Sunday, September 28, 2008

Waking Up from the American Dream

Like many people, I've been getting a crash course in economics over the past couple of weeks trying to make sense out of this Wall Street mess. Also like many people, I am fairly outraged at the idea that my tax dollars should be given to people and companies who got themselves into this mess in the first place with no conditions and no strings attached.

Thomas Friedman has written an incisive op-ed for the New York Times that goes beyond commenting on the immediate crisis and penetrates into what is now a multi-generational problem in American culture:

Many things make me weep about the current economic crisis, but none more than this brief economic history: In the 19th century, America had a railroad boom, bubble and bust. Some people made money; many lost money. But even when that bubble burst, it left America with an infrastructure of railroads that made transcontinental travel and shipping dramatically easier and cheaper.

The late 20th century saw an Internet boom, bubble and bust. Some people made money; many people lost money, but that dot-com bubble left us with an Internet highway system that helped Microsoft, I.B.M. and Google to spearhead the I.T. revolution.

The early 21st century saw a boom, bubble and now a bust around financial services. But I fear all it will leave behind are a bunch of empty Florida condos that never should have been built, used private jets that the wealthy can no longer afford and dead derivative contracts that no one can understand.

Worse, we borrowed the money for this bubble from China, and now we have to pay it back — with interest and without any lasting benefit.

Yes, this bailout is necessary. This is a credit crisis, and credit crises involve a breakdown in confidence that leads to no one lending to anyone. You don’t fool around with a credit crisis. You have to overwhelm it with capital. Unfortunately, some people who don’t deserve it will be rescued. But, more importantly, those who had nothing to do with it will be spared devastation. You have to save the system.

But that is not the point of this column. The point is, we don’t just need a bailout. We need a buildup. We need to get back to making stuff, based on real engineering not just financial engineering. We need to get back to a world where people are able to realize the American Dream — a house with a yard — because they have built something with their hands, not because they got a “liar loan” from an underregulated bank with no money down and nothing to pay for two years. The American Dream is an aspiration, not an entitlement.
[emphasis added]

Friedman's last paragraph here is the most pertinent. Americans need to realize that they have, at least since the Reagan administration, been living beyond their means and in the process sunk into a sand trap of debt. Capitalism is built on greed but that greed must be mediated by prudence. Americans didn't do that. We bought cars, electronics, houses, and anything else that the consumer culture told us we had to have. Like a child with a credit card in a candy store, we didn't care if it was good for us, we did not ask if we really needed it, and we never considered how we would pay for it.

At the same time, Americans stopped making anything except debt. Manufacturing jobs went overseas and the uneducated or unskilled found themselves settling for lower and lower paying jobs. At the same time the educated workers became undervalued and found themselves either taking jobs alongside the unskilled or becoming a part of a system of debt, either by taking jobs with these organizations or taking on considerable debt in order to get educated. Americans lost the understanding or appreciation of work (I am speaking as though I am not a member of this group, but I assure you that I am) because it did not result in anything for their employer or for themselves. Instead, the populace began treading water, with the level of living expenses rising and the weight increasing debt pulling them down. The entire culture was mobilized into a new generation of lenders and debtors with no way out.

A couple of weeks ago, the American economy came extremely close to a total collapse and many citizens have had their retirements and other savings or investments threatened, damaged, or lost altogether. This is not about Wall Street. This is not about Main Street. This is about the entire system of American economics as it exists today and the full fruition of a deregulated economy. The system does not need to be rescued. It needs to be changed.

Thursday, September 25, 2008

The Dark Bailout

I have a post detailing my thoughts on the possible billion dollar bail out of Wall Street soon, but for now, enjoy THE DARK BAILOUT:

Monday, September 22, 2008

"Let him kiss me with the kisses of his mouth: for thy love is better than wine." - Solomon 1:2

With all the shit going on in the world at the moment this is pretty trivial, but I found it amusing.
Pastor David Allison of Havens Corners Church in Ohio has taken issue with Katy Perry's hit song "I Kissed a Girl" and posted the message "I KISSED A GIRL AND I LIKED IT THEN I WENT TO HELL" on the church's billboard. Here is an MSNBC video of the story and the community's reaction:

Aside from the message on the sign, which buries the needle on the douche bag-o-meter, the other gem of this story is Allison's insistence that he and the members of his church love homosexuals. Because nothing says love like telling someone they are damned to hell.

And here is a Youtube video of the offending song:

And speaking of crazy Christian leaders, check out this story on Sarah Palin's former pastor, who established his career witch hunting. Literally.

I generally don't like guilt by association, but people can be judged by the company they keep and since Palin apparently endorses abstinence-only sex education, teaching creationism in science classrooms, and credits this church as helping her political career it is relevent to the ongoing debate of her qualifications for office.

UPDATE: For some reason this post is not showing the comments link, so just click on the headline, scoll down, and comment away.

Wednesday, September 17, 2008

And it all falls into place . . .

I'm not a conspiracy nut. I don't buy into them largely because they give the supposed conspirators far too much credit. I did not buy into the "9/11 was an inside job" story because to do so demands that I believe that the people who brought us the "intelligence" on Iraqi WMDs, the Mission Accomplished speech, a never ending war in Afghanistan, deregulation of the mortgage industry, and the FEMA response to Hurricane Katrina could possibly have the skill to pull off the biggest conspiracy in American history.

No, they are not that skilled. But they are opportunistic, as the fallout of the September 11th attack proves. And now with the economy swirling in the bowl and foreclosures occurring left and right, the Republican party has found a way to turn this to their advantage.

From The Michigan Messenger:

The chairman of the Republican Party in Macomb County, Michigan, a key swing county in a key swing state, is planning to use a list of foreclosed homes to block people from voting in the upcoming election as part of the state GOP’s effort to challenge some voters on Election Day.

“We will have a list of foreclosed homes and will make sure people aren’t voting from those addresses,” party chairman James Carabelli told Michigan Messenger in a telephone interview earlier this week. He said the local party wanted to make sure that proper electoral procedures were followed.

State election rules allow parties to assign “election challengers” to polls to monitor the election. In addition to observing the poll workers, these volunteers can challenge the eligibility of any voter provided they “have a good reason to believe” that the person is not eligible to vote. One allowable reason is that the person is not a “true resident of the city or township.”

The Michigan Republicans’ planned use of foreclosure lists is apparently an attempt to challenge ineligible voters as not being “true residents.”

The result here is pretty obvious. Many who have lost their homes come from poor or less affluent neighborhoods, which tend to vote Democrat. And anyone who has lost their home is likely to show some rage at the the incumbent political party, so they are also likely to vote against the Republicans.

Like I said, I'm not a conspiracy theorist. I would not dream of suggesting that the Republicans used deregulation to deliberately sabotage the housing market and disenfranchise Democratic voters while passing tax cuts to the wealthiest members of society and giving their friends and donors in the oil lobby incentives that resulted in the biggest profits in history. That would be crazy talk.

But it sure seems as though the Republicans are doing their best to make it look that way.

Monday, September 15, 2008

All Decks Brace for Impact

Here is a condensed version of this AP article posted at MSNBC.

Street scrambles as Lehman deal collapses

NEW YORK - A failed plan to rescue Lehman Bros. was followed Sunday by more seismic shocks from Wall Street, including an apparent government-brokered takeover of Merrill Lynch by the Bank of America.

A forced restructuring of the world's largest insurance company, American International Group Inc., also weighed heavily on global markets as the effects of the 14-month-old credit crisis intensified.

A global consortium of banks, working with government officials in New York, announced late Sunday a $70 billion pool of funds to lend to troubled financial companies. The aim, according to participants who spoke to The Associated Press, was to prevent a worldwide panic on stock and other financial exchanges.

Ten banks -- Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS -- each agreed to provide $7 billion "to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."

The Federal Reserve also chipped in with more largesse in its emergency lending program for commercial and investment banks.

* * *

Futures pegged to the Dow Jones industrial average fell more than 300 points in electronic trading Sunday evening, pointing to a sharply lower open for the blue chip index Monday morning. Asian stock markets were also falling.

Lehman Brothers announced early Monday that it would file for Chapter 11 bankruptcy protection. All potential buyers walked away after the U.S. Treasury refused to budge on its refusal to provide any takeover aid, as it had done six months ago when Bear Stearns faltered and earlier this month when it seized Fannie Mae and Freddie Mac.
* * *

The deal would not come without risks, however. Merrill Lynch, like many of its Wall Street peers, has been struggling with tight credit markets and billions of dollars in assets tied to mortgages that have plunged in value. Merrill has reported four straight quarterly losses.

And Bank of America's own finances are far from robust. As consumer credit deteriorates, the bank has seen its profits decline, and the company is still in the midst of absorbing the embattled mortgage lender Countrywide Financial, which it acquired in January.

The stunning weekend developments took place as voters, who rank the economy as their top concern, prepare to elect a new president in seven weeks.

* * *

The end of Lehman may not stop the financial crisis that has gripped Wall Street for months, analysts said. More investment banks could disappear soon.

The independent broker-dealers "are going the way of the dodo bird," said Bert Ely, an Alexandria, Va.-based banking consultant.

That's partly because some of the firms, particularly Merrill, made bad bets on real estate. But several analysts said that investment companies will need the deep pockets of commercial banks to survive the next few years.

* * *

The common denominator of the financial crisis, analysts said, is the bursting of the housing bubble. Home prices have dropped on average 25 percent so far. Roubini predicted they could drop another 15 percent.

The crisis has begun to slow the broader economy as banks make fewer loans and consumers have begun cutting spending. Many economists are now forecasting that the economy could slip into recession by the end of this year and early next year.

That, in turn, could cause additional losses for commercial banks on credit cards, auto loans and student loans. [Emphasis added.]
* * *

The International Monetary Fund predicted earlier this year that total losses from the credit crisis could reach almost $1 trillion. So far, banks have only taken about $350 billion in losses.

Commercial banks are also starting to feel the pinch. Eleven have closed so far this year, including Pasadena, Calif.-based IndyMac Bank, which had $32 billion in assets and $19 billion in deposits.
* * *

Individual customers are starting to get nervous about the financial health of their banks for the first time in generations, he said. Whalen's firm analyzes the safety and soundness of banks for business clients, but began receiving inquiries from individuals in the past two months for the first time, he said.

"If we don't get ahead of this, we are going to face a run on the retail banks by election day," he said. [Emphasis added.]

Thursday, September 11, 2008

Wednesday, September 10, 2008

Stick Your Nozzle Inside My Pipeline and Fill Me Up

You just can't make this shit up:

Government officials handling billions of dollars in oil royalties engaged in illicit sex with employees of energy companies they were dealing with and received numerous gifts from them, federal investigators said Wednesday.

The alleged transgressions involve 13 Interior Department employees in Denver and Washington. Their alleged improprieties include rigging contracts, working part-time as private oil consultants, and having sexual relationships with - and accepting golf and ski trips and dinners from - oil company employees, according to three reports released Wednesday by the Interior Department's inspector general.

The investigations reveal a "culture of substance abuse and promiscuity" by a small group of individuals "wholly lacking in acceptance of or adherence to government ethical standards," wrote Inspector General Earl E. Devaney.

The reports describe a fraternity house atmosphere inside the Denver Minerals Management Service office responsible for marketing the oil and gas that energy companies barter to the government instead of making cash royalty payments for drilling on federal lands. The government received $4.3 billion in such Royalty-in-Kind payments last year. The oil is then resold to energy companies or put in the nation's emergency stockpile.

Between 2002 and 2006, nearly a third of the 55-person staff in the Denver office received gifts and gratuities from oil and gas companies, the investigators found.

Devaney said the former head of the Denver Royalty-in-Kind office, Gregory W. Smith, used illegal drugs and had sex with subordinates. The report said Smith also steered government contracts to a consulting business that was employing him part-time.

At least now we know that the American public wasn't the only one getting screwed by the oil companies.