Entries from September 2008 ↓

What is going on??

September 29th, 2008 — Thoughts

As I write this, the $700 billion bailout plan has failed and the DJIA has closed down over 656 points, or 5.89%. At one point, the Dow was down 738 points, the largest intra-day drop in history. Yesterday, I wouldn’t have believed it. The headlines indicated that after a weekend of negotiations, a compromise was reached in the House on the $700 billion plan to be voted on today. Finally, I thought, we’ll get this bill down the road to the Senate and work toward getting confidence restored in the markets. But in today’s world, shock is becoming the only constant. Normally, the big news today would have been the sale of Wachovia to Citigroup. Instead, the President held a press conference this morning at 7:35 am, before the markets opened, to urge the House members to vote for the bill. But in the end, congressmen from both sides worried more about their own political futures than about the confidence of the market. The bill failed 228 to 205. Those who voted against it cited as their reason severe criticism of the bill amongst their constituents. Only 60% of Democrats voted for the measure, which to me is surprising. Why couldn’t Speaker Pelosi get a larger percentage of Democrats to support the bill? 95 Democrats voted against it. Only 12 of them were needed to pass the legislation. Only 65 Republicans voted for the measure, or 35%. So, neither party was united on this measure. Now, both sides are pointing fingers at the other, blaming them for the failure. Right after Nancy Pelosi failed to convince 12 Democrat members to change their ‘no’ votes to ‘yes’, the Democratic leadership held a press conference to make sure that they had the first word on assigning blame. They were shocked that they didn’t have more Republican support. On the other side of the aisle, Real Clear Politics reports that GOP leadership is pointing to an “exceedingly partisan” speech by speaker of the House Nancy Pelosi just minutes before the vote was to begin. From their perspective, this conveniently timed speech essentially turned the passing of the bill into a moratorium on the supposed Bush administration’s failed economic policies. I submit that the vote could have turned out differently had the speaker not attempted to turn this into a moratorium for political gain. Why couldn’t she have just kept her mouth shut?

Among those in the after-vote press conference was Barney Frank, who in my opinion shares a lot of the blame for the underlying factors facing the financial market. For all you nay-sayers out there, look at the recent reporting by the Wall Street Journal on this issue. The Boston Globe and others have printed similar stories criticizing government pressure, lead by Frank, to artificially lower housing mortgages and give financial institutions incentives to come up with creative, predatory loans. The lesson from this should be that government pressure on lenders, in the interest of affordable housing, cannot negate the high risks associated with providing loans to people who can’t afford them. Where is the accountability for Mr. Frank’s actions? Instead, Mr. Frank continues to point the finger at everyone else. Talk about blind to your own mistakes.

In the end, this failure is not good. The House should go back into deliberations immediately and stay until they work out a compromise. Nancy Pelosi and her fellow Democrats would be well advised not to attempt turning a future vote into a moratorium for political gain. Additionally, Republicans would do well to realize their principals of non-government market influence cannot save the economy today. The market didn’t reach this crises through a lack of government influence but largely through an underlying government pressure toward more affordable housing. So now it takes more government influence to correct the negative government influence of the past.

Let’s get this done now!!

Cheers,
Joel

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The debate - economy and foreign policy

September 28th, 2008 — Thoughts

Both candidates’ understanding of the economy does not inspire confidence. However, in matters of foreign policy, McCain gets it.

Many members of the MSM are calling the first presidential debate on Friday night more or less a tie (Fox, NYT, Washington Post, WSJ). I tend to agree. Whereas, Obama did well in the debate on economic matters (I still disagree strongly with his redistribution of wealth plan), McCain did very well in the debate on foreign policy matters (I’m sure Justin strongly disagrees with McCain’s Iraq policy). While there were certainly presentational differences - Obama looking at McCain and the camera and McCain mostly looking at Jim Lehrer, Obama’s polished rhetoric and McCain’s energetic one liners - the two did a good job of highlighting their differences…and, in one area, a similarity. Neither candidate was willing to discuss how the current economic woes would affect their budget proposals in the future. McCain answered with cleaning up government excessive spending and perhaps going so far as conduct a government spending freeze. Obama answered that we’d have to wait and see how the current economic situation affects government tax revenue and perhaps delay new social programs.

Both answers are in my mind somewhat inadequate and highlight how much larger the current economic condition is than the two candidates are really aware of. In one sense, I agree with both candidates. We don’t know how the economy will affect tax revenue over the next several years. We may have to delay certain things. We should take a serious look at pork barrel projects and consider a spending freeze…if it came to that. But these answers still do not address the fundamental issue of the current economic fragility…namely the extent to which government regulation has caused the current situation and the extent to which it can aid in a solution. On the one hand, corporate greed, always a scapegoat of the left, is blamed for the current financial woes. Financial institutions, we are told, took on more risk than was wise in the name of ever increasing profits. The FBI has begun an investigation into this possibility. On the other hand, failure of congress to provide adequate reforms over Fannie and Freddie is blamed for the mortgage crises, which started this mess in the first place. The WSJ in particular has written several scathing articles of Barney Frank, chairman of the Financial Services Committee, and how he has repeatedly blocked reform for Freddie and Fannie over the last 6-8 years all in the name of affordable housing. But wait; isn’t overly affordable housing what got us in this mess in the first place? To all you Bush bashers that want to spin the current mess as a failure of the Bush administration, consider this quote from the Boston Globe, “When the White House warned of “systemic risk for our financial system” unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.” Really, go figure. Barney Frank’s fingerprints are all over this and yet he still does not acknowledge his own role in this mess.

The point of all this is that the economy befuddles experts, causes university professors to disagree, and generally is a beast that no one has been able to tame or control, ever. True, we can affect it by various policies. But many policies, whether they are advocating more or less regulation, fail to guarantee economic security and prevent economic woes. This issue is still not understood fully by either candidate or the two parties.

In the second half of the debate, the focus shifted to foreign policy. Listening, I generated a list of questions I would like to ask Obama.

1. Do you think we can/should/will WIN in Iraq? You continue to dodge the issue of winning and losing.

2. Do you agree that General Patraeus’ strategy should be implemented in Afghanistan? If so, can you acknowledge his strategy as a winning strategy in Iraq? If not, why not?

3. Do you think Osama Bin Laden misspoke when he called “Iraq the perfect base to set up the jihad to liberate Palestine?” Do you think that leaving Iraq on a timeline would make the Al Queda situation better or worse?

Since Obama probably wont be coming to our blog to answer these questions, if any of his supporters feel up to the task of answering for him based on their understanding of his positions, feel free. I’m genuinely interested in your opinions.

Okay, that’s all for now. All this political talk is making me sleepy!

Cheers,
Joel

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John McCain’s strategy to disillusion us

September 25th, 2008 — Thoughts

It seems to me that McCain’s main strategy at this point (besides trying to shore up his economic credentials by grandstanding in Washington and screwing up negotiations) is to smear Obama so much that one of two things happen:

1) If Obama gets angry and lashes back, McCain could win because few things are scarier than an angry black man. Plus, it undermines Obama’s change message.

2) The smears and lies (that even Karl Rove said go “too far”) make the casual observer disgusted with the political process once again and keep people from going to the polls on Nov 4th. That’s truly the best chance of victory Republicans could hope for… because as any savvy political observer knows, when less people vote, Republicans win.

So on that note, I like this recent Obama TV ad. It really exposes McCain’s tactics without being too outraged about it:

justin

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