How Did We Get Here?

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Posted on : 12/08/2012 07:00:00 AM | By : Dann | In : , ,

I have been mulling a longer piece on the causes of the 2008 fiscal meltdown, but really haven't been able to motivate myself to get it done.  But this piece in the Washington Examiner lays out a couple of the causes that have been largely neglected in the media.

The media narrative has been that the 2008 meltdown was caused by greed; specifically corporate greed.  I happen to agree that corporate greed played a huge role in the collapse of the housing market.  Companies like Countrywide created mortgages where there was a significantly reduced probability of repayment.  Companies like Goldman Sachs....primarily Goldman Sachs...monetized those loans and then created worthless derivatives based on those loans.  When the fiscal house of cards collapsed, they were left holding all the money.

A nice deal....if you are Goldman Sachs.

I also think that individual greed played a role.  Specifically, the individual desire to have more than you can reasonably justify based on your income.  It isn't enough to just be able to "make the payments".

I can recall discussing mortgages back in the early 2000s with a friend.  Someone in his family had just taken out a mortgage where they would not be required to repay any principle.  They just had to make the interest payments.  We both thought they were nuts.

How did the market develop loans for which there was no expectation that the principle would ever be repaid?

It turns out that there was a program created during the Carter administration called the Community Reinvestment Act.  It was designed to help some folks obtain mortgage financing that might not otherwise be able to do so.   A big deal to those that qualified, but not really a big deal in the larger home finance market.

The Clinton administration took that program and put it on fiscal steroids with his National Homeownership Strategy.  The Bush administration changed the name, but otherwise kept the same program in place.  This program broadened the pool beyond otherwise credit worthy poor people to include people who had no rational expectation of repaying those loans.

I don't have the video, but I do recall seeing Mr. Clinton on TV in the fall of 2008 saying that perhaps his administration had been a little too aggressive when it came to boosting home ownership.

With more people buying homes, the price of homes went up.  Speculative investments were made on speculative investments.  Leveraging of debt occurred.

You would still think that the private risk incurred in creating such debts would cause financial institutions to shy away from the so-called "sub-prime" mortgages.  Here is where the government doubled down on a bad idea.

The amount of private risk was minimized by the federal government.  At the time of the meltdown, the U.S. government was almost the sole purchaser of sub-prime mortgages due to the efforts of Fannie Mae and Freddie Mac.

Essentially, the government created the mandate for the loans and then created a market that would offer the loans.  The net result is a tale that should have grown old by now; privatized profits and public risk.

From the article linked above:

"All of us participated in the destructive behavior -- government, lenders, borrowers, the media, rating agencies," said Warren Buffett. "At the core of the folly was the almost universal belief that the value of houses was bound to increase."
There are naturally other elements to the saga.  The influence peddling between members of Congress and companies like Countrywide that prevented the Bush administration from limiting the number of risky mortgages that Fannie and Freddie were snapping up.  The lax enforcement of investment laws by the SEC during the Bush administration.  The gutting of the Glass-Steagall Act (passed by a GOP led congress, signed by a Democrat President) may have also played a role.

It is corporatism...government imposed policies that favor certain corporate interests...writ large.

And the results were unsurprising to anyone that has spent more than a few moments studying American history.

All Things In Their Own Time

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Posted on : 12/07/2012 07:00:00 AM | By : Dann | In : ,

I had set aside today's entry thinking that I would put a little something together in honor of Pearl Harbor Day.  But then nothing unusual or interesting came to me.

Until earlier this week when we lost a great American.  An icon.  A legend.

Master jazz musician; Dave Brubeck.  He passed away this week a day before he was to turn 92 years old.

Given the season of the year, perhaps this little Brubeck gem is appropriate:



Mr. Brubeck was also a U.S. Army veteran who served with Patton's 3rd Army.  He ended up playing the piano for some of the other soldiers stationed in Europe and was asked to put together a band to keep the guys entertained.  Which he did.

Aside from his visionary piano performances, Mr. Brubeck was also a leader in the area of civil rights.  His quartet was one of the first racially integrated bands in the Army.  He maintained that sort of integration after leaving the Army which caused no small bit of trouble on some college campuses where they played.

 Some musicians and critics openly resented his success, and others questioned his prominence in a form of music that was created primarily by black musicians.

But Mr. Brubeck was an outspoken advocate of racial harmony and often used his music as a platform for cross-cultural understanding. He once canceled 23 of 25 concerts in the South when local officials would not allow his African American bass player, Eugene Wright, to appear with the rest of the group.

On a tour in the Netherlands in the 1950s, the African American pianist Willie “The Lion” Smith was asked, in Mr. Brubeck’s presence, “Isn’t it true that no white man can play jazz?”

Without answering at first, Smith gestured toward Mr. Brubeck and said to the reporter, “I’d like you to meet my son.”



His gifts to the uniquely American world of jazz music were many.  His creations have inspired generations of musicians as well as simple jazz enthusiasts like me.

And while Europe isn't the Pacific...and it sure isn't Pearl Harbor...there is at least a modest tie with the day and those that served.  As someone that opened up new perspectives in American culture, I'm sure that Dave Brubeck would appreciate the attempt.

You can listen to NPR's remembrance of Mr. Brubeck here.

The title of this entry is a bit of a pun.  Dave Brubeck innovated with unique musical time signatures based on his travels around the world .  It ain't much of a pun, but it works.  Again, I think Mr. Brubeck would get it and appreciate it.

Getting Better All On Our Own

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Posted on : 12/06/2012 07:00:00 AM | By : Dann | In : , , ,

There has been a modest amount of buzz about recent reports that the U.S. has reduced carbon emissions more than any other country.  I think it is important to keep in mind that we lead the world in carbon emissions.

At least until China catches up in a few years.

So it should be the easiest for us to make reductions.  Sort of like when an obese person goes on a diet.  Those first few pounds are pretty easy to lose.

Most of the reductions came due to recent progress in natural gas mining and recovery.  Natural gas produces far less CO2 when compared with other fossil fuels.

Where The Killing Is

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Posted on : 12/05/2012 07:00:00 AM | By : Dann | In : , ,

In all the hubbub over guns and deaths, there is a lot of number fiddling that goes on.  Take for example this piece that accurately points out that 62 school aged children were killed by guns in Chicago this year.  It also accurately points out that 442 school aged children were shot this year in Chicago.

The underlying point that this piece makes is that Chicago is some of the most draconian anti-gun laws in the country.  And still, these kids are dying by the wagon load.

Here is the deception.  While the vast majority of those kids were certainly "school aged", my bet is that they were not in school.  My bet is that the vast majority of those kids were killed willfully taking part in drug deals when they were shot and/or killed.

Which brings to mind a salient point that if we really wanted to cut the number of deaths due to guns in the U.S., we would legalize drugs immediately.  It would have the salutatory effect of also cutting other rates of crime as well.

Of course, none of this has anything to do with the tragedy in Connecticut last month.

The underlying point that kids are dying in Chicago under some of the most onerous anti-gun laws in the country is a fact.  Adopting those kinds of laws on a national level will do nothing to cut gun deaths in the U.S.  We will instead become a nation of unarmed victims amidst armed brigands.

Establishing public policy based on unusual circumstances seems to be counterproductive to me.  The dominant problem causing gun deaths in America is our failed War on Drugs.  The dominant problem causing mass shootings is people with untreated mental health issues.  Addressing both of those problems would be of far greater service to progress than making life easier for the criminals that walk in our midst.

Person Of The Year Fluke

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Posted on : 12/05/2012 07:00:00 AM | By : Dann | In : , ,

Literally.

It appears that Time magazine has included Sandra Fluke in their list of candidates for 'Person of the Year'.  for those that may not recall, Ms. Fluke is the college student that was subjected to the rather boorish behavior of Rush Limbaugh after she announced that she wanted her contraceptives covered by her university insurance program.  The university in question is associated with the Roman Catholic church.  For better or worse, those Catholic folks have a problem with contraceptives and objected to being forced to pay for something that they oppose as a matter of faith.

Now before anyone gets all het up, I am well aware that Ms. Fluke's testimony included the fact that some contraceptives have very serious uses for other medical conditions.  And I happen to agree with her that if someone has one of those conditions, then it isn't exactly unreasonable to expect your health insurance program to exclude include the appropriate medication from in the available treatment options.

That being said, I can't think of a single reason to include her on any list of important people.  Michael Graham of the Boston Herald agrees.  I think his take is worth reading for the larger social commentary.

Can you think of anyone who better represents the America of 2012 than Ms. Fluke? I can’t.
She’s got it all: The “Generation Cupcake” inadequacy (“So what if she didn’t earn the award — give it to her, anyway!); the “Occupod” sense of entitlement (“Somebody should be buying my condoms, and it ain’t gonna be me!”); and, of course, the liberal detachment from reality (“There’s a war on women! We’re being oppressed! Just ask Hillary Clinton, Condi Rice and Oprah!”).

Then there’s the economic angle. One could argue that the icon of the failing Obama economy is the college grad with a worthless degree under his arm and a bed in his mom’s basement.

Time magazine gives us Sandra Fluke, with a bachelor’s degree in (no joke) Feminist, Gender, & Sexuality Studies, no marketable skills, and still on the academic track, living on the largess of others.

I’m not trying to be mean to Sandra Fluke. Unlike Rush Limbaugh I make no comment on her personal life or sexual proclivities.

But I also didn’t — and would never — put this unaccomplished 30-something on the “Person of the Year” list for publicly whining about paying her own bills.
He pretty well sums up America in 2012.  Whatever it is, someone else is responsible.  Ms. Fluke is a perfect fit.

edited 12-6-2012

It Takes All Kinds - Local Edition

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Posted on : 12/04/2012 07:00:00 AM | By : Dann | In : , , , ,

The following actually was scheduled for 11/12/2011.  I have no idea why it was not published.  Blogger must have hiccuped.

It still applies.

...

I saw something last week that gave me a bit of pause.

Stationed in front of the local Post Office were a pair of young ladies with an obvious political message.  It was a pretty cold day for early November and you had to respect their passion even if you disagreed with their politics.

One of the young ladies was white; perhaps 'European' in today's vernacular.  The other was definitely of African extraction, although I have no doubt that she is every bit the American that I am.

The posters on display showed our President, Mr. Obama.  Bearing the 'toothbrush' style mustache once popularized by Charlie Chaplin.

And Adolph Hitler.

The accompanying text suggested that these young ladies support impeaching Mr. Obama for some reason.

I am pretty adamant about opposing that sort of hyperbolic imagery.  I thought it compromised civil debate when it was applied to Mr. Bush.  The same is true now that Mr. Obama is the subject of such criticism.  Neither one was/is even close to being in Adolph Hitler's league.  People with legitimate public policy disagreements should be able to agree on that much.

I suppose the other option was the young ladies were conducting a social science experiment to see how people would react.

I didn't stop to find out which was the case.

Spending Cuts Vs. Tax Hikes Explained

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Posted on : 12/03/2012 02:00:00 PM | By : Dann | In : , , , , ,


This pretty well encapsulates the current "negotiations" on our deficit spending problem.

Book Recommendation - Revolt in 2100

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Posted on : 12/03/2012 07:00:00 AM | By : Dann | In : , ,

Throughout Robert Heinlein's literary life, he created an alternate world that embraced technology and an individualist perspective on the world.  Mr. Heinlein is credited with predicting the impact of future technologies on society even though his predictions were errant with respect to the specifics of those technologies.  He was an avowed anti-Communist, a veteran, and a visionary.

Robert Heinlein is one of my favorite authors.  His book "Starship Troopers" should be required reading for every high school student.  Ignore the movie for anything more than titillation and explosions.

I happened across his book "Revolt in 2100" in the library.  In reality, this is one modest length book with a few short stories tacked onto the end.

Robert Heinlein has always impressed me for a variety of reasons.  His repeated treatments of the themes of individual liberty and individual responsibility are thought provoking.  His outright advocacy for equality of any dimension continues to be relevant to current events.

One aspect of Mr. Heinlein's writing is his ability to allow the reader to infer language and actions.  His books never contain profanities, yet you know when someone is using them.  His books never include overtly salacious content, yet almost everyone is having sex and characters wander around au naturale at some point in many of his stories.

Apparently, Mr. Heinlein was an infrequent nudist.

"Revolt in 2100" takes place in an America dominated by a theocracy.  The protagonist, and a few other characters, undertake an accidental journey where they discover some of the dirty secrets about how the theocrats maintain their power, how they justify actions that are antithetic to their professed faith, and how tenuous their hold on power truly is.

Our protagonist is John Lyle, member of the personal guard of the Prophet Incarnate.  This guard is known as the Angels of the Lord.  Also he is an officer and graduate of West Point, his duties are the sort that are more typically performed by an ordinary soldier.

Mr. Heinlein frequently uses military characters or characters that are veterans in his stories.  Being a veteran of the U.S. Navy, Mr. Heinlein believed that military service was a virtuous experience.  Call me biased, but I generally agree!

John Lyle has grown up accepting the version of history taught by the church/state that presented the religious leadership as being divinely endorsed.  Religious instruction and monitoring of the population being the "will of God".

John graduates from West Point and eventually joins the elite guardians of the church/state leader.  A position where his commission earns him the lowest rung on the ladder.

As a part of this elite unit, he learns that the government expects him to have human failings.  It plans to use those failings later on to obtain either leverage on his future behavior, or as justification to terminate his military career if it should ever become an inconvenience to the church/state.  The 'wise' officer being the one that is monitored to commit a few lesser failings in order to better hide the greater failings that they enthusiastically enjoy.

Such failings inevitably involve women.  Imagine that!

John then meets one of the Sisters that "minister" to the leader of the church/state.  And, yes, the scare quotes imply just what you think.  But she didn't know what she was agreeing to do when she joined the Sisters.  Imagine her surprise when the moment of truth arrived.

The story proceeds from there as John and his paramour join the resistance. 

The short stories include a cautionary tale about wishing for real anarchy.  (i.e. the total lack of government as opposed to the socialist state that our modern "anarchists" promote)  Also included is a story about space exploration in the asteroid belt.

"Revolt in 2100" is solid work by Mr. Heinlein, even if it is not his best work.  It was a reasonably enjoyable read.


Larry Hagman

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Posted on : 12/02/2012 07:00:00 AM | By : Dann | In : ,

Like most folks my age, I've seen Larry Hagman in a lot of roles over the years.  "I Dream of Jeannie" is the obvious first exposure, but he's a pretty good actor and got around, theatrically speaking.

I am also known for having to tell you one story just so the story I tell afterwards will make sense.

I recently found one tribute to Mr. Hagman that includes:

End of that story. Here's the sequel...
Go read them both.  You won't be sorry.