Friday, October 24, 2008

Anna Schwartz

Anna Schwartz is 92 years old, lived through the Great Depression, and wrote a book about it. The Wall Street Journal interviewed her about the current situation:
"The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."

So even though the Fed has flooded the credit markets with cash, spreads haven't budged because banks don't know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is "the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue."

Thursday, October 23, 2008

This Is Why Most Americans Opposed the Bailout

From an op-ed in the NY Times, written by David Scharfstein and Jeremy Stein, two Harvard professors:

Although there are many things to like about the government’s plan, the failure to suspend dividends is not one of them. These dividends, if they are paid at current levels, will redirect more than $25 billion of the $125 billion to shareholders in the next year alone. Taxpayers have been told that their money is required because of an urgent need to rebuild bank capital, yet a significant fraction of this money will wind up in shareholders’ pockets — and thus be unavailable to plug the large capital hole on the banks’ balance sheets.

Moreover, given their own equity stakes, the officers and directors of the nine banks will be among the leading beneficiaries of the dividend payout. We estimate that their personal take of the dividends will amount to approximately $250 million in the first year.

Wednesday, October 22, 2008

Samuel Adams

No people will tamely surrender their Liberties, nor can any be easily subdued, when knowledge is diffusd and Virtue is preservd. On the Contrary, when People are universally ignorant, and debauchd in their Manners, they will sink under their own weight without the Aid of foreign Invaders.

-Samuel Adams
1775 - letter to James Warren

The Patriot Post

Tuesday, October 21, 2008

Thursday, October 16, 2008

What Caused The Economic Downturn

“Your congressman is trying to make mortgages more expensive. Ask him why he opposes the American dream of home ownership.”
So said a Fannie Mae sponsored commercial issued in response to some in the federal government calling for increased regulation or competition. Unfortunately, even after a $200 billion bailout and Fannie Mae going into federal conservatorship - along with the ripple effect largely responsible for the $800 billion "rescue" bill - expensive mortgages are the least of our worries.

What is Fannie Mae? They, coupled with Freddie Mac, are a Government Sponsored Entity (GSE). Which means they are private corporations created and sponsored by the federal government. Fannie was established during the Great Depression in order to provide more liquidity to the mortgage market. They did this by buying up mortgages that other banks made to consumers. They would then resell some of these, while holding on to others. This buying activity allowed banks to make more and more loans, because they didn't have to service them. It was generally thought of as a good idea because banks making lots of loans meant it was easier for average citizens to buy homes. In fact, through these programs, US home ownership steadily rose.

Steadily, that is, until the last decade, during which time home ownership rates increased quickly as interest rates fell and the buying and selling of loans increased. There were other entities that competed against Fannie Mae and Freddie Mac in the mortgage buying market, but, as the director of the Congressional Budget Office Dan Crippen said, "The debt and mortgage-backed securities of GSEs are more valuable to investors than similar private securities because of the perception of a government guarantee."

This government-induced value made Fannie Mae very profitable. So profitable that they were able to pay their executives tens of millions of dollars in salaries and bonuses. They were also able to use those profits to lobby Congressional leaders with millions of dollars.

As competition grew, Fannie became more aggressive in what kinds of loans they would buy. They had begun to lose market share to competitors, and naturally wanted to retake the lead. But they also had other motivators beyond profits,
“Fannie Mae faced the danger that the market would pass us by,”

“We were afraid that lenders would be selling products we weren’t buying and Congress would feel like we weren’t fulfilling our mission. The market was changing, and it’s our job to buy loans, so we had to change as well.”
And what was the underlying mission that Fannie felt pressure to fulfill? Artificially facilitate mortgages to ever more and more people. As a result, between 2005 and 2007 Fannie guaranteed three times as many risky loans (loans made without documentation of income or savings) as it had in all earlier years combined. And that doesn't even include subprime loans.

During this same period, it became apparent to some members of Congress and the financial industries that Fannie Mae was in danger. But because of Fannie's government mandated "mission" - facilitate more mortgage loans, no matter what - all attempts to regulate or otherwise reign Fannie in were defeated. Despite sharp warnings from officials like Federal Reserve Chairman Alan Greenspan,
"Enabling these institutions to increase in size...we are placing the total financial system of the future at a substantial risk."
And increase in size they did. By July of this year they owned or guaranteed half of the $12 Trillion mortgage industry. Their scope meant just about every mortgage lender in the country, both large and small, relied on Fannie and Freddie to help them continue to make loans. Worse yet, because of the government-backed nature of the GSE's,"
Although banks are typically prohibited from concentrating their money in the stock or bonds of any one company, those regulations create an exemption for debt issued by Fannie Mae and Freddie Mac, which have long been considered the safest of investments."
Not only were banks heavily reliant upon Fannie, but they were allowed to dangerously leverage themselves because Fannie was backed by the government.

So we set up a program whereby the federal government can influence the market (making it behave contrary to its nature), force that program to expand until it dominates that market, and then induce excessive risk taking because it's backed by the very same government.

That is what caused the economic crisis. It wasn't greed. It wasn't capitalism.

It was government.

Monday, October 13, 2008

What Caused the Bank Failures?

Instead of thinking, "hmm, I wonder if it's a good idea to rely so much on sub-prime mortgages?", Fannie Mae executives were painstakingly planning and executing the hilarious practical joke of covering an entire car in Post-It notes.

Friday, October 10, 2008

Joe Biden=In Command of Facts=Blithering Balderdash

Mark Steyn:
Senator Biden was glib and fluent and in command of the facts — if by “in command of the facts” you mean “talks complete blithering balderdash and hogwash.” He flatly declared that Obama never said he would meet Ahmadinejad without preconditions. But, on Debate Night, the official Obama website was still boasting that he would meet Ahmadinejad “without preconditions”. He said America spends more in a month in Iraq than it’s spent in seven years in Afghanistan. Er, America has spent over $700 billion in Afghanistan since 2001. It’s spending about $10 billion a month in Iraq. But no matter. To demonstrate his command of the “facts”, Senator Biden sportingly offered up his own instant replays:

“My friend John McCain voted 422 times against tax cuts for the middle classes. Let me repeat that so the American people are clear on this. My friend John McCain voted 673 times against tax cuts for the middle classes.”

The problem was that it all sounded drearily senatorial. Mention any global crisis — civil war in Bosnia, genocide in Darfur, Russian aggression in Georgia, the lack of five-star restaurants in Wales — and Biden has been there, usually within the last two weeks, and always at public expense. What the American taxpayer gets for the Emir of Delaware’s frequent-flyer miles is harder to discern. Biden was doing his best to turn in a decent karaoke version of Lloyd Bentsen, but, unfortunately, Governor Palin declined to play Dan Quayle. That left Joe sounding like an ancient pol being generically vice-presidential. Sarah, at her best, sounded like the citizen-politician this country’s Founders intended. She hasn’t voted 397 times against this or that in the U.S. Senate, because she’s been running a state, and a town, and a commercial fishing operation. She’s a doer, not a talker, which is why so many of my fellow professional talkers disdain her.

When Regular Joe Six-Pack Bluecollar Biden tried to match her on the Main Street cred, it rang slightly wacky. “Look,” he said, “All you have to do is go down Union Street with me in Wilmington or go to Katie’s Restaurant or walk into Home Depot with me, where I spend a lot of time.” Why? Is he moonlighting as a checkout clerk on the evening shift? Or is he stalking that nice lady in Lighting Fixtures? As for Katie’s Restaurant, ah, I’m sure it was grand but apparently it closed in 1990. In the Diner of the Mind, the refills are endless and Senator Joe is sitting shootin’ the breeze over a cuppa joe with a couple other regular joes on adjoining stools while Betty-Jo, the sassy waitress who’s tough as nails but with a heart of gold, says Ol’ Joe, the short-order cook who’s doing his Sloppy Joes just the way the Senator likes ‘em, really appreciates the way that, despite 78 years in Washington, Joe Biden is still just the same regular Joe Six-Pack he was when he and Norman Rockwell first came in for a sarsaparilla all those years ago. But, alas, while he was jetting off for one-to-one talks with the Deputy Tourism Minister of Waziristan, the old neighborhood changed.

The Chicago Way

Editorial from John Kass at the Chicago Tribune
The Chicago Way is a road the Beltway media establishment dare not travel. It must frighten them. It conflicts with their fairy tale about Obama as reformer, and they're much too busy rummaging through garbage cans in Alaska to bother about Chicago's political alleys.

But any child in Illinois knows the Chicago Way leads through the most politically corrupt city in America, in a politically corrupt state, where muscle trumps reason, where Democratic warlords brazenly promote their offspring into public office, where even souls are offered up for sale.

The national media have never wanted to understand, much less expose, political corruption here, or examine how Obama prospered under the Daley machine's guidance. A trip down the Chicago Way would force them to re-examine their ridiculous narrative that sets Obama as a political reformer riding a white horse, or is that a winged unicorn?

Thursday, October 09, 2008

Does Eagle Mountain Need UTA?

Eagle Mountain is about 45 miles from Salt Lake City. It is very much a bedroom community, with most people living in EM and commuting to work in either SLC or the Provo area to the southeast. It is such a new area that roads are often overcrowded, as supply has not kept up with demand.

So in comes the Utah Transit Authority (UTA) to provide express bus services to Eagle Mountain and its neighbor, Saratoga Springs. It will cost an additional quarter-cent in sales tax as well as a $200,000 a year federal grant for the first three years of the new route. After that 3 year period is up, UTA says FrontRunner will be at Thanksgiving Point, "boosting the service". At that point, the route would likely change from going to Salt Lake to just going to the FrontRunner stop.

UTA claims that the bus service would get 25% of commuter traffic, reducing congestion. Lehi, which has seen its city streets explode with traffic as EM and SS grew, would see a 15% drop in traffic, according to the UTA. However, some have expressed deep skepticism in those numbers, citing historical data showing traffic capture of only 1-2%. The heavy commuting nature of Eagle Mountain would likely mean higher commuter-transit usage than other areas, but wouldn't push the numbers quite that significantly.

Cost for this bus line includes:

-$600,000 in federal money
-sales tax money, which the city estimates would have been $10,000 in'07-'08
-the regular $4 per ride, $160 a month bus fare.

Once the two cities approve the bus lines and are annexed into the UTA taxing district, they are guaranteed to pay the tax, but are not guaranteed the bus service. That is up to the UTA commissioners to decide, though it's very unlikely that the service would be removed.

My question is, is UTA necessary? Currently it costs me $160 a month to drive to work in Salt Lake City, and it takes me about an hour. With my carpool partner, the cost is cut in half to $80 a month, and driving in the carpool lane saves time. Now, that doesn't include the cost of buying or maintaining the car. But I would own it even if I didn't commute to work. Maintenance costs obviously are increased because of the increased mileage, but I do it myself and it isn't substantial. With even one more carpool partner, the effective maintenance costs would be decreased further.

Is there a more targeted, more efficient way to provide for mass transit than UTA? I know and understand the benefits of mass transit. What I don't understand is how two passengers in a vehicle costs less than a bus full of people. Also, in addition to my own monthly fare cost, plus the increased sales tax, why must people in Arkansas or South Dakota foot the $600,000 bill to subsidize my commute?

Eagle Mountain residents will vote on the issue in November, and the question I'd like answered by then is, is there an alternative to UTA-directed mass transit?

Sources used:,5143,700264432,00.html

Wednesday, October 08, 2008

Jameson Jones Fund

As reported at the Daily Herald, and repeated here,
For months, Mark Myers nursed the pumpkin patch in the empty lot next to his Saratoga Springs house.

It's been a tradition in the neighborhood for years now; when the pumpkins are plump and orange, kids come running to pick their favorite ones to take home. Back when it all started, next-door neighbor Cindy Jones helped plant the first seeds.

"This is something I just do for fun, just for a hobby," Myers said.

But this year, Myers tended to his pumpkins with a specific purpose. In February, he and the rest of the tight-knit neighborhood reeled from news that the Joneses' youngest child, a 3-year-old boy with Down syndrome named Jameson, was diagnosed with leukemia.

Myers and others around the block hatched a plan: The pumpkin sale this year would be a fundraiser to help the family. The neighbors sought donations for the sale and eventually secured some extra pumpkins, corn stalks and straw bales. The last step was telling the Joneses the sale was for them.

"From the moment they decided to plant the seeds, they knew they'd be donating this money to Jameson," neighbor Heather Anderson said. "Everybody in the community pitched in on this, and they had no idea the whole time."

Myers said he'll never forget the day he asked Jameson's father, Troy, to meet him in his driveway.

"He said, 'There's probably other people who could use it,'" he said. "I said, 'No, not as much as you guys could use it. You guys have been through hell and back.'"

Consistent rain didn't stop people from coming out for the sale Saturday afternoon. As friends and new faces alike paced the rows of pumpkins looking for the perfect one, Jameson got a wheelbarrow ride down the street from Myers.
I found out today that the pumpkin sale was only one day - last Saturday. But the reporter of the story told me that there is a fund set up at Mountain America Credit Union. You can go to any branch and ask to contribute to the Jameson Jones fund.

Tuesday, October 07, 2008

Weezer - The Good Life

A gold star to whoever identifies the actress who plays the delivery girl in this video.

Oh, and youtube fans must watch Weezer's "Pork and Beans" video.

Bailout? Ask Ex-Presidents For A Loan

As the world ponders the merits and effectiveness of a $800 Billion bailout plan, and investors large and small wonder if a Great Depression 2.0 is on its way, it seems timely to discuss how much money our living former presidents are making. I don't mean making like how regular citizens make money, but making from the United States government. That means from taxpayers.

Their retirement allotment comes to $191,000 a year. But they are also entitled to much, much more in the form of payments for a wide array of services. Things like postage, office supplies, travel, office rent, etc. Which doesn't really sound that nefarious on the surface. Until, that is, you see what those presidential telephones are costing us.

George Bush, Jimmy Carter, Gerald Ford, Ronald Reagan, and Bill Clinton spent $904,000 on telephone service, and $7 million on rent. During that time, Bill Clinton received the lion share in those categories, asking for $420,000 for telephone and $3.2 million for office rent.

In all, the price tag since 2001 for the three living presidents is $17.5 million dollars. Jimmy Carter cost $4 million, George Bush cost $5.5 million, and Bill Clinton cost $8 million. This, despite the fact that all are millionaires.

So as politicians and citizens alike ponder the Main Street vs. Wall Street debate, and wonder why the government is giving hundreds of billions of dollars to huge banks, perhaps we could also discuss why we're giving our ex-presidents such a substantial bail out of their own.

Monday, October 06, 2008

Biden's Low Expectations

I read the following comment on a blog last week, and thought it share-worthy:
I think Biden Rocked!

He came in with low expectations. Especially after the Couric interview where he had a huge gaffe of explaining that when the Stock Market crashed, FDR got on TV. I was fully expecting a gaffe-fest from him but he was able to overcome this with clearly rehearsed lines from his advisors.

But he was able to sidestep many direct questions by Ifill choosing instead to offer rebuttals to Palin’s arguments or further explain his ticket’s position.

I wasn’t that impressed how he kept using the same words over and over again like “fundamental” and how he kept having to repeat things. He did do a good job relating to the middle class by mentioning Scranton repeatedly, which we all know is a blue-collar, middle-class town.

He was only incoherent one time, trying to explain the McCain tax plan, and he made one big gaffe when he said the U.S. and France kicked Hezbollah out of Lebanon . But I wouldn’t hold all of his Foreign Relations experience against him.

Friday, October 03, 2008

Ads From The Debate

The ads using material from the debate last night are already out. Here's the first two that popped up on my youtube account:

First, from Obama,

And from McCain,

Juanes - La Noche

So I just recently discovered Juanes. He's a Columbian singer, and while I still don't know a ton about him, I've liked what I've heard so far. Here's a song called "La Noche":

Thursday, October 02, 2008

Joe Biden, Clean & Articulate

There has been much talk lately of Gov. Palin's performance in interviews with Katie Couric and Charles Gibson. With help from Gibson's editors and Couric's anti-female feminism, bloodthirsty Democrats, eager to wash away the stain of their own dirty politics, are crowing about Palin's supposed blunders.

In light of this, I thought it instructional to point out her counterpart's own blunders. Blunders which have earned him the nickname, gaffe-o-matic.

Joe Biden plagiarist:

Joe Biden Indians & Dunkin Donuts:

Joe Biden Clean and Articulate:

Joe Biden forgetting TVs and an FDR presidency didn't exist in 1929:

Joe Biden tells wheelchair bound man to "stand up":

Joe Biden's fake helicopter story:

And that's leaving out how he slammed his running mate's campaign commercial without even having seen it, accidentally opposed his running mate's position on the AIG bailout, and telling a supporter that he and Obama aren't supporting clean coal when in fact Obama is - and that just days earlier he gave a speech in favor of using more coal.

I realize Biden doesn't think the presidency lends itself to on the job training, but you'd think after 20+ years in the Senate he'd have the VP thing down.