Good morning Coffee Drinkers. I am most pleased to present to you the first ever Morning Coffee guest writer, the Logician. I've been trying to get guest writers for a long time now (yes, this is a guilt trip), but the MC doesn't pay, nor is it as prestigious as even the National Enquirer, although our journalistic integrity far exceeds that rag. Anyway, the Logician is a longtime reader and and has frequently commented on various posts. Since he has a mind for such issues, I asked him to write, in layman's terms, a bit about the economic issues that our country faces. So, please, enjoy what he hath Brewed for thee.
[Publisher's Comment: I'm not sure how the naming conventions for guest writers should work, having never had one, so mayhap this format will change.]
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Good morn to you good folk of the world, you who rise with dread when the sun rises, long week after long week, with a wish for the fragrant comforts of the percolator. Heartiest salutations to you all, and contempt and curses to the rest of you! And a hex on Pyrrhic verse, and all those who force the practice on suffering young. Read on, grow wise.
Leaving behind failed poetic greetings, let me launch into the topic of the day. The current economic crisis, with increasing foreclosures, failed banks, toppled securities firms, lost investments, and a staggering economy present an ugly picture. Many are objecting to helping incompetent and failing big businesses, as witnessed by the massive public rejection of a bailout.
The Morning Coffee's reader has no doubt heard the rhetoric: regulators failed, greed caused it, the market was overpriced, predatory lenders preyed on unsavvy customers, irrational panic in the stock market, tax cuts for the wealthy, greedy investors, people overspent. There's truth to many of these charges. There's lots of blame to go around, and varying degrees of culpability. Some have intentionally gouged customers, some have been willfully negligent, others stupid, most foolishly optimistic. It's a big problem with many sides to it. Hopefully the following survey of the landscape will present a clearer picture. I hope to explain the start of the problem here. The second stage of the problem will be in a subsequent essay.
The easiest problem to understand is that people are losing homes. Who's responsible? Ultimately, the customer accepted the mortgage. In most cases, sixth grade math should have told them they wouldn't be able to pay in the long run. Mental laziness, lack of wherewithal, indifference toward personal honor and responsibility provided the stimulus to enter into a loan that the borrower could not sustain over the long haul. Mortgage brokers and lenders acted as enablers by making it easy for people to get these loans. The scale of the problem inflated when pushy real estate agents withheld business from appraisers if they failed to inflate the value of the property sufficiently.
The other side of this problem is that lenders are losing money. In many cases this threatens their ability to survive and to continue lending us the money we need for our day-to-day needs and desires. The more that banks and thrifts go under, the harder it gets to receive a loan. Under current conditions, no one wants to give a loan to anyone but those with the highest credit ratings. It's becoming more common for lenders to insist on 30% of a loan as a down payment. As noted above, lenders were frequently responsible for their own downfall because of their shortsighted focus. By failing to require a sufficient down payment, failing to verify the borrower's financial claims, and failing to even crosscheck their own records and do a proper risk assessment, they set themselves up for a big fall. Why would anyone set themselves up this way? Greed and lack of personal loyalty to their institution played a big role, from the bottom up. The mortgage officer was glad to push through a crappy mortgage; if he didn't, there was no commission. The president of the company could point to increased sales and project ballooning revenues for the next year. One needn't be concerned with the fact that these mortgages are 30 year mortgages I suppose, so long as the killer yearly bonuses keep coming.
Lenders' negligence doesn't explain all their losses. Organized criminal gangs (white collar, usually) gouged billions of dollars from lenders and stole houses outright from the owners. These types of fraud are very cost intensive to uncover in many cases. To prevent these, the level of scrutiny for loan applicants would need to increase dramatically. This measure would delay loan approvals significantly, and require substantial additional costs passed onto the borrower. Lenders have typically made business decisions that help them define an acceptable level of risk. (No one – I emphasize this point - has made a serious attempt to quantify how much fraud is involved in this mess. Nor do federal agencies appear inclined to tackle that project. It would make many agencies, fairly or not, appear grossly negligent. Even if the criticism is unjustified, it would be a brutal rhetorical blow to many. On a political note, John McCain is the only political figure that has ever pushed for a systematic investigation on the extent of mortgage fraud. Specifically, he intends to create a "9-11 Commission style" body to investigate various aspects of the mortgage crisis, including the degree of damage caused by mortgage fraud.)
Another variable causing losses for lenders is that borrowers simply stop paying. If a borrower has a $250,000 loan on a house that devalues – as in many current markets – to say, $125,000, many borrowers decide that it's foolish to keep paying and simply stop doing so. The lender may recover some of the lost money, but they can only get $125,000 from the house, minus processing fees. It might not be worth while going after the assets of a welcher who probably lives from paycheck to paycheck anyhow. People from all classes of society have done the calculations, chucked personal responsibility out the window and walked away from the mortgages.
The lending institution fails because it took out BIG loans to allow it to make the "small" loans. Now they have to pay principal on those same big loans but don't have money coming in from the small loans. The lender also gets money from the sale of business securities. But investors see the problems in the mortgages and pull their money out. Now they lender doesn't have this money either.
That's the first part of the problem. The indirect affect on the rest of the economy is the bigger issue, but this will require a follow-up essay.
30 September 2008
20 September 2008
Morning Coffee (130)
Greetings, Glorious Quaffers of the Coffee (five). So much to discuss, yet so little time. I've been meaning to do this all week. I wish my work day started at noon so I could Brew some Coffee prior to having to go to work, but alas, that is not the case. Our little meetings might be relegated to weekend business only. Consider this: I wrote the next paragraph 13 days ago...I really need to finish this...
The Palin Problem:
McCain's selection of Alaska Governor Sarah Palin has most Conservatives salivating. They love her, and her selection has wrought havoc on the self-identity of Liberals. They don't know how to react. It's actually turned them into schizophrenic maniacs. Liberals have been turned on their heads: she must be a terrible mother to her kids because she's a successful woman. Have you ever thought you'd hear a liberal say that? Liberals have attacked Palin's family, saying they're immoral for having a 17 year old daughter who engages in pre-marital sex. That's something you'd expect from Conservatives, yet they've actually been quite calm about that business. Actually, come to think of it, neither side seems to know what to think about her selection. Conservatives/Republicans completely bought into her after one measly speech at the Republican National Convention, and Liberals/Democrats hate her for the very reasons they would normally appreciate her. (I was saying it before anyone else...but I have no proof because I'm lazy and didn't finish writing this...)
McCain's selection of Alaska Governor Sarah Palin has most Conservatives salivating. They love her, and her selection has wrought havoc on the self-identity of Liberals. They don't know how to react. It's actually turned them into schizophrenic maniacs. Liberals have been turned on their heads: she must be a terrible mother to her kids because she's a successful woman. Have you ever thought you'd hear a liberal say that? Liberals have attacked Palin's family, saying they're immoral for having a 17 year old daughter who engages in pre-marital sex. That's something you'd expect from Conservatives, yet they've actually been quite calm about that business. Actually, come to think of it, neither side seems to know what to think about her selection. Conservatives/Republicans completely bought into her after one measly speech at the Republican National Convention, and Liberals/Democrats hate her for the very reasons they would normally appreciate her. (I was saying it before anyone else...but I have no proof because I'm lazy and didn't finish writing this...)
My main problem with Sarah Palin, around which all other problems revolve like self-immolating satellites, is that the woman has been on the scene for a nano-second, and so many rational-minded people have become quite enamored with her. They fell in love with her the way so many Democrats fell in love with Obama: after one speech at a party's national convention. McCain may or may not have adequately vetted her, but much of the voting public (Republicans) seemed to have no interest whatsoever in doing so. Some say that the "high" she's brought to the McCain campaign will subside, and if that's the case, I can only hope that people will look at her with a critical eye. Not in an adversarial nature, not spitefully, but critically. Because anyone who is so close to the Office of the President should be critically and thoroughly examined.
Thus far, I do not think Sarah Palin is right for the job, though I could be swayed given evidence of her competence beyond the pithy anecdotes provided by Palin's high school classmates, who pull double duty as members of her governorship. In the last week or so, I've read a great deal about her. I've read the nasty bits written by leftist blogs, and I've read the fan-boy literature written by rightists. I've read the stuff written by those with a more tempered tongue. I still don't like her as VP. I think her being picked was an excellent political move by McCain, which I alluded to during our last meeting, for a number of interesting reasons which have been covered by those with the aforementioned tempered tongues, but I do not think she's right for the job. Let me put it to you this way: Were I to think McCain has what it takes to be President, I'm not thrilled with the idea that if he were incapacitated, Sarah Palin would be running our nation. That doesn't mean I think Obama the better candidate. Quite the contrary; Obama is to me as bad a candidate for the job as Sarah Palin.
We've all heard arguments about whether Palin has enough experience for the job, and the McCain campaign initially asserted that she has plenty of foreign policy experience. After all, she's the governor of Alaska, which if you had a map handy, you would know is right next to Russia. And, golly gee, she's the commander-in-chief of the Alaska National Guard. Of course, Maj Gen Craig Campbell of the Alaska National Guard reminds us that her "commander-in-chief" title means little in terms of her contribution to national security. Oh, and part of the missile defense network resides in Alaska, which implies that mere proximity to national security related infrastructure bestows upon residents and administrators alike a mythical expertise in national security issues. Bollocks.
Thankfully, such flimsy arguments are being abandoned. Instead there's talk of Calvin Coolidge, Theodore Roosevelt, and Harry Truman. See, those guys didn't have a lot of experience when they were tapped as VP candidates either, so by default, Palin must be an alright pick. This brand of thinking makes no sense to me. Ignoring all else, to suggest that because three times in the past 220 years (although all in the 20th century) poorly experience people have been picked as running mates and it turned out alright, then picking poorly experienced running mate must be okay, is absurd. It's sort of like saying that it's okay to drive drunk because you've done it a few times and you didn't crash or get pulled over.
But you cannot ignore all else. Coolidge had 25 years of elected office experience, first in city offices, then serving in his state's legislature. Which was prior to becoming the lieutenant governor, which was prior to him being elected as governor of Massachusetts, which happened to be two years before being asked to be Warren Harding's running mate. That last fact is the only tidbit ever mentioned, because further examination of Coolidge's history puts Palin to shame. Once Harding was elected, he was the first President to invite his VP to Cabinet meetings, which turned out to be fortuitous as Coolidge finished off Harding's term and served one of his own (and turned down a second nomination).
What about Theodore Roosevelt, the youngest President in history? He surely must be more inexperienced than Palin, as he is also mentioned by Palin supporters as having a light resume. I'm not sure how this argument would hold even superficially. Roosevelt was a rare breed. In 1882, at the age of 24, he wrote The Naval War of 1812, for which he did his own research and was widely acclaimed. He later wrote the four-volumned, forward-thinking, The Winning of the West between 1889 and 1896. He was a deputy sheriff in North Dakota. He became president of the board of New York City Police Commissioners in 1895, and made major changes to the police force. Roosevelt was appointed Assistant Secretary of the Navy in 1897, but was the de facto Secretary of the Navy as John Long was mostly inactive. At the outbreak of war with Spain in 1898, Roosevelt formed the "Rough Riders," the First US Volunteer Cavalry Regiment, which he commanded as a Colonel in battle in Cuba. He was nominated for a Medal of Honor for his actions there, and posthumously received it in 2001, becoming the only President to have earned the nation's highest medal. He was elected as governor of New York in 1899. He was then tapped as McKinley's running mate and served as Vice-President until McKinley died, and then served out McKinley's term and one of his own. By no account is Sarah Palin comparable to Theodore Roosevelt.
What about Theodore Roosevelt, the youngest President in history? He surely must be more inexperienced than Palin, as he is also mentioned by Palin supporters as having a light resume. I'm not sure how this argument would hold even superficially. Roosevelt was a rare breed. In 1882, at the age of 24, he wrote The Naval War of 1812, for which he did his own research and was widely acclaimed. He later wrote the four-volumned, forward-thinking, The Winning of the West between 1889 and 1896. He was a deputy sheriff in North Dakota. He became president of the board of New York City Police Commissioners in 1895, and made major changes to the police force. Roosevelt was appointed Assistant Secretary of the Navy in 1897, but was the de facto Secretary of the Navy as John Long was mostly inactive. At the outbreak of war with Spain in 1898, Roosevelt formed the "Rough Riders," the First US Volunteer Cavalry Regiment, which he commanded as a Colonel in battle in Cuba. He was nominated for a Medal of Honor for his actions there, and posthumously received it in 2001, becoming the only President to have earned the nation's highest medal. He was elected as governor of New York in 1899. He was then tapped as McKinley's running mate and served as Vice-President until McKinley died, and then served out McKinley's term and one of his own. By no account is Sarah Palin comparable to Theodore Roosevelt.
Harry Truman is another President with whom Palin is compared, since Franklin D Roosevelt kept Truman completely out of the loop. The idea being that Truman was grossly unprepared to take over the Presidency, but did a great job once the position was thrust upon him. Oh, and Roosevelt didn't really know Truman when he was selected, just like McCain doesn't really know Palin. Thus, Palin is as good fo a pick as Truman was (never mind that Roosevelt didn't really want Truman as his running mate). But the issue really is one of irresponsibility: Roosevelt was irresponsible in keeping Truman from knowing anything relating to the war effort, and America was lucky that Truman was up to the task. I would argue that McCain is similarly irresponsible in selecting someone so inexperienced. Of course, Truman had, you know, 20 plus years of experience as an government employee at various levels.
The comparison of Sarah Palin to any of these people is simply absurd. She is, to my knowledge, the most quantitatively and qualitatively inexperienced person to ever be selected as a vice presidential candidate. Take, for instance, this fact: every VP candidate since Spiro Agnew has met with foreign leaders prior to being selected as a running mate. Palin is the first to have never met with a foreign leader during the performance of official duties. Yet we're told that Palin has foreign policy experience simply because her state is next to the most desolate, least populous portion of Russia?
Her impact on the campaign is clear; she's revitalized an ambivalent base, and that is, I suppose, the REAL reason she was selected. Again, masterstroke by the McCain campaign for this reason. If McCain were to die in office, Sarah Palin may or may not do a great job. But despite how likable she may be (and that's the heart of politics), her lack of experience (and numerous other things) gives me severe reservations.
It may turn out that the woman is simply too polarizing and that too much of the McCain campaign's time will be spent deflecting criticism and accusations, and McCain will suffer because of it. A survey of the Brian Ross and Investigative Team's website on 17 September shows 24 stories for Palin, 2 for McCain, 1 for Biden, and none for Obama. Most of the stories had to do with some sort of accusation, be it email, book banning, etc. But I think the McCain campaign has done a pretty good job at deflecting at least one accusation. Remember the "Sarah the Book Banner" story that ran a bit ago? Well, my opinion is that anyone who even thinks about asking a librarian what it takes to ban books is not fit to run our country, and I've seen nothing that indicates that she didn't at least look into it, whatever her end-state intentions may have been. In any event, shortly after that story broke, an alleged list of the books she sought to be banned appeared in the news. Turns out the list was completely falsified, but liberal bloggers jumped all over it and propagated the list all over. My assessment is that this list was generated by someone in McCain's campaign or at the least, a right wing supporter. Why you ask? Well, they knew that it would be a hot-button issue for liberals, and that they'd latch onto it without even really thinking about it. Once it was revealed that the list was wrong, it looked like libelous, hate-mongering by the leftist blogging community and this totally eviscerated the story. So, now we have someone who may or may not have wanted to ban or censor books, but we might not ever know the truth because the validity of the premise has been killed. Score one for some right winger outt there. Hell, the librarian now cannot even remember specifics of the conversation she had with Palin...
On a sub-topic to the Palin issue, you may have heard that she and her administration weighed the merits of using Yahoo! mail in leiu of an official mail account to conduct official business. This way, it would be impossible for someone to subpoena her email. Which is really what transparency is all about, folks. Avoiding the possibility that your government can be scrutinized. Outstanding.
This may all seem like a lot of hate-mongering by the Morning Coffee. Some may fear that I've teetered into the realm of "semi-rag;" mouth-piece of the left. You might think I dislike Sarah Palin. I'm sure that's what most conservatives would think were they to stumble onto my blog. I assure you, this is not the case. I do not dislike Sarah Palin, though I disagree with some of her policies and the way she ran her administration. My take is simple. I try to avoid taking (political) ideological sides or bitterly defending one candidate over another. My goal is to be the adversary of any of them, all of them, who are not behaving; who are trying to pull the wool over our eyes; who are endangering our nation. That's my only goal. Let me be clear: I do not want Sarah Palin as the Vice President of the United States, but that doesn't mean for a second that I want Barack Obama to be the President. Neither of them are qualified. If the masses will take a step back from their emotions, they might see this too.
Word of the Day: Misprize (transitive verb): 1. To hold in contempt; 2. To undervalue.
On This Day in History: The Battle of Chalons, in modern day France, took place on this day in 451 CE. During this battle, Magister militum Flavius Aetius and the Roman allies defeat Atilla the Hun and his allies in what was probably the largest battle in the ancient world and the last major military operation for the Western Roman Empire. This was also likely the first battle to pit a mostly Christian force against a mostly non-Christian force since the death of Constantine I in 337 CE. In 1187, Saladin begins his seige of Jerusalem. Ferdinand Magellen begins his attempt to circumnavigate the globe in 1519. The Walking Purchase, between the Penns and the Lenape tribe of Native Americans, takes place in 1737. The Lenape tribe agreed to sell to the Penns an area from the junction of the Delaware and Lehigh Rivers to as far west as a man could walk in a day and a half, believing it to be approximately 40 miles. The Penns hired three of the fasted runners in the colonies, and Edward Marshall finished the trip, covering a distance of 70 miles, which netted for the Penns 1.2 million acres (roughly the size of Rhode Island). Needless to say, the Lenape believed they were swindled, and tried, unsuccessfully, to nullify the agreement for 19 years. Long gone was William Penn's desire to deal with native tribes fairly, after all, he was dead. Not much else to report...
"Anyone who has the power to make you believe absurdities has the power to make you commit injustices." - Voltaire
Her impact on the campaign is clear; she's revitalized an ambivalent base, and that is, I suppose, the REAL reason she was selected. Again, masterstroke by the McCain campaign for this reason. If McCain were to die in office, Sarah Palin may or may not do a great job. But despite how likable she may be (and that's the heart of politics), her lack of experience (and numerous other things) gives me severe reservations.
It may turn out that the woman is simply too polarizing and that too much of the McCain campaign's time will be spent deflecting criticism and accusations, and McCain will suffer because of it. A survey of the Brian Ross and Investigative Team's website on 17 September shows 24 stories for Palin, 2 for McCain, 1 for Biden, and none for Obama. Most of the stories had to do with some sort of accusation, be it email, book banning, etc. But I think the McCain campaign has done a pretty good job at deflecting at least one accusation. Remember the "Sarah the Book Banner" story that ran a bit ago? Well, my opinion is that anyone who even thinks about asking a librarian what it takes to ban books is not fit to run our country, and I've seen nothing that indicates that she didn't at least look into it, whatever her end-state intentions may have been. In any event, shortly after that story broke, an alleged list of the books she sought to be banned appeared in the news. Turns out the list was completely falsified, but liberal bloggers jumped all over it and propagated the list all over. My assessment is that this list was generated by someone in McCain's campaign or at the least, a right wing supporter. Why you ask? Well, they knew that it would be a hot-button issue for liberals, and that they'd latch onto it without even really thinking about it. Once it was revealed that the list was wrong, it looked like libelous, hate-mongering by the leftist blogging community and this totally eviscerated the story. So, now we have someone who may or may not have wanted to ban or censor books, but we might not ever know the truth because the validity of the premise has been killed. Score one for some right winger outt there. Hell, the librarian now cannot even remember specifics of the conversation she had with Palin...
On a sub-topic to the Palin issue, you may have heard that she and her administration weighed the merits of using Yahoo! mail in leiu of an official mail account to conduct official business. This way, it would be impossible for someone to subpoena her email. Which is really what transparency is all about, folks. Avoiding the possibility that your government can be scrutinized. Outstanding.
This may all seem like a lot of hate-mongering by the Morning Coffee. Some may fear that I've teetered into the realm of "semi-rag;" mouth-piece of the left. You might think I dislike Sarah Palin. I'm sure that's what most conservatives would think were they to stumble onto my blog. I assure you, this is not the case. I do not dislike Sarah Palin, though I disagree with some of her policies and the way she ran her administration. My take is simple. I try to avoid taking (political) ideological sides or bitterly defending one candidate over another. My goal is to be the adversary of any of them, all of them, who are not behaving; who are trying to pull the wool over our eyes; who are endangering our nation. That's my only goal. Let me be clear: I do not want Sarah Palin as the Vice President of the United States, but that doesn't mean for a second that I want Barack Obama to be the President. Neither of them are qualified. If the masses will take a step back from their emotions, they might see this too.
Word of the Day: Misprize (transitive verb): 1. To hold in contempt; 2. To undervalue.
On This Day in History: The Battle of Chalons, in modern day France, took place on this day in 451 CE. During this battle, Magister militum Flavius Aetius and the Roman allies defeat Atilla the Hun and his allies in what was probably the largest battle in the ancient world and the last major military operation for the Western Roman Empire. This was also likely the first battle to pit a mostly Christian force against a mostly non-Christian force since the death of Constantine I in 337 CE. In 1187, Saladin begins his seige of Jerusalem. Ferdinand Magellen begins his attempt to circumnavigate the globe in 1519. The Walking Purchase, between the Penns and the Lenape tribe of Native Americans, takes place in 1737. The Lenape tribe agreed to sell to the Penns an area from the junction of the Delaware and Lehigh Rivers to as far west as a man could walk in a day and a half, believing it to be approximately 40 miles. The Penns hired three of the fasted runners in the colonies, and Edward Marshall finished the trip, covering a distance of 70 miles, which netted for the Penns 1.2 million acres (roughly the size of Rhode Island). Needless to say, the Lenape believed they were swindled, and tried, unsuccessfully, to nullify the agreement for 19 years. Long gone was William Penn's desire to deal with native tribes fairly, after all, he was dead. Not much else to report...
"Anyone who has the power to make you believe absurdities has the power to make you commit injustices." - Voltaire
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