Wednesday, January 25, 2012
The President of Ameritopia Speaks
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via The American Spectator and The Spectacle Blog by Jeffrey Lord on 1/25/12
"We learned that mortgages had been sold to people who couldn't afford or understand them."
-- President Obama in last night's State of the Union Address
Stop right here.
Forget the rest of the speech. Focus just on this single sentence and understand what is really afoot here.
Back in February of 2009, my former Reagan colleague Peter Wallison, now at the American Enterprise Institute, took the time to make a typically Wallisonian in-depth look at the financial crisis and it's causes. He published his findings right here in The American Spectator
What we learned was that in 1993 -- the beginning of the Clinton era -- there was what Wallison termed a "major effort" by Clinton's bank regulators to "reform" banking rules.
Banking rules? What banking rules?
Banking rules put in place by Jimmy Carter in the 1977 Community Reinvestment Act. These Carter banking rules, which replaced earlier banking rules that had replaced earlier banking rules that had replaced still earlier banking rules, were constructed by the government after much study beginning in 1993. Constructed in such a fashion as to do precisely what President Obama described last night.
Wrote Wallison here in The American Spectator back in February 2009:
In 1995, the regulators created new rules that sought to establish objective criteria for determining whether a bank was meeting CRA standards. Examiners no longer had the discretion they once had. For banks, simply proving that they were looking for qualified buyers wasn't enough. Banks now had to show that they had actually made a requisite number of loans to low- and moderate-income (LMI) borrowers. The new regulations also required the use of "innovative or flexible" lending practices to address credit needs of LMI borrowers and neighborhoods. Thus, a law that was originally intended to encourage banks to use safe and sound practices in lending now required them to be "innovative" and "flexible." In other words, it called for the relaxation of lending standards, and it was the bank regulators who were expected to enforce these relaxed standards.
Stop right here.
There is a reason our friend Mark Levin's book Ameritopia is meeting with such bestselling success in this 2012 campaign season. We discussed it here and have every intention of using it as a guide to current events throughout the year.
Last night's Obama State of the Union is exhibit A of Ameritopia at work.
After outlining in detail the eternal and historical left-wing quest for utopia as "the ideological and doctrinal foundation for statism," Levin underlines that:
[U]topianism has long promoted the idea of a paradisiacal existence and advanced concepts of pseudo 'ideal' societies in which a heroic despot, a benevolent sovereign, or an enlightened oligarchy claims the ability and authority to provide for all the needs and fulfill all the wants of the individual -- in exchange for his abject servitude.
With this as the ideological/doctrinal utopian foundation of the left, Levin writes at length about the reality of this in modern America. The "massive administrative state…an army of bureaucrats…highly compensated…." Etc. And the task at hand for this American utopian army? "It monitors daily life and attempts to mechanically extinguish risk, dissimilarity, and choice, as well as that which has become routine and acceptable, in pursuit of societal perfection."
What has Mark Levin just described there?
That's right. He has nailed exactly the driving force behind that one single sentence from the Obama State of the Union speech.
In the quest to create a utopian society of homeowners -- home owning as a stand-alone a fine thing -- the Ameritopians of the Carter era changed the banking rules in 1977. Banking rules that were in fact utopian rules from earlier times in American history. Come 1993 and the dawn of the Clinton era, and -- shocker -- there was no utopian society of homeowners as a result of Carter's utopian banking rules. So, but of course, in another yet another quest for utopia, the Clinton utopians changed the Carter utopian banking rules. Launching Levin's "army of bureaucrats" in the "massive administrative state" that was the Department of Housing and Urban Development, Fannie Mae and Freddie Mac the Clintonites set out anew on the latest utopian quest.
They failed. The financial crisis exploded in 2008 as a result. And so… what?
So now President Obama stands in front of the Congress last night sorrowfully announcing (without mentioning any names, of course) that the promised land of utopia in housing has not been found. He says, without a hint of irony: "We learned that mortgages had been sold to people who couldn't afford or understand them."
Well, duh. Another attempt at utopia hasn't worked as promised. And what does Obama propose to do?
Tonight, I want to speak about how we move forward, and lay out a blueprint for an economy that's built to last…
Meaning? Meaning…now we are supposed to all build Obama's idea of utopia!
That's what last night was about, in short. The latest of an endless line of utopian prophecies from yet another leftist insisting he's the guy who can at long last create the perfect utopian society -- and oh by the way, who cares that this has zero to do with the Constitution of the United States or the Declaration of Independence?
This is the real problem in 2012 -- and in reality, always.
Somebody somewhere is always trying to sell a utopian bill of goods -- a bill of goods guaranteed for failure precisely because there is no such thing as utopia.
That wasn't the President of the United States on your television screens last night.
That was the President of Ameritopia.
Whatever unfolds this primary season -- Newt, Romney, Santorum, other -- all understand somewhere in their bones that they are running for President of the United States of… America.
Not… Ameritopia.
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Fact Checking Obama (A Full-Time Job)
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via The American Spectator and The Spectacle Blog by W. James Antle, III on 1/25/12
The Associated Press has a nice rundown of the lies, exaggerations, distortions, and outright nonsense otherwise known as the State of the Union address.
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Tuesday, January 24, 2012
Monday, January 23, 2012
The Food Stamp President
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via Power Line by John Hinderaker on 1/17/12
(John Hinderaker) Newt Gingrich has labeled President Obama the food stamp president. In last night's South Carolina debate, Juan Williams, in an already-famous exchange, tried to push back on that characterization, unsuccessfully. "The fact is more people have been put on food stamps by Barack Obama than any president in American history," Gingrich told Williams. The White House apparently doesn't like the association between Obama and food stamps; Jay Carney said that the claim that President Obama's policies have added to the food stamp rolls is "crazy."
As happens so often with White House statements, Carney's characterization had no basis in fact. We wrote about the metastasizing food stamp program in Food Stamp Nation:
Food stamp use has exploded during the Obama administration, reaching an all-time high of 45.8 million in August. This chart, prepared by Republicans on the Senate Budget Committee, depicts the extraordinary growth in the program that began when Barack Obama took office in 2009:
That is right: federal spending on food stamps has doubled since George W. Bush left office. In large part, this is due to fraud–another emblem of the Obama administration. As Jeff Sessions said:
The agriculture bill we are considering this week…would result in a quadrupling of food stamp funds from their 2001 levels. At a proposed $80 billion a year, food stamps are becoming one of the largest items in our budget….
There is little if any oversight of the program, resulting in the extraordinary waste and abuse of taxpayer dollars. … In some cases, the only thing you need to become food-stamp eligible is have a brochure from the federal government be sent to you in the mail. …
This program is not being run honestly, effectively, or fairly. It is deeply disappointing and extremely telling that the Democrat-led Senate voted down even this modest effort to address the almost shameless mishandling of taxpayer funds. We're in a fiscal crisis that is already killing jobs, and these bills just increase spending—and destroy confidence—that much more.
Obama, of course, has done nothing to crack down on fraud or try to get a grip on food stamp spending. So, more recently, Sessions has again written to the Obama administration to ask for its cooperation in getting food stamp spending under control. You can read his letter here. An excerpt:
I am writing about widespread reports of fraud and abuse in the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. At $89 billion, the annual food stamp budget is the largest of nearly eighty federal welfare programs that cost taxpayers around $900 billion a year. Following growing concern over lax oversight, the USDA recently issued a press release announcing "new tactics to combat fraud and enhance SNAP program integrity."
While the weak economy has increased the number of people on food stamps, spending on the program has dramatically outpaced the rise in unemployment. … [A]ccording to research by University of Chicago economist Casey Mulligan, most of the increased spending on welfare programs (including food stamps) since 2007 is the result of expansions of eligibility, rather than increases in the number of people who would have been eligible under pre-recession rules. …
Records released last month show a couple in Washington State living in a $1.2 million home but still receiving benefits; a Michigan lottery winner was allowed to continue receiving benefits after receiving a $2 million payout (that state also discovered 30,000 ineligible college students its food stamp rolls, later taking action to remove them); and the Milwaukee Journal-Sentinel reported that Wisconsin food stamp recipients routinely sell their benefit cards on Facebook.
As the Ranking Member of the Senate Budget Committee, I have a responsibility on behalf of taxpayers to hold federal agencies accountable for how public funds are being spent. I would therefore ask that the Committee be immediately provided with a thorough explanation of all oversight actions your Department is taking, as well as a list of recommended federal reforms that would reduce waste, inefficiency, and abuse in the food stamp program.
To my knowledge, the Obama administration has not yet responded to this request for accountability, but I will publicize any response the Department of Agriculture makes. In the meantime, was Gingrich correct in dubbing Barack Obama the food stamp president? Actually, Gingrich was being charitable: he could have called Obama the food stamp fraud president.
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An ignored “disparity”
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via Power Line by Scott Johnson on 1/18/12
(Scott Johnson) Yesterday Thomas Sowell released a four-part series of columns drawing on his vast research on ethnic and cultural differences. Here are links to each of the four columns and a salient quote from each:
Gross inequalities in skills and achievements have been the rule, not the exception, on every inhabited continent and for centuries on end. Yet our laws and government policies act as if any significant statistical difference between racial or ethnic groups in employment or income can only be a result of their being treated differently by others.
An ignored "disparity," part 2:
Statistics are often thrown around in the media, showing that people with college degrees earn higher average salaries than people without them. But such statistics lump together apples and oranges — and lemons.
An ignored "disparity," part 3:
Historical happenstances — the fact that the Romans invaded Western Europe but not Eastern Europe, for example — left a legacy of written languages in Western Europe that people in Eastern Europe did not have until centuries later.
But the innumerable factors affecting human achievements are not only complex and hard to untangle, they offer neither politicians nor intellectuals the opportunity to simply be on the side of the angels against the forces of evil. Factors which present no opportunity to star in a moral melodrama have often been ignored in favor of factors that do.
An ignored "disparity," part 4:
[M]undane explanations of gross disparities are seldom emotionally satisfying — least of all to those on the short end of these disparities. With the rise over time of an indigenous intelligentsia in Eastern Europe and the growing influence of mass politics, more emotionally satisfying explanations emerged, such as oppression, exploitation and the like.
Since human beings have seldom been saints, whether in Eastern Europe or elsewhere, there were no doubt many individual flaws and shortcomings among the non-indigenous elites to complain of.
Please read the whole thing! Readers interested in the subject should know that Sowell has written three related books on the subject, beginning with Race and Culture: A World View. He has drawn on something like a lifetime of learning to write these four columns.
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Sunday, January 22, 2012
Media Plays Up GOP Association, Hides Dem Connection In Two Similar Stories
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via Big Journalism by Warner Todd Huston on 1/22/12
Last week two political operatives were arrested in separate incidents, one Democrat and one Republican. It certainly isn't news that political operatives sometimes break the law, but how the different incidents were reported is typical of how the Old Media establishment uses guilt by association to tar Republicans but rarely does the same thing to take swipes at Democrats.
The similarity in the two stories is that both of the accused are former staffers of high profile politicians. The Democrat was an Obama campaign staffer while the Republican was a staffer of the Republican Governor of Wisconsin, Scott Walker. Neither currently works for those high profile pols, but only the Republican was linked to his former boss. The Democrat's link to Obama was mostly ignored by the media.
Story One: Some Guy Arrested
We'll begin with the tale of Iowa Democrat operative Zachary Edwards who tried to steal the identity of a rival Republican in order to use that identity to get the Republican in trouble.
Edwards tried to use the identity of Iowa Secretary of State, Republican Matt Schultz (and/or Schultz's brother) to illegally obtain some sort of state benefits so that he could then claim that the Republicans were illegally obtaining state benefits. This Edwards fellow hoped he could smear the GOP Sec. of State as engaging in some sort of unethical behavior. (The Iowa Republican blog has more on the fight between Schultz and Iowa Democrats)
Now, as it happens Edwards is not only a member of a politically connected Democrat consulting firm, Link Strategies — a company with long-standing ties to powerful Iowa Democrat Senator Tom Harkin — but Edwards was also a member of Obama's Iowa team in 2007/08. Edwards' bio has since been scrubbed from the Link Strategies page but read in part, "In September 2007, Zach joined the Obama New Media department as co-director of the Nevada New Media team and then moved on to direct New Media operations in five other primary states (New Mexico, Texas, North Carolina, and South Dakota)."
For a screen shot of Edwards memory-holed bio from the Link Strategy site, see the Iowa Grounds blog.
So, how was Edwards' arrest reported? For one thing, it was hard to find Edwards' Democrat affiliation and his past role as a top Obama campaign staffer in stories of this incident.
- KCCI TV Channel 8 (Des Moines) does not bother to note the perp's Democrat ties at all.
- The Dubuque Telegraph Herald and the Des Moines Register both published an AP report that simply calls Edwards a "Des Moines man accused of ID theft." Also no mention of his Democrat Party ties.
- Finally, Eastern Iowa News blog reports Edwards Democrat ties only at the very end of its story.
It is interesting to note that the story of the criminal action by this former Obama staffer is not easy to find. Few Old Media outlets bothered to cover it.
Story Two: Those Darn Criminal Republicans
Our second story is that of the arrest of Mr. Tim Russell of Wisconsin. Russell was a former aide to Wisconsin Governor Scott Walker and is accused of stealing funds intended for wounded veterans and families of U.S. soldiers who died in Iraq and Afghanistan — an odious crime, indeed.
Russell had been a Walker campaign staffer and county aide up until the Governor took the top seat in the state but has since not been working for him. Along with two others, Russell was arrested for a scheme to defraud the state of $42,000 that was earmarked for veterans.
So, how did the Old Media handle this tale of criminality? Unsurprisingly, Russell's ties to Walker and his party affiliation were either in the headline or the very first paragraph, if not both. And there were dozens of stories posted on this incident, too.
- The New York Times slammed Walker with guilt by association in its headline and first paragraph.
- Reuters did the same thing as the NYT.
- The Associated Press follows suit by mentioning Walker in the headline and the first paragraph.
- Green Bay's NBC affiliate also features Walker in the headline, etc.
- In a companion story, the Milwaukee Journal Sentinel also prominently features the perp's party affiliation.
- Politico pulls the same stunt as the others.
There are more stories than these few, of course. In fact, there are far more stories about this former Walker aide than there are about the Obama operative. Politico, for instance, never reported on the Democrat criminal. Apparently the news of the criminal actions of a former staffer for a mere governor is far bigger news than that of a former staffer of the President of the United States.
In any case, this is a perfect illustration of how the Old Media goes for the jugular when reporting on criminal Republicans compared to how they (don't) go after Democrats in similar instances.
It's just apiece with the Old Media's bias against Republicans. All the news that's fit to warp.
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Friday, January 20, 2012
Citizens United: Two Years of Free Speech
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via Big Government by David Bossie on 1/20/12
Two years ago the United States Supreme Court decided the landmark case of Citizens United v. FEC. The Court reversed an anomaly in campaign finance law by restoring the First Amendment protection of political speech.
Over the past two years Citizens United's victory has been the subject of countless attacks. It has inspired some members of Congress to attempt to pass legislation to chill political speech, caused the President to chastise the Supreme Court during the State of the Union, and even led to irrational demands that we amend the Constitution to curtail the Freedom of Speech.
Despite the heated rhetoric, little in politics has changed. Before Citizens United, candidates, independent groups and political parties ran political ads. Shockingly, the same is true after Citizens United. Some lament the amount of money spent on political speech, but as George Will has noted, Americans will spend more money on Easter candy than they spend electing a President.
The liberal drumbeat against the decision seems to be led by a group of leftist non-profit organizations. These groups, with such good governance names as Democracy Unlimited, Democracy 21, Public Citizen, and Common Cause, are fighting to overturn the First Amendment.
One such non-profit organization, Democracy Unlimited, has launched the Move to Amend campaign. Their campaign hopes to pass a constitutional amendment to curtail the First Amendment. This group plans to celebrate the second anniversary of the Citizens United decision by staging "Occupy the Courts" protests across the country. While the corporate-owned press will praise these protests, I have little doubt that if a conservative non-profit employed a similar tactic it would be dismissed as "Astroturf" lobbying, rather than heralded as a populist uprising. Of course the anti-corporate speech protest is paid for and sponsored by Democracy Unlimited.
When I sued the FEC I was fighting to protect the freedom of speech. I'm glad to see these liberals and their corporate sponsors exercising that right.
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Sunday, January 15, 2012
What Did Romney Do at Bain?
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via Megan McArdle : The Atlantic by Megan McArdle on 1/10/12
At any time, the Wall Street Journal's article on the fate of companies that Bain Capital invested in during Romney's tenure would have probably made a splash. But luckily for the commentariat, Romney gave the story a nice push by making a really incredibly stupid gaffe--remarkably, the biggest one he's made in months of hard campaigning.The result has been predictable: the left (and some of his opponents) are accusing Romney of exemplifying predatory capitalism that destroys firms, jobs, and lives, while the right defends his work as creative destruction. What's the truth?
First, the particulars. From the WSJ:
Amid anecdotal evidence on both sides, the full record has largely escaped a close look, because so many transactions are involved. The Wall Street Journal, aiming for a comprehensive assessment, examined 77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999, to see how they fared during Bain's involvement and shortly afterward.I think you can tell two stories from this data--and without looking at each individual case in depth, it's really hard to tell which story is right.
Among the findings: 22% either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses. An additional 8% ran into so much trouble that all of the money Bain invested was lost.
Another finding was that Bain produced stellar returns for its investors--yet the bulk of these came from just a small number of its investments. Ten deals produced more than 70% of the dollar gains.
Some of those companies, too, later ran into trouble. Of the 10 businesses on which Bain investors scored their biggest gains, four later landed in bankruptcy court.
Certainly, there are private equity deals--and maybe firms--that don't add social value. They cash out existing shareholders by burdening the company with a lot of debt, and then either take the company public again or take it into bankruptcy. I've heard it suggested that to the extent these deals unlock value, they do so by getting cooperation from management insiders--which sounds suspiciously like either "collusion" or "bribing them to do their jobs".
On the other hand, private equity deals can shake loose dysfunctional managements that have been systematically running the company into the ground, provide capital and management advice to struggling firms, or give fledgeling companies the push they need to soar.
Either of these stories works with the facts laid out by the Journal. There's a broad spectrum of private equity strategies, from pure cash-flow plays that sell off underperforming assets, to something more akin to a corporate turnaround specialist. Bain is closer to the latter than the former--their "special sauce" is that they have a sort of consulting approach to financial problems (and often, the cream of Bain Consulting's talent, from which they recruit heavily.)
Turnaround situations, and new firms--both of which Bain says it focuses on--probably have a higher failure rate than "sell off an obviously undervalued asset" or "fix a simple cash flow problem". Which could also explain a high failure rate. It's probably a somewhat simpler operation to predict whether you can sell off a division, than whether you can revamp the product line to make it sell to the tween segment.
Largely, I expect people are going to believe what they want to believe; if you're invested in the notion that finance is useless and predatory, you'll see Romney as a predator; if you valorize markets and business, you'll tend to see Bain's record as admirable.
Me, I don't know. Pending more information, I'm suspending judgement.
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More Evidence NY’s Cigarette Tax Hike Was a Bust
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via Big Government by Capitol Confidential on 1/15/12
The Empire State is struggling to bring in additional tax revenue it projected it would gain from efforts to stop smokers from buying untaxed cigarettes on Indian Reservations, reports the New York Post:
The state's tax collectors were recently calling around to convenience-store owners, wondering what was up. The $130 million in extra tax that Albany was expecting from a change in the law about cigarette sales on Indian reservations wasn't happening.
A memo sent to members of the New York Association of Convenience Stores from the group's president, Jim Calvin — a copy of which I have on my desk — said, "I got a call from Gov. Cuomo's budget office yesterday. In examining cigarette tax receipts so far this fiscal year (April 1 to March 31) it looks like they will fall considerably short of their projection in new revenues. . . ."
The state had hoped to get the extra dough by enforcing a new law that made it illegal for licensed cigarette wholesalers in the state to sell untaxed name-brand cigarettes like Newport and Marlboro to Indian reservations.
Why the need for the extra measures focused on Indian Reservation sales in the first place?
In short, going "On The Reservation" and buying untaxed, name-brand cigarettes became an appealing prospect to many smokers following New York's institution of a $1.60 per pack cigarette tax hike in 2010:
The reservation store would sell the cigarettes to non-Indian customers who were trying to avoid the hefty taxes imposed by the state. The state and legitimate sellers of cigarettes were both hurt.
The sale of nontaxed smokes by stores on Indian reservations became an issue two years ago when the state cigarette tax was raised significantly and many smokers took more of their business to reservations — or to Internet sellers — whose packs aren't taxed. Some folks even bought lower-taxed cigs smuggled in from out of state.
The news that New York could be $130 million short of projected revenue as a result of its particular approach to sin tax policy may serve as a timely reminder to legislatures kicking off their sessions in states around the country where cigarette tax increases are being proposed, either by lawmakers or influential interest groups.
Among those states are Alabama, Georgia, Idaho, and Maryland, the latter of which in particular is no stranger to the issue of black-market sale of smuggled cigarettes.
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Boys will be boys *UPDATED*
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via Bookworm Room by Bookworm on 1/13/12
Boys are born equipped with this neat little toy. Amongst its many enjoyable attributes, you can write your name in the snow with it. There are lots of other things you can do with it. Long hikes without pit stops? No problem. Use a tree or, if you're adventurous, see if you can fill the Grand Canyon. Long drive without pit stops? No problem. That's what empty soda bottles are for. Object that offends you? Well, if you're adrenalized, testosteronized, and hanging around with the boys, that might not be a problem either, 'cause you can whip out your toy and make a statement (warning: slightly graphic and definitely NSFW):
Click here to view the embedded video.
I certainly don't approve of what those guys did. It's vulgar, and I'm opposed to vulgarity on principle. It's stupid, both at a micro level and, as the recent headlines show, at a macro level. It's a typical example of group think. I routinely tell my children to be very careful when they're with a group, because there's something about a group mentality that causes massive IQ loss.
The one thing I'm not is outraged. This is not systemic abuse of the type that surfaced in Abu Ghraib. Nor does it cross the line from stupid and vulgar into terribly abusive. Terribly abusive would have been a video of these men doing the same thing to living prisoners. Having Al Qaeda types — the ones who like to slice of men's cool toy and stuff it in the victim's mouth, or who videotape themselves beheading people, or who torture children to death, or who gang rape women, or who blow up school buses, etc. — having these types express outrage over this alleged "barbarity" only serves to highlight just how innocuous what these young men did really was. Crude? Yeah, sure. But also innocuous.
I'm also not alone in my lack of outrage. Even liberal Washington Post readers are unimpressed. As of this writing, 82% of them think "It's not surprising — things like this happen in war," while only 11% find it an "unacceptable desecration" and 7% an "embarrassment." Americans understand that boys will be boys, they understand that boys will always have their toys, and they understand that, under actual combat conditions, men make foolish decisions that nevertheless do not qualify as war-time atrocities.
UPDATE: In Comment 2, DQ, who my best friend and someone I admire greatly, disagreed with my rather cavalier dismissal of the Marines' conduct. He stated "I am outraged," and then explained why. I countered by explaining why I did not consider what happened an outrage. Later, it struck me what the difference was in our approach to this video.
As I mentioned in my Michelle Obama post, grammar matters. When it comes to the response to peeing Marines, one has to remember that the word "outrage" functions as both a noun and a verb.
DQ is totally within his rights to feel outrage. The verb is his own response to a crude, vulgar, and stupid incident. It marks him as a man with higher, more refined feelings.
I, however, was not really talking about my own feelings when I posted about the Marines. I was talking about the noun, rather than the verb. In the theater of war, and especially in the theater of war propaganda, it is a mistake to call what happened "AN OUTRAGE." That elevates the Marines' conduct to an atrocity or a war crime in terms of their risk of court martial and in terms of the animus America's enemies direct against her.
When the US government and the Pentagon, instead of issuing a dry "their behavior was inappropriate and they will be dealt with," starts apologizing as if the video was the crime of the century, that allows the enemy to justify ever greater efforts against American troops. "They peed on our dead. We're going to torture them, behead them, blow up their women and children, etc."
My post was about proportionate response. I therefore made in my own mind a distinction between being outraged and categorizing something as "an outrage." This distinction is an important factor in figuring out where bad behaviors (and there will always be bad behaviors) belong on the scale of military scandals.
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Saturday, January 14, 2012
Vulture Capitalism
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via American Thinker on 1/12/12
Vultures are unsightly scavenger birds but they form a vital role in the eco-system just as "vulture capitalists" form a vital role in the free market economic system. Both consume the dead or dying for personal gain.Things you can do from here:
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Monday, January 09, 2012
A word from “Zeb” Zobenica
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via Power Line by Scott Johnson on 1/5/12
(Scott Johnson) Reader "Zeb" Zobenica writes to comment on the OWS phenomenon:
Watching, and listening to, the #OWS crowd on TV provoked a "flashback" to the time I was readying myself to enter the corporate world.
I was a Marine jet pilot with an engineering degree, a wife, two young kids, a dog…and a cane. After sixteen months of "paint and repair" at a naval hospital following a plane crash, and an additional half-year of rehab, it was decided that I would never sit in an ejection seat again. It was time to meet a new challenge, sell myself to strangers…and put "grits" on the table with a pay check earned in the private sector.
While listening to the #OWS protestors, the realization that "these people are clueless" reverberated between my tinnitus-challenged ears. Memories harkened me back to the approach I used when confronted with job-seeking. Career change preparation included choosing where I wanted to live, proximity to extended family, salary considerations for a person with my education and experience. Research was done on several potential employers in the aerospace industry…corporate structure, plant locations, product lines, customers, hiring and layoff cycles, and an assessment of what I could contribute to their "war effort." Letters were written expressing an interest in their company and stating confidently the belief that I would be an asset to their corporation. The interviews that followed revealed a candidate in a gray business suit, tie, spit-shined shoes, hands and hair groomed, who knew something about the outfit he was hoping to work for, yet faced with the need to assure an employer that my gimpiness would not affect job performance.
Fast forward to #OWS. Is this what the self-esteem movement has produced? Everybody gets a Happy Face? Nobody keeps score? There are no winners and losers? Trophies are for showing up? This is a "me" generation on steroids. They pursued academic degrees that promised little or no return on the investment and now find themselves deeply in debt…Where was the parental advice? School counselors? Was there no consideration given to job opportunities in the field, salaries offered, or a perfunctory cost-benefit analysis performed? Did they not understand that, unless one's applying for a job in a tattoo parlor or a chop-shop, body paint and piercings are not frequently found in the market place? To most employers, such appurtenances suggest a person with issues, consumed with self, an in-your-face personality who may not play well with others. Real life has owners, bosses, and co-workers who are not impressed with ear lobes festooned with "bagels" nor with potential employees who make a habit of reminding others of their rights. The wise human resources manager avoids these sea-lawyers like the plague. Out-of-court settlements are now a cottage industry and it's wise to keep these entitlement-gurus off the company payroll.
Zuccotti Park, in microcosm, took on the characteristics of a bacterial colony in a Petri dish. The population starts small, there is space, and plenty to eat. As the numbers multiply, demand for nutrition increases, and the by-products of consumption began to accumulate, inevitably leading to a toxic environment and disease. Street lesson #1…every organism, whether biological or physical, in order to function, requires a source of energy and produces waste. Chardonnay and pasta become piss and crap; gasoline becomes exhaust. It must be dealt with. It is a local issue affecting those in the Petri colony. It is not of planetary concern. Once handed-off to Gaia, she is well prepared to process what is produced.
Free food, or for that matter, free anything, attracts freeloaders, even in a Zuccotti Utopia. The workload on the gourmet cooks increased and they soon felt put upon. The chefs, after toiling for 18 hours daily, said enough is enough. Street lesson #2…there is no such thing as a free lunch. There exists among our species lazy, slothful slackers who demand access to the fruits of someone else's labor. It's hard-coded in the DNA.
Societies require organization; divisions of labor; systems to produce, manage, and allocate resources, resolve differences, and provide security. This means some become money managers, others collect trash. Some become bureaucrats, others stand before them with hat-in-hand. Who, or what, determines which role individual utopians get to play? Merit? Muscle? Big stick? Bloods or Crips? Street lesson #3…life isn't fair.
"Give peace a chance? Can't we all get along?" Apparently not. Utopia had to come to grips with stolen laptops, broken drums, rapes, and murder. Street lesson #4…there is a reason that cities have police departments and nations have armies. "Kumbaya" is a song, not a policy.
It may be said, simply and forthrightly, that "life is about choices and choices have consequences." This common sense slogan was apparently not taught to the #OWS crowd along the way. They've shown the world their tats, tits, lobes, and asses. We've heard their bongos, read their signs, and smelled their garbage, 'grass', urine, and excrement.
We, the real 99%, are not impressed!
R.M. "Zeb" Zobenica
Capt., USMC (Ret.)
I thought you might enjoy that.
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Media Bias, Stage Two
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via Power Line by John Hinderaker on 1/8/12
(John Hinderaker) Scott wrote this morning about the absurdity of Republican debates being moderated by liberal activists like George Stephanopoulos and David Gregory, who, as Scott put it, are "on a mission to take down the candidates by making them appear crazy or by separating them from the base of the Republican Party." But that is just stage one of the liberal press's effort to control the presidential election cycle. Stage two comes when Democratic Party activists posing as journalists report on the proceedings.
From now until November, the leading offender likely will be the Associated Press. Today the AP described last night's debate in November; its account began:
Mitt Romney brushed aside rivals' criticism Saturday night in the opening round of a weekend debate doubleheader that left his Republican presidential campaign challengers squabbling among themselves far more than trying to knock the front-runner off stride.
Three days before the first in-the-nation New Hampshire primary, Romney largely ignored his fellow Republicans and turned instead on President Barack Obama. "His policies have made the recession deeper and his policies have made the recovery more tepid," he said, despite a declining unemployment rate and the creation of 200,000 jobs last month.
The AP's gratuitous editorializing is intended to suggest that Romney's assertion that Obama's policies have worsened the recession and weakened the recovery is self-evidently false. But that is absurd: the nation's "declining unemployment rate" is all the way down to 8.5%, whereas it was 7.6% when Obama took office. Moreover, that comparison understates the deterioration in the nation's employment since Obama took office, since hundreds of thousands of people have given up and left the labor force. Further, as I noted here, the slow rate of job creation under Obama has made this the slowest recovery from a major recession on record.
So it is the Associated Press, not Mitt Romney, that has no idea what it is talking about. Nevertheless, this sort of misleading, biased and outright false editorializing will we constant from now until November.
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Sunday, January 08, 2012
Can Credit Unions Replace 'Predatory' Lending?
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via Megan McArdle : The Atlantic by Megan McArdle on 1/6/12
Felix Salmon has a really interesting piece about a professor who took out a loan from a personal finance company--at a roughly 40% APR--after her credit union turned her away.Is it a good idea for the professor to be taking out loans at 40% interest rates? Really, she didn't have much of a choice. She needed the money, she got precious little help from her credit union, and the loan company was friendly and extended her the cash on terms she could afford.Salmon, who is an enormous booster of credit unions, thinks that this points to directions for reform:
What's more, the professor's relationship with World Finance has indeed improved her credit. Since taking out that first loan, she's obtained two different credit cards, and also bought a brand-new BMW with 2.9% financing. All with essentially no help at all from her primary financial institution, which is Missouri Credit Union. The debt the professor is taking on may or may not be wise, given her unique individual circumstances. And the credit union could in theory be a valuable resource in terms of helping her work out whether, for instance, she can really afford that car. But the relationship there is broken, and I see no chance that it will be fixed.
James does admit that he let the professor down: "I think we did fail her," he says, "and I don't think we did what we should have done." The credit union dropped the ball with respect to her loan application, which was left in limbo when she was in a time of need. But at the same time, he also admitted to me that the credit union would not have given her the unsecured loan she was looking for.
The professor's credit score is now good enough that she qualifies for a mortgage; it wasn't before. That's the kind of help a credit union should be able to give, and it's disappointing that Missouri Credit Union doesn't seem to be able to bring itself to do that. If the professor (a) wanted credit and (b) wanted to improve her credit score, then the loan company was, sadly, the place she needed to go.
So two things are needed here, I think. The first is effective regulation, with teeth; I hope that Richard Cordray, newly installed at the head of the CFPB, will start providing that soon. There's no time to waste.I too, am a fan of the credit union. We got our mortgage through Navy Federal, and even though we could probably refinance to something cheaper, we're sticking with them because I like the customer service and the fact that they will bend over backwards to fix issues with your loan. (Back when I had a car loan, it took me a year to straighten out issues with my car titling, and as long as I made the payments, they kept giving me more time).
But regulation isn't enough: we also need alternatives -- non-predatory financial products which allow people with bad credit to repair that credit and get back on their feet. Many credit unions provide such products, but as we've seen, many credit unions don't. And credit unions are in any case often difficult institutions to navigate: it's never entirely obvious who's allowed to join any given one. Can someone set up a Kiva for America? Help is needed, here. And it's very hard to find.
But I don't think that they are somehow going to substitute for the lenders at the bottom of the risk market: loan companies and payday lenders. Felix, who is on the board of a credit union, may have some insight into this that I don't, of course. But right now, I don't see it.
Credit unions are not charities. They have responsibilities to the members who deposit money with them: they cannot make loans that are reasonably likely to lose money (at least in aggregate). And while the interest rates on products like payday loans are indeed eye-popping, the companies themselves are not especially profitable. This suggests that the reason the loans are so expensive is that they cost a lot to make.
Why is this? For starters, because the risk of default is very high. It's hard to get good numbers, and estimates vary widely, but I'm pretty sure that they're well north of 10%. That's a pretty high default rate for any type of loan, but particularly one where the term is measured in weeks.
That's not the only reason to think that these loans are expensive. Since they are often for very small amounts, they have high transaction costs relative to the loan amount--it takes just as much time to process forms for a $200 loan as it does for a $10,000 loan.
There's also the structure of the loan, which involves a lot of intensive interaction with the borrower. Remember, the short term (and the fact that they're tied to payday) helps hold down the default costs on payday loans. It's also really expensive to achieve; it means maintaining a storefront with people in it at all hours.
Credit unions might make those loans somewhat cheaper by layering that overhead on top of existing operations, and because they don't need to make a profit. On the other hand, credit unions lack expertise and skill in this sort of loan. In general, credit union loans are not wildly cheaper than similar loans from other institutions.
But I suspect that what Felix has in mind is substituting a different--and much cheaper--type of loan for the payday loans. And I'm skeptical that this can happen. All of the research that I've seen on these super-expensive loan products indicates that most of the people who are taking them are not doing so because they don't understand how high the interest rate is, but rather, because they have exhausted all of their other borrowing options. (And frequently, the alternative is even more expensive: a bounced check fee, a utility disconnect that will require a hefty fee for reconnection, a lost day of work because of car trouble).
So I take it that the reason that the credit unions aren't putting them into cheaper loans is that they can't. The cost of an unsecured loan to someone with terrible credit is high because those loans go bad very frequently, resulting not only in the loss of funds, but in considerable overhead expended on collection. Particularly in the case of credit unions, who--as my auto loan illustrates--work very, very hard to keep their members' loans from going bad.
And I'd guess that credit unions, for all sorts of reasons, don't really want to get into the super-expensive-super-risky loan business. That's why they focus on figuring out how to help you not need the money. Obviously, that is going to be a bad outcome in some particular cases, because no system is ever perfect. But on balance, I can understand why credit unions aren't eager to get into the payday loan game.
Update: Apparently, some are. But the products often aren't substantially cheaper than regular payday loans--though Felix highlights this program at a State Employees credit union, which does look much cheaper.
Felix asks me if there's any reason that last program can't scale. I think there are three possibilities:
1. They're losing money on it, and a lot of credit unions can't be in the business of charity to people who need payday loans
2. Their lending population is somehow different from those who need regular payday loans (state paychecks are pretty steady, and the program requires direct deposit)
3. It's a game changer that will revolutionize payday loans.
I'm pretty skeptical that #3 is the answer--these loans are cheaper than most credit cards, and that's a very competitive space. On the other hand, all game changing innovations suffer from not having been done before: that's no proof that they can't be. I'll only note that the general experience of nonprofits in this space seems to be that they have to charge high APRs (or fees that amount to the same thing) in order to make up for the costs.
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