What I want from Wall Street

(What follows is a rant, written mostly for my own satisfaction. I sincerely doubt that anyone in Washington has the independence, spine, or innate sense of justice to bring this to pass.)

It looks as if the bailout is going through as planned. Our sold-out hacks in Washington have given the bankers and their quasi-governmental servants (Paulson and Bernanke) everything they wanted, albeit with enough fancy packaging to satisfy what remains of their consciences. Because of this unnecessary flood of borrowed money, you and I and every other human being in this country will each be saddled with $2,300 more debt.

Part of the lubricant on this bill is a vague statement about restricting excessive executive salaries. What “excessive” means wasn’t defined, but you can be sure it will be a number far north of anything we mere mortals earn.

I’m not satisfied. I want more. How much more? Alright, Mr. Bank Director, CEO, CFO, COO, Bond Rater, Mortgage Bundling Bungler, I’ll tell you in three words.

All of it.

I want your condo in Manhattan, your house in the Hamptons, your ski place in Vail, your cottage in Maine, and any other real estate you possess.

I want the Beemer, the Lexus, the Porsche, the motorcycle, the boat, and the plane.

I want all your bank accounts, your stocks, your bonds, and your gold, even the stuff stashed in Switzerland.

In short, I want everything you have with a shred of resale value.

Not for me personally, of course. Unlike you, I’m not greedy. I want it to be auctioned off and put in a fund to help offset the barely imaginable sum of money we are throwing at your abysmally managed businesses.

We’ll leave you your personal belongings and loan you a FEMA trailer. You can Ebay some stuff and put down the security deposit on a walkup in Queens.

Before you start whining about unfairness, think about the burden your greed, recklessness, and stupidity will put on the ordinary people of America. These are folks who work just as hard as you do or more, but for some tiny fraction of your salary. They are having trouble with the couple thousand on their credit card right now, but thanks to your idiocy their tax dollars will be going down your gold-plated rathole instead of fixing their roads or hiring a teacher.

Oh yes, and I want your job. Any company that wants a bailout must fire all their directors and their top-level managers. There are plenty of smart people who work for you. They just lacked the killer instinct necessary for that last stage of corporate climbing. We like that. They’ll be easier to control.

I’m not talking about torches and pitchforks here. I believe in due process of law. The U.S. government should appoint a special prosecutor and sue you in Federal Court for everything you have. I can sense you smiling as you think of your dream team of lawyers. Forget it. We’re going to bring back Eliot Spitzer.

Remember him? The Sheriff of Wall Street? He made his name smacking you around. He suspects that you tipped off the cops to his hooker habit. He hates your guts. We’re going to say, “Eliot, if you can nail these guys, and nail them in a manner that would make a Roman soldier wince, all is forgiven. You’ll be a hero, and we’ll let you back into polite society.” We’ll hire Patrick Fitzgerald to help him. We’ll give him all the money and staff he needs. So you think Eliot got screwed by a professional for top dollar? Oh, just wait…

One more thing. The median American household earns $49,000 a year. Even if your former employees decide to trust you with money again, anything you earn over median wage will be garnished until the whole $700 billion is repaid. If that means that you live and die in the middle class, so be it.

Maybe we could raise a few billion this way. Not much in the scheme of things, I suppose, but the sobering effect on the people who take over your jobs would be priceless. “Regulate us!” they will cry, “Put us on a short leash!” Every time one of you former titans pours them a latte or parks their car, they will be viscerally reminded of the price of failure.

(Update, 9/29/08, 6PM EST: The bailout was defeated in the House, 228-205. Wall Street tanked. My own retirement account is probably taking a beating, but I don't care. I doubt that the replacement bill will be much better, but keep up the pressure on your elected representatives.)

(Update, 10/04/09: The bailout went to the Senate, was trimmed with pork, and passed. It returned to the House and passed.)

Plugging holes in the dam

So the U.S. government is bailing out the big boys. The geniuses at the wheel are taking over the world’s biggest insurer, AIG. The hundreds of billions of dollars necessary for this will be provided by you and me and every other schmuck in America who pays taxes. Another step down the debt hole, following the path set by the bailouts of Fanny Mae and Freddy Mac (the quasi-non-governmental corporations that buy up mortgages so ordinary folks can own homes) and the reckless brokerage firm Bear Stearns.

I used to work in the hydroelectric industry, and while there I learned something about dams and leaks. One of the basic principles of fixing leaks is that you put material on the side where the water is going into the dam, not the side where it is coming out. Otherwise the water flow just blows your patching material back out of the hole.

Unfortunately, our government is doing exactly this. Your tax dollars and mine (actually, the money is being borrowed all over the world) are being used to buy up worthless pieces of paper representing bundles of mortgages. These mortgages were mostly sold in a devious manner to people who couldn’t afford them for homes priced at twice what the market can sustainably bear. Now many of these mortgages are in default, but the good mortgages cannot be separated from the bad, so the whole deal is poisoned. No matter how much money our government pours into the accounts of the big banks and investment firms that bought this crap, the paper will still be suitable only for wrapping fish and stuffing effigies of Lehman Brothers executives.

As I pointed out earlier, the government would serve us all better by approaching the other end of the equation. The long-term solution is improving the financial situation of ordinary people so that they can afford to pay their mortgages. That, in turn, would slow or stop the slide in housing prices, which would reduce the number of people with mortgages that exceed the market price of their house.

The other solution on the upside of the dam is realizing that there is about 45% froth on the top of home prices right now. The past ten years has seen a classic price bubble, triggered by the aforementioned sleazy mortgages. Adjusted for inflation, home prices were flat from 1947 to 1997, and then nearly doubled in just a few years.

The government needs to enforce a great renegotiation. It wouldn’t be all that complex to do some studies of historical housing prices by metropolitan area and calculate roughly what the price of homes should be minus the wing-ding inflation of 1997-2007. Make the banks knock down the mortgages from the 2000-2007 era to something near reality. It would be bitter, but a 40% markdown would be better than the 99% markdown they are suffering now. Convert all these loans to plain vanilla fixed rate mortgages and outlaw everything else. More ordinary people could then stay in their homes and get on with their lives, buoying our shaky economy.

I don’t want to hear anything about coddling “people who made bad decisions.” By all means, perp walk the mortgage brokers who passed the buck, the financial analysts who gave the thumbs up, the bond raters who held their noses and lied, and the C-level managers of the firms that cheerfully bought all the soiled paper. They all should have known better. I forgive most of the over-optimistic home buyers. Sure, some were speculators, ready to flip their overpriced plasti-board McMansions to the next bigger fools. However, a lot were just people sick of pouring money down the rent rathole and trying to achieve their dream of homeownership. This majority of Americans, who can’t balance their own checkbooks, much less calculate compound interest, are dependent upon the judgement of professionals as to what kind of loan makes sense for them. There is no way to sort them out, but it’s better to save a few speculators than to let the whole lot of them collapse into bankruptcy.

Take care of the ordinary citizen and the Dow Jones will take care of itself.

The Vermont Governor’s Race: Parsing the Poll

I just received an email from the Vermont Democratic Party touting the recent WCAX poll results for the Governor’s race. It struck me as absurd. The reported numbers were Republican Jim Douglas at 48%, Democrat Gaye Symington at 33%, Independent (nee’ Progressive) Anthony Pollina at 7%, and 12% undecided. Apparently the Democratic Party is thrilled that their candidate is 15% behind the incumbent with only 50 days left in the campaign.

Assuming that Pollina will not miraculously acquire 40 percentage points in the next month and a half, what does this mean for Symington?

The answer comes in looking slightly deeper into the poll numbers.

48% of those polled have a favorable opinion of Douglas and 43% have an unfavorable opinion. The WCAX piece doesn’t mention it, but we can assume that 9% hold no strong opinion about him.

Symington’s numbers are 37% favorable, 15% unfavorable, and 48% no opinion. Pollina’s numbers are 41% favorable, 33% unfavorable, and 26% no opinion.

Everybody who likes Douglas plans to vote for him. 89% of the people who like Symington plan to vote for her. 17% of the people who like Pollina plan to vote for him.

Half of Vermonters don’t really know much about Symington, a quarter don’t know much about Pollina, and 9% aren’t paying any attention to politics at all. (No opinion about our 6-year incumbent governor?)

That match between favorable opinion and votes for Douglas gives me the impression that his support is reasonably solid and would require major effort to disrupt. The burning question is where Symington will get another 16% of the voting population. All the undecided plus a chunk of Pollina’s support would do it, but given his favorable/vote ratio I get the feeling that Pollina’s 7% is made up of diehards.

Symington is lucky in that she has a low 15% unfavorable rating, but she will need to craft a high-speed introduction to half the voters. If she wants to carve out a piece of the incumbent’s 48% she’ll have to come up with some emotionally charged issue that damns him to the ninth ring. Douglas’s continuous platitude-based campaigning and “fall on the ball” political strategy has managed to keep 57% of the voters unoffended at the very least. It will be like punching a big lump of marshmallow Fluff.

I called this one back in May as mutually assured destruction for Symington and Pollina. Later I proposed that they agree to a form of virtual Instant Runoff Voting in order to consolidate the non-Douglas vote around one candidate. Sadly, I seem to be a minor-league Cassandra, having the gift of foresight (when watching two freight trains barreling towards each other) and the curse of not being listened to. Why the Democrats and Progressives don’t come to some agreement still mystifies me. The conservatives are willing to compromise within their own circle and win. Is it that the Democrats would rather lose than let the Progressives in the door? Would the Progressives rather forgo statewide influence than compromise their independence? Whatever the reason for mutual intransigence, the Democrats should forget about the Governor’s office till Douglas retires and concentrate on building a veto-proof majority in the legislature.

Guess who?

“She's a nutcase!”

Given the generally political nature of this blog, and my general take on politics, you probably already know who she is.

As I walked into the farmer's market this morning I heard this phrase from a cheerful, laughing woman at the “Obama for President” table. I knew exactly who she was referring to.

“She” is Sarah Palin, Governor of Alaska, Republican vice-presidential candidate, picked out of right field by John McCain, apparently on impulse. According to some insiders, he picked her in a spiteful reaction to pressure from Karl Rove to choose Mitt Romney.

It makes a statement about this choice that I instantly knew exactly who the woman at the farmer's market was talking about, and that most of the people reading this essay had a good idea as well, even without any contextual clues.

And yes, without resorting to the above mentioned pejorative, I can say that a number of her views are outside the mainstream. For example, Palin opposes abortion even in cases of rape or incest, a view that only garners support in the 15% range. She has some standard hard right views on global warming (it isn't) and endangered wildlife (they aren't). So far, a commonplace Christian paleo-conservative. She also has a disorderly pile of skeletons tumbling out of her political closet, including a politically motivated firing (troopergate), some expense account hijinks, and a hand in glove relationship with the oil industry. Again, no big surprise. Picking a politician from Alaska is the cold weather equivalent of picking one from New Orleans – there is no escaping at least a whiff of corruption.

The thing that makes me sit up and take notice, the thing that makes me shudder at the thought, the thing that makes me look for the Obama donation webpage, however, is her membership in a church that espouses Dominion Christianity.

As with any movement, Dominionism is not monolithic. It ranges from people who believe that Christians should take an active and aggressive role in politics to Christian Reconstructionists, who believe in Constitution-shredding theocracy. This extreme faction of the evangelical right is the Christian analog to Wahhabi or Taliban Islam. In Islam there is such a thing as Sharia law, that is, law based on the Koran. The Christian Reconstructionists want the United States to operate like a Christian version of Iran, Saudi Arabia, or the tribal areas of Waziristan, with Old Testament biblical teachings superseding the Constitution. Chip Berlet splits the hairs nicely on this subject over at the Huffington Post.

Where does Sarah Palin stand on this continuum? There are indicators but no clear answers. Her church for the past quarter century, the Wasilla Assembly of God, has connections with the so-called Third Wave movement, a cross-denominational movement obsessed with global “spiritual warfare” and end times theology. The general thrust of the movement is to take over governments and societies around the world in order to prompt the second coming of Christ. Palin participated in a public religious ceremony conducted by Wasilla Assembly of God pastor Ed Kalnins in June, so her connection is still vital. Palin is apparently a believer in the end times theology of her church, and believes that the invasion of Iraq is a mission from God.

Actually, wherever she is on the Dominionism spectrum, the implications are similar. The far end of the Dominionism spectrum trashes the Constitution and takes us directly back to the Dark Ages. The near end puts ultra-conservative Christians in public office and uses the skeleton of the Constitution, as interpreted by ultra-conservative Christians, to take us by a slightly more circuitous route back to the Dark Ages. No matter which interpretation Palin favors, it would make her oath of office problematic. For her, swearing to uphold the Constitution would be at worst a direct lie and at best, self deception.

A major question of this presidential race is whether the mass of voters will come to recognize her religious and social extremism, or swallow the image of the ordinary working mom promoted by her campaign. The Obama campaign needs to start making pointed statements about her extremism now, and insistently till November.

It's not that there are too many fools in the world...

...It's just that lightning is improperly distributed. (Mark Twain)

Apparently my computer was a fool, because a powerful lightning strike fried its motherboard like Cajun blackened catfish a few weeks ago. Hence the recent silence from the Minor Heretic. It is back now, with a new motherboard, under warranty.

I'll be back in the figurative saddle in another week or so. I am presently deeply engaged in my profession, installing solar equipment at a frantic rate. This is nothing special. Everyone I know in the solar industry is flat out busy. The exponential expansion of renewable energy is a bright spot in an otherwise bleak world.

It's August: Turn off the computer. Go outside. Have an ice cream cone. Walk it off.

More later.