3/11/09
As I’ve been saying for months (years, really), those experts who contend that the root of our financial problems lies in the housing crisis have it wrong. Housing is more a manifestation of our larger problem, i.e., far too much debt at all levels, but primarily at the household level, that has fueled a Potemkin economy that must be allowed to unwind. Housing is only one of the vehicles used to secure and thus amass such debt and also one of the “beneficiaries” of consumers’ access to debt that they would never have been granted under more normal, sober circumstances. The unwinding of the easy, what the hell, it’s not my money debt fueled Potemkin economy will be long and painful, and any attempts, especially the ham-handed attempts that characterize the Bush/Obama economic approach, to ease the discomfort will only prolong the agony.
One of the manifestations of the overall debt problem is the behavior of businesses in response to the reckless flow of consumer debt. To put it simply, firms really believed that consumers actually had the money they were spending. However, those consumers never had the money they were spending; what they had was access to liability creation. Businesses, however, having drunken the kool-aid (How frequently have you heard such drivel as “Oh, these people are really well-heeled.” “My customers have deep pockets.”?), priced their products and services and expanded their businesses as if they had customers with big bank accounts and high, stable incomes rather than large credit lines, either unsecured in the form of credit card payables or secured in the form of home equity lines of credit. When those “wealthy, upscale” consumers no longer had access to liability creation, business imploded.
This is indeed, if not a tragedy, an utter abashment for such businesses. But that is how a free market economy is supposed to work: if one behaves more like a sheep than a reasonable, thinking, critical business person, one should pay the price. The best will learn from such lessons, pick themselves up, and prosper once more. Those who had no business running a business will find some other type of work. Unfortunately, it is highly unlikely in the Bush/Obama era, in which the responsible are made to pay for the irresponsible, that such a free market outcome will be the result. Instead, large businesses will be propped up and, if things go far enough, even some politically favored small businesses will also be kept alive by the application of generous amounts of federal succor, courtesy, ultimately, of those who behaved responsibly and took the time to open their eyes rather than repeat the happy talk cant that has substituted for sound economic observation for the last twenty years or so. And the mistakes and garbled thinking that got us into this mess will be repeated…again and again and again.
Wednesday, March 11, 2009
Tuesday, March 10, 2009
“EXPRESSWAY…TO YOUR (WALLET)…”
3/10/09
Those of you who watch CNBC regularly are doubtless familiar with the series of Ameriprise commercials featuring an aging hipster doofus trying to accomplish the impossible task of convincing members of my generation that they are not only cool, but erudite, attractive, worldly, and sophisticated while a headache inducing sound track pounds away in the background. All of these commercials are laughably ridiculous for a number of reasons, but the latest perfectly encapsulates the source of at least one of my generation’s financial troubles.
In this particular ad, the self-appointed arbiter of all things cool, doubtless in response to the evaporation of my generation’s sure thing IRAs, 401Ks, etc., asks
“Did you think the road to retirement was an expressway?”
This expert then says the viewers “need a plan” and recommends seeing an Ameriprise “financial advisor,” presumably to resume their trek on the road to riches, or at least away from abject poverty.
Hmm…
People are responsible for their own actions, and, most saliently, for their financial decisions, as the Pontificator ceaselessly argues. That having been said, can anyone blame my fabulous generation for thinking that the road to retirement was an expressway when financial firms, most notably and least credibly Ameriprise, have been spending scores, if not hundreds, of millions of dollars convincing people of just that? For years, “financial planners” have twisted and perverted one study by Ibbotson on historical returns of the stock market to convince people that, given enough time, the stock market is a sure thing and if one just religiously puts money into stocks, the market works like a bank account on gorilla biscuits. Using compounding rates of anywhere from 10% to 15% (depending on how desperately they need the sale), such “financial professionals” have convinced millions of apparently gullible Americans (Just look at our public officials and the flotsam and jetsam on which we blow money we don’t have if you have any doubts concerning the gullibility and sheep-like instincts of the American public.) that if they put everything in the stock market (in, of course, the funds that pay the highest commissions to the “planner”),they, like the Soviet defense forces in Dr. Strangelove, can’t possibly miss. Those of you familiar with the outcome of such a strategy in that classic 1964 Kubrick film are not at all surprised that a similar approach to investing has yielded similar consequences.
Ameriprise is only being singled out in this particular post because of the aforementioned most inane of a long line of excerebrose commercials featuring perhaps the least credible dispenser of financial advice in the long and sordid history of the “financial planning” business. While there are many good and valuable people in the brokerage and financial consulting and planning businesses (some of whom doubtless work for Ameriprise), they are hopelessly outnumbered by the charlatans and mountebanks that have been attracted to that profession by the twin prospects of quick and abundant cash and a near complete absence of accountability. Millions of people whose former careers involved selling shoes or fast food go around calling themselves “financial planners” and the results have been predictable. Now, the same people whose dearth of anything resembling financial knowledge and background is matched only by their dearth of shame are offering plans to get their witless “investors” out of the trouble into which they were plunged by the same “financial planners.”
The sad thing is that Ameriprise and many others (like the local real estate expert, whose expertise in finance hopefully, but probably doesn’t, exceeds his expertise with English diction, who once counseled levering up to buy investment property, including now valueless hotel rooms (“Those who focus only on eliminating debt, rather than building wealth, will never get wealthy.”), and who, most recently, has been promoting his sure fire “get out of debt” formula) have prospered with such a strategy, and I, for one, am betting that they will continue to do so.
After all, they are targeting the always vigilant and thoughtful American public.
Those of you who watch CNBC regularly are doubtless familiar with the series of Ameriprise commercials featuring an aging hipster doofus trying to accomplish the impossible task of convincing members of my generation that they are not only cool, but erudite, attractive, worldly, and sophisticated while a headache inducing sound track pounds away in the background. All of these commercials are laughably ridiculous for a number of reasons, but the latest perfectly encapsulates the source of at least one of my generation’s financial troubles.
In this particular ad, the self-appointed arbiter of all things cool, doubtless in response to the evaporation of my generation’s sure thing IRAs, 401Ks, etc., asks
“Did you think the road to retirement was an expressway?”
This expert then says the viewers “need a plan” and recommends seeing an Ameriprise “financial advisor,” presumably to resume their trek on the road to riches, or at least away from abject poverty.
Hmm…
People are responsible for their own actions, and, most saliently, for their financial decisions, as the Pontificator ceaselessly argues. That having been said, can anyone blame my fabulous generation for thinking that the road to retirement was an expressway when financial firms, most notably and least credibly Ameriprise, have been spending scores, if not hundreds, of millions of dollars convincing people of just that? For years, “financial planners” have twisted and perverted one study by Ibbotson on historical returns of the stock market to convince people that, given enough time, the stock market is a sure thing and if one just religiously puts money into stocks, the market works like a bank account on gorilla biscuits. Using compounding rates of anywhere from 10% to 15% (depending on how desperately they need the sale), such “financial professionals” have convinced millions of apparently gullible Americans (Just look at our public officials and the flotsam and jetsam on which we blow money we don’t have if you have any doubts concerning the gullibility and sheep-like instincts of the American public.) that if they put everything in the stock market (in, of course, the funds that pay the highest commissions to the “planner”),they, like the Soviet defense forces in Dr. Strangelove, can’t possibly miss. Those of you familiar with the outcome of such a strategy in that classic 1964 Kubrick film are not at all surprised that a similar approach to investing has yielded similar consequences.
Ameriprise is only being singled out in this particular post because of the aforementioned most inane of a long line of excerebrose commercials featuring perhaps the least credible dispenser of financial advice in the long and sordid history of the “financial planning” business. While there are many good and valuable people in the brokerage and financial consulting and planning businesses (some of whom doubtless work for Ameriprise), they are hopelessly outnumbered by the charlatans and mountebanks that have been attracted to that profession by the twin prospects of quick and abundant cash and a near complete absence of accountability. Millions of people whose former careers involved selling shoes or fast food go around calling themselves “financial planners” and the results have been predictable. Now, the same people whose dearth of anything resembling financial knowledge and background is matched only by their dearth of shame are offering plans to get their witless “investors” out of the trouble into which they were plunged by the same “financial planners.”
The sad thing is that Ameriprise and many others (like the local real estate expert, whose expertise in finance hopefully, but probably doesn’t, exceeds his expertise with English diction, who once counseled levering up to buy investment property, including now valueless hotel rooms (“Those who focus only on eliminating debt, rather than building wealth, will never get wealthy.”), and who, most recently, has been promoting his sure fire “get out of debt” formula) have prospered with such a strategy, and I, for one, am betting that they will continue to do so.
After all, they are targeting the always vigilant and thoughtful American public.
Friday, March 6, 2009
“…UP FROM THE GROUND COME A BUBBLIN’ CRUDE…”
3/6/09
I don’t often like to put up posts dealing with pure investment or trading strategies; I don’t like to talk my positions and see the first parenthetical remark in the third paragraph of this post. However, more general observations that metamorphosize into specific trades might be of interest to my readers, so I’ve put up this post. These are not recommendations, only thoughts.
I’m liking oil at these levels for several reasons:
First, either the economy is going to recover (Loyal readers know that I think such a recovery is highly unlikely in any but the longest of terms, but, unlike my (usually) younger, much more highly paid, far more expert, and obviously more sagacious colleagues who ply their trade as financial geniuses on Wall Street or its more far geographically far flung approximations, I recognize that my, or anyone’s, chances of being right on any macro call approximate my chances of being wrong on that call.) or the dollar is going to get trashed as part of the ill-fated government efforts to revive the moribund economy and capital markets. (Loyal readers know that I think this outcome is the far more likely one, with the same caveats featured in my earlier parenthetical digression.) Either way, oil, priced in dollars, benefits.
Second, oil has fallen a long way in a short time. This is, of course, no reason to buy anything. Remember the experts (not this one) who told people to buy GM at $15, $10, and $5 for the very same reason. I also know that oil has been much lower, around $10, in relatively recent memory. However, such lows were reached before China was a factor in the world oil markets. In fact, when oil was at $10, most “experts” thought that China would be a next exporter of oil in the 21st century. Now that China and India are in the market, their secular bid, even considering the poor state of their cyclical bid at present, should prevent the return of such cheap oil. We have to be near the floor here.
Third, a bullish bet on oil could serve as a hedge against my continuing overall bearish outlook on the stock market, manifested by my continuing, but shrinking, position in QQQQ puts.
USO=27.96 at this writing.
I don’t often like to put up posts dealing with pure investment or trading strategies; I don’t like to talk my positions and see the first parenthetical remark in the third paragraph of this post. However, more general observations that metamorphosize into specific trades might be of interest to my readers, so I’ve put up this post. These are not recommendations, only thoughts.
I’m liking oil at these levels for several reasons:
First, either the economy is going to recover (Loyal readers know that I think such a recovery is highly unlikely in any but the longest of terms, but, unlike my (usually) younger, much more highly paid, far more expert, and obviously more sagacious colleagues who ply their trade as financial geniuses on Wall Street or its more far geographically far flung approximations, I recognize that my, or anyone’s, chances of being right on any macro call approximate my chances of being wrong on that call.) or the dollar is going to get trashed as part of the ill-fated government efforts to revive the moribund economy and capital markets. (Loyal readers know that I think this outcome is the far more likely one, with the same caveats featured in my earlier parenthetical digression.) Either way, oil, priced in dollars, benefits.
Second, oil has fallen a long way in a short time. This is, of course, no reason to buy anything. Remember the experts (not this one) who told people to buy GM at $15, $10, and $5 for the very same reason. I also know that oil has been much lower, around $10, in relatively recent memory. However, such lows were reached before China was a factor in the world oil markets. In fact, when oil was at $10, most “experts” thought that China would be a next exporter of oil in the 21st century. Now that China and India are in the market, their secular bid, even considering the poor state of their cyclical bid at present, should prevent the return of such cheap oil. We have to be near the floor here.
Third, a bullish bet on oil could serve as a hedge against my continuing overall bearish outlook on the stock market, manifested by my continuing, but shrinking, position in QQQQ puts.
USO=27.96 at this writing.
Wednesday, March 4, 2009
“YEAH, I’LL ADMIT IT’S GOT ON SOME MILES ON IT, BUT IT STILL RUNS GOOD…”
3/4/09
I sent the following letter to the Chicago Sun-Times in response to Carol Marin’s piece on the 5th District Congressional primary:
3/4/09
In her 3/4/09 piece on the 5th District Congressional primary, Carol Marin concludes by writing “But they (the ward bosses in the 5th District) would be wise to tremble just a little. Because the earth under their feet just moved” with the nomination of Machine functionary turned independent County Board member Mike Quigley as the Democratic candidate for that Congressional seat.
The Machine may have some reasons to tremble, but the outcome of this primary is not one of them. First, how will Mike Quigley’s agenda in Washington be any different from that of a candidate sent to Washington with the blessing of the Machine in the primary? Quigley will surely get the Organization’s blessing in the general election, and he will just as surely push the same agenda either John Fritchey or Pat O’Connor, the two candidates in the race who best approximated “Machine candidates,” would have pushed: staunch support for President Obama’s agenda and, more importantly, plenty of federal money for the 5th District and for Chicago.
Second, while Mike Quigley “beat the Machine,” with a 22% plurality, the combined votes of Fritchey (18%) and O’Connor (12%) indicate that if the Organization could have decided on one of those two, it would have easily taken advantage of the low turnout and trounced Quigley and nominated its candidate, even in the 5th district that includes some of the most independent wards in the city.
If the Machine has anything to fear coming out of this primary, it is not so much Mike Quigley’s nomination as the lack of someone capable of enforcing party discipline and getting the ward organizations to unite behind one candidate in this disparate and somewhat difficult to control north side and north suburban district.
I sent the following letter to the Chicago Sun-Times in response to Carol Marin’s piece on the 5th District Congressional primary:
3/4/09
In her 3/4/09 piece on the 5th District Congressional primary, Carol Marin concludes by writing “But they (the ward bosses in the 5th District) would be wise to tremble just a little. Because the earth under their feet just moved” with the nomination of Machine functionary turned independent County Board member Mike Quigley as the Democratic candidate for that Congressional seat.
The Machine may have some reasons to tremble, but the outcome of this primary is not one of them. First, how will Mike Quigley’s agenda in Washington be any different from that of a candidate sent to Washington with the blessing of the Machine in the primary? Quigley will surely get the Organization’s blessing in the general election, and he will just as surely push the same agenda either John Fritchey or Pat O’Connor, the two candidates in the race who best approximated “Machine candidates,” would have pushed: staunch support for President Obama’s agenda and, more importantly, plenty of federal money for the 5th District and for Chicago.
Second, while Mike Quigley “beat the Machine,” with a 22% plurality, the combined votes of Fritchey (18%) and O’Connor (12%) indicate that if the Organization could have decided on one of those two, it would have easily taken advantage of the low turnout and trounced Quigley and nominated its candidate, even in the 5th district that includes some of the most independent wards in the city.
If the Machine has anything to fear coming out of this primary, it is not so much Mike Quigley’s nomination as the lack of someone capable of enforcing party discipline and getting the ward organizations to unite behind one candidate in this disparate and somewhat difficult to control north side and north suburban district.
THE BOLD FREE MARKETEERS ARE AT IT AGAIN
3/4/09
I sent the following letter to the Wall Street Journal in response to an article on the Fannie and Freddie bailout. The naked hypocrisy of those rugged capitalists at the Journal never ceases to amaze me:
3/4/09
In his 3/4/09 Opinion piece entitled “Rethinking the Fan and Fred Takeover,” in which he argues that the value of the common equity in Fannie and Freddie should have somehow been preserved rather than wiped out in the federal takeover of those ill-fated institutions, Holman W. Jenkins, Jr. concludes:
“Nothing was inevitable about the collapse of equity values that has made the banking problem so much more difficult.”
No, nothing was inevitable about the collapse of equity values in the financial sector…until managements squandered their shareholders’ capital on addle-brained “investments” to the point at which the taxpayers were forced to step in to save the creditors and the counterparties who also should have known better, but that is another issue.
Repeating arguments employed by Bill Miller and Edward Lampert, two money managers who made astronomical long bets on Fannie and Freddie and lost huge (and now, as is common with big time money managers who talk free market when times are good and beg for federal succor when things don’t go perfectly, are whining like petulant teenagers), Mr. Jenkins echoes the plaint that the government ought to encourage private investment in the financial sector. The idea, however, is not for the government to encourage investment for the sake of investment, and certainly not to encourage investment in poorly conceived, mismanaged institutions. In fact, the government ought to encourage very little, other than the free functioning of markets. And it is the function of the markets to encourage not just wholesale investment but, rather, investment in profitable enterprises, thus channeling capital to its most productive, rather than the most politically favored, uses. As those of us who still remember free markets know, that is how they once worked.
I sent the following letter to the Wall Street Journal in response to an article on the Fannie and Freddie bailout. The naked hypocrisy of those rugged capitalists at the Journal never ceases to amaze me:
3/4/09
In his 3/4/09 Opinion piece entitled “Rethinking the Fan and Fred Takeover,” in which he argues that the value of the common equity in Fannie and Freddie should have somehow been preserved rather than wiped out in the federal takeover of those ill-fated institutions, Holman W. Jenkins, Jr. concludes:
“Nothing was inevitable about the collapse of equity values that has made the banking problem so much more difficult.”
No, nothing was inevitable about the collapse of equity values in the financial sector…until managements squandered their shareholders’ capital on addle-brained “investments” to the point at which the taxpayers were forced to step in to save the creditors and the counterparties who also should have known better, but that is another issue.
Repeating arguments employed by Bill Miller and Edward Lampert, two money managers who made astronomical long bets on Fannie and Freddie and lost huge (and now, as is common with big time money managers who talk free market when times are good and beg for federal succor when things don’t go perfectly, are whining like petulant teenagers), Mr. Jenkins echoes the plaint that the government ought to encourage private investment in the financial sector. The idea, however, is not for the government to encourage investment for the sake of investment, and certainly not to encourage investment in poorly conceived, mismanaged institutions. In fact, the government ought to encourage very little, other than the free functioning of markets. And it is the function of the markets to encourage not just wholesale investment but, rather, investment in profitable enterprises, thus channeling capital to its most productive, rather than the most politically favored, uses. As those of us who still remember free markets know, that is how they once worked.
Sunday, March 1, 2009
DEFENDING CNBC’S RESIDENT CASSANDRA
3/1/09
In a 3/1/09 Chicago Tribune commentary piece, Mike Zucker, a stockbroker who resides in South Lake Tahoe, California, excoriates CNBC futures reporter Rick Santelli for Mr. Santelli’s expression of exasperation at the government’s plan to bail out millions of underwater and/or behind on their payments “homeowners.” Mr. Santelli, making perfect sense, said of the Obama administration’s plan “The government is promoting bad behavior!” Then Mr. Santelli went on to ask if “we really want to subsidize the losers’ mortgage.” While the word “loser” was poorly chosen, and one suspects Mr. Santelli regrets using it, Mr. Santelli’s major point was absolutely right; the Obama administration’s proposal is yet another in a long line of government schemes designed to punish the responsible to bail out the irresponsible.
Mr. Zucker disagrees, but his arguments are specious. He says that
“Nobody’s suggesting paying for neighbors’ mortgages or extra bathrooms. The proposal deals with a shared government/lender concept of moderating some mortgage rates and possibly some minor principal.”
Who exactly does Mr. Zucker think the “government” is in a “shared government/lender concept”? The government is indeed the taxpayer, the responsible taxpayer who pays his or her mortgage on time because he or she didn’t feel the need to look down his nose at others by an ostentatious display of wealth s/he did not have in the form of a house s/he could not afford.
Mr. Zucker, while castigating Mr. Santelli for not having read the Obama plan, is apparently a little short himself on the plan’s details. One component is a refinance plan, allowing Fannie Mae and Freddie Mac, both now wards of the state, to lend up to 105% of the value of home, up from the previous 80% of a home’s value. Who is on the hook for the $200 billion the government will put up to back these risky mortgages? The taxpayer. The second major component, of the plan, with a price tag of $75 billion, is to persuade lenders (if they can be identified, but that is another issue) to reduce the monthly principal and interest payment on a mortgage to 38% of borrower’s income. If the lenders do that, the government (i.e., the taxpayer) will provide a further subsidy to bring down the P&I to 31% of a homeowner’s income. The first component of the Obama plan puts the taxpayer on the hook for untold liabilities, the second goes right into the taxpayer’s pocket to, indeed, bail out his neighbor’s extra bathrooms and outrageous spending.
Mr. Zucker argues that not all lenders are in trouble because they bought too much house. This argument is ridiculous. If you can’t afford your mortgage payment, you bought too much house, and/or borrowed too much against your house, by definition. Even outside the most outrageous cases (e.g., the (perhaps, but probably not, apocryphal) guy who makes $50,000 and has $350,000 (or more) in mortgage debt and a home equity financed Lexus or two in the driveway), even those few people whom Mr. Zucker cites who actually put down 20% on a conventional mortgage and are now in default are, by definition, in more house than they can afford. When one buys a house, one does not spend to the absolute limit of one’s income and assume everything will at least stay the same, or, in most cases, improve, financially. A prudent buyer buys less house than s/he can afford and puts money aside just in case things take a turn for the worse on the financial and economic front. I’m sure those in favor of bailing out the irresponsible can find a few people who applied such quaint logic to their home purchases and subsequent spending habits but who still find themselves in danger of default, but I’d be willing to bet a very few. If this program were designed only to help out such responsible borrowers, it would be so small it would escape all but the most ardent political junkie’s notice.
Mr. Zucker, who apparently doesn’t watch CNBC and thus doesn’t know Rick Santelli’s position on the overall bailout mania in Washington, comes up with the following:
“Rick, rewarding bad behavior is giving huge subsidies to financial institutions that use them to buy other companies, or to treat their incapable executives to expensive junkets…”etc., etc.
Perhaps to Mr. Zucker’s surprise, this is a point on which he, I, and Mr. Santelli agree. Rick Santelli has consistently opposed every bailout that has come down the pike, and has done so to the strong opposition of his CNBC colleagues who, with a few exceptions, have been all for the bailouts that constitute the Bush/Obama financial policy.
The responsible are already bailing out the irresponsible through the low interest rates we receive on our savings, low interest rates that prevail largely because Obsequious Ben Bernanke and his colleagues at the Fed simply can’t bear to see any borrower, especially big borrowers with impressive sounding Wall Street names, fail. Now Mr. Obama is following in Mr. Bush’s bail out footsteps by proposing a massive government spending program, ultimately coming out of the taxpayers’ pockets, designed to bail out more people who simply borrowed too much money to buy too much house and too many toys. Again, the responsible will be forced to pick up the tab for the irresponsible.
And people wonder why the ranks of the responsible continue to shrink.
In a 3/1/09 Chicago Tribune commentary piece, Mike Zucker, a stockbroker who resides in South Lake Tahoe, California, excoriates CNBC futures reporter Rick Santelli for Mr. Santelli’s expression of exasperation at the government’s plan to bail out millions of underwater and/or behind on their payments “homeowners.” Mr. Santelli, making perfect sense, said of the Obama administration’s plan “The government is promoting bad behavior!” Then Mr. Santelli went on to ask if “we really want to subsidize the losers’ mortgage.” While the word “loser” was poorly chosen, and one suspects Mr. Santelli regrets using it, Mr. Santelli’s major point was absolutely right; the Obama administration’s proposal is yet another in a long line of government schemes designed to punish the responsible to bail out the irresponsible.
Mr. Zucker disagrees, but his arguments are specious. He says that
“Nobody’s suggesting paying for neighbors’ mortgages or extra bathrooms. The proposal deals with a shared government/lender concept of moderating some mortgage rates and possibly some minor principal.”
Who exactly does Mr. Zucker think the “government” is in a “shared government/lender concept”? The government is indeed the taxpayer, the responsible taxpayer who pays his or her mortgage on time because he or she didn’t feel the need to look down his nose at others by an ostentatious display of wealth s/he did not have in the form of a house s/he could not afford.
Mr. Zucker, while castigating Mr. Santelli for not having read the Obama plan, is apparently a little short himself on the plan’s details. One component is a refinance plan, allowing Fannie Mae and Freddie Mac, both now wards of the state, to lend up to 105% of the value of home, up from the previous 80% of a home’s value. Who is on the hook for the $200 billion the government will put up to back these risky mortgages? The taxpayer. The second major component, of the plan, with a price tag of $75 billion, is to persuade lenders (if they can be identified, but that is another issue) to reduce the monthly principal and interest payment on a mortgage to 38% of borrower’s income. If the lenders do that, the government (i.e., the taxpayer) will provide a further subsidy to bring down the P&I to 31% of a homeowner’s income. The first component of the Obama plan puts the taxpayer on the hook for untold liabilities, the second goes right into the taxpayer’s pocket to, indeed, bail out his neighbor’s extra bathrooms and outrageous spending.
Mr. Zucker argues that not all lenders are in trouble because they bought too much house. This argument is ridiculous. If you can’t afford your mortgage payment, you bought too much house, and/or borrowed too much against your house, by definition. Even outside the most outrageous cases (e.g., the (perhaps, but probably not, apocryphal) guy who makes $50,000 and has $350,000 (or more) in mortgage debt and a home equity financed Lexus or two in the driveway), even those few people whom Mr. Zucker cites who actually put down 20% on a conventional mortgage and are now in default are, by definition, in more house than they can afford. When one buys a house, one does not spend to the absolute limit of one’s income and assume everything will at least stay the same, or, in most cases, improve, financially. A prudent buyer buys less house than s/he can afford and puts money aside just in case things take a turn for the worse on the financial and economic front. I’m sure those in favor of bailing out the irresponsible can find a few people who applied such quaint logic to their home purchases and subsequent spending habits but who still find themselves in danger of default, but I’d be willing to bet a very few. If this program were designed only to help out such responsible borrowers, it would be so small it would escape all but the most ardent political junkie’s notice.
Mr. Zucker, who apparently doesn’t watch CNBC and thus doesn’t know Rick Santelli’s position on the overall bailout mania in Washington, comes up with the following:
“Rick, rewarding bad behavior is giving huge subsidies to financial institutions that use them to buy other companies, or to treat their incapable executives to expensive junkets…”etc., etc.
Perhaps to Mr. Zucker’s surprise, this is a point on which he, I, and Mr. Santelli agree. Rick Santelli has consistently opposed every bailout that has come down the pike, and has done so to the strong opposition of his CNBC colleagues who, with a few exceptions, have been all for the bailouts that constitute the Bush/Obama financial policy.
The responsible are already bailing out the irresponsible through the low interest rates we receive on our savings, low interest rates that prevail largely because Obsequious Ben Bernanke and his colleagues at the Fed simply can’t bear to see any borrower, especially big borrowers with impressive sounding Wall Street names, fail. Now Mr. Obama is following in Mr. Bush’s bail out footsteps by proposing a massive government spending program, ultimately coming out of the taxpayers’ pockets, designed to bail out more people who simply borrowed too much money to buy too much house and too many toys. Again, the responsible will be forced to pick up the tab for the irresponsible.
And people wonder why the ranks of the responsible continue to shrink.
“I RESEMBLE THAT REMARK”
3/1/09
The storied Fifth Congressional District of Illinois, the district of Rostenkowski, Flanagan, Blagojevich, and Emmanuel, will effectively select a new Congressman on Tuesday. Who’s going to win? No one knows. Reliable, independent polling is largely unavailable. State Representative John Fritchey has the support of most committeemen in the district. Alderman Patrick O’Connor of the 40th Ward has his powerful ward organization, and whatever support Mayor Daley can muster in the district, behind him. State Representative Sarah Feigenholtz and Cook County Commissioner Mike Quigley split the independent, progressive vote between them and with labor Tom Geoghegan. So no one knows who will win, but it is highly unlikely to be anyone but the aforementioned four current officeholders.
What prompts me to address this race was a comment Alderman O’Connor made in an interview on an Irish radio show on WCEV-AM to host Sean Ginnelly. Ginnelly, obviously cognizant of the advantage that Irish names have on the ballot in Chicago (or anywhere in this country, for that matter), laughed as he asked O’Connor “Does the name help out at all?”
Alderman O’Connor replied “I’ve always been proud of it, so I don’t hide from it for sure.”
What an idiotic reply! Who in anything resembling his right mind would hide from a name like Patrick O’Connor, especially in a district in which Dan Rostenkowski (whose surname surely didn’t hurt him in that district for LOTS of reasons, not least of which is the large number of Polish-American voters who live there) was defeated by a guy named Michael Patrick Flanagan? Alderman O’Connor is either too obtuse to see that Mr. Ginnelly was joking or too obsequious and timid to take any kind of risk by giving a light-hearted reply to Mr. Ginnelly’s obvious softball.
A personal point: If we ever move back into the city, any district in which people with names like Rostenkowski, Flanagan, Quigley, O’Connor, Feighenholtz, and Geoghegan are, or were, politically viable is a district in which I would want to live. Okay, so it’s not the 19th ward, but it still sounds like a great place despite that obvious shortcoming.
The storied Fifth Congressional District of Illinois, the district of Rostenkowski, Flanagan, Blagojevich, and Emmanuel, will effectively select a new Congressman on Tuesday. Who’s going to win? No one knows. Reliable, independent polling is largely unavailable. State Representative John Fritchey has the support of most committeemen in the district. Alderman Patrick O’Connor of the 40th Ward has his powerful ward organization, and whatever support Mayor Daley can muster in the district, behind him. State Representative Sarah Feigenholtz and Cook County Commissioner Mike Quigley split the independent, progressive vote between them and with labor Tom Geoghegan. So no one knows who will win, but it is highly unlikely to be anyone but the aforementioned four current officeholders.
What prompts me to address this race was a comment Alderman O’Connor made in an interview on an Irish radio show on WCEV-AM to host Sean Ginnelly. Ginnelly, obviously cognizant of the advantage that Irish names have on the ballot in Chicago (or anywhere in this country, for that matter), laughed as he asked O’Connor “Does the name help out at all?”
Alderman O’Connor replied “I’ve always been proud of it, so I don’t hide from it for sure.”
What an idiotic reply! Who in anything resembling his right mind would hide from a name like Patrick O’Connor, especially in a district in which Dan Rostenkowski (whose surname surely didn’t hurt him in that district for LOTS of reasons, not least of which is the large number of Polish-American voters who live there) was defeated by a guy named Michael Patrick Flanagan? Alderman O’Connor is either too obtuse to see that Mr. Ginnelly was joking or too obsequious and timid to take any kind of risk by giving a light-hearted reply to Mr. Ginnelly’s obvious softball.
A personal point: If we ever move back into the city, any district in which people with names like Rostenkowski, Flanagan, Quigley, O’Connor, Feighenholtz, and Geoghegan are, or were, politically viable is a district in which I would want to live. Okay, so it’s not the 19th ward, but it still sounds like a great place despite that obvious shortcoming.
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