This is an American revolution?

Change at any cost.  Change of the guard.  Bush and Congress thought they could scare the people into the bailout bill, just like with the Patriot act and the war in Iraq.  Not this time.  Maybe the American people do not care if they lose money, but rather want the government and markets to work properly.  Maybe Americans are looking past the short term hurt and toward the healthy functioning of democracy and capitalism for many future generations to come.  The government and the investment institutions all failed us, and maybe now we want them to fail so that better, more effective entities will take their place.  Maybe we want to clean house and have new politicians and bankers.  Maybe we are sick of all the ineffectiveness we have been seeing for the past decade.

Or . . .

Maybe we are just too stupid to see the bailout as anything but a life preserver for Wall Street.  If so, no one really sold it as much more than that.  The government was too scared to tell us the actual consequences of not passing the bailout bill, for fear that markets would respond poorly.  But maybe they should have tried to educate the American people, so we would respond properly.  Maybe they played the fear card one time too many.

Either way, America needs change!

End of the World! I feel . . . okay, I guess. And you?

Holy shit, Sarah Palin is inept and incoherent!  She got torn a new asshole by Katie Couric.  Ouch!!  Imagine what Biden will do to her in a debate?  Palin said the word “guest” when she meant “guessed” and “maritime” when she meant “marine”.  If she says “axed” when she means “asked” I am jumping off the Bayonne Bridge in protest.  She’s done, failed like WaMu.  No more white trash in the White House.

And if Putin, based in Moscow, decides to fly to the US, he is probably going to head west and fly over Europe and the Atlantic rather than fly east over Alaska and the Pacific.

McCain is done to.  He charges into “Wharrrshingtun” to fix the financial crisis, and at best he did nothing (looking like a fool in the process) and at worst he derailed the talks and fucked everything up (looking like a first class failure).  If he misses the debate in Mississippi, he might as well get into the grandfather business.  Merely suggesting the debate be postponed, and that he may not show up at the debate has to be one of the stupidest things a politician has ever done.  It does not exactly say high-performing, multi-tasking, leader of the free world.  It kinda says: whoa, I need a break, can I get some water?  Missing Letterman was political suicide.

Hey, WaMu has failed.  Let’s see if that affects anyone other than the shareholders of WaMu.  Let’s hope (pray) the FDIC manages this failure properly.  Kind of a interesting idea: let WaMu go bankrupt, let the shareholders take the hit on the liabilities, and sell the assets to a competitor.  We may need to employ this strategy again.  Let’s see if the world ends as another bank does.  Probably not.

One thing is for sure: we are at economic war and the war profiteering has begun.  GET SOME!

Prediction: there will be no bailout, because no one wants another American civil war.

Let them eat cake!!!

Choking Obama Off?

Is it possible that this bailout “plan” for Wall Street is really just a way to leave Obama with no money to spend on any of the programs he’s proposed if he’s elected president?  Paulson & Bernanke are Bush appointees, and you have to think they feel some loyalty to him and his party.  I wonder if the 700 billion dollars won’t actually be spent or needed on Wall Street if McCain becomes president?  One cannot discount that bipartisan politics are not at play here.

Bailout?

Ok, the bailout.  So we buy up the bank’s and brokerage’s non-liquid (worthless paper) assets.  We do this with the hope that these institutions will start lending out money again and the economy will grow again.  But isn’t that what got us here in the first place, loose credit?  I am not convinced that the institutions will make credit available after they sell off their worthless assets.  What’s to prevent them from selling these liabilities to the Fed, then still keep their credit belts tight, and the economy still stalls?  And shouldn’t the lesson of the past 58 weeks be that credit was given too freely for too long for too many people?  Credit should now be hard to get, not easy to get.

This bailout is starting to look like a raid on the national coffers (which are empty) to shore up an industry that needs to severely revise its business model, not be thrown a life preserver.  And then we are supposed to accept the bailout with no means of accountability, transparency, or oversight.  The proposal seeks immunity from prosecution if the plan is poorly or unsuccessfully administered.

All Paulson & Bernanke keep offering as upside to the bailout is that certain institutions probably will not fail, and credit will probably be available again, and unemployment will probably not grow, and the market will probably stabilize.  700 billion dollars doesn’t come with any guarantees these days.  Bernanke has not seemed to considered how this plan would affect inflation, inflation being one of two prime concerns of the Federal Reserve.

Why not let the vacuum that these failed companies will create be filled by other companies, perhaps even new companies, that will strive to perform better and don’t have the these liabilities holding them down.  Not every single financial company has these liabilities on their books.  Most do, sure, but not every single one across the globe.

There are plenty of small, local, solvent financial institutions willing to write loans to businesses.  Okay, Bank of America will not lend to a MacDonald’s franchisee anymore, but there are many other institutions that would be happy to offer them credit.

So much for Schumpeter’s theory of creative destruction.

Kudos to Dodd for standing up to Paulson & Bernanke

Posts 1 and 10 are worth reading.

United America

While many are going on and on about how we need to bring America and Americans back together again, recent evidence suggests that most American’s are united about a few things. Recent (and not so recent) polls show that nearly two-thirds (and sometimes many more) of Americans agree about the following . . .

1. Bush is a lousy president

2. Cheney is a lousy vice-president.

3. Congress is pretty lousy too.

4. The Iraq war sucks, and we should get troops out of Iraq right away.

5. The economy also sucks, and America is in a reccesion.

6. Oil prices are too high and are affecting American’s bottom line, and America needs to reduce it’s dependence on oil.

7. The world needs to lower the amount of greenhouse gases released into the air.

8. Americans would like to see a decrease in the number of illegal immigrants entering America.

9. The health care system in America needs revision.

10. FEMA could be doing more to help the victims of Hurricane Katrina.

That’s right TWO-THIRDS of American’s agree on the above things! Two-thirds is a landslide mandate in American politics these days. America seems rather united to me, despite what you see going on in the debates in both houses of congress.

(poll data source: pollingreport.com)

Where are the social darwinists now?

This is a great article about the hypocrisy of conservatives and federal handouts. The neo-cons say: Working-class entitlements? No way! Brokerage bailouts? Yes please!

London as New York City (Jersey City too?)

Here’s an interesting article about London. Comparisons can be made between the dynamics there and here. Interesting stuff about banking and derivatives, if that’s your bag.

NAFTA

Here’s my BIG question about NAFTA: is Greenland getting its fair shake?

The Co$t of War

In USD: $3,845 per second!

Cha-ching! And this was supposed to be “the self-financing war”.

Mortgage Crisis

We have to be careful not to reward stupidity.

We are all for foreclosure freezes to try to give people in need a new chance to reorganize their finances and avoid people having to lose their homes. But we must not protect people that tried to live beyond their means. The trouble is, how do you define the difference between the two, especially since housing prices have been so damn high up until very recently?

Anyone who who acquired a non-doc, interest-only mortgage on the house they intended as their primary residence for the long-term played with fire. It is extremely risky to take out such a loan, and is generally reserved for situations of speculation where the buyer intends to sell the property in the short term in a booming market. Such mortgages are like buying stock on margin: you either win big or have to payout more than you bet with.

As tragic as it may be that some people undertook this strategy to finance their home and may have to give up their home, this type of behavior cannot be caught by the safety net that politicians are proposing. This falls into the realm of ideology that the law often uses when it states, “ignorance of the law is not a defense argument”, meaning you cannot say I did not know killing someone was illegal, thus I should not be charged with murder.

Those who took out interest-only loans should have know what they were getting into and that the risk of financial loss was extremely high. Bailing them out because they bet that home prices would always increase and that they would be able to use this increase in equity to refinance into a better mortgage is not the right thing to do. For then it is a slippery slope that leads to the point were one can make the argument that poor investment choices that lead to an under-performing stock portfolio are equally worthy of a bailout. This is simply not the world we live in, for such a world is not economically sustainable.

As with all investments, homes included, buyer beware.

If we reward stupidity, I will become a wealthy man.

McCain Shoots Back! (At a new target)

Clinton & Obama have been taking shots a McCain for weeks, pointing out how they feel they are both uniquely equipped to beat him in a national presidential election. And for weeks McCain has been firing back, talking about how he plans on beating Clinton. But last night he fired at a new target: Obama. With Barak’s recent string of back-to-back wins, McCain took dead aim at Obama for the first time and accused him of having a platform based on “platitudes”. Platitudes!?! Christ, he stole one of MY favorite put downs!!! Shit, are the Democrats doing the right thing here as they move forward to put an inexperienced junior senator up against a man with nothing but experience both professionally and personally? Obama likes to point to his past and his life’s accomplishments as to why he thinks he will make a great president. Well McCain whips his ass on that level. Obama cannot win that debate with McCain, no matter how much he may “welcome” it. It’s simply too nuanced an argument for your average American to comprehend. McCain comes straight out of central casting as your prototypical US President. A couple of good speeches and McCain runs the table when it comes to character; Obama will have to leave his chair, push it in, and walk away. Then Obama will be forced to then put his record up against McCain’s, and it seems he is quiet vulnerable here too, as Clinton loves to point out. Now’s her time to put the screws to Obama on this topic, this is her leverage point that may swing things back in her favor: experience. I think Americans will vote for experience over hope, especially when the debate turns to national security which is where McCain and the GOP will certainly steer things. I mean look what happened when we took a chance on a rather inexperienced governor from Texas? If McCain lays off Obama in the short term, he’ll allow the Democrats to vote him their nominee, then he can fire a full frontal assault on him later. But if he strikes too soon, he may make the Dems rethink Obama and swing to back to Clinton, who’s a harder take down for McCain than Obama. The chess match moves forward, one piece at a time. It’s getting tense.

BTW: this whole “Feed The Pig” ad campaign had me fooled! It took me nearly six viewings of these ads to figure out that the pig is the protagonist, not the antagonist. I thought the pig represented pork barrel spending and earmarks, not a piggy-bank! That’s what happens when the art director makes him all creepy looking — like he stepped off a Slipknot music video set — rather than look cute like a real piggy-bank. Putting the pig in a suit sure doesn’t help him look sympathetic. And he pops up all over town with is hand extended, seemingly extorting money from people. Boy did the creatives on this ad campaign miss the mark. One small line of copy in the last couple of seconds is the only thing that clues you into the fact that the ads are about the value of saving money rather spending it conspicuously. Damn!

SynFlux Plan . . .

SynFlux Economic Stimulus / Deficit Reduction Plan

1. Pass a law so that half of a person’s minimum monthly credit card payment would go toward principal.

2. Pass a law putting a cap on credit card interest rates at 19%.

3. Instead of giving a refund check as now proposed, cut federal withholding taxes immediately to put the same amount of money back into employee’s paychecks. (This would be a temporary rollback until the full amount is paid out.)

4. Cut maximum corporate tax rates on businesses that generate less than one half million dollars in sales to 10% on profits, cap tax rates on all corporate profits at 20%

5. For salaried employees, eliminate employee federal tax filing requirements, set the withholding rate to a flat rate of 15% that would cover all federal income taxes, fico, social security, etc. Non-salaried American’s would still have to file yearly federal tax returns, and also pay a flat rate of 15% of income.

6. For salaried employees, eliminate employee state tax filing requirements, set the withholding rate to a flat rate of 5% that would cover all state income taxes. Non-salaried American’s would still have to file yearly state tax returns, and also pay a flat rate of 5% of income.

7. Create a federal sales tax for consumers of 2%.

8. Create a federal sales tax for business-to-business transactions at 5%. This would include any business doing business within the US, regardless of where their headquarters are or where they are incorporated.

9. Cap state sales tax rate at 6%.

10. Eliminate the estate tax.

11. Create a carbon emission credit exchange for industry in the US like in Europe.

12. Raise the minimum wage to $8 an hour.

13. Create some form of universal health care where all US citizens are required to have health care or else face a higher withholding tax rate.

14. Allow all US citizens access to Medicaid regardless of income level.

15. Require all US doctors to accept Medicaid for the first five years in practice.

16. If a corporation does not offer health care benefits, it must set up Medicaid for its employees and automatically withhold the premium payment from the employee’s paycheck and pay the Medicaid system on the employee’s behalf.

17. Require all US corporations to pay taxes quarterly, eliminating yearly filing.

18. Make the first semester of college tuition at a state or community college 100% tax deductible to all US citizens.

19. Eliminate federal and state income taxes for all US military personnel holding the rank of an NCO or lower.

20. Eliminate federal and state income taxes for all US military reserve personal and National Guard personnel while serving active duty in a combat zone.

Something like the above!

It’s not a tumor

It’s not a recession, it’s a slowdown. It’s not negative growth, it’s lower positive growth.

PADRP

The Powerhouse Arts District of Jersey City

Jersey City. Arts capital of New Jersey? It’s been called that. These days though some JC artists feel they are getting short-changed by the city. They feel the city has not followed through on commitments — via various zoning laws and provisions for developers — to provide affordable live/work artist studios. I’ve read the entire Powerhouse Arts District Redevelopment Plan (PADRP), and I must say that it is troublesome. Looking at the document from a macro view, it is very easy to accuse it and its framers of elitism. It seeks to create a special class of Jersey City citizens — qualified artists — that should be protected from free-market real estate forces on the sole proposition that these artists somehow are inherently more capable of contributing to the overall good of a community than any other type of citizen in the community. It also seeks to provide the type of haven to artists that other groups of obviously more needy people never get. The elderly, the physically and mentally handicapped, the blind, the deaf, should all be so lucky to have a municipality equally concerned for their special housing needs. When finished reading the PADRD, you cannot help but feel that the people that wrote it see themselves as victims looking to create a below market price real estate sanctuary onto themselves.

The PADRP rests on some very questionable legal grounds. Mainly, is it fair and just to make affordable housing available only to a very small and select group of low to middle income people, and not to all people of low and middle income? Poor people have always resided in JC, long before any artists had. The qualifications to be considered an artist by the PADRP and thus eligible for the special housing offerings are not that strict. In fact, it reads as though you only need to practice your art as a committed hobbyist rather than as a working professional. You can sell used cars by day and as long as you sketch out a drawing or two each and every month and show them to your friends, you’re an artist! By PADRD metrics, I myself qualify as an artist of three disciplines: writing, film/video, and photography. Yet in a recent Jersey Journal front page article, it is noted that many of the new live/work artist units available are not being snapped up by the glut of eligible artist applicants. Instead it seems many of the artists have not been following through with the required paperwork. The city and the building owners are now starting to allow anyone with the proper income requirements to apply for and occupy these units. Which is a good thing because empty affordable housing is perhaps even more offensive than no affordable housing at all.

The PADRD’s complex zoning restrictions certainly do not make the area a very appealing one to developers as it will cost a lot of money to meet all the requirements. But that might have been the point of the PADRP, to preserve the status quo of a blighted, toxic industrial area so a small group of people could continue to live and work on the cheap. But now that JC has become a very desirable place to live — which is not entirely due to the artists and arts community, as the PADRP and local JC artists would have you believe — even toxic, industrial land lots are now seen as diamonds in the rough. (And before we do anything else, let’s all please stop and pause to reflect at just how great that is!) Let’s face it, it’s the PATH train with its easy access to New York City that makes JC and its real estate so desirable, not its art or culture. The same market forces that shape New York City are going to shape JC too, it’s unavoidable. Regrettable to some perhaps, but we should remember that New York City is considered the greatest city in the world. We all have to figure out how to adapt to this changing environment and not expect the environment to adapt to our particular needs: in case you haven’t noticed that’s how it works, that’s how it has worked, and that’s how it will always work. One fact of economics, real estate development, and politics is that most municipalities seek to develop land so as to increase their tax revenues. A city like JC needs all the tax dollars it can get to improve its educational system, its social services, its public works, and to fund various government departments like its fire and police departments. When a company like the Toll Brothers seeks to spend hundreds of millions of dollars to create properties that will provide the kind of property tax dollars that might actually help improve all wards of JC, it is very hard for the city to take the marginal concerns of a very small group of artist all that seriously.

The Toll Brothers actual do seek to meet many of the art and culture requirements of the PADRP. Sure not all of them, but again, a reading of the intricacies of the PADRP makes it clear that it is impossible for any developer or group of developers to hit every one of those nails on the head. The Toll Brothers proposed changes are really not that drastic; many are practical considerations regarding building materials. In one case they would like the option to use aluminum instead of wrought iron. In another, they want to reduce the width of some of the parking lots from nine feet to eight-and-a-half feet. Yes they want to make some of the buildings taller so they can recoup their sizeable investment by having more units to sell at market prices. The nature and scope of the redevelopment outlined in the PADRP is going to cost huge sums of money. So far, it seems that the Toll Brothers are the only developers that wish to make the investment in the Powerhouse District and are willing to work within the vast majority of the PADRP regulations. It can only be expected that any organization like the Toll Bothers is going to have some changes in mind. Let’s not forget that the entire PADRP could easily be voted out of existence by the JC legislature, and the Powerhouse District could become one of many things that would be far, far worse than what the Toll Brothers are proposing.

To have a thriving art and cultural scene in any city, you need to have a lot of residents in that city. The more people that live here in JC, the larger the demand becomes for art and culture. Residents of JC often complain that there are too few good bars, restaurants, and shops to be found locally. More are needed they say. Yet most of the local bars, restaurants, and shops are hardly booming. Their owners are anxiously awaiting the population growth spurt destined for JC as new housing is built and occupied. These business owners understand that more residents here equals more economic stability for them. Why don’t the artists here in JC comprehend this basic principle? Surely not all artists wish to remain starving do they? If they do, well then they are going to have to do so somewhere else, as most of us like to eat.

Overall the PADRP could be a great thing. Its only major tweak should be that the affordable housing be made available to all people and not strictly reserved for qualified artists. I foresee minor concessions being made by current Powerhouse District residents, the Toll Brothers, and city officials as they are all fundamentally on the same page.

Mortgage Crisis of Character

When analyzing the sub-prime mortgage debacle, consider this: a lot of people lied about their employment status and overstated their income on their no documentation loan applications and wound up living beyond their means.