Tuesday, September 30, 2008
Monday, September 29, 2008
Friday, September 26, 2008
This mechanism -- purchases of senior preferred stock with warrants in troubled institutions -- addresses the problems with the Treasury plan. The financial market is stabilized, companies get recapitalized, failures are avoided, debt securities are supported, and time is gained for illiquid assets to mature.
The institutions continue to function, their cost of funding will decline as equity capital increases, and innocent third parties like bank depositors, broker/dealer clients and insurance-policy holders are all protected. The only difference is that potential losses are kept with the shareholders where they belong.
Under a Preferred plan, the shareholders of the firms who created the problems bear the first loss. Who do you think should pay?
Thursday, September 25, 2008
Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) -- and their sponsors in Washington -- are largely to blame for our current mess.
The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.
Once we're done imposing Spartan discipline on the dining rooms of Wall Street, how about some of the same for the halls and classrooms of the average inner-city high school? A nation in panic at the sight of banks imploding has yawned for years while the public-school system melted down.
A handful of Supreme Court decisions going back 40 years relaxed standards of oversight for dress codes, comportment, speech and expulsion, and the average school principal or teacher threw in the towel on daily discipline. Not my job.
This election may be won by whichever man looks better riding an economic surfboard the next month, but the campaign's undercurrents are pushing the basics back to the surface.
More than opportunism has landed this presidential campaign in places that represent standards, like Saddleback in California and Messiah in Pennsylvania. People want standards again because they work -- in business, in schools, in daily life.
Friday, September 19, 2008
With their reliable business partners in the West, the Kremlin has opened up a lucrative market for what could be called democracy offsets. In exchange for oil and gas from Russia, they provide democratic credentials and pretend Mr. Putin and Mr. Medvedev are elected officials rather than mafia bosses.
Until Russia has a government that is accountable to its citizens, no company or individual will be safe here. The silver lining of the meltdown will be the weeding out of so many of the foreign and domestic profiteers who greedily abetted Mr. Putin's drive to turn Russia into a dictatorship. But there are still many who hope that all will be back to business as usual once the dust settles. Apparently they think the show must go on, even though many of the lead actors have left the stage -- and the theater itself is ablaze.
Thursday, September 18, 2008
The media is turning the news into a presidential video game. "Hurricane Ike" or "Wall Street Meltdown" appears onscreen, and the media boots up Barack Obama and John McCain to see how well they talk the problem. Mostly they are speaking gobbledygook about things they barely understand. Whatever a credit default swap is, I'm against it. The public is left to wonder if they are voting for a commentator in chief or commander in chief.
You say Sarah Palin doesn't have enough "experience" to run Washington? Washington is barely fit to be run.
The problem isn't standard political corruption. The problem is that the $2.8 trillion federal budget is a vast ocean of Beltway pilot fish feeding off scraps from the whale -- lawyers, lobbyists, ex-Members of Congress. No one runs the Sea of Washington. It's too big, too deep.
Wednesday, September 17, 2008
Indeed, incessant legal and administrative challenges make true the Democrat claim that oil from newly opened areas will not reach the market for years. These groups make use of a wide range of laws and regulations to challenge development. And they will make sure that the Democrats' proposal is meaningless.
We're told that the Democrats now favor drilling. That they have seen the light after feeling the heat all summer. What's really happening is we're mid-way through a political hoax.
Tuesday, September 16, 2008
Both John McCain and Barack Obama exhorted Americans to dedicate themselves to public service in an appearance at Columbia University on Thursday, to mark the seventh anniversary of 9/11. But Americans need no lectures from politicians to participate in their nation's civic life. They need them to stay out of the way. Between the two, Sen. Obama is far less likely to do so.
Monday, September 15, 2008
The success of the surge in pacifying Iraq has been so swift and decisive that it's easy to forget how difficult it was to find the right general, choose the right strategy, and muster the political will to implement it. It is also easy to forget how many obstacles the State and Pentagon bureaucracies threw in Mr. Bush's way, and how much of their bad advice he had to ignore, especially now that their reputations are also benefiting from Iraq's dramatic turn for the better.
Friday, September 12, 2008
Democrats have often caricatured conservatives' concern with judges as part of what they consider an "obsession" with abortion. In fact, over the last 40 years judicial activism has brought the courts to the center of national policy making in virtually all aspects of life.
All nominees must be decent human beings that meet the highest standard of competence, honesty and integrity. But they must judge neutrally, without fear or favor, and without regard to what interests may be before them and their personal feelings for the litigants or the causes they may represent. Justice and the rule of law demand no less. The Constitution and laws must be interpreted as they were written, not as judges think they should have been written.
The framers of the U.S. Constitution believed that the judiciary would be the "least dangerous branch" because the judges commanded neither purse nor sword, and would exercise judgment and not will. In order to keep faith with the Constitution they drafted, all Americans, whatever their policy preferences, should agree that this is the judiciary's proper role, and that foreign and defense policy must be left to the politically accountable president and Congress.
Thursday, September 11, 2008
Mr. Obama truly believes that he can offer the world beyond America's shores his biography, his sympathies with strangers. In the great debate over anti-Americanism and its sources, the two candidates couldn't be more different. Mr. Obama proceeds from the notion of American guilt: We called up the furies, he believes. Our war on terror and our war in Iraq triggered more animus. He proposes to repair for that, and offers himself (again, the biography) as a bridge to the world.
Mrs. Palin used her veto pen to slash more local projects than any other governor in the state's history. She cut nearly 10% of Alaska's budget this year, saving state residents $268 million.
Mrs. Palin also killed the infamous Bridge to Nowhere in her own state. Yes, she once supported the project: But after witnessing the problems created by earmarks for her state and for the nation's budget, she did what others like me have done: She changed her position and saved taxpayers millions. Even the Alaska Democratic Party credits her with killing the bridge.
Mrs. Palin's record here is solid and inspiring. She will help Mr. McCain shut down the congressional favor factory, and she has a record to prove it. Actions mean something. You can't just make stuff up.
The Bush tax cuts also aren't the budget problem. Until this year federal tax collections have been surging. In the four years after the 2003 tax cuts become law, tax receipts exploded by $785 billion.
The fiscal blowouts have included a record farm bill, notwithstanding record farm income; an aid bill for distressed homeowners, extended unemployment benefits, and more generous veterans benefits.... Rather than sort through priorities, Congress is spending more on just about everything.
Meanwhile, remember that "pay as you go" spending promise that Speaker Nancy Pelosi made in 2006? We called it a ruse at the time, and the last two years have proved it.
As they contemplate their choice for President, voters might want to consider which of the candidates is likely to be a check on Congressional appetites, rather than a facilitator.
Tuesday, September 9, 2008
Monday, September 8, 2008
Treasury Secretary Henry Paulson wants to prop up the walking dead so the world keeps buying their mortgage-backed securities. His action may calm jittery credit markets, and it may get the companies through the current mortgage crisis -- albeit at enormous cost to American taxpayers. The tragedy is that he and Congress didn't act 18 months ago -- when the cost would have been far less -- and that he still isn't killing the Fannie and Freddie business model that has done so much damage. These corpses could still return to haunt us again.
Thursday, September 4, 2008
New Orleans is still far from being able to withstand a 100-year storm -- in other words, a storm that has a 1% chance of happening next year, a 10% chance in any given decade, and a 30% chance during the duration of a standard mortgage. An individual might accept these odds, but not a rational insurance company for any price most property owners would be willing to pay.
Final liability for more and more of life's risks is being assumed by the federal government, i.e., taxpayers.
...if homeowners and businesses were expected to pay the full costs of the weather risks they take, we would see a lot more pristine coastline.... What is the function of insurance, after all, but to provide price signals to encourage safe choices over dangerous ones?
Wednesday, September 3, 2008
The stakes are so high in this presidential election for a fundamental reason that doesn't get discussed nearly enough: The federal government is so large and powerful. In particular, any aggressive president and Congress acting together have it in their legal authority -- under our presently elasticized Constitution -- to exercise near complete control over the economy. A long line of judge-made law since the Supreme Court's New Deal era decision in Wickard v. Filburn (1942) says there is almost no limit, under the commerce clause of the Constitution, to the regulatory reach of the federal government.
Thus, a united president and Congress can, as a practical matter, do all or any of the following (plus much more): take your money and give it to someone else; tell businesses what to produce and sell, who to hire and what wages to pay; set all commodity, wholesale and retail prices; control all energy supplies, communication networks and financial markets; replace all private health-care with a government system; prescribe the curriculum for all schools; determine which students get a slot in elite universities; diminish political and other speech; and enroll all citizens above the age of 17 either in the military or in civilian corps for periodic instruction and service. Children could be required to spend the summer in government "youth" camps.
Tuesday, September 2, 2008
At a special meeting in Brussels, EU national leaders told Russian President Dmitry Medvedev to abide by the terms of a French-brokered cease-fire, including a pullback of Russian troops to their preconflict positions. If he doesn't do so, they warned, they will hold another meeting.
That's all. It's been almost three weeks since Mr. Medvedev signed the cease-fire, and five days since Moscow broke with the rest of the world by recognizing the self-declared independence of Georgian provinces South Ossetia and Abkhazia. Yet Europe's leaders evidently need more time to ruminate over the situation in the Caucasus.