The Canadians, The Birds

I’d like to take a short break from political heaviness and offer a couple of happy things.

Thing One:

I was just up in Halifax, Nova Scotia on business. At one point I was in a car with two colleagues, trying to find our hotel. We had to go through a tollbooth at a bridge and the guy at the wheel asked the tollbooth attendant about the street and hotel in question. I expected to hear a terse, five-word response. Instead, after making change for us, the attendant leaned on the edge of his window and delivered a 45-second detailed set of directions, complete with block-by-block landmarks. Gratifying enough, but as a line of cars piled up behind us….

Nobody honked.

There was not even the slightest “bip” of reminder. The Nova Scotians waited politely while one of their own put the visitors on the right course. Our driver had lived near Halifax for a year and when I remarked on the incident he noted that one could get sick of that much politeness. After some time there he wanted to tell someone off, just because. I think I could stand it for a while.

Thing Two:

Have you ever been three feet from a full-grown bald eagle? How about a snowy owl? Ever seen a red-tailed hawk up close?

You can at the Vermont Institute of Natural Sciences in Quechee, Vermont. VINS is an educational center dedicated to raptors – those predatory birds with hooked beaks and sharp claws that make life difficult for small furry animals. They also have a rehabilitation center that handles about 400 injured birds a year. Most of their avian menagerie is made up of former patients.

The VINS campus is laid out across open fields just off Route 4, about 4 miles west of Exit 1 on I-89. The birds themselves are housed in a semicircle of mesh-roofed structures that allow them to fly around and perch. There are trails through the nearby woods and educational exhibits.

Three times a day the staff brings out a selection of birds for an educational presentation, closer inspection, and some open air flying. When I was there last month they brought out a red-tailed hawk, a kestrel, a Cooper’s hawk, and a barred owl. The setting is beautiful, the birds are magnificent, and I actually learned a few things. They are open 7 days a week till October 31st. Go.

Wooden Arrows

In the heyday of ancient Rome, cooks would prepare outrageous dishes for the extravagant feasts of the wealthy. One example of this excess was stuffing a duck inside a goose, and then that goose inside a sheep, and then the sheep inside a calf, and so on. The tradition lives on in the waning days of the American Empire. Our elected representatives just served us a turkey stuffed inside a pig.

That the $700 billion bailout bill failed in the House the first time out came as a shock to the power brokers of Washington. The voices of the many drowned out the voices of the moneyed few, and for a moment the corporate grip on our government slipped. That grip retightened, though, and the bailout was rewritten in the Senate.

That rewrite was the most cynical I can remember. Oh, I’ve seen straight-ahead bad bills. There were Constitution shredders such as the Patriot Act and the Military Commissions Act. There were oath-breaking abrogations of legislative responsibility such as the bill authorizing the Bush administration to invade Iraq. There have been the usual anti-environmental bills with upside down bizarro-world names like the Clean Skies Initiative and the Healthy Forests Act.

This one was pure unabashed bribery. The most notorious earmark, for its sheer particularity, was the $2 million reduction in excise taxes on “wooden arrows intended for use by children,” benefiting a factory in Oregon. There was a $192 million tax break for makers of rum in Puerto Rico and the U.S. Virgin Islands. Racetrack owners can now depreciate their facilities over 7 years, saving them $100 million in taxes. The long suffering Hollywood film industry got an extension of a tax break for filming in the U.S. (as if they wouldn’t) worth $478 million over 10 years. And so on.

Even I got some pork, by accident. They put the extension of the 30% tax credits for solar energy installations in the bailout bill as a hostage. The part they didn’t put in was the $2,000 cap on that tax credit. Buy $100,000 worth of solar, get a $30,000 tax credit. My business should boom, but I am not overjoyed. All of this generosity will be financed on credit, paid back by ordinary American taxpayers.

The effectiveness of this earmark bribery is being debated, as compared to the drop in the markets, for example, but it was bribery nonetheless. I would have more respect for the Senate if they had done it this way:

Senate Leader: I know this bill is a giveaway to the Wall Street tycoons and stinks to high heaven, but it comes with a bribe. Here is a suitcase filled with twenties. It is yours in exchange for your vote.

Senator Weasel: Thank you for the bribe. You have bought my vote. I have no self-respect now, but this money will allow me to buy pills so I can sleep at night.

Mark you, I wouldn’t have much respect for them, but the grudging respect due a thief who doesn’t rationalize his crimes.

Here’s a thought: Apply a little library science to legislation. Bills have to go through one or more relevant committees and/or subcommittees before being considered by the House or Senate as a whole. What if there was a law that bills could only have amendments relevant to the categories of committees they pass through? A banking bill can only have banking amendments related to the purpose of the bill, not tax amendments or agricultural amendments Of course, earmarks are the way that legislators bribe their way into the favor of politically significant groups in their home districts, so this would meet with resistance. The solution would be to, in effect, legalize and regulate earmarks. Set aside some percentage of the federal budget specifically for those geographically and economically specific giveaways. Senators and Representatives can fight over this fixed amount out in the open.

But that is just detail. Ultimately, we need to change the way we choose our representatives, cutting the big money out of our campaign system and replacing it with carefully monitored public financing. Until then, the pork will adorn the turkey, Wall Street will feast, and we will pay the bill.

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.