Tuesday, September 30, 2008
Thank you, RedStateUpdate.
Via HotAir: "People will wish that 'Planet of the Apes' was real and was happening now..."
Just to elaborate on that bit about Biden being an idiot, "Debate Questions for Joe Biden".
Monday, September 29, 2008
The speech heard 'round the world:
Never mind that the budget projections were based on the Nasdaq bubble continuing forever, or that 9/11 happened on those two years...
But how can I put all the blame on the House GOP for not wanting to eat a "mud" sandwich of a bill when Pelosi ignores the plain fact of Democratic opposition to regulation of Fannie and Freddie?
I'd rather that the House Republicans sucked it up, voted for the bill, and then focused their public relations machine on telling the other side of the story. But even I would have had to swallow pretty damned hard when Pelosi was carving the epitaph of capitalism live on the floor of the House.
Saturday, September 27, 2008
In my book a precondition isn't, as Obama put it in the debate, "Until you agree to do exactly what we say, we won't have direct contacts with you." A precondition is more along the lines of "you don't have to dismantle your entire facility right now, but as a gesture of good faith we demand that you suspend your uranium enrichment program."
I'm pretty comfortable with "preconditions".
The line between tactic and strategy is a little less clear. I posit that there are many layers of strategic thought, and it is often hard to separate the tactic from the strategy.
Let's say the goal of our current policy in Iraq is to leave behind a tolerably secure country with a political system that is, if not perfectly democratic, at least internally inclusive and not externally aggressive. The surge was a comprehensive plan with several moving parts designed to meet that goal. You might call that a strategy. The components of the surge - small neighborhood camps, supporting the Sons of Iraq, etc. - are more tactical in nature.
I think it's wrong to refer to "the surge" as "a tactic" as though the surge was so crudely defined as to simply mean the introduction of more troops. It is at least a collection of several tactics, not unreasonably referred to as a strategy.
And one can take a broader perspective too. Securing Iraq is part of a larger geopolitical strategy of reducing safe havens for terrorist organizations, eliminating potential sources of WMD, introducing democracy as an inherently pacifiying force, etc.
Taken from the other side, the IED is a tactic which is part of a strategy of demoralizing American support for the war. But without the IED tactic, the enemy doesn't have much of a strategy, do they?
I participated in a rather raucous chatroom during the debate and most of us thought McCain seemed rather spry and with-it, though clearly passing up the opportunity to lay the economic mess at the feet of the ACORN crowd. We thought Obama looked tired, off balance, irritated, stuttering, and on the defensive. And of course, McCain cleaned up on geopolitics.
Then I watched the Luntz "undecided" focus/dial group on Fox in amazement as many of the folks there thought exactly the opposite. Obama was articulate, on the offensive, and McCain was grumpy and old. (Uh, of course he seemed old. He's ... old.)
Friday, September 26, 2008
I'll grant there were one or two SEC rule changes in the last 8 years that didn't help, but the genesis of the current problem is not free markets run rampant, it's perverse incentives mandated and subsidized by the government. Obama and the other Dems are telling a real whopper when they disclaim any responsibility.
When the House Republicans finally succumb to the Paulson plan they should say something like this: The government has finally created a problem so massive that only more government intervention can fix it.
There's a lot about the Paulson plan that has become unsavory in its growth from a three page draft to a hundred-plus-page draft. If they do this in "traunches" that are too small they risk collapsing the confidence of the market. If they make it too punitive then banks may not participate.
But it is a plan with a core that is capable of succeeding. The House Republican plan is a fundamentally flawed plan that cannot be taken seriously.
The man is toxic. He was at the center of the very obviously unconstitutional pay-raise scandal. He defended it. He compared his salary to that of tattoo artists and migrant dairy farm laborers. Even before the pay-raise scandal he was Gov. Rendell's lapdog, rolling over his then Republican majority to give Ed everything he wanted.
Harris, Fleck- you two are on notice. Support this man again at your political peril.
Wednesday, September 24, 2008
Let's say we do this on the installment method like Schumer wants. The possibilities are...
-It could fail to give the market enough confidence and sputter out immediately.
-It could work at first, giving opponents firepower to oppose later installments, which may or may not collapse the program later.
I don't like how that games out. I think that even if it works at first, failure to renew -or even uncertainty about renewal- will restart the death spiral.
Standard & Poor’s Ratings Services cut its ratings on $25 billion in collateralized debt obligations, citing credit deterioration of residential mortgage-backed securities and stress in the U.S. residential mortgage market.
Welcome to the party, guys.
Seriously though, this is a self-fulfilling prophecy, and the ratings agencies are throwing gasoline on a fire that they helped start. There needs to be a temporary moratorium on credit rating reductions for at least several months. This would be much, much more effective than the stupid ban on short-selling that does little other than dry up liquidity and exempts market-makers, leaving the little guy holding the bag.
Monday, September 22, 2008
Sec. Paulson's draft legislation was three pages long. Sen Dodd's modified draft is 44 (at least according to the proprietary Dow Jones newsletter I get from my brokerage).
(Congressional Quarterly coverage)
I'm basically OK with the idea of Treasury taking warrants for equity in a participating financial firm, but if the Congress gets too punitive with this plan then banks aren't going to want to participate until things are much, much worse. I like Jonah Goldberg's analogy of using dynamite to put out an oil well fire -- you'd better make sure you use enough dynamite! Too strong a disincentive to use the Bailout fund will make the whole thing pointless and fail to resolve the problem.
Sen. Leahy and others aren't too excited about the explicit lack of oversight in the Paulson proposal.
Frankly, there's a reason for that. Treasury is going to have to wade around in the financial mud. They're going to have to pay too much for certain assets. They're going to have to make sure that certain firms don't fail even if that means other firms do, and that's what might determine which paper gets bought more so than the intrinsic value of the paper. That's the whole point of the bailout.
Says Leahy, legislation "that eliminates the role of the courts in reviewing the decisions and policies of the administration invites abuse."
Yes. Yes it does. But aren't we way past "abuse" when we're talking about a cool trillion dollars? This is like sending in a Navy Seal team into Waziristan on a covert mission to get Bin Laden and then wanting Congress to hold committee hearings to determine which particular huts and caves are to be stormed.
No. Just get it done. Send in the Treasury Special Forces, and don't ask too many questions. Hold your review hearings in three or four years.
I think Ohio will go for McCain, but I'm not quite confident enough in that to assign it to him yet.
Follow my picks at http://josephcollins.predictnovember.com/
For the benefit of my compadres who wouldn't otherwise focus their eyeballs on a conservative blog, let me just say that this Axlerod astroturfing thing is sort of a big deal.
"A new kind of politics"? New depths of depravity, perhaps.
Sunday, September 21, 2008
I've suggested before.
But whomever he chooses, he should choose quickly, preferably before Friday's Presidential debate.
Friday, September 19, 2008
It's often interesting to get a foreigner's take on the American scene even if one doesn't agree with every assessment. Right off the top, Ms. Platell seems to have forgotten the Iron Lady's involvement in two wars, the Falklands War and the 1990 Gulf War (where she advised GHW Bush not to "go wobbly").
But that's minor. Overall, it's an interesting read.
Is Palin the American version of Diana? I don't think so, but the comparison can't be dismissed out of hand.
There's a notable anti-Palin, anti-Republican bias, but the British press isn't as coy about those sorts of things either, and she does zing Obama a few times. She seems to have found the only unflattering picture of Palin known to mankind, and amplifies a distortion in the Gibson interview about the situation with Georgia and Russia. (The question was about membership in NATO, which by definition sort of implies mutual defense.)
"Her story is both epic and small time, heroic and ordinary, astonishing and familiar."
But the closing leaves me a little cold:
"For all the hype that has surrounded Barack Obama, the cruel fact may prove to be that more American voters can identify with the dreams of the white girl from the frontiers than the black man from the Washington beltway."
Thursday, September 18, 2008
A major contributing factor to the downward spiral of financial companies are "mark to market" accounting rules.
This is a rule change that came in after the last recession, somewhat reasonably requiring companies to report asset values at their current market value rather than according to a performance model that could sometimes be tweaked beyond reason.
But now we have a major asset bubble collapse where the assets don't have reasonable market values because the market has seized up. Your book of dodgy debts might probably perform at 80 cents on the dollar if left to maturity, but if you had to sell it in the next three days you might only get 15 cents on the dollar for it. So you have to report an 85% markdown rather than a 20% markdown. And now you have to raise 20 billion in two days or your credit rating will be lowered, and then you're bankrupt.
So when we try to figure out what regulations we need, we need to use the sniper rifle rather than the shotgun approach.
Wednesday, September 17, 2008
Bill doesn't want the government "running the economy", just ousting executives and telling them to change everything.
I disagree with Cavuto on one thing - of course the oil companies were attempting to maximize their profits. That's beside the point. The major oil companies are dwarfed by state owned oil companies in OPEC nations. They don't control jack.
But I agree with Cavuto's central point - the cure is often worse than the disease. Be careful what you wish for.
Tuesday, September 16, 2008
The easiest policy target in the Bush administration was probably an SEC rule change in 2004 that allowed hedge funds and investment banks to leverage themselves to 30 and 40 times, when previous capital requirements limited them to something like 13x (I haven't found the exact level yet, but this is accurate enough to make the point). Over-leveraged funds have a history of catastrophic failure due to their extreme sensitivity to capital losses, and this time is no exception.
Certain Democrats want to say that the Bush administration failed to regulate mortgage originators sufficiently. This misses the point by a mile. Fundamental market checks and balances were broken, and the downright fascist oversight necessary to keep things copacetic would not have been tolerated... by the Democrats...
Once upon a time, FDR brought us Fannie Mae to help more people afford to buy homes. In the 1970s, Fannie was spun off as a private company with a public mandate. Freddie Mac was created at the same time in order to instill market discipline. For decades this was a relatively benign market distortion that continued to allow access to credit for home-buyers. But the seeds of their eventual demise had been sown - Fannie and Freddie served two masters, their shareholders and the Congress.
Asset bubbles become dangerous when easy credit is introduced. Though he denies it, many blame former Federal Reserve Chairman Alan Greenspan for keeping the Fed funds rate too low for too long. In the wake of the NASDAQ bubble, speculators were looking past tech stocks to real estate for their high risk/high reward investment vehicles. Unlike dot-bomb stocks, real estate is based on a tangible asset, and lenders (with the institutional support of Fan and Fred) were more willing to give credit on something they could repossess if necessary.
Government Subprime Encouragement:
Once again I am blessed by the fact that somebody else has done some of the heavy lifting for me. Ed at HotAir found two articles (NYT, IBD) showing which elected officials are at fault. IBD reports that Clinton-era policies mandated the creation of the subprime market as a means toward creating greater minority home ownership. Lenders not conforming to policy faced fines.
Now faced with inordinately risky subprime mortgage debt, the banking sector found a way to distribute and normalize the risk across several loans. While the risk of any single loan may have been deemed too risky, a bundle of similar loans offered a high yield while reducing the individual risk that any one loan in the bundle might fail. And even if a loan failed, the property could be repossessed and much of the principal recovered.
High Yield, Low Risk(?):
Having "solved" the risk problem of subprime debt, debt rating agencies branded these new Collateralized Debt Obligations with the highest imprimatur.
High Yield, Low Risk (!):
Seeing a financial product giving a large degree of safety with yields above Treasury, institutional investors short-sold Treasuries and bought CDOs. And they did it a lot. Seeing a demand for this product, loan originators like Countrywide Financial violated Federal law by handing out loans to every crackhead and/or house-flipper who came along.
Broken Risk-Taking Mechanism:
The Big Hairy Problem of the previous paragraph is that the people who were originating loans were not the ones taking on the risk. The market mechanisms controlling risk taking were fundamentally broken. It would have taken an army of regulators to police this problem.
Still, as Ed at HotAir pointed out, the Bush administration wanted to reform Fannie and Freddie, but Congress balked...
Lobbying and Misguided Policy Goals:
The link between lobbying and the positions of the officials being lobbied has always been a tricky one. Pro-gun legislators are naturally favored by the NRA, and pro-choice officials are naturally favored by NARAL. Causal relationships are not terribly easy to disentangle.
Nevertheless, it is important to know who was aligned with Fannie and Freddie PACs and employees (1989-2008):
1. Sen Dodd, $133,900
2. Sen Kerry,$111,000
3. Sen Obama, $105,849
4. Sen Clinton, $75,550
5. Rep. Kanjorski, $65,500
Keep in mind that while Dodd has been in the Senate since 1981, Obama has only been in the Senate since 2005, and Clinton since 2001.
But it wasn't just that Democratic officials in particular had been lobbied, they believed the Fan/Fred story and honestly sought the goal of increased minority home ownership. (I'm sure it didn't hurt either that Sen Dodd got the special "friends of Angelo [Mozilo]" VIP home loan from Countrywide.)
Who said this?: "These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis."
That would be Rep. Barney Frank (D) in 2006, when he was the Ranking Member on the House Financial Services Committee and presented with a Bush administration plan to reform Fannie and Freddie. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
But Wait, There's More!:
Several institutions sold Credit Default Swaps in relation to the mortgage credit market. Risk was once again shifted and multiplied in what Warren Buffett once called "financial weapons of mass destruction".
Did I Mention There's More Still?:
If you'll recall from the beginning of the story, the rating agencies thought all this mortgage debt was just fine and dandy. And over-leveraged companies like Bear Sterns, Lehman Brothers, AIG, Citigroup, and many, many others owned this stuff to the gills. The mortgages, if held to maturity, would probably pay out much better than what you could sell them for on the open market, which was rapidly seizing up. As values of mortgages and CDOs began to decline, mark-to-market rules meant that owners of this debt had to show a loss on their balance sheets whether they sold those instruments or not. Without a liquid market in which to sell, firms took write-down after write-down, some eventually selling the CDOs for pennies on the dollar.
Those rating agencies? They're just now, after many billions in write-downs, deciding that many of the firms owning these debt instruments face credit downgrades themselves unless they raise some billions in new capital. When word of these
So how much of all that do you want to put on Bush? Maybe some. Not nearly all of it.
Obama's central contention is that "greed" and lax regulation (aka "the free market") are to blame. Capitalism embraces greed, not because -in the words of the fictional Gordon Gekko- "greed is good", but because greed is a part of human nature, and you'd be better off harnessing it than fighting it.
Asset bubbles are an inescapable part of any mostly free society. Only a person who thinks that greed can be legislated out of humanity would think that the situation described above was not terribly exacerbated by government policy. Why does Obama think he is any less shortsighted than those central planners who came before him?
Monday, September 15, 2008
Unfortunately, the study also showed that excessive alcohol shrinks your brain. But that one's no big surprise. Also, being obese was linked to brain loss.
I wonder if Michael Moore drinks Key-Light by the case with the five or six vegan pizzas it looks like he eats daily.
Seriously though, meat is delicious. Human brain evolution is a testament to a steady, nutrient-dense diet. And while you can over-do anything, if a food is delicious there's a good chance it has something your body wants.
With the Lehman meltdown — and whatever's next — anyone else expect one of the two candidates to announce an impressive treasury secretary ASAP?
And in response to that, I suggest Mitt Romney. A guy who has been around the financial block with Bain, whose experience is on the same order of magnitude as Hank Paulson. A guy whose moral incorruptibility is not in question. Treasury is a position where Romney's best skills will be used and his detractors won't be able to say that his Mormonism is remotely relevant.
Saturday, September 13, 2008
It seems that the editing at ABC is still ongoing. The "full interview" online video does not contain the follow-up question, "Didn't that take some hubris?", which is listed on the Mark Levin site as a question that was not edited out.
Questions about "Troopergate" were answered sufficiently.
That's all for now. ABC doesn't have any more "full" interview video, and I have yet to see what is passing for the original tape of questions on Russia, the Bush Doctrine non-gotcha question, or anything else.
Perhaps they are still editing it.
She did a good job defending herself on a tricky subject. Even though the specific earmark may have been killed, the money was still in the transportation budget and could still have been used to build a bridge. So, she really did have the last word on the bridge.
Furthermore, she started to explore the systemic problems of earmark abuse, and contrasted that with an open airing of the funding of projects. Not the most small-government position in the world, but consistent with McCain's and Palin's records as clean government types, and a position that has a more realistic chance of actually happening.
What did Obama and Biden do? They voted for the bridge, and for the corrupt system that allowed the phrase "Bridge to Nowhere" to enter the American culture.
Of course, inherent in that question is the presumption that Bush policies are primarily responsible for the current situtation. As I've already started to argue in previous posts and will continue to expand upon, Bush policies for the most part have not put us where we are.
I'll try to avoid repeating what others have said about Gibson's dripping condescention and his attempt to impersonate Carl Levin with his glasses. Suffice it to say that it's there.
And of course, keep in mind that they edited the heck out of the interview.
Thursday, September 11, 2008
The info on the debt-to-GDP ratio is a little misleading since they refer only to the public debt of $5.4 trillion rather than the gross debt in excess of $9 trillion. Heritage explains why they use public debt rather than total debt, but firstly, I disagree with that analysis, and secondly I can still make my point with the higher figure.
Still, the total debt as a percentage of GDP is not out of whack as compared to the 1990's. That's not to say that I like the debt being so high, or that I am uncritical of the percentage of foreign debt.
In the 2000 election season we heard about projected surpluses as far as the eye could see. That was based on NASDAQ bubble economics. Deficits would have occurred whether taxes were cut in the first Bush term or not.
And of course, the real killer is the $42.9 trillion liability for Social Security and Medicare over the next 75 years.
So how does the Iraq war fit in to all of this? Eh. Defense spending as a percentage of GDP is also low by historic standards.
From an economic growth perspective, not all debt is bad. It can often be good or benign, and paying down debt too rapidly can suck a lot of juice out of the economy. From a libertarian perspective, more debt is bad because it represents the power of the government to control our lives.
Wednesday, September 10, 2008
- RCP shows PA-11 as the eleventh most likely House seat to change hands.
- The NRCC has released a second ad against Kanjorski on the "We sort of stretched the facts" YouTube moment.
- I can't believe DtT missed this one (they were so close!), but Kanjo was the fifth highest recipient of Fannie and Freddie related campaign contributions between 1989 and 2008 after Senators Dodd, Kerry, Obama and Clinton. Actually, that would make him the highest recieving member of the House Representatives since the rest were all Senators.
As a matter of political theater though, I've read too many pundits telling conservatives (in particular) that it doesn't matter what you mean to say, it's what people hear.
People are hearing a smear against Palin. If the shoe were on the other foot (say, if somebody said that you were the first clean and articulate black guy to run for President, or pointing out the obvious fact that if you were a white guy named Barry Smith you wouldn't have gotten 90% of the black vote in South Carolina), then it would be open season on the speaker.
Thus, whether this was an implicit jab at Palin or not, I have no sympathy for Obama in this instance.
Sunday, September 07, 2008
The most frequent complaint I hear is about the "Bush tax cuts" and how the rich don't pay their "fair share" - a term that is rarely defined.
Here's a graphic shamelessly pilfered from the Sept 15 issue of National Review:
The top line represents the share of the total income tax burden paid by the top 10% of income earners, and the bottom line is the remaining 90%.
Of course, that's the income tax, not the payroll tax. Many like to point out that those on the lower end pay a greater percentage of their income in total tax outlays.
What exactly does this show? First it should be pointed out that the FICA payroll tax goes to Social Security and Medicare. These pillars of the New Deal and the Great Society are crumbling before our eyes. The actuarial gamble has not worked out.
What is the Left's solution to the financial instability of these programs? Sharpen the redistribution!
These programs are already inherently redistributive even though the rhetoric about Social Security has historically obfuscated this by referring to it as a plan to which one has contributed and is therefore due some return. The solution offered by Obama is to enhance the redistributive aspects of these programs by lowering the payroll tax on lower earners and raising the cap on taxed income.
Raising the base salary cap from $108k would be targeted at the top quintile, but would fail to significantly impact the very richest of the rich whose income would be in excess of the new higher cap. In other words, the income range most likely to reinvest in the economy would be hardest hit without even addressing the Democrats complaint about income inequality, and in fact making it more pronounced.
There are two main taxes paid by individuals, the income tax and the payroll tax. The rich already account for an historically high percentage and overwhelming majority of the revenues collected from the income tax. It's hard to see how the Left could possibly complain about the trajectory of the lines shown in the above chart.
Regarding the payroll tax, the Progressive scheme of "social insurance" was never meant to impact the rich. Social insurance has turned out to be grand failure, though a very popular one. Demanding that the rich pay their "fair share" is little more than demanding to be bailed out of a profound failure of democratic socialism without acknowledging said failure.
How does cutting taxes across the board make the economy worse?
Thursday, September 04, 2008
Green background? Yikes. Glad that wasn't there the whole time.
Those protesters in the hall are the lowest form of scum on the earth. "You can't win an occupation"? Tell that to Germany and Japan. It makes McCain's remarks about failing schools all the more poignant.
She killed. End of story. McCain will not give that good of a performance on Thursday.
Talk of somebody else writing her speech is... um, obvious. Every speech given by every politician at this level is written by somebody else.
Of course, a press corps that thought further into the future than the next ten seconds might notice that Obama's solitary political skill seems to be reading speeches off a teleprompter.
EDIT: She improvised over teleprompter malfunctions. Who knew?
Wednesday, September 03, 2008
This is the kind of thing that leads me to agree:
Rich, I will tear out your eyes and urinate on your brain...
It was primarily a testimony to McCain's character, but substantively there was very little. We were treated to the John McCain biography, eloquently delivered in the Fred Thompson trademark baritone. (Fred, couldn't you have left out the part about the exotic dancer?)
On substance, the red meat was confined to a few sentences:
We need a President who understands that you don't make citizens prosperous by making Washington richer, and you don't lift an economic downturn by imposing one of the largest tax increases in American history.
Now our opponents tell you not to worry about their tax increases.
They tell you they are not going to tax your family.
No, they're just going to tax "businesses"! So unless you buy something from a "business", like groceries or clothes or gasoline ... or unless you get a paycheck from a big or a small "business", don't worry ... it's not going to affect you.
They say they are not going to take any water out of your side of the bucket, just the "other" side of the bucket! That's their idea of tax reform.
That was pretty much it. A few stray lines about the Courts, regulation, and abortion, but the above quote as the strongest of it.
Politically, I think Fred's speech was passable. Given the limited American attention span and the widespread ignorance on the complex reasons behind our economic problems, it probably wouldn't have been wise to dwell on tax policy. A speech emphasising McCain's character is probably the most sellable message he has for a prime time audience with undecided voters, but to call it a great speech is a bit of a stretch.
Tuesday, September 02, 2008
Sayeth The One:
"My understanding is that Gov. Palin’s town, Wassilla, has I think 50 employees. We've got 2500 in this campaign. I think their budget is maybe 12 million dollars a year – we have a budget of about three times that just for the month."
Indeed. But right now she's the Governor of a state with an $11.2 billion budget and 15 thousand employees.