The final decision

With the election on Tuesday I am thankful this will be my last national political piece. I have some regrets about living in Colorado–a swing state–only because the hotly contested election races draw more money from both parties to television advertising and telephone soliciting. Even a quick finger on the remote cannot avoid the onslaught of misrepresentations, half-truths and personal attacks marring the integrity of both campaigns. This is one reason highly qualified people stay out of politics and remain in private industry.

The negative campaigning brings to mind a number of questions I need to ponder before making my final presidential selection. If you have some answers, please leave a comment at www.kwmv.org/blog.
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• Why are there 35,000 registered lobbyists in America and only 535 people in Congress (a ratio of almost 70-1)?

• Can either candidate lead us out of this financial crisis?

• Why do we chastise the Cubans for human rights violations and maintain Guantanamo prison on a tiny portion of the same island?

• If we are a racist country, why is Colin Powell one of the most respected people in America?

• Why are such a large percentage of pro-life advocates also in favor of capital punishment?

• What is the difference between Timothy McVeigh and William Ayers?

• What is the difference between Charles H. Keating and Tony Rezko?

• Do the religious leaders Jeremiah Wright, John Hagee and Louis Farrakhan really promote tolerance?

• If we have a minimum age for a president, should we have a maximum age or should there be no age requirement?

• Would formalized same sex relationships really have a profound negative effect upon communities at large?

• If there is compulsory education, then why does the dropout rate exceed 50% in most inner cities?

• If we have immigration laws in place, who decided not to enforce them?

• On election ballots, why aren’t incumbents’ names highlighted making it easier to vote them out of office?

• Why is our Congress able to legislate and determine their working conditions and compensation when we are their employers?

• If most legislators have never run a business, how can they be so arrogant as to set business policies and then delegate the oversight to underlings with even less experience?

I look forward to your answers. Send them my way at www.kwmv.org/blog.

CRY-SIS

I remember the thrill of buying my first home and the anticipation of waiting for the bank’s decision on our mortgage application. In that long forgotten era, the 1970s, buyers were required to put down 20 percent of the total loan and complete a myriad of paperwork proving their ability to pay.

During the last few years, buyers with no money, no job, no documents or no credit history received home mortgages without the kind of vetting we experienced. The most serious investment most of us ever made had evolved into an entitlement.

There are many things that converged to create the current financial crisis. We can start with the modification of The Community Reinvestment Act. This law forces banks to lower mortgage standards in depressed areas in exchange for favorable reviews by the Federal Reserve. In 1995 a sweeping change reduced the paperwork and verification process allowing less creditworthy buyers to obtain mortgages.

Sub-prime financing was off and running.

In 1999, The Gramm-Leach-Bliley Act set the stage to allow banks, insurance companies, brokerage and investment firms to cross the boundaries of mortgage limits created during the depression. This was another vital component in creating the drama unfolding today.

Following the dot-com crash and 9/11, the only part of the economy that thrived was housing and a number of people set out to make it even better. The prospect of easy money combined with easy loans propelled the housing boom. In any market, too much cash chasing too few assets will cause prices to rise.

It has been disclosed that over 60 percent of mortgage applicants lied on their applications either about their incomes or their intentions for the property. Many of these mortgages ended up covering investments and the purchases of second homes—not primary residences. Bizarre loan products allowed borrowers to pay almost nothing for a few years, allowing speculators to purchase multiple properties. The result: About one of every six homes in America has a mortgage in excess of its actual property value.

Mortgage lenders can be called predatory, and the real estate brokers criminal, but how many of us would refuse a virtually free house with the anticipation of appreciation as high as 15 to 20 percent each year?

Enter the investment banks unshackled by previous regulations. Investment banks took these sub-prime mortgages bundled them and then sold, split and resold new bundles; a derivatives market developed and credit default swaps became money-printing machines. We politely call a garbage dump a landfill, and now we have, ‘toxic assets,’ another euphemism for bad bundles that smell.

People assumed that Fannie Mae and Freddie Mac, the purchasers of many of these bad mortgages–to the tune of more than a trillion dollars during 2005-2007–carried an implicit government guarantee.

What caused this bubble to burst?

• • Greed on the part of everyone involved from the homebuyer to the investment bank on Wall Street.
• • The use of Fannie Mae and Freddie Mac by Congress as politically motivated money-laundering machines. Alan Greenspan and several departmental auditors warned the American public four years ago of improper bookkeeping and insane debt-equity ratios.
• • The failure by banks and investment firms to accurately report their real asset base and the incompetence of the bond-rating agencies.
• • Unrealistic pricing in the derivatives market based on computer models using archaic default ratios in an environment where actual defaults proved well above historic averages.

Now we will be footing the bill for idiotic legislation that lead to excesses that government chose to overlook instead of overseeing.

Here’s another bleak thought: Many sub-prime homeowners that got in early have gone on to take home equity loans and purchase cars with subsidized financing. Additionally, there are 1.5 billion credit cards currently issued in America or about nine for each family; credit card debt averages about $12,000/household. As the credit crunch becomes more acute, default will become widespread in the consumer credit market. This will affect insurance companies, banks and managed retirement plans.

On a more macro scale, states and municipalities will receive less income due to a huge drop in property tax collections and this year the federal government will receive little capital gains revenue. The $700 billion band-aid is miniscule compared to the unregulated $62 trillion derivatives markets that touches every financial institution in the world. However, it should be sufficient to allow Mr. Paulson to leave his post with dignity and foster the re-election of incumbent Congress people.

In a few weeks we will be choosing a new president. Neither candidate has any governing or global financial experience. Neither candidate has any experience running a business for profit as opposed to running a government in deficit. Neither has ever created private-sector jobs. I doubt if either candidate really understands the interlocking relationships within the global economy. Unfortunately, one of them will win, and more than likely, most of us will lose.

MY ENDORSEMENT

Many hundreds of readers have asked me for an endorsement for the presidential election. I am a board member of our local non-profit community-based radio station and FCC and IRS regulations prohibit political endorsements through our station’s web site or on the airwaves. I am not nearly as clever as Rosie O’Donnell, Chuck Norris or Hannah Montana, all of whom have expressed their support for their respective candidates.

We should all accept that speeches from candidates rarely match their performance in office, and the fantasy never quite measures up to the reality.

We don’t have to reach too far back to find striking examples: Ronald Reagan’s vision of smaller government actually resulted in a bloated the federal budget.

Who could forget George H.W. Bush and his mantra of no new taxes?

Bill Clinton urged more assistance for the underprivileged but his statistical record shows quite the opposite.

I remember in 2000 that George W. Bush, the compassionate conservative, professed he would unite and not divide.

I am no longer sure which party represents smaller, more efficient government or which party intends to increase rather than decrease entitlement programs. I have no idea which party will raise or lower taxes. I know how the candidates stand on the abortion issue, but I am confident Roe versus Wade will never be overturned.  How each candidate stands on health care, energy, unemployment, education, the current financial crisis, the looming game of Russian roulette, Iran eradication or immigration is a moving target depending on which speech is given on a particular day.

I do know that focusing on the deficits of one’s opponents may mean that each candidate has very few of his own accomplishments to bring to the forum. And that may be the most disturbing thing of all.

I cannot endorse, but I can state a few things that trouble me about both contenders.

I am a third-generation Jewish American and America has been a bountiful haven for immigrants from the far corners of the world. I find Senator Obama’s long-running association with The Trinity United Church totally unpalatable. If I was attending a synagogue and the rabbi continually spewed anti-racial epithets, ranted vitriolic ethnic slurs or seethed hate about America, I would leave the church and find another house of worship. The church’s endorsement of Louis Farrakhan and support of his long-standing anti-Semitic viewpoints are tantamount to declaring David Duke a great American. This is a blight on the church and all of its parishioners. One must question the credentials of the spiritual leadership from that institution and its followers. The tolerance of intolerance is intolerable.

No one can deny the heroic behavior of John McCain during his confinement as a prisoner of war. But the Cold War era from which his experience was forged is a relic of the last century. I believe in a strong military for protection and to respond to legitimate threats, but the days of any nation’s conventional military hegemony are fading and armed solutions are likely not the answer to another region’s internal political problems. Leadership is not only a composite of experience, but consists of an astute ability to recognize change while at the same time offering a clear vision of the future. Experience matters little if one intends to use outdated solutions for problems that arise in an ever changing domestic and global environment.

Change means that we give up something now for something that is hopefully better in the future. Change can happen by circumstance or by choice. However it comes, we need to respond by intelligently steering our nation’s destiny by putting our own welfare first without losing sight of our worldwide responsibilities. Each candidate espouses change, but Alphonse Karr’s adage, “The more things change, the more they remain the same,” has never been more prescient.

My endorsement is simply to vote, and to vote intelligently. Do judicious research, listen to opposing points of view and commit to the candidate, both locally and nationally, and not to either party. There are both good and bad Republicans and Democrats. Voting is the most incredible privilege we have as Americans. It should be cherished and used wisely.