Thursday, January 31, 2008
Make the Tax Cuts Permanent...The Only Stimulus You Need
It is important to note that Brittney Spears has a better chance of being alcohol free than the tax cuts have of becoming permanent anytime before the next election. Thus, I want to not only analyze the stimulizing effect of making them permanent but also the politics of the current situation.
In my second week in Macro Economics I learned that during recessions the government lowers taxes, and during times of inflation the government raises taxes. This would follow a similar principle only in this case you would remove the uncertainty of future tax increases.
The beauty of making the tax cuts permanent is that it requires no outlay of any sort of funds at all. Unlike the current stimulus package which will likely come from bonds or from other spending, making the tax cuts permanent is not only a stimulus but it is a stimulus with no extra spending. Beyond that it will likely not even require any future spending cuts necessarily. The stimulus this will provide will likely far outweigh any lost future revenue for the federal government. By 2004 and 2005, the federal government was receiving record high revenues because the Bush tax cuts had stimulated the economy so much that it far outweighed the revenue the government lost from reducing tax rates.
It is hard to quantify how much stimulus taking the uncertainty of future tax increase away will do however there is no doubt it will have a stimulating effect. The tax cuts weren't merely for income, but rather for such things as inheritence and capital gains. Capital gains taxes punish long term investors (capital gains taxes are taxes on income from investments that one has held for at least a year, like holding a stock the most common capital gain). It is hard to know how many people are holding off making long term investments to see what will happen to capital gains taxes but they are around.
The sort of long term investment that capital gains brings is exactly the sort of stimulus this economy needs. For instance capital gains affects real estate investment. What kind of a shot in the arm would the housing market get if the new capital gains tax rates were made permanent? Again, this is unquantifiable but there is no doubt there would be a stimulus.
Now, unfortunately, despite what I see as a logical way to not only provide stimulus but to do it responsibly without borrowing or taking from another group, I know there is no way this will happen this year. This reality presents an opportunity for anyone willing to take it. First, if these tax cuts aren't made permanent, they will turn into tax increases. The very same Democrats who are now characterizing the economy is an impending disaster are also ready and willing to raise taxes in the middle of this disaster. If taxes are raised during a recession, it only perpetuates it.
Thus, if income taxes, capital gains taxes, and inheritence taxes go back to their previous levels, the federal government will be artificially contracting the economy at the exact same time the economy is contracting on its own. This is what we are facing if the tax cuts are not made permanent. Unless this slow down stops and turns around and we have boom in two years, we are facing a counter productive tax increase in two years.
I believe that the Democrats have decided to play class warfare with taxes, and I believe that it won't work if the other side sells the tax cuts the way I know they can be sold. About half of all Americans invest in the stock market. That means a capital gains increase is an increase on the taxes of half of all Americans. Furthermore, I bet nearly all of those that don't would like to. The inheritence tax doesn't merely punish the wealthy but savers. For instance, if you put $100 away every month for forty years, that grows to over one million dollars by the end. That means anyone that was a saver their entire lives is likely to leave their heirs with the estate tax (also called the inheritence tax or the death tax) when they pass away. Thus, the Democrats punish savers when they force an inheritence tax on large estates. Ultimately, the necessity of making the tax cuts permanent comes from all the stimulating benefits I just described.
If the Democrats aren't willing to make them permanent, the Republicans need to argue that we need a party in power that will. While the Democrats scream about tax cuts for the rich, the Republicans just need to throw cold hard truth on it, and remind everyone the tax cuts were for all. Furthermore, they need to remind every day Americans what disaster lies ahead if natural contraction is combined with artificial contraction.
Making the tax cuts permanent makes perfect sense. In fact, it makes so much sense that of course it isn't something the pols in Washington would ever do. Given that reality, the Reps must at least use that reality to their advantage politically. The Dems think they have the economy as an issue. That is only the case if the Republicans let them.
In my second week in Macro Economics I learned that during recessions the government lowers taxes, and during times of inflation the government raises taxes. This would follow a similar principle only in this case you would remove the uncertainty of future tax increases.
The beauty of making the tax cuts permanent is that it requires no outlay of any sort of funds at all. Unlike the current stimulus package which will likely come from bonds or from other spending, making the tax cuts permanent is not only a stimulus but it is a stimulus with no extra spending. Beyond that it will likely not even require any future spending cuts necessarily. The stimulus this will provide will likely far outweigh any lost future revenue for the federal government. By 2004 and 2005, the federal government was receiving record high revenues because the Bush tax cuts had stimulated the economy so much that it far outweighed the revenue the government lost from reducing tax rates.
It is hard to quantify how much stimulus taking the uncertainty of future tax increase away will do however there is no doubt it will have a stimulating effect. The tax cuts weren't merely for income, but rather for such things as inheritence and capital gains. Capital gains taxes punish long term investors (capital gains taxes are taxes on income from investments that one has held for at least a year, like holding a stock the most common capital gain). It is hard to know how many people are holding off making long term investments to see what will happen to capital gains taxes but they are around.
The sort of long term investment that capital gains brings is exactly the sort of stimulus this economy needs. For instance capital gains affects real estate investment. What kind of a shot in the arm would the housing market get if the new capital gains tax rates were made permanent? Again, this is unquantifiable but there is no doubt there would be a stimulus.
Now, unfortunately, despite what I see as a logical way to not only provide stimulus but to do it responsibly without borrowing or taking from another group, I know there is no way this will happen this year. This reality presents an opportunity for anyone willing to take it. First, if these tax cuts aren't made permanent, they will turn into tax increases. The very same Democrats who are now characterizing the economy is an impending disaster are also ready and willing to raise taxes in the middle of this disaster. If taxes are raised during a recession, it only perpetuates it.
Thus, if income taxes, capital gains taxes, and inheritence taxes go back to their previous levels, the federal government will be artificially contracting the economy at the exact same time the economy is contracting on its own. This is what we are facing if the tax cuts are not made permanent. Unless this slow down stops and turns around and we have boom in two years, we are facing a counter productive tax increase in two years.
I believe that the Democrats have decided to play class warfare with taxes, and I believe that it won't work if the other side sells the tax cuts the way I know they can be sold. About half of all Americans invest in the stock market. That means a capital gains increase is an increase on the taxes of half of all Americans. Furthermore, I bet nearly all of those that don't would like to. The inheritence tax doesn't merely punish the wealthy but savers. For instance, if you put $100 away every month for forty years, that grows to over one million dollars by the end. That means anyone that was a saver their entire lives is likely to leave their heirs with the estate tax (also called the inheritence tax or the death tax) when they pass away. Thus, the Democrats punish savers when they force an inheritence tax on large estates. Ultimately, the necessity of making the tax cuts permanent comes from all the stimulating benefits I just described.
If the Democrats aren't willing to make them permanent, the Republicans need to argue that we need a party in power that will. While the Democrats scream about tax cuts for the rich, the Republicans just need to throw cold hard truth on it, and remind everyone the tax cuts were for all. Furthermore, they need to remind every day Americans what disaster lies ahead if natural contraction is combined with artificial contraction.
Making the tax cuts permanent makes perfect sense. In fact, it makes so much sense that of course it isn't something the pols in Washington would ever do. Given that reality, the Reps must at least use that reality to their advantage politically. The Dems think they have the economy as an issue. That is only the case if the Republicans let them.
The Primary Coverage: Hyperanalysis, Saturation...Enough Already
Here is how much of a political junkie I am. I get emails from the Rudy campaign, the McCain Campaign, the Duncan Hunter Campaign, and even Hillary's campaign, and that doesn't include the plethora of political websites and interest groups like GOP USA and the Minutemen that also send me emails on a regular basis. This political junkie has had it with the primary season and I am quite curious about the new evidence in the Natalie Holloway case and that's only because it has nothing to do with the primaries. At this point, I am searching for a tv station that constantly produces the sound of nails on a chalk board only because that also has nothing to do with the primary election.
Everywhere I turn, I find good honorable candidates get cut up and hyperanalyzed by folks who frankly have no standing or credibility to criticize a garbage man let alone long standing public servants. The last two days everywhere I turn, I find an endless stream of hyperanalysis of whether or not Mitt Romney did or didn't call for a timeline...whether or not John McCain did or didn't lie about it...and whether or not John McCain did or didn't say he wouldn't nominate someone like Sam Alito to the bench. Both professional and amateur pundits hyperanalyze every word, every movement, and every sound until no one is sure what the debate is.
The whole entire thing is trivial and worthless. Let's look at this battle over timelines for instance. Comparing the record and credentials of John McCain to Mitt Romney on issues relating to Iraq, GWOT, and foreign policy in general is sort of like comparing the basketball games of LeBron James to my own. There are many good reasons why Mitt Romney would be a great President however none of them relate in any way to being ready to be Commander in Chief.
Many amateur and professional pundits then try and paint John McCain as a liar for suggesting Romney was for timelines. No living American has sacrificed more and served more honorably for this country than McCain. To question his character and principle, especially if you are one with little sacrifice or accomplishment of your own, is really the height of hubris. Most of these folks that question his integrity have an agenda. They may hate McCain/Feingold or McCain/Kennedy, but that isn't enough for them. Thus, they create imaginary issues of character to further demean McCain. Make no mistake similary tactics have been used against all the candidates on both sides.
All these amateur and professional pundits are preaching to the choir. No one is going to be swayed by their obvious and clearly biased rants. Furthermore, they all say the same thing. I can't turn around without someone proclaiming that they refuse to vote for this or that candidate under any circumstances, or that you must vote for this or that candidate or face the wrath of a third or fourth candidate winning the White House. Every Republican candidate has been portrayed as being the end of the Republican party as we know it as well. Most of these rants are frankly nothing more than an homage and a regurgitation of the rants of the likes of Rush Limbaugh. It is one thing for Rush to do it, but when his rants spawn a million other rants that are frankly no different, well, then, this political junkie has had it.
Blogging evolved from so called citizen journalists who felt the media had ceased to do its job effectively and decided that they would do it for them. It turns out that most bloggers aren't very much different than the very pundits they rail against, only they are a lot less eloquent, they don't get paid, and their political ideology is different. The very same citizen journalists that scream about bias, lack of disclosure, and corruption in the media, then turn around and write a biased, corrupt, piece in which they fail to disclose that they support an opponent of the very politician they rail against.
All of this writing is written for the benefit of no one but sycophants. Here is just one example of what I mean.
At least this blogger disclosed his bias, however the only one being dishonest is th blogger themselves. McCain has a long a distinguished career and he has never had his character questioned, at least not with any credibility, even if he did misconstrue Romney's position, and that is not at all clear, wouldn't forty plus years of distinguished service give McCain some slack to cut. In fact, the blogger doesn't like McCain, I believe, specifically because of McCain/Feingold. There is no problem there, however creating this red herring about so called lying in the campaign is nothing more than a means to blunt a politician that he doesn't support. With all of the accusation traded by every campaign against every other one, it is beyond irresponsible to isolate one attack and hold said politician to a standard that you refuse to do with any other.
The whole entire thing makes me crazy. Today, Michelle ran a piece questioning McCain's allegiance to the free markets. Apparently, something that McCain said last night spawned this latest attack. I am frankly fed up to even bother reading the contents and figure it out. All I know is that he has had thirty plus years of public service. If he really was anti free market, it wouldn't have taken until last night to realize it. The politicians frankly attack each other enough for me. I really have no use for people that are supposed to naturally suport them following suit and attacking them some more. Isn't there anything positive that anyone can say about anyone of the candidates on either side?
I have watched good man after good man...from Rudy, to McCain, to Romney, to Huckabee, and now McCain again, get put through the gauntlet. Because folks are unhappy with one thing, or two things, or even three things, they must be unhappy entirely. McCain is unacceptable because of McCain/Feingold or McCain/Kennedy. A lifetime worth of work is rendered irrelevant because one or two or even three political actions weren't what some people wanted. Back in April, John McCain gave an empassioned and eloquent defense of the surge and the war in Iraq in general. At the time, the conventional wisdom was that such a defense was political suicide. McCain didn't care and he risked his entire political future on the outcome of an unpopuluar war. He was fond of saying this...
When the chips were down, he was the only one to stand up for a policy that was successful but unpopular. Yet, none of the so called critics that incessently hyperanalzye and hyper criticize McCain ever give him even one iota of credit for this political courage.
Frankly, and ultimately, McCain is demonized by Conservatives because he dared to stray from the Conservative line from time to time and he chose a different path. He did it from time to time mind you. On the whole, he is quite conservative, but that isn't enough. Because he dared to cross the line and work with liberals on some issues, he must be destroyed and demonized.
Of course, McCain isn't the only one to face the firing squad. He is just the one to face it now. Romney's been called a flip flopper. He's had everything from his health care plan, to his tax plan, to his border plan, hyper analyzed for any hint that it too might stray from the conservative party line. If there was a hint, then that was also immediately hyperanalyzed and demonized.
Don't get me wrong. Of course, candidates should be criticized and they should be scrutinized when it is appropriate. I don't have a problem with any questioning anyone else's record. The problem I have is when that is all there is. Going by what I have read each and every candidate in the field is one step above the devil. They will each destroy the party and the country, and they are all ruthless tyrants with no ethics, morals or principles. The whole thing makes me sick. I heard that there is movement in the Natalie Holloway case and also that Brittney is in trouble again. I can't wait to get more details not because I care, but because neither has anything to do with the election.
Everywhere I turn, I find good honorable candidates get cut up and hyperanalyzed by folks who frankly have no standing or credibility to criticize a garbage man let alone long standing public servants. The last two days everywhere I turn, I find an endless stream of hyperanalysis of whether or not Mitt Romney did or didn't call for a timeline...whether or not John McCain did or didn't lie about it...and whether or not John McCain did or didn't say he wouldn't nominate someone like Sam Alito to the bench. Both professional and amateur pundits hyperanalyze every word, every movement, and every sound until no one is sure what the debate is.
The whole entire thing is trivial and worthless. Let's look at this battle over timelines for instance. Comparing the record and credentials of John McCain to Mitt Romney on issues relating to Iraq, GWOT, and foreign policy in general is sort of like comparing the basketball games of LeBron James to my own. There are many good reasons why Mitt Romney would be a great President however none of them relate in any way to being ready to be Commander in Chief.
Many amateur and professional pundits then try and paint John McCain as a liar for suggesting Romney was for timelines. No living American has sacrificed more and served more honorably for this country than McCain. To question his character and principle, especially if you are one with little sacrifice or accomplishment of your own, is really the height of hubris. Most of these folks that question his integrity have an agenda. They may hate McCain/Feingold or McCain/Kennedy, but that isn't enough for them. Thus, they create imaginary issues of character to further demean McCain. Make no mistake similary tactics have been used against all the candidates on both sides.
All these amateur and professional pundits are preaching to the choir. No one is going to be swayed by their obvious and clearly biased rants. Furthermore, they all say the same thing. I can't turn around without someone proclaiming that they refuse to vote for this or that candidate under any circumstances, or that you must vote for this or that candidate or face the wrath of a third or fourth candidate winning the White House. Every Republican candidate has been portrayed as being the end of the Republican party as we know it as well. Most of these rants are frankly nothing more than an homage and a regurgitation of the rants of the likes of Rush Limbaugh. It is one thing for Rush to do it, but when his rants spawn a million other rants that are frankly no different, well, then, this political junkie has had it.
Blogging evolved from so called citizen journalists who felt the media had ceased to do its job effectively and decided that they would do it for them. It turns out that most bloggers aren't very much different than the very pundits they rail against, only they are a lot less eloquent, they don't get paid, and their political ideology is different. The very same citizen journalists that scream about bias, lack of disclosure, and corruption in the media, then turn around and write a biased, corrupt, piece in which they fail to disclose that they support an opponent of the very politician they rail against.
All of this writing is written for the benefit of no one but sycophants. Here is just one example of what I mean.
I oppose a McCain nomination not only because he has a liberal record and his hallmark legislation was 1) a blow to free speech (McCain-Feingold), 2) an attack on democracy and capitalism that enabled people like Hillary Clinton and Mr. Hsu to raise millions of dollars through apparent fraud, meanwhile preventing people like you, me, and Chuck Norris from donating more than a few thousand dollars to a candidate we support (McCain-Feingold), 3) an attack on national sovereignty and the rule of law (McCain-Kennedy), 4) capitulation to global warming hysteria (McCain-Leiberman), and an attack on free markets (All of the above cited legislation), but most of all because he has been dishonest in his campaign.
At least this blogger disclosed his bias, however the only one being dishonest is th blogger themselves. McCain has a long a distinguished career and he has never had his character questioned, at least not with any credibility, even if he did misconstrue Romney's position, and that is not at all clear, wouldn't forty plus years of distinguished service give McCain some slack to cut. In fact, the blogger doesn't like McCain, I believe, specifically because of McCain/Feingold. There is no problem there, however creating this red herring about so called lying in the campaign is nothing more than a means to blunt a politician that he doesn't support. With all of the accusation traded by every campaign against every other one, it is beyond irresponsible to isolate one attack and hold said politician to a standard that you refuse to do with any other.
The whole entire thing makes me crazy. Today, Michelle ran a piece questioning McCain's allegiance to the free markets. Apparently, something that McCain said last night spawned this latest attack. I am frankly fed up to even bother reading the contents and figure it out. All I know is that he has had thirty plus years of public service. If he really was anti free market, it wouldn't have taken until last night to realize it. The politicians frankly attack each other enough for me. I really have no use for people that are supposed to naturally suport them following suit and attacking them some more. Isn't there anything positive that anyone can say about anyone of the candidates on either side?
I have watched good man after good man...from Rudy, to McCain, to Romney, to Huckabee, and now McCain again, get put through the gauntlet. Because folks are unhappy with one thing, or two things, or even three things, they must be unhappy entirely. McCain is unacceptable because of McCain/Feingold or McCain/Kennedy. A lifetime worth of work is rendered irrelevant because one or two or even three political actions weren't what some people wanted. Back in April, John McCain gave an empassioned and eloquent defense of the surge and the war in Iraq in general. At the time, the conventional wisdom was that such a defense was political suicide. McCain didn't care and he risked his entire political future on the outcome of an unpopuluar war. He was fond of saying this...
I'd rather lose an election than a war
When the chips were down, he was the only one to stand up for a policy that was successful but unpopular. Yet, none of the so called critics that incessently hyperanalzye and hyper criticize McCain ever give him even one iota of credit for this political courage.
Frankly, and ultimately, McCain is demonized by Conservatives because he dared to stray from the Conservative line from time to time and he chose a different path. He did it from time to time mind you. On the whole, he is quite conservative, but that isn't enough. Because he dared to cross the line and work with liberals on some issues, he must be destroyed and demonized.
Of course, McCain isn't the only one to face the firing squad. He is just the one to face it now. Romney's been called a flip flopper. He's had everything from his health care plan, to his tax plan, to his border plan, hyper analyzed for any hint that it too might stray from the conservative party line. If there was a hint, then that was also immediately hyperanalyzed and demonized.
Don't get me wrong. Of course, candidates should be criticized and they should be scrutinized when it is appropriate. I don't have a problem with any questioning anyone else's record. The problem I have is when that is all there is. Going by what I have read each and every candidate in the field is one step above the devil. They will each destroy the party and the country, and they are all ruthless tyrants with no ethics, morals or principles. The whole thing makes me sick. I heard that there is movement in the Natalie Holloway case and also that Brittney is in trouble again. I can't wait to get more details not because I care, but because neither has anything to do with the election.
JCAHO, Fannie Mae, and the Fallacy of Privatizing Grady Hospital
It has been nearly two months since JCAHO threatened to pull Grady Hospital's accreditation. I have already explained several times that this step is quite drastic. This is only the second time this has happened. The story received some coverage when it was initially reported and then little was said about it. One reason is because the actual contents of the report haven't been released. In the only other case when JCAHO did this, there was an incident in which a woman begged for help for forty five minutes before dropping on the floor and dying. That incident forced JCAHO's hand in the matter. Why then has the actual report not been released so that the folks can see what exactly are the nightmarish situations at Grady Hospital?
The reasons for this are quite complicated. Grady Hospital is a public hospital and they should be the subject of an open records request. I have spoken with several folks that have attempted to get records from Grady and they describe an atmosphere of stonewalling. JCAHO, on the other hand, is a whole different matter. If someone tries to get the report from JCAHO they immediately tell you that JCAHO is a private organization and not subject to document requests. The problem of course is that JCAHO isn't really private, and they aren't really public. They are quasi both.
The recommendations of the Grady Task Force purport to make the Grady board private and thus create a structure at Grady Hospital that is much like the structure at JCAHO. Grady Hospital will also be quasi public quasi private. In my business, mortgages, Fannie Mae enjoys a somewhate similar structure as well. On the one hand, Fannie Mae is a GSE (Government Sponsored Entity) and on the other hand they are a publicly traded company (trading under the symbol FNM on the NYSE). Since the government created Fannie Mae it gets privileges other entities wouldn't. On the other hand, it is a for profit company like any other for profit company. That is one reason why this GSE was the subject of a serious accounting scandal only a few years ago. This GSE allowed its obsession with profits get the best of it much like other for profit companies.
If Grady is allowed to turn its board private, then it will be private whenever it suits the powers that be, and public also whenever it suits them. What that means is that Grady will scream private whenever anyone wants to create scrutiny and oversight, and scream public when it needs a handout. None of this is lost on the corruptors that make up the Grady Task Force that made these recommendations. I don't believe for one second that turning Grady's board private has anything to do with fixing the systemic problems that put it here.
In fact, it is obvious to me that the same corruptors that put Grady in this position have now used this as an opportunity to make its structure even easier to corrupt. If Grady Hospital's board is allowed to go private, then we may as well put all the activities at the hospital into the perverbial lockbox, close it, and throw the key into the Atlantic Ocean because that is how difficult it will be to ever find out what is going on there. By creating a dual private/public structure, you let the very same people that put it into this mess define it whenever they need to define it. They will define it to their benefit if history is any indicator.
That, I believe, is the sad and brazen nature of the powers that be at Grady Hospital. Even at this time of extreme crisis the only thing they are looking for, I believe, is an angle. That angle is the vague and undefined, private/public structure, that makes Grady even more easy to corrupt. Grady is currently a public hospital with no gray area and yet two months after a damning report is revealed we still haven't seen the contents of that report. That's because despite their public nature, the board continues to balk at requests to release that report. They do this despite their being a public hospital begging for half a billion dollars, and they do it despite their being overwhelming public interest and right to know the contents of this report. If Grady is able to withstand scrutiny when they are solely public, how easy will it be for Grady to do it when they can attach the private label to their entity.
Recently, I produced a piece with recommendations for fixing Grady Hospital. The piece was laced with steps to make it more transparent and more open. Transparency is the only way to confront corruption because corruption happens because no one is watching. This plan by the Grady Task Force would do the exact opposite to Grady Hospital. I don't believe it will do anything but make things worse, and I believe that is exactly how the powers that be want it.
Epilogue:
For a full summary on this entire Grady fiasco and how this privatization plan fits in please read this summary
The reasons for this are quite complicated. Grady Hospital is a public hospital and they should be the subject of an open records request. I have spoken with several folks that have attempted to get records from Grady and they describe an atmosphere of stonewalling. JCAHO, on the other hand, is a whole different matter. If someone tries to get the report from JCAHO they immediately tell you that JCAHO is a private organization and not subject to document requests. The problem of course is that JCAHO isn't really private, and they aren't really public. They are quasi both.
The recommendations of the Grady Task Force purport to make the Grady board private and thus create a structure at Grady Hospital that is much like the structure at JCAHO. Grady Hospital will also be quasi public quasi private. In my business, mortgages, Fannie Mae enjoys a somewhate similar structure as well. On the one hand, Fannie Mae is a GSE (Government Sponsored Entity) and on the other hand they are a publicly traded company (trading under the symbol FNM on the NYSE). Since the government created Fannie Mae it gets privileges other entities wouldn't. On the other hand, it is a for profit company like any other for profit company. That is one reason why this GSE was the subject of a serious accounting scandal only a few years ago. This GSE allowed its obsession with profits get the best of it much like other for profit companies.
If Grady is allowed to turn its board private, then it will be private whenever it suits the powers that be, and public also whenever it suits them. What that means is that Grady will scream private whenever anyone wants to create scrutiny and oversight, and scream public when it needs a handout. None of this is lost on the corruptors that make up the Grady Task Force that made these recommendations. I don't believe for one second that turning Grady's board private has anything to do with fixing the systemic problems that put it here.
In fact, it is obvious to me that the same corruptors that put Grady in this position have now used this as an opportunity to make its structure even easier to corrupt. If Grady Hospital's board is allowed to go private, then we may as well put all the activities at the hospital into the perverbial lockbox, close it, and throw the key into the Atlantic Ocean because that is how difficult it will be to ever find out what is going on there. By creating a dual private/public structure, you let the very same people that put it into this mess define it whenever they need to define it. They will define it to their benefit if history is any indicator.
That, I believe, is the sad and brazen nature of the powers that be at Grady Hospital. Even at this time of extreme crisis the only thing they are looking for, I believe, is an angle. That angle is the vague and undefined, private/public structure, that makes Grady even more easy to corrupt. Grady is currently a public hospital with no gray area and yet two months after a damning report is revealed we still haven't seen the contents of that report. That's because despite their public nature, the board continues to balk at requests to release that report. They do this despite their being a public hospital begging for half a billion dollars, and they do it despite their being overwhelming public interest and right to know the contents of this report. If Grady is able to withstand scrutiny when they are solely public, how easy will it be for Grady to do it when they can attach the private label to their entity.
Recently, I produced a piece with recommendations for fixing Grady Hospital. The piece was laced with steps to make it more transparent and more open. Transparency is the only way to confront corruption because corruption happens because no one is watching. This plan by the Grady Task Force would do the exact opposite to Grady Hospital. I don't believe it will do anything but make things worse, and I believe that is exactly how the powers that be want it.
Epilogue:
For a full summary on this entire Grady fiasco and how this privatization plan fits in please read this summary
Wednesday, January 30, 2008
The Florida Primary or Rudy Gets Doped by his Rope a Dope
Florida turned into Rudy's Waterloo rather than his Rope a Dope and John McCain is now the clear front runner in the Republican field. Florida is also the second state, and the two largest so far, to not count for the Dems.
There is really little to add. Rudy's strategy turned out to blow up in his face rather that to be the sort of genius that I surmized a while ago. John Edwards dropped out in the aftermath of the results. The CW is that this will help Obama. CW hasn't been right more than it has been wrong in this election cycle so what it actually will do is to be determined.
It is clear that the entire nominating process should be analyzed after this is over. Rudy was pretty much stuck with an impossible strategy because in the end he had no choice. Florida and Michigan won't have any delegates count toward the Dems even though they will toward the Reps. Iowa and NH continue to play a role way more than they deserve in nominating the President, and no one can explain to me at least how these two states hijacked the process and forced the rest of us to bow down to them.
The race now comes down to Mitt and McCain for the Reps and Obama and Hillary for the Dems. Anything can happen on either side and events remain fluid.
There is really little to add. Rudy's strategy turned out to blow up in his face rather that to be the sort of genius that I surmized a while ago. John Edwards dropped out in the aftermath of the results. The CW is that this will help Obama. CW hasn't been right more than it has been wrong in this election cycle so what it actually will do is to be determined.
It is clear that the entire nominating process should be analyzed after this is over. Rudy was pretty much stuck with an impossible strategy because in the end he had no choice. Florida and Michigan won't have any delegates count toward the Dems even though they will toward the Reps. Iowa and NH continue to play a role way more than they deserve in nominating the President, and no one can explain to me at least how these two states hijacked the process and forced the rest of us to bow down to them.
The race now comes down to Mitt and McCain for the Reps and Obama and Hillary for the Dems. Anything can happen on either side and events remain fluid.
Divine Intervention?
According to Dennis Lennox, because of inclement weather in Central Michigan, the University had to cancel all school related activity including his disciplinary hearing. At this point, the hearing is in limbo and he has heard nothing more. He wanted to thank all of his supporters and everyone that called and wrote in to the school.
I believe the fight isn't done and this is an opportunity for more people to express their displeasure with the heavy handed nature by which the administration is treating him. Here is a list of emails for folks to contact and make your voices heard.
CMU President Michael Rao, mailto:president@cmich.eduand (989) 774-3131* Assistant Dean of Students Anthony Voisin anthony.a.voisin@cmich.edu and (989) 774-3016 * Board of Trustees Chairman Jeffrey Caponigro (R), capon1jr@cmich.edu and (248) 355-3200* Board of Trustees member Stephanie Comai (R), comai1s@cmich.edu and (734) 761-6915* Board of Trustees member John Kulhavi (R), kulha1jg@cmich.edu and (248) 737-6222* Board of Trustees member Gail Torreano (R), torre1gf@cmich.edu and (313) 223-7171
I believe the fight isn't done and this is an opportunity for more people to express their displeasure with the heavy handed nature by which the administration is treating him. Here is a list of emails for folks to contact and make your voices heard.
CMU President Michael Rao, mailto:president@cmich.eduand (989) 774-3131* Assistant Dean of Students Anthony Voisin anthony.a.voisin@cmich.edu and (989) 774-3016 * Board of Trustees Chairman Jeffrey Caponigro (R), capon1jr@cmich.edu and (248) 355-3200* Board of Trustees member Stephanie Comai (R), comai1s@cmich.edu and (734) 761-6915* Board of Trustees member John Kulhavi (R), kulha1jg@cmich.edu and (248) 737-6222* Board of Trustees member Gail Torreano (R), torre1gf@cmich.edu and (313) 223-7171
Economic News: Fast and Furious
The economic news came fast and furious today. The Gross Domestic Product grew by only .6% in the fourth quarter.
This data combined with four straight months of weaker than expected employment numbers, and now there is conclusive evidence that the economy is softening. Let me say that again there is conclusive evidence that the economy is SOFTENING. The simple fact of the matter is that when employment slows down but the economy is still creating jobs that means the economy is softening, not in disaster. (keep in mind that the economy has created jobs every single month since July 2003). Also, when the GDP slows down but is still growing then again the economy is softening, not in disaster. There is not conclusive evidence that the economy is in disaster, or that we are about to head into a recession.
Frankly, the article I referenced isn't helping matters much frankly. When I read things like "deteriorating" and "fears of recession", I understand why the perception of the market is totally different than the reality of the numbers. GDP growth of .6% is concerning. There is no doubt about that, however it shouldn't warrant a word like deteriorate. Unfortunately, wording is vital in economic analysis. People respond not to what the GDP numbers are but rather what they are perceived to be. When folks read the economy is deteriorating and there are fears of recession, they perceive disaster and act as such. The numbers don't present an impending disaster, only the manner in which they are described do.
This is important because the fed cut its key interest rate by another half a point today.
Keep in mind we are at a minimum of three months from technically being in a recession. A recession is two straight quarters of negative growth in the GDP. Obviously we had small but positive growth in the GDP last quarter.
The more I watch the Fed and its response to the numbers that the economy actually produces the more I get the feeling that the inmates are running the asylum. The sort of economic data we have had the last three months warrants tempered rate cuts. That means the fed should be cutting rates by one quarter of one percent at each of their meetings. The Fed just cut the rate by 1.25% in one week. A softening economy needs mild stimulus, not a hurricane of stimulus.
A hurricane of stimilus is exactly what we have had. The fed funds rate is now down to 3% and I doubt we are done. Bernanke may be looking to cut this rate below two percent which in my opinion would be terribly irresponsible especially given the lessons of Greenspan's rate cut. This will be combined with the fiscal stimulus that the President and Congress are debating.
The more I watch Bernanke the more I get the feeling that the inmates are running the asylum. This stimulus appears to be in response to the so called cries of the market. That is a fancy term for traders in bond and equity pits complaining that he isn't doing enough to stimulate the economy. Any Fed chair that makes their decisions based on what a collection of blowhards in a trading pit want isn't fit for the job.
I know one thing for sure and that is he isn't responding to any economic data. The economic data would warrant a much more tempered rate cut. I predict that by this time next year he will be just as aggressively raising rates in order to avoid inflation. Once again, if a Fed chair cuts rates only to raise them just as quickly they have failed in their duty. Stay tuned...
The economy nearly stalled in the fourth quarter with a growth rate of just 0.6 percent, capping its worst year since 2002.Any veteran readers of my work know that I have been quoting the GDP as growing by 3.6% and that is because that was the number in the prior quarter. The generally accepted even number is 3%. Three percent growth is solid. Anything more is worrisome for inflation and anything less is worrisome for a recession. With only 2.2% growth that is of course concerning for impending recession.
Wednesday's Commerce Department report showed that the economy deteriorated considerably during the October-to-December quarter as worsening problems in the housing market and harder-to-get credit made individuals and businesses more cautious in their spending. Fears of a recession have grown, even as inflation remained elevated.
For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse was the biggest culprit; builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.
This data combined with four straight months of weaker than expected employment numbers, and now there is conclusive evidence that the economy is softening. Let me say that again there is conclusive evidence that the economy is SOFTENING. The simple fact of the matter is that when employment slows down but the economy is still creating jobs that means the economy is softening, not in disaster. (keep in mind that the economy has created jobs every single month since July 2003). Also, when the GDP slows down but is still growing then again the economy is softening, not in disaster. There is not conclusive evidence that the economy is in disaster, or that we are about to head into a recession.
Frankly, the article I referenced isn't helping matters much frankly. When I read things like "deteriorating" and "fears of recession", I understand why the perception of the market is totally different than the reality of the numbers. GDP growth of .6% is concerning. There is no doubt about that, however it shouldn't warrant a word like deteriorate. Unfortunately, wording is vital in economic analysis. People respond not to what the GDP numbers are but rather what they are perceived to be. When folks read the economy is deteriorating and there are fears of recession, they perceive disaster and act as such. The numbers don't present an impending disaster, only the manner in which they are described do.
This is important because the fed cut its key interest rate by another half a point today.
Stocks closed in negative territory despite the Federal Reserve's decision to lower a key interest rate by 0.50% in an effort to light a spark under an economy that slowed down sharply at the end of 2007. A 175-point rally on the Dow was erased with just minutes left in the trading day.The manner in which the fed has been cutting rates, over a point in the last week and over two points in the last three months, is more appropriate for an economic crisis. The more economic numbers I see the more I am convinced that we are in a softening period not necessarily in a period of disaster. Of course, we will be in a disaster if I am right.
Keep in mind we are at a minimum of three months from technically being in a recession. A recession is two straight quarters of negative growth in the GDP. Obviously we had small but positive growth in the GDP last quarter.
The more I watch the Fed and its response to the numbers that the economy actually produces the more I get the feeling that the inmates are running the asylum. The sort of economic data we have had the last three months warrants tempered rate cuts. That means the fed should be cutting rates by one quarter of one percent at each of their meetings. The Fed just cut the rate by 1.25% in one week. A softening economy needs mild stimulus, not a hurricane of stimulus.
A hurricane of stimilus is exactly what we have had. The fed funds rate is now down to 3% and I doubt we are done. Bernanke may be looking to cut this rate below two percent which in my opinion would be terribly irresponsible especially given the lessons of Greenspan's rate cut. This will be combined with the fiscal stimulus that the President and Congress are debating.
The more I watch Bernanke the more I get the feeling that the inmates are running the asylum. This stimulus appears to be in response to the so called cries of the market. That is a fancy term for traders in bond and equity pits complaining that he isn't doing enough to stimulate the economy. Any Fed chair that makes their decisions based on what a collection of blowhards in a trading pit want isn't fit for the job.
I know one thing for sure and that is he isn't responding to any economic data. The economic data would warrant a much more tempered rate cut. I predict that by this time next year he will be just as aggressively raising rates in order to avoid inflation. Once again, if a Fed chair cuts rates only to raise them just as quickly they have failed in their duty. Stay tuned...
Analyzing the SOTU through Applause
I believe that the President did a reasonably good job in delivering the SOTU and it seemed to be fairly well received. The interesting thing about this and all SOTU addresses is that if even one tenth of what is suggested is accomplished that would be quite a year. Thus, I doubt much of what he said will come to fruition, however I found a dynamic that was quite interesting. By analyzing when Bush received only friendly advice and when he received full applause we can see what issues the two parties will make contentious and where there is room to work.
I first noticed this when Bush talked about taxes. He alluded that the people know how to spend their own money better than the government and that as President he wouldn't allow the government to tax them anymore than they already are. Now, this seems like the sort of thing that both parties could get behind however in this case only the friendly Republicans applauded. Bush frankly framed this rather slyly and so by not applauding the Dems were indicating that they are for raising your taxes. Of course, we Republicans have always felt that way however it was interesting to see the Dems so overtly being for raising taxes.
There were some issues where there is no common ground like Iraq. On this issue, Bush received almost exclusive applause only from friendly forces. There were other issues where there was plenty of common ground like expanding research for AIDS in Africa which received applause from both sides throughout.
There were other issues that were more nuanced, like embryonic stem cell research. The President mentioned the discovery of a new form of stem cell research and he proclaimed that this discovery could lead to an end to the contentious issue and only the Reps applauded. Then, he began to talk about his unconditional opposition to any cloning and both sides applauded.
All mentions of the troops of course received applause from both sides, including plans to update and evolve VA treatment in light of the scandal last year. The troops are obviously one thing that each side supports enthusiastically and without hesitation.
The biggest surprise came in the overwhelming applause to one piece of Bush's speech toward AQI. Bush said that we will not back down from AQI and we will stay and finish them. Both sides applauded here. This is quite surprising since the Dems won't acknowledge that AQI is an enemy we need to defeat. They may have been caught up in the moment however their applause is also a tacit rejection of their entire position on Iraq.
The tax cuts may wind up being the most contentious domestic issue in the campaign. Bush received enthusiastic applause from his side when he called on making them permanent, and a cold stare from the other side.
The most interesting set of applause came in response to FISA. Bush called on Congress to make changes in FISA permanent (they expire Feb 1). This wasn't merely met with applause but in my estimation the most rousing applause of the evening from the Reps and again the Dems gave him a cold stare.
There is no chance this Congress will make the tax cuts permanent, however if the SOTU is any indication we are about to have a full out political brawl on FISA.
All in all I didn't mind the speech however I continue to be concerned by the rhetoric toward my business. Bush called on reform to Fannie Mae. Reform is another of those warm fuzzy words that mean nothing. Fannie Mae is the only portion of the market not to be hit. It really doesn't sound like they are the ones that need reform. If the President is not able to understand that dynamic and wants to target Fannie Mae even though Fannie is actually doing it right, that should scare everyone.
I first noticed this when Bush talked about taxes. He alluded that the people know how to spend their own money better than the government and that as President he wouldn't allow the government to tax them anymore than they already are. Now, this seems like the sort of thing that both parties could get behind however in this case only the friendly Republicans applauded. Bush frankly framed this rather slyly and so by not applauding the Dems were indicating that they are for raising your taxes. Of course, we Republicans have always felt that way however it was interesting to see the Dems so overtly being for raising taxes.
There were some issues where there is no common ground like Iraq. On this issue, Bush received almost exclusive applause only from friendly forces. There were other issues where there was plenty of common ground like expanding research for AIDS in Africa which received applause from both sides throughout.
There were other issues that were more nuanced, like embryonic stem cell research. The President mentioned the discovery of a new form of stem cell research and he proclaimed that this discovery could lead to an end to the contentious issue and only the Reps applauded. Then, he began to talk about his unconditional opposition to any cloning and both sides applauded.
All mentions of the troops of course received applause from both sides, including plans to update and evolve VA treatment in light of the scandal last year. The troops are obviously one thing that each side supports enthusiastically and without hesitation.
The biggest surprise came in the overwhelming applause to one piece of Bush's speech toward AQI. Bush said that we will not back down from AQI and we will stay and finish them. Both sides applauded here. This is quite surprising since the Dems won't acknowledge that AQI is an enemy we need to defeat. They may have been caught up in the moment however their applause is also a tacit rejection of their entire position on Iraq.
The tax cuts may wind up being the most contentious domestic issue in the campaign. Bush received enthusiastic applause from his side when he called on making them permanent, and a cold stare from the other side.
The most interesting set of applause came in response to FISA. Bush called on Congress to make changes in FISA permanent (they expire Feb 1). This wasn't merely met with applause but in my estimation the most rousing applause of the evening from the Reps and again the Dems gave him a cold stare.
There is no chance this Congress will make the tax cuts permanent, however if the SOTU is any indication we are about to have a full out political brawl on FISA.
All in all I didn't mind the speech however I continue to be concerned by the rhetoric toward my business. Bush called on reform to Fannie Mae. Reform is another of those warm fuzzy words that mean nothing. Fannie Mae is the only portion of the market not to be hit. It really doesn't sound like they are the ones that need reform. If the President is not able to understand that dynamic and wants to target Fannie Mae even though Fannie is actually doing it right, that should scare everyone.
Kenya in Crisis Day 32: A Broken Record
There are more scene of violence with men carrying machetes butchering each other. Violence caused by machetes has now become an all too common occurrence in Kenya.
I think the last paragraph is the understatement of all understatements. At this point the last thing anyone should be worrying about is Kenya's reputation, and any story that makes a point of it, is in my opinion missing the point.
The latest flare up was spurned by the murder of an opposition law maker.
As the murders become more rampant, more extreme, and more significant, the situation becomes more desperate. I still haven't seen anything that makes me believe that we are headed for anything but an all out genocide. All of the so called diplomacy from President Bush, to Senator Obama, to other world leaders appears to me to be window dressing. Case in point, the next paragraph.
Meanwhile, Kofi Annan has begun formal mediations.
Kenyan military helicopters swooped to break up machete-wielding mobs on Tuesday as the killing of an opposition legislator stoked bloody protests across the
east African country.
About a dozen people were killed on Tuesday, bringing the toll to more than 850 since President Mwai Kibaki's disputed December 27 election triggered violence that has now taken on an ethnic momentum of its own.
Post-election protests have degenerated into cycles of killing between tribes who have never reconciled divisions over land, wealth and power left by British colonial rule and exacerbated by politicians in 44 years of independence.The crisis has cost Kenya its reputation as a bastion of peace in a turbulent region, and dented its previously flourishing economy, east Africa's largest.
I think the last paragraph is the understatement of all understatements. At this point the last thing anyone should be worrying about is Kenya's reputation, and any story that makes a point of it, is in my opinion missing the point.
The latest flare up was spurned by the murder of an opposition law maker.
Gunmen killed an opposition lawmaker in Nairobi on Tuesday, triggering a new flare-up of the ethnic fighting that has gripped Kenya since its disputed presidential election and dimming hopes for negotiations to end the month-long standoff.
Mugabe Were, who was shot to death as he drove home, was among a slew of opposition members who won seats in the legislative vote held at the same time as the presidential election. The opposition, which won the most seats in parliament, accuses President Mwai Kibaki of stealing the presidential vote.
As the murders become more rampant, more extreme, and more significant, the situation becomes more desperate. I still haven't seen anything that makes me believe that we are headed for anything but an all out genocide. All of the so called diplomacy from President Bush, to Senator Obama, to other world leaders appears to me to be window dressing. Case in point, the next paragraph.
Meanwhile, Kofi Annan has begun formal mediations.
Former U.N. chief Kofi Annan on Tuesday opened formal mediation to end Kenya's post-election crisis, pulling together both sides to strike a political deal and stanch violence threatening to spiral out of control.I will not make any crude and inappropriate remarks about Annan's ability to mediate this crisis and merely say I have my doubts about what he can accomplish. Odinga's quote is diplomatic however I am of the opinion that there is no more Kenya. There are only tribes, and Odinga doesn't lead any of them. By meeting with the leaders of each faction, it seems to me as though Annan is missing the basic dynamic of the crisis. I believe these two could walk into the middle of Nairobi and have tea together and it wouldn't do much. This is no longer political and mostly tribal. In order to stop it, the leaders of each tribe need to be mediated, and that isn't who Annan is meeting with.
Annan opened the meeting in the Kenyan capital Nairobi flanked by President Mwai Kibaki and opposition leader Raila Odinga. Western nations have urged both sides -- who appear far apart -- to take the talks seriously or risk losing aid.
"There is only one Kenya," Annan said as he spoke to open the ceremony. "The crisis has a profound and negative impact on the social fabric of Kenya, on the Kenyan economy."
Monday, January 28, 2008
CMU Vs. Dennis Lennox: What's at Stake
Prologue: First here is a quick rundown for those that haven't been following. Back in March, the administration at Central Michigan University offered their prestigious Griffin Chair to former Michigan Lottery Chair Gary Peters. This was a peculiar hire because Peters had already made his intentions public that he was considering a run at the U.S. Congress in a district hundreds of miles from the campus. This story was discovered by CMU junior, Dennis Lennox. Lennox began to track the story through a newsletter as well as this website. In October, Lennox captured Dean of Students Pamela Gates assaulting him when he served her with a FOIA request. At roughly the same time, the administration began to use unusually heavy handed tactics toward Lennox. They banned him from videotaping others in public places, a move that even sparked the ACLU to defend Lennox. Then, the administration sanctioned Lennox for such dubious violations as distributing literature too close to a doorway.
Currently, he is two days from facing a disciplinary hearing for this incident. Lennox was passing out literature at about nine in the evening inside a university building. This is a technical violation of the student code of conduct and his literature was confiscated by a Professor Koper. The incident got even more complicated because Lennox also refused to identify himself to the Professor which is another technical violation of the same student code. (As I have pointed out multiple times, drinking under age is also a violation but I know of no freshman or sophomores sanctioned for violating that policy at CMU)...now for my piece...
Some reading this may not see any relevance of the plight of Dennis Lennox to their own lives, however I believe the outcome is relevant to all of us. That's because Lennox has decided to take on a force more powerful than him. That force, like all powerful forces, didn't merely roll over when he took them on. Instead, they used the power they had and they used it liberally. They used that power toward him in a manner they would never dream of using toward anyone else. The irony is that the powerful forces haven't held themselves accountable at all while they have strictly applied rules toward Lennox. Lennox faces a disciplinary hearing because he passed out literature where he wasn't supposed to. While this may in fact be a technical violation of their student code of conduct, j walking is also a technical violation of traffic law. If someone were the subject of a j walking ticket, I would say the police were targeting that person. The CMU admin is using the student code of conduct here to target Lennox in a manner no less egregious than if someone received multiple j walking tickets.
While Lennox faces sanctions for exercising his first amendment rights too aggressively and for not identifying himself to a stranger at night, let's see what the administration has done and what if any sanctions that has merited. The Dean of Students assaulted Lennox and the assault was captured on video. A FOIA request found this exchange of emails.
and this response
This same set of emails found this one as well...
The author of this email is the head of the Poli Sci department himself, Del Ringquist, and he himself describes a department in chaos and turmoil. According to his own words, this is a department in an ideological civil war and hiring has become a tool for each of the ideological forces. As head of the department, the chaos and lunacy is ultimately his responsibility.
No one, not Dean Gates, not the two professors, and not Ringquist, have been held accountable for their behavior. The only one facing sanctions is Lennox himself. That's because the other folks I mentioned are part of the powerful force that Lennox is fighting. The powerful are rarely held to account. Only those with limited resources like Lennox ever have their behavior scrutinized.
Thus, Lennox is fighting one battle in the war to turn the ideals of this country into a reality. We are part of a country in which each individual is supposed t be equal. Of course, we all understand that in reality that is rarely the case. In reality, there are those with power and resources and those without it. Lennox is fighting one battle to turn the ideals of this country into a reality. If Lennox is sanctioned on these trumped up charges then the next powerful force will have an even easier road in eliminating their threat with whatever means they feel are necessary. If, on the other hand, the rest of us band together and let the administration know that this is unacceptable, and they back down, it will make it that much tougher for the next powerful force to exert its will to get its way.
There is a great line in a great movie, Hotel Rwanda,
Every reader of this piece has a choice to make now. You can all read this and think to yourself how terrible the way they are treating Dennis Lennox and go on with your day (go back and eat your own dinner), or you can do something about it. There is also a great and appropriate saying
Will you decide to do nothing, or will you stand up for what is right? The choice is ultimately up to the reader. The reader's sacrifice in all of this is very small compared to what Lennox already has sacrificed and certainly what he still may. All that I ask is that you contact the folks at the emails I provide and let them know that this won't do. If everyone let's the administration know that they are watching, the folks will show the administration which force is really the most powerful force there is. One battle in a greater war will be won as well.
CMU President Michael Rao, mailto:president@cmich.eduand (989) 774-3131* Assistant Dean of Students Anthony Voisin anthony.a.voisin@cmich.edu and (989) 774-3016 * Board of Trustees Chairman Jeffrey Caponigro (R), capon1jr@cmich.edu and (248) 355-3200* Board of Trustees member Stephanie Comai (R), comai1s@cmich.edu and (734) 761-6915* Board of Trustees member John Kulhavi (R), kulha1jg@cmich.edu and (248) 737-6222* Board of Trustees member Gail Torreano (R), torre1gf@cmich.edu and (313) 223-7171
Currently, he is two days from facing a disciplinary hearing for this incident. Lennox was passing out literature at about nine in the evening inside a university building. This is a technical violation of the student code of conduct and his literature was confiscated by a Professor Koper. The incident got even more complicated because Lennox also refused to identify himself to the Professor which is another technical violation of the same student code. (As I have pointed out multiple times, drinking under age is also a violation but I know of no freshman or sophomores sanctioned for violating that policy at CMU)...now for my piece...
Some reading this may not see any relevance of the plight of Dennis Lennox to their own lives, however I believe the outcome is relevant to all of us. That's because Lennox has decided to take on a force more powerful than him. That force, like all powerful forces, didn't merely roll over when he took them on. Instead, they used the power they had and they used it liberally. They used that power toward him in a manner they would never dream of using toward anyone else. The irony is that the powerful forces haven't held themselves accountable at all while they have strictly applied rules toward Lennox. Lennox faces a disciplinary hearing because he passed out literature where he wasn't supposed to. While this may in fact be a technical violation of their student code of conduct, j walking is also a technical violation of traffic law. If someone were the subject of a j walking ticket, I would say the police were targeting that person. The CMU admin is using the student code of conduct here to target Lennox in a manner no less egregious than if someone received multiple j walking tickets.
While Lennox faces sanctions for exercising his first amendment rights too aggressively and for not identifying himself to a stranger at night, let's see what the administration has done and what if any sanctions that has merited. The Dean of Students assaulted Lennox and the assault was captured on video. A FOIA request found this exchange of emails.
Mr. Lennox is not only someone with noxious political and social beliefs, but someone who has mental health issues, and someone who seems to be losing control. The psychologist's advice (he has been following some of this on the news) is the following: "Don't provoke him. Don't initiate a confrontation of any sort, be it email, letter, or a face-to-face. He will respond in kind and escalate. Do not respond to correspondence, taunts, or 'stalking behavior' other than by calling the police. Appoint a mediator, if possible, from the counseling center [a neutral party], to try to convince him to either get help, back off or face scholastic or legal consequences." The psychologist went on to say that he thought that Lennox was a ticking bomb of sorts: he's angry [a little ball of hate, really], he's been rejected by other conservatives, and he has fixated on certain groups of people as the ultimate cause of his unhappiness. I know we are all furious with Lennox, and despise what he represents—let's face it, a movement that loathes academe and all it stands for. But I do think the above advice is solid and worth considering. Oh, and Horowitz has had connections with the Christian Right and the YAF because of their shared hatred for Muslims. It's a weird partnership, but one that has been flourishing for at least 10 years (Frontline did something on it a few years ago).
and this response
So are you saying that this kid is dangerous? As in Virginia Tech dangerous? Let's not ignore the warning signs...These professors had of course never actually met Lennox, and it goes without saying that it is totally egregious to make such incendiary statements unless they are warranted. These statements weren't made as part of some sort of evaluation but rather strictly to poison the waters against him in an attempt to marginalize him. Just like Dean Gates, who assaulted him, neither of these professors has yet been held to account for their behavior.
This same set of emails found this one as well...
I think there is a growing impression that CMU is a Conservative Republicanbase and I and several others have heard this over and over from folks in our own administration, the faculity, and from Lansing politicians. The Department of Political Scinece has had top rate policy analysts in the first effort to fill the Griffin Chair and they percieve that they were overridden because of Ranny Ricker's call regarding (name blacked out). In the second search to fill the Griffin Chair the Department received a hassle when they found a moderate Republican to have cleared al the hurdles and a political ally and close associate of John Engler was almost foisted upon them even though the person lacked the same excellent qualifications as Bill Ballinger...
The author of this email is the head of the Poli Sci department himself, Del Ringquist, and he himself describes a department in chaos and turmoil. According to his own words, this is a department in an ideological civil war and hiring has become a tool for each of the ideological forces. As head of the department, the chaos and lunacy is ultimately his responsibility.
No one, not Dean Gates, not the two professors, and not Ringquist, have been held accountable for their behavior. The only one facing sanctions is Lennox himself. That's because the other folks I mentioned are part of the powerful force that Lennox is fighting. The powerful are rarely held to account. Only those with limited resources like Lennox ever have their behavior scrutinized.
Thus, Lennox is fighting one battle in the war to turn the ideals of this country into a reality. We are part of a country in which each individual is supposed t be equal. Of course, we all understand that in reality that is rarely the case. In reality, there are those with power and resources and those without it. Lennox is fighting one battle to turn the ideals of this country into a reality. If Lennox is sanctioned on these trumped up charges then the next powerful force will have an even easier road in eliminating their threat with whatever means they feel are necessary. If, on the other hand, the rest of us band together and let the administration know that this is unacceptable, and they back down, it will make it that much tougher for the next powerful force to exert its will to get its way.
There is a great line in a great movie, Hotel Rwanda,
I think they will say how terrible and go back and eat their dinner
Every reader of this piece has a choice to make now. You can all read this and think to yourself how terrible the way they are treating Dennis Lennox and go on with your day (go back and eat your own dinner), or you can do something about it. There is also a great and appropriate saying
evil reigns when good people do nothing
Will you decide to do nothing, or will you stand up for what is right? The choice is ultimately up to the reader. The reader's sacrifice in all of this is very small compared to what Lennox already has sacrificed and certainly what he still may. All that I ask is that you contact the folks at the emails I provide and let them know that this won't do. If everyone let's the administration know that they are watching, the folks will show the administration which force is really the most powerful force there is. One battle in a greater war will be won as well.
CMU President Michael Rao, mailto:president@cmich.eduand (989) 774-3131* Assistant Dean of Students Anthony Voisin anthony.a.voisin@cmich.edu and (989) 774-3016 * Board of Trustees Chairman Jeffrey Caponigro (R), capon1jr@cmich.edu and (248) 355-3200* Board of Trustees member Stephanie Comai (R), comai1s@cmich.edu and (734) 761-6915* Board of Trustees member John Kulhavi (R), kulha1jg@cmich.edu and (248) 737-6222* Board of Trustees member Gail Torreano (R), torre1gf@cmich.edu and (313) 223-7171
The Fallacy of Rate Tinkering
Here is the profile of the typical borrower that I believe is most in need of help at this moment. They bought a property for say $250K when really they probably shouldn't have gone over 225K. They likely got an ARM, and even an interest only, to make the loan work, however because they overbought their payment was frankly too high no matter what type of loan they got. Because it was, they likely robbed Peter to pay Paul so to speak for a while. What I mean by this is that in order to get money to afford their mortgage they ran up credit cards, personal loans, and any other form of cash they could get their hands on. Once they were tapped out they went back to their mortgage broker for help. Their mortgage broker could help because by this point their property had gained 10-15- and even 20%. Their mortgage broker wrapped up all their new debt and got them a loan at 275-300K. Now, keep in mind these borrowers couldn't afford their loan at 250k. They really couldn't afford their loan at 275k. I believe that for many borrowers this process happened multiple times and each time they gradually dug an even bigger hole for themselves. This means folks owe 30-50% and even more than they can reasonable afford on their loan amounts.
At this point, the situation is critical because all of this so called new found equity was a slight of hand of an out of control market. The values of their properties are now back at or even below their original cost. Meanwhile they owe 10-15-20 and even more percent more than their original cost. These folks are in big trouble.
Now, there all sorts of politicians offering all sorts of bailouts for these folks. In my opinion, none of them will work because what these folks need is relief on their loan amounts. In order to save these folks they need to owe what they can afford. This has less to do with the rate and much more to do with the loan amount. I am surprised a politician hasn't suggested that we en masse cut the loan amounts on all these borrowers by up to 30%. If we did, these folks would be saved. (While there are all sorts of dramatic problems with this the folks would get a payment they could afford and thus it could work politically)
On some level, I can't figure it out because cutting the loan amounts dramatically is no less extreme than cutting the interest rates dramatically or freezing them. Changing loan amounts on a private contract en masse is to me no different than changing interest rates on a private contract en masse. On a typical thirty year loan, the bank receives up to three times the original loan amount in payments over the life of the loan. In other words, the borrower winds up paying about 750k worth of monthly payments over thirty years on a 250k mortgage. Thus, a bank would still make plenty over the life of the loan even at reduced loan amounts.
Of course, there is one catch. Borrowers almost never hold onto a loan for the full term. Thus, a bank might loan 250k, and would get paid off significantly less than that a few years later (once those loans are invariably paid off by selling or by refinancing. If the loan amounts were reduced these two options that aren't available would suddenly be available) if those loan amounts were reduced en masse. Maybe just maybe, that is why the feds haven't suggested that loan amounts be lowered en masse.
Of course, there is an equally problematic reality with lowering rates en masse. Banks rarely hold onto loans for the full term of the loan either. Banks by and sell loans to and from each other all the time. By lowering or freezing rates on loans en masse the government is equally reducing the value of the loan from the perspective of the bank. By freezing or cutting rates, the government has just made loans less valuable to banks. Thus, a bank may get the shaft by buying a loan expecting one set of terms and getting another, or a bank could find that they hold onto a loan they can no longer sell because the terms have been changed. Either way, by freezing or cutting rates, the government disrupts the market for mortgages dramatically.
The difference between the two scenarios is that one is pretty obvious to most and the other is only obvious to professionals in the business. Neither of course makes any sense, but one's lack of sense is more subtle. Lowering rates or freezing rates en masse puts no less stress on the banks that are holding those loans than the stress that would be put on them if the government forced banks to reduce loan amounts en masse. The only difference is that lowering loan amounts enough would actually save the borrower. Of course, it would save the borrower at the expense of a total meltdown in the mortgage market.
The current rate freeze proposals would only disrupt the mortgage market even further and likely wouldn't destroy it. Of course, the current rate freeze wouldn't actually save the borrowers either. The fallacy of course is that the government is trying to save irresponsible people. That is the rub. The government would never refer to the folks as irresponsible but that is what they are. Anyone that needs the government to step in and reorganize the terms of a private contract so that they can meet the terms of that contract IS IRRESPONSIBLE.
That, ultimately, is the diciest part of this rate freeze. The government wants to rearrange the so called deck chairs on the Titanic. These folks are irresponsible. No government bailout will change that. They can freeze all the rates they want but the profile of the borrower won't change. Even if the terms were ultimately ones they could afford, it is likely they would use that opportunity to run up their debts. That likely won't happen anyway because these folks are irresponsible. Thus, they put themselves into a position that is beyond help.
The fallacy of the rate freeze is that it likely won't have much of an effect. Even if it did, those folks would likely use that opportunity to get into more trouble. If someone needs an en masse loan decrease, is that really the sort of person the government should try saving? That, ultimately, is the fallacy of the rate freeze. While there is no political advantage to doing the sensible, the sensible thing is to make these people suffer because while it isn't much of an option it is still better than anything artificial.
At this point, the situation is critical because all of this so called new found equity was a slight of hand of an out of control market. The values of their properties are now back at or even below their original cost. Meanwhile they owe 10-15-20 and even more percent more than their original cost. These folks are in big trouble.
Now, there all sorts of politicians offering all sorts of bailouts for these folks. In my opinion, none of them will work because what these folks need is relief on their loan amounts. In order to save these folks they need to owe what they can afford. This has less to do with the rate and much more to do with the loan amount. I am surprised a politician hasn't suggested that we en masse cut the loan amounts on all these borrowers by up to 30%. If we did, these folks would be saved. (While there are all sorts of dramatic problems with this the folks would get a payment they could afford and thus it could work politically)
On some level, I can't figure it out because cutting the loan amounts dramatically is no less extreme than cutting the interest rates dramatically or freezing them. Changing loan amounts on a private contract en masse is to me no different than changing interest rates on a private contract en masse. On a typical thirty year loan, the bank receives up to three times the original loan amount in payments over the life of the loan. In other words, the borrower winds up paying about 750k worth of monthly payments over thirty years on a 250k mortgage. Thus, a bank would still make plenty over the life of the loan even at reduced loan amounts.
Of course, there is one catch. Borrowers almost never hold onto a loan for the full term. Thus, a bank might loan 250k, and would get paid off significantly less than that a few years later (once those loans are invariably paid off by selling or by refinancing. If the loan amounts were reduced these two options that aren't available would suddenly be available) if those loan amounts were reduced en masse. Maybe just maybe, that is why the feds haven't suggested that loan amounts be lowered en masse.
Of course, there is an equally problematic reality with lowering rates en masse. Banks rarely hold onto loans for the full term of the loan either. Banks by and sell loans to and from each other all the time. By lowering or freezing rates on loans en masse the government is equally reducing the value of the loan from the perspective of the bank. By freezing or cutting rates, the government has just made loans less valuable to banks. Thus, a bank may get the shaft by buying a loan expecting one set of terms and getting another, or a bank could find that they hold onto a loan they can no longer sell because the terms have been changed. Either way, by freezing or cutting rates, the government disrupts the market for mortgages dramatically.
The difference between the two scenarios is that one is pretty obvious to most and the other is only obvious to professionals in the business. Neither of course makes any sense, but one's lack of sense is more subtle. Lowering rates or freezing rates en masse puts no less stress on the banks that are holding those loans than the stress that would be put on them if the government forced banks to reduce loan amounts en masse. The only difference is that lowering loan amounts enough would actually save the borrower. Of course, it would save the borrower at the expense of a total meltdown in the mortgage market.
The current rate freeze proposals would only disrupt the mortgage market even further and likely wouldn't destroy it. Of course, the current rate freeze wouldn't actually save the borrowers either. The fallacy of course is that the government is trying to save irresponsible people. That is the rub. The government would never refer to the folks as irresponsible but that is what they are. Anyone that needs the government to step in and reorganize the terms of a private contract so that they can meet the terms of that contract IS IRRESPONSIBLE.
That, ultimately, is the diciest part of this rate freeze. The government wants to rearrange the so called deck chairs on the Titanic. These folks are irresponsible. No government bailout will change that. They can freeze all the rates they want but the profile of the borrower won't change. Even if the terms were ultimately ones they could afford, it is likely they would use that opportunity to run up their debts. That likely won't happen anyway because these folks are irresponsible. Thus, they put themselves into a position that is beyond help.
The fallacy of the rate freeze is that it likely won't have much of an effect. Even if it did, those folks would likely use that opportunity to get into more trouble. If someone needs an en masse loan decrease, is that really the sort of person the government should try saving? That, ultimately, is the fallacy of the rate freeze. While there is no political advantage to doing the sensible, the sensible thing is to make these people suffer because while it isn't much of an option it is still better than anything artificial.
A Cynical View of the Clintons
If there are any cynics as far as the Clintons are concerned, all your perceptions of the two will either be proven right or wrong in the next couple of weeks. After a landslide victory in South Carolina, Barack Obama is set to receive the endorsement of Ted Kennedy. Between several early primary victories and his outstanding fundraising, Obama is no longer merely a formidable opponent. He is now a full out threat to the Clinton's plans on re taking the White House.
We, cynics, have a chance to see if our cynicism is warranted. We believe that the Clintons will do anything to get elected because we cynics believe the Clintons value power over anything else. That means, if we cynics are right, we will see a heavy dose of race baiting. We will see a heavy dose of hit jobs alluding to prior drug use, Tony Rezko, and they may even use Barack's name and faith against him.
Now, some reading this may in fact be saying that we have already seen that. Yes, we have seen a bit of it, however that is not the intensity that we cynics believe we will see. We cynics believe that Hillary will stop at nothing to get elected and the more that is in doubt the more desperate her tactics will become.
You want to see how heavy this will become. Let's see how Hillary cynic number one Dick Morris sees it...
Now, a harsh shot in one debate is not beyond the pale and it would be unfair to characterize Clinton as doing something any other candidate wouldn't do. We cynics don't believe this is the last we will hear of Tony Rezko in the debate. If we cynics are right, then soon Tony Rezko will become part of the political vernacular.
Then, there is Obama's church. The pastor, Rev. Dr. Jeremiah A. Wright, Jr, has opened Obama up to plenty of guilt by association attacks to any cut throat politician the kind we cynics believe Hillary will be. Here is what he said about Louis Farrakhan...
Obama has also admitted to prior drug use. If they raise the issue it won't be the first time. Their proxy Bill Shaheen raised the issue this way...
The Clintons immediately distanced themselves from the comments and Shaheen was even fired from the campaign. It is of course unclear what role if any the played. The cynics would spin a large machiavellian yarn about this whole fiasco but much of it happened behind closed doors so who knows. If we cynics are right, this is not the last time this issue will be raised.
Beyond that, who knows what the Clintons might have up their perverbial sleeves? If we cynics are right, there is all sorts of dirt that the Clintons will dream up. They have already tried to attack an essay he wrote in kindergarten. We cynics believe they hire P.I's to dig up dirt on their enemies. If we cynics are right, they will trot out every skeleton in every closet that Barack Obama has ever had.
Dick Morris long ago pointed out that Hillary would look to get Obama in the mud with her. She needed to bring him down from the perch that he was on as the politician that would unite, that is above the fray, and the one that will bring about a new kind of politics. They have been able to accomplish that to a certain extent however not enough to put him away. I think they realize that on the issues there is little difference. I think they realize that he beats Hillary on personality and charm. I think they realize that to beat him they need to make his theme look hypocritical and fraudulent. In order to do that, they need to sling as much mud at him as possible hoping he will sling back. If we cynics are right, that is exactly what she will do and the blue print is what I have provided. If we cynics are right, the next few weeks of the Democratic race should be all about race, drugs, religion, as well as friends and associates. We shouldn't hear much about policy, and it will be ugly. We will wait and see if the cynics are right.
That, of course, is if we cynics are right. If we are wrong then the next couple weeks will be spent debating the finer points of the differences in their health care plans, their Iraq withdrawal plans, and their stimulus packages. If we cynics are wrong then the next two weeks will be spent campaigning on the issues. Either way, the next two weeks will tell if we cynics have a reason to be cynical or if we may just owe the Clintons a bit more slack than we have given them since the 1990's.
We, cynics, have a chance to see if our cynicism is warranted. We believe that the Clintons will do anything to get elected because we cynics believe the Clintons value power over anything else. That means, if we cynics are right, we will see a heavy dose of race baiting. We will see a heavy dose of hit jobs alluding to prior drug use, Tony Rezko, and they may even use Barack's name and faith against him.
Now, some reading this may in fact be saying that we have already seen that. Yes, we have seen a bit of it, however that is not the intensity that we cynics believe we will see. We cynics believe that Hillary will stop at nothing to get elected and the more that is in doubt the more desperate her tactics will become.
You want to see how heavy this will become. Let's see how Hillary cynic number one Dick Morris sees it...
Precisely because he is going to lose it. If Hillary loses South Carolina and the defeat serves to demonstrate Obama’s ability to attract a bloc vote among black Democrats, the message will go out loud and clear to white voters that this is a racial fight. It’s one thing for polls to show, as they now do, that Obama beats Hillary among African-Americans by better than 4-to-1 and Hillary carries whites by almost 2-to-1. But most people don’t read the fine print on the polls. But if blacks deliver South Carolina to Obama, everybody will know that they are bloc-voting. That will trigger a massive white backlash against Obama and will drive white voters to Hillary Clinton.Race is of course only one issue which the Clinton's can subtly sling mud at Obama with. There is Tony Rezko. Here is what Hillary said at their last debate...
Obama has done everything he possibly could to keep race out of this election. And the Clintons attracted national scorn when they tried to bring it back in by attempting to minimize the role Martin Luther King Jr. played in the civil rights movement. But here they have a way of appearing to seek the black vote, losing it, and getting their white backlash, all without any fingerprints showing. The more President Clinton begs black voters to back his wife, and the more they spurn her, the more the election becomes about race — and Obama ultimately loses.
when you were practicing law and representing your contributor ... in his slum landlord business in inner city Chicago."
Now, a harsh shot in one debate is not beyond the pale and it would be unfair to characterize Clinton as doing something any other candidate wouldn't do. We cynics don't believe this is the last we will hear of Tony Rezko in the debate. If we cynics are right, then soon Tony Rezko will become part of the political vernacular.
Then, there is Obama's church. The pastor, Rev. Dr. Jeremiah A. Wright, Jr, has opened Obama up to plenty of guilt by association attacks to any cut throat politician the kind we cynics believe Hillary will be. Here is what he said about Louis Farrakhan...
Minister Farrakhan will be remembered as one of the 20th and 21st century giants of the African American religious experienceNow, Obama has long distanced himself from these statements. The positions of the pastor are problematic, and that is putting it diplomatically, and Obama was even married by him. That said, this is like condemning Arnold Schwarzenneger for the positions of his father. Of course, if we cynics are right, that won't stop Hillary from using it to sling mud at Obama.
...
His integrity and honesty have secured him a place in history as one of the nation’s most powerful critics. His love for Africa and African American people has made him an unforgettable force, a catalyst for change and a religious leader who is sincere about his faith and his purpose
Obama has also admitted to prior drug use. If they raise the issue it won't be the first time. Their proxy Bill Shaheen raised the issue this way...
The Republicans are not going to give up without a fight ... and one of the things they're certainly going to jump on is his drug use," said Shaheen, the husband of former N.H. governor Jeanne Shaheen, who is planning to run for the Senate next year. Billy Shaheen contrasted Obama's openness about his past drug use -- which Obama mentioned again at a recent campaign appearance in New Hampshire -- with the approach taken by George W. Bush in 1999 and 2000, when he ruled out questions about his behavior when he was "young and irresponsible."
Shaheen said Obama's candor on the subject would "open the door" to further questions. "It'll be, 'When was the last time? Did you ever give drugs to anyone? Did you sell them to anyone?'" Shaheen said. "There are so many openings for Republican dirty tricks. It's hard to overcome."
The Clintons immediately distanced themselves from the comments and Shaheen was even fired from the campaign. It is of course unclear what role if any the played. The cynics would spin a large machiavellian yarn about this whole fiasco but much of it happened behind closed doors so who knows. If we cynics are right, this is not the last time this issue will be raised.
Beyond that, who knows what the Clintons might have up their perverbial sleeves? If we cynics are right, there is all sorts of dirt that the Clintons will dream up. They have already tried to attack an essay he wrote in kindergarten. We cynics believe they hire P.I's to dig up dirt on their enemies. If we cynics are right, they will trot out every skeleton in every closet that Barack Obama has ever had.
Dick Morris long ago pointed out that Hillary would look to get Obama in the mud with her. She needed to bring him down from the perch that he was on as the politician that would unite, that is above the fray, and the one that will bring about a new kind of politics. They have been able to accomplish that to a certain extent however not enough to put him away. I think they realize that on the issues there is little difference. I think they realize that he beats Hillary on personality and charm. I think they realize that to beat him they need to make his theme look hypocritical and fraudulent. In order to do that, they need to sling as much mud at him as possible hoping he will sling back. If we cynics are right, that is exactly what she will do and the blue print is what I have provided. If we cynics are right, the next few weeks of the Democratic race should be all about race, drugs, religion, as well as friends and associates. We shouldn't hear much about policy, and it will be ugly. We will wait and see if the cynics are right.
That, of course, is if we cynics are right. If we are wrong then the next couple weeks will be spent debating the finer points of the differences in their health care plans, their Iraq withdrawal plans, and their stimulus packages. If we cynics are wrong then the next two weeks will be spent campaigning on the issues. Either way, the next two weeks will tell if we cynics have a reason to be cynical or if we may just owe the Clintons a bit more slack than we have given them since the 1990's.
The Wall Street Journal on the Economy
A few weeks back I published this piece stating my own doubts about the whether or not the economy really is in the crisis that the CW has it in. If the powers that be are wrong and they have overreached in their response, they can turn a mild recession into a disaster from unnecessary stimulus. It is important to examine those consequences since one way or another there will be plenty of stimulus. What I present now is another economic view that mirrors that of mine, and more importantly an analysis of the consequences if we are right...
I don't try and find anaylsis of the economy that is similar to mine for any sort of an ego boost or some such thing...really...
It is beyond question that those in power believe wholeheartedly that we are in an economic crisis. The Fed has cut rates by nearly 2% and now the President and Congress have agreed on a stimulus package. If the economy is merely softening, then what we all should be worried about is the out of control stimulus not the current state of the economy.
The article is tempered in their analysis of the potential pitfalls of their supposition. I won't be. It would be an unmitigated disaster if I am right. If I am right, there would be out of control inflation leading to out of control interest rates, that could possibly put the economy in its first period of stagflation since the 1970's. That's because the out of control inflation will lead to out of control interest rates which would slow down the stimulus that everyone is creating. In other words, not only could this stimulus backfire and lead to inflation, but that could be disastrous and slow down the economy as well.
Stagflation is a period of high inflation and recession concurrently. It is quite a problem and resolving it is no less tricky, especially in this political climate. That's because solving one end perpetuates the other. That means that if you tackle the inflation portion, you will perpetuate the recession portion, and vice versa.
That is the potential problem with to so called overreach. By solving a problem that wasn't there in the first place, you create a problem that also wasn't there in the first place, and it is unclear if you resolve the other problem. The problem with politicians responding to economic crises during election cycles is that their responses are almost always political in nature. They look at the politics of the situation not the economics. That is what the Fed chairman is for. That individual is supposed to look at the economics of the situation. The Fed chairman appears to be being pulled by bond, stock, and commodities traders, and he is cutting rates because they are screaming for rate cuts. If anyone has seen the pits in any exchange, they know full well that it is the opposite of rational thought.
I don't try and find anaylsis of the economy that is similar to mine for any sort of an ego boost or some such thing...really...
It is hard to imagine any time in history when such rampant pessimism about the economy has existed with so little evidence of serious trouble.The article goes on to point out something that I didn't know that is vital to this discussion: housing is just less than five percent of the overall economy. That's important because the only real evidence that the economy is in trouble is squarely on the shoulders of the housing crisis. The housing market is in crisis without a doubt, however it is still yet to be determined how much of an effect that will have on the economy as a whole.
True, retail sales fell 0.4% in December and fourth-quarter real GDP probably grew at only a 1.5% annual rate. It is also true that in the past six months manufacturing production has been flat, new orders for durable goods have fallen at a 0.8% annual rate, and unemployment blipped up to 5%. Soft data for sure, but nowhere near the end of the world.
It is most likely that this recent weakness is a payback for previous strength. Real GDP surged at a 4.9% annual rate in the third quarter, while retail sales jumped 1.1% in November. A one-month drop in retail sales is not unusual. In each of the past five years, retail sales have reported at least three negative months. These declines are part of the normal volatility of the data, caused by wild swings in oil prices, seasonal adjustments, or weather. Over-reacting is a mistake.
It is beyond question that those in power believe wholeheartedly that we are in an economic crisis. The Fed has cut rates by nearly 2% and now the President and Congress have agreed on a stimulus package. If the economy is merely softening, then what we all should be worried about is the out of control stimulus not the current state of the economy.
The article is tempered in their analysis of the potential pitfalls of their supposition. I won't be. It would be an unmitigated disaster if I am right. If I am right, there would be out of control inflation leading to out of control interest rates, that could possibly put the economy in its first period of stagflation since the 1970's. That's because the out of control inflation will lead to out of control interest rates which would slow down the stimulus that everyone is creating. In other words, not only could this stimulus backfire and lead to inflation, but that could be disastrous and slow down the economy as well.
Stagflation is a period of high inflation and recession concurrently. It is quite a problem and resolving it is no less tricky, especially in this political climate. That's because solving one end perpetuates the other. That means that if you tackle the inflation portion, you will perpetuate the recession portion, and vice versa.
That is the potential problem with to so called overreach. By solving a problem that wasn't there in the first place, you create a problem that also wasn't there in the first place, and it is unclear if you resolve the other problem. The problem with politicians responding to economic crises during election cycles is that their responses are almost always political in nature. They look at the politics of the situation not the economics. That is what the Fed chairman is for. That individual is supposed to look at the economics of the situation. The Fed chairman appears to be being pulled by bond, stock, and commodities traders, and he is cutting rates because they are screaming for rate cuts. If anyone has seen the pits in any exchange, they know full well that it is the opposite of rational thought.
Sunday, January 27, 2008
The South Carolina Review
The only thing that it appears we know with each primary is that the race gets more muddled after each primary. Barack Obama took full advantage of South Carolina's large African American population. He won the state in a landslide and he won nearly eighty percent of the African American vote. The race continues to be muddled. Obama has important victories in South Carolina and Iowa while Clinton has victories in Nevada and New Hampshire.
Clinton continues to maintain a significant lead nationwide and in many of the Super Tuesday states. On the other hand, Obama may now enjoy the big mo from South Carolina. Of course, the big mo has turned out to be the big hype so far on both sides and so it is unclear if this victory is due to local demographics (a large African American population) or if it will lead to more victories in other states.
Obama has proven Dick Morris to be quite prophetic. He predicted long ago that this race would be neck and neck to the end and he also predicted that Hillary would end up victorious. So far, he couldn't have been anymore accurate.
The next major state is Florida for the Reps. It will be Rudy's Waterloo, and if you believe the polls, it will be the end of his campaign as well. Of course, if you believed the polls, Barack Obama would have won in NH, and Michigan would still be counting.
At this point, the only thing we know is that we know very little. I think the Dow Jones over the next week is easier to predict than the races on either side. Anyone who claims otherwise is fooling themselves and you. Stay tuned...
Clinton continues to maintain a significant lead nationwide and in many of the Super Tuesday states. On the other hand, Obama may now enjoy the big mo from South Carolina. Of course, the big mo has turned out to be the big hype so far on both sides and so it is unclear if this victory is due to local demographics (a large African American population) or if it will lead to more victories in other states.
Obama has proven Dick Morris to be quite prophetic. He predicted long ago that this race would be neck and neck to the end and he also predicted that Hillary would end up victorious. So far, he couldn't have been anymore accurate.
The next major state is Florida for the Reps. It will be Rudy's Waterloo, and if you believe the polls, it will be the end of his campaign as well. Of course, if you believed the polls, Barack Obama would have won in NH, and Michigan would still be counting.
At this point, the only thing we know is that we know very little. I think the Dow Jones over the next week is easier to predict than the races on either side. Anyone who claims otherwise is fooling themselves and you. Stay tuned...
Kenya in Crisis Day 30: The Black Hole of Violence
The violence continues in Kenya and the death toll has now exceeded 800. It is unclear to me who is counting and whether or not the group is accurate. I believe that there is too much chaos in the country to give an accurate count, however there is no doubt that a lot of folks have died...
Gangs of youths armed with machetes and clubs fought running battles with police on Sunday and burned tribal rivals alive in their homes in western Kenya, pushing the death toll from a month of escalating ethnic violence to nearly 800.
Sunday marked exactly one month since the Dec. 27 disputed president election which sparked the violence that has transformed this once-stable African country, pitting longtime neighbors against each other and turning towns where tourists used to gather for luxury holidays into no-go zones.
In response to one of my previous entries, I received this 
comment
commentThree of the happiest years of my life were spent living and working in Kenya, I now live in northern Uganda but keep close ties with my Kenyan friends. I disagree profoundly with your description of the current crisis as being merely tribal and something therefore peculiarly African.
It is important to understand that this crisis is not merely anything. The commenter says that they spent time there and they go onto give very good detail of the roots of this crisis. This crisis is very complicated and has elements of class, politics, as well as criminality. My point is that the people of Kenya have chosen tribalism over nationalism. Right now, neighbors are killing neighbors based on tribal affiliation. In other words, very few consider themselves Kenyans now. Instead they consider themselves Kikuyu or Luo or anyone of about twenty tribes that are in Kenya. 
This was certainly a difficult concept for me to initially understand myself however tribes have no national identity. The same tribes that are battling each other in Kenya can be found throughout the continent of Africa. Their leaders are likely located in other countries. The two so called leaders, Raila Odinga and Mwai Kibaki, don't control their respective tribes, Kikuyu and Luo. In fact, the opposition is made up of a collection of tribes. Right now the tribal warfare pits the Kikuyu against most of the other tribes in the nation.
In order to bring this violence under control all those folks with machetes need to see someone they see as a leader call for an end to the violence. Neither of the two men can claim that mantle. They can claim leadership to the country of Kenya but right now that country is more and more in name only.
As the country decays further and further into chaos it grows closer and closer to genocide. The turmoil continues.
Saturday, January 26, 2008
Vernon Jones: The Smoking Gun
DeKalb County, Georgia...
For much of the last decade, Dekalb County has been buying up land and turning it into parks and other natural outdoor areas as part of their green space program. According to their site, nearly 2300 acres have been acquired by the county and transformed into greener space.
A source has forwarded me 34 pages worth of documents that make the acquisition of 183 acres in particular suspect to say the least. At the center of this latest scandal is an individual that I am well aware of, Vernon Jones.
These 183 acres of land is known as Arabia Mountain Heritage Area. The area in question belonged to a company by the name of Dekalb Stone Company (later changed OldCastle Materials). They owned a rock quarry that was at the time of the beginning of this affair not in use.
Vernon Jones inquired about acquiring this land for the county's green space initiative. On November 21, 2001, he sent the CEO of the company, Morris Bishop, a letter formally requesting the county acquire the land. In January and then June of 2002, the company responded and informed the county that the land had been grandfathered in and that the company intended to re open the area for one of their quarries.
In April of 2003, (again according to the documentation including a court brief) VJ flew to Washington D.C. and met with Bishop and other big wigs from OldCastle to try and broker a deal to provide the company with land to build a quarry in another area of DeKalb County. This quarry was to be built in an area by what is known as Maddox Road. At roughly this exact time, VJ also goes ahead and invests in 53 acres of land right across the street from the Arabia Mountain Heritage Area. It is of course common knowledge that land is depressed in areas next to rock quarries and Jones pays roughly 500k for this strip of land. (Of course, again, not a bad deal considering he makes just under 100k per year as DeKalb County CEO)
This worked out to be a good deal not only for the county but for the company as well. There was only one hurdle. The new land had to be approved for re zoning. I have already pointed out the corrosive effect of corrupt review processes in the medical profession as well as in academia. The process for the review of this zoning was no less corrupt. The very same folks that were involved in brokering the deal, the DeKalb County Board lead by VJ himself, were the ones in charge of deciding the fate of the zoning action. Since the board, and Jones specifically, had a stake in the successful approval of the application, the whole approval process became nothing more than a sham.
According to the documents I received, the zoning approval came with two corrupt quid pro quos. First, OldCastle agreed to give up its 183 acres of land in Arabia to the green space initiative and second they agreed to pay DeKalb County a total of 8.3 million dollars. Here are snippets of correspondences that I was able to get a hold of...
I would like to reassure DeKalb County of our commitment once our land use permits are granted for the Maddox Road site. It is our commitment to donate the South Goddard Road site (the Arabia Mountains area) to DeKalb County for their greenspace expansion
...
I am pleased to advise you that OldCastle Materials is hereby agreeing to donate #300,000 on or before October 31, 2004 to the development of Rock Chapel Park, located on Rock Chapel Road in DeKalb County
Both these emails were written by Morris Bishop, the CEO of OldCastle, to DeKalb County Commissioner Hank Johnson.
According to a brief filed with the Superior Court of Dekalb County (civil action file no. 03-cv-12396) not only were these quid pro quos never disclosed, but neither were VJ's financial interests in seeing the deal go through. To top it off, the application was rushed through without giving residents of Maddox Road area a proper opportunity to object to a quarry being built in their neighborhood.
All of this might have stayed under the radar had it not been for LaFarge Aggregators, a competing quarry company. Their own application to build a quarry in the same area was bumped so that OldCastle could get their application fast tracked. LaBarge of course wasn't sitting on 183 acres of prime real estate that they could donate to the DeKalb County greenspace project. (They are the plaintiffs in the legal suit)
The 53 acres that Vernon Jones bought in 2004 were then sold by him at the end of 2007 for a cool $770,000, or an almost 50% profit in about three years. Not bad considering where the market was. It goes without saying that upcoming greenspace projects are kept private so that there isn't a run on real estate in those areas. In other words, VJ traded on "inside information" as a result of his position.
Epilogue: To see where Vernon Jones fits into the mess overall at Grady Hospital, please read this summary. Also, please read the recommendations my colleagues and I have come up with for saving Grady Hospital
Friday, January 25, 2008
Digesting the Stimulus Package
Well, while I am still uncertain about the severity of the economic downturn, and the CBO's projections support my conclusions, it is clear the Fed and now Congress and the President disagree. Along with cutting the Fed Funds rate by nearly two percent, the President and Congress have now agreed on a stimulus package.
What continues to be unclear to me is if all of this stimulus is necessary. We haven't seen this sort of aggressive rate cutting since 2002. Of course then, we had the internet bubble crash followed by 9/11 followed by the accounting scandals.
No one needs to tell me how severe the housing crash is I lived it. Still, it isn't clear to me that the housing crisis is necessarily a pre cursor to a crisis altogether.
There is no doubt that the politicians are responding to election year pressures, and it seems pretty obvious to me at least that Bernanke's moves are a response to investment market demands. Once again, the Fed Chairman is selected not elected exactly so he doesn't do what I suspect he is doing. It is not the Fed's job to calm markets. If a bunch of traders are throwing a hissy fit, that is too bad for them. The Fed chairman is not supposed to lower or raise rates because they are. This is like a parent letting their child watch tv an extra hour because they are crying.
Short term moves in markets are frankly inconsequential. If the markets nosedive for a few days, weeks, or even months, because traders are freaking that the whole world is about to explode then so be it. The minute that traders start to dictate Fed action is the day that the inmates run the asylum of the economy. That is the day that the Fed begins to over reach and produce fed action that is counter productive, and that is exactly what I believe is happening here.
As for the politicians, it is not at all unsurprising that they jumped over each other to look as though they are providing relief to "struggling" families. The relief is token and unlikely to have much of an effect on anyone. Furthermore, with the Bush tax cuts about to expire, it is unclear what this stimulus will do. I for one believe that if the feds really wanted to send a stimulated signal to the economy they should have made the tax cuts permanent. A lot of spending is on hold pending that resolution. Giving everyone a one time check of $600 and up is all well and good, however all those folks are facing an uncertain tax future, and clearing up the tax future is much more stimulating in my opinion.
In a rare display of election-year bipartisanship, the Bush administration and House leaders agreed Thursday on a $150 billion economic stimulus package that would send tax rebates to 117 million American families by spring.The U.S. economy is roughly thirteen trillion dollars, and thus it is unclear how much a stimulus package of only 150 billion dollars will do. It is clear that between this package and the aggressive rate cuts we have a lot of aggressive stimulus.
With a possible recession looming, both sides made concessions that they normally might not have made, acting out of apparent fear over being punished by voters for doing nothing. And they did it swiftly, reaching an accord in less than a week of negotiations.
The proposal, which still has to pass muster in the Senate, would send slightly more than $100 billion in rebates to individuals, including many who paid no taxes last year, and provide nearly $50 billion in tax incentives for businesses, chiefly through faster tax write-offs of investments.
What continues to be unclear to me is if all of this stimulus is necessary. We haven't seen this sort of aggressive rate cutting since 2002. Of course then, we had the internet bubble crash followed by 9/11 followed by the accounting scandals.
No one needs to tell me how severe the housing crash is I lived it. Still, it isn't clear to me that the housing crisis is necessarily a pre cursor to a crisis altogether.
There is no doubt that the politicians are responding to election year pressures, and it seems pretty obvious to me at least that Bernanke's moves are a response to investment market demands. Once again, the Fed Chairman is selected not elected exactly so he doesn't do what I suspect he is doing. It is not the Fed's job to calm markets. If a bunch of traders are throwing a hissy fit, that is too bad for them. The Fed chairman is not supposed to lower or raise rates because they are. This is like a parent letting their child watch tv an extra hour because they are crying.
Short term moves in markets are frankly inconsequential. If the markets nosedive for a few days, weeks, or even months, because traders are freaking that the whole world is about to explode then so be it. The minute that traders start to dictate Fed action is the day that the inmates run the asylum of the economy. That is the day that the Fed begins to over reach and produce fed action that is counter productive, and that is exactly what I believe is happening here.
As for the politicians, it is not at all unsurprising that they jumped over each other to look as though they are providing relief to "struggling" families. The relief is token and unlikely to have much of an effect on anyone. Furthermore, with the Bush tax cuts about to expire, it is unclear what this stimulus will do. I for one believe that if the feds really wanted to send a stimulated signal to the economy they should have made the tax cuts permanent. A lot of spending is on hold pending that resolution. Giving everyone a one time check of $600 and up is all well and good, however all those folks are facing an uncertain tax future, and clearing up the tax future is much more stimulating in my opinion.
News and Views on Lennox Vs. CMU From Other Sources
Several different media sources have begun to pick up the story of CMU's disciplinary hearing against Dennis Lennox. Just to bring everyone up to speed. Lennox is being threatened with punishment up to expulsion at a disciplinary hearing next Wednesday January 30th. The subject of the disciplinary hearing is from an incident with a Professor Koper in which Lennox was passing out literature inside a university building at about nine in the evening. The larger context is the painstaking manner in which Lennox has been tracking the hiring of Gary Peters to the lucrative position of Griffin Chair in the poli sci department. Peters is simultaneously running for U.S. Congress in a district hundreds of miles away. Lennox, and his organization, believe that Peters should choose between CMU and his run for Congress.
First, here is the student newspaper at CMU
I found this editorial to be so amateurish that it bordered on corrupt. They framed the issue as some sort of debate of free speech running up against disruptive behavior. That frankly ignores the mountain of evidence that the administration has singled out and targeted Lennox in a manner that they never would for the general student population. Furthermore, in theory it may very well be disruptive to pass out literature indoors, however in this incident Lennox was doing it at nine in the evening. There weren't any classes and thus he was disrupting no one. We don't cite people for j walking even though that is also a technical violation of the law.
To frame this issue as a matter of free speech rubbing up against disruptive behavior is frankly bad journalism. This campaign against Lennox by the administration is nothing less than a campaign to initimidate Lennox so that he drops his campaign against Peters, and my prior work has documented that.
The Saginaw news has also picked up the story.
Blog of Bodner gives a synopsis of the situation and quotes me as well.
Central Michigan University administrators are going forward with an expulsion hearing for a student who opposes Democratic congressional candidate and political science professor Gary Peters, The Saginaw News reports today.
First, here is the student newspaper at CMU
Before rallying behind Lennox, his supporters must first take the disciplinary code for what it is: a spectrum, the extremities of which rarely are exercised. Do not presume malice against an entire ideology simply on basis of a possible, yet unlikely, punishment.
The charges against Lennox do not specifically address his message, but rather the manner through which he spread it. University officials have reiterated the necessary consequence of free speech: that it is impossible, if not even undesirable, to distinguish hate speech from free speech and to limit only the former.
I found this editorial to be so amateurish that it bordered on corrupt. They framed the issue as some sort of debate of free speech running up against disruptive behavior. That frankly ignores the mountain of evidence that the administration has singled out and targeted Lennox in a manner that they never would for the general student population. Furthermore, in theory it may very well be disruptive to pass out literature indoors, however in this incident Lennox was doing it at nine in the evening. There weren't any classes and thus he was disrupting no one. We don't cite people for j walking even though that is also a technical violation of the law.
To frame this issue as a matter of free speech rubbing up against disruptive behavior is frankly bad journalism. This campaign against Lennox by the administration is nothing less than a campaign to initimidate Lennox so that he drops his campaign against Peters, and my prior work has documented that.
The Saginaw news has also picked up the story.
The 23-year-old became a lightning rod after he launched a campaign against CMU educator and political candidate Gary C. Peters, who Lennox said should "pick either Congress or campus."This particular piece would be characterized as hard news. The story is reported straight. Lennox is quoted and both side's positions are presented. That is the way hard news is supposed to be written, and thus there are no problems here. I frankly believe that Res Ipsa Loquitor (the facts speak for themselves), and thus if anyone presents the facts there is only one conclusion to draw.
The university hired Peters, a former Michigan lawmaker and state lottery commissioner, last year as its Griffin Endowed Chair in American Government. Peters is seeking the Democratic nod to face Republican Congressman Joe Knollenberg in Oakland County this fall.
Lennox said the hearing stems from allegations he provided false information to a university official, did not comply with an official and violated policy regulating the distribution of printed materials. He said the incidents happened Oct. 23 as he distributed anti-Peters fliers on campus and refused to give his name to an unidentified man who was collecting copies of the newsletter.
Blog of Bodner gives a synopsis of the situation and quotes me as well.
Central Michigan University administrators are going forward with an expulsion hearing for a student who opposes Democratic congressional candidate and political science professor Gary Peters, The Saginaw News reports today.
A hearing on Wednesday at 8 a.m. will decide the future of Students Against Gary Peters spokesman Dennis Lennox, a third year student, who has coordinated a coalition of 150 students who want Peters to pick between Congress and campus. It is unknown if the hearing will continue, as school administrators and trustees have been besieged by hundreds of complaints in recent days.I have been told by sources that Lennox' greatest ally is media pressure and thus it looks as though his allies are ratcheting up their own attacks...
Lennox is charged with three alleged violations of student regulations for an October 23 incident when a then-unknown man confiscated copies of The Peters Report newsletter.
Kenya in Crisis Day 29: "Leaders" Meet Violence Continues
Nearly a month into the crisis in Kenya, the two leaders finally met face to face with Kofi Annan as the mediator
It is unclear if this meeting will have anything more than symbolic value. I continue to believe that these two so called leaders are leading nothing. This crisis is now largely tribal with Kikuyu being attacked by most of the other tribes. These two leaders may lead political movements and they may lead supposed countries but they don't lead their respective tribes.
While this meeting was taking place sporadic violence continued throughout Kenya. The latest incarnation is in the city of Nakuru.
This situation continues to spiral out of control and the rest of the world is largely sitting by despite the reality that genocide is fast approaching.
Kenya's President Mwai Kibaki and Raila Odinga, leader of the main opposition party are meeting Thursday with former United Nations Secretary-General Kofi Anna as mediator.
It is unclear if this meeting will have anything more than symbolic value. I continue to believe that these two so called leaders are leading nothing. This crisis is now largely tribal with Kikuyu being attacked by most of the other tribes. These two leaders may lead political movements and they may lead supposed countries but they don't lead their respective tribes.
While this meeting was taking place sporadic violence continued throughout Kenya. The latest incarnation is in the city of Nakuru.
Kenyan police have imposed a night-time curfew in the western city of Nakuru where clashes have left at least 10 people dead over the past 24 hours.
Violence is continuing in Kenya's Rift Valley province, despite progress towards resolving the country's political crisis.
Hundreds have been killed since last month's disputed election, but it took until yesterday for President Mwai Kibaki and Opposition leader Raila Odinga to meet for talks.
This situation continues to spiral out of control and the rest of the world is largely sitting by despite the reality that genocide is fast approaching.
Thursday, January 24, 2008
More Liberal Fantasy Toward Real Estate
This one comes from Robert Kuttner of the Boston Globe. Like many of his liberal colleagues, he is also calling for a government bailout of distressed sub prime mortgages. His plan is much like that of Hillary Clinton only he takes it another step further. While Clinton merely wants rates frozen en masse, he actually wants to create a new government agency that will re negotiate distressed mortgages at lower rates.
It is typical liberal philosophy that any problem can be resolved with new bureaucracy. In this case, the problem is much more complicated than that, but that will be addressed in a minute. First, Kuttner of course puts all the blame in one corner...
That is frankly a distortion of what happened but it is also irrelevant at this point. What Kuttner doesn't say and what needs to be said, is that these same borrowers used the new found equity of the housing boom to take out cash and many times multiple times. I believe these folks got themselves in over their heads initially, but whether that is true or not, many of them are way in over their heads because they borrowed, multiple times many times, against the equity in their homes. Whatever their original situation, at this point most of these folks are so deep in debt they couldn't be saved even if you reduced their rate to zero. Furthermore, by systematically renegotiating rates of distressed borrowers, you create a moral hazard. These folks made poor financial decisions. That may not be P.C. but it is the truth. If they are rewarded with lower rates, then we encourage these same folks to make the same mistakes again. While bailing them out with a new government bureaucracy may sound like the compassionate thing to do, I don't believe for one second that it is the right thing to do.
What Kuttner doesn't explain is that his proposal is quite risky. If he is wrong and his new government program doesn't work, then what he will have done is needlessly create more bureaucracy, more paperwork, and more government. Kuttner's perspective is the same faulty politically correct perspective that most media have. It isn't the borrower's fault and if we only give them some assistance, then everything will be fine. First, they must share some of the responsibility since their signature is on the documents. Second, whether or not they are sympathetic isn't the issue. The issue is whether or not they can be saved. Kuttner seems to believe that merely renegotiating mortgages en masse will save them en masse. If the problem were that simple it would have already been done. The problem is that these folks have mortgages that are too great for their budget. In other words, it isn't the interest rate that is the issue but rather the size of the loan.
The way to save these borrowers isn't to reduce their rate but to reduce their loan amount. What actually needs to happen is for twenty or twenty five percent of the mortgage amount to go away. A 250k mortgage must be reduced to 200k. Now, I doubt politicians would ever suggest that because it is patently ridiculous, and yet no one seems to have a problem suggesting that rates be renegotiated in masse.
Now, Kuttner goes on to indict the very system that made sub prime popular.
This is the system that Lew Ranieri created by taking sub prime loans, packaging them together and turning them into bonds. Kuttner is right. It is much more difficult to renegotiate these sorts of loans. What he doesn't say is that this system has opened up home ownership to millions of folks that otherwise wouldn't be able to enjoy it. By turning mortgages into bonds, this frees up money for banks that they can then use to lend to new folks. The system has flaws however I am all for any system that creates an opportunity for more people to own.
The system is not the issue frankly. What we do going forward is? We can be the land of government interference and bureaucracy everytime something goes wrong like Kuttner suggests. On the other hand, we can be the land of personal responsibility and respect for private contracts like I suggest.
We are in the middle of a housing crisis. This crisis will affect millions and millions will be hurt. I don't believe that it is the government's job to save an industry. I don't believe it is the government's job to bail people out when they make poor financial decisions. Beyond that, I firmly believe that not only will such action lead us closer to socialism, but frankly it is counter productive.
What's needed is a government body like the Home Owners Loan Corporation of the New Deal era, when America last faced mass mortgage foreclosures. The HOLC issued tax-exempt bonds, and used the proceeds to refinance distressed mortgages at low rates.
According to Alfred DelliBovi, president of the Federal Home Loan Bank of New York, writing in "The American Banker," by 1935 the HOLC had refinanced 20 percent of all qualifying US mortgages. It saved close to 1 million Americans from foreclosure.
It is typical liberal philosophy that any problem can be resolved with new bureaucracy. In this case, the problem is much more complicated than that, but that will be addressed in a minute. First, Kuttner of course puts all the blame in one corner...
Millions of borrowers face foreclosures because, knowingly or otherwise, they took out bait-and-switch subprime mortgages, often with no down payments. With housing values depressed, many loans now exceed the value of the house.
That is frankly a distortion of what happened but it is also irrelevant at this point. What Kuttner doesn't say and what needs to be said, is that these same borrowers used the new found equity of the housing boom to take out cash and many times multiple times. I believe these folks got themselves in over their heads initially, but whether that is true or not, many of them are way in over their heads because they borrowed, multiple times many times, against the equity in their homes. Whatever their original situation, at this point most of these folks are so deep in debt they couldn't be saved even if you reduced their rate to zero. Furthermore, by systematically renegotiating rates of distressed borrowers, you create a moral hazard. These folks made poor financial decisions. That may not be P.C. but it is the truth. If they are rewarded with lower rates, then we encourage these same folks to make the same mistakes again. While bailing them out with a new government bureaucracy may sound like the compassionate thing to do, I don't believe for one second that it is the right thing to do.
What Kuttner doesn't explain is that his proposal is quite risky. If he is wrong and his new government program doesn't work, then what he will have done is needlessly create more bureaucracy, more paperwork, and more government. Kuttner's perspective is the same faulty politically correct perspective that most media have. It isn't the borrower's fault and if we only give them some assistance, then everything will be fine. First, they must share some of the responsibility since their signature is on the documents. Second, whether or not they are sympathetic isn't the issue. The issue is whether or not they can be saved. Kuttner seems to believe that merely renegotiating mortgages en masse will save them en masse. If the problem were that simple it would have already been done. The problem is that these folks have mortgages that are too great for their budget. In other words, it isn't the interest rate that is the issue but rather the size of the loan.
The way to save these borrowers isn't to reduce their rate but to reduce their loan amount. What actually needs to happen is for twenty or twenty five percent of the mortgage amount to go away. A 250k mortgage must be reduced to 200k. Now, I doubt politicians would ever suggest that because it is patently ridiculous, and yet no one seems to have a problem suggesting that rates be renegotiated in masse.
Now, Kuttner goes on to indict the very system that made sub prime popular.
In the old days, before mortgage loans were packaged into bonds, a distressed borrower and a lender could negotiate a lower rate. If the bank just foreclosed, the borrower would lose the house and the bank would be stuck with a property worth less than the mortgage.
By lowering the interest rate, the bank would take a smaller loss, and the borrower would keep the house.
Today, however, the bank seldom holds the loan - because the geniuses who thought up subprime packaged the loans into bonds. Renegotiating terms of these bonds is like unscrambling an egg.
This is the system that Lew Ranieri created by taking sub prime loans, packaging them together and turning them into bonds. Kuttner is right. It is much more difficult to renegotiate these sorts of loans. What he doesn't say is that this system has opened up home ownership to millions of folks that otherwise wouldn't be able to enjoy it. By turning mortgages into bonds, this frees up money for banks that they can then use to lend to new folks. The system has flaws however I am all for any system that creates an opportunity for more people to own.
The system is not the issue frankly. What we do going forward is? We can be the land of government interference and bureaucracy everytime something goes wrong like Kuttner suggests. On the other hand, we can be the land of personal responsibility and respect for private contracts like I suggest.
We are in the middle of a housing crisis. This crisis will affect millions and millions will be hurt. I don't believe that it is the government's job to save an industry. I don't believe it is the government's job to bail people out when they make poor financial decisions. Beyond that, I firmly believe that not only will such action lead us closer to socialism, but frankly it is counter productive.
Another Interesting Email in the Evolving Saga at CMU
Introduction: If this is your first introduction to the saga going on at Central Michigan University, here is a quick rundown. Gary Peters was hired to a distinguished position at CMU, the Griffin Chair. This hire raised eyebrows because Peters is subsequently running for U.S. Congress in a district hundreds of miles away. Dennis Lennox is a junior at CMU and he began tracking this case nearly immediately. In fact, he, along with a few other folks, dedicated this website to tracking the saga. He has used several highly aggressive, highly confrontational tactics to confront University officials including Peters. While they are controversial (and certainly debateable whether they are appropriate) there is no denying they are well within his first amendment rights. Despite this, the University has sanctioned Lennox on multiple occasions. They have attempted to limit his use of video equipment in public places. They sanctioned him for passing out literature too close to a doorway, and now, they have proceeded with a formal disciplinary hearing that could result in suspension or even expulsion, because he violated their policy against distributing literature inside University buildings.
I, like several area bloggers and even conservative powerhouse Redstate, feel he is being targeted and his constitutional rights are being squelched because he is attempting to expose the truth. While I make no secret of my natural bias, I also believe that I can source all my opinions with facts. As you will read further, this is not my first brush with a powerful admin trying to squelch a student's rights. I take this seriously and frankly personally, and I hope everyone else does also.
In response to my concerned email to the President of CMU, Michael Rao, his assistant sent me an emailed response. I am told that this response is a form letter and several folks received the same email. (though it should be noted that it was personally addressed to me). First, here is the email.
There are several things of interest here. The most important is this...
This isn't the first time that administration officials attacked Lennox' character and the comment I alluded to wasn't the first attack on Kuritzky's character. In Lennox' case, administration officials traded this set of emails back and forth.
I received this unsolicited email from Dr. Michael Ward (currently of the University of Cincinnati though he went to medical school at Emory at the same time as Kuritzky) regarding Kuritzky
This was one of several times when university officials or those close to them referred to Kuritzky as pathological. I have been told by sources that University officials even characterized Kuritzky as a sociopath to Atlanta media.
Again, while this is shocking and disturbing, but frankly not surprising. The administration's attempts to marginalize their opponents knows no bounds, especially when the stakes are as high as they are in these two cases. The admins will use any opportunity to smear their opponents because their marginalization is paramount in each case. That's because their opponents are presenting the truth, and because they are, they must be marginalized. Each administration has gone on a concerted effort to make Lennox and Kuritzky the issue rather than the actual issue at hand, and the allusion in this email is just one example.
The second intriguing part is this...
Lennox has already had his right to use video equipment in public threatened. He was already sanctioned for distributing literature too close to a doorway. Now, he is being threatened with expulsion for distributing literature inside a building. Whether or not CMU's policy on free speech is fair or not, it sure doesn't appear to be applied fairly in this case.
The next intriguing part of this email is this...
Since we are talking about fair, is it fair that only after handwringing and three months after the initial incident that Lennox was finally allowed to actually see the evidence against him? How can he mount a proper defense when the evidence is presented to him only a week prior to the hearing? If CMU is really fair, and Koper filed formal charges at the end of October, why did CMU wait until the end of January to present the evidence against him to Lennox?
Finally, I will note that an assistant responded to my complaints to the President. This is not out of the ordinary however it is quite ironic that when the initial complain was filed the President, Dr. Michael Rao, was carbon copied himself. If he is too busy to respond to complaints about the action, why does he need to be carbon copied in the original email filing the complaint?
I, like several area bloggers and even conservative powerhouse Redstate, feel he is being targeted and his constitutional rights are being squelched because he is attempting to expose the truth. While I make no secret of my natural bias, I also believe that I can source all my opinions with facts. As you will read further, this is not my first brush with a powerful admin trying to squelch a student's rights. I take this seriously and frankly personally, and I hope everyone else does also.
In response to my concerned email to the President of CMU, Michael Rao, his assistant sent me an emailed response. I am told that this response is a form letter and several folks received the same email. (though it should be noted that it was personally addressed to me). First, here is the email.
Dear Mr. Volpe:
Thank you for writing to the president to express your views. I am responding on the university’s behalf.
By Federal law, all CMU students are entitled to privacy in their relationships with the university. This puts the university at a distinct disadvantage when statements are made that are untrue. The university is limited in its ability to contradict those statements.
The university compares favorably with any higher education institution in its defense of the rights of all members of the community to express their opinions. The board and president have defended the rights of a wide variety of persons to express views and advocate their positions and will continue to defend these free speech
rights.
The university has an Advocacy Policy that has been in place for many years. It describes where students and others may engage in advocacy activities. Students have very wide rights of advocacy outside on the campus. The policy does not allow hand-billing and many other advocacy activities inside university buildings, except in connection with university sponsored events or in specified locations. That policy is applicable to everyone. Violations of the policy are dealt with through the student discipline procedures and employee discipline processes.
The Code of Student Rights, Responsibilities and Disciplinary Procedures (Code) has a long-standing and fair process for listening to both sides when students are subject to the university’s discipline procedures. This process follows the best practices recommended for public universities and has withstood challenges in the past. The Code lists twelve possible sanctions that may be imposed for violation of university regulations, ranging from written reprimand to dismissal (for the most egregious violations). Students who decline to respond to charges are provided a hearing.
The university’s processes for investigations and student discipline offer the persons involved a full opportunity to tell their side of the story. When they refuse to do so, the university makes a decision based on the information it has before it. It cannot allow persons to prevent closure on anything simply by declining to participate in legitimate processes.
Mary Jane FlanaganSecretary to the Board of Trustees and
Executive Assistant to the President
There are several things of interest here. The most important is this...
By Federal law, all CMU students are entitled to privacy in their relationships with the university. This puts the university at a distinct disadvantage when statements are made that are untrue. The university is limited in its ability to contradict those statements.Now, without mentioning Lennox, there is a clear insinuation here that he lied and that if they weren't legally handcuffed his lies would be exposed. This is not the first time I have seen this tactic used. A similar tactic was used toward Kevin Kuritzky in the fiasco at Emory. Let's examine the comments of an anonymous reader to this piece.
Due to some involvement in the ongoing lawsuit by Kevin against Emory, I am unable to reveal my name but was interested to see what was going on with the case. I never knew there was so much publicity surrounding the case and it was interesting to read about both sides for once. I believe in due justice but wanted to clarify a few things.1.Modus Operandi, mode of operation, is a close second to Res Ipsa loquitor (the facts speak for themselves) in my pantheon of Latin phrases. Studying both of these incidents, I continue to find more and more similarities that are frankly part of the Modus Operandi of corrupt admins that deal with students that attempt to stand up to them. This is one. This comes down to simple debating tactics. If the facts are on your side, you argue the facts. If they aren't, you try and marginalize your opponent. That is what is going on in both cases. In both cases, the facts are on the side of the students. If they weren't the admin would have pointed out the facts. Since the admins couldn't argue the facts, they attempted to marginalize their opponent by attacking their character. Dennis Lennox is insinuated to be a liar and Kuritzky insinuated to be unfit to be a doctor. In both cases, specifics or details are subtly not given and the lack of detail is explained away by vague and undefined legalisms. Modus Operandi.
Although I am unable to give details, Kevin's pattern of behavior should have led to his expulsion way before his senior year. This went beyond "simple" things as tardiness and even plagurism. Unfortunately for other Emory grads, there were other students displaying "unprofessional" behavior at the same time and they were treated the same. I agree the timing of his expulsion raises some eyebrows, but nothing that he "revealed" was a secret.
This isn't the first time that administration officials attacked Lennox' character and the comment I alluded to wasn't the first attack on Kuritzky's character. In Lennox' case, administration officials traded this set of emails back and forth.
Mr. Lennox is not only someone with noxious political and social beliefs, but someone who has mental health issues, and someone who seems to be losing control. The psychologist's advice (he has been following some of this on the news) is the following: "Don't provoke him. Don't initiate a confrontation of any sort, be it email, letter, or a face-to-face. He will respond in kind and escalate. Do not respond to correspondence, taunts, or 'stalking behavior' other than by calling the police...
So are you saying that this kid is dangerous? As in Virginia Tech dangerous? Let's not ignore the warning signs
I received this unsolicited email from Dr. Michael Ward (currently of the University of Cincinnati though he went to medical school at Emory at the same time as Kuritzky) regarding Kuritzky
Mike, Just wanted to let you know that you shouldn't get taken in by Kevin Kuritzky. The guy is a pathological liar and I have personally been taken in by his stories only to realize that he was flat out lying. I also know numerous other people who have experienced the same. It is quite sad because he is a very charming, intelligent person. He just uses these skills to manipulate people. Don't get taken in by him.Mike--
Michael Ward MD,
MBA
Resident
Physician
Department of Emergency Medicine
University of Cincinnati
This was one of several times when university officials or those close to them referred to Kuritzky as pathological. I have been told by sources that University officials even characterized Kuritzky as a sociopath to Atlanta media.
Again, while this is shocking and disturbing, but frankly not surprising. The administration's attempts to marginalize their opponents knows no bounds, especially when the stakes are as high as they are in these two cases. The admins will use any opportunity to smear their opponents because their marginalization is paramount in each case. That's because their opponents are presenting the truth, and because they are, they must be marginalized. Each administration has gone on a concerted effort to make Lennox and Kuritzky the issue rather than the actual issue at hand, and the allusion in this email is just one example.
The second intriguing part is this...
The university compares favorably with any higher education institution in its defense of the rights of all members of the community to express their opinions. The board and president have defended the rights of a wide variety of persons to express views and advocate their positions and will continue to defend these free speech rights.I personally don't know how favorably CMU compares to other campuses, however in the case of Dennis Lennox, his constitutional rights were so threatened that in pure strange political bedfellows, even the ACLU came to his aide
Right Michigan has obtained a letter from the American Civil Liberties Union addressed to Central Michigan University President Michael Rao and dated November 27th requesting that the University lift a ban on videotaping Professor Gary Peters on campus, a ban targeted at a conservative student, Dennis Lennox. According to the ACLU the University's decision "violates Mr. Lennox's First Amendment right to engage in political advocacy."
Agree or disagree with Lennox's tactics, or with the ACLU's position on most other things, for that matter, but they're absolutely right about this one.
Lennox videotapes a Professor in a public setting at a public university on public property. CMU's targetted ban (it didn't exist before Gary Peters and Dennis Lennox) is a direct attempt to scuttle his First Amendment rights and, in fact, the rights of every Michigan taxpayer. Props to the ACLU for getting this one right.
Lennox has already had his right to use video equipment in public threatened. He was already sanctioned for distributing literature too close to a doorway. Now, he is being threatened with expulsion for distributing literature inside a building. Whether or not CMU's policy on free speech is fair or not, it sure doesn't appear to be applied fairly in this case.
The next intriguing part of this email is this...
The university has an Advocacy Policy that has been in place for manyKeep in mind, Lennox placed his literature next to the student newspaper which was also distributed inside the building. The student newspaper was in violation of this policy (which of course has no logical rhyme or reason. What purpose would it serve for a school to ban distribution of literature inside a building). If the policy is applicable to everyone as the email claims why is it that only Lennox is being held accountable? Also, is exercising one's right to speak freely too aggressively really the sort of thing that a formal hearing is for? Even if Lennox was in technical violation of their code, is his use of his own free speech too aggressively really the sort of behavior that needs to wind up being formally processed? Is the student code of conduct really supposed to be used to threaten a student with formal sanctions because they happened to put literature in a place they technically weren't allowed? Really, is that what it is for?
years. It describes where students and others may engage in advocacy
activities. Students have very wide rights of advocacy outside on the
campus. The policy does not allow hand-billing and many other advocacy
activities inside university buildings, except in connection with university
sponsored events or in specified locations. That policy is applicable to
everyone. Violations of the policy are dealt with through the student
discipline procedures and employee discipline processes.
Since we are talking about fair, is it fair that only after handwringing and three months after the initial incident that Lennox was finally allowed to actually see the evidence against him? How can he mount a proper defense when the evidence is presented to him only a week prior to the hearing? If CMU is really fair, and Koper filed formal charges at the end of October, why did CMU wait until the end of January to present the evidence against him to Lennox?
Finally, I will note that an assistant responded to my complaints to the President. This is not out of the ordinary however it is quite ironic that when the initial complain was filed the President, Dr. Michael Rao, was carbon copied himself. If he is too busy to respond to complaints about the action, why does he need to be carbon copied in the original email filing the complaint?
