrative details later. The important thing is to get the process going, to free up credit, and give the economy a chance.


The path to hell is paved with good intentions

September 28, 2008

I won’t claim that this will explain the whole mortgage mess, which has led us to this point–the brink of an economic collapse–but things are becoming clearer as time passes.

Tammy Bruce wrote a great post on this. It’s clear to me now that both Republicans and Democrats helped create this problem, but I am getting the sense that the Democrats are more culpable for our current mess. The timeline goes like this:

1977 – The Community Reinvestment Act (CRA) is enacted into law, during the Carter Administration. The law incintivizes banks to make home loans to lower income borrowers, and allows lawsuits against banks for “discriminating” against low-income people. The intent is to enable affordable housing–home ownership–for low-income homeowners.

Edit 9/29/08: I messed up the timeline a bit here. 1995 was the year when bank lending thresholds were reduced. 1999 was the year when Glass-Stiegel was repealed.

1995 – The CRA is revised by the Clinton Administration, along with a Republican congress, which lowers the standards banks use for making home loans.

1999 – The Clinton Administration, along with a Republican congress, repeals the Glass-Stiegel Act, a law passed in the Great Depression era to prevent ordinary banks from coupling with investment banks and their activities. This was done, once “the horse left the barn”, to prevent the kind of bank failures that occurred leading up to the Depression. The reason given to get rid of it at the time was the Act made U.S. banks less competitive in the global marketplace, since apparently foreign banks did not have to deal with this restriction. This deregulation, however, would later prove fatal to banks, since it allowed them to buy the toxic mortgage bonds that Fannie Mae and Freddie Mac produced. In 2008 this has once again caused ordinary banks to fail.

2002 – The Fed lowers interest rates to historic lows in response to the 2001 recession, and the 9/11 attacks which deepened the recession. This causes home mortgages to become more affordable to a wider market.

2003 – The Bush Administration tries to create an oversight board for Fannie Mae and Freddie Mac, citing a history of shady accounting practices, and unfettered risky lending. The Democrats in congress blocked this measure. The Bush Administration capitulated on the plan.

2004 – The SEC grants waivers to Lehman Brothers, Merrill Lynch, Goldman Sachs, and a few other investment banks, to allow them to increase the amount of leverage they can have against their assets.

As the economy recovers, the Fed gradually raises interest rates, affecting the rates people pay for their existing subprime and interest-only loans.

2005 – Sen. John McCain joins with 3 senators to try to reform the government’s involvement in lending, but efforts are blocked.

Gateway Pundit has a more detailed timeline of the Bush Administration’s many efforts to reform the oversight and regulation of Fannie Mae and Freddie Mac, through 2008. Pundit also details the many collapses of financial institutions that have taken place this year.

2008 – The @#$% hits the fan. Treasury Secretary Paulson puts forward a rescue plan of $700 billion to restore liquidity to the credit markets, saying it’s necessary to avert a financial and economic depression panic.

A common theme that’s coming to light is that whenever there were efforts by Republicans to reform Freddie Mac and Fannie Mae, the Democrats consistently opposed it, saying that it would take away the ability of poor people to obtain home loans. The two main names I’ve heard so far who have blocked these efforts are Chris Dodd, the Democratic senator from Connecticut, and Barney Frank, the Democratic House member from Massachusetts. Further, Sen. Barack Obama has received the 2nd highest amount of campaign contributions from Freddie Mac and Fannie Mae, second only to Sen. Chris Dodd. Yet these people want you to believe that the Bush Administration is totally responsible for this problem.

Sen. Obama claims that he raised the alarm about Fannie and Freddie a while ago. I’ve tried looking this up, but I haven’t been able to find anything on it. If someone has a reliable source on this, please let me know and I’ll update this post. I want to give him his due if he deserves it.

We need to ask ourselves who’s fooling whom this election. It’s obvious to me that some are trying to do a snow job on the American people on this, avoiding blame for this problem.

Sarah Palin is an inspired choice

September 9, 2008

I first saw John McCain’s VP candidate, Alaska Gov. Sarah Palin, on Glenn Beck’s show in June:

It’s interesting how Beck floated the question of her being VP, which Palin gracefully declined. I remember being impressed with Palin by the end of the interview, and a bit disappointed that she sounded so definite about not taking the VP nomination. I know potential candidates are expected to say stuff like, “Aw, shucks. I’m flattered, but I’m really focused on what I’m doing now,” to show they’re not too eager. She plainly said, “No,” which is usually a sign that the person just doesn’t want the job, period. I’m glad she changed her mind.

Some time back William Kristol threw out Palin’s name as his suggestion for McCain’s VP pick on an episode of Fox News Sunday. It was promptly laughed off the table at the time. I thought, “Wouldn’t that be neat?” Now Kristol is deemed a bit of a sage, bucking conventional wisdom.

When I heard that McCain had picked Palin I was excited. The first word out of my mouth was “Wow!” I didn’t think he had it in him. Palin is a risky but brave choice. McCain had a roster of candidates he could’ve picked from, any of which would have made everyone feel safe, but at best complacent or at worst divided. Either of these emotions would’ve made it easier for Obama to win. He could seem fresh and new, and with the blessing of the Clintons, shown a united front. Palin has energized the Republican Party in a way that none of the other VP candidates could have.

The reason I say Palin is a risky choice is she is unknown. It reminded me a bit of George H.W. Bush’s choice of Dan Quayle 20 years ago. People asked, “Who is that guy??” The difference is Quayle was a candidate who desperately wanted respect, despite the fact that he wilted under the spotlight, and occasionally was like a deer in the headlights in that first run. Palin in her acceptance speech at the convention was cool and confident. She sounded “Reaganesque”. People could see right from that moment that she is a rising star. Some have even said, “She is the future of the Republican Party.” I think what they see is that she had her “Obama moment” at the convention. I’m referring to Obama’s keynote address at the 2004 Democratic convention, which really wowed the crowd. Now, I have good feelings about her in this role, but let’s see how she does down the road before declaring her “the future”. I only say this because, well, we don’t really know her yet.

Contrary to what the MSM has been saying, I don’t think Palin is risky because of her experience. On the contrary. I think it would be riskier to elect Obama president at this time. The way I see it is the choice for president is between a candidate who has had executive experience as a Naval officer, McCain, and a candidate who has had none. Even Gov. Palin has had more of this than Obama has. Why is this important? A person in an executive position, like the presidency, needs to make decisions and be unequivocal about them in order to lead.

The very idea of this makes many liberals uncomfortable. They want decisions made by consensus. They also want someone who appears thoughtful, and is principled but not certain that any particular direction is the right way to go. My impression is they like the idea of responsiveness, someone who can turn on a dime when conditions change. They also like the uncertainty they see in their leaders because they feel it’s a more realistic position to take, because who really knows how things will turn out until something is tried? And once something is tried, and it doesn’t work, well then it’s time to try something else. Experiment.

The problem is in executive positions, as former president Bill Clinton found out, there often isn’t time for that. A good executive listens and gets input before making a decision. Bad decisions are made in a vacuum, but there must come a point where a direction is chosen and that’s just the way it’s going to be for a while. Once a direction is chosen it’s a good idea to see how progress is going and if objectives are being met. If not, at some point down the road reconsidering the decision should at least be put on the table. This process may sound stupid to some, because, “Are you just going to stick with a stupid decision come hell or high water?” The point is when leading a large organization you have to pick a direction and stick with it or else the enterprise will become chaotic, which leads to decreased effectiveness, due to confusion among the ranks and decreased morale. People need to feel like their efforts are accomplishing something and not just being thrown away because, “Oh, I changed my mind.” There are consequences to being indecisive. You can either commiserate endlessly or get something done, even if it doesn’t turn out like you expected. It’s called leadership.

Sen. Joe Biden pointed out at the Democratic convention that executive experience isn’t really important, because President Lincoln had none before he became president, too. That’s a good argument, and I don’t have anything to say in answer to that, except that Lincoln was decisive. He was determined to win the Civil War no matter the cost. He didn’t sue for peace with the Confederacy despite his popularity ratings going into the toilet. I haven’t seen Obama be decisive. I might have more confidence in his executive abilities if I saw him take a genuinely informed position and stick to it for a while.

Secondly, the Founders envisioned that the people who became president would be men of accomplishment (I use “men” here in a historical context because they never envisioned a woman becoming president) who had shown they could accomplish great things, and show their leadership qualities. I have listened for evidence that Sen. Obama has done some things that are worth “writing home about”, and to date I haven’t heard any, either from pundits or his adoring supporters. Many will point out that he graduated from Harvard with top honors. Indeed that is an accomplishment that is worthy of praise, but in comparison to other people in government this would earn him a position doing just what he was doing before he ran for president: being a state senator, and then progressing to senator in the federal government. There are many people in government who have degrees from Ivy League universities. So the next question is, “What else have you got?”

Rudy Giuliani made a very good point at the recent Republican convention: Obama has never been in a position where he has to make a decision that’s critical to the functioning of an organization, except perhaps in his own campaigns for office. In the scheme of things, how you run a campaign says some things about you, but I wouldn’t put it in with governing experience because bad decisions in a campaign only affect the candidate. Bad decisions in government hurt other people. Despite many people saying, “Yeah, and that’s the reason why Obama is the right choice because he has better judgment,” I say Obama has good judgment about international affairs the way Michael Moore does. Moore said in 2002 that there were no WMDs in Iraq. He based this on the fact that the U.N. inspectors hadn’t found any up to the time they left. The truth was though he didn’t really know. He got “lucky”. People like Moore take ideological stands, and in many people’s eyes events sometimes come out as predicted by that ideology. Ideological positions are right the way a broken clock is. Sometimes events just coincidentally appear to “work” the way the ideology expects them to. I don’t mind principles based in ideology, but I’m uncomfortable with leaders whose whole world view is defined by one. It reflects an inflexibility that I think is dangerous for this country.

So to again quote Giuliani, I think the Republicans have the ticket “the right way around”, with McCain at the top of the ticket, and Palin as the VP candidate. I think it’s fine for a vice president to “learn at the knee” of the president. VPs have to be available to make decisions should the president be incapacitated or die, but they’re not expected to be president most of the time.

Lately the MSM has put forward the odd notion that Palin is in effect the GOP’s presidential candidate, as if McCain is irrelevant, and besides he’s going to die soon, isn’t he? This is absurd. We’re not voting for Palin for president. For some reason the media has no such apprehensions about electing Obama president, who was elected to the Senate in 2005, and has spent most of his time campaigning for president since 2006. He reminds me of John Edwards, who did the same thing in the 2004 presidential election, practically running for president the moment he was elected senator. It’s as if Edwards and Obama have seen the Senate as just a jumping off point for higher office. Obama was a state senator in Illinois before joining the congress. Edwards was a tort lawyer before he joined. I’d almost lump Hillary Clinton in with this group, except she waited a bit longer from the time she got elected.

It’s as if they were employees who worked at the “ground level” for a while, became mid-level managers at a Fortune 500 company, and then expect to move up to CEO after having only worked at the place for a year. The question I have for these candidates is what the hell is the rush? Do us all a favor and learn the job before getting into a position where you could do damage to the organization.

The Obama campaign just looks odd to me, with an inexperienced though extremely eloquent candidate leading the ticket, and a very experienced, seasoned candidate, Sen. Joe Biden, running for VP. Some have rightly wondered, “Shouldn’t it be the other way around?”

Edit 10-21-08: I found three videos of Sarah Palin.

Sarah Palin R-Gov. Alaska on Charlie Rose, 10-12-07

Sarah Palin’s speech when it was announced she was McCain’s VP pick, broadcast on CBS

Green Room interview with Sarah Palin on Charlie Rose

McCain-Palin campaign logo