This Man Is RIGHTEOUS

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The Nutshell Has Roots

In the recent post(s) "In A Nutshell," the cause of the financial breakdown and the central culprits were revealed:

1) The causus causata of the snowballed meltdown has been identified: The subprime lending corruption at Fannie & Freddie.

(2) A look at the timeline makes clear that the practice of sub-prime lending began in the Clinton era and was called to the carpet in 2004 when it started getting out of hand and raised red flags to number crunchers. The Republican-backed snooping was beaten back by Democrats like Barney Frank, Reid, and others.

(3) The "community organizing" that Barack has on the top of his resume' for "experience" refers to his activities with ACORN--which worked hand-in-hand with Franklin Raines at Fannie.

(4) Raines is now "economic advisor" to Obama.

Furthermore, Senator Obama blames "Republican deregulation" for the breakdown. That's demonstrably false. There's been no "deregulation" in the financial sector that Barack can point to. Nada. Zip.

When additional regulation was sought for Fannie Mae specifically (by Republicans--like McCain himself-- who recognized a potential S&L redux), it was Democrats like Dodd and Frank who bullied and blocked it.

Fannie Mae, as mentioned, worked hand-in-hand with the group ACORN to get sub-prime loans out to indigents, and packaged those very loans and unloaded them for big bucks that were enjoyed by Fannie Mae executives like Raines, Mudd, and Wilkinson, who then gave large contributions to the Obama campaigns.

Meanwhile, the group ACORN is all over the news now for serial voter fraud.

Recall also that Barack was the lawyer and trainer for ACORN, which is the "community organizing" outfit he refers to for his "experience."

HELLO?!?!?

Nostradamus 101

Okay, I'm ready to make a prediction on the presidential race using a poetic technique of prognostication (and a highly subjective analysis of it) that many believe predicted Napoleon, Hitler, the Kennedy brothers, and even 9/11 centuries before they existed when used by Nostradamus in the 16th Century.

Let's begin with the relevant facts:

McCain's a Virgo, and Obama's a Leo.

Hmm. Does the lion eat the virgin, or does does the virgin soothe the savage beast, and vanquish it?

To find the answer, we have to gather more clues:

Election Day--November 4--is seven days after the new moon, and two days before the lunar first quarter.

Coincidence? Maybe.

Significance? Unknown (i.e. above my paygrade).

More significantly (perhaps), it's on a Tuesday, which, as everyone knows, is not only hamburger payday for Wimpy (i.e. Obama?), but, as I'm privileged to know, was quarters night at my alma mater's Tavern, before the campus went dry...

....like the economy just did.

A-ha. Now I'm getting somewhere.

Many young lions prowled the Tavern for virgins...

...which were nowhere to be found (and, when making the analogous extension, certainly not on Governor Palin's end of the ticket).

Let's just cut to the chase. The outcome is clear (unless, of course, the skies are overcast).

Behold the inspired quatrain:

The hungry lion
Dark & smelly
Will strike the old virgin
(Veteran though he be)...

And the prediction:

...And win to lose
Or lose to win.

Go ahead and write that in stone. And you can be hailed as an "expert" and used in a pretentious documentary on cable no matter who wins, because the ambiguity of the couplet allows you to say you were right no matter what the outcome will be.

If you want, you can also easily read bin Laden (i.e. "dark & smelly lion"), the United States ("old, veteran virgin"), and 9/11 ("strike," "win to lose, or lose to win") into the quatrain and couplet and call me a prophet if 9/11 happened not in 2001, but will happen in 2009, even though I'm really talking about contemporary political events, because Nostradamus is hailed as one for writing far more ambiguous quatrains "about 9/11" half a millennium ago (even if he, too, was writing about his own contemporary political events).

It would really help your credibility, though, if you had an English accent and smoked a pipe.

P-U!

There was this:

Q: Speaking of your girls, what do you think they think of Mommy? How do they think of you?

Mrs. Obama: ...you know we have this ritual in the morning....they can come in my bed and if Dad isn’t there--because he is too snore-y and stinky, they don’t want ever to get in the bed with him...

And now this:

(From CBS News' Dean reynolds)

(NASHVILLE, TENN.) - After most of the previous 12 months covering Barack Obama's campaign for the presidency, it was interesting, instructive and, well, relaxing to follow John McCain for the last few days. The differences between the two are striking.

...The McCain campaign plane is better than Obama's, which is cramped, uncomfortable and smells terrible most of the time. Somehow the McCain folks manage to keep their charter clean, even where the press is seated...

Comic Relief

But Obama actually reminds me of this guy:

Not Doomsday For Capitalism

The Bush-hating Left has been slamming the "Bush Economy" since the last recession, the recovery, a record-setting expansion, and now the crunch with equal calumny throughout.

Now they have a real (and very conveniently timed) downswing that they can celebrate.

But it was never as bad as slandered when it was doing well.

Despite the subprime larva which broke out of its cocoon and is now wreaking havoc like Mothra, the problems we have now have nothing to do with the tax-cuts, deficits, or the general de-regulation that they railed about for the last eight years (when specific regulation was attempted for Fannie Mae, as needed, and as called for by Bush, McCain, & other Republicans, Democrats sabotaged the effort).

Those things, like the sub-prime lending, drove the expansion, but unlike the sub-prime lending, they did not cause the catastrophe.

Nevertheless, they finally have a real "economic debacle" they needed that would "validate" their serial complaints for the fiormer and roll out the red carpet for "change."

But, as before, are things here really THAT bad as to warrant Marx's I-Told-You-So obituary for Capitalism and a Cinderella shoe for socialism?

Knowing that there were ideological forces behind the sub-prime lending catastrophe that may have intentionally pushed the System to the brink (see the Cloward-Pivens strategy designed to ultimately discredit capitalism--with thanks to fj for the tutorial links), those forces and their sniveling tools here are spreading rumors of Capitalism's demise prematurely, methinks:

We're Not Headed for a Depression

No, this isn't the crisis that kills global capitalism.

By GARY S. BECKER

In order to promote a much smoother functioning of the financial system, it is paramount to distinguish between the immediate steps needed to cope with the present crisis and the long-run reforms needed to reduce the likelihood of future crises. Let's start with the short-run fixes.

David GothardFirst of all, the magnitude of this financial disturbance should be placed in perspective. Although it is the most severe financial crisis since the Great Depression of the 1930s, it is a far smaller crisis, especially in terms of the effects on output and employment. The United States had about 25% unemployment during most of the decade from 1931 until 1941, and sharp falls in GDP. Other countries experienced economic difficulties of a similar magnitude. So far, American GDP has not yet fallen, and unemployment has reached only a little over 6%. Both figures are likely to get quite a bit worse, but they will nowhere approach those of the 1930s.

The Treasury's announced insurance of all money-market funds, and the full insurance of bank deposits, carry considerable moral hazard risks, but they have not aroused much controversy. The main thrust of the new banking law allows the Treasury secretary to purchase bank assets up to $700 billion in order to increase the liquidity of the banking system. These assets are of uncertain worth since there is essentially no market for many of them, and hence they have no market price. The government hopes to create this market partly through using auctions, where banks would offer their assets at particular prices, and the government would decide whether to buy them. I would have preferred starting with a smaller dollar value of purchases, and up the amount if the situation deteriorates further.

Partly because many consumers are repelled by the intention to bail out companies and their executives who made decisions that got the companies into trouble, the new law includes income and severance pay limits for executives whose firms seek government help. Even though one cannot think much of executives who led their banks into such a mess, that is a bad precedent since it involves too much micromanagement of bank operations. Moreover, such salary controls can be evaded by very generous fringe benefits.

The moral-hazard consequences for banks receiving a bailout now is worrisome since they may expect to get rescued again by the government if their future investments turn sour. Yet while I find helping these banks highly distasteful, moral-hazard concerns should be temporarily relaxed when the whole short-term credit system is close to collapse. Still, the bank bill with its huge bailout does suggest that the $29 billion bailout of the bondholders of Bear Stearns in March was a mistake. It seemed to have a moral-hazard effect by encouraging Lehman Brothers and other investment banks to delay in raising more capital because they too might have expected the government to come to their rescue if times got much worse. Although the government was apparently concerned that foreign central banks were major holders of the bonds, it was unwise to give them and other bondholders such full protection.

One troubling provision is that the government can take an equity stake in banks it helps. Some economists have proposed a similar role for government equity in these banks. I believe it is unwise to give governments equity in private companies, even if the government does not have voting rights in company policies. Many examples in recent history, such as the current Alitalia fiasco, show that political interests outweigh economic ones when governments have some ownership of private companies. This is likely to happen in this bailout if some banks that are helped decide to sharply cut employment in the districts of some congressmen, or to transfer many jobs overseas.

Taxpayers may be stuck with hundreds of billions of dollars of losses from the various government insurance provisions and government purchases of assets. Although the media has made much of this possibility through headlines like "$700 Billion Bailout," such large losses are highly unlikely except in the low probability event that the economy falls into a sustained major depression. Indeed, with efficient auctions, the government may well make money on its actions, just as the Resolution Trust Corporation that took over many savings-and-loan banks during the 1980s crisis did not lose much, if any, money. By buying assets when they are depressed and waiting out the crisis, the government may have a profit on these assets when they are finally sold back to the private sector. Making money does not mean the government involvement is wise, but the likely losses to taxpayers are being greatly exaggerated.

The temporary banning of short sales is an example of a perennial approach to difficulties in financial markets and elsewhere; namely, "shoot the messenger." Short sales did not cause the crisis, but reflect beliefs about how long the slide will continue. Trying to prevent these beliefs from being expressed suppresses useful information, and also creates serious problems for many hedge funds that use short sales to hedge other risks. Their ban can also cause greater panic in other markets.

The main problem with the modern financial system based on widespread use of derivatives and securitization is that while financial specialists understand how individual assets function, even they have limited understanding of the aggregate risks created by the system. That is, insufficient appreciation of how the whole incredibly complex financial system operates when exposed to various types of stress. In light of such limitations, it is difficult to propose long-term reforms. Still, a few reforms seem reasonably likely to reduce the probability of future financial crises.

- Increase capital requirements. The capital requirements of banks relative to assets should be increased after the crisis is over in order to prevent the highly leveraged ratios of assets to capital in financial institutions during the past several years. Possibly a minimum ratio of capital to assets should be imposed by the Fed on investment banks and money funds. As much as possible, the measure of capital should not be its book value but its market value, such as the market value of publicly traded shares of banks. Book value measures, for example, apparently badly missed the plight of Japanese banks during their decade-long banking crisis of the 1990s.

- Sell Freddie and Fannie. The government should as quickly as possible sell Freddie Mac and Fannie Mae to fully private companies that receive no government insurance or other help. These two giants did not cause the housing mess, but in recent years they surely greatly contributed to it, partly through congressional pressure on them to increase their purchases of subprime loans. They have owned or guaranteed almost half of the $12 trillion in outstanding mortgages while having a small capital base. The housing market already has excessive amounts of government subsidies, such as from the tax exemption of interest on mortgages, and should not have government sponsored enterprises that insure mortgage-backed securities.

- No more bailouts. The "too big to fail" approach to banks and other companies should be abandoned as new long-term financial policies are developed. Such an approach is inconsistent with a free-market economy. It also has caused dubious company bailouts in the past, such as the large government loan years ago to Chrysler, a company that remained weak and should have been allowed to go into bankruptcy. All the American auto companies have asked for and received handouts too since they cannot compete against Japanese, Korean and German car makers, partly because these American companies have been incredibly badly managed. A "too many institutions in trouble to fail principle," as in the present financial crisis, may still be necessary on rare occasions, but failure of badly run large financial and other companies is healthy and indeed necessary for the survival of a robust free-enterprise competitive system.

Is this a final "Crisis of Global Capitalism" -- to borrow the title of a book by George Soros written shortly after the Asian financial crisis of 1997-98? The crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesized the collapse of capitalism in the middle of the 19th century. Although I admit to having greatly underestimated the severity of the current crisis, I am confident that sizable world economic growth will resume before very long under a mainly capitalist world economy.

Consider, for example, that in the decade after various predictions of the collapse of global capitalism following the Asian crisis, both world GDP and world trade experienced unprecedented growth thanks to the power of market competition on a global scale. The South Korean economy, for example, was pummeled during that crisis, but has had significant economic growth since. World economic growth will recover once we are over the present severe financial difficulties.

Mr. Becker, the 1992 Nobel economics laureate, is professor of economics at the University of Chicago and senior fellow at the Hoover Institution. Portions of this article first appeared on his Web site.

Subtleties

Tellingly, in tonight's debate, That One's (i.e. Obama's) attitude towards those eligible for healthcare is the same attitude Fannie Mae (and Obama's outfit ACORN) had for those eligible for home loans: Pre-existing conditions should be ignored.

It's a philosophy that tells you exactly where That One's coming from.

It manifested itself again with his "right" to healthcare (vs. McCain's "responsibility").

For his part, after McCain scolded That One for saying he would just go in and bomb Pakistan, and That One shot back by reminding everyone that McCain said (joked), "Bomb-bomb-Iran" and "nuke N. Korea" (or something), McCain failed to ask: "Is That One really comparing Iran and North Korea to Pakistan, a democracy and our ally in the war on terror?" (internal problems with jihadist hordes notwithstanding)

Because he was.

M-Hm.

It turns out that one of Barney Frank's fanny-frends was a chief executive at Fannie Mae.

Getting Out The Vote (Democrat-Style)

Obama sure knows how to get the vote out:

"CLEVELAND - Volunteers supporting Barack Obama picked up hundreds of people at homeless shelters, soup kitchens and drug-rehab centers and drove them to a polling place yesterday on the last day that Ohioans could register and vote on the same day, almost no questions asked.

The huge effort by a pro-Obama group, Vote Today Ohio, takes advantage of a quirk in the state's elections laws that allows people to register and cast ballots at the same time without having to prove residency."

Right. "The People."

That was the other day. And now this:

"Nevada state authorities seized records and computers Tuesday from the Las Vegas office of an organization that tries to get low-income people registered to vote, after fielding complaints of voter fraud.

Bob Walsh, spokesman for the Nevada secretary of state's office, told FOXNews.com the raid was prompted by ongoing complaints about "erroneous" registration information being submitted by the Association of Community Organizations for Reform Now, also called ACORN."

M-hm. ACORN.

It's About Time.

"Whatever the question, whatever the issues, there's always a back story with Senator Obama...Our current economic crisis is a good case in point. The crisis started in our housing market in the form of subprime loans that were pushed on people who could not afford them.

"Bad mortgages were being backed by Fannie Mae and Freddie Mac, and it was only a matter of time before a contagion of unsustainable debt began to spread," McCain said during an event in Albuquerque, NM.

"This corruption was encouraged by Democrats in Congress, and abetted by Senator Obama."

McCain said he raised the alarm and called for tighter borrowing rules on Fannie Mae and Freddie Mac two years ago, which could have helped stem the crisis.

By comparison, he said, Obama was "silent" while congressional Democrats fought efforts to rein in the mortgage giants.

"As recently as September of last year, [Obama] said that subprime loans had been, quote, 'a good idea.' Well, Senator Obama, that 'good idea' has now plunged this country into the worst financial crisis since the Great Depression," McCain said.

Carl Campanile, AP


Good. Keep it up. Harder.