The Issa Alternative

If liquidity is what we need, then can someone tell me what is wrong with the Issa Alternative:

Under the plan, Congress authorizes the Treasury to issue up to $700 billion dollars in unique callable T-Bills (Guaranteed Recovery Bonds) to be purchased by private investors to capitalize a Rescue Fund that will be managed by the Treasury Department. Financial institutions borrow from the fund at a rate that fully covers the interest paid to investors in the Recovery Bonds plus an insurance premium to protect taxpayers.

Full Issa Alternative.

Filed under: National , Henry Paulson, Rep. Darrell Issa, Wall Street bailout

Brother Paul on the bailout bill

“We’ve already pumped in $700 billion, here’s another $700 billion. This is going to destroy the dollar. That’s what you should be concerned about.”

Filed under: National , inflation, Ron Paul, Wall Street bailout

Barney’s rubble

I am certain there is a policy component to the current financial mess we are in, but it is clear to me that the extension of credit to people with no ability (or intention) to pay is the foundation.

And that blame rests squarely on the shoulders of affirmative-action lending practices. We all know you can’t legislate morality. It is equally true that you cannot legislate wealth. Wealth and morality are only earned by individual choice.

When people chose to take advantage of loopholes in policy to achieve financially immoral ends, well, we see the result in examples of consumers and institutions walking away from debt they never had the intention of honoring.

Capitalism just can’t work that way:

Five years ago, Barney Frank vouched for the “soundness” of Fannie Mae and Freddie Mac, and said “I do not see” any “possibility of serious financial losses to the treasury.”

Moreover, he said that the federal government has “probably done too little rather than too much to push them to meet the goals of affordable housing.”

Earlier this year, Senator Christopher Dodd praised Fannie Mae and Freddie Mac for “riding to the rescue” when other financial institutions were cutting back on mortgage loans. He too said that they “need to do more” to help subprime borrowers get better loans.

Filed under: National , Barney Frank, Chris Dodd, Fannie Mae, federal housing policy, Freddie Mac, subprime mortgages, Wall Street bailout

Details on T.A.R. Program hard to come by

Being sort of a detail oriented person at times, I’ve grown a bit frustrated trying to wade through the rhetoric about this bailout plan.

Thank God for Wikipedia.

They’ve got the entire T.A.R. Program spelled out in details beyond “$700 billion bailout.”

Filed under: National , credit crunch, Henry Paulson, Wall Street bailout

Three debate options

Instead of having a debate tonight, I suggest the candidates sit on stage, reflecting in silence, while these three songs are beamed live to a national audience.

Filed under: Concepts, National , Barack Obama, Chick Corea, Crysatal Silence, Evening Star, Fripp and Eno, John Coltrane, John McCain, Naima, presidential debate

The government’s “destructive strategy”

I’m no disciple of Ron Paul, but for two years now I have enjoyed listening to his perspectives on the state of things.

Then come the scare tactics. If we don’t give dictatorial powers to the Treasury Secretary “the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet.” Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

Filed under: National , Ron Paul, Wall Street bailout

Jeffrey Sykes’ thought for the day on the credit crunch and Wall Street bailout

I guess you’ve been hearing about this bailout of Wall Street. You know, fat cat in a top hat. Thinks he’s an aristocrat. That’s crap.

Jim Morrison aside, crap is what they are talking about. Or junk as it is known on Wall Street.

In layman’s terms, the problem can be summed up as follows: Capitalism is a big shell game. One takes something of value from person A and sells it outright or transforms it and sells it to person B at a higher price, the difference is called profit.

Now we’ve evolved in our MBA wisdom away from widgets and tangible items of value to these complex paper-only items called bonds, or more MBA style “collateralized debt obligations.”

In essence, some guys sat around and figured the traditional loan and finance game was booked, kind of like the job market for a Gen-X’er waiting for a baby boomer to retire, so they created these CDOs by pooling assets and selling the debt to another financial house to raise capital to loan to third parties. At least that’s my understanding.

Because of the expansion of credit to everybody in America with our without the ability to pay, and because even more guys in finance needed a job, home loans got pushed to people who could not afford them and to others who never intended to pay them back. So you had the cornerstone of the American Dream becoming a tool in a high-stakes game of financial chance. Like Texas Hold’Em, you had bankers betting the value of the collateral (the home) would rise, and you had mechanics and wives of McDonald’s employees watching “Flip That House” thinking “I can get one of these zero-down loans, put in $2,000 in the bathroom sink and kitchen cabinets, and sell it to another schmuck for 5 percent more than my loan. Yeah, yeah, then I can buy that new handbag at Gucci and drive my Escalade to the beach house I rented for $4,500 for five nights.”

So in essence you had lots of people buying in to this idea that they could make a quick buck and then blow that money on consumerism that would go up in smoke in a flash of instant gratification.

The problem is that the immutable law of supply and demand reacts to a flood of supply by undercutting the price. When they all woke up, the value was diminished, and in some cases worthless because of the folks who never intended to put cash into the pipe in the first place.

So now we’ve got bankers and finance journalist running around like mad screaming “Bailout! Lo, the end is nigh! Bailout!”

I say no. I say let the bankers get a shovel and start mixing concrete and pushing wheelbarrows. They’d be more useful then.

While you’re at it, take all the jewel laden wenches I see on QVC and HSN pitching crap nobody really needs to buy. That’s half the problem. Consumerism now drives 65-70 percent of our country’s GDP. The implications of that are enormous and far too complex for me to get into here.

But when a guy in Eden loses his job making underwear to a guy in China because the Chinese can make it cheaper so we can buy it cheaper, something is really wrong. And when we have to have a government bailout of the finance industry to keep US consumer spending artificially propped up so the Chinese worker can keep that nation’s GDP growth above 10 percent by cranking out more and more crap to sell on QVC, we are, in a word, fucked.

Now there’s an a priori concept your can take to the bank.

Filed under: Concepts , credit crunch, Wall Street bailout

The Subprime Primer

I got this email containing a .pps slideshow. Totally hilarious.

Subprime Primer

Does contain the f-word a few times. I never knew stick figures could be so funny.

If anybody knows how to better format a .pps file for the web, let me know.

Filed under: Concepts, National, Random , credit crunch, political satire, subprime mortgages, Wall Street bailout

Webster critical of Brad Miller’s ties to Fannie/Freddie

From the campaign of former state Sen. Hugh Webster, GOP candidate for Congress in the 13th District:

Miller Recipient of Fannie Mae / Freddie Mac Funds

In his three terms in Congress, Brad Miller has become a favorite son of Fannie Mae and Freddie Mac. He is among the top of the list of recipients in the House of Representatives of political contributions from the mortgage lenders having received $18,000 at last report. It is no wonder that Brad Miller and others in Washington are supporting the bailout of Fannie and Freddie and other troubled financial institutions. In fact, Miller has received over half a million dollars in contributions from finance, insurance and real estate political action committees.

How can a man so tied to these institutions be trusted to do what is right for hard working North Carolinians in these tough economic times? While these companies were spending recklessly and throwing caution to the wind, Miller was happily accepting and spending their money to further his political career.

Former State Senator Hugh Webster believes that these companies, their executives, and directors must deal with the mistakes they made and not rely on the hardworking American taxpayer. In a free market society, it is not the responsibility of the taxpayer to pay for the mistakes and wrongdoings of the institutions that they trusted.

Filed under: National, North Carolina , Brad Miller, credit crunch, Fannie Mae, Freddie Mac, Hugh Webster, Wall Street bailout

“Oz never did give nothing to the tin man”

I wrote a song about 15 years ago called “Why Comply?” I was about 23 and just diving into this period of introspection on the state of things and the reality of my surroundings. I was working as a minor court official at the time, and one of the papers that crossed my desk a lot was called “OFA-FTC” which stood for “Order for Arrest for Failure to Comply”

I have this pretty signigicant anarchist streak in my veins, so I got to thinking about all the house of cards and mantles of power that define our surface realities and I got this image in my mind of two people lying in the grass looking at a blue sky and taking it all in and one turns to another while thinking
“Why do we put up with all this nonsense” and asks “Why Comply?”

I’ve never played that song in public until earlier this month when I played the local coffee house. The song was prety well received and my drummer friend really liked it so we practiced it last night. The bassist immediately kicked in a great bass groove over the Gmaj13 and Fmaj13 chord shapes.

What fun.

Before we ended the song, the drummer started singing the lyrics to this America song and we realized our groove was real similar to the main phrases in Tin Man.

I thought that was a pretty good compliment. They say talent borrows, but genius steals.

We play our first gig as a band this Saturday at Backstreet Buzz on Market Street in Reidsville.

Filed under: Music, Reidsville , live music, Reidsville, Third Moment, Tin Man

Let the guilty be accountable

Amidst the clamor for a Wall Street bailout, I got to wondering what a straight shooter like Ron Paul had to say about the government’s proposed $1 trillion magic wand plan.

As expected, Paul did not disappoint. It’s too bad we left the path of common sense, planning and moderation so long ago.

Ron Paul via CNN:

Because the boom comes about from an increase in the supply of money and not from demand from consumers, the result is malinvestment, a misallocation of resources into sectors in which there is insufficient demand.

In this case, this manifested itself in overbuilding in real estate. When builders realize they have overbuilt and have too many houses to sell, too many apartments to rent, or too much commercial real estate to lease, they seek to recoup as much of their money as possible, even if it means lowering prices drastically.

This lowering of prices brings the economy back into balance, equalizing supply and demand. This economic adjustment means, however that there are some winners — in this case, those who can again find affordable housing without the need for creative mortgage products, and some losers — builders and other sectors connected to real estate that suffer setbacks.

The government doesn’t like this, however, and undertakes measures to keep prices artificially inflated. This was why the Great Depression was as long and drawn out in this country as it was.

Filed under: National , credit crunch, Paulson plan, Ron Paul, Wall Street bailout

A sustainable repression?

Niall Ferguson, one of the best young historians out there, takes a look at Repression versus Depression:

Cheap money and deficit finance were the techniques recommended by Keynes and others in the 1930s as solutions to the problem of the Depression. They were used and abused in the 1960s and 1970s when there was no depression, with ultimately disastrous inflationary results. But can these techniques work now? So far, what they have achieved is what might be called a Great Repression. They have in effect repressed, but not cured, a depression. The question is whether, as some psychological theories would suggest, repression is a sustainable strategy or whether, at some point, the patient will come out of denial, break down and admit the terrible truth.

Filed under: Concepts, International, National , finance, Keynesian economics, macroeconomics, Niall Ferguson

Democratic controlled legislature undermining “effort to clean up wrongdoing in Raleigh.”

Charlotte Observer editorial:

The N.C. General Assembly and a state agency it created to monitor ethics and restore public trust in government have unwittingly undermined a concerted effort to clean up wrongdoing in Raleigh.

That was certainly not the legislature’s intent when it passed new legislation governing official conduct. The State Ethics Commission was given the job of receiving financial disclosure reports from a wide array of public officials, dispensing advisory opinions on proper compliance with the code of ethics and investigating certain violations of the state’s ethics laws.

But when the Office of State Auditor – created by the N.C. Constitution to monitor financial, performance and other issues related to how state agencies conduct public business, began eyeing a state legislator earlier this year, some lawmakers took umbrage. They amended the law to keep the auditor from investigating possible breaches of the state government ethics act. Auditor Les Merritt’s only role would be to refer allegations of violations of the ethics act, the separate legislative ethics act or new lobbying laws to the State Ethics Commission.

On the face of it that appears to be a rational act of a legislative body concerned about empowering a single state authority to investigate potential problems. But in the wider realm of public opinion, it looks like legislators are resisting efforts by watchdog institutions to figure out whether official wrongdoing has occurred.

Filed under: North Carolina , Les Merritt, NC Democratic corruption

A scenario for the ages …

I noticed a few weeks ago that if current trends hold in the electoral college, but an anomaly occurred New Hampshire to put that state for McCain, we could have a 269-269 tie in the electoral college.

The Washington Times follows suit with an examination of what would happen in the event of a tie in the electoral college:

Obama-Palin anyone?

On Nov. 5, the presidential election winds up in a electoral-college tie, 269-269, the Democrat-controlled House picks Sen. Barack Obama as president, but the Senate, with former Democrat Joe Lieberman voting with Republicans, deadlocks at 50-50, so Vice President Dick Cheney steps in to break the tie to make Republican Sarah Palin his successor.

Ten score and eight years ago …

A long time ago in a galaxy far, far away …

Filed under: National , electoral college, John Adams, the Election of 1800, Thomas Jefferson

GOP leader Stam featured on WRAL

State issues get a work over in this edition of Headline Saturday from WRAL. Featuring Rep. Paul Stam, GOP leader in the state house.

Filed under: North Carolina , NC legislature, NC politics, Paul Stam

The Republican fisherman

A woman in a hot air balloon realized she was lost. She lowered her altitude and spotted a man in a boat below.

She shouted to him, ‘Excuse me, can you help me? I promised a friend I would meet him an hour ago, but I don’t know where I am.’

The man consulted his portable GPS and replied, ‘You’re in a hot air balloon, approximately 30 feet above a ground elevation of 2346 feet above sea level. You are at 31 degrees, 14.97 minutes north latitude and 100 degrees, 49.09 minutes west longitude.’

She rolled her eyes and said, ‘You must be a Republican.’

‘I am,’ replied the man. ‘How did you know?’

‘Well,’ answered the balloonist, ‘ everything you told me is technically correct, but I have no idea what to do with your information, and I’m still lost. Frankly, you’ve not been much help to me’

The man smiled and responded, ‘You must be a Democrat.’

‘I am,’ replied the balloonist. ‘How did you know?’

‘Well,’ said the man, ‘you don’t know where you are or where you are going. You’ve risen to where you are, due to a large quantity of hot air. You made a promise that you have no idea how to keep, and you expect me to solve your problem. You’re in exactly the same position you were in before we met, but, somehow, now it’s my fault.’

Filed under: Concepts

Are you tired of Bev Perdue and Democratic corruption in Raleigh?

Filed under: North Carolina , Beverly Perdue, NC governor's race, Pat McCrory

Obama’s economic background

Filed under: National , Barack Obama, Fannie Mae, Franklin Raines

Mark Cuban deletes my comments on Josh Howard

Apparently Mark Cuban doesn’t like my perspective on Josh Howard’s opinion of the Star-Spangled Banner. He’s deleted my earlier comment on his blog. Let’s see how long this one lasts.

Mark: There still is no context for what Josh Howard said. It was very stupid.

Here is what people from his hometown are saying about his perspective on the National
Anthem.

http://www.youtube.com/watch?v=-BqG9kjknVw

You can delete this post again, but it still won’t change the fact that what he said was
unacceptable in any context.

Comment by jhs — September 19, 2008 @ 7:11 pm

Filed under: National , Josh Howard, Mark Cuban, Star-Spangled Banner

A black man who loved the Star-Spangled Banner

I know a lot of black people and I know a lot of black people love America. In fact, I know one of them who, along with his brother, served in Vietnam. The brother didn’t come home from Vietnam. He was killed serving his country.

There is another black man I was never lucky enough to meet who loved America and the Star-Spangled Banner. He too served in the military, the 101st Airborne Division.

Later on he became a big star, you might of heard of him.

In the above video he is being interviewed about playing the Star-Spangled Banner in a new-fangled manner.

He went on to play that song many, many times. Among the most salient is the version in the video below. Some commentators have noted that the version he played in 1969 was much different than the version played here in 1970. Perhaps the violence of the age had become too much for him and it is reflected in the more aggressive, piercing tone (among the best I’ve ever heard in a live performance) and the chaotic madness between the recognizable phrases.

As a metaphor, I think it is very powerful, much more so than the note for note rush of the Woodstock version.

It also reflects the beauty and continuity of America. What began as such a grand experiment still retains much of that beauty. Sure, there is chaos and conflict and at times nonsensical peaks and dips and all too often a chaos of emotion, but in the end we are all working toward an end expressed beautifully by the resolution of Hendrix’ effort here.

Filed under: Concepts, Music, National , Atlanta Pop Fest, Dick Cavett, Jimi Hendrix, Josh Howard, Star-Spangled Banner, Woodstock

Damaged goods

Stephen A. puts the smack down on Josh Howard.

Winston-Salem residents follow suit.

Filed under: National, North Carolina, Sport , Josh Howard, NBA, Star-Spangled Banner, Winston-Salem

Josh Howard speaks his mind

Dallas Morning News:
In a video posted on YouTube, the swingman is shown at Allen Iverson’s charity flag football game in July. When the national anthem is being sung, various participants are shown mugging for the camera. When the camera gets to Howard, he says: ” ‘The Star-Spangled Banner’ is going on. I don’t celebrate this [expletive]. I’m black.”

Filed under: National, Sport , Josh Howard, Mark Cuban, NBA, Star-Spangled Banner, Wake Forest University

“Listen to what the man said”

Professor Stiglitz on “finanical alchemy” via The Big Picture.

Filed under: National , Joseph Stiglitz, Lehman Brothers, The Big Picture

“Take a number”

Filed under: National , bailout, Bear Stearns, Fannie Mae, Freddie Mac, taxpayers

Bright boys from a rich man’s investment firm

Like many average Americans, I work to gain a paycheck. I use the paycheck to buy needed goods and services. But it seems like a lot of Wall St. big boys thought they could outsmart the system by creating a slate of “financial instruments” based on debt trading, upon which I assume they intended to make money by charging fees here and there along the way.

In essence it seems like a ponzi scheme run amock.

The Wall St. Journal has a nice summation of the recent bailout of insurance giant AIG, which pretty much sums up the point that you can’t just trade money around in a big circle without somebody having something of substance upon which to base the value on.

Or as that stellar economist Geddy Lee said so many years ago, “You can’t have something for nothing.“

WSJ online:

Debt-driven financial traumas have a long history, from the Great Depression to the S&L crisis to the Asian financial crisis of the late 1990s. Neither economists nor policymakers have easy solutions. Cutting interest rates and writing stimulus checks to families can help — and may have prevented or delayed a deep recession. But, at least in this instance, they don’t suffice.

In such circumstances, governments almost invariably experiment with solutions with varying degrees of success. President Franklin Delano Roosevelt unleashed an alphabet soup of new agencies and a host of new regulations in the aftermath of the market crash of 1929. In the 1990s, Japan embarked on a decade of often-wasteful government spending to counter the aftereffects of a bursting bubble. President George H.W. Bush and Congress created the Resolution Trust Corp. to take and sell the assets of failed thrifts. Hong Kong’s free-market government went on a massive stock-buying spree in 1998, buying up shares of every company listed in the benchmark Hang Seng index. It ended up packaging them into an exchange-traded fund and making money.

Make sure to read the section “Swaps Game”:

The latest trouble spot is an area called credit-default swaps, which are private contracts that let firms trade bets on whether a borrower is going to default. When a default occurs, one party pays off the other. The value of the swaps rise and fall as the market reassesses the risk that a company won’t be able to honor its obligations. Firms use these instruments both as insurance — to hedge their exposures to risk — and to wager on the health of other companies. There are now credit-default swaps on more than $62 trillion in debt, up from about $144 billion a decade ago.

What’s the percent increase from $144 billion to $62 trillion?

My solution would be to take all these bright boys from a rich man’s investment house and put them to work picking up trash, improving erosion control and other public works while paying them real money for real work. Then at least they would have the capital to buy real goods and services in the real world.

Filed under: Concepts, National , AIG, credit crunch, derivatives, financial instruments, swaps game