Colorado Springs

Maybe I'm reading too much into this, and perhaps I'm picking on one town unfairly, but what is going on with Colorado Springs? First, the city votes to not raise taxes in the face of falling revenue due to the recession, so HUGE budget cuts go into effect. The town becomes a microcosm of letting free market principles work. City street lights and parks are shut down. Citizens can pay to have service restored, so after awhile you can tell what parts of town are affluent enough to pay for city lights and what parts are not. Some folks are willing to pay more to have the service returned than it would have cost them in taxes. But this lack of logic doesn't stop the town.

Now, the story breaks that an Easter Egg hunt has been cancelled in the town because of over zealous parents. I want my kids to get eggs too, but sometimes you don't. That's LIFE, people. What is wrong with these parents? I think my own hometown has shut down it's easter egg hunt. When I was growing up, the local Lions Club would sponser this massive easter egg hunt at the city park. they would rope off different sections of the park for different age groups, and cover the ground in these frankly awful sugar 'eggs'. You could also get a golden egg that you would redeem for a chocolate bunny. After the event, everyone would receive an ice cream bar. My grandpa was a member of the club, and one year he just 'happened' to be helping out with the pen that I was going to be hunting eggs in. When the hunt starts, I naturally run over to my grandpa because he was spreading out eggs and I wanted to be near him. I vaguely remember picking up eggs and then suddenly I find a golden egg! Cool! My parents were happy but I remember them making a comment about how grandpa accidentally 'dropped' the egg when I was there. So it was fixed. That's about all the parental interference I recall seeing when I participated. I do remember when I was older and we went there with my younger brother some parents would jump in to get eggs. What is wrong with these parents? Aren't you just teaching your kids that 'Mommy or Daddy will be there to make all your problems go away.' ?

What I don't like about free market principles in these cases is that they are so focused on the individual. We live in a society. We all need to work together. I'm not advocating that everyone should have a government paid for ipad, but what is going on is haves vs have nots. Which actually if you think about it is exactly what free market principles advocates.

Kid Politics

I love how some conservatives claim that Obama has some kind of brain washing agenda to warp the minds of our youth. This American Life takes a tour of the Regan library and watches elementary kids attempt to reenact the invasion of Grenada. The kids are rewarded for choosing the path Regan took, and not rewarded for choosing otherwise. Who is warping our youth here? I mean, I think this scenario reenacting is a really interesting idea, but putting the kids into these situations and pretending them that they are making the decisions, then psychologically smacking them when they don't follow what actually happened is total BS and just teaches the kids to be sheep and be afraid of making their own decisions.

Contraception

The debate over contraception is really dumb. We've been through this, haven't we? It's moronic to go over it again. The Catholic church has to cover contraception under a number of state laws. It's suddenly a problem when it's a federal law? Come on. Rush Limbaugh is an idiot, but we already knew that. The coverage is not for sex. It's because you can use contraception to treat medical conditions. I overheard 2 VPs in my office talking about this issue. They agreed with the substance of Limbaugh's comments, but not of what he actually said. They don't seem to get it, either. I was tempted to inject myself into the conversation, but I'm just a lowly worm and it didn't seem like the right place to be tossing around the words slut and prostitute. If you have an issue with birth control being covered, then why aren't you livid by the fact that Medicare covers Viagra? That means I'm paying for all the old geezers to have sex! And that has been law since 2005. So spare me your BS over this issue. Or first give up your Viagra, then we can have a conversation.

Banking explained

Dylan Ratigan explains how banking has worked during the last 12 years in his book Greedy Bastards. I've read a lot of books about the financial crisis, but I think that he does a superb job of explaining how modern banking works in the simplest terms I've ever seen. It's well worth your time to read it. Ratigan doesn't name names, but who is the bank that led the way on some of this innovation of the combination of cutomer bank + investment bank + insurance comany? This combination was ILLEGAL until the repeal of Glass-Stegal in 2000. So who was this bank that broke through this barrier? Thanks to Bill Moyers, you can find out: It was Citi and their want to acquire Traveller's Insurance.

Making the best of a bad situation

Oh, this is great. Jon Oliver concludes that Romney will be the nominee because Santorum is just too much for the general election. He ties this up by running a clip of Santorum defending his stance on Right to Life even in situations of rape with the idea that everything happens according to God's plan, and that you must make the best of a bad situation. So Republicans must accept Romney because that is God's plan, and they must make the best of a bad situation.

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Is Mortgage Principal Reduction a way to arrest the downward spiral in housing?

Update: Jared Bernstein also agrees that principal reduction is a good idea. He even has this line:

Research has clearly revealed that owing more than the value on your home is the strongest predictor of foreclosure, and housing finance analysts widely agree that principal reduction is the best medicine to avoid this outcome.

I've become involved with a Quora post about Mortgage Principal Reduction. You can see the responses here.

This is my latest response to all the latest postings:

Full disclosure: I own a home and am underwater. I am current on my mortgage, in which I owe about 140% of the current value of the home.

Moral hazard. These banks are still around even though they should have gone under in 2008. They are zombies now and will die out sooner or later. The  next crisis is coming. Our crony capitalist system is 'fixed' and is not sustainable. Where is the moral hazard for these banks that gave out the NINJA loans, the liar loans, etc.? These banks make millions in fees, get saved by taxpayer money, shower themselves in bonuses, then refuse to help the very customers that they took money from ( in fees and taxes). These banks don't even know where the papers are to a lot of the mortgages (see the robo signing scandal) and are in such a hurry to save themselves that they are foreclosing on the wrong people. This question of principal reduction has become a big 'pity the poor banks' forum. Most people that have answered this question seem to be assuming that everyone will simply try to take advantage of the principal reduction for those underwater and will be greedy. I am just saying that I would like to see us figure out a way to arrest the falling of prices and stabilize the market. You could tie the write down to something so that when housing stabilizes and begins to rise again, the bank that is holding the mortgage would see some or most of the upside. The point is, you can address the moral hazard part and do the write downs. The 'wait and see' approach has not stopped housing prices from falling, so I don't think that is no longer an option.

Another question: How much of these 'toxic assets' do the banks still own? They won't say because as soon as they let that cat out, they are finished because it will be revealed that the emperor has no clothes. It's called mark-to-market accounting. The banks hate mark-to-market because they have to reflect asset value loss on their balance sheets, and that can results in lower earnings. The current value of the mortgages would reveal a lot of banks to already be insolvent. So doing a principal reduction and a refi would actually allow the banks to have a more realistic number on their books and reduce the risk of losing the whole mortgage in foreclosure or having owners do a strategic default.

Most of the answers here are assuming that the current state of banking is likely to continue for the foreseeable future. I think that is a big assumption.

This notion that the banks are hands off on the economy is odd. The banks spent the past 30 years using the national economy as a giant casino and share much of the responsibility for cratering the economy in 2008. But lets not forget that if you don't have banks, you don't have a national economy. These banks are publicly owned companies that answer to shareholders, not private partners. I would like to see the banks return to being privately owned, boring-banking, 3-6-3 institutions that we had in the middle of last century but we will have to wait for the next crisis for that scenario to increase in likelihood.

It makes absolute sense to spend on infrastructure with federal borrowing costs at historic lows. Putting that off just makes it more expensive for future generations because it has to get done. But who thinks long term in this country? Not politicians and certainly not the banks.

Cleveland is tearing down homes because they are left abandoned after the foreclosure and are then looted for anything of value. This makes them completely worthless, which further depresses the values in the surrounding neighborhood. I have never seen anything like it. The banks are supposed to sell the properties ASAP in a foreclosure even if that means taking a loss. This is something that is not happening at all in Cleveland because they apparently can't give them away and are not willing to spend thr thousands of dollars needed to fix the homes to make them sellable. Which means that the banks would rather take a total loss on the home instead of trying to keep the current owners in the house and getting some of the money back. Which to me proves that the banks can take the hit that people in this forum are saying isn't possible. This is why I don't understand why the banks are willing to take take a total loss on a home vs taking a partial loss on the home and letting the owners stay at a reduced principal and interest. The only reason this make sense is that the banks know they are in trouble, so they are just milking all they can through foreclosure fees and other fees to bleed the system dry until their day comes.

Debt forgiveness is one of the hallmarks of our society. For example, bankruptcy laws have been on the books since our country's founding, in part due to our founding fathers' disgust with European usury laws, and an understanding that extreme, unworkable debt serves no purpose but to enslave the debtor to his or her creditors. I mean, even Mitt Romney suggested at a forum in Florida on January 23. http://www.huffingtonpost.com/2012/01/23/mitt-romney-foreclosure-florida_n_1223394.html

To quote an article by Eliot Spitzer and Dylan Ratigan about this  http://www.ritholtz.com/blog/2012/01/mitt-romneys-state-of-the-union-challenge-on-the-mortgage-crisis/

    "If you force the banks to recognize losses on the mortgage debt they are holding, then all of a sudden they will have an incentive to write down debt. Otherwise, a bank will do anything it can to maintain the fiction that the debt is worth 100 cents on the dollar, including lie, harass, and robo-sign. "

There is even a video segment where they address this topic: http://www.dylanratigan.com/2012/01/24/eliot-spitzer-simon-johnson/

People have been screaming about inflation for years yet it's not there. Let's stop being spooked by these phantom bond vigilantes. It will take strong leadership right our economy, and I'm still looking for it. The banks made a huge number of loans based on the assumption that housing would not drop in value. It was assumed that letting the banks go under in 2008 would have been as disaster so we bailed them out and kept all the players in place and have been limping along ever since. Now the assumption is that principal reductions will lead to chaos. Could this assumption also be wrong? The only moral hazard I see is that we are allowing these gambling addicts that call themselves bankers to stay at the table.

Talking to an A$$hole

I had an amusing conversation with some person on Facebook last week. (This post is going to get really, really R rated with a touch of Louie CK, so I apologize for the language in advance). Look at the last few posts:

Me:

Equality of opportunity means you give everyone the same choices starting out. Equal education, healthcare, basic safety net. After that you are on your own. Go squander your education or run with it. Freeing people up from having to worry about medical bills or being on the street if their company goes bust is what allows people to accomplish awesome things. Otherwise only those with great wealth to begin with can free themselves of those worries. Yet you find that disagreeable. I'm not talking about giving everyone gold plated health insurance or a free car to drive. If you are worried that America is on that path though, fear not. America is the only advanced country where it actually does matter who your parents are, what income bracket you were born into, or if you have health problems. Our safety nets have so many holes in them that entire swaths of our citizens and their children live in poverty and are malnourished. So don't get upset at us progressives for talking like this, because America is a lot more like the world you say you want to live in vs. the one I'm talking about. It's more of a myth now to hear stories about someone who was poor and struck it rich. America loves this story though. Because everyone in America is convinced that they will someday be rich. That's why we love rich people because that could be us someday. That's why tax cuts for the wealthy are so popular. Everyone thinks they will be rich, so why would they vote to increase their future taxes? It's an awesome and effective deception. But we don't live in that world. We are all different and most of us are just average. It's good to remember that our world was created by people who were no smarter than us though, and that is why we need equal opportunity so that we as a people can continue on with this great experiment to pursue life, liberty, and happiness.

His response:

I know many people who began in poverty and are now much higher on the economic ladder. Simply because you don't know anyone who had capabilities to succeed beyond their beginning economic status does not negate their existence. You, sir, live with a Utopian vision of a money free existence where everyone busts their ass for the sake of feeling good. How much SOMA would it take to calm the masses into such a vision?

America IS a land where one can succeed if one has the desire, the drive, and the requisite ability.

My father in law, for one, began his life in and out of foster care because his mother had trouble taking care of her four older children. When he left home before eighteen it was with $50 that he had saved from working and that he managed to keep from being stolen by his own family.

Now he makes that much every 15-20 minutes. He had no lucky breaks or silver spoon or connections of any kind and he made it because it IS possible in America.

That is the beauty of my country. If you try, you have the possibility of exceptional advancement.

There are tradeoffs in such a society. I know my father-in-law feels awkward going back to where he grew up. He is more successful than anyone else in his neighborhood. Some even demand money from him so he doesn't go back too often. There is transparent resentment over his success.

I find it difficult to see such a man and then to see a diatribe such as yours written by someone with the same possibilities for success.

Before I knew him, I thought I would remain in the same economic stratum as my parents, which is what something like 90% of the population does. Instead, I now understand that determination is what's needed. Determination and ability, which can be learned, as long as you're honest with yourself and position your career so that it's moving forward.

I work long hours and have travelled extensively for work. I am a platinum elite member of Marriott and I've got a lot of air miles stored up.

I've put close to 35,000 miles on my car in one year and I begin my work days at 6 AM and end at 5:30-9 PM. I spend my free time playing with my family, educating myself about the industry, working out, watching my Cowboys lose, and sleeping.

I've lost patience for people that I grew up with that had the same advantages yet squandered everything. Now, they demand "fairness" and "equality" because they can't get work after spending time in jail or because they chose to teach English in Barbados during their twenties.

I have to go now. Today, I'm weightlifting, then grocery shopping, then getting my kid to her overpriced daycare where she learns English, Spanish and, as of June, Mandarin. Then I'll write a dozen reports, which will take only today if I'm lucky. Ill then cook dinner, watch television with my wife, put my kid to bed, work some more, then go to sleep between 9 and 10. Tomorrow ill be up at 5:30 AM starting the whole thing again.

Keep your ideals of a stress free, money provided existence. In the world we actually live in, I'm proud of my accomplishments and I look forward to more.

Then in another post, this guy laid out what his plans are for his future:

I think you're underestimating nationwide anger at Obama. In any case, I'm gun shopping and I have a Costco membership. My family will be okay in the case of an anti-Christian soulless liberal dictatorship headed by King Barack and Queen Michele. The soul of America must be fought for but I'm hedging myself against the possibility that we continue supporting Islamo-Fascism, Race Card politics, nationwide infrastructure erosion, and idiot welfare policies.

My Dad's right. When I've made my millions, we'll campaign together, creating a new Independant Party with the pragmatism of Teddy Roosevelt, the drive of James Polk, and the political savvy of Lincoln.

The dude really pissed me off and he is a total asshole, but the point of his attacking me was...I don't know what. The guy is my age, yet he thinks like this. Boy, his dad must have been a total asshole too. Sounds like he was if he came from the poorer neighborhoods and had to deal with all that crap. And I don't blame his dad for being an asshole because that is what he probably had to be just to survive in that environment. Two points here. I don't really care about his dad, and I also think that it's insane that in America today we still have to have areas of the country that are mired in poverty. WHAT the fuck is that all about?? Anyways, he seemed to believe that the changes I was proposing would turn us all into lazy loafs. Uh, no you fucking idiot. I'm not proposing we go to some fucking ass backwards collective like Communist China during Mao. Those people did nothing because they wouldn't get rewarded for doing more. That's fucking retarded. How the fuck do these idiots form their worldview? I propose that the field is tilted back towards being slightly favorable to Main Street, and suddenly I'm this moron. Go fuck off, pal. Why come to the conclusion that I'm some jobless hippy fuck just because I'm saying that there is some gross inequality going on. I think that if you look at what I'm saying, I would probably INCREASE this douche's chances of getting wealthy and making his goals because the changes I am urging would throw out all the scheming and rotten douche bag bankers, executives, and lawyers that are currently sitting at the top and kicking everyone else in the face. But this fuck nut doesn't get it. Maybe he is one of those douche bag idiots, and if we clear out all those assholes, then his chances really would go down the drain. Acutally, as I was reviewing the Facebook posts for this blog, I learned that the guy works in the fossil fuel extraction business, and almost all of those folks seem to think that any changes to the status quo = doom for everyone. So that does make him part of the problem, not because he is working on something that provides me with fuel that I need, but that he seems to think that his efforts are the only way forward. Well, too bad for you, you fucking idiot shithead. I don't give a rats fuck how hard you or your dad work. Don't come at me and use that as the straw man against my reasonable arguments, you piece of shit. I work hard too, you motherfucker. You think you are better than me. You are not, sir. Equality of Opportunity is NOT Maoism, you dumb fuck.