Let them eat cake: Normally I spend 2-5 paragraphs easing into the topic, but as I don’t have an analogy applicable to the duties of an entity I will not be able to completely understand, I may as well get right to it. Heck, until about two months ago I would have guessed that a Freddie Mac was something you could get on the McDonald’s value menu for a limited time. But I can guarantee I had made comments in favor of regulating the private industry long before the current push to rescue investment industry giants and did not have to read ten articles promoting that view to think so. I expressed the desire to have more regulation in the areas of prevailing wage, immigration, smoking in restaurants, guns, and free trade, among others and included fairly vague wishes to monitor the business practices of large corporations such as those currently about to cost us $700 billion in parts 8 and 21. People think that regulation would stymie the type of capitalism that is necessary for this country to thrive. On the contrary, I think that doing so effectively will let us have our cake and eat it too. THis is something that will not happen if one pays $48 for 24 cupcakes courtesy of a tight-lipped Byerly's employee who withheld the fact that marble cupcakes are about twice as expensive as chocolate. For the more accurate history of the cake line’s originality having stemmed from Marie Antoinette, see http://en.wikipedia.org/wiki/Let_Them_Eat_Cake. Has anyone given credit to Cliff Clavin for having invented Wikipedia? It's a little known fact that the original idea for the Federal Reserve came from Mayan fruit bats.
Federal Reserve
Federal Reserve: I only vaguely know how important the Federal Reserve is to the economic futures of American citizens. I have read expert opinions by people who know much more about what a valuable service the FR provides. I've read as many articles written by those seeking to abolish the Fed as those defending the FR’s decision making processes. The debate again reminds me of John Stuart Mill's germane line: “In all intellectual debates, both sides tend to be correct in what they affirm, and wrong in what they deny.” I already used that one in part 28, but I think it applies here as well. To me, I feel toward the Federal Reserve the same way I felt after having watched “The Passion of the Christ”; it was neither good nor bad, it just was. We may have to put up with the Fed as a necessary evil. Wikipedia mentions that the FR is a “governmental/quasi-private banking system”- ahhh, the government (congress initiated, see the next paragraph below) and banking that closely linked is concerning- as Ron Paul writes- “the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy . . . Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state.” (See Ron Paul’s “Abolish the Fed” article delivered in the house of representatives on September 10, 2002 which also contains a companion piece about the gold standard- “Why Gold?” written by Lew Rockwell, a leading libertarian political commentator- http://www.lewrockwell.com/paul/paul53.html.)
Rockwell’s most telling contribution: “Most of the time, governments are pleased to inflate their currencies so long as they don’t have to pay the price in the form of mass bankruptcies, falling exchange rates, and inflation.” I know there have been millions of personal bankruptcies concerning the sub-prime mortgage mess, which was never properly regulated and the government and the banking/mortgage* industry stood to gain hundreds of millions of dollars in taxes and mortgage fees and now that it has failed the taxpayer is on the hook for bailing them out. (Keep in mind, I do not think it takes a genius to have figured this out; I wrote paragraphs 2-6 of this offering at some point in June of 2008. More importantly, Paul and Rockwell wrote their pieces in September of 2002.) I quote from a source that indicates the present reality of inflation given the overall state of the economy, (gas prices, food prices,** etc.). The Falling exchange rates component of Rockwell's article- ? I’ll plead ignorance, if I wrote now that exchange rates were falling and tried to justify why, including that the Federal Reserve was responsible, when this blog diatribe is published and read by all English speaking peoples on the earth, I will look like an idiot if the Dow and Nasdaq are up significantly. Next week, the fourth week in September 2008, congress will be rescuing those that are too big to fail. The FR cannot be blamed for all of our problems and I don’t need an expert to tell me that. Congress was wise to get out of the market business, contracting this obligation to the FR. Rockwell concludes- “What keeps the gold standard from becoming a reality again is the love of big government and war.” His comments on the gold standard can be digested at your leisure and it is slightly off topic for me to get into that here. He refers to big government and war, which are traditionally, and respectively, considered a democrat’s and republican’s most representative areas of junta-ness/expertise.*** Now, after reading the pros and cons of the FR, it seems that the FR is at least one entity which seems economically detrimental to the middle class which may need to remain.
Inconclusive detriment: I am willing to forego an attack after the truth on such an entity because it is not obviously at fault for as many forthcoming middle class woes as some already identified institutions, policies, or governmental policy makers. However, as a government entity it must clearly bear some responsibility for the rampant regulation-phobia that keeps millionaires up at night. I find it amusing in the forthcoming general election season that both parties will issue their partisan rhetoric blaming the other party and do as Jon Stewart said at the end of his interview with Richard Clarke on the Daily Show in late May 2008- “abdicate responsibility while usurping power” kind of like Le Bloc Quebecois and the neo-democrats (see part 29). I have a hunch that the FR does about as much good as it does harm; in case you haven’t noticed, I do not have the same hunch about much of the rest of the agencies the government has rendered or installed to assist in our successes or to hasten our failures. So being, because the facts concerning the Federal Reserve’s potential financial detriment to the country at large are inconclusive, I would rather spend my words of frustration poking angst and fun at other issues in an effort to see that they are improved. Of course, I have less chance of actually improving those conditions than of convincing a bald eagle to get plugs or a hissing cockroach that routine rhinoplasty is not something that only grey, mammoth, large-horned, small-brained, odd-toed ungulates prevalent in Africa and southeast Asia can have performed on an outpatient basis, but it will be fun to give it a go.
In the old days: The United States has always had a central banking system and the Federal Reserve is just the third iteration. Anyone can read about the “financial panics” which “renewed calls for a centralized banking system” in 1907 (a call not answered until 1913, during Woodrow Wilson’s presidency- http://en.wikipedia.org/wiki/Federal_Reserve. So, we saw the need to create a central banking system in order to avoid central panics. Economic historians will tell of the 1929 stock-market crash, the Dow Jones failure of 1989 and the economic recession of the 1970s. So, it is clear the FR is not blameless. The link tells of then “Senate Republican leader and financial expert Nelson Aldrich” and executives representing many of the most wealthy bankers at the time, who “secluded themselves for 10 days at Jekyll Island, Georgia.” That sounds like it is all on the up and up- politicians and rich men all go to Jekyll island and hide. The “Aldrich Plan . . . was derided by southerners and westerners who believed that wealthy families and large corporations ran the country and would thus run the proposed National Reserve Association.” I must admit, the various quotations included in the link are enough to make me sick, because it shows in what ways the less wealthy are powerless to combat the omniscience of greed. As I do not have evidence to the contrary, despite Milton Friedman having said that “the most pressing [economic problem of the day] was how to get rid of the Federal Reserve.” (a quote which is contained in the link above). On that matter, in addition to many others, I would defer to Friedman. I began in parts 1 and 2, detailing how difficult it would be to prove a number of things. Attempting to prove that the Federal Reserve is more responsible for the forthcoming economic position of the middle class than are immigration, taxation or campaign finance would be difficult.
George Will and borrow and spend: George Will’s April 19, 2008 article “Can We Survive Mission Creep at the Federal Reserve?” is a bulwark of an unsound argument which makes a blanket statement of all those in the middle class. (www.startribune.com/opinion/commentary/17924569.html) Will writes “Having maxed out many of their 1.4 billion credit cards, between 2001 and 2006 Americans tapped $1.2 trillion of their housing equity. Business Week reports that the middle-class debt-to-income ratio is now 141 percent, double that of 1983.” It is not the FR’s specific obligation, nor the government’s generally, to save people who put themselves in economic peril by assuming debts in excess of their income. Will is brilliant and most of the time I can even understand him. He seems to be advocating a FR laissez faire approach, which would allow the market to correct itself without intervention from the FR, without Americans exhibiting our famous economic anxiety, which causes more fiscal problems than it corrects. I had to again write to the same local radio host that had callers voicing their opinions on irresponsible middle class debt-mongers who complain about their own financial woe which they have caused. I would refer readers to the fact that my household pays off each credit card bill the month it is due so that no interest can accrue. I am not mortgaging my future, nor my children's, for expensive vacations or possessions, or writing checks that I cannot cash. I may be in the middle class minority when it comes to a debt-to-income ratio, and being so, can continue to justify my economic foresight of the tenuous ground even responsible middle class citizens tread now which will only worsen in the future. Again, food prices, gas prices, health care, education, prices on necessary cost items and taxes aren’t getting any easier to swallow given the limited cost of living increases middle class workers have been receiving. So, the argument that ALL middle class citizens are economically their own worst enemy will continue to fall on deaf ears.
“McCain Warns Against Big-Government Aid Amid Housing, Credit Crisis”: This Boston Globe article from March 26, 2008 contains some good and some bad news. The good news- “Any assistance for borrowers . . . must be temporary and must not reward people who were irresponsible at the expense of those who weren't.” Now who could disagree with that? Of course, let us consider- “Government assistance to the banking system should be based on solely preventing systemic risk that would endanger the entire financial system and the economy.” You could not have foreseen the practices of the mortgage industry which made all of the home-lender vultures rich? The government has the reaction time of a heavily-sedated lesser flamingo. Conservatives love the free-market, to which mortgage industry giants like Freddie Mac and Fanny Mae will be returned after being for a time, government sponsored foster children. While the damage had already been done, perhaps the government should have acted more quickly into the dealings of the aforementioned companies that held nearly half of the nation’s mortgages. This is a massive, massive strike against the unregulated free-market. Luckily, the government does not have a peregrine falcon for a pet; imagine what a bird that flies at about 200 miles per hour could get away with under their consenting eye. My proposal- the government should have a hand in the mortgage industry, with more regulations, perhaps not permitting as many banks to authorize loan amounts to homebuyers that the rest of the taxpayers cannot afford. If they more adequately regulate such business entitities, I will promise not to reference as many bird types in order to communicate government’s imperfections. But what can a Bush administration expect when a headline like “Bush to Relax Protected Species Rules” headline comes across my desk? The leading paragraph- “The Bush administration . . . plans to let federal agencies decide for themselves whether highways, dams, mines and other construction projects might harm endangered animals and plants.” Shockingly, “Developers welcomed the plan, while environmentalists derided it.” Next you will tell me that birds of prey love meals consisting of small rodents. A picture of an eagle, a species protected for the last 35 years by scientists, appears prior to the text of the article, and he looks pissed.
No treacle: Apparently George Will and my favorite conservative Echo Narcissists think that the more they whine about “it is what it is” economic conditions of the middle class the more they are serving the public good with tough love. The poison of this position is the attempt to manage the expectation of those who have worked hard enough to feel secure. The treacle/cure to this position is that plenty of those in the middle class, have earned the right to enjoy some of life's offerings (assuming they have not been charging televisions, furniture, vacations, and automobiles they cannot afford). We should not be relegated to the eating of Ramen noodles and stone soup or be forced to wait in line at Cub Foods for day old bread. We too have worked hard enough to enjoy the fruits of our labor- cable television, a monthly, reasonably-priced night out to Applebees, etc. Grammar policeman George Will and the Echo Narcissists might do better to stifle someone else, say the state department or the department of the treasury.
HOUSING MARKET
Below can be found a number of articles which concern the mortgage mess we finally discovered we were in in 2007 and of course some smart ass comments concerning the articles.
1) The source: “Needed Intervention in the Subprime Mess”; Star Tribune editorial, December 9, 2007.
The quotes and comments: The Bush administration plan was “for a five-year interest rate freeze on some adjustable-rate subprime loans, 2 million of which were set to adjust to levels as high as 11 percent . . . [this is] “an acknowledgement that the subrime problem had become so deep that regulators had to step in to avoid an even larger meltdown in the housing market”--say one that might cause the bailout of secondary mortgage market lending giants Fannie Mae and Freddie Mac, putting economic floaties on their arms until they can learn to responsibly grab billions of dollars from borrowers while we are the ones drowning and also taking over an insurance company like AIG- (See “AIG on the Line for Others’ Losses” Washington Post, September 17, 2008, Zachary A. Goldfarb and Binyamin Appelbaum- http://www.msnbc.msn.com/id/26752313.) AIG, in the article, has their hands in more cookie jars than some other Wall Street corporations failing just as severely. I would ask why a government that can tap phone lines, cannot regulate or spread more thinly, an industry’s investment opportunities (for such is the nature of the insurance industry, otherwise they wouldn’t take on such risky ventures as those described in the article) so that if one investment gusset plate falls the whole economic bridge can still remain serviceable. “ . . . the government is telling investors in U.S. mortgages—those who actually own the loans after the banks sold them as securities—that they’ll have to settle for less interest income. That’s no the kind of signal the markets like to receive.” Awww. I would like to follow with the comment that the government tells the taxpayer things all the time that we don’t like to hear, but they don’t. They tell us that “the fundamentals of the economy are strong,” (McCain) that they’ll only tax the rich (Obama), that we’ll all have jobs, that health insurance costs will not rise, that we’ll pull out of Iraq and that cheese doodles wrapped in spider webs have some nutritional value. What is worse, we believe that someone’s promise is a solemn oath not to disappoint. When a friend says that she’ll pick us up at 7:15, we expect them to show up reasonably close to that time and we feel let down if they cancel on us. Politicians let us down all the time and we keep voting for them and they are more responsible for our lifestyle than whether we make it to Baker’s Square for a slice of pie and some coffee. I may have used a similar analogy elsewhere, but since no one is reading what I write anyway, I figure I can go back to the dry well without anyone feel as if they have been cheated.
2) The source: “Recession Fears After Housing Bubble Burst”; Alec Klein and Zachary A. Goldfarb, Washington Post, June 17, 2008.
The quotes: “After years of giving out mortgages to millions of people with less-than-stellar credit histories, lenders were imploding as subprime borrowers defaulted on their loans. The contagion spread quickly to Wall Street, which had packaged those risky loans and sold the securities to big investors in the United States and around the world.” The whole of the story is how news of a crashing mortgage industry has affected various investors with the realities of market conditions.
Comments: You catch a break- none.
3) The source: “White House Plan Offers Little Foreclosure Relief”; John W. Schoen, MSNBC.com, March 31, 2008.
The quotes: “The White House has opposed measures that would ‘bail-out’ borrowers losing their home or the investors who bought securities backed by their mortgages.” You can bail out some of the borrowers some of the time and extricate most of the borrowers none of the time, but you can rescue some of the loaners most of the time.
Comments: ‘Tis true, the government is reportedly not bailing out all of the mortgage lenders to the rejoicing of taxpayers everywhere, but you are bailing out some of them, to the disgust of taxpayers everywhere. There is such a thing as an Oversight Committee at work somewhere within the corridors of Washington no? Perhaps we should sanction the expansion of their duties via a referendum. Yes, and methinks it was Polonius (from Shakespeare’s “Hamlet”) who saith:
"Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry."
Which, of course, I take to mean- that wives should not loan out their husbands to friends. So there you go.
(Note: in this article is also contained this information, common knowledge among people who have followed the demise of the investment and mortgage market much more closely than I have: “Since the financial markets began to come unwound last summer, the government’s primary response has come from the Federal Reserve. After a series of fairly tepid interest rate cuts failed to stem the turmoil, policy makers responded with increasing urgency, culminating in a $30 billion pledge to shore up Bear Sterns after a flight of investor capital pushed the firms to the brink of collapse.” I didn’t include the Federal Reserve in this post for nothing.)
4) The source: “Campaigns Have Deep Ties to Mortgage Giants”; Jonathan Weisman, Washington Post, July 16, 2008.
The quotes: “When Fannie Mae and Freddie Mac’s stock prices plunged and rumors of their insolvency swirled, the presidential campaigns of Sens. John McCain and Barack Obama released terse statements about the mortgage giants, then went nearly silent.” Shocking. I guess I could have saved that for the comments section. “ ‘. . . actually saying what has to happen next is a little bit scary if you’re in a campaign, especially if some of your most prominent supporters have such deep ties to these entitities” said a senior research fellow at what the article identifies as “the conservative Heritage Foundation.”
Comments: Anyone who thinks that Obama is some truth-wielding knight-errant who is poised to upset the political status quo and McCain is some former Maverick (ala Darth Vader) ready to realign with his cavalier past, has fewer synapses coursing through their brain than this statuette of Jiminy Cricket I have staring at me from my desk. Jiminy, symbol of conscience, nagging arthropod- quite a fellow- John McCain and Barack Obama- not so much. Some people can make others feel guilty for “wasting” their vote on an Independent; I have been unable to make some other people feel guilty enough for wasting it on either of this election’s “appealing” choices. Both men are too beholden to the major industry magnets that pay them. If the rich are paying them their salaries, (go look up total campaign contributions and the sources please) who in the world do you think their agenda setting will favor when they are in office? Jesus people! By that, I do not mean that they will favor Jesus. The question was rhetorical; the definitive use of the name of the son of god was meant to express frustration. To illustrate the point- “Fannie and Freddie [have spent] nearly $200 million in lobbying and campaign contributions over the past decade, according to lobbying reports and Federal Election Commission disclosures. It has also won them plenty of protection from calls for greater regulation, less federal protection and even nationalization . . . that protection may be ending, Washington economists say . . .” Don’t count on it.
5) The source: “Communities Suffer as Foreclosure Rate Rises”; John W. Schoen, MSNBC.com, June 24, 2008.
The quotes: “ . . . local governments are coping with shrinking tax rolls, lenders are saddled with more foreclosed homes than they can sell and empty homes in many neighborhoods are being vandalized. [In Florida says one resident] ‘lots of homes have been abandoned by their owners, and many people are going into bankruptcy . . . Whole condo projects sit half-finished and rotting in the Florida sun. On some streets almost half the homes are empty. Many people have lost 40-50 percent of the value of their home.’ ” The remainder of the long article catalogues the condition of nearby parks, the abandonment and damage to homes, sometimes by the former tenants, the lack of pride in ownership, plywood barricades preventing further damage, the silence in communities hit hard by the mortgage crisis. One Indiana woman writes: “ ‘Our local government is planning to demolish vacant homes [which will] cost the city more money, which in turn creates more tax burden for South Bend’s residents. It is a vicious cycle.’ ”
Comments: But calm down. Our next president and the next congress will fix all of that, because they said they would. They will appoint some magic fairy to resolve the economic issues of our day, feed us bon-bons and provide us with butt-pillows. I have included all of these articles about the mortgage crisis as an element of an economic factor that in fact does affect a large number of citizens generally and more specifically- middle-class citizens. FYI- try focusing on funding for your retirement when the stock market is as erratic as it has been and while you are attempting to sell a home that is bankrupting you. An economic analyst on CNN the other day indicated that inflation is at 5.4% and that income increases were inbetween 3-4%. His most valued measures were food, gas and housing. All is well however, because if I can look at this issue in a vacuum . . . there is little else in this country that is economically alarming. That would be sarcasm.
Which, of course, I take to mean- that wives should not loan out their husbands to friends. So there you go.
(Note: in this article is also contained this information, common knowledge among people who have followed the demise of the investment and mortgage market much more closely than I have: “Since the financial markets began to come unwound last summer, the government’s primary response has come from the Federal Reserve. After a series of fairly tepid interest rate cuts failed to stem the turmoil, policy makers responded with increasing urgency, culminating in a $30 billion pledge to shore up Bear Sterns after a flight of investor capital pushed the firms to the brink of collapse.” I didn’t include the Federal Reserve in this post for nothing.)
4) The source: “Campaigns Have Deep Ties to Mortgage Giants”; Jonathan Weisman, Washington Post, July 16, 2008.
The quotes: “When Fannie Mae and Freddie Mac’s stock prices plunged and rumors of their insolvency swirled, the presidential campaigns of Sens. John McCain and Barack Obama released terse statements about the mortgage giants, then went nearly silent.” Shocking. I guess I could have saved that for the comments section. “ ‘. . . actually saying what has to happen next is a little bit scary if you’re in a campaign, especially if some of your most prominent supporters have such deep ties to these entitities” said a senior research fellow at what the article identifies as “the conservative Heritage Foundation.”
Comments: Anyone who thinks that Obama is some truth-wielding knight-errant who is poised to upset the political status quo and McCain is some former Maverick (ala Darth Vader) ready to realign with his cavalier past, has fewer synapses coursing through their brain than this statuette of Jiminy Cricket I have staring at me from my desk. Jiminy, symbol of conscience, nagging arthropod- quite a fellow- John McCain and Barack Obama- not so much. Some people can make others feel guilty for “wasting” their vote on an Independent; I have been unable to make some other people feel guilty enough for wasting it on either of this election’s “appealing” choices. Both men are too beholden to the major industry magnets that pay them. If the rich are paying them their salaries, (go look up total campaign contributions and the sources please) who in the world do you think their agenda setting will favor when they are in office? Jesus people! By that, I do not mean that they will favor Jesus. The question was rhetorical; the definitive use of the name of the son of god was meant to express frustration. To illustrate the point- “Fannie and Freddie [have spent] nearly $200 million in lobbying and campaign contributions over the past decade, according to lobbying reports and Federal Election Commission disclosures. It has also won them plenty of protection from calls for greater regulation, less federal protection and even nationalization . . . that protection may be ending, Washington economists say . . .” Don’t count on it.
5) The source: “Communities Suffer as Foreclosure Rate Rises”; John W. Schoen, MSNBC.com, June 24, 2008.
The quotes: “ . . . local governments are coping with shrinking tax rolls, lenders are saddled with more foreclosed homes than they can sell and empty homes in many neighborhoods are being vandalized. [In Florida says one resident] ‘lots of homes have been abandoned by their owners, and many people are going into bankruptcy . . . Whole condo projects sit half-finished and rotting in the Florida sun. On some streets almost half the homes are empty. Many people have lost 40-50 percent of the value of their home.’ ” The remainder of the long article catalogues the condition of nearby parks, the abandonment and damage to homes, sometimes by the former tenants, the lack of pride in ownership, plywood barricades preventing further damage, the silence in communities hit hard by the mortgage crisis. One Indiana woman writes: “ ‘Our local government is planning to demolish vacant homes [which will] cost the city more money, which in turn creates more tax burden for South Bend’s residents. It is a vicious cycle.’ ”
Comments: But calm down. Our next president and the next congress will fix all of that, because they said they would. They will appoint some magic fairy to resolve the economic issues of our day, feed us bon-bons and provide us with butt-pillows. I have included all of these articles about the mortgage crisis as an element of an economic factor that in fact does affect a large number of citizens generally and more specifically- middle-class citizens. FYI- try focusing on funding for your retirement when the stock market is as erratic as it has been and while you are attempting to sell a home that is bankrupting you. An economic analyst on CNN the other day indicated that inflation is at 5.4% and that income increases were inbetween 3-4%. His most valued measures were food, gas and housing. All is well however, because if I can look at this issue in a vacuum . . . there is little else in this country that is economically alarming. That would be sarcasm.
FINANCIAL CRISIS?
Hurricane stock market: By the time I actually self-publish the contents of this book, the market could be back to normal. If someone could tell me what normal is, that might actually comfort me. I have been in a 401k retirement account for almost 12 years and it has not really been healthy in years, with the performance of investment vehicles having been stagnant for about 7 years. I do not like to panic. Sometimes the reason to panic is thrust upon you and only some annoyingly self-assured jackass would continue to tell you not to worry, as if they had consulted some kind of oracle that had guessed the future, or at least had a number of cardboard coasters to bridge the gap between a short table leg and the floor. “How to Clean up a Category 4 Financial Storm” Washington Post, September 18, 2008 written by Steven Pearlstein, briefly touches on the current global marketplace before summing up the financial panorama: “What we are witnessing may be the greatest destruction of financial wealth that the world has ever seen—paper losses measured in the trillions of dollars. Corporate wealth. Oil wealth. Real estate wealth. Bank wealth. Private-equity wealth. Hedge fund wealth. Pension Wealth. It’s a painful reminder that, when you strip away all the complexity and trappings from the magnificent new global infrastructure, finance is still a confidence game—and once the confidence goes, there’s no telling when the selling will stop.” I have little doubt that the Federal Reserve had to bail out the likes of AIG and the government sponsored enterprise FMs (Fannie Mae and Freddie Mac) among others, even to the taxpayer’s detriment. My disgust is centered around the very reasonable idea that there is no reason it had to get to that point. The same could be said for the “Saggy Pants Law” that a judge in Florida recently ruled unconstitutional. If young men would simply save some of the money they spent on Madden 2009, Halo or Guitar Hero and spend $12 on a belt, we wouldn’t have needed to hear yet another judge invoke the word “Unconstitutional” to defend some dumb-asses right to dress like a former prisoner.
Pearlstein writes: “Having pumped $100 billion in the banking system and lent $115 billion more to rescue Bear Stearns and AIG, the Federal Reserve was forced to ask the Treasury yesterday to borrow some extra money to replenish its coffers.” Who do you think the Treasury Department will ask for money?**** You still believe the Obama promise that middle-class taxes will not be raised? Is there any Kool-Aid left?
Risk and reward: All considered actions and words come down to one thing- the balance of risk versus reward. The financial industry is thought to have lived in that arena more than any person, entity, animal out looking for some drunken fun or caterpillar choosing which tree limb it should affix its cocoon to. The government was oblivious to the possibility of current market conditions? Really? Oblivious of this- some Wall Street banks “used their own ‘AAA’ credit ratings to borrow more money and keep the loans on their own balance sheets or those of ‘structured investment vehicles’ they created to hide these new liabilities from regulators and investors.” It is not good if investment corporations are more intelligent in the ways of subterfuge than your own government. I suspect they weren’t. The government, and the politicians that comprise it, have proven that when it occurs to them to be sneaky, they can be. It makes sense that corporations should balance their risk management along with their wealth management and be regulated in so doing; I think this and I barely know what I am talking about. I have to get new license tabs for my car, pay my homeowner’s insurance and buy a license to catch a fish. Regulate the damned financial industry! Regulate it! Regulate it! My son listens when I tell him to leave the injured dragonfly struggling to take flight or he gets dragged, sometimes kicking and screaming back into the house. The middle class taxpayers are constantly berated for their inability to manage their own finances, but the federal and state governments too often come nowhere near being able to manage theirs.
Spread too thin: It appears that those who got fat on the reward of securities purchasing, insurance holdings, sub-prime mortgage rates and other investments, even from the complete or partial acquisition of another industry giant, whose market prices were made more attractive by the government (i.e. Bear Stearns was acquired by J.P. Morgan) and the rewards to reap therein, were far too short-sighted concerning the risk of those endeavors--and the government allowed them to be; the financial industries were spread too thin, they had reached across too many investment aisles. Imagine that The Home Depot spent millions in advertising and start-up costs trying to sell roasted chicken or beer. If there is some crazy southern Home Depot that actually does this let me know and I’ll come up with another example. Am I to believe that a rabbit munching on some recently planted Asters has more fear of the revenge of the homeowner than a financial investment company or large bank has of the federal government? There are fourth-graders hitting on tom-boys in the shade of the giant slide at recess right now that recognize this dichotomy more than grown financial pimps whom the government enabled. There is risk that comes with reward. These financial corporations and our country should have learned that long before now and certainly now should be made to learn it, though it appears we can’t teach the financial giants a lesson without it affecting the economic midgets. It is to be hoped that when they are all back on their feet again, paying their CEOs $24 million for leaving their company that there was a contractual obligation pencilled into the contract to pay back the little man that funded their failure.
Too big to fail I: I keep reading about all of these bail-out packages, which I see as loans paid to an industry that the country cannot afford to have fail. How about a law that makes it Unconstitutional for a financial industry giant that is too big to fail be considered not too rich to pay back its debts. A bee with conjunctivitis acts more responsibly by pollinating a dandelion than some of the vultures who continue to hold onto their investment capital courtesy of the government. (Note- dandelions are reproduced without pollination and by most sensible people in North America- are considered weeds. Treasury Secretary Henry Paulson must be one busy guy, but a bit less busy if he doesn’t set up a loan amortization schedule; he doesn’t even need to charge them interest on the loan; see, our expectations are so low that we don't even expect you to play by your own rules.)
Too big to fail II: See Edward Lotterman’s St. Paul Pioneer Press, September 18, 2008, Business Section (C) column explores the fascinating world of identifying the conditions that would prevent large commercial banks or other financial institutions from failing. I had identified above, two of the three conditions he indicates prior to having read his article and the other is so obvious I am surprised I missed it. This does not mean that his word is law, but that it doesn’t take a genius to have considered a safeguard, especially since there have been a number of collapses in our history and in European history where the governments were not as educated on the symptoms of failure- meaning those responsible for the current iteration of financial industry failure had some precedents to consider. Lotterman’s list of three things to avoid in the future- 1) “prudent regulation by the Fed and Securities and Exchange Commission [to] reduce risk-taking and overleveraging” (had that one); 2) “government should not deliberately foster the growth of large institutions” (had that one too); 3) “let enough firms fail that the rest at least worry they might not be rescued.” (missed that one). I am disgusted with myself.
Conclusion and blame: I am not suggesting that the current administration is to blame for the present market conditions, because the current crisis, as many economists may tell you, originated in the too economically confident days of the Clinton administration and quite probably prior to that. I am also not suggesting that any and all of those admittedly rather liberal sources I quote from above are completely correct in their assessments of the economic situation as it stands. Though, I would mention that I was unable to detect a partisan quality in any of the articles- I would expect a backlash from liberals if the only guy I quoted was the helmet-headed, near relation to Cha-ka from “The Land of the Lost” Sean Hannity. What I am suggesting is that the politicians that run our government have avoided placing any restrictions on the financial market constituents that line their candidate’s pockets with campaign finance dollars. This, to me, is more obvious than the benefit of a robin having genetically inherited a world-class gag reflex for the purpose of feeding its young. Continuing to favor extremely minimal regulations could lead many more to adopt the lifestyle of those people who live in tent cities for reasons other than that they are in the expected path of an aquatic natural disaster/hurricane. I could, could, make an analogy between the gag reflex of a robin and our having to swallow the bailouts that will cost us billions.
Weak Constitution I: Anyone continuing to deify the Constitution’s ambiguous intent, particularly originating from the first amendment, for the right to donate so much money to the candidate of their choice who, it is only natural, can be expected to respond in kind with a returned favor that jeopardizes the freedoms of hundreds of thousands of others, can no longer hide behind the very Constitution that he thinks protects him. That approach sounds awfully like hypocrisy to me. Look at Amendments I and X in the Bill of Rights, the only two that could be construed as justifying the selfish, unqualified “rights” of individual choice- namely the giving of billions to fund a candidacy. The first amendment is comprised of a list of five rights—they are: freedom of religion, speech, press, assembly and the petition for a redress of grievances. I see nowhere in that sentence anything about the right to give sickening amounts of money to a cliché who will put it to no good purpose, forsaking some of the people who most need his assistance. The tenth Amendment is comprised of the most vague string of words in the entire Constitution: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Somehow that equates to—“here Mr. Obama take my $10 million and consider it a contribution in kind to be spent on your candidacy and in no way do I expect you to reciprocate with a veto of House Bill 10 which allows me to taser calves while I am giving them a flexible arm interest rate on a stall in a barn I plan on setting on fire.” Constitutional advocacy, when brandished under these auspices makes me sick; the greater justice is to protect the liberties of the many from being sacrificed by the wants of the few.*****
Weak constitution II: I do not find it a fit argument to say that all freedoms of this most selfish kind, that of essentially buying a politician’s vote, are protected under the direction of the Constitution just as a Flintstone vitamin does not protect my daughter from contracting the croup. Again, I am using deductive reasoning to figure on the probability of there being a 1-to-1 relationship between the money given to a candidate and his eventual repayment in the form of a favorable vote on the issue of the donor’s choosing. Barry Bonds is alleged to have taken steroids, and I believe he undoubtedly did so. Some, cognizant of what steroids might do for a player’s performance have minimized the effects on his overall production. My question would continue to be, why feel so compelled to take them if the results are so inconclusive? I am to believe, that billionaires with so much to lose, would gift millions in donations to someone from whom nothing is expected in return? Not even the collective intelligence of the dwindling pollinating bee commonwealth is buying that and it is fall, when they have far fewer flowers to visit and more time to pontificate on such rueful complicit bastards.
Keep in mind: Two things- 1) the original Constitution contained provisions allowing slavery to continue for the next twenty years- a much greater violation of individual freedoms than today’s dross of conservatives and liberals whining about campaign finance regulations that aren’t even as effective as they should be; and 2) a document that goes by the name of The Declaration of Independence, which predates the Constitution, in wide appeal, by 11 years includes this text: “In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.” The substitution of just a couple of words in that paragraph could make it applicable to our current predicament. Take out “Prince” and put in "oligarchical American government." And follow up the notion that we have formally “repeated Petitions” with “passive-aggressively petitioned” and the paragraph is completely appropriate considering the present condition of the citizens of the country. Is there an author among us who might suitably, deliberately and successfully write our government's representitives for the economic amelioration of the middle class, so that they cannot deny us that for which we have formally requested?
Short-selling your individual liberty: From the article- “SEC Imposes Emergency Ban on Short-Selling” from the Associated Press, September 19, 2008, (http://www.msnbc.msn.com/id/26785712/) I learned that short-selling is the practice of “borrowing a company’s shares, selling them, and pocketing the difference when the stock fails.” Those borrowing shares are hoping that the company’s stock fails. That is how they make money. There is even a practice in the investment industry call “naked short-selling” which has nothing to do with pre-conditions of deciding whether to get naked with a member of the opposite sex, based on your expectations of how attractive they are without any clothes on. One question for those Constitutional law folks who think that the individual freedom to do anything you want, while restricting others from realizing their liberties . . . wouldn’t the ban on short-selling be a ban on one's individual liberty? It was ordered as a measure to protect the delicacy of the stock market. Conservatives, and certain liberals for that matter, who also favor deregulation, must think they are novice magicians; they distract our attention from the area where a surprise is forthcoming, and when our gaze is set back upon that spot, nothing of substance is revealed. Again, republican lenders as well as democratic ones are to blame. The problem is not party, but is rather money related. We will be no better off under Obama than under McCain. I plan to make my vote matter by not voting for either the guy who admits the economy is not his strong suit, nor the guy who criticizes that man with no workable solution of his own. Lucky for us, the financial industry is the only economic area this country has to focus on . . . (riiiiiiight- see next time).
Too big to fail II: See Edward Lotterman’s St. Paul Pioneer Press, September 18, 2008, Business Section (C) column explores the fascinating world of identifying the conditions that would prevent large commercial banks or other financial institutions from failing. I had identified above, two of the three conditions he indicates prior to having read his article and the other is so obvious I am surprised I missed it. This does not mean that his word is law, but that it doesn’t take a genius to have considered a safeguard, especially since there have been a number of collapses in our history and in European history where the governments were not as educated on the symptoms of failure- meaning those responsible for the current iteration of financial industry failure had some precedents to consider. Lotterman’s list of three things to avoid in the future- 1) “prudent regulation by the Fed and Securities and Exchange Commission [to] reduce risk-taking and overleveraging” (had that one); 2) “government should not deliberately foster the growth of large institutions” (had that one too); 3) “let enough firms fail that the rest at least worry they might not be rescued.” (missed that one). I am disgusted with myself.
Conclusion and blame: I am not suggesting that the current administration is to blame for the present market conditions, because the current crisis, as many economists may tell you, originated in the too economically confident days of the Clinton administration and quite probably prior to that. I am also not suggesting that any and all of those admittedly rather liberal sources I quote from above are completely correct in their assessments of the economic situation as it stands. Though, I would mention that I was unable to detect a partisan quality in any of the articles- I would expect a backlash from liberals if the only guy I quoted was the helmet-headed, near relation to Cha-ka from “The Land of the Lost” Sean Hannity. What I am suggesting is that the politicians that run our government have avoided placing any restrictions on the financial market constituents that line their candidate’s pockets with campaign finance dollars. This, to me, is more obvious than the benefit of a robin having genetically inherited a world-class gag reflex for the purpose of feeding its young. Continuing to favor extremely minimal regulations could lead many more to adopt the lifestyle of those people who live in tent cities for reasons other than that they are in the expected path of an aquatic natural disaster/hurricane. I could, could, make an analogy between the gag reflex of a robin and our having to swallow the bailouts that will cost us billions.
Weak Constitution I: Anyone continuing to deify the Constitution’s ambiguous intent, particularly originating from the first amendment, for the right to donate so much money to the candidate of their choice who, it is only natural, can be expected to respond in kind with a returned favor that jeopardizes the freedoms of hundreds of thousands of others, can no longer hide behind the very Constitution that he thinks protects him. That approach sounds awfully like hypocrisy to me. Look at Amendments I and X in the Bill of Rights, the only two that could be construed as justifying the selfish, unqualified “rights” of individual choice- namely the giving of billions to fund a candidacy. The first amendment is comprised of a list of five rights—they are: freedom of religion, speech, press, assembly and the petition for a redress of grievances. I see nowhere in that sentence anything about the right to give sickening amounts of money to a cliché who will put it to no good purpose, forsaking some of the people who most need his assistance. The tenth Amendment is comprised of the most vague string of words in the entire Constitution: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Somehow that equates to—“here Mr. Obama take my $10 million and consider it a contribution in kind to be spent on your candidacy and in no way do I expect you to reciprocate with a veto of House Bill 10 which allows me to taser calves while I am giving them a flexible arm interest rate on a stall in a barn I plan on setting on fire.” Constitutional advocacy, when brandished under these auspices makes me sick; the greater justice is to protect the liberties of the many from being sacrificed by the wants of the few.*****
Weak constitution II: I do not find it a fit argument to say that all freedoms of this most selfish kind, that of essentially buying a politician’s vote, are protected under the direction of the Constitution just as a Flintstone vitamin does not protect my daughter from contracting the croup. Again, I am using deductive reasoning to figure on the probability of there being a 1-to-1 relationship between the money given to a candidate and his eventual repayment in the form of a favorable vote on the issue of the donor’s choosing. Barry Bonds is alleged to have taken steroids, and I believe he undoubtedly did so. Some, cognizant of what steroids might do for a player’s performance have minimized the effects on his overall production. My question would continue to be, why feel so compelled to take them if the results are so inconclusive? I am to believe, that billionaires with so much to lose, would gift millions in donations to someone from whom nothing is expected in return? Not even the collective intelligence of the dwindling pollinating bee commonwealth is buying that and it is fall, when they have far fewer flowers to visit and more time to pontificate on such rueful complicit bastards.
Keep in mind: Two things- 1) the original Constitution contained provisions allowing slavery to continue for the next twenty years- a much greater violation of individual freedoms than today’s dross of conservatives and liberals whining about campaign finance regulations that aren’t even as effective as they should be; and 2) a document that goes by the name of The Declaration of Independence, which predates the Constitution, in wide appeal, by 11 years includes this text: “In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.” The substitution of just a couple of words in that paragraph could make it applicable to our current predicament. Take out “Prince” and put in "oligarchical American government." And follow up the notion that we have formally “repeated Petitions” with “passive-aggressively petitioned” and the paragraph is completely appropriate considering the present condition of the citizens of the country. Is there an author among us who might suitably, deliberately and successfully write our government's representitives for the economic amelioration of the middle class, so that they cannot deny us that for which we have formally requested?
Short-selling your individual liberty: From the article- “SEC Imposes Emergency Ban on Short-Selling” from the Associated Press, September 19, 2008, (http://www.msnbc.msn.com/id/26785712/) I learned that short-selling is the practice of “borrowing a company’s shares, selling them, and pocketing the difference when the stock fails.” Those borrowing shares are hoping that the company’s stock fails. That is how they make money. There is even a practice in the investment industry call “naked short-selling” which has nothing to do with pre-conditions of deciding whether to get naked with a member of the opposite sex, based on your expectations of how attractive they are without any clothes on. One question for those Constitutional law folks who think that the individual freedom to do anything you want, while restricting others from realizing their liberties . . . wouldn’t the ban on short-selling be a ban on one's individual liberty? It was ordered as a measure to protect the delicacy of the stock market. Conservatives, and certain liberals for that matter, who also favor deregulation, must think they are novice magicians; they distract our attention from the area where a surprise is forthcoming, and when our gaze is set back upon that spot, nothing of substance is revealed. Again, republican lenders as well as democratic ones are to blame. The problem is not party, but is rather money related. We will be no better off under Obama than under McCain. I plan to make my vote matter by not voting for either the guy who admits the economy is not his strong suit, nor the guy who criticizes that man with no workable solution of his own. Lucky for us, the financial industry is the only economic area this country has to focus on . . . (riiiiiiight- see next time).
CEO salaries: I wrote back in part 11 (October of 2007) that it was obvious that the excessive CEO salaries were one factor that was to the detriment of the middle class because it took money away from those who on a daily basis, it could be argued, are at least as responsible for a company's success as is a CEO and less to blame when it fails.
PS: A local conservative Echo Narcissist (Jason Lewis of 100.3 KTLK) actually maintains that the entire demise of entities like Freddie Mac and Fanny Mae, and thus the whole economic crisis, is the fault of the democrat. They, according to Lewis, are the party that encouraged the aforementioned companies to write more junk loans and to take on more mortgage debt and have been the party that has exclusively benefited. He feels that the whole mortgage debacle is not a free-market failure and is not a failure of rampant unchecked capitalism. Sir, if you are that incapable of approaching any aspect of the truth, perhaps you should help write for a soap opera, where your style of melodrama could really be appreciated. Apparently, no republican ever gained an ethically questionable monetary break considering the lack of regulations in the free market. People, the terms "capitalism" and "free market regulations" are not mutually exclusive. In order for our country to truly regain its economic health, which means that not just the rich should come out of this unscathed, proving that should be job one.
Reaction time and state fair rides: Considering that we've heard rumblings of severe distress coming from the financial industry, (for at least a year) perhaps we should expect our federal government economic experts to have a reaction time which at least matches that of a fake plant. This would still make it more progressive and prospective than Bill Gates' beloved and still iconic PC. The Apple/MAC ad campaign has been running for about two years and Gates finally must have realized they were eating into his monopolization of the computer sales industry. Using Seinfeld was a great move and I don't see anything wrong with that. One other concern is the reported interest of plenty of congressional whiners to pass a bailout bill which still leaves an uncapped amount of money available to CEOs, whether that is if they remain or depart from the bailed out entity, I couldn't speak to. If the proposition precluding exorbitant CEO salaries does not make it into the bill, I will feel even worse than I felt at discount state fair ride day. This day for kids, reduced rides that should already have been two tickets from four tickets to three tickets. Confused? I was too when I found that they charged the adults the same number of tickets to ride on a ride only a mannequin would find enjoyable for a duration of time that only a virgin having relations with himself in an outhouse at that fair could appreciate.
See, the state fair rides are just like the proposed bailout of billion dollar corporations. We "get" to ride along with someone enjoying the experience far more than we are (our kids on the one hand and billionaires on the other)- that is, if you consider the aspect of the proposed bill that would relieve bankrupt mortgagees of some of their debt off the bargaining table, afterwards we feel cheap and used, it costs us much more than you'd think, and all too often, the kids/billionaires liked the ride so much they want to go on it again.
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* Consider the Fanny Mae and Freddie Mac situation- “Not only are they too big to fail. They are almost too big to rescue. They hold or guarantee some $5.2 trillion of the nation’s $12 trillion of mortgages, backed by the thinnest wafer of capital, meaning their collapse would imperil the already paralysed American housing market. Yet as Joshua Rosner, an analyst at Graham Fisher, a research firm, points out, nationalising them, a stark choice for the government since their shares tumbled last week, would ‘result in a doubling of the federal deficit, a further collapse of the dollar and unthinkable implications for the Treasury’s cost of funding in the debt markets.’ ” See theeconomist.com- July 14, 2008, http://www.economist.com/finance/displaystory.cfm?story_id=11735141.
** Even the price and sales of Spam have gone up recently- “There's no sign of a slowdown. Food inflation is running at an annualized rate of 6.1 percent as of April [2008], according to the Bureau of Labor Statistics. The price of Spam is up too, with the average 12-ounce can costing about $2.62. That's an increase of 17 cents, or nearly 7 percent, from the same time last year. But it's not stopping sales, as the pork meat in a can seems like a good alternative to consumers . . . Spam sales were up 10.6 percent in the 12-week period ending May 3, compared with last year. In the last 24 weeks, sales were up nearly 9 percent.” (Courtesy of- Associated Press, May 28, 2008- “Sales of Spam rise as consumers trim spending”- http://www.msnbc.msn.com/id/24861341/.) Spam is canned meat . . . meat in a can . . . and it is becoming popular again because of the rising prices of a necessary cost- food. The last time Spam was this huge was when it fed the Allied troops during WWII. Ok, the article doesn’t precisely refer to that being peak Spam popularity. At this rate, this meat in a can may ration us through this particular economic downturn from a sustenance perspective. The rising popularity of canned meat in 2008 . . .; what’s next, the rising cost of a vacation in a jar? The economy is even hitting the birds hard. A friend mentioned she is paying nearly $18 for a bag of seed these days, up almost $8 from last year.
Also, food prices/groceries are up 5% overall since the spring of 2007 (courtesy Star Tribune opinion article which appeared on April 26, 2008, by Allen Levine). As Levine writes, considering we spend 10% of our income on groceries, that 5% increase on last year’s $100 a week, cost us $105 a week in 2008. That is $260 increase for the year. If I received a 3% raise, and gas, food, property taxes, diapers, child care, college tuition and health care all went up 5%, my pay raise would actually amount to a pay cut. See, http://www.startribune.com/templates/Print_This_Story?sid=18184719. Not convinced? Would you like another source? Ok, see the July 7/14th (2008) Newsweek inset on page 57 revealing that milk and bread were up 15%, and eggs up 26% since a comparable period in 2007. Rice, corn, orange juice , apples, chicken and ground beef are also up more than the average person is going to NET from their pay “raise.”
*** It is important to keep in mind that many congressional democrats supported the Bush administration’s interest in going to war with Iraq, despite what many liberals might contend; similarly, it is preposterous to lay all of the blame on democrats for the reality of big government. Thinking this would require one to prove that only democrats ask for earmarks in state or federal legislative bills and that only democrats benefit from taxes collected from the working people who have earned their money. Conservatives—good luck with that.
**** That’s right- “President George W. Bush, flanked by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, acknowledged that the program will put a ‘significant amount of taxpayer’s money on the line.’ ” Paulson contributed: “ ‘As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford.’ ” (See- “Government Plans Bold Financial Rescue” Associated Press, September 19, 2008- http://www.msnbc.msn.com/id/26787984/. Paulson has only been the treasury secretary since 2006 so he could have had no foreknowledge of the market conditions that have brought about these necessary bail outs. Not quite so; he was “President and Chief Executive Officer of Goldman Sachs, one of the world’s largest and most successful investment banks.” (see Wikipedia). He is a true industry insider whose soul was purchased in a leverage buyout by his greed gene. If the idea of regulatory measures to check the greed of the rich ever crossed his mind, they were soon put to death. He is estimated to be worth more than $700 million; any chance he would put middle class interests above those he has served for more than 34 years. He worked for former president Richard Nixon underling John Ehrlichman for two years—do the words conviction of conspiracy, obstruction of justice and perjury mean anything to you. Enough said.
***** Here, I may have been influenced by Star Trek II- The Wrath of Khan- hey, at least I admitted it so that I might embrace my shame.
