KCRWs Left Right & Center 12/19/08
A wish for the world this holiday season. Peace to all and may our future be hopeful.
MENTIONED ON TODAY'S SHOW
MATT'S BLOG!
mattmilleronline.com
New York Times Op-Ed Columnist
The Madoff Economy
By PAUL KRUGMAN
Published: December 19, 2008
The revelation that Bernard Madoff — brilliant investor (or so almost everyone thought), philanthropist, pillar of the community — was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend.The scale of his alleged $50 billion Ponzi scheme is hard to comprehend.
Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?
Charles Krauthammer's syndicated column
http://www.azstarnet.com/sn/printDS/272324
My Groups
-
Music News from KCRW.com Updated: Yesterday
-
Design and Architecture Updated: Jun 22, 2009
-
KCRW's Good Food Updated: Jun 7, 2009
Neighborhood
Explore friends, family, friends & family, or entire neighborhood.
Comments
Robert Scheer didn't complain about Robert Rubin until 7 minutes into the show.
Is that a new record?
Tony Blankley needs to brush up on how hybrid cars work. They don't get energy from the coal-powered home electrical circut, they simply use gas much more effectively that standard cars.
And finally, the United States has had people trading on their last names at least since John Quincy Adams, and we've survived.
Possibly the second best thing George Washington did was to not have children. (The first, in my estimation, was to leave office after two terms)
I am a lifelong libral, and come from a family of the same, so it pains me to say this, but could someone please convince Bob Scheer to have a beer before each broadcast?
Electric cars DO NOT get power from coal. The plug-in cars Tony refers to are used as much as 8-track players these days.
Why does no one on the show draw attention to his repeated mendacity on this and other subjects?
Tony isn't so bad. Who did you think was better on the show?
Matt makes plenty of sense -- remember, he's the center and the counterweight. Name me another show that's as provocative in a half-hour of radio (and no, I'm nobody's mother on the show).
Sarah, producer/moderator/bloginatrix
I agree with Mikell's statement.
Maybe the most significant issue is how sophisticated investors, as well as underfunded regulators, didn't catch Madoff. If Blankley is right that this scheme probably didn't start as an intentional Ponzi scheme but eventually became one when things started going badly, then the question is what keeps that from happening all the time. Or as Scheer and Krugman argue, how different is this from all the other investment stuff that goes on. Capitalist theory assumes that you are producing things of value and not just speculating and creating the appearance of real wealth, or creating bubbles of irrational exuberance that people then game. There are some good articles in the recent Atlantic magazine about all this.
A good discussion about the auto workers and for that matter the low level white collar workers who are being unemployed as a result of ineptness at the top. Also about the school teachers and the view that teachers unions are the problem with schools, particularly the urban ones that do badly. This downward business cycle has of course been emphasized by the abuses of the mortgage industry and the failure of the public to restrain them through government. Again the issue seems to be investors and particularly the banking system gaming the system as to when the "bottom" is going to be, just as they were gaming when the top of oil prioces was going to be. People love the idea of initiative and innovation but innovation in finance seems to be mostly bad, or at least it qquickly gets that way. Perhaps if we cared more about stability and sustainability for the large group of people, particularly if we are counting on them to buy cars and houses, we would have a more stable system. Instead the go for it mentality of recent capitalism, particularly in the way it encourages risk but punishes failure, needs to be rethought. Who was in the subprime market but people who are vulnerable to have their income interrupted in downturns? So we clobber them once and then we clobber them twice. What good does it do to let banks foreclose on houses and own a bunch of vacant buildings? Maybe we should only have foreclosures in good times, when the market can bear them.
As for Caroline Kennedy, that's really up to New York voters. All an appointment would give her is a head start. The reason we get these "legacy" candidates, and perhaps the worst has been George W. Bush, is the amount of money needed to run for the Senate, or pretty much any office of significance, which prevents people who aren't rich or famous from having much of a chance. Obama was quite unusual to be up from nowhere and to arrive at a time when even many of the wealthy as well as those of modest means wanted a chance. Caroline also will appeal to those who are sick of politics of usual and perhaps will have some unrealistic nostalgia for Camelot fantasy. She is obviously not used to on the ground politics, but people will hope that she ends up more like her uncles and less like Bush. Even Blankley expressed respect for Ted Kennedy, which is amazing consider how conservatives used to vilify him in ways now reserved for Hillary and now Obama. Caroline Kennedy does seem to be smart and doing good things. If she gets in, voters will get a chance at her pretty quickly if she isn't up to it.
Too many people giving their comments. With Ariana out the show has a little more time for the speakers. But with her, everything is too rush.
Civilized discussion is hardly possible when the host has to keep telling people to move along, hurry up, and take only 10 seconds for their comments. Stop trying to cover so much.
Tony is just too damn picky! He parses every syllable from Bob rather than engage in a civilized discussion.
And everyone has turned into charactures of themselves. Predictable and pedantic.
As for Caroline Kennedy, she has "The Name You Know," and little else...not even a con game. If the Democrats of New York have any concern for their constituents they would appoint a genuine legislator, not someone with a name who will be nothing more than another mindless vote for their side in the Senate.
I do, however, take issue with two opinions that Tony espoused during the 12/19 show:
First, I take issue with his assertion that "Letting the green crowd.." design cars would be a disaster. I have long felt that electric cars have been given short shrift for too long. Tony's comment that electric cars will have to be powered by dirty coal burning plants is only partially true. Even if they are powered (indirectly) by coal, the efficiency increase of electric motors over internal combustion engines that burn fossil fuels (approximately 92% vs approximately 19%) is so great that overall carbon emissions will decrease. ADDITIONALLY, it is almost inevitable that local solar photovoltaic production (for example, solar panels on your garage roof and at the workplace) will provide a large percentage of the energy needed to charge the more efficient batteries that are emerging for the market. The cost of PV production is now high, but will come down as production of panels increases, so solar PV, in my opinion, will become cost comptetetive with coal in short order. Furthermore, the development of exchangable battery packs will eliminate the need to "charge your car for several hours" when you need to make longer trips. Check out the idea here:
http://www.greentechmedia.com/articles/better-place-to-charge-up-california-5237.html
Secondly, I agree with Bob that a significant portion of the financial sector in this country exists solely to create wealth through schemes that benefit those who produce nothing of substance. Though finance is a necessary component in growing business, it has gotten out of hand. Frankly, as a small businessman (solar and radiant heating systems) who actually CREATES something though my labor, I will go further and say that many of those people who brought on this mess by developing these greedy schemes SHOULD be forced out of the finalncial sector, and perhaps find out what it's like to work in a Wal Mart or at a manufacturing job.
Anyway, that's my rant; thanks to all of you who produce the program for all of your good work!
Regarding Mr. Blankley's Rant
In my left leaning home of Southern California, there is at least one radio station (in the FM band of the Los Angeles market) that plays Holiday (Christmas) music continually, until, I believe, the first of the new year. My recollection is that they have been doing this now for years.
See this link: http://www.kost1035.com/main.html
As I travel the U.S. 12 -18 days a month (Airline Pilot), and tune the radio in my Hotel room in city after city, I seem to be able to find Christmas music playing. Even in NYC.
I continue to find that Mr. Blankley's weekly homily to be "Republican Ideology Only" and to contain no real problem solving substance for the needs of the country, and that is disappointing.
His methodology can not even find Christmas music, where it actually exists, this indicates little chance of any real solutions to the problems of the average citizen coming from the Right or their ilk.
Bah Humbug.
http://www.nytimes.com/2008/12/19/opinion/19krugman.html?_r=1
I agree with everything you said about "pay for performance" and "testing"...this idea, which is the foundation of George Bush's No Child Left Behind. I don't want to go off on a tangent, but can you believe we're taking Bush's lead on something as important as education?
You're exactly right. The best teachers will not take jobs in the schools that need them the most if they will be punished by student performance as measured by flawed standardized tests. Not to mention that each state decides what students need to learn before graduating and these targets, while thorough and ambitious, are unrealistic.
Policy-wise, fixing schools is easy. The actual work (teaching) will always be difficult and challenging, and thus rewarding.
Here's the simple facts:
1. All else being equal, the more intelligent the teacher, the better his/her students do. The focus should be on testing teachers, not testing students. THe focus should be on evaluating teachers, not on student test scores. If students are performing badly, the teacher needs to explain why and teams of teachers and administrators should constantly seek ways to improve their teaching and target poor performing students. All students should have IEPs just like Special Education students receive. The current system is separate but equal in reverse.
2. Rather than hire Superintendents as managers and administrators, we should be hiring superintendents to be instructional leaders. The mayor-city manager model would work in schools. The Mayor is the Superintendent and her job is work with teachers to improve student performance. A city manager is hired to make sure the electricity bills are paid.
3. We have to rid ourselves of this notion that all students will be going to college. Most high-school curriculum is based on a college-prep curriculum. More emphasis should be placed on vocational education, which right now suffers from a social stigma as a place where the stupid kids are sent. (Some will complain, what if a vo-tech student later decides he wants to go to college? The answer is that's no different than what we have today--those students go to Junior colleges, many of which are run like extended high-schools, and then go on to a 4-year college after they've learned "how" to be a student.)
4. School Board Associations and School Administrator Associations do more harm than good and really exist only as self-preserving entities. Most states have a State Board of Education and then allow local-control of schools by selecting local school boards. That makes sense. But then to allow those local school boards to join together in associations at the State and National level doesn't make much sense from any point of view. If you're going to do that, why have a State Board of Education? What happens is that local schools use local tax money to pay the dues to statewide and national school boards associations who lobby congress. Money ends up being spent on all sorts of ways that never impacts the school children in a local community. Why do I include adminstrator association? For a slightly different reason. Yes, unlike school boards, the administrators can argue they are employee unions. The difference is that these are the LEADERS of the schools. By allowing the leaders to join together, you take away any power a local school board of citizens might have. If they fire a bad superintendent in one town, the administrator association simply finds him a job in another town. The new superintendent a school board hires ends up having the same philosophies and sense of entitlement as the previous one because they both belong to the same association.
5. Everyone knows why private schools outperform public schools--because of parents not because of better teachers. When a parent pays to send their child to school, they pay more attention to their kids' performance and behavior.
6. Class Size. It's time people stop crying about this, which we've known is a problem forever, and fix it. We need more teachers and more classrooms. This is another reason private schools fair better.
7. Finally, there are a lot of issues with teacher unions just as there are with any union. Unions are a positive force but unfortunately they involve peopel and so are not perfect. But the most damaging effect unions have is on recruiting intelligent teachers. THe intelligent kids constantly hear how teachers are not paid well and so they choose unproductive majors like political science, English, History, etc. These majors are great for someone who wants to be a university professor but are otherwise a waste of time. Others go into productive majors. So why if these kids are so intelligent do they choose these nowhere majors? Because they are kids and they are gullible and they are trusting. So, what happens? Average and Below Average students go to the School of Education, which has a very easy curriculum, and the bright students go to other professions.
8. The truth about Teacher Salaries. When we hear people complaining about teacher salaries they are usually talking about Entry Level salaries. If you look at the salary of teachers with 10 or more years of experience, their salaries tend to match or exceed those of other professions. Now, this may not be true in certain areas, so Cost of Living increases for certain cities may be in order. But generally speaking life-time teachers are comparatively well compensated. If we want to attract better teachers throwing more money at them won't work if unions continue to complain they aren't paid enough. Teachers should be middle class. If you want to be in the upper class, then you shouldn't be a teacher.
9. Department of Education. Yes, we need one. No, we don't need the one we have now. There is too much time, money and rhetoric spent on programs that don't benefit at-risk students and/or support programs that have the greatest impact on students. For example, programs that exist simply to "educate the public", i.e. PR, should be the first to go. The current department fancies themselves to be some sort of R&D testing ground but all they really are is basically a Cafeteria filled with lots of interesting choices and delicious sounding menu items when really all we really need is a balanced meal.
10. Last point. Students who are not well-fed and generally healthy don't perform as well as other students. You do the math on how to fix this one. It's not that difficult.
I understand no one will listen to me on any of this. Because it's all true. And a million objections and "buts" aside, it's a simple as that.
You're welcome.
Dalton and I don't always agree much, but most of his education piece sounds good (I don't know much about superintendent organizations.) A lot of this involves spending money, particularly on poor kids who come to school with fewer resources, monetary and cultural, than other kids. We also have to put in personal effort to close the education gap, which, assuming that there are also jobs for the educated, is society's main way out of poverty. Are we prepared to do this?
One reason teachers are paid respectable amounts is because of teachers unions, particularly since it was traditionally a female occupation and that brings lower pay. The other main education issue is how to evaluate merit fairly in merit systems. Otherwise people are having their futures determined either by arbitrary or "our gang" behavior by higher ups, or by things beyond their control, particularly if you are teaching poverty kids to whom all sorts of bad social things can happen. Relying on high stakes test scores is a temptation that may be hard for education funders to resist. There are a few professions like football coaches, who are subjected to these kinds of arbitrary measures of success, but to attract good teachers you have to plan on a career of fair treatment. People like DC Superintendent Rhee talk a good game on that but haven't won teacher's trust yet. One underlying problem is the influence of business community bosses who like to be able to fire whoever they want, and the Republicans they elect.
As for Warren, he is becoming the face of national public Protestant piety in America's civil religion and is poised to take the place formally occupied by Norman Vincent Peale and then Billy Graham. He represents a new brand of Evangelical leader replacing the Falwell, Dobson, Robertson generation. After Evangelicals have attained respectability and political clout for the past 30 years, Warren has fewer grievances over disrespect and is less fixated on gay bashing and related sexuality issues, nor is he in the anti-science fundamentalist camp. His books do not speak to me particularly but he does have a brand of evangelical Christianity that follows Jesus on caring for the sick and the poor, which is certainly more significant in the Bible than the few passages on gays. Obama not only pays Warren back for his significant acceptance during the campaign but the gets the symbolism of trying to bridge divides and being what Bush promised but quickly abandoned, a uniter not a divider. Gays smarting from the California vote are understandably uneasy about the choice of Warren. What matters most is what Obama does once the invocation is over and he is in office. I just hope that Warren is not asked to bless any wars.
Tony began the show by characterizing the misdeeds of Wall Street as an aberration, an exception from the values that have led to America's prosperity. Over the long haul we can specify many virtues of our systems of business and education, but Tony's argument was a subtle distraction from the reasonable deliberation of the role of regulations. Tony later complained that "17%" of school teachers have led to a dysfunctional education system. By what criteria do we measure failure? Here we are sitting in the holiday muck of a broken financial system and Tony is characterizing the schools as dysfunctional, which may share the same proportion of good and bad actors as Wall Street, while defending our "momentary" business crisis. Am I the only one saw the absurdity in this situational reasoning? There is a difference; the few bad teachers could never lead to the systemic meltdown we are seeing today.
Matt went on later to interrupt Bob's defense of teacher unions stating we simply need to pay teachers more money. How Matt? By which mechanism? Society has not shown the connection between postponing their momentary self-interest to provide higher taxes towards this end. That was the value of unions that Bob was communicating to you. Often Matt will interrupt Bob with an abstraction and miss the salient point.
I second Dave's comments on electric cars. Tony likes to include this rant in defense of the now discredited old guard, but what's really at stake is our developing transportation and energy producing infrastructure.
For several years now, I've been putting off buying a new vehicle; waiting for plug-in hybrids to come on line. I am not the only one. I am also moving as quickly as I can to retrofit my house for solar production. It's way past time that we decentralize and de-fossilize energy production and move on to zero/near-zero emissions transportation.
If we won't now do the sensible thing and (temporarily) buy out the big three and retro-fit the U.S. auto industry - and our electrical grid - for the future, China will come to dominate these sectors. If that time comes, I'll gladly buy a high quality plug-in from China; just as I've bought high-quality Toyotas and Hondas.
It's sad to watch th decline...
In the Philadelphia area, we have a couple of stations playing Christmas music 24/7. When I was a satellite radio person, they had multiple channels of Christmas music. And virtually every place I go, including my workplace, is playing nonstop Christmas music.
If what you said is true, Tony, can I move in with you?
Tony Blankley keeps repeating the claim that hybrid and electric cars are somehow not a good thing because they suppposedly “run on coal”.
First of all, gasoline-electric hybrid cars such as the Toyota Prius do not use any coal-generated electricity; they run on gasoline only. An electric, or part electric, car can save on energy by storing momentum in a battery when it slows down. That’s how hybrid cars save on gasoline. Only an all-electric car, or a plug-in hybrid, could possibly be said to run on coal. Those are not common yet, but they ARE a good idea.
The claim that coal-generated electricity is worse than burning gasoline is one of the lies the oil companies and auto industry used to in the 90’s to discredit the idea of electric cars. It’s not true. Even coal-generated electricity is not as bad as burning gasoline; that’s one of the reasons there are no gasoline-burning power generation facilities.
Furthermore, not all electricity is generated by burning coal, and even if it were, it doesn’t have to stay that way in the future.
Hybrid and electric cars that use no gasoline, or less gasoline, ARE a good idea, and electric cars will be an even better idea in conjunction with cleaner electricity sources.Seriously, though, I still respect him and support him 110% and I'm generally a centrist on most issues, but I do feel it's time to get radical in a few areas. Unfortunately, I'm afraid he's feeling the burden of being a "first" and thus it's a great responsibility to future minority presidents that he not be perceived as radical. Thus, I'm afraid we're going to get a very establishment oriented presidency, just like we would have had we elected Hillary.
He's still better than McCain, who ran as Bush's third term, because the neocons and evangelicals had to suffer some sort of accountability for their failures and excesses or our whole system of government would collapse. Not to mention Cheney and Rove would still be very influential, which is a very bad thing. And finally, he has already restored a lot of our credibility internationally which was squandered by Bush and Cheney.
So, overall, I'm happy. But I'm not thrilled with Obama's lean to the right.
Did you see any of the Sunday Shows this week?
Newsflash on Meet the Press...Condaleeza Rice thinks Bush has been a great president.
Newsflash on Fox Sunday...Dick Cheney thinks his own farts don't stink, and Bush's only occasionally do.
Newsflash on CBS Face the Nation...Bob Scheefer is still alive.
Newsflash on ABC This Week with What's his name...no podcast available yet...but my guess is someone from the Bush administration believes the Bush Administration was just peachy and Obama needs to prove he's a different kind of politician.
Newsflash on McLaughlin Group...John still considers Jeremiah Wright fascinating.
Newsflash on Washington Week...Meet the Press is the new Washington Week...is it just me or has Meet the Press lost its edge and its gravitas...I know some people like this wonky-sing-songy style but I'm not one of them. Washington Week fills this niche pretty well, do we need another one on NBC? It's cloying.
If you don't like LR&C, please tell us which show you prefer? Or quit spinning your wheels.
I love this show because it makes me think, and it makes me get mad when I hear Matt Miller say stupid things like Obama should raise the gas tax. OMG.
I, too, miss Ariana when she's not on--which is becoming more and more frequent.
I really enjoyed the live LR&C last month. It was long enough to really cover some ground.
The very premise of the show dictates that two of the players have to be inflexible ideologues, never giving an inch. Sarah, get the transcripts for any two shows at random and combine all of Bob's comments on one page and all of Tony's on another. Then number each paragraph and publish them for us to use as a reference.
Then during the show Bob can shout out his standard didactic diatribes "paragraph 4, 6, and 17!" And Toady can fire back his predictable "and 1, 6 and 5, to you buster!"
This way we can save time, cover more topics, and Matt and Ariana can have a thoughtful intelligent discussions of the issues.
The bickersonian aspects of the show are grinding.
Let me remind you of the mandate for 10% ethanol that caused world food shortages. It's the unforeseen consequences of government mandates no matter how well meaning they may be, which lead us into danger.
Electric cars may more efficiently utilize energy from fossil fuels, but they still rely on fossil fuels. Hybrid cars may be efficient in burning fossil fuels, but there are conventional cars that are just as efficient. Electric and hybrid cars both rely on the manufacture and periodic replacement of batteries, which not only drives up to fuel cost per mile, but also creates and new toxic waste to add to using a motor vehicle.
What we need now is a transition car to carry us to the next vehicle that will not rely on fossil fuel in any manner and will not create its own toxic waste. If it's hybrid or electric, fine. But lets not throw out a simple, clean, highly efficient oil burning car simply because it's not as sensational as those vehicles endorsed by the Green Party.
Allow Washington to mandate business practices and you will get green cars to nowhere driving over the bridge to nowhere.
Well, Bob tends towards monologue and hyperbole. I actually admire Tony's restraint is letting Bob rant on with such flawed premises as the sole source of our current economic problems is greedy bankers.
How can you possibly describe Matt's most recent show as "thoughtful intelligent"??
His two biggest ideas were:
1. Raise gas prices. Which is an utterly absurd, extreme left idea that even Bob has to be goaded into agreeing with.
2. Pass a law to help candidates running against candidates with famous family names. Has he and the other "ditto" intellectuals ever looked at other professions? You might notice there are a lot of famous siblings and relatives in sports, not to mention music and acting. While i agree that deregulation was a leading cause of the financial meltdown, regulating charisma and dna seems to me to be going a bit far.
Maybe your biases and delicate sensitivities are clouding your judgement. It may just be your DNA but just in case, let's pass a law against you making any more pointless posts.
You have failed to state the most important simple fact that everyone who examines American education agrees on: The highest correlation to student outcomes is the quality of their parents. If you see a failing student - particularly in the absence of a diagnosable disability - the probability is that it is the result of poor parenting. Going on 40+ years now, American education has promised that if the public would just keep increasing funding for education, then the American society wouldn't need to worry about poor parenting. It is about time to drop the ruse - no education system can consistently compensate for a poor parenting environment.
Tony's point is just because you can't see the smoke coming out of the tailpipe doesn't mean there isn't a carbon footprint. If you listen to the program, you will hear Tony say Hybrids and Electric cars. The argument isn't that we shouldn't convert to all-electric cars, it's the government mandate to do so. Let free enterprise work, or else you get government encentives to build big SUVs again.
American oil policy, subsidies, and taxing obscure the real cost of oil. If we added the cost of procuring, securing, and protecting oil supplies by our military, you'd be paying $17/gal for gas.
Like many (I believe including all 4 of the show's pundits), I share the opinion that true capitalism has never been implemented anywhere. The issue that people really are arguing about is not whether or not we should have capitalism, but how much regulation is the correct amount for our particular brand of socialism.
In capitalism of the Ayn Rand strand, there is no property held by the public sector, and that's not really on anyone's radar. Even the Libertarians concede that a modern America must provide for national defense - which requires public ownership of military bases at the very least.
So having put to bed the notion that ANYONE is talking about capitalism, let's get to the point... What type of socialism is in the best interest of America.
Bob would have us believe that the only problem with the American economy is that greedy bankers hijacked the mortgage markets to raid them. The truth is that in the '90s many, many people from various backgrounds (most of them liberals) came to the conclusion that it was a good idea if more Americans owned their own homes. But for this to occur lending regulations needed to be loosened. There was pressure from every sector to liberalize these regulations and allow less credit worthy borrowers access to the capital necessary to buy homes.
At the same time, there was a great deal of international capital looking for "safe" investments, and historically American mortgages were one of the safest that still yielded a reasonable rate of return.
So we had the convergence of more capital to lend and looser regulations on that lending which lead to a dramatic bubble. Home prices were inflated beyond their true market value. No one is sure now what that value will be once this dramatic adjustment is over; probably somewhere around the 2003 home prices, but possibly more like the 1999 home prices. So one sees, across the board 5-10 years of property equity getting erased. Further if one purchased a home in the last 5-10 years, one now has (at best) no equity or may even owe more than the property value (especially if one purchased it with an interest only mortgage). Banks are trying to avoid having to write down loan principals to the actual current value of the underlying properties (if anyone could actually determine those), and home “owners” are swinging to the opinion that it is pretty stupid to stay in a home when they “owe” 20% more than the actual value of the home.
It is ugly.
Everyone knew that the new category of borrowers would have a higher foreclosure rate, but no one knew how high that would be. If I recall correctly experts in the mortgage industry expected subprime borrowers to fail at around 3% (compared to the historical .5% for primary home mortgages). And it has turned out to be dramatically higher.
I know that Bob lives in this delusion where all of this occurred simply because of greedy bankers, but the reality is that it is a very complicated problem.
Everyone agrees (I think, but Tony may not) that certainly more regulation is in order.
For me, the biggest question is how did companies get "too big to fail". In the American economic experience, one of the primary roles of the Federal government was to insure that business entities didn't become anticompetitive because of their size. And it seems to me that by definition if a company has grown so large and influential that is can command Federal subsidization of its business risk (because its failure could not be suffered by the national economy), it is by definition anticompetitive, since its smaller rivals cannot command such risk subsidization. For me it is an urgent priority to examine the national economy, determine which business entities are "too big to fail", and break them up ala AT&T & Standard Oil into entities which, if they don't manage their risks properly, can fail without causing a national catastrophe.
The problems with LRC is that it's over represents the "left" part. I applaud Matt for doing a good job representing the center but he is by no means a centrist. Bob and Ariana only disagree on the degree of leftism with Bob being out in the boonies. I think Tony does a great job considering that he is alway outnumbered at least 2 to 1.
The one nice thing about having one conservative to three liberals is that when Tony is away they have to bring in a fresh voice to represent the right. I wish they could let someone else come in when Ariana or Bob are away to give us some fresh perspectives (Amity Shlaes was awsome when she replaced Tony!). I suggested once that when Ariana is away they should pickup someone from the "Independant-conservative" blogospere to mixup the idiological makeup from time to time but they seem to prefer to let Tony and Bob get more time instead. Of course that argues for a longer show but they don't seem to be willing to make that happen.
Jerry wrote:
"I'd love to hear someone say interesting, novel things that challenge my established beliefs and opinions, but guys like Tony distort the truth, make shit up, lie outright, avoid the real issues, throw up red herrings all the time, to promote their ideology. "
It looks like you slather youself in rationalizations to avoid challenges to your beliefs and opinions. You've convinced yourself that you're open opinions different than your own, but in the very next sentence you dismiss anyone who doesn't agree with you ("guys like Tony") saying they're liars. That is just not the case. Tony (like many, including Bob) is mistaken on facts at times. That doesn't make him a liar.
Its pretty clear than when someone posits something you diagree with, rather than determine if there's any merit, you lazily discount it as a lie. Which is fine, but please don't lie to youself. You should at least recognize that your no different than most people who would rather ignore things they find uncomfortable than examine the merits.
Finally, if you want a voice from the right that IMO offers quite sound obversations, check out Pat Buchanan. Ron Paul will also often make sense but about 1/4 of the things he comes up with are just waaaaaaaaay out there - the gold standard... in the 21st century ... makes me giggle. George Will does some good stuff, too, but he can get pretty esoteric for my tastes on occasion.
>Tony's point is just because you can't see the smoke coming out of the tailpipe doesn't mean there isn't a carbon footprint. If you listen to the program, you will hear Tony say Hybrids and Electric cars.
Second of all, using this as your primary argument for reform or not reform, I'm quite catching your drift, is just as much cop out as it is true. Of course, good parents make a difference, but to knee-jerk blame parents because their child is not doing well in a subject is just too reactionary and all too easy an excuse for schools. On the flip side, I'm sure a quick survey of the biographies of successful people might show that they all did not have great parents. Many great people have come from poor childhoods and bad parents.
So to pretend parents are a panacea is wrong.
It is in fact the intelligence and knowledge of the teacher that is paramount to the success of the student. The establishment doesn't want to admit this because it puts them squarely on the hook.
You wrote:
So, you'd rather we continue to BLAH BLAH BLAH
It's fine to intellectualize about the past. You can complain, for example, that America was created through ethnic cleansing. Or you could intellectualize that America became the greatest force for good in the planet's history and therefore the ethnic cleansing was justifiable in the long term. You intellectualize slavery. Do you think there was no slavery in Africa before the "white man" arrived. There are still slaves in Africa today. Intellectualizing can be good fun.
But when you start doing it in real time, you are a fanatic. I'm curious whether you and Matt Miller would have the same point of view if you were a single mother living in a small town with no public transportation and you had put gas in your car to get to work everyday, etc. etc. Not everyone lives near a subway or bus station in this country. There are places where you must live very far away from your place of work in order to find reasonable-priced housing.
So for some super-intellectual lumphead to come up with some "easy solution" for solving all those problems you listed, it takes quite a lot of nerve, and quite frankly disregard for your fellow citizens.
George Bush and Dick Cheney to this day intellectualize over 4000 dead American soldiers. They don't have to feel sorry for their mistakes because, as I heard one conservative pundit say last week, they "had" to die. It was necessary.
So how about this. Come up with a logical, incremental plan to solve all those problems. Start with lowering housing prices nearer major industrial areas. Then start building a network of filling stations for whatever alternative fuel(s) you settle on. If a person has a choice between driving a car than runs are gas because there are a jillion gas stations conveniently located on his way to work or when he takes a vacation, that's just common sense. He's not going to buy a hybrid car that he constantly needs to worry about how he's going to keep fuel in it. What if he's in a bad neighborhood or a dark highway. He or she would be stranded. So start ther.
And finally, if you are just going to willy nilly punish the poor and middle class to obtain your great VISION...How about passing this LAW:
NO BUILDING BIG CARS in AMERICA!!!!!!!!!!!!
PUT A TAX ON THE CARS instead of the FUEL!!!!!
BUILD ALTERNATIVE FUEL STATIONS
LOWER REAL ESTATE PRICES
CREATE MORE PUBLIC TRANSPORTATION
GIVE INCeNTIVES TO CARPOOL
Wouldn't that be more fair place to start than punishing the poor with your knee-jerk liberal solutions you bone head????
Well, just as there is no objective metric for "good teachers", there is no objective metric for "good parents". So trying to debate whether historically productive individuals had good or bad parents is just a fool's errand. For example, Joe Kennedy was definitely not the caring, nurturing, involved parent that many of us affiliate with good parenting; however his parenting produced a President, a US Attorney General, and three US Senators. I don't know if that makes him a good or bad dad, but many fathers would be happy if the fruit of their parentage had those results.
So setting aside the qualitative discussion of what makes good parents here's the unaddressed issues with public education, imo.
First, I agree with your original post that there is way too much focus on college preparation curriculum. Every policy decision maker is the product of the university system, and so, of course, there is a heavy handed bias that all children should head that way. It has forced industries that once relied on vocational programs to move to the dramatically more expensive university system in order to keep their employment numbers sufficient. And it also means that the two thirds of high school graduates who are not going to complete college have a valueless high school diploma. It is not surprising to me that once a teenager realizes they will not be going to college they leave the education system - that's all that the education system prepares them for. So, in agreement with you, I would say that the overwhelming majority of public education should be focused on vocational programs - mechanics, plumbers, electricians, LPNs, basic bookkeepers, computer programmer, etc. This is where the majority of students will find adult employment, and it is where the majority of education should be focused.
Secondly, back to parents... I'm sorry, but the underlying premise of current public education is that parents aren't qualified to teach their children. The presupposition is "Give us a lot of money, and in a few years you can trust that we'll have turned you child into a productive adult." In fact, parents who refused to buy into this load of crap have had to go to court in numerous states just to be able to keep their kids at home and see to their education personally. And after forty years of this experiment the one (and perhaps only) undisputed fact is productive parents (ignoring the debate over whether or not they are "good" or "bad") produce productive children. I personally believe that today's teachers are better than ever before. They certainly have better educations and generally better resources to draw upon (albeit inequitably distributed), but the fact of previous generations still hold - children are the products of their parents - not the educational system - and productive parents produce productive offspring. If one wants to improve the outcome of children, then look to programs like the Harlem Project - where they are focusing resources on improving the parenting.
Barry Dalton wrote:
"So how about this. Come up with a logical, incremental plan to solve all those problems. Start with lowering housing prices nearer major industrial areas. Then start building a network of filling stations for whatever alternative fuel(s) you settle on. If a person has a choice between driving a car than runs are gas because there are a jillion gas stations conveniently located on his way to work or when he takes a vacation, that's just common sense. He's not going to buy a hybrid car that he constantly needs to worry about how he's going to keep fuel in it. What if he's in a bad neighborhood or a dark highway. He or she would be stranded. So start ther."
It's always funny to me how folks on the left swear I'm a militant conservative and folks on the right swear I'm a militant liberal. Anyway.
Here's one idea that is rather simple but politcally probably impossible. How about the Federal government stop subsidizing urban sprawl via ever increasing highway widening? The Interstate system made a lot of sense in the 1950s when military mobilization depended on the trucks, but that need is passed. If the Federal government would use the money it collects via fuel taxes to establish high speed rail urban corridors and develop intercity & intra-city mass-transit, rather than ever increasing highway capacity, soon people would give up on this paradigm (particularly in the South & West) of a twenty mile/thirty minute drive to work each day as commuter highways became choked over the next few years. They would switch away from urban flight, return to denser urban centers where they could walk, bike or mass trans to a jobsite (at most) a couple miles away. The tax base would return to the urban cores, gas prices would fall as demand from 80 million commuters ends and soon (a few years) momentum would kick in and pretty much solve the "automobile problem". Further, because they couldn’t just flee to the suburbs, people would be forced to address issues such as urban crime and inner city education rather than just ignore them (or at best discuss them in abstract detachment) in their remote gated communities. As I say, I don't entertain the belief that anyone in Federal government has the backbone to say to all those suburbanites in Littleton, Grapevine, Chula Vista, etc, "Hey, if you want a more comfortable drive into Denver, Dallas, San Diego, etc, figure out how to pay for it with out relying on the Federal government, because the Federal government is out of the unsustainable process business..." But it is fun to fantasize about the way things ought to be.
Apparently you're not paying attention. The problem is fuel availability. We can either shape demand or watch our children fight endless wars over a finite resource.
An interesting interview with a couple researchers. If you think the drop in oil prices means that we're out of the woods on energy policy, these guys say you're dead wrong. And they've got the International Energy Association (IAE) data and worldwide oil company contacts to prove it. The data have tremendous implications for the energy security of you and your families, this nation. Frankly, they argue we're in a much worse situation with energy than any of us believes.
<http://www.netcastdaily.com/broadcast/fsn2008-1213-2.mp3>
It's also available on iTunes.
This is an hour long interview on this week's Financial Sense Newshour discussion series, hosted by Jim Puplava. This is between two leading energy experts, Matt Simmons an energy investment banker, and Robert Hirsch, a top US energy consultant discussing the precariousness of world oil supplies with lots of facts and figures.
The price of oil has declined sharply enough recently to make folks think that the oil price problem has mostly gone away. This interview destroys that myth. Toward the end of the interview, Simmons talks about Glencore, a giant Swiss raw materials broker caught in a squeeze that Simmons thinks might help to account for the oil price collapse.
You're just plain wrong about "no objective metric for good teachers.
But you are right about parents;
And you would have been right if you had said, "there is no objective metric for good students."
And that's the problem. Testing is just busy work. Children, and by extension, people in general develop at different rates. One child might speak clear English at age two and another may win a pulitzer prize at age 80. The emphasis on standardized testing of students is just wrong. It's just something to show "the boss" and make policy makers pretend they are actually making a difference.
But you can objectively measure teachers by testing them on both the subject matter they teach and their teaching methods. Teachers who perfom badly on this test should be transfered to clerical duties, coaching positions or drivers ed. Or we can pay for them to retrain in another profession. Anything but let them continue teaching. If you find a teacher who is extra compassionate but a little bit dumb, let them teach pre-school where compassion is more important than curriculum.
Stop making excuses for teachers. Teachers unions should be trying to recruit better teachers, not just trying to protect the jobs of dues-paying but otherwise average-intelligence teachers.
Sir, with all due respect, it is you who can not see through your knee-jerk ideology. There are no simple solutions, I think we can all agree. But to rally around an idea, like artificially inflating prices of commonly needed commodity through taxation, is simply unfair. It's more than unfair. You are creating real human suffering. And, like Dick Cheney, you feel completely justified and will sleep like a baby because it is not personally affecting you or your family.
This the same problem as getting rid of the progressive income tax and substituting a sales tax instead. An unfair burden shifts onto the poor and middle class. $5 bucks for a gallon of gas might not be much to you, but to a lot of us, it's the difference between paying the heating bill or the house payment this month.
So get your head out of your you know what and think of another solution besides artificial taxation.
We were told not long ago there was a big financial crisis and all we needed to do was throw 700 billion dollars at it. Now, the banks can't even tell us where that money went.
Intelligence is a good thing. But you've got to use it.
"Bob would have us believe that the only problem with the American economy is that greedy bankers hijacked the mortgage markets to raid them. The truth is that in the '90s many, many people from various backgrounds (most of them liberals) came to the conclusion that it was a good idea if more Americans owned their own homes. But for this to occur lending regulations needed to be loosened. There was pressure from every sector to liberalize these regulations and allow less credit worthy borrowers access to the capital necessary to buy homes. "
StanH, I totally agree with everything you said; except that I would propose an amendment:
insert the phrase
"and add in an unexpected rise in fuel prices that inflated the monthly expenses of homeowners as well as reducing expendable income that would have been otherwise spent in the local economy rather than funneled to the oil industry"
after the words "unaffordable loans,"
So, the new paragraph would read:
Add in a housing bubble, as people overestimated the traditional increase in home prices and the mortgage industry used that overestimation to fuel an otherwise untenable series of eventually unaffordable loans, "and add in an unexpected rise in fuel prices that inflated the monthly expenses of homeowners as well as reducing expendable income that would have otherwise been spent in the local economy rather than funneled to the oil industry", and you have our situation.
your arguments are all over the map and have a pot-calling-the-kettle-black quality to them. Since you will not address my points or examine the information I've provided, I'll not respond again.
If it makes you feel any better, you Dr. NO-types will probably get your way. Do nothing until the pain is searing and the situation dire, it's the American way.
bye.
Riddle me this, then Batman:
If I'm riding in the center seat on the airplane, between a Liberal Intellectual on the left and a Oil Exec on the right, and they both look very happy, what does it mean?
The Oil Exec is happy because gas prices are higher and he can make more profit.
The Liberal Intellectual is happy because gas prices are higher which he believes will force us to rely less on foreign oil.
Explain to me why you both want the same thing, but because your motives are different, your vision is better than his?
The result is the same in that it hurts the most vulnerable citizens in the society. But you don't care, you Dukakis, because people don't matter to you. You only care about your vision.
Well, there's a fine line between vision and magical thinking.
At least have the courage to think of a plan that doesn't start with the weakest. At least try to pretend to have a little compassion when someone makes a legitimate argument.
Matt Miller, Ariana and I have all said at different times that the government could offset the increase in gas prices with a equal reduction in payroll taxes or some other program like we do for Ag, like food stamps. The idea is to shape consumption and demand through government policy.
We can either change the game, or fight endless wars over a shrinking nonrenewable resource. You seem to assume that it won't be poor people who suffer most in resource wars. Don't see a lot of rich kids toting rifles in Iraq.
We can either break the backs of the petrodictators--Saudis, Russia, Kuwait, Chavez--by curtailing our demand or we can continue to fill their coffers and fund their campaign to blunt America's will and attack this nation.
Thomas Friedman in Hot, Flat, Crowded tells the story of how he gave and speech where he claimed it was $40/bbl oil that brought down the USSR. A former Russian diplomat corrected him. It was a decade of $80/bbl oil followed by $40/bbl that broke the USSR's back. We can do it to the Saudis, we can do it to the Rusians (again) and we can do it to Hugo Chavez. Energy Independence IS Homeland Security.
Speaking of vision. "No" is not a vision. I note that you've yet to propose a single idea about how to deal with the looming oil collapse and position the nation to take a leadership role in the new energy economy.
Henry Ford said it best: "If I'd given people what they wanted, I'd have invented a faster horse."
I agree that the unconditional allotment of $700,000,000 (well, only $350,000,000 so far) to the banking industry with virtually no oversight was a very bad idea. But this was neither a left, nor a right fiasco. Polossi and Frank were shouting just as loudly as Paulson.
It reminded me of the sort of thing that happens in Mexico. There’s a tradition in Mexico for the outgoing administration to feather their post-Presidential nests with swaths of public money. When Paulson said, “Ya know all those bankers on Wall Street that I was partners with until I became Secretary of Treasury, and who I’ll be partners with when we leave office in six months… We need to give them unfettered access to $700,000,000 right now or the American economy will DIE,” it demonstrated a level of greed and corruptions that Salinas, Zedillo, etc could only fantasize about achieving.
While I agree with much of what you post, Stan, I believe you are perpetuating some recent myths. When the large first wave of (rather modest) loan rule liberalizations occurred (I believe) in the late ‘80s, there was no dramatic increase in foreclosures. This fueled a lot of optimism, and rules were loosened further, again with only a very small rise in foreclosure rates. In retrospect, the probable reason that foreclosures did not immediately spike, is because the loan rule liberalizations led directly to increased home buying, which increased prices. So if someone was in danger of foreclosure they could sell easily – and profitably - and avoid it. This led to a snowball effect where liberalization drove increased buying which drove down foreclosure rates which drove liberalization.
The myth that there were large swaths of the financial community that were aware of this unsustainable dynamic and chose to ignore it out of simple greed is a mischaracterization. Everyone – buyers, lenders, public officials – looked around and saw A LOT of people who a generation ago would have been renters now holding mortgages (albeit non-traditional, subprime mortgages) and thought, “This is a huge, egalitarian leap forward. And if it turns out these people can’t increase their incomes at a rate sufficient to eventually pay off their non-traditional mortgage, they’ll just sell the house for a profit in five years.”
Many very smart people knew that something different was occurring, and occasionally someone might even speculate that there might be a bubble or two in specific real estate markets. However, most sincerely thought we had discovered this marvelous new paradigm. Extremely rare was any analyst who voiced the opinion that we were gripped in a catastrophic, unsustainable dynamic; when they did they were universally derided for their ignorance of the way the modern economy worked.
Tragically the bubble nature of the situation masked the true risks involved. Mortgage backed securities realized that subprime loans were riskier than tradition loans and sincerely tried to analyze those increased risks, but they underestimated their risk. For example, if one is an underwriter, and one issues a credit default swap presuming that the underlying mortgages will fail at 4%, but instead they fail at 12%, one’s company is suffering a 300% increase in exposure.
And this is exactly what happened. By 2004 or so, all the underwriters had come to the conclusion that they had overestimated the failure rate of these non-traditional loan packages, because for a decade these loans had performed so well. And it is extremely hard for Underwriter X to hold the line at a 12% estimate when the loans have been performing much, much better than that for 10+ years AND Underwriter Y across the street is willing to underwrite the insurance policy at 3% failure assumption; pretty soon ALL of Underwriter X’s customers have left for Underwriter Y.
What’s more this similar mechanism wasn’t limited to just mortgage insurance underwriters, mortgage brokers and appraisers felt a similar pressure.
Tragically, the home bubble also drove a very large, general consumer price/credit bubble. All these marginal home owners, in addition to “owning” homes they really couldn’t afford, also had access to “equity” that they didn’t really have and used this imaginary value to drive up consumer prices for EVERYTHING. So in the end, it is not just home prices that will readjust, but pretty much every consumer product – vacations, vehicles, food, labor (for companies) - everything; and that’s what were seeing. As the broader economy deleverages, and consumers and companies have to buy things with “real” money demand is stifled, and almost certainly will be until the process is complete. Estimates I’ve read/heard for the duration of this range from spring ’09 all the way into 2011 (YUCK!!! I hope that one is wrong.) My guess, for the little it is worth, is late summer of ’09.
Finally, as to what should be done… Well, there are a lot of smart people trying to figure that out, and if it were simple and easy, I’m pretty sure it would have been done already. If, as Bob advocates, we just freeze foreclosures, we “lock in” these overvalued home principals and probably prolong the misery. If we use the remaining $350 billion (or additional money) to pay down principals, we feed the moral hazard and the next time around people will worry even less about buying or issuing mortgages to overvalued properties. If we continue what we did with the first $350 billion, we’re just subsidizing incompetence. (How does it make any sense to say, “Yeah, you made a lot of bad loans in the past, so here’s $350,000,000, but please use it better this time.”) I would like to see the money get allocated to those elements of the financial sector who continued to make sound loans throughout the subprime euphoria, thus subsidizing competence, but I don’t have a good mechanic in mind for achieving that goal.
Yeah, I know it was too long… I wouldn't have read this far :)
Barry wrote:
"But you can objectively measure teachers by testing them on both the subject matter they teach and their teaching methods. "
Teachers can be objectively tested on their knowledge of teaching methods - the theory of teaching. But every evaluation of the actual practice of those methods relies on an evaluator. While objective evaluators - those without any previous ties to the teacher or school system - are in theory possible, to my knowledge no school system implements them. Further even with an objective evaluator, circumstances are subjective. Presuming an objective evaluator, how does one objectively compare the performance of a teacher with 30 children who are the product of inner city ghetto homes to the performance of a teacher with 20 children who are the product of college educated suburban homes when teaching the same curriculum objectives? The fact that no objective process for teacher evaluation exists is the root of the merit pay impasse. If one existed, I believe the overwhelming majority of bystanders would favor merit pay. But absent one, knowledgeable observers agree that merit pay is really just a code phrase for either "reward the administration’s favorite teachers", or "base teacher pay on student quality". Both of which would exacerbate problems in public education.
Dalton throws in gas prices as another stress leading to foreclosures, whcih is true. Oil company profits have certainly avoided the recession. If we should be getting money from those who have it (rather from future generations who are going to have it) we would be getting the oil companies, who get a lot of benefit from government, to contribute.
re Dan's comment: I'm not that familiar with Mexico although it has been mostly a one party state, so leaving office is not something they had to worry about, except maybe an individual leader. My biggest objection to his comment is that subprime mortgages did not contribute to an increase in homeownership, and even before the crisis began, most subprime lending was for refinance. Essentially we were financing consumer spending, which could not be sustained from real earnings like wages which were not going up, from home equity and the lower interest rates the fed promoted. That can only go on for so long.
The problem is that instead of good loans we had bad loans. The industry didn't mind bad loans, particularly adjustable rates that explode after 2 or 3 years, because they just create an opportunity to require a new round refinancing and convert peoples' home equity into a whole new set of thousands of dollars in fees. (This is the equivalent of selling a new car that will break down in 2-3 years so you will buy another new car.) They kept the dynamic going by requiring cooperative appraisers who want to work to give artificially high appraisals and then turn that amount in fees taken off the top. This went on until the rising tide of home prices stopped rising, in that they got ahead of themselves. So the problems were 1. bad loans and 2. a bad set of incentives that rewarded making bad loans. Add #3, the absence of a cop on the beat to prevent #1 and #2.
The selling of the bailout originally focused on the government acquiring, and hopefully fixing, bad loans. Eventually some recalcitrant Republicans had to be bribed with sweeteners. You may recall some last minute finagling added a loophole that swallowed the bill and virtually allowed Paulson and the Administration to do anything. Most of the money went to banks and the AIG insurance company at the height of a bunch of failures of name financial institutions and investment banks. When the car dealers came to Congress, they were made to go through more scrutiny, Congresspeople got to vote no and eventually the administration gave them some money anyway. What good has it done? Loans aren't flowing again but, like the war on poverty, the line may have been held even if victory has not happened. We will see, since everything is on hold until Obama and a Congress with fewer Reublicans are in office.
Anyway of Dan's suggestions, I think we need to use whatever money there is to fix the bad mortgages and get them out of the system. Replace them with mortgages that are affordable long term, lack explosive gimmicky features, and reflect a valid appraisal of the home's value. Maybe the taxpayers need to eat the risk as home price deflation wrings out all the bubble exuberance. After all people need places to live and the population is still going up. We could also start building homes for ordinary people instead of mansions where there aren't enough rich people to afford them. As to "moral hazard" (which I consider an abused term, since the moral hazard was selling bad mortgage products to people who were less understanding of how bad they were, not fixing the problem that this created) we need a regulated economy that prohibits unfair and deceptive practices, putting to use our understanding of how easy it is to overwhelm people with complex choices, and not letting it happen. We need the reality of a trustworthy economy, not just the appearance of trust.
Dan has it right on merit pay. Teachers don't trust that they will be treated fairly. That's why these union grievance procedures exist. They are the whipping boys for conservatives and no doubt some lousy teachers use them to hang on to their jobs. But this is a small part of a complex systemic problem that is rooted in race and class divisons and segregation, as well as the unwillingness of voters and taxpayers to make a system that is good for everyone.
One model worth looking at would be the creation of peer review teams of teachers from other areas, independent of any local old boy or ideological networks, to evaluate other programs. When there was a huge amount of mistrust between legal aid programs for the poor and the conservative politicians who funded them, they came up with the idea of having teams of other experienced and respected practitioners take a week off, come in and evaluate programs and the people in them. Part of this was an emphasis on improving performance and increasing skills, rather than firing or disciplining people. With schools, the people that are going to make good things all happen are the teachers on the ground, not funders, bureaucrats, ideologues or politicians. Schools, including the least attractive ones in impoverished urban areas where the greatest needs are, have to be places people want to work, where their needs are supported, and where they can make a positive difference. They can't be places where people are harrassed, isolated and expected to solve problems without resources. For political resons that's what No Child Left Behind has been.
While I agree with the broad strokes that Stan paint: many bad loans were made; the housing bubble fed excessive consumer credit spending via “equity” that wasn’t real; oil companies are evil; I am concerned that Stan (like many, many people including Bob) oversimplifies a complex system. And offering such simplistic ideas as don’t let greedy people make bad loans lulls us into thinking that the system is fixed just because we’ve implemented some cosmetic reforms. There appears to be a consensus that there needs to be more regulation than what has been in place for the past decade, but constructing effective regulations governing complex systems is … well, complex.
For example, consider a person in his final year of medical school. Should he 1) be constrained to buying a home based only on his current student income, or 2) using an interest only ARM should he allowed to be buy a much more expensive home since his income is going to rise dramatically in the next few years and when the ARM matures he almost certainly will be able to afford the home? Or consider some one in sales who has an occasional “good year” that skews his annual income upwards for that one year, but distorts his true average income. Should he be able to buy a home during that one good year based on that year’s income? Constructing a “regulatory solution” to these types of situations is not a simple task. If only it were as simple as “pass regulations against bad loans.”
And speaking of bad loans, I have to take issue with some of Stan’s premise that companies were deliberately making “bad loans”. Aside from an occasional, anecdote about a corrupt lender I haven’t seen or hear any evidence of this presumed widespread practice of making loans that were sure to end in default. Certainly, in many markets presumed appreciation was a culprit when housing prices began to fall. Many of the “bad loans” were refinances of the exact same loans every three or four years. A homeowner would come to a mortgage broker in 1998 and say, “I want this house, but I can’t afford it. But I could pay the interest and I expect my income to rise dramatically in the next few years, can I get an interest only ARM?” And eventually a mortgage company would say, “OK”. And in 2001 that homeowner says, “Well, I can’t afford the house yet but I can afford to pay more in interest and the house has gone up in value. Can I take out that equity for a vacation and a car?” And eventually a mortgage company would say “OK”. Well, was the loan from 1998 a “bad loan”? The mortgagee didn’t default on it; he got the house he wanted; the mortgage company got the fees and interest income they wanted. What about in 2004, when they go through the exact same process again? Was the 2001 loan a bad loan? It got paid in full; the mortgagee got the house he wanted but couldn’t afford under conventional lending rules, and the mortgage company had gotten its fees and interest from the 2001 loan.
What magic insight was the mortgage company supposed to use 2004 to suddenly realize that the third loan in this series was THE “bad loan”? Especially when the entire industry was operating under the same mechanisms?
On the moral hazard issue… I never participated in any of this crap. I had exhaustive conversations with colleagues and friend wondering how people making less money than me were affording twice or three times the home we were living in. I took extreme measures to avoid carrying any consumer debt as was documented on a different NPR show. Now why should my tax money go to clean up bad decisions made by (IMO) reckless borrowers and lenders, by paying off portions of their principal?
Dan is correct that bad loans are not necessarily bad for any conceivable borrower. They are bad for the borrower that has them. An adjustable rate may be good for a doctor whose income will get better over the course of his/her career or a military person who will be stationed in a particular place for a short time. They are terrible for a retiree on a fixed income or working people with stagnant wages. A system in which people expect to refinance every few years only works if home prices will go up enough to cover the enormous and unnecessarily high costs of refinancing. And there becomes no way that the loan will be paid off. I remember as a kid the cartoons where a figure (resembling the runaway slave Topsy from Uncle Toms Cabin) jumps from one ice flow to another crossing a river. Not something you want to do for a secure future.
Certainly the financial system is complex, which enabled the smartest guys in the room to fool everyone with incredibly complex schemes of multiple "tranches." Arguably the rating agencies were corrupt in rating these things AAA, but that is part of the problem if everyone depends for their livlihood on the scheme going forward. Anyway there needs to be more protection against unsuitable transactions because they are inherently unfair and deceptive, mostly because one side knows more than the other. I suppose if professional speculators want to play these games with each other, that is one thing, but to suck everyone else in is destructive. People want a decent and stable life, not creative destruction, high risk, or homelessness.
As to why should I care if I avoided the problem personally, part of the issue is that we are all in this society together. Few live in caves and subsist on their own efforts. Bad mortgages are bringing down the economy and hurting everyone.
You guys are all missing the point of what I'm saying about teachers. I agree totally with the premise that all students have individual differences. They start at different points, come from difference environments, develop at different rates, have different cultures, have different parents, etc. etc. etc.
Merit pay, where applied, relies almost entirely on student testing. Teacher pay is otherwise influenced by the affluence of the school district, local taxpayer support, education level and training, and years of experience.
My point is that all of these are tangental to the real issue. They are ways to subjective "show" that a teacher is doing their job.
In truth, there is an objective way to measure teacher quality. And that objective measure is:
a) intellegence testing, such as IQ tests
b) High School and University GPA
c) Standardized tests, such as ACT and SAT
d) Knowledge or subject-based tests
We are not talking about testing children here, who are in various stages of development. We're talking about testing professionals. They should not be afraid of these tests.
Dig a little deeper in your research, go past what the professional educators, administrators, State Boards, and school boards and other politicians are telling you. Teachers unions are important for worker protections but they exist to protect those who are already in the system. I'm suggestion we recruit future teachers based on their university performance and their intelligence.
The answer to student success is intelligent teachers. It's a simple as that.
Anyone who professes to understand all the complexities of this issues is self-deluded because this soup was made complicated on purpose. So, any politicians who offers a simple solution such as give the banks $350 billion is being intellectually dishonest.
You don't have to be a genious to see that rich people are just milking the system.
I wonder how much of this could have been solved by giving this money directly to struggling home owners and people who lost money in their IRAs.
Sure, it would have been attacked by the right as socialism and bailing out people who made bad decisions. It would be the classic unfairness we see in every household where the good brother is taken for granted and the bad brother is constantly rewarded for his bad behavior through enticements to be better. Or when they guy who gets stopped by the police for speeding answers the question truthfully, "do you know why i stopped you?" Answer truthfully, your reward is a $100 ticket, but lie and chances are you'll get off scot free. My point is life is unfair, but to use the current rhetoric, this is a crisis. So we do things we shouldn't normally do.
But to reward the bankers who made the bad loans with billions of dollars instead of giving it to the good bankers who didn't make mistakes is just dumb and irresponsible. it would have been much smarter just to give the money directly to the citizens who were in trouble. We could have demanded community service from them or garnished their wages. We could have demanded anything and they would have given it because they were in trouble. And they would be spending money in the economy with that money today, and maybe we wouldnt still be in a financial crisis.
I don't care if all the million dollar bankers left this country. There are plenty of intelligent people who'd take those jobs for $100,000 and do a much better job.
The financial crisis isn't a "puzzl" to be solved and explained. It's not an intellectual excercizes. We let the wolves in the hen house and they ate the hens and now they want more hens. We've got to stop believing people simply because they are "financial gurus" or lawyers or economists.
No one person is worth a $80 million per year salary plus perks. That kind of salary has nothing to do with the market, with performance or even with intelligence. I think we should pass a windfall profit tax on executive salaries on anything above what logically one human being could be worth to a company. If it were me, I'd say that amount was $1 million. Shoot, I'd settle for $10 million.
But how will we attract good execs if we don't pay them what they demand?
We don't. We let them move to other countries. We don't need them.
I've never agreed more with Matt Miller than this week on his comments about Caroline Kennedy and the New York Senate seat. I don't like either the Bush or Clinton legacy, but everyone of them won an actual election. Giving the seat to her is a total affront to America and makes us look more and more like some bannana republic. I hope the democratic party has the guts to stop this and appoint someone with some qualifications or that just doesn't say, "I want it, I'm from a famous family".
To the best of my knowledge Caroline Kennedy meets the qualifications set out in the Constitution to be a senator. She is a citizen. She is at least 35 YOA. She is also an attorney, a Constitutional scholar, an author, a mother, a wife and a citizen of the state of New York all of her adult life.
Are you actually complaining that she's not a politician? What other qualifications do you think she should have?
My beef is with her presumption and her lack of involvement in politics and society. Just being "qualified" doesn't get one entrance into one of the highest of all democracticaly elected bodies in the world. Krauthammer was right, if Mrs. Kennedy is given the job based on her pedigree, the Senate begins to look more and more like the House of Lords.
I come from a family of political and government service and I beleive being a politician can actually be a good thing. I'd love to see a qualfied member of the state senate, house of reps, judge, distinguished professor, mayor, charitable organization, or leader of a large governmental department / entity from NY take this job. At least this way the person has a legitimate stake on the position.
She's a constitutional scholar and an expert on civil liberties, something we could use after the Bush/Cheney years.
And she served as director of the Office of Strategic Partnerships for the the New York City Department of Education for $1 per year salary. In that job she raised $65 million in private money for the NYC schools. She's a director of the Commission on Presidential Debates as well as a director of the NAACP Legal Defense & Education Fund. And, fo course, she runs the Kennedy Library Foundation and is an adviser to the Harvard Institute of Politics.
What more do you really want?
Famous family or not, at least the Kennedy Clan has tried to make public service about something "higher than your own self interest."
Unlike the Bush Clan, who view government as either a way to increase your own wealth and power.
I don't think the Kennedy's are getting rich through public service. Look at Ted's key issues--none of them benefit himself.