McCain's Clear-Eyed Observations on Mortgage Madness

Rising home prices led lenders to lower their standards, McCain said. “Some Americans bought homes they couldn't afford,” he added, “betting that rising prices would make it easier to refinance later at more affordable rates."...Wall Street helped inflate the housing bubble, McCain argued, by betting big on mortgage-backed securities. When housing prices started to decline and foreclosures started to rise, a widely dispersed network of investors found themselves owning a lot of questionable mortgage debt, which sent investors into a panic...In McCain’s formulation, irresponsible lending and borrowing created the problem, and uncertainty is at the root of its spread throughout the financial community. If accurate, this diagnosis demonstrates the folly of the Democrats’ proposed cures, which would reward irresponsibility and increase uncertainty among investors....Thumbs Up, Editorial, National Review Online, 3/28/2008

If you listened carefully to the plan offered by the junior Senator from New York, Clinton's prescription for the mortgage panic, simply and honestly described by the Senator John McCain, was a promise to alleviate the panic by stimulating more of it. What, you say?

If a debt market is running scared because there are widely distributed doubts about repayment of mortgages, a policy where the government guarantees that people with mortgages don't have to pay will instead guarantee that the debt market will panic even more. Such a policy would entirely undercut the mortgage security business, sending it into a depression. That's Senator Clinton's plan. Carefully denying the truth so artlessly expressed by Senator McCain, she proposes a policy that will make the truth even worse. Why? Let's lay it out point by point:

1) Securities based on mortgages have strong prices when people pay back their loans, making for a) happy investors, and b) more mortgages, and c) more houses built, and d) more happy owners.

2) Holders of securities based on mortgages panic when the word gets out that people are not paying back (or have been relieved from paying back) their loans. What happens?

a. Prices of securities based on loans plunge.
b. In response, banks and mortgage brokers re-introduce high standards for getting loans.
c. Following that, credit tightens;
d. Fewer mortgages are granted;
e. Foreclosures rise;
f. The homebuilding industry starts to shrink;
g. Existing home sales go south;
h. Then, constituents for both parties become unhappy.
i. Politicians start to spitzer.
j. If politicians succeed in spitzering, market collapses, later described as the popping of a "bubble" in real estate.
k. If politicians fail in their efforts to spitzer, market corrects, credit conditions improve, people are happier, especially home buyers, banks, mortgage brokers, and taxpayers.

It isn't very complicated. Just look at the fiscal history of any bank.

How long are we going to keep voting for people who think without the bother of checking against the facts? Don't listen when politicians spitzer about mortgages. The better idea is to sort out your problems, negotiate with your bank or mortgage broker, cut expenses where possible, work out an agreement, and change your expectations to meet real conditions, not false hopes. The latter are the specialty of prostitutes and look at who has to pay!

Luther

Obama/Bloomberg? NonPartisan? Ha!

He was only the warm-up act for Sen. Barack Obama's economic speech in New York on Thursday, but Mayor Michael Bloomberg sparked plenty of speculation by sharing the stage with the Democratic presidential hopeful...Could There Be an Obama-Bloomberg Ticket? CNN, 3/27/08

For those easily fooled, this news item will come as a surprise. Isn't Bloomberg a Republican who's brought New York's city budget into balance?

Well, actually, you've been fooled if you believe that. Bloomberg, a multibillionaire and, until 2001, a lifelong Democrat, managed the deficits that came out of the 9/11 attack on New York with substantially higher property and other taxes. There have been no substantive spending cuts. Instead, as tax revenues have risen with the real estate and stock market boom of the Bush Administration, there has been a substantial increase in spending. That's how New York came to have a surplus in a few years under Bloomberg, a surplus now in serious danger. With the financial services industry reeling under the credit crunch, New York City's budget is going out of whack. Except for the fact that Bloomberg refused to lower taxes, to return the surplus to the taxpayers in other words, the city would already be in substantial deficit.

Bloomberg is also a change advocate of the most pernicious sort. Bloomberg to people: eat what I say you should eat; don't smoke; drive what I say you should drive; pay more taxes. If you're not easily fooled, the gossip about a marriage between the Mayor of New York and the Senator from Illinois is probably the truest news story run on CNN in years. The "nonpartisan" label is similar to standard glosses in society page announcements used to veil differences that might end up in divorce court. That's a prospect unlikely to happen with these two. The only objection to their marriage might be from those conservatives who object to incest.

Luther

Policy by Avoidance: Why Liberals Always Get It Wrong

Obama seemed to suggest that families in America escape poverty by patiently accumulating wealth and passing it on to future generations—when in fact millions of Americans of all races leap out of poverty within a single lifetime through their own initiative, not their inheritances. We are long past the time when the legacy of Jim Crow laws and other forms of official discrimination can explain black poverty rates...Getting Poverty Wrong, Stephen Malanga, City Journal, 3/21/2008

Stephen Pinker, at times probably the most hated scientist at faculty meetings in Cambridge, has written extensively about the modern propensity to deny human nature. (See his book The Blank Slate: Modern Denial of Human Nature, Stephen Pinker, 2002) Policy wonks (the Clintons, the Obamas, the McCains) become enraged by opinions that suggest something other than Social Construction determines what lives people lead. Under this political idea, nothing good happens unless a Democrat (or pseudo-Democrat) proposes and executes a plan. The notion that human beings, at birth, contain the foundation for much of what they'll need in life, especially the will to look after themselves and their families, is deeply offensive to modern left/liberals. They still believe in the 18th century notion that human beings are blank slates, whose personalities and success in life are only written in by politically correct ideas and liberal 5-year plans enforced by an all-powerful state. It is arguable that an entire political movement over the last one hundred years has been based on what Pinker and many other scientists have demonstrated time and again is a false notion, that human beings are helpless and ignorant without the intervention of the state. When a Spitzer is on the loose, however, beware!

Reading Obama’s speech prompted me to look at his larger economic policy proposals, especially those aimed at combating poverty. Clearly, he believes that our economy is failing many Americans, and to help the impoverished, he proposes everything from tax credits for the working poor to a higher minimum wage. In fairness, on these issues, he’s not much different than his Democratic opponent, Hillary Clinton...Yet both candidates are largely missing the point. While they insist that strengthening labor unions or protecting homeowners from foreclosures will alleviate the hardships of the poor, the latest data from the U.S. Bureau of the Census remind us that the breakdown of the traditional two-parent, married family is a far greater contributor to poverty in America than many of the supposed shortcomings of our economy....(Getting Poverty Wrong, Malanga, City Journal.

Shades of the late Patrick Moynihan! In a hugely misinterpreted analysis of poverty, published during the Nixon Administration, the late Senator Moynihan warned that, unless government policy was constrained by what he impolitely called "benign neglect", economic conditions among African-Americans were likely to get worse, not better. Government policy, Moynihan posited, was actually the largest cause of poverty, especially among African-Americans. Such policy did this in several pernicious ways: encouraging out-of-wedlock childbirth (for more aid to dependent children); discouraging presence of a father (presence of a working age male in the household prevented welfare assistance); and more generally, substituting a poverty-level survival income for the will to get a job. The best solution, Moynihan suggested, was to let people learn how to take care of themselves and their children. This message was greeted as treason by Democrats, another proof of the malfeasance of the Nixon Administration. Exposing a fiction, hoping to better the lives of Americans, was the late Senator's treasonous act. Liberals preferred to continue denying the truth, in order to continue ordering up policies based on lies.

And that's how liberals, by denying evidence (to protect the delicate sensibilities of their constituents), always get it wrong. Why do we keep electing these idiots? Pinker would probably say the following: because of our inborn capacity for hope, we are also vulnerable to hopeful lies. And Pinker would likely advise: to avoid being sucked in by lies, pay attention. Each of us is born with eyes and ears and the intelligence to assess what they see and hear. Use them. What's on display for anyone to see is a history of liberal plans for how we should spend our money, and the consequences to us and to the economy when we listened. The false economy of the Clinton/dot.com era, the inflation of the Carter era, the trillions spent on "relief of poverty" from the Johnson Administration onwards, the trillions more spent on "fixing" public education -- how much evidence to do you need to realize that liberals always get it wrong? Hope and change based on what's out there can transform the world. Based on fictions and denial, they can bring chaos and ruin.

Luther

New York and Cleveland Spitzered Enough?

The term "Spitzer" belongs in the dictionary, and its definition should be "any politician." We ought to think of all politicians as Spitzers. No, they don't all have lurid involvements with prostitutes. But they all have an inflated view of their superiority over the rest of us...The Universal Spitzer, Arnold Kling, TCSDaily.com, 3/28/2008

A Spitzer a day keeps prosperity away?

From the sound of it, you couldn't go wrong saying that in downtown Cleveland. TCSDaily's Arnold Kling has made a nice coinage out of a name.

Suppose that we define "Spitzer" as someone who believes in the aggressive use of political power. A Spitzer believes it is his mission to tell us what to do for own good...Is Barack Obama--who also comes from a Harvard Law School background, and who identifies the "audacity of hope" with government expansion--a Spitzer? Absolutely. Is Hillary Clinton--who sees the the state as a substitute for a village, making it also a substitute for the family--a Spitzer? Positively. Is John McCain--who Virginia Postrel describes as "an instinctive regulator who considers business a base pursuit"-- a Spitzer? Unfortunately, yes....(The Universal Spitzer, Arnold Kling, TCS Daily.com, continued...)

Could spitzer be a verb? Imagine a politician saying "I'd sure like to Spitzer you; the taxpayers can pick up the tab."

One thing is certain. When a Spitzer shows up at your door, quadruple your prices for anything he or she wants!

;-)

Luther

Mistake On the Lake Continues to Play Out

Wonk recently returned from another trip to his ancestral home, Cleveland, Ohio, "The Best Location in the Nation," that decaying Rust Belt town that was once, for a brief shining moment (in the 1920s), the nation's Second City before Chicago grabbed that moniker more or less permanently.

Today, like Detroit, Cleveland is largely a burnt-out husk of its former industrial glory. Entire neighborhoods emptied overnight over the past 2 years as wave after wave of foreclosures hit homeowners with marginal incomes and ridiculous interest-only or 2/28 mortgages they never understood and never should have signed. Cleveland's thuggish underclass then finished the job by stripping each foreclosed house of anything of value, turning huge blocks of the city into the kind of thing you see in apocalyptic films like "Mad Max." Guess that's "progressive" politics in action. Except now there's nothing left to redistribute.

As if Cleveland hasn't already sunk far enough into the primeval slime, Clevelanders have demonstrated their almost suicidal fear and self-loathing by electing and re-electing, time after time as their U.S. Representative, none other than Denny Kucinich, Cleveland's own Boy Blunder. Obviously bored by the hometown crowd, he's spent more time in recent years traveling across the U.S. and foreign nations alike, badmouthing his country and promoting his never-ending Harold Stassen-like quest for a Presidency that will never be his, since even most Ohioans know he's an idiot. Except in Cleveland which will probably re-elect this certifiable moron and Marxist darling who, apparently, still has deep psychological problems with any authority other than his own.

The primary problem with cities like Cleveland, Detroit, Toledo, et. al. is the refusal of the general population to recognize that the Democrats they ritually put into office year after year are old-fashioned 1930s machine pols who raise taxes on Joe Sixpack to enrich themselves and their cronies while letting their once bright cities rot out from under them. Sort of the Saddam or Mugabe effect in slo-mo. Cleveland's politicians in particular, aided and abetted by The Plain Dealer, arguably America's worst newspaper after the Minneapolis Star-Tribune, routinely trash businesses, and now banks as Enemies of the People. And then they and their constituents scratch their heads wondering where all the jobs went. Gosh, I don't know.

Until folks up in northern Ohio learn a little bit more about the laws of cause and effect, they're doomed to residing permanently at the bottom of the American economic barrel. Why people do this to themselves has always been beyond me, but there you go. It's why I never moved back.

Back Again, Kicking Eliot While He's Down & Out

Greetings, Earthlings. Wonk is back, after being scarcer than truth in the Obama and Billary campaigns over the past month. Continuing fallout from earlier cited family matters continues to intrude. But what a delight that Luther has returned from his own recent hiatus to help former NY Governor Spitzer down from his lofty pedestal. (HazZzMat: "Governor" Spitzer: Why They're Cheering on the Floor of the Exchange.) Couldn't have happened to a nicer guy.

We learned long ago that the more self-righteous, the more sanctimonious the politician is, the more likely he's a closet perp awaiting discovery.

What Governor Paterson Faces in New York

It is breath-taking to consider how different New York looks this morning compared to only a week ago. Back then, Eliot Spitzer was seemingly ensconced in the governorship and Bear Stearns was a financial house valued by the market at something on the order of $30 billion...[Today the whole company was sold for 10% of its value of last Friday]. Seven years ago our city was attacked by a barbaric enemy, who came down out of the skies and killed thousands, destroying in the process the buildings that symbolized our commercial and trading spirit...But within only a few years, our city has rebuilt if not ground zero then the physical space needed to conduct our commerce, all in one of the greatest building booms and surges of optimism in history....The New York Sun, 3/17/2008.

If you've followed the story closely, as many New Yorkers have, it's more breathtaking than the editors at the Sun have written in today's lead editorial. Despite this brilliant recovery, New York State is dominated by tax and spend liberals in both parties. With tax receipts plummeting with the crisis in financial services, budget deficits are climbing rapidly in Albany and threatened in New York despite Mayor Bloomberg's best efforts. In the Democrat Assembly and the Republican Senate, politicians are falling over themselves to spend more money that we don't have, holding out the promise of taxes, more taxes on a state already taxed more heavily than any other, including California.

What's worse, many giant projects felt necessary by state and regional authorities have become financial disasters. The transportation center near ground zero is a total flop. While the MTA has rebuilt the basic elements of the network that crisscrossed downtown Manhattan, including the lines that went directly under the World Trade Center, the "center" is an empty lot. The Second Avenue Subway, a project already three years and several billion dollars late, won't open until 2012. The Ratner socialism-for-the-rich Atlantic Yards project, which depends heavily on eminent domain and the destruction of several neighborhoods, can't find private financing.

And yet, despite regulatory and tax conditions that would drive most entrepreneurs out of state, as so many have left upstate and western New York in the last two decades, vast numbers of new small businesses have swum against the flood of regulations, bureaucratic entanglements, and monsterous tax rates to build new, stable neighborhoods across the city. Politicians and political investment have done none of this. They have only stood in the way, hands out for more tax money.

It was a surge in which Bear Stearns was an important part, both in terms of its business, which surged until the latest downturn, and in terms of philanthropy, where managing directors were expected to give at least 4% of their annual compensation to charity... Bear aficionados searching for epitaphs may find themselves flipping through Alan C. Greenberg's book, "Memos From the Chairman," which includes one prescient note dated March 13, 1979: "It certainly looks like we have a dynamic future in store as long as we remember the words of the famous philosopher Haimchinkel Malintz Anaynikal: 'thou will do well in commerce as long as thou does not believe thine own odor is perfume.'"...(After the Bear, cont'd)

Greenberg's conception never bothered private citizen Spitzer, Governor Paterson's predecessor. His preposterous hypocrisy, while not quite rivaling Caligula, is, sadly, representative of a whole political class in New York State, a class that has, with rare exceptions, like Mayor Bloomberg, stood fast on the principle that nothing so serves their constituents as taking money and property from everybody else, a time-honored tradition going back to Roscoe Conkling. Private citizen Spitzer crossed the line, but there are many just on the other side.

And one should not imagine that the failure of one private company, and the tottering of another (Citigroup), is proof that the thieves in Albany were right. These disasters are instead a disturbing, real demonstration of the foolishness of the politically driven business model in New York: nothing is so good as the financial services industry; nothing else is worth giving tax incentives to. Fact is, banks and brokerages are the foundation of the New York State. The political judgment that promoted this result bears unpleasant comparison to farmers who plant one crop year after year. When that crop fails, there's nothing left. This is already close to the case in western New York, where you can drive for a hundred miles in some directions and find only ghost towns.

There will be much backward looking, as there was after September 11, 2001, at how the collapses we've just seen could have happened. Our own instinct, in the case of Bear Stearns, is to look to whether it is possible to transmit true price signals with an unsound currency. But this is a time to remember that the resilience that is the hallmark of New York and to work at fashioning the right policy prescriptions in the months and years ahead...(After the Bear, NY Sun, cont'd)

A creative political administration in Albany is the one that will find some way to attract a more complex business mix to the state. This will involve tax policy, development ideas, and negotiations with major unions. It will involve, as the new Governor of New York said in his inaugural address, "taking actions that we are not used to taking."

A new administration is being assembled in Albany, and before long another will be assembled in Washington. Both of them will be all too tempted to tax the most successful...at producing capital and other gains. There is growing talk among the Democrats of protectionism. It is a good moment to study how the Great Depression came upon us. What is needed now is a renewed commitment to protecting the ability of and, importantly, the incentives for people to take risks, to make investments, to create jobs, and to make profits. Many governors and financial houses have come and gone, but those principles have produced the resilience that has made New York so great. (After the Bear, Editorial NY Sun, 3/17/08, cont'd)

The ideas prominently expressed in The New York Sun are not often taken seriously in New York City, the home, after all, of left-liberal journalism from television networks to The Times. But one hopes that Governor Paterson of New York does. He shows more signs of doing so than the sanctimonious liar who preceded him, and it's a good thing. A lot more than the future of one former star from Yale is at stake. The future of New York State stands on the brink. The new Governor of New York knows that. The time is fast coming for action. May God bless Governor Paterson's search for answers with good sense and a willingness to deal with what is, and not with what seems to be.

Luther

Who Is That Masked Man?

"Who's next?"

Luther

A DAY LATER, CLINTON EMBRACES SPITZER...

Oh, wait, she's about to punch him. Damn, should have taken that shot two seconds earlier!

Oh, forgot the rest of the headline...

'S LICENSE AGREEMENT.

You get to cheat in the press, right?

Luther

Spitzer Understatement of the Week

For a supporter, New York Gov. Eliot Spitzer sure hasn't done Sen. Hillary Rodham Clinton any favors lately....Hillary Clinton's Spitzer Problem, Peter Baker, The Washington Post, 3/13/08

Not surprisingly, Senator Clinton has removed all traces of hooker hunting, private citizen Spitzer from her Web site. It's a trick she learned from the Chinese communists. If someone offends you, pretend he doesn't exist.

Luther

Ohoh-'bama!

Sen. Barack Obama's pastor says blacks should not sing "God Bless America" but "God damn America."...In a campaign appearance earlier this month, Sen. Obama said, "I don't think my church is actually particularly controversial." He said Rev. Wright "is like an old uncle who says things I don't always agree with," telling a Jewish group that everyone has someone like that in their family...Rev. Wright married Obama and his wife Michelle, baptized their two daughters and is credited by Obama for the title of his book, "The Audacity of Hope."....Obama's Pastor: God Damn America; U.S. To Blame for 9/11, ABC with Brian Ross

I'm sure John McCain is glad he doesn't have an Uncle Joe Billy who screams about woodpiles and rape from the pulpit.

Luther

What a Difference a Masthead Makes

As New York's de facto governor, David Paterson, readies himself to take the reins of a vast state government, he and his aides are scrambling to assemble a policy agenda out of the ruins of the Spitzer administration....Paterson Sets Albany Shakeup, Jacob Gershman, The New York Sun, 3/13/08

The above was the lead front page article in The New York Sun the day private citizen Spitzer took a dive off his divorce lawyer's desk. The Sun was the only New York paper to run an article about what was coming next. The Times led with hooker hunting, private citizen Spitzer's resignation set as if it had been the landing at Normandy. Predictably, The New York Post ran soft core photos of "Kirsten", with a lot more on Friday. The Sun hardly agrees with Governor-by-default Paterson on one issue but his picture filled a quarter of the paper's front page. Why?

Governor Paterson is the story. The Love Gov is history.

Luther

Spitzer: What Some New Yorkers Are Saying

Please explain to me how getting a divorce is similar to cheating on your wife with a prostitute while holding a public office that fashioned itself around ethical and straight-shooting morals....J. Williams, Editorial Reply, J. Williams, Rochester Democrat & Chronicle, 3/11/2008

Some will need that explanation, especially over at Senator Clinton's office.

Traveling a day early to Washington using taxpayer dollars is a great idea if it were to attend meetings to lobby for more funding for NYS. Staying at one of the most expensive hotels in Washington shows a lack of respect for taxpayers but I'm sure it isn't worth the additional waste of tax dollars to create a task force to investigate or to have the State Troopers follow his every move. A good scolding would work. But to travel a day early on our dime and to stay at one of the poshest, most expensive hotels in what is already an expensive city in order to engage in an illegal activity is not only criminal it is immoral and reprehensible. And again, on our dime. To show how big his ego has gotten and how "untouchable" he felt he had become he did all of this in spite of taxpayers but then he chooses the night before Valentine's Day as a poke in the eye to his wife. Personal? Private? Baloney !...(Editorial Reply, 'SnowBoy', Rochester Democrat & Chronicle, 3/11/2008)

Eliot "Snow White" Spitzer doesn't have a friend in SnowBoy, that's for sure!

In my opinion, whether Spitzer is a Republican or a Democrat is beside the point. He broke the law, and should step down. The whole thing is sad and disturbing, for his family but also the people of New York, especially since he demanded such high standards from all of us. This is not merely cheating on his wife while in office or having a gay love affair. Neither of those is illegal....(Editorial Reply, 'Elignore," Rochester Democrat & Chronicle, 3/11/2008)

In a long lost innocent age, say, 1983, this was considered the standard American view. Oh, Dutch, where are you when we need you the most?

Luther

Spitzer: Perspective from Nicholas Wapshott

A number of New York crooks and their lawyers could be forgiven for indulging in a little schadenfreude last night at Governor Spitzer's oblique confession to having consorted with a prostitute. After picking up glittering prizes at Princeton and Harvard, the governor set out on a brilliant legal career in which he liked to pose as a combination of Mob buster Eliot Ness and class warrior Robin Hood. Time magazine even named him "Crusader of the Year."...Prosecuting Himself, Nicholas Wapshott, The New York Sun, 3/11/2008

That schadenfreude was visible on the subway this morning at 6:30 when the writer was on his way to work, people howling with laughter at the headlines and the stories -- hell, the spectre of the Lone Ranger partying with a high-end tart. Fact was, though, that the Love Gov had a powerful, impressive start, with the sky (i.e. the White House) a reasonable goal.

Ah, but don't play Saint Michael in New York City. People will be looking for you, down the avenues and streets, in the clubs and bars, and with relentless fury. Every Assistant DA, professional and amateur sleuth, not to mention the crowds who love to see a public burning, were waiting for a fall. No one but the poor woman married to the Love Gov was crying. And I doubt very much that people were weeping when Savanarola was torched in a public square in Florence either.

Wapshott's article, however, should be required reading in public schools and public and private universities. This is what really happens in politics. Forget the thirty second spots and the endorsements. Stick with what they actually do.

Word is that the Love Gov's favorite Senator was rather silent about all this. One can't imagine why.

Luther

"Governor" Spitzer: Why They're Cheering on the Floor of the Exchange

The revelation that Spitzer enjoyed the services of a high-end Washington call-girl ring may bring with it federal charges - and likely means the end of an exceptionally maladroit administration...It's been forgotten now, but the former "Sheriff of Wall Street" rose to power by his own rules. After all, he began his career by using his father's money to systematically cheat the spirit - if not the letter - of the state campaign-finance laws to win office as attorney general. He then spent years engaging in elaborate denials about those shenanigans, with vague apologies mixed in as necessary when caught in his lies...As attorney general, he started out by taking on genuine malfeasance on Wall Street - but ended up prosecuting petty cases in order to bully companies into installing his cronies in key corporate positions...His first year as governor was one magnificent botch....Gov. Longshot? David Patterson's Unusual Rise, Fred Siegel, The New York Post3/11/2008

There is nothing quite so satisfying as the sight of a sanctimonious hypocrite confessing his sins in public. As a result, New York may soon go from suffering Eliot Spitzer's blind ambition to the competent ministrations of an African-American.

(Patterson was) a longtime minority member of the state Senate before becoming lieutenant governor; he'd bring to the governor's office the legislative perspective and understanding of how the capital works that Gov. Steamroller has so notably lacked...He even gets along well with Senate Majority Leader Joe Bruno; he just might be able to bring a welcome spirit of openness to Albany....(Gov. Longshot, cont'd...)

The old saw never sounded as true: Justice is blind. And New Yorkers are more likely to get a healthy vision from a governor who can't see than from a lying hypocrite who can't tell the difference between a love affair and a honey trap.


Luther