12/30/07
A commercial that has been playing frequently on the radio of late is illustrative, as much advertising is, of where our country and national character is headed—straight into the toilet.
This particular annoying ad, for a drug company, features a man saying that he has “acid reflux.” His wife corrects him, telling he has “acid reflux (something or other) DISEASE.” Then the two of them yammer on about a particular drug’s copay’s being no higher than those of generics or other name brand drugs under their insurance plan.
I’m no doctor, and I make it a point to see one as rarely as possible. However, I am aware that what is now called “acid reflux” was for years called “heartburn.” It was not a DISEASE, as the shrewish wife featured on the commercial insists, but a minor inconvenience treated by, in increasing degrees of intensity, ignoring it until it went away, watching one’s diet, or taking Pepto-Bismol, Bromo-Seltzer, or, my favorite, Brisochi.
Why did we treat our heartburn with over the counter remedies, if we treated it at all, rather than calling our heartburn a “disease” and treating it with expensive drugs? I can think of several reasons. First, we had good sense. Second, we weren’t in the habit of being led around by the nose by advertising. Third, we didn’t have prepaid health plans that are laughingly called health “insurance.” But things have changed. Now, like the couple in the baleful radio commercial, we cower in fear at imagined “diseases” and whine like children at the mere prospect of having to interrupt our lascivious spending on trendy piffles in order to actually pay for some of our health care out of our own pocket.
This all serves the interests of the big government/big business cabal that has increasingly taken over our culture and our nation, turning the former into an open sewer and striving mightily, with much success, to turn national character into jelly. The drug companies obviously do very well selling us expensive drugs for which someone else pays. The insurance companies expand their business from traditional “insurance” into being a prepayer, at a big markup, for every necessity of life. The corporations in general think this is fine because they have a hook, health “insurance,” that keeps people in their jobs as corporate automatons rather than starting troublesome competing small businesses. And the citizenry becomes nice and pliable, begging “Please, don’t take my health ‘insurance’ away from me, or force me to make some of my own decisions. And whatever you do, don’t make me endure the unutterable sacrifice of not buying that latest bauble from China in order to actually meet some of my own responsibilities without passing them off to ‘someone else.’”
One can learn a lot from an inane commercial.
Sunday, December 30, 2007
ANOTHER ANNOYING AD
12/30/07
During the holidays, Visa or MasterCard (I can’t remember which; one might attribute my inability to recall to the ineffectiveness of the ad, but, given my failure to notice things, that probably is not the case.) incessantly ran an ad in which legions of young faux-prosperous people proceed, as if directed by some sort of guiding power, to various “cash” registers and present their form of payment, the ubiquitous piece of plastic that has, since it has found its way into many of the wrong hands, helped transform our society into the addle-brained consumption giant that it is. In the ad, some miscreant interrupts the process by actually paying in (Are you sitting down?) cash! Oh, the temerity! The whole process winds down; everyone frowns or otherwise expresses their disapproval of the rube who pays cash. What a fool!
When my brother-in-law, who has an attitude toward saving and spending that is much like mine, first pointed this ad, and how much he hated the message it delivers, out to me, I had a hard time sharing his outrage. Why? Because, initially, the ad was for a debit card, and stressed that it was for a debit card. I have no problem with debit cards (I also have no problems with credit cards as long as a balance is NEVER carried, but that is another issue.); using a debit card is far preferable to holding up a long line by writing a check in a busy store. Whenever this happens, I feel like telling the check writer “This is why they invented debit cards!”, but, like most people, I don’t. Perhaps there is a new year’s resolution here. But I digress.
The commercial then, some might say subtly, but not really, changed. The ad was no longer for a debit card, but for a MasterCARD or a Visa CARD. The “debit” was somehow dropped. So now I share my brother-in-law’s outrage, but not his surprise. The message of the newly debit-less ad is now clear: If you pay cash, you’re a chump. Put it on the card (Borrow from the Chinese, they may as well say, but I digress again, at least this time parenthetically.), get what you want, don’t even think of saving for it. Buy it now…pay, or, more likely, refinance your credit card balance, later. Delay gratification? Why do you hate America? Spend, spend, spend! Even, perhaps especially, when you can’t afford what you’re buying. Why, it’s the new America’s role in the world!
Great insight can be gained from a specious commercial.
During the holidays, Visa or MasterCard (I can’t remember which; one might attribute my inability to recall to the ineffectiveness of the ad, but, given my failure to notice things, that probably is not the case.) incessantly ran an ad in which legions of young faux-prosperous people proceed, as if directed by some sort of guiding power, to various “cash” registers and present their form of payment, the ubiquitous piece of plastic that has, since it has found its way into many of the wrong hands, helped transform our society into the addle-brained consumption giant that it is. In the ad, some miscreant interrupts the process by actually paying in (Are you sitting down?) cash! Oh, the temerity! The whole process winds down; everyone frowns or otherwise expresses their disapproval of the rube who pays cash. What a fool!
When my brother-in-law, who has an attitude toward saving and spending that is much like mine, first pointed this ad, and how much he hated the message it delivers, out to me, I had a hard time sharing his outrage. Why? Because, initially, the ad was for a debit card, and stressed that it was for a debit card. I have no problem with debit cards (I also have no problems with credit cards as long as a balance is NEVER carried, but that is another issue.); using a debit card is far preferable to holding up a long line by writing a check in a busy store. Whenever this happens, I feel like telling the check writer “This is why they invented debit cards!”, but, like most people, I don’t. Perhaps there is a new year’s resolution here. But I digress.
The commercial then, some might say subtly, but not really, changed. The ad was no longer for a debit card, but for a MasterCARD or a Visa CARD. The “debit” was somehow dropped. So now I share my brother-in-law’s outrage, but not his surprise. The message of the newly debit-less ad is now clear: If you pay cash, you’re a chump. Put it on the card (Borrow from the Chinese, they may as well say, but I digress again, at least this time parenthetically.), get what you want, don’t even think of saving for it. Buy it now…pay, or, more likely, refinance your credit card balance, later. Delay gratification? Why do you hate America? Spend, spend, spend! Even, perhaps especially, when you can’t afford what you’re buying. Why, it’s the new America’s role in the world!
Great insight can be gained from a specious commercial.
Saturday, December 29, 2007
TIDINGS OF COMFORT AND JOY
12/29/07
The Quinns spent the night of Christmas Eve in a Hyatt hotel. We normally wouldn’t stay at such a swanky place, but we got a great deal and the local Hampton Inn doesn’t have a pool. As is our Christmas morning tradition, we took a swim with the kids. In order to leave the pool, we had to walk through an adjoining workout facility.
I noticed a small sign in the workout facility telling fitness aficionados that Garmin Forerunner navigational devices were available at the front desk for guests who wished to take a run around the neighborhood. Hmm…
Here we were in a Hyatt, the type of place frequented by upscale, Wall Street types. That Hyatt was offering a navigational device to their guests who spent time in the fitness facility and who liked it run, a place and an activity also favored by young Wall Street wunderkinds. The first thought that came to my mind was that the Wall Street geniuses who revolutionized the mortgage market by carefully calibrating and controlling the risks of every tranche in the CDOs they created could not find their way back to their hotel (the most prominent building within long eyeshot, by the way) when jogging without the aid of a navigational device.
This “mortgage crisis” could turn out to be worse than even I thought!
The Quinns spent the night of Christmas Eve in a Hyatt hotel. We normally wouldn’t stay at such a swanky place, but we got a great deal and the local Hampton Inn doesn’t have a pool. As is our Christmas morning tradition, we took a swim with the kids. In order to leave the pool, we had to walk through an adjoining workout facility.
I noticed a small sign in the workout facility telling fitness aficionados that Garmin Forerunner navigational devices were available at the front desk for guests who wished to take a run around the neighborhood. Hmm…
Here we were in a Hyatt, the type of place frequented by upscale, Wall Street types. That Hyatt was offering a navigational device to their guests who spent time in the fitness facility and who liked it run, a place and an activity also favored by young Wall Street wunderkinds. The first thought that came to my mind was that the Wall Street geniuses who revolutionized the mortgage market by carefully calibrating and controlling the risks of every tranche in the CDOs they created could not find their way back to their hotel (the most prominent building within long eyeshot, by the way) when jogging without the aid of a navigational device.
This “mortgage crisis” could turn out to be worse than even I thought!
Friday, December 21, 2007
KEEP ON DANCIN’
12/21/07
The Commerce Department reported this morning that consumer spending was up 1.1% in November, much more than expected, while consumer income was up 0.4%, a little less than expected. The market loved this news; at this writing, the Dow is up over 200 points.
One can make nothing out of either one statistic (or a conjoined pair of statistics) or one day’s trading, but this news, and the markets’ seeming reaction to it, provides an opportunity to consider broader issues.
What is described as the sub-prime problem (or the sub-prime “crisis” by those who lack the senses of proportion, decorum, or perspective) is, as I have pointed out for a long time, just part of a larger debt problem that has at its root the self-destructive American pastime of spending more than one can afford, indeed, more than one makes or has. So why is news that we continue to spend more than we make (Note that spending exceeded income by a factor of almost three.) such good news?
The “experts” (i.e., the same people who told us this “mortgage blip” was well under control, really not a problem at all; they had talked to the guys at the big Street firms about this, you know) tell us that this spending news will enable us to avoid recession, at least for awhile. Oh, boy!
November’s spending binge reminds one of one last gasp before the party comes to an end. It’s as if a couple guys went out at 2:00 AM with the last few bucks everyone could scrape together and bought a couple cases of Meister Brau to keep things going long after everyone should have gone home. The consequences are at best predictable and at worst fatal.
So party away, everyone…people continue to spend beyond their means! Hey, and Bernanke will show up in the morning with plenty of Bromo-Seltzer, Pepto-Bismol, vitamins and other placeboes that we really think can make us feel better.
And the hole gets deeper and deeper.
The Commerce Department reported this morning that consumer spending was up 1.1% in November, much more than expected, while consumer income was up 0.4%, a little less than expected. The market loved this news; at this writing, the Dow is up over 200 points.
One can make nothing out of either one statistic (or a conjoined pair of statistics) or one day’s trading, but this news, and the markets’ seeming reaction to it, provides an opportunity to consider broader issues.
What is described as the sub-prime problem (or the sub-prime “crisis” by those who lack the senses of proportion, decorum, or perspective) is, as I have pointed out for a long time, just part of a larger debt problem that has at its root the self-destructive American pastime of spending more than one can afford, indeed, more than one makes or has. So why is news that we continue to spend more than we make (Note that spending exceeded income by a factor of almost three.) such good news?
The “experts” (i.e., the same people who told us this “mortgage blip” was well under control, really not a problem at all; they had talked to the guys at the big Street firms about this, you know) tell us that this spending news will enable us to avoid recession, at least for awhile. Oh, boy!
November’s spending binge reminds one of one last gasp before the party comes to an end. It’s as if a couple guys went out at 2:00 AM with the last few bucks everyone could scrape together and bought a couple cases of Meister Brau to keep things going long after everyone should have gone home. The consequences are at best predictable and at worst fatal.
So party away, everyone…people continue to spend beyond their means! Hey, and Bernanke will show up in the morning with plenty of Bromo-Seltzer, Pepto-Bismol, vitamins and other placeboes that we really think can make us feel better.
And the hole gets deeper and deeper.
Thursday, December 20, 2007
THE FRENCH ARE MAKING US LOOK LIKE SLACKERS!!!
12/20/07
Yesterday, ECB President Jean-Claude Trichet dismissed calls for rate cuts in Euroland, stating “We have to do our job, and our job is to deliver price stability.” At least one central bank president has a clear sense of what he was hired to do.
Meanwhile, back in this country, Obsequious Ben has rolled out stimulus plan after stimulus plan, testifying to his willingness, indeed his eagerness, to fan the fires of inflation and tank the dollar in order to get into the good graces of Wall Street. When none of those schemes worked, earlier in the week he trotted out some half-hindquartered regulatory regimen designed to make it more difficult to make sub-prime loans. This action is, of course, completely extraneous: how many people are out there right now hustling sub-prime loans? The market has at least begun to address this problem. But this latest regulatory abomination does serve Obsequious Ben’s purposes well: it shows that he is “doing something” for his pals on Wall Street while having little impact on whatever designs the financial finaglers might have on the sub-prime market.
Obsequious Ben’s latest actions also serve another purpose: Any of you who harbored the ingenuous notion that we have a free market Fed Chairman ought to be completely disabused of such an idea by now.
While the President must be born in the United States, the Constitution says nothing about the birthplace of the Fed chairman. The Constitution also says nothing about the Fed—how about that? But that is another conversation. We as a nation have also shown a tremendous acuity for importing great talent, whether in engineering, finance, entertainment, medicine, or athletics. Do you suppose we could somehow lure a diligent Frenchman over here to run our central bank?
Yesterday, ECB President Jean-Claude Trichet dismissed calls for rate cuts in Euroland, stating “We have to do our job, and our job is to deliver price stability.” At least one central bank president has a clear sense of what he was hired to do.
Meanwhile, back in this country, Obsequious Ben has rolled out stimulus plan after stimulus plan, testifying to his willingness, indeed his eagerness, to fan the fires of inflation and tank the dollar in order to get into the good graces of Wall Street. When none of those schemes worked, earlier in the week he trotted out some half-hindquartered regulatory regimen designed to make it more difficult to make sub-prime loans. This action is, of course, completely extraneous: how many people are out there right now hustling sub-prime loans? The market has at least begun to address this problem. But this latest regulatory abomination does serve Obsequious Ben’s purposes well: it shows that he is “doing something” for his pals on Wall Street while having little impact on whatever designs the financial finaglers might have on the sub-prime market.
Obsequious Ben’s latest actions also serve another purpose: Any of you who harbored the ingenuous notion that we have a free market Fed Chairman ought to be completely disabused of such an idea by now.
While the President must be born in the United States, the Constitution says nothing about the birthplace of the Fed chairman. The Constitution also says nothing about the Fed—how about that? But that is another conversation. We as a nation have also shown a tremendous acuity for importing great talent, whether in engineering, finance, entertainment, medicine, or athletics. Do you suppose we could somehow lure a diligent Frenchman over here to run our central bank?
Sunday, December 16, 2007
MAYBE IT WASN’T SUCH A BAD BET AFTER ALL
12/16/07
I sent the following letter to Steve Chapman of the Chicago Tribune in response to his 12/16/07 column on various Democratic schemes to bail lenders out of mortgage loans they can no longer afford. As I have said in the past, Steve is, in my opinion, one of the best, if not the best, political/economic columnist in the country today. Not only does he share my libertarian outlook, he also writes effectively, argues cogently, and defies predictability:
Steve Chapman
Chicago Tribune
435 N. Michigan Avenue
Chicago, IL 60611
schapman@tribune.com
12/16/07
Steve,
You argue in your 12/16/07 column that the Democrats are “having a rollicking good time…doing noble deeds with other people’s money” by cooking ups schemes to fleece the lenders in order to bail out irresponsible lenders. Your description of the situation is deficient only in that it fails to capture the entire scope and audacity of this latest effort by politicians to use other people’s money in order to aid a favored constituency or to be perceived as “doing something.”
The Center for American Progress, a liberal think tank, has proposed creating a new government agency, the Family Foreclosure Rescue Corp., that would buy mortgage backed securities and issue new fixed rate loans for those facing foreclosure. The American Enterprise Institute, a supposedly “free market” think tank, has proposed a rehash of the Home Owners’ Loan Corp. of the 30s, a government agency that bought mortgages and refinanced them on easier terms for borrowers. On Friday, the Senate passed by a vote of 93-1 legislation increasing the amount of loans the FHA can insure to $417,000 from $362,790 so that taxpayers will now be put on the hook for insuring that the comfortably middle class can stay in homes the vast majority of Americans could not dream of affording. The Democratic candidates are proposing that the FHA guarantee loans extended to refinance people who will be unable to make their payments once they adjust to reflect the (contractually stipulated) higher interest rate after the teaser period. Republicans are proposing expanding the conforming limit for loans purchased by Fannie Mae and Freddie Mac beyond $417,000 to at least $600,000. No sense, I guess, letting the free market principles for which the GOP says it stands get in the way of using other people’s money to help out its wealthy constituency.
All these plans have in common putting the taxpayers on the hook to save those who bought more house than they could afford, or who used their homes as piggybanks to finance the purchase of things they couldn’t afford, and to bail out the foolish investors who lent to them.
One can very plausibly argue that the borrowers are at fault here; they simply borrowed more than they could repay and/or bet the wrong way on the real estate market. One can also plausibly argue that the investors are at fault; they bought paper that was riskier than they supposed and were paid far too little for the risk they assumed, relying on now clearly faulty assumptions and risk mitigation schemes promulgated by Wall Street wunderkinds who thought a surfeit of numbers and formulae could compensate for a woeful lack of investment experience and common sense. One can somewhat less plausibly argue that those who originated the loans are at fault because they duped borrowers into loans they couldn’t afford. But as the old saying goes, you only fall for lies and stories when you really want to. In order for one to blame the originator, one has to adhere to the new American motto “It’s not my fault,” to the idea that no one should ever be held responsible for his decisions, unless they turn out wells for him.
No one can plausibly argue, however, that the taxpayers, or at least the financially responsible taxpayers, are somehow at fault for the current mortgage mess. Yet all of the above plans, embraced by politicians across the political spectrum seek to use to coercive power of government to force the financially responsible to bail out the financially irresponsible and fiscally reckless.
As you point out, “a lot of people took a calculated gamble on interest rates and home prices” and lost. That is bad news. But it would be truly tragic if a lot of people instead took a calculated gamble that government would be there to bail them out of their financial idiocy and won.
I sent the following letter to Steve Chapman of the Chicago Tribune in response to his 12/16/07 column on various Democratic schemes to bail lenders out of mortgage loans they can no longer afford. As I have said in the past, Steve is, in my opinion, one of the best, if not the best, political/economic columnist in the country today. Not only does he share my libertarian outlook, he also writes effectively, argues cogently, and defies predictability:
Steve Chapman
Chicago Tribune
435 N. Michigan Avenue
Chicago, IL 60611
schapman@tribune.com
12/16/07
Steve,
You argue in your 12/16/07 column that the Democrats are “having a rollicking good time…doing noble deeds with other people’s money” by cooking ups schemes to fleece the lenders in order to bail out irresponsible lenders. Your description of the situation is deficient only in that it fails to capture the entire scope and audacity of this latest effort by politicians to use other people’s money in order to aid a favored constituency or to be perceived as “doing something.”
The Center for American Progress, a liberal think tank, has proposed creating a new government agency, the Family Foreclosure Rescue Corp., that would buy mortgage backed securities and issue new fixed rate loans for those facing foreclosure. The American Enterprise Institute, a supposedly “free market” think tank, has proposed a rehash of the Home Owners’ Loan Corp. of the 30s, a government agency that bought mortgages and refinanced them on easier terms for borrowers. On Friday, the Senate passed by a vote of 93-1 legislation increasing the amount of loans the FHA can insure to $417,000 from $362,790 so that taxpayers will now be put on the hook for insuring that the comfortably middle class can stay in homes the vast majority of Americans could not dream of affording. The Democratic candidates are proposing that the FHA guarantee loans extended to refinance people who will be unable to make their payments once they adjust to reflect the (contractually stipulated) higher interest rate after the teaser period. Republicans are proposing expanding the conforming limit for loans purchased by Fannie Mae and Freddie Mac beyond $417,000 to at least $600,000. No sense, I guess, letting the free market principles for which the GOP says it stands get in the way of using other people’s money to help out its wealthy constituency.
All these plans have in common putting the taxpayers on the hook to save those who bought more house than they could afford, or who used their homes as piggybanks to finance the purchase of things they couldn’t afford, and to bail out the foolish investors who lent to them.
One can very plausibly argue that the borrowers are at fault here; they simply borrowed more than they could repay and/or bet the wrong way on the real estate market. One can also plausibly argue that the investors are at fault; they bought paper that was riskier than they supposed and were paid far too little for the risk they assumed, relying on now clearly faulty assumptions and risk mitigation schemes promulgated by Wall Street wunderkinds who thought a surfeit of numbers and formulae could compensate for a woeful lack of investment experience and common sense. One can somewhat less plausibly argue that those who originated the loans are at fault because they duped borrowers into loans they couldn’t afford. But as the old saying goes, you only fall for lies and stories when you really want to. In order for one to blame the originator, one has to adhere to the new American motto “It’s not my fault,” to the idea that no one should ever be held responsible for his decisions, unless they turn out wells for him.
No one can plausibly argue, however, that the taxpayers, or at least the financially responsible taxpayers, are somehow at fault for the current mortgage mess. Yet all of the above plans, embraced by politicians across the political spectrum seek to use to coercive power of government to force the financially responsible to bail out the financially irresponsible and fiscally reckless.
As you point out, “a lot of people took a calculated gamble on interest rates and home prices” and lost. That is bad news. But it would be truly tragic if a lot of people instead took a calculated gamble that government would be there to bail them out of their financial idiocy and won.
Saturday, December 15, 2007
“SHINE YOUR SHOES, MR. STREET?”
12/15/07
Now that Ben Bernanke’s Rube Goldberg funds auction, liquidity facility scheme failed to provide sufficient succor to the free marketeer tough guys on Wall Street, look for Obsequious Ben to come up with another hasty, ill-conceived, and ultimately ill-fated scheme to attempt to get back into the good graces of the Wall Street self-styled swashbucklers.
Inflation? Who cares? It’s only energy, and that only matters to average people, not the types of people with whom Ben seeks to ingratiate himself. The dollar? Hell, foreigners still take it, so what does Obsequious Ben care? The boys on Wall Street are unhappy with Ben, and he can’t live with that disapproval. Like the sycophantic servant boy who lives to please his master, Ben Bernanke simply cannot tolerate even the slightest hint of unhappiness from Wall Street.
Incidentally, there was an outstanding piece on the Opinion page (in this case, A21) of Friday’s (i.e., 12/14’s) Wall Street Journal concerning the relative flaccidity of the Fed, any Fed, in the face of the current worldwide financial problems. The article “The Global Money Machine,” by David Roche is well worth reading. Mr. Roche’s analysis of the situation is especially cogent, and his last paragraph, the point of which is obvious to those of us with a clear view of the world but that will come as a shock to the “See No Evil” crowd, comfortable in the assumption that “a strong overseas economy will see us through,” is especially chilling. (See the 10/30/07 entry in the Insightful Pontificator. “THE STREET VS. THE VOLCANO.”)
Now that Ben Bernanke’s Rube Goldberg funds auction, liquidity facility scheme failed to provide sufficient succor to the free marketeer tough guys on Wall Street, look for Obsequious Ben to come up with another hasty, ill-conceived, and ultimately ill-fated scheme to attempt to get back into the good graces of the Wall Street self-styled swashbucklers.
Inflation? Who cares? It’s only energy, and that only matters to average people, not the types of people with whom Ben seeks to ingratiate himself. The dollar? Hell, foreigners still take it, so what does Obsequious Ben care? The boys on Wall Street are unhappy with Ben, and he can’t live with that disapproval. Like the sycophantic servant boy who lives to please his master, Ben Bernanke simply cannot tolerate even the slightest hint of unhappiness from Wall Street.
Incidentally, there was an outstanding piece on the Opinion page (in this case, A21) of Friday’s (i.e., 12/14’s) Wall Street Journal concerning the relative flaccidity of the Fed, any Fed, in the face of the current worldwide financial problems. The article “The Global Money Machine,” by David Roche is well worth reading. Mr. Roche’s analysis of the situation is especially cogent, and his last paragraph, the point of which is obvious to those of us with a clear view of the world but that will come as a shock to the “See No Evil” crowd, comfortable in the assumption that “a strong overseas economy will see us through,” is especially chilling. (See the 10/30/07 entry in the Insightful Pontificator. “THE STREET VS. THE VOLCANO.”)
Wednesday, December 12, 2007
GOD IS NOT OMNIPOTENT
GOD IS NOT OMNIPOTENT
12/12/07
As regular readers of the Insightful Pontificator know, I am a big fan of Sun-Times columnist Neil Steinberg. While we disagree on many issues, we share a generally cynical (many would say dark, I would say realistic) view of life and, if I can say so myself, an entertaining and effective writing style.
One of the larger points on which Neil and I disagree is religion. While I am a practicing and rather serious Catholic (though, unfortunately, at times my faith has a hard time penetrating my often hard and cynical veneer), Neil leans toward agnosticism, though recently I have detected some search for his childhood faith, or at least the traditions of that faith, in his columns. That is a very hopeful sign.
In today’s column, however, Neil’s agnosticism was highlighted when he wrote of the Colorado church shootings and related them to his concepts of a Malevolent, Insecure, or Bumbling God.
Here is the reply I sent to Neil:
Neil Steinberg
Chicago Sun-Times
nsteinberg@suntimes.com
12/12/07
Neil,
God couldn’t have arrived in time to prevent those horrible shootings in Colorado. God, unfortunately, has to work through people, and people have the option of saying “No” to God, which they do on an all too regular basis. This is the concept of free will that permeates Roman Catholic, and much other Christian and non-Christian, theology.
Your concepts of the Malevolent God, the Insecure God, or the Bumbling God, while advanced tongue-in-cheek, are not necessary to explain at least some of the world’s suffering. The concept of the non-omnipotent God is far more effective. God is not, as many suppose, omnipotent because He is forced to work through people who have the power to refuse Him. Certainly, God did not will those shootings; it was the shooter who defied God’s will that we all love each other as brothers and sisters in Him. The shooter said no to God and massive suffering resulted.
Explaining the suffering wrought by others, such as the Colorado shootings, is made easier once one accepts the concept of free will, though this concept does little or nothing to lessen the pain. (One might question God’s granting us free will, but then one must ask himself if he would rather God had made him an automaton. The answer should be self-evident.) What is far harder to explain is suffering brought on by natural tragedies, disease, etc. Believers eventually learn that all things cannot be explained, but must be accepted until we are imbued with greater knowledge when we do meet with our Creator face to face. Such a concept is understandably harder for non-believers to accept.
Thanks, Neil.
12/12/07
As regular readers of the Insightful Pontificator know, I am a big fan of Sun-Times columnist Neil Steinberg. While we disagree on many issues, we share a generally cynical (many would say dark, I would say realistic) view of life and, if I can say so myself, an entertaining and effective writing style.
One of the larger points on which Neil and I disagree is religion. While I am a practicing and rather serious Catholic (though, unfortunately, at times my faith has a hard time penetrating my often hard and cynical veneer), Neil leans toward agnosticism, though recently I have detected some search for his childhood faith, or at least the traditions of that faith, in his columns. That is a very hopeful sign.
In today’s column, however, Neil’s agnosticism was highlighted when he wrote of the Colorado church shootings and related them to his concepts of a Malevolent, Insecure, or Bumbling God.
Here is the reply I sent to Neil:
Neil Steinberg
Chicago Sun-Times
nsteinberg@suntimes.com
12/12/07
Neil,
God couldn’t have arrived in time to prevent those horrible shootings in Colorado. God, unfortunately, has to work through people, and people have the option of saying “No” to God, which they do on an all too regular basis. This is the concept of free will that permeates Roman Catholic, and much other Christian and non-Christian, theology.
Your concepts of the Malevolent God, the Insecure God, or the Bumbling God, while advanced tongue-in-cheek, are not necessary to explain at least some of the world’s suffering. The concept of the non-omnipotent God is far more effective. God is not, as many suppose, omnipotent because He is forced to work through people who have the power to refuse Him. Certainly, God did not will those shootings; it was the shooter who defied God’s will that we all love each other as brothers and sisters in Him. The shooter said no to God and massive suffering resulted.
Explaining the suffering wrought by others, such as the Colorado shootings, is made easier once one accepts the concept of free will, though this concept does little or nothing to lessen the pain. (One might question God’s granting us free will, but then one must ask himself if he would rather God had made him an automaton. The answer should be self-evident.) What is far harder to explain is suffering brought on by natural tragedies, disease, etc. Believers eventually learn that all things cannot be explained, but must be accepted until we are imbued with greater knowledge when we do meet with our Creator face to face. Such a concept is understandably harder for non-believers to accept.
Thanks, Neil.
“NOW, NOW, KIDS…DADDY WILL MAKE EVERYTHING RIGHT. YOU JUST WAIT AND SEE.”
12/12/07
So the tough guy free marketeers didn’t get as much help as they wanted from the Fed yesterday, so they whined like children that didn’t get the precise toy they wanted for Christmas and took the Dow down 300 points.
Ben Bernanke, like an overindulgent, jelly spined father demanding that stores open on Christmas morning to make sure his little disappointed darlings get exactly what they want, comes through with his half-hindquartered fund injection scheme. And it works! The markets are opening up, and up huge, this morning.
As I have said in the past, we are in big trouble when the Chairman of the Federal Reserve Board judges his performance by the volume of the cheers from Wall Street. But I had no idea how much trouble we are in. Ben Bernanke will throw the dollar over the side, will throw inflation to the wind, will do absolutely anything to please Wall Street.
We are on the precipice of a financial disaster unlike anything we have seen in at least 78 years. When this band aid bursts, the wound will infect our entire system. And Ben Bernanke will be there to pour liquefied feces on the festering wound. He will make G. William Miller look like the very portrait of prudence.
So the tough guy free marketeers didn’t get as much help as they wanted from the Fed yesterday, so they whined like children that didn’t get the precise toy they wanted for Christmas and took the Dow down 300 points.
Ben Bernanke, like an overindulgent, jelly spined father demanding that stores open on Christmas morning to make sure his little disappointed darlings get exactly what they want, comes through with his half-hindquartered fund injection scheme. And it works! The markets are opening up, and up huge, this morning.
As I have said in the past, we are in big trouble when the Chairman of the Federal Reserve Board judges his performance by the volume of the cheers from Wall Street. But I had no idea how much trouble we are in. Ben Bernanke will throw the dollar over the side, will throw inflation to the wind, will do absolutely anything to please Wall Street.
We are on the precipice of a financial disaster unlike anything we have seen in at least 78 years. When this band aid bursts, the wound will infect our entire system. And Ben Bernanke will be there to pour liquefied feces on the festering wound. He will make G. William Miller look like the very portrait of prudence.
Saturday, December 8, 2007
“IT’S THOSE DAMN PROFITEERS AGAIN!”
12/8/07
Sheila Bair, Chairman of the FDIC, suggested yesterday that those who are criticizing the Paulson/Bush Irresponsible Lender and Borrower Bailout Plan may have hidden financial motives. Ms. Blair said yesterday “I do worry that some of the investors have taken short positions on the ABX” and thus are criticizing the plan. Ms. Bair didn’t identify specific nefarious investors who are talking their position and admits that she has no evidence for her suspicions. It seems that Ms. Bair, in setting banking policy, is using the same approach that her boss uses for foreign policy, but I digress.
It also seems to have escaped Ms. Bair’s notice that there are legitimate reasons, other than talking one’s position, for criticizing the plan. For example, as the Pontificator has outlined on numerous occasions:
--Financially prudent and responsible homeowners and investors who have exercised restraint and common sense in their financial dealings simply will not, and should not, support a plan that bails out the financially imprudent and irresponsible. Exercising the same sober-mindedness in their approach to politics that they exhibit in their financial dealings, and perhaps mindful of Shakespeare’s admonitions regarding those who protest too much, these opponents of the plan simply don’t believe the protestations of the Bush administration that no taxpayer money will be used in this “plan” and that the scheme was not devised to bail out the Bush administration’s cheerleaders and financiers on Wall Street. On the same note, for any member of the Bush administration to criticize people for profiteering is so disingenuous as to cause one to regurgitate, but I digress…again.
--Somewhat less financially prudent homeowners who realized that they were in over their heads and took the necessary, painful ameliorative actions to get their financial houses in order are now seeing those who refused to do anything to help themselves getting help from a “voluntary” government program and thus feel betrayed. These converts to good sense, who deserve our admiration, must be thinking “What am I, some kind of chump? Had I only not taken that second job and denied myself and my kids things we really wanted, and instead, like my neighbor, said ‘to hell with it’ and bought the high def with the surround sound system, the government would have helped me out.” Such converts to financial prudence, which we used to encourage in this country, will thus have been encouraged by the “conservative” Bush administration to return to the path of financial salaciousness.
Incidentally, part of the Bush “plan” is to give “homeowners” who could not afford their mortgage payments after the (clearly spelled out and thus eminently anticipatable) step up in their mortgage rates an extension of their teaser periods for five years. The Bushocrats tell us that this period will allow those “homeowners” to get back on their feet and put them in a position to refinance their mortgages. However, where is the incentive for people to refinance to a higher fixed rate of interest? Such bailoutees can reason, with a great deal of logic, that the government will probably step in after five years and force their lenders to extend the teaser periods for another five years. So why refinance now? Why play the chump, like the guy next door who busted his butt to get his house in order only to be forced to bail out those who laughed at his new found sense of financial responsibility? Even if the government doesn’t step in and extend the teaser period again, it is a well worth taking the minimal risk that it won’t. Why should the financial miscreant, once absolved of his fiscal sins with generous doses of other people’s money, refinance any sooner than he absolutely has to?
This, ladies and gentlemen, is a textbook example of moral hazard.
--There are those of us who, unlike the Bush administration, really believe in the free market and thus feel that the heavy hand of government is not needed to work out of this financial problem. In fact, Sheila Bair, doubtless unknowingly, outlined this argument when she said “It’s in everybody’s interest to modify these loans. If you’re in a down market, closing out (sic) a property almost never makes sense because you’re going to have to settle for a significant loss.” If that is the case, Ms. Bair, why does the government have to get involved?
Oh, I forgot. The free market Bush administration knows better than the free market.
Sheila Bair, Chairman of the FDIC, suggested yesterday that those who are criticizing the Paulson/Bush Irresponsible Lender and Borrower Bailout Plan may have hidden financial motives. Ms. Blair said yesterday “I do worry that some of the investors have taken short positions on the ABX” and thus are criticizing the plan. Ms. Bair didn’t identify specific nefarious investors who are talking their position and admits that she has no evidence for her suspicions. It seems that Ms. Bair, in setting banking policy, is using the same approach that her boss uses for foreign policy, but I digress.
It also seems to have escaped Ms. Bair’s notice that there are legitimate reasons, other than talking one’s position, for criticizing the plan. For example, as the Pontificator has outlined on numerous occasions:
--Financially prudent and responsible homeowners and investors who have exercised restraint and common sense in their financial dealings simply will not, and should not, support a plan that bails out the financially imprudent and irresponsible. Exercising the same sober-mindedness in their approach to politics that they exhibit in their financial dealings, and perhaps mindful of Shakespeare’s admonitions regarding those who protest too much, these opponents of the plan simply don’t believe the protestations of the Bush administration that no taxpayer money will be used in this “plan” and that the scheme was not devised to bail out the Bush administration’s cheerleaders and financiers on Wall Street. On the same note, for any member of the Bush administration to criticize people for profiteering is so disingenuous as to cause one to regurgitate, but I digress…again.
--Somewhat less financially prudent homeowners who realized that they were in over their heads and took the necessary, painful ameliorative actions to get their financial houses in order are now seeing those who refused to do anything to help themselves getting help from a “voluntary” government program and thus feel betrayed. These converts to good sense, who deserve our admiration, must be thinking “What am I, some kind of chump? Had I only not taken that second job and denied myself and my kids things we really wanted, and instead, like my neighbor, said ‘to hell with it’ and bought the high def with the surround sound system, the government would have helped me out.” Such converts to financial prudence, which we used to encourage in this country, will thus have been encouraged by the “conservative” Bush administration to return to the path of financial salaciousness.
Incidentally, part of the Bush “plan” is to give “homeowners” who could not afford their mortgage payments after the (clearly spelled out and thus eminently anticipatable) step up in their mortgage rates an extension of their teaser periods for five years. The Bushocrats tell us that this period will allow those “homeowners” to get back on their feet and put them in a position to refinance their mortgages. However, where is the incentive for people to refinance to a higher fixed rate of interest? Such bailoutees can reason, with a great deal of logic, that the government will probably step in after five years and force their lenders to extend the teaser periods for another five years. So why refinance now? Why play the chump, like the guy next door who busted his butt to get his house in order only to be forced to bail out those who laughed at his new found sense of financial responsibility? Even if the government doesn’t step in and extend the teaser period again, it is a well worth taking the minimal risk that it won’t. Why should the financial miscreant, once absolved of his fiscal sins with generous doses of other people’s money, refinance any sooner than he absolutely has to?
This, ladies and gentlemen, is a textbook example of moral hazard.
--There are those of us who, unlike the Bush administration, really believe in the free market and thus feel that the heavy hand of government is not needed to work out of this financial problem. In fact, Sheila Bair, doubtless unknowingly, outlined this argument when she said “It’s in everybody’s interest to modify these loans. If you’re in a down market, closing out (sic) a property almost never makes sense because you’re going to have to settle for a significant loss.” If that is the case, Ms. Bair, why does the government have to get involved?
Oh, I forgot. The free market Bush administration knows better than the free market.
IT’S NOT CUTE ANY MORE
12/8/07
As I have said ad nauseam in the Insightful Pontificator, the problem our economy and financial system is facing is not limited, as many seem to still suppose, to sub-prime mortgages. The problem is too much debt, at the personal, government, and, relatively recently, corporate levels. The sub-prime problem is only the most salient, the first, and, I fear, a small manifestation of this problem.
Many readers of the Pontificator, even readers who display a great degree of financial acumen, have asked me the question “What is wrong with a lot of debt?” This is not a silly question.
I can see at least three financial (leaving aside, at least for now, the moral) problems with a lot of debt, or at least with the amount of debt that permeates our financial system.
First, too much debt, and too much bad debt, can freeze the financial system. Remember the old adage that a cat who has sat on a hot stove is not likely to sit on a hot stove again. She is also not likely to sit on a cold stove. Once lenders and investors have been burned by a loose lending system disguised by what turned out to be faulty Rube Goldbergesque financial schemes, they are going to be hesitant to lend again, even to worthy borrowers. If our financial system thus seizes up, this could lead to depression.
Second, asset values have been inflated by loose credit. Even if the financial system does not seize up but merely reacts in a sane and sensible manner to a modified credit environment, credit will become less available and asset values will deflate. We are already seeing this in the housing market. A broad deflation in asset values, especially in the values of houses, which many homeowners have been using as piggy banks, could lead to a recession.
Third, even if the financial system does not freeze, and even if asset values do not deflate (We’re a little late for the second supposition, and maybe for the first.), the gargantuan debt that we have accumulated over at least the last decade or so will have to be serviced. The more of our earnings that must be used to service debt (much, if not most, of which is held overseas), the less of our output and earnings that can be used for other things, like investment and consumer spending. More money for debt service could lead to at least an economic slowdown and, given the sheer amount of debt involved, a recession.
So excessive debt levels have consequences ranging from slowdown to depression. If all three of the above scenarios take place simultaneously, a very good possibility, if not a present reality, we could be in for a rehash of the ‘30s. I’m serious.
There is, of course, the question, of what constitutes an “excessive” level of debt. Paraphrasing a Supreme Court Justice’s observations on an entirely different matter, I can’t define an excessive level of debt, but I know it when I see it. I’m seeing an excessive level of debt now.
As I have said ad nauseam in the Insightful Pontificator, the problem our economy and financial system is facing is not limited, as many seem to still suppose, to sub-prime mortgages. The problem is too much debt, at the personal, government, and, relatively recently, corporate levels. The sub-prime problem is only the most salient, the first, and, I fear, a small manifestation of this problem.
Many readers of the Pontificator, even readers who display a great degree of financial acumen, have asked me the question “What is wrong with a lot of debt?” This is not a silly question.
I can see at least three financial (leaving aside, at least for now, the moral) problems with a lot of debt, or at least with the amount of debt that permeates our financial system.
First, too much debt, and too much bad debt, can freeze the financial system. Remember the old adage that a cat who has sat on a hot stove is not likely to sit on a hot stove again. She is also not likely to sit on a cold stove. Once lenders and investors have been burned by a loose lending system disguised by what turned out to be faulty Rube Goldbergesque financial schemes, they are going to be hesitant to lend again, even to worthy borrowers. If our financial system thus seizes up, this could lead to depression.
Second, asset values have been inflated by loose credit. Even if the financial system does not seize up but merely reacts in a sane and sensible manner to a modified credit environment, credit will become less available and asset values will deflate. We are already seeing this in the housing market. A broad deflation in asset values, especially in the values of houses, which many homeowners have been using as piggy banks, could lead to a recession.
Third, even if the financial system does not freeze, and even if asset values do not deflate (We’re a little late for the second supposition, and maybe for the first.), the gargantuan debt that we have accumulated over at least the last decade or so will have to be serviced. The more of our earnings that must be used to service debt (much, if not most, of which is held overseas), the less of our output and earnings that can be used for other things, like investment and consumer spending. More money for debt service could lead to at least an economic slowdown and, given the sheer amount of debt involved, a recession.
So excessive debt levels have consequences ranging from slowdown to depression. If all three of the above scenarios take place simultaneously, a very good possibility, if not a present reality, we could be in for a rehash of the ‘30s. I’m serious.
There is, of course, the question, of what constitutes an “excessive” level of debt. Paraphrasing a Supreme Court Justice’s observations on an entirely different matter, I can’t define an excessive level of debt, but I know it when I see it. I’m seeing an excessive level of debt now.
Friday, December 7, 2007
THE LATEST FULMINATIONS FROM THE SELF-APPOINTED ARBITERS OF CONSERVATIVE IDEALS
12/7/07
Here is a letter I just sent to The Wall Street Journal. Of course, the Journal won’t print it; most of the letters that The Wall Street Journal deems worthy of publishing would serve equally as well as the answer to a high school civics question, viz:
“Compare and contrast the greatness of Presidents George Washington and George W. Bush. On second thought, forget the “contrast” portion of this question. After all, how can one draw contrasts between the two presidents whose transcendent greatness is their most distinguishing characteristic?”
but I digress.
My letter was sent in response to a 12/7/07 article by Kim Strassel. In that article, Ms. Strassel trots out the usual laundry list of complaints of self-described conservatives from various Wall Street precincts about Mr. Huckabee: He raised taxes several times while governor of Arkansas (as Ronald Reagan did in California), favors a tougher stance on illegal immigration, is not gung-ho for every “free trade” agreement that comes down the pike, and, in general, is not completely beholden to the whims and wishes of corporate America.
The point of the below letter is not to support Mike Huckabee. While I find many of Mr. Huckabee’s policy stands and personal traits attractive, I am not a Huckabee supporter. The overriding point of the letter is that The Wall Street Journal, or any of the self-appointed arbiters of all things conservative ought to be awfully careful before they question someone’s fealty to conservative principles:
Letters to the Editor
The Wall Street Journal
200 Liberty St.
New York, NY 10281
Wsj.ltrs@wsj.com
12/7/07
In her 12/7/07 Opinion piece questioning the conservative credentials of Mike Huckabee, Kim Strassel closes with “…Republican voters need to understand they are signing up for a whole new brand of “conservatism.”
It is curious that The Wall Street Journal editorial page, or Kim Strassel, if she was working there then, did not warn conservatives in 2000 that, by voting for George W. Bush and a Republican congress, they were signing up for “a whole new brand of ‘conservatism,’” a “conservatism” that has come to include:
--budget busting spending on pork barrel projects and other non-entitlements
--creation of a whole new entitlement that cements the Medicare program’s primacy in the coveted “most likely to bust the budget” category
--federalization of education standards
--complete surrender in the effort to control our borders
--the further decimation of manufacturing in this country as the GOP’s corporate masters search the globe for the cheapest possible labor, regardless of the consequences for the health and safety of American consumers
--a foreign policy that can best be described as the government’s placing its substantial proboscis into people’s lives on a global scale
--an alarmingly cavalier attitude regarding the government’s taking what is most sacred from some of our best and brightest young citizens: their lives, and
--generally, anything that serves to increase the wealth of the corporate plutocrats that the modern Republican Party exists to serve.
Mark Quinn
Naperville, IL
Here is a letter I just sent to The Wall Street Journal. Of course, the Journal won’t print it; most of the letters that The Wall Street Journal deems worthy of publishing would serve equally as well as the answer to a high school civics question, viz:
“Compare and contrast the greatness of Presidents George Washington and George W. Bush. On second thought, forget the “contrast” portion of this question. After all, how can one draw contrasts between the two presidents whose transcendent greatness is their most distinguishing characteristic?”
but I digress.
My letter was sent in response to a 12/7/07 article by Kim Strassel. In that article, Ms. Strassel trots out the usual laundry list of complaints of self-described conservatives from various Wall Street precincts about Mr. Huckabee: He raised taxes several times while governor of Arkansas (as Ronald Reagan did in California), favors a tougher stance on illegal immigration, is not gung-ho for every “free trade” agreement that comes down the pike, and, in general, is not completely beholden to the whims and wishes of corporate America.
The point of the below letter is not to support Mike Huckabee. While I find many of Mr. Huckabee’s policy stands and personal traits attractive, I am not a Huckabee supporter. The overriding point of the letter is that The Wall Street Journal, or any of the self-appointed arbiters of all things conservative ought to be awfully careful before they question someone’s fealty to conservative principles:
Letters to the Editor
The Wall Street Journal
200 Liberty St.
New York, NY 10281
Wsj.ltrs@wsj.com
12/7/07
In her 12/7/07 Opinion piece questioning the conservative credentials of Mike Huckabee, Kim Strassel closes with “…Republican voters need to understand they are signing up for a whole new brand of “conservatism.”
It is curious that The Wall Street Journal editorial page, or Kim Strassel, if she was working there then, did not warn conservatives in 2000 that, by voting for George W. Bush and a Republican congress, they were signing up for “a whole new brand of ‘conservatism,’” a “conservatism” that has come to include:
--budget busting spending on pork barrel projects and other non-entitlements
--creation of a whole new entitlement that cements the Medicare program’s primacy in the coveted “most likely to bust the budget” category
--federalization of education standards
--complete surrender in the effort to control our borders
--the further decimation of manufacturing in this country as the GOP’s corporate masters search the globe for the cheapest possible labor, regardless of the consequences for the health and safety of American consumers
--a foreign policy that can best be described as the government’s placing its substantial proboscis into people’s lives on a global scale
--an alarmingly cavalier attitude regarding the government’s taking what is most sacred from some of our best and brightest young citizens: their lives, and
--generally, anything that serves to increase the wealth of the corporate plutocrats that the modern Republican Party exists to serve.
Mark Quinn
Naperville, IL
Tuesday, December 4, 2007
REPUBLICAN FREE MARKETEERS AT WORK
12/4/07
So now Hank Paulson, Treasury Secretary for the free market Bush administration, is proposing that Congress authorize state and local governments to issue tax exempt bonds in order to refinance the shaky mortgages that permeate our financial system.
Mr. Paulson’s, and Mr. Bush’s, proposal amounts to ordering local governments to use their limited authority to issue municipal bonds, bonds that are normally, or at least properly, issued to finance local capital projects like streets, sewers, etc., and to put the taxpayer backed full faith and credit of local governments on the line in order to bail out foolish people who “bought” more house than they could afford and the even more foolish people who lent them money. Effectively, the free market Bush administration is once again using the jackboot of government to force the financially prudent to bail out the financially fatuous.
Hey, you can’t vote Democratic! Why, they’ll expand the scope and power of government in order to reward the indolent and irresponsible!
So now Hank Paulson, Treasury Secretary for the free market Bush administration, is proposing that Congress authorize state and local governments to issue tax exempt bonds in order to refinance the shaky mortgages that permeate our financial system.
Mr. Paulson’s, and Mr. Bush’s, proposal amounts to ordering local governments to use their limited authority to issue municipal bonds, bonds that are normally, or at least properly, issued to finance local capital projects like streets, sewers, etc., and to put the taxpayer backed full faith and credit of local governments on the line in order to bail out foolish people who “bought” more house than they could afford and the even more foolish people who lent them money. Effectively, the free market Bush administration is once again using the jackboot of government to force the financially prudent to bail out the financially fatuous.
Hey, you can’t vote Democratic! Why, they’ll expand the scope and power of government in order to reward the indolent and irresponsible!
Monday, December 3, 2007
FLIP THIS IDEA
12/3/07
Today’s Wall Street Journal outlined the results of a study of $2.5 trillion in subprime loans made since 2000. The study found that (Surprise!...to anyone but regular readers of the Insightful Pontificator) that many so-called subprime loans were made not to the underemployed, the marginally making it, and other denizens of the lower rungs of the economic ladder. No, many of these loans were made to people with good credit scores who were relatively well off and who perhaps live in your neighborhood. These borrowers were either too lazy to go through the backbreaking work of actually filling out a mortgage application (doubtless because they had other things to do, like watch the latest mind-numbing episode of their always excerebrose favorite situation comedy), didn’t want to, or couldn’t, document an income qualifying for a far cheaper prime loan, or, most likely, were able to borrow more with a subprime loan than they could with a conventional loan. They simply wanted to buy more house than they could afford or decided, after watching an episode of “Flip This House” or some other fatuous offering from the supposedly high-brow cable networks that offer an “intelligent alternative” to the completely idiotic network fare, that they were now fully qualified real estate investors to whom the price of a loan didn’t matter because they would be out of the property at an enormous profit long before the real costs of the loan began to bite.
So, again, this is not a problem only for those “other people” who barely merit the notice of their betters. The “sub-prime” problem affects places like Naperville, IL, Smithtown, NY, and Shaker Heights, OH. Many of your neighbors are stretched beyond their financial limits. The damage will by no means be limited to the WalMart shoppers of the world. Tiffany, Nordstrom’s, Mercedes, BMW, and other such supposedly safe havens of those “not affected at all by the crisis” will soon start to feel pain, lots of it.
But it’s even worse than that. The Journal study was limited to sub-prime loans. Wait until the rest of the world finds out what Insightful Pontificator readers already know: that the Alt-A and prime mortgages are not in such good shape, either. As mortgage lending standards deteriorated, loans that wouldn’t have been made ten or fifteen years ago are classified as prime today. As one of the great men in the financial world, my first boss in the money business, said years ago when his bright young junk bond analyst presented deals that looked promising from the perspective of that 26 year old kid, was often heard to say as he shook his head in disbelief “We’ve come a long way, haven’t we?” The problem is that, during the last ten years, as mortgage financing has become more, er, enlightened, the people in charge have been not much, if at all, older than that 26 year old kid and, if I may say so myself, not as bright. There is no longer the distinguished, older gentleman in the office down the hall with generous dollops of experience, wisdom, and gray hair to restrain the enthusiasm, and the avarice, of the financial wunderkinds who can still remember their first shave.
Today’s Wall Street Journal outlined the results of a study of $2.5 trillion in subprime loans made since 2000. The study found that (Surprise!...to anyone but regular readers of the Insightful Pontificator) that many so-called subprime loans were made not to the underemployed, the marginally making it, and other denizens of the lower rungs of the economic ladder. No, many of these loans were made to people with good credit scores who were relatively well off and who perhaps live in your neighborhood. These borrowers were either too lazy to go through the backbreaking work of actually filling out a mortgage application (doubtless because they had other things to do, like watch the latest mind-numbing episode of their always excerebrose favorite situation comedy), didn’t want to, or couldn’t, document an income qualifying for a far cheaper prime loan, or, most likely, were able to borrow more with a subprime loan than they could with a conventional loan. They simply wanted to buy more house than they could afford or decided, after watching an episode of “Flip This House” or some other fatuous offering from the supposedly high-brow cable networks that offer an “intelligent alternative” to the completely idiotic network fare, that they were now fully qualified real estate investors to whom the price of a loan didn’t matter because they would be out of the property at an enormous profit long before the real costs of the loan began to bite.
So, again, this is not a problem only for those “other people” who barely merit the notice of their betters. The “sub-prime” problem affects places like Naperville, IL, Smithtown, NY, and Shaker Heights, OH. Many of your neighbors are stretched beyond their financial limits. The damage will by no means be limited to the WalMart shoppers of the world. Tiffany, Nordstrom’s, Mercedes, BMW, and other such supposedly safe havens of those “not affected at all by the crisis” will soon start to feel pain, lots of it.
But it’s even worse than that. The Journal study was limited to sub-prime loans. Wait until the rest of the world finds out what Insightful Pontificator readers already know: that the Alt-A and prime mortgages are not in such good shape, either. As mortgage lending standards deteriorated, loans that wouldn’t have been made ten or fifteen years ago are classified as prime today. As one of the great men in the financial world, my first boss in the money business, said years ago when his bright young junk bond analyst presented deals that looked promising from the perspective of that 26 year old kid, was often heard to say as he shook his head in disbelief “We’ve come a long way, haven’t we?” The problem is that, during the last ten years, as mortgage financing has become more, er, enlightened, the people in charge have been not much, if at all, older than that 26 year old kid and, if I may say so myself, not as bright. There is no longer the distinguished, older gentleman in the office down the hall with generous dollops of experience, wisdom, and gray hair to restrain the enthusiasm, and the avarice, of the financial wunderkinds who can still remember their first shave.
“UH…IT’S IN THE BILL OF RIGHTS, RIGHT THERE BY THE ‘SEPARATION OF CHURCH AND STATE’ CLAUSE”
12/3/07
Today’s Wall Street Journal story outlining that paper’s study concluding that (surprise!) the impact of the “sub-prime” crisis is wider than the echo chamber that is Wall Street and the financial media had supposed included a common defense of the lascivious lending practices that have contributed to the mortgage problems we are currently experiencing. A spokesman for Fremont Investment & Loan, responding to a suit against Fremont by Massachusetts Attorney General Martha Coakley alleging unfair and deceptive lending practices, countered that, without access to Fremont’s loans “…many Massachusetts residents who are homeowners today would never have been able to purchase homes.”
This is a defense? This diaphanous codswallop presupposes that homeownership is both a right and is per se a great thing. Neither, despite what some financially fatuous would have you believe, is true. Back when the world of finance was dominated by clear thinkers with their own money, or at least their own careers, on the line, we somehow had developed the quaint notion that people who can’t afford homes shouldn’t be homeowners until they were financially prepared to do so.
If the Fremont spokesobfuscator had added a few words to his quote, viz:
“many Massachusetts residents who are homeowners today and who have no business whatsoever being homeowners would never have been able to purchase their homes”
his statement would have been true. Unfortunately, it would not have advanced his position, so, in the modern world of high finance, what merit would it have had?
Look for this pathetic excuse for an argument (i.e., “whatever nefarious scheme we cooked up helped people become homeowners”) become even more frequent as politicians conduct the ineluctable witch-hunts that accompany any discomfort that they can label a “crisis.” Why? Because this idiotic line of reasoning appeals to an American public that has been taught to eschew thinking in favor of feeling.
Today’s Wall Street Journal story outlining that paper’s study concluding that (surprise!) the impact of the “sub-prime” crisis is wider than the echo chamber that is Wall Street and the financial media had supposed included a common defense of the lascivious lending practices that have contributed to the mortgage problems we are currently experiencing. A spokesman for Fremont Investment & Loan, responding to a suit against Fremont by Massachusetts Attorney General Martha Coakley alleging unfair and deceptive lending practices, countered that, without access to Fremont’s loans “…many Massachusetts residents who are homeowners today would never have been able to purchase homes.”
This is a defense? This diaphanous codswallop presupposes that homeownership is both a right and is per se a great thing. Neither, despite what some financially fatuous would have you believe, is true. Back when the world of finance was dominated by clear thinkers with their own money, or at least their own careers, on the line, we somehow had developed the quaint notion that people who can’t afford homes shouldn’t be homeowners until they were financially prepared to do so.
If the Fremont spokesobfuscator had added a few words to his quote, viz:
“many Massachusetts residents who are homeowners today and who have no business whatsoever being homeowners would never have been able to purchase their homes”
his statement would have been true. Unfortunately, it would not have advanced his position, so, in the modern world of high finance, what merit would it have had?
Look for this pathetic excuse for an argument (i.e., “whatever nefarious scheme we cooked up helped people become homeowners”) become even more frequent as politicians conduct the ineluctable witch-hunts that accompany any discomfort that they can label a “crisis.” Why? Because this idiotic line of reasoning appeals to an American public that has been taught to eschew thinking in favor of feeling.
THE SCARIEST TAG TEAM SINCE THE ROAD WARRIORS (AKA “THE LEGION OF DOOM”)
12/3/07
There are, as always, plenty of politicians willing and able to solve our problems, real and imagined, with generous dollops of other people’s money. The current problems wrought by the financial wunderkinds on Wall Street, their salespeople who insist on being called “mortgage consultants,” and a financially obtuse public has thus provided a fecund field for political posturing. In my last post, I commented on Hank Paulson’s (he of the free market Bush administration) plan to extend teaser rate periods in an effort to head off defaults on home loans. Now Hillary Clinton has come along proposing to go Mr. Paulson one better: not only should we force lenders (whoever they might be…see my 12/1/07 post) to extend teaser periods, we should also mandate a 90 day moratorium on home foreclosures!
In my 10/14/07 post, I explained how the world, or at least how the political world, works:
“This is in the normal course of our government’s workings: The Democrats come up with some asinine plan to remedy some problem, real or imagined, with your money. The Republicans respond with a slightly less asinine plan to attack the problem, also with your money, making sure that the primary beneficiaries of the program are among the GOP’s favored constituencies. That is how the world works.”
These latest dance of Secretary Paulson and Senator Clinton is a slight variation on the above described process. In this latest case, the Republicans have come up with a completely asinine idea only to be trumped by the Democrats with an idea that is somehow even more asinine. Both “plans” are designed to make the financially frugal pay for the sins of the profligate. Your government at work.
Lest anyone think that the differences between the parties are more stark than this cynical commentator would indicate, note Senator Clinton’s comments regarding Secretary Paulson:
“I’m very pleased the administration is responding to this crisis.”
Your very likely next president then indicated that she has “high regard” for Mr. Paulson. So much for this election’s being the “most momentous in our lifetimes,” or some such drivel.
There are, as always, plenty of politicians willing and able to solve our problems, real and imagined, with generous dollops of other people’s money. The current problems wrought by the financial wunderkinds on Wall Street, their salespeople who insist on being called “mortgage consultants,” and a financially obtuse public has thus provided a fecund field for political posturing. In my last post, I commented on Hank Paulson’s (he of the free market Bush administration) plan to extend teaser rate periods in an effort to head off defaults on home loans. Now Hillary Clinton has come along proposing to go Mr. Paulson one better: not only should we force lenders (whoever they might be…see my 12/1/07 post) to extend teaser periods, we should also mandate a 90 day moratorium on home foreclosures!
In my 10/14/07 post, I explained how the world, or at least how the political world, works:
“This is in the normal course of our government’s workings: The Democrats come up with some asinine plan to remedy some problem, real or imagined, with your money. The Republicans respond with a slightly less asinine plan to attack the problem, also with your money, making sure that the primary beneficiaries of the program are among the GOP’s favored constituencies. That is how the world works.”
These latest dance of Secretary Paulson and Senator Clinton is a slight variation on the above described process. In this latest case, the Republicans have come up with a completely asinine idea only to be trumped by the Democrats with an idea that is somehow even more asinine. Both “plans” are designed to make the financially frugal pay for the sins of the profligate. Your government at work.
Lest anyone think that the differences between the parties are more stark than this cynical commentator would indicate, note Senator Clinton’s comments regarding Secretary Paulson:
“I’m very pleased the administration is responding to this crisis.”
Your very likely next president then indicated that she has “high regard” for Mr. Paulson. So much for this election’s being the “most momentous in our lifetimes,” or some such drivel.
Saturday, December 1, 2007
“YOU TWO WILL SIT DOWN, YOU’LL WORK THINGS OUT, YOU’LL GO BACK TO HER…IT’LL BE BEAUTEEFUL”
12/1/07
The Street was abuzz yesterday (Friday, 11/30) about a plan being hatched in the Treasury Department that would freeze interest rates (temporarily, so it is said) on sub-prime home loans, often at the teaser rates that were, in many cases, the only rate at which the borrower could afford the home he or she bought.
There is nothing wrong with a borrower and a lender sitting down to negotiate a way to work out a loan that has gone, or soon will go, sour. After all, most homebuyers don’t want to be evicted and most lenders don’t want to repossess property, especially in a real estate market like this one. One of the obvious ways to avoid foreclosure is to prolong, temporarily or otherwise, rates at which the borrower can remain current. However, the Paulson plan has a distinctive malodorous pall to it for a number of reasons.
First, there is a heavy element of government coercion here. The whole arrangement does not appear to have the trappings of a freely negotiated deal between borrower and lender. The force of government is heavily involved here; if Fannie and Freddie, which hold, through securities or collateral, 15% of the sub-prime market, can be brought into the deal, the pressure will be intense on other lenders and investors to go along. The federal government obviously has enormous leverage with Fannie and Freddie. If government coercion is a key element of the plan, can a taxpayer financed subsidy to “disadvantaged” lenders or homeowners be far behind? Even if one is naïve enough to believe Hank Paulson’s protestations that no government money will be involved in his latest palliative, the generous application of the government strong-arm would itself be baleful enough.
Second, the days when the borrower could identify his lender (usually the green eye-shaded Mr. Barsaszkas in the imposing greystone called an S&L down the street) and sit down to negotiate with him are long over. The typical borrower’s loan has been sliced and diced into dozens or hundreds of securities held by investors worldwide. The lender must negotiate with the loan servicer, whose powers to negotiate are murky and therefore conducive to litigation. Even if those cases in which the servicers’ power to negotiate is clearly spelled out, there is something wrong with a situation in which servicers are responding to ukases from Washington to negotiate solutions that might not be in the interests of the investors in the loans they service. As Mark Adelson, a money manager quoted in The Wall Street Journal, said
“There is a part of this that’s just morally repugnant. The problem is that policy makers are talking to servicers about giving away other people’s money.”
Third, no one is talking about disclosure yet. While this might come out in the details, it is imperative that, if these loans are renegotiated, they be written down to reflect the reduced cash flows they will generate. Much of the “sub-prime problem” has been exacerbated, indeed created, by an effort to paper over underlying financial difficulties. A “solution” that does not involve full disclosure could be counterproductive.
Fourth, this “solution” ignores the worst manifestations of the underlying problem. Many, if not most, of these loans are bad loans even at the existing interest rate. In fact, while details of the Paulson plan remain scarce, such loans would not even be covered by the plan, a rare concession to reality on the part of policymakers. So if the Paulson plan only covers those mortgage loans that could be saved by an extension of the teaser period, a substantial chunk of the sub-prime mortgage loans are going to fail despite the plan. Further, even those loans that are “salvaged” will fail when the postponed reset finally takes place. Thus, for many of these loans, this is merely a call for the governor on Christmas Eve to put off the execution until after the holidays. The miscreant will die; he will merely be given the “gift” of another week or so to think about it. The “homeowner,” knowing that he will lose his home anyway, will let the property fall into further neglect, decreasing its value. As Alan Fournier, another astute fund manager quoted by the Journal said
“This reduces the pressure short term to bring everything to a clearing price. We really just need to let it wash through.”
(Messrs. Adelson and Fournier are very astute fund managers, regular readers of the Insightful Pontificator, or both. But I digress.)
It’s even worse than Mr. Fournier and most people suppose. The Paulson plan has been hatched under the mistaken impression that the problem we are witnessing is a sub-prime mortgage problem. As I said months ago, and the rest of the world started to realize much later, this is a debt problem that extends far beyond sub-prime home mortgages. As a society, we have borrowed far too much without the means to repay what we have borrowed. Self-styled financial geniuses have convinced themselves, and the supposed moneyed cognoscenti, that the resultant high levels of risk could be eliminated by the application of Rube Goldbergesque financial engineering techniques even the creators of which, as it turned out, didn’t understand.
So it looks like this latest plan being forced down the throats of the markets and the economy by the central planners of the Bush administration will be merely a band-aid, a band-aid applied before antiseptic that serves only to let the underlying infection fester and spread.
The Street was abuzz yesterday (Friday, 11/30) about a plan being hatched in the Treasury Department that would freeze interest rates (temporarily, so it is said) on sub-prime home loans, often at the teaser rates that were, in many cases, the only rate at which the borrower could afford the home he or she bought.
There is nothing wrong with a borrower and a lender sitting down to negotiate a way to work out a loan that has gone, or soon will go, sour. After all, most homebuyers don’t want to be evicted and most lenders don’t want to repossess property, especially in a real estate market like this one. One of the obvious ways to avoid foreclosure is to prolong, temporarily or otherwise, rates at which the borrower can remain current. However, the Paulson plan has a distinctive malodorous pall to it for a number of reasons.
First, there is a heavy element of government coercion here. The whole arrangement does not appear to have the trappings of a freely negotiated deal between borrower and lender. The force of government is heavily involved here; if Fannie and Freddie, which hold, through securities or collateral, 15% of the sub-prime market, can be brought into the deal, the pressure will be intense on other lenders and investors to go along. The federal government obviously has enormous leverage with Fannie and Freddie. If government coercion is a key element of the plan, can a taxpayer financed subsidy to “disadvantaged” lenders or homeowners be far behind? Even if one is naïve enough to believe Hank Paulson’s protestations that no government money will be involved in his latest palliative, the generous application of the government strong-arm would itself be baleful enough.
Second, the days when the borrower could identify his lender (usually the green eye-shaded Mr. Barsaszkas in the imposing greystone called an S&L down the street) and sit down to negotiate with him are long over. The typical borrower’s loan has been sliced and diced into dozens or hundreds of securities held by investors worldwide. The lender must negotiate with the loan servicer, whose powers to negotiate are murky and therefore conducive to litigation. Even if those cases in which the servicers’ power to negotiate is clearly spelled out, there is something wrong with a situation in which servicers are responding to ukases from Washington to negotiate solutions that might not be in the interests of the investors in the loans they service. As Mark Adelson, a money manager quoted in The Wall Street Journal, said
“There is a part of this that’s just morally repugnant. The problem is that policy makers are talking to servicers about giving away other people’s money.”
Third, no one is talking about disclosure yet. While this might come out in the details, it is imperative that, if these loans are renegotiated, they be written down to reflect the reduced cash flows they will generate. Much of the “sub-prime problem” has been exacerbated, indeed created, by an effort to paper over underlying financial difficulties. A “solution” that does not involve full disclosure could be counterproductive.
Fourth, this “solution” ignores the worst manifestations of the underlying problem. Many, if not most, of these loans are bad loans even at the existing interest rate. In fact, while details of the Paulson plan remain scarce, such loans would not even be covered by the plan, a rare concession to reality on the part of policymakers. So if the Paulson plan only covers those mortgage loans that could be saved by an extension of the teaser period, a substantial chunk of the sub-prime mortgage loans are going to fail despite the plan. Further, even those loans that are “salvaged” will fail when the postponed reset finally takes place. Thus, for many of these loans, this is merely a call for the governor on Christmas Eve to put off the execution until after the holidays. The miscreant will die; he will merely be given the “gift” of another week or so to think about it. The “homeowner,” knowing that he will lose his home anyway, will let the property fall into further neglect, decreasing its value. As Alan Fournier, another astute fund manager quoted by the Journal said
“This reduces the pressure short term to bring everything to a clearing price. We really just need to let it wash through.”
(Messrs. Adelson and Fournier are very astute fund managers, regular readers of the Insightful Pontificator, or both. But I digress.)
It’s even worse than Mr. Fournier and most people suppose. The Paulson plan has been hatched under the mistaken impression that the problem we are witnessing is a sub-prime mortgage problem. As I said months ago, and the rest of the world started to realize much later, this is a debt problem that extends far beyond sub-prime home mortgages. As a society, we have borrowed far too much without the means to repay what we have borrowed. Self-styled financial geniuses have convinced themselves, and the supposed moneyed cognoscenti, that the resultant high levels of risk could be eliminated by the application of Rube Goldbergesque financial engineering techniques even the creators of which, as it turned out, didn’t understand.
So it looks like this latest plan being forced down the throats of the markets and the economy by the central planners of the Bush administration will be merely a band-aid, a band-aid applied before antiseptic that serves only to let the underlying infection fester and spread.
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