Saturday, January 31, 2009

Big Brother is watching you: Maybe your electric utility, maybe your credit card companies, maybe your mortgage lender

I recall, back in the early 1970s, writing a log capturing utility to track programmer productivity, and it was called “Big Brother” or “BigBR”. (That was its actual name as an executable.) Now, we have big brother again, in a couple of areas, both reported in the Saturday, Jan. 31 New York Times.

On the front page Leslie Kaufman has “Utilities Turn Their Customers Green, With Envy,” link here. In the Sacramento CA area, the Municipal District sends a statement to each homeowner comparing the home’s electrical use to those of “efficient neighbors” and “all neighbors.” The intention is to stimulate energy conservation and the purchase of EnergyStar appliances.

Then on the first page of Saturday’s Business Day, Ron Lieber has a story about monitoring consumption habits as part of a credit score. The story is “American Express Kept a (Very) Watchful Eye on Charges”, link here. Apparently American Express was thought to keep track of “blacklisted” merchants used by cardmembers. The theory was that people who spent money at certain places (bars, massage parlors) are less reliable than ordinary people. Furthermore, it kept track of items like what company owns your mortgage, and how stable your employer is. If too much of this added up unfavorably, your credit limit could be reduced. Another company reported, a subprime lender, to have reduced credit lines based on merchant use was CompuCredit.

Credit scores apparently can be affected by these practices. I wonder if eventually it will be affected by negative-looking Myspace pages or blogs!

There is more about this problem, especially with respect to American Express, at the blog “Newcreditrules”.

Friday, January 30, 2009

Life Insurance industry denied "cashless bailout"; Expert gives tips: conversion to term is not right for everybody

Daniel R. Solin has a column “Spilling the Insurance Beans: 10 insurance tips no one else will tell you” on “Walletpop” on AOL this morning Jan. 30. He says the are the tips most agents won’t tell you. He contests the notion that conversion from whole life to term is always a good idea (floated by PrimeVest and some other companies, which claimed a potential $40 trillion market!), because many people don’t know how to invest the difference (especially now in a poor economy). Young single people should consider life insurance if they intend to have children later because it is cheaper then (and he could hint at the existential problems of not being responsible for someone else). He also suggests a “fee-only” insurance adviser, who will accept fiduciary accountability to the customer (most insurance agents don't he says). Yes, the slide show gives some nice comfy pictures of a well-dressed financial professional sitting with a family. The link is here. He also gives a couple of tips on replacement costs with home and auto insurance.

Also, insurance regulators, working through the National Association of Insurance Commissioners, denied the industry’s request to lower capital surplus standards, with the Jan. 29 press release here. The American Council on Life Insurance had argued that the current standards were too conservative, especially in the current economic depression, and that companies faced ratings downgrades and even more falling share prices. NAIC is essentially saying that a lowering of standards would amount to a “cashless bailout” (or a “karma bailout” – “salvation”). The ACLI gave its reaction here.

I remember the LOMA exams when I was working in the life industry in information technology, and I recall multiple choice questions about what NAIC and ACLI do.

Update: Feb. 1, 2009

David S. Hitzenrath and Nancy Trejos have an article on the front Business page F01 of the Sunday Feb 1 Washington Post "The Risks of Life Insurance
Anxiety About Industry Complicates Consumer Choices" link here. The article discusses the unusual idea of selling a life insurance policy if you believe you don't need it, or become squeamish. But within a state, if a life insurer gets in trouble, the other competitors have to help stabilize it. But annuitants may feel queasy that over time insurers may be unable to pay out life annuities certain, as life spans increase (as with pensions) and investment assets fail to rise for insurers because of a prolonged downturn. Eventually the whole industry could come under stress.

Thursday, January 29, 2009

Electronic waste exports not meeting rules; a huge problem, out of control?

If you really want to worry about your karma, look at the Time Magazine article Jan 19 “E-Waste Not” by Bryan Walsh, link.

The “short of it” is that a lot of our electronic waste (computers, cell phones, TV’s) winds up in Guiyu, China. If you want to wonder about dependence on the poor and slave-wages in other countries, think what the poor do contaminating themselves in this town salvaging scrap.

A Government Accountability Office report, Aug. 2008 (link here (“Electronic Waste: EPA Needs to Better Control Harmful U.S. Exports through Stronger Enforcement and More Comprehensive Regulation”) found that 43% of all recycle exports bypass required permissions from the Environmental Protection Agency of destination countries.

ABC News had reported on this problem in April 2008, in a story by Grant Gross, here. ABC also offers a "gross out" slide show of five graphic pictures of waste in China here.

The Time article does note many improvements in manufacturing computers, to use much less of toxic substances.

Computer manufacturers like Dell have charged small fees for recycling old machines. Most cities have recycling events once a year around the time of Earth Day. Washington DC has often held one at the Convention Center.

Sustainability, everyone?

Wednesday, January 28, 2009

Several trillion more may be needed for bailout, to mop up toxic assets: the "schizoid economy"

On the day that the House passed the first stimulus package – with no Republican votes, Geithner is hinting that soaking up the “oil spill” of toxic assets could cost 3 or 4 trillion, sums that we would have no way of managing without eventual inflation or calls from foreign investors.

The New York Times story is by Stephen LaBaton and Edmund L. Andrews, “Geither Says Plan for Banks is in the Works” (Jan. 28) here but Yahoo! reproduced an AP story by Daniel Wagner warning that hundreds of billions more will be needed.

There will always be a temptation to look for pockets to pick, as I wrote on my main blog Sunday. We face the "Schizoid Economy."

Monday, January 26, 2009

National Building Museum sponsors "Green Community" exhibit

The National Building Museum, at Judiciary Square in Washington DC, is holding a year long “Green Community” exhibition in an alcove on the second floor. The display runs from Oct. 2008 to Oct. 2009.

The exhibition comprises a number of stations showing aerial photos of several cities, along with videos and photos of renewable energy projects in these cities. The most interesting may be Greensburg KS, which, in rebuilding from the tornado, is putting in wind turbines. The aerial photo showed miles of farmland, divided into mile squares, with the town in the middle.

The museum does not allow photography of indoor exhibits. You can see something similar by going to Google, then to maps, entering “Greensburg KS” and then to “satellite”. The museum’s article on Greensburg is here.

There were similar stations for areas like Savannah GA, London, Santa Monica CA, Muskegon Heights MI, and New York City.

The Museum will sponsor a roundtable, “For the Greener Good: Sustainability Roundtable” on Tuesday Jan. 27 2008, link here.

Sunday, January 25, 2009

National service plans get quick attention from conservative columnist

Morton Kondracke has an op-ed on the front page of the “Voices” section of the Sunday Jan. 25, 2009 Washington Times, “National service time has come,” link here.

Running the political range from Senator Edward Kennedy to Orin Hatch, there has developed a proposal to expand Americorps from 75000 to 250000 citizens a year. Right now it pays a small stipend of $12500 a year (a decent salary when I started working in 1970) and a $4700 scholarship. Given the economy, there may be many more young people not starting college for several years, until in there 20s.

Some Republicans, Kondracke says, may fear that Obama will convert service volunteers into a political following.

But the administration has enlisted Colin Powell (a Republican) to try to convey the idea that service is a moral obligation ("karma") for every able American, starting with the "national day of service" on Martin Luther King Day last Monday. Obama will use the Internet in a way that recalls FDR's use of radio and fireside chats.

An expansion of national service also helps argue for ending “don’t ask don’t tell” for gays in the military. Conditions of forced intimacy can occur in many service situations, especially overseas in the Peace Corps.

Yesterday CNN was reporting a lot on the “Obama Effect.” When African American kids take standardized tests on days where Barack Obama was prominent in the news, they did as well as white kids on certain standardized tests. But on other days, they gave in to the fear of showing up peers (a kind of perverse “reverse socialization”).

Saturday, January 24, 2009

Obama gives first Sat. video address; financial experts accelerate talk of nationalizing the banks; what about bond holders?

It seems these days that the news only gets worse on the financial crisis – just when it might be good to change the subject, such as the decision by the Fairfax County School Board to give grades on the 10-point scale as everyone else.

The New York Times editorial staff has an online discussion blog this morning “Nationalizing the Banks” (with a placard red-white-blue picture of a Bank of America branch), here. There is a general consensus that we are near the end of the road – as Obama said, we can’t keep kicking the can. Nationalization is a last resort, and we are just about there. It sounds as thought "bad bank" sounds like "bad dog." There is also a constructive discussion of the failure of rating agencies and the need to regulate them.

The biggest downside is that shareholders and bondholders get wiped out. Shares have been largely wiped out already compared to over a year ago, but the bond comment is really scary. Bonds are supposed to be “safe”, especially for retirees, right? What about the bank bonds hidden away in supposedly mainstream mutual funds in so many portfolios?

It sounds like we’re going to see “nationalize” as a method in a java library soon. Are we on our way to full socialism? No, say the experts. It’s hard to make sense of it.

The Washington Post is filled with gloom and doom headlines this morning, about the accelerating of the global crisis, and Obama’s need to decide on how big the stimulus and next bailout will be.

There are numerous media reports that some of the banks receiving bailout money have been doing heavy lobbying (big surprise!).

The Wall Street Journal has a three part video “The End of Wall Street: What Happened” here. Some effort went into this 25 minute short film, as if it were going to be shown in film festivals like AFI's Silverdocs. It compares credit default swaps to the parlor bets on ships returning in Britain back in the 18th Century.

Barack Obama has his Saturday morning video address at the Whitehouse site (on "The White House Blog") here. You have to click on the play arrow to start it (that’s because of a minor security fix that the White House wanted to prevent unwanted cookies). He mentioned a proposed American Recovery and Investment Act before Congress with a website "Recovery" (shell link here) that will make transparent how taxpayer stimulus money is being spent. Obama mentioned the paradox that in a deflationary depression there is job loss even when there is so much work to be done.

CNN has a “Dear Mr. President” column (link)with suggestions ranging from green tax credits and stopping the bailouts, stopping foreclosures, to “give each person $25000”. No, we can’t. But point 14 is alarming: means testing entitlements: phasing people out age 65 and under from entitlements proportionally and make them depend on their families (I presume). “Let's stop taking money from people who are working to pay for these programs we can no longer afford.” Trouble is, those of us who worked paid our FICA and Medicare taxes, too.

Obama will deliver the State of the Union address in February, probably right after the Super Bowl; Fox News story here.

Another idea floated on CNN is "wage loss insurance" (kind of a blowup on unemployment insurance) which is supposed to be related to the offshoring debate, but the first peril that could befuddle that is "online reputation."

Thursday, January 22, 2009

Sorkin, on ABC, warns of doubling bank bailout

Andrew Ross Sorkin (who looks fresh right off a college campus, but then, so does Chris Cuomo) warned on ABC Good Morning America at 7 AM this morning that the government is about to have to double the size of the bank bailout. As we’ve said, another $1.5 trillion is needed just for the banks immediately, and even more is needed in Europe.

The latest wave of bank panic resumed Friday when Bank of America found that it had to ask for $20 billion more to take care of Merrill Lynch, which it had acquired. Now everyone else is in line.

The ABC story isn’t up yet, but Sorkin’s own financial article in the New York Times, “Obama’s Bailout Challenge” is here on Jan. 19. I suspect he’ll have another one very shortly. Sorkin makes some comparison of Sweden’s staged nationalization of banks, but says our problem is much bigger. A good comparison, he says, is Japan in the 1990s.

Bank stocks rallied Wednesday, Obama’s first full day at work, but they’re likely to sink today as this talk goes around.

Timothy Geithner’s confirmation hearings Wednesday were underwhelming, with his own IRS problems and lack of specific gravity – sorry, specificity. Blomberg’s story is here.

The deficit and debt seems to grow every day. One tempting target that worries me: means testing the “earned entitlements” very quickly, which countries like Australia do now (although Australia has much stronger privatized retirement systems, which is what we should have had all along – so it couldn’t become cannon fodder for someone else’s mistakes). Other countries that have faced these problems, like Japan, have much more cohesive family structures (and “filial piety”) than we do. It’s a cultural confrontation that can grow quickly.

Wednesday, January 21, 2009

Obama may face banking emergency right away

The New York Times has a most sobering article this morning by Edmund L. Andrews, reproduced on CNBC, “Obama Has No Quick Fix for Banks,” link here.

The talk of nationalization is feeding on itself, driving investors into pre-emptive selling quickly. Bank losses seem much worse than even imagined a few weeks ago. Yet, Mr. Obama still believes that putting a floor under home prices may well help protect the banks from further steep losses.

Dutch bank ING fell 25% Tuesday, after major European losses Monday while US markets were closed and rumors that ING was negotiating a further deal with the Dutch government (see this story by Miles Johnson. ING USA has laid off 7% of its US work force recently. I was laid off, but with ample severance and early retirement (at age 58, it wasn’t exactly a buyout but had the same effect as one), at the end of 2001 in the previous downturn brought on by the 2001 recession and 9/11. It would be possible for ING to spin off the US operations as a separately traded and capitalized company, with the major operations in Minneapolis, Atlanta and Hartford as the nucleus of the company.

While much is written about the financial condition of Bank of America after taking over Merrill Lynch, and of Wells Fargo after taking over Wachovia (both companies seem to be asking for more Tarp money), the overall impression from many financial pages is that the “virus” is much worse in Europe (particularly Britain, Germany, Belgium, the Netherlands, and Spain) than even in the United States. Only a coordinate, consistent policy among all affected countries will work. It seems that Mr. Obama and the Senate need to get the confirmations done today and get to work immediately. The financial emergency will be a major distraction and keep Obama from getting to other issues quickly. He must deal with these right now, even today.

Jack Guttentag ("The Mortgage Professor") does have an interesting perspective "The Foreclosure Crisis" on Yahoo! here and gives the details of his own "Pickens Plan for Mortgages", (that is, "Breaking the Back of the Financial Crisis") dated Dec 2008, on his own site here.

In the longer run, Mr. Obama must deal with the idea that huge debts will turn away foreign investors (China) and cause them to demand repayments. That’s why he talks so much about entitlements, but their problems are farther down the road, and it does not make sense to mix up the problems in social security and Medicare with the immediate problems with the banks.

Also, oil prices are slowly coming back, now to $41.

Smart Money has an article "Get Paid While You Wait for the Rebound" of some bizarre investments, here.

Post Script:

Anybody notice this morning (Jan. 21) that The Washington Post and The Washington Times coincidentally have the same headline banner in print, "Obama Takes Charge"?

Tuesday, January 20, 2009

Obama takes office: while Washington parties, Blodget suggests total seizure of banks; $2.5 trillion more in losses soon; US banks insolvent?

Barack Obama (he did use his middle name) stumbled slightly at the oath of office (or it was Chief Justice John Roberts who stumbled, as the Oath was given a few minutes late, and after playing a musical chamber piece by British composer John Williams) and gave an eighteen minute address today. The text on CNN is available here and also is there as a video. CNN has a video of the oath here sponsored by ExxonMobil, the only company in my own portfolio that has done well during the current mayhem. (It’s the main reason I stay afloat.) (Hint, folks, energy – renewable -- and utilities ought to do well.)

A central quote was:

“The success of our economy has always depended not just on the size of our gross domestic product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart -- not out of charity, but because it is the surest route to our common good.”

Later he referred to 1 Corinthians 13:11:

"We remain a young nation, but in the words of Scripture, the time has come to set aside childish things."

Even so, with “the cat away” and the country partying under high security in Washington, the financial markets are open and sinking today, with very malignant news for overseas banks, including a matter in Britain with the Royal Bank of Scotland, all of which the new president probably will have to tend to immediately (even this afternoon) on this side of the Atlantic.

And, forget the idea of a “bad bank.” Henry Blodget has a striking piece (“Why are we so afraid to fix the banks the right way?) suggesting that Obama can seize many of the banks and “fix them the right way” without deficits. The only problem is that shareholders get wiped out – but they’re almost wiped out anyway. Here's the link.

Today Nouriel Roubini (next to Yahoo!'s tech ticker) called the U.S. banking system “insolvent” and predicted at least $2.5 trillion in losses almost immediately, in another bombastic piece on Yahoo! here.

The worrywarts and sharks in the financial industry (and, for that matter, mobile "gossip boy" bloggers) will not let the president alone even long enough for his catered lunch at the Capitol and his public transfer-of-power signing (left-handed – you know, like a pitcher (hopefully not Chuck Stobbs) inviting Mickey Mantle to bat right handed). Barack Obama has his work cut out for him on the first afternoon on the job.

Today's performance on the Dow was the worst ever for Inauguration Day. Banks sink not only on mortgages but credit cards and people losing their jobs -- in short, deflationary depression.

Note on Internet search business:

Efficient Frontier, a major leader in SEM technology, issued a press release today "Despite Recession, Search Advertising Held Value, ROI was Steady and Retail Sector Saw 9% Spend Increase Annually", link here. The report, when read closely, seems mixed.

Jan. 21

One other true thing: Barack Obama (the first "geek president") should not only keep his Blackberry; he should have his own computer in the Oval Office or the adjacent study (in the West Wing). It probably ought to be a MacIntosh. Yes, he could surf our blogs every morning himself.

ABC News reported that Barack Obama took the Oath of Office a second time Jan. 21 in the Map Room because Chief Justice John Roberts got one word out of sequence on Jan. 20. Story by John Tapper: "Political Punch: Obama Took Oath of Office Again Tonight", link here.

Monday, January 19, 2009

Martin Luther King Day: The banking crisis worsens, while people tend to a National Day of Service

The Wall Street Journal has a pretty good editorial today (Jan 19) “The Bush Economy,” link here. The WSJ points out that recession had already begun when Bush took office, with the dot-com bubble bust, and that his early tax cuts and encouragement of Fed policy, while seeming to offer a short term boom after about the start of 2003, did indeed only create another unsustainable bubble (I’m reminded of the Magnolia/HDNet movie of the name “Bubble” that would appear during this false housing boom.). Wall Street only had a party because the Fed seemed to be giving its blessing, and yes, the rest of us felt their hangover. Maybe it was bad policy, or maybe it was bad leadership, and a feeling that Greenspan and then Bernanke are personal “role models”, but right out of Ayn Rand. The editorial offers a graph with the legend, "The Fed's Folly."

What’s clear now is that the bailouts, while keeping the ATM machines running, aren’t unfreezing credit much, and we wonder what will happen to the auto companies come the Ides of March. So the Washington Post this morning has it’s “bad bank” article, about proposals to quarantine toxic assets (the way and antivirus program quarantines dll’s and exe’s), as by Binyamin Appelbaum and David Cho, “One Idea for Bank Crisis: Quarantine the Bad Assets: U.S. Officials Look To Solution by Sweden in ’91,” link here. The Wall Street Journal indicates that Britain is considering a similar idea. All of this makes it that much harder for Barack Obama to get help to upsidedown homeowners.

Today, Obama’s campaign (along with Colin Powell) did organize its National Day of Service. In his Inaugural address tomorrow, Obama is expected to say that every day will be a day of service. In Washington DC, Josh Groban and David Arquette worked at a hot meal center. In South Arlington, there was a simple canned food collection, at a food bank often staffed by volunteers from area churches, including the Clarendon Presbyterian Church. The picture is of the collection effort today.

Saturday, January 17, 2009

Foreclosure crisis really hits prime borrowers hard, too

Dina ElHoghdady and Sarah Cohen have a front page story in the Saturday Jan 18 Washington Post that corrects a common misperception of the foreclosure crisis. The title is “The Growing Foreclosure Crisis” (part of a series: “The Crash: What Went Wrong”) and the link is here.

Consider this table, in millions

Category, Mortgages, Delinquent, Percent:

Prime borrowers, with good income and credit and significant downpayments, actually account for 84% of the delinquencies. The Alt-A category is controversial, and reflects good credit with little documented or insufficient income. Subprime is well known.

Much of the grief for prime borrowers is attributable now to recession, but much of it comes from the fact that the housing price collapse affects them, too, and some have lost down payments.

The story shows the hardest hit area to be around San Bernadino and Riverside CA, about 16% delinquent. The Washington DC area stands at 8%, with concentration more in certain neighborhoods. Boise Idaho is doing well at 5%.

I suppose that this story helps make the argument that homeowners need much of the economic stimulus money, but you either have to print it or play Robin Hood and take it from somebody else.

Friday, January 16, 2009

Obscure political appointment raises the questions about "conflict of interest" over public speech; more implications for "reputation defense"?

A K-street think tank and lobbying group (OMB Watch, referring to the Office of Management and Budget) published a piece about a an appointment to the Office of Information and Regulatory Affairs (OIRA), Jan. 13, 2009, called “Transition at OIRA: What Kind of Change?” The link is here.

Actually, it’s a little more complicated. On Jan. 7, 2009 President Bush extended the tenure of Susan Dudley, but what is at issue is a report, linked in the article, about President-elect Barack Obama’s intention to appoint Cass R. Sustein, a “prolific legal scholar” to the position. The author of the OMB watch piece believes that Mr. Sustein’s writings can make him an inappropriate choice for the position. For example, he reportedly raised questions about the constitutionality of the OSHA (Occupational Safety and Health Administration of the Department of Labor).

I remember that early in the Clinton administration questions were raised about appointments based on their “writings” of Lani Guanier before her appointment as Assistant Attorney General. Of course, this all sounds reasonable when we’re talking about “political appointments.”

But, now we’re in the world of blogging and social networking sites where anyone can be a global publisher. Employers have to worry about the appropriateness of people in jobs, not just on obvious issues of “reputation,” but on the more subtle notion that clients might be distracted if they find out the employee’s views on things.

Thursday, January 15, 2009

Airline safety: what a surprise that birds are a problem (or a non-surprise!)

Well, by now, everyone has watch media coverage of the miraculous water landing of a USAir airbus (A320) on the Hudson River this afternoon.

Robin Roberts, an ABC News reporter, actually watched the incident from her balcony in her New York City condo. She was about to call 911 herself, but water taxis were present immediately. Private taxis showed up before the authorities did.

It was “women and children first” (like on the Titanic -- the media and passengers have mentioned this several times already today) with water temperature of 35 F and air temperature of 20 F. But there were only four injuries, all hypothermia. All passengers and crew were safe.

News reports have indicated that bird collisions on takeoff are much more common than the public realizes. There are at least 2000 a year, with up to $600 million in damage, but it is very rare for both or all engines to be damaged. This incident seems to have been an encounter with a V-formation of Canada geese. Birds, after all, are "the dinosaurs". Migratory bird populations seem to be increasing and "The Birds" (a la Alfred Hitchcock) seem to become immune to airport noise and devices set up to divert them. The worst incident ever was in 1960 with an Eastern Airlines flight.

Airline safety expert John Nance praised the pilot’s (the captain was an Air Force Academy graduate) decision to land the “glider” on water rather than try to make it to Teeterboro Airport north of the City, and risk crashing in a populated area.

However, had this been a longer flight (it was headed for Charlotte, NC and had many Bank of America employees) it would have carried more fuel and might have sunk quickly.

The Coast Guard will have to lasso the aircraft to keep it from hitting the Lincoln Tunnel.

I have probably flown 300 times in my life (four trips to Europe). Only once have I had a close call. In late August, 1992, returning from Cincinnati (actually Covington KY) to Washington, the Delta pilot gave a warning and said that we might have to return and to a crash landing. But then ten minutes later he said everything was all right. We landed normally but were rushed off the plane at arrival.

I’ve had very few cancellations, but once a weekend trip to Nova Scotia from New York was postponed because of a wildcat mechanics strike. In later winter 1979, Southwest Airlines took off from Amarillo, TX despite zero visibility fog associated with a stationary front, unusual in that part of the country.

YouTube has a CNN video almost immediately after the crash, with passenger interviews added, link here.

Wednesday, January 14, 2009

Banks groveling for more bailout money, and they really need it

Steven Pearlstein has an interesting column in the Business Section of the Wednesday Jan 14 2009 Washington Post, “Unfairly rewarding greedy bankers, and why it works,” link here. He also has a Q&A column on the bailout in the Post today.

Pearstein argues that the credit crunch or freeze (as Ali Velshi on CNN and Suze Orman on Oprah call it) results from a loss in the “shadow banking system” which still needs to be able to securitize loans. The banks simply have to have more capital with “fungible” money.

Last night (Tuesday), Suze Orman told viewers on ABC Nightline that one should never take money out of a secured asset (home equity) to pay unsecured debts (credit cards).

And today the New York Times has a front page story by Edmund L. Andrews and Eric Dash, “Deeper Hole for Bankers: Need Keeps Growing for Funds in Bailout,” link here.

Barack Obama wanted most of the remaining $350 billion in TARP bailout to be redirected to help homeowners. But so had John McCain. But it looks like the banks will get it before Obama is in office.

Tuesday, January 13, 2009

Nature Network director calls the U.S. "poor"

The Executive Director of New York’s Nature Network, Bill Shore, has characterized the United States’s “true economic condition” with one word: poverty.

That brutal but brief letter appears on p A20 of the Jan. 13 New York Times on “Advice for Obama on the Economy,” link here.

The worst thing we can do is send people to the Malls, when we have a non sustainable energy infrastructure, enormous foreign debt, and balanced of payment deficits.

I guess he could have reminded us that T. Boone Pickens has a Plan.

And he could have talked about the “End of Suburbia” movies. It almost calls for a kind of Amish local, labor-intensive self-sufficiency.

Monday, January 12, 2009

National Safety Council calls for total cell phone ban for drivers

Drivers talking on cell phones are as impaired as legally drunk drivers, according to a University of Utah study. Even using hands-free devices doesn’t significant reduce the impairment. Other activities, like “Gossip Girl”-style text-messaging while driving, add to the risk.

The study was published July 29, 2006, and the story on the University website is here.

This morning, MSNBC reprinted an AP story and the Today Show reported that The National Safety Council wants to ban all cell phone use when driving, link here. In early 2009, there are six states that ban hand-held cell phone devices: California, Connecticut, New Jersey, New York, Utah and Washington — along with the District of Columbia. Washington DC is one of the strictest jurisdictions for enforcement of all traffic laws in the nation, with photo enforcement of speed and red lights,

In fact, NSC’s own press release is easy to find on the web, and here it is. To quote: “A study from the Harvard Center of Risk Analysis estimates that cell phone use while driving contributes to 6 percent of crashes, which equates to 636,000 crashes, 330,000 injuries, 12,000 serious injuries and 2,600 deaths each year.”

In a few areas (including Washington DC) there have been discussions of banning eating, coffee drinking, and other activities while driving.

Other jurisdictions have thought about raising the driver's license age, often 16, and phasing it in, with supervision and day use only at first. Back as far as the 1960s there were calls to raise licensing ages, in a world where farm kids learned to drive tractors and cars at 13 or 14 (in the WB's "Smallville", young Clark, who is supposed to be "legally" 14 in Season 1, is shown driving cars and farm equipment).

Sunday, January 11, 2009

Minneapolis paper, using school systems as examples, argues for tort reform

The Minneapolis Star Tribune on Sunday June 11 has an editorial that sounds like a stron argument for tort reform. The piece is called “Life: A lawsuit waiting to happen. In America, people used to defend their rights: Now they use them as a weapon”. The link is here. The piece, and comments that follow, are full of anecdotes where people shut things down out of fear, or don’t disclose information properly out of fear. The problem is particularly gratuitous with school systems, who shut down programs out of fear of suits.

John Stossel has covered this issue a few times in his ABC 20/20 “give me a break” column. Stossel has advocated the European system of "loser pays." Libertarians have been mixed on tort reform, as the principle of torts is essential to the idea of "freedom of contract" and property rights, but in practice torts are a tool for abuse, particularly of larger interests (even unions) to harass smaller and more efficient competitors out of business. In Washington DC we have had a particularly egregious abusive lawsuit brought by a former judge against a small drycleaning business.

I can imagine another editorial all to easily on how we might need tort reform to save the Internet some day.

Another good related topic for a succeeding editorial would be “libel tourism.”

I lived in Minneapolis, right downtown, from 1997-2003. They were some of the best years of my life. As I recall, Jesse Ventura, independent governor from 1999-2003, advocated tort reform.

Saturday, January 10, 2009

Foreclosures, "jingle mail", nonrecourse laws and deficiency judgments

The Washington Post Real Estate Section, on p F01, has a story today on “people who walk,” by Alejandro Lazo, titled “Walking Away, and What It Leaves Behind: The Wide and Lasting Impact of Quitting a Mortgage,” link here. The print version has an amusing graphic of blue footprints.

People with upside-down mortgages are sometimes walking away with “jingle mail”, partly because they had regarded their homes as investments rather than just as places to live. They are exerting a lot of political pressure to demand that the bailout money help them.

But a foreclosure can drop someone’s FICO score by as much as 200 points, quickly into the Fair or Poor category for many people. Presumably a short-sale or workout leaves the borrower's credit in much better shape.

States like California and Arizona have “nonrecourse laws” to prevent banks from pursuing people for deficiency judgments. However other states, including Virginia, Maryland and Texas allow deficiency judgments, even if in practice not many lenders are trying to pursue them, since subprime borrowers probably had few assets.

During the previous real estate bust, in Texas and the southwest in the late 1980s and early 1990s, many homeowners were pursued, however, particularly those with conventional notes. (FHA and VA loans tended not to do this even then.) It was even possible for original owners to be pursued after unqualified assumptions (which FHA stopped allowing around 1994). The orange paperback James A. Wiedemer: "A Homeowner's Guide to Foreclosure: How to Protect your Home and your Rights", Dearborn, Dearborn Financial Press, 1992, gives some gory details. I was caught in the downdraft (caused by falling oil prices, savings and loan problems, and illegal land-swap speculation bubbles busting) when coming back from Texas in 1988, and sold the home-condo at a small loss under unqualified assumption, but still a default followed later. I made good and was eventually paid back all the money with interest, so my situation eventually turned out well (although it was traumatic when it started). Condos in Dallas sometimes were down in the teens in the early 1990s, to recover only toward the middle or end of the Clinton boom decade. My impression is that Texas is in better shape than a lot of the rest of the country now this time around.

Friday, January 09, 2009

Obama campaign organizes massive volunteer drive; KIPP schools speak out on education

On Friday, January 9, WJLA and NBC Washington reported on a new push for volunteer service using Barack Obama’s campaign organization. It is called “Renew America Together” with the domain name USAService (link).

Colin Powell was shown as encouraging every American as expected to become involved. On the surface, this sounded like a call for national socialization. The program is supposed to start Martin Luther King Day, Jan. 19, one day before the Inauguration. The website offers a map with entry of zipcode and coordinate volunteer activities within a specified number of miles of the zipcode. They tend to be things like food collection drives. They don’t seem to be really specialized. I can imagine, and will start looking at ideas like chess clubs for inner city children.

In the 1990s I volunteered with a meals on wheels service then related to AIDS (now more inclusive) Food and Friends, here.

Today, the founders of the Knowledge Is Power Program, KIPP – Mike Feinberg and Dave Levin, have an op-ed, on p A17 of The Washington Post, “What ‘Yes, We Can’ Should Mean For Your Schools”, link here.

They list five general points, which would aim toward much more national standards of performance and teacher quality. The KIPP school program is incredibly demanding of the teachers that its schools hire. Check the invitation and see what is involved.

In the meantime, the news media report over 7% unemployment, officially. And we did this to ourselves. We didn’t have to.

Thursday, January 08, 2009

There's plenty of Web reaction to Barack Obama's dire warning about another quasi-Great Depression

This morning (January 8), AOL’s strike page featured a story (from the AP) about Barack Obama’s dire warning that the US and global economy could still get much worse, and that this time the recession (or, frankly, depression) could become prolonged and last for years. The carrot in his warning was that Congress must indeed pass a massive economic stimulus package.

Yet, the “living presidents” luncheon at the White House yesterday and the CNBC interview Wednesday evening really did not convey that kind of urgency. And in the interview Obama said he was trying to establish a range on how much expansion of the deficit (and addition to the national debt) was acceptable.

The AP story by Jennifer Loven, if read between the lines, seems to link back to the mechanics that caused the prolonged recession in Japan in the 1990s (the supposed “liquidity trap”) as well as the Asian and Russian financial crises of the late 1990s. Obama seems to be following the thinking of liberal Nobel economist Paul Krugman, whose book “The Return of Depression Economics and the Crisis of 2008” I reviewed yesterday on my book review blog. Obama obviously has read the book recently. Even that book distinguished between depression economics and depression "reality".

Nevertheless, there is an enormous reaction on the Web this morning, all over the map. For example. Ruth Calabria writes on MarketWatch (“Voice Your Opinion”) and opens her op-ed by talking about sending the unemployed off to war as cannon fodder during WWI (link here). But on Newswire “Jazzman” writes that Obama is under the influence of “radical ideology” connected with Afro-centrism, link here and that the existence of the United States could be in question.

Economic perils tend to sift down not just to direct hardships but to questions about the basic rights of various people, as individuals, to be seated at “the table.” At least, they demand that everyone see the hidden debts that he or she owes. I’ve seen this all before, like during the hardships of the 70s. This time, maybe it’s (more) real.

Update: 12 Noon

Barack Obama gave a major speech, to the effect that the economic crisis is unlike any other in our lifetimes, on all major networks at 11:15 AM today. I haven't found the text of the speech yet, but here is the MSNBC story. I'll post the link for the speech as soon as I find one (visitors, please give link if you see one).

The "community blog" on Barack Obama's own website announces that the speech will be made today, here.

Here is a transcript of the speech on CNN. Obama delivered the speech at George Mason University at Fairfax, Virginia. Obama calls his program "The American Recovery and Reinvestment Plan."

Wednesday, January 07, 2009

DC Schools struggle with certifications; Maryland schools rank #1; Poor children develop differently according to study

The Washington DC school system is trying to reduce the number of technically unqualified teachers under “No Child Left Behind”, but maintains that the number is misleading for a variety of reasons. Sometimes teachers have Praxis certifications in closely related fields but must be counted as unqualified.

Bill Turque has a story in the Metro section, p B01, of the Thursday Jan. 8, 2009 Washington Post, “D.C. Reduces Number of Unqualified Teachers: City still trails neighboring jurisdictions,” here.

The less obvious issue is the controversy over the need for education courses. As I covered on my main blog on Aug. 22, 2008, the need for “education” courses drives away many people, especially career switchers or retirees, who might consider teaching and who have “real world” experience. But some such persons may be less temperamentally inclined to work with cognitively disadvantaged children.

A Post story by Nelson Hernandez Jan 8 (page B02) indicates that Maryland’s public schools are the best in the country. The link is here.

One of the studies was conducted by Education Week. I noticed on their front page an important story by Richard Roundup, “Scientists track poverty links to cognition: socioeconomic difficulties affect prefrontal development of children,” link here. Michelle Rhee, DC Chancellor, has insisted that any child can be taught to be a good student, at least regardless of poverty. But the practical evidence is overwhelming that students from prosperous homes with married or at least stable parents do much better in school, and learn much of what they know at home as well as in school. The study will be published in the Journal of Cognitive Neuroscience in August 2009.

Another study ranking Maryland first was conducted by MGT of America.

Monday, January 05, 2009

Michelle Rhee will demand even more of DC teachers

Washington DC School System Chancellor Michelle Rhee has created even more controversy by announcing radical plans to shake up teacher training. Perhaps the latest story is an escalation of what the teacher's union may perceive as her "reign of terror" with teacher dismissals as "the national razor".

Rhee advocates the belief that student performance depends on teaching intensity and skill and not just on home life. She believes that students from any home background can achieve academically. I thought, when I read about the comments, about the appearance of high school freshmen and sophomores on McGarry’s “It’s Academic” on Saturday mornings on NBC-Washington, and syndicated in some other cities.

The Washington Post story is by Bill Turque, appears on p B1 (Metro) of the Jan. 5, 2008 Washington Post, “Rhee Plans Shake-Up of Teaching Staff, Training: Career Development Would Change for Those Who Remain,” link here.

Rhee will dismiss or buyout many more teachers, particularly those whose performance does not improve within 90 day probation and coaching. There seems to be a great deal of emphasis on reaching every student, including the most underprivileged. Teachers must be in this for the career and for a calling, and not just for a job. It’s hard to see how the teachers’ unions will deal with this.

Rhee seems to have the view that certification from the National Board for Professional Teaching Standards does not necessarily correlated to improved performance of students. She wants to deemphasize this program and replace it with teacher mentoring or coaching and the use of a teaching consulting firm from Massachusetts.

Sunday, January 04, 2009

American Clean Skies Foundation calls for natural gas development

Today ABC news on Sunday morning introduced the website and network news channel “” which has a very elaborate website if you visit it. It calls itself “America’s Clean Skies Network” (curiously, the HTML code doesn’t have a title). Margaret Ryan is executive director and Denise Rose appeared on ABC. Randall Swisher from the American Wind Energy Association also appeared. The network runs an “energy news center” on weekdays at 9 AM until 4:30 PM.

CleanSkies is sponsored by the American Clean Skies Foundation which actually offers a sister website that is easier to use.
The organization supports the development of natural gas and maintains that it clean and sustainably available in the United States. That comports with the Pickens Plan, previously discussed on this blog. Pickens got back on the air Jan 5 2009 to promote his plan again after NBC Nightly News, and added "Yes we can".

Saturday, January 03, 2009

Look at the national debt clock; can we trust the government? Bubble in T-bills coming?

A couple of New Year’s stories highlight the potential gravity of the growing national debt. According to a Washington Post front page story Saturday Jan. 3, it will increase by $2 trillion this year in this playout of “bailout nation.” The story title is “U.S. Dent Expected to Soar This Year: $2 Trillion Increase May Test Federal Ability to Borrow,” link here.
You can look at the National Debt Clock online here (it increases as you refresh the web page). It is over $10 trillion, or over $30000 per person in the United States.

About 40% of the private debt matures in less than a year, causing government to borrow more. What’s particularly dangerous is the debt held by countries like China, on which we depend on cheap labor.

On Friday, January 2, John P. Opdyke offered a piece on the front page of the Wall Street Journal, “The Doomsayers Who Got It Right: More bad news in store for 2009? Last year’s cassandra’s are still Gloomy” link here. The link is here.

The story mentions Bob Rodriquez, of the FPA New Income Fund, as predicting “a massive bubble in Treasurys,” adding “quite frankly, we do not trust the U.S. government.” How libertarian! Rodriquez says that the first warning signs appeared as Alt-A mortgages began going south as soon as 2005: the were people with good credit but unsubstantiated or low income. That alone is an interesting observation about the nature of our labor markets.

Friday, January 02, 2009

Immigration debate in VA may lead to a film project; in the mean time, tempers flare; stay-at-home moms drive debate; also, a kid's generosity

This morning I found an interesting film project on YouTube, “The 9500 Liberty Project”, which purports to be the world’s first “Interactive Documentary on YouTube”, with link here. The project, setting up a "virtual town hall", will document the angry “debate” on illegal immigration going on in Prince William County, Virginia (particularly around Manassas and Manassas Park), since about 2005. (Some say that the "illegal" part has now dropped off.) The tempers have flared in a number of occasions, over local elections and local officials, even with threats of or even filings of SLAPP suits, and now the idea that illegal immigration and the foreclosure crisis are related (an idea often mentioned in conservative papers like “The Washington Times”).

The grass roots film project looks interesting, and I can see other similar projects could be envisioned, such as one regarding “don’t ask don’t tell.”

The Washington Post today has a front-page article by Kristen Mack, “Pr. William Mothers of Dissension: Stay-at-Home Moms add Politics to Duties”, link here. I couldn’t find the exact blogs (that are supposed to track both sides of the issue, but which the newspaper story did not spell out), but instead found angry retorts and legal controversies when I went searching. You can go to the “BVBL” site (apparently mentioned in the Post article) here and follow the links, but it’s hard to tell what is factual and what is going on. (When I tried the blackvelvetbruecelee blogspot blog mentioned there in two different browsers, it came back encrypted or overlaid, possibly Chinese characters; the visitor can experiment with language translators.) Where is the real debate on the substance of the immigration issue? You can also visit "Help Save Manassas" here. The "anti-bvbl" site seems to be this (link from an April 4, 2008 Post article by Kristen Mack).

There is better news today about human nature. ABC’s “Good Morning America” today (Jan. 2) presented an eleven-year-old boy in Florida who had set up his Red Wagon Foundation to help the homeless. The story (“Kid Holiday Hero Helps Homeless: after 2004 Hurricane Kid Asked How He Could Help, Hasn't Stopped Since” by Morgan Zalkin, Kiran Khalid, and Lee Ferran, link here. This is hard for adults to do when their own lives are not in control.

Update: Jan. 6, 2009

Today, ABC "Good Morning America" ran an undercover experiment in a New Jersey deli: "Confronting Racism in America: Customers React Very Differently When Hispanics Denied Service at N.J. Deli," by Eric Hanan and Yardena Schwartz, link here. The experiment played on the public emotions associated with the illegal immigration issue when day laborers, believed to be illegal (perhaps incorrectly) were not served.

Thursday, January 01, 2009

Could we have a world without money? It's not just "pay your bills", it's "pay your dues"!

David Ignatius offers a nice moralistic op-ed on p A13 of the New Year’s Day Washington Post, “It’s Time to Pay the Bills,” link here. I would add another phrase, “It’s time to Pay the Dues” (or “pay your dues”). Visitors familiar with the tone of some of the posts on my main blog probably know what this means (it would make a good multiple choice question on a history test in Virginia’s SOL’s).

Ignatius, writing a piece that starts out as if it belongs in The Washington Times instead, quite reasonably questions where we stop sliding down the slippery slope of what we call Bailout America, and it isn’t John McCain’s “Country First” – it may come back to Barney Frank’s “punish the country”.

I divert for a moment, recalling that on a Sunday night in March 2008, seeing a headline on AOL news, and writing the posting called “New alarms: ‘Margin Calls’ on the US Economy and the Financial System”, about Bear Stearns, on March 16 (navigate there with the archive links on the left side of this page). Then, on another Sunday afternoon, September 14, 2008, I saw another AOL headline about Lehman Brothers and a second one about AIG’s credit rating. I had intended to blog about the movies. That was indeed The Margin Call (that would make a good name for an indie movie, wouldn’t it, maybe with John Malkovich). I wrote a post with a milder title “Weekend Wall Street Turmoil”. But I also dropped everything else that I was doing and emailed a financial planner / life insurance agent that I knew pretty well and told her to read all the breaking news before she talked to another client. Here we go – I worked in the life insurance and financial services business in I.T. and know it pretty well (ING and ReliaStar, etc) but I don’t want to “sell things” – I’ve been through all this before. But anyway, I told her in the email that this was financial Armageddon (the end of Life As We Knew It), with the whole Sunday session on Wall Street falling apart over the credit default swaps, and that either the government rescues Lehman and AIG right away, or the whole economy would fall like a house of cards. This all happened on my computer in less than an hour. She wrote back soon, pretty much agreeing.

Ignatius maintains that that Paulson pretty much missed the test question on Lehman Brothers; but maybe not; if he had saved it, we’d still be in pretty much the same place on the Bailout Nation slide.

What this amounts to is a failure of our financial business leadership, and the political leadership in both parties (it’s as much about Congress – now Nancy Pelosi – as it is about Bill Clinton and George W. Bush) to know right from wrong. In our system, we get the leadership that we elect, and we therefore get the leadership that we deserve. Here’s a specific example of my own. Tuesday, on the way to see the new Visitor’s Center at the Capitol (that opened Dec. 2) I got into a conversation on the Metro with a middle aged couple from Sacramento, CA about the housing bust. Yes, they were upside down like everybody else, but they were good moral Republicans and paying their mortgage and all their bills. But they were mad that their neighbors were intentionally defaulting on upsidedown “pineapple” houses and then going across the street to buy foreclosures. These are ordinary citizens, doing what’s morally wrong (but legal) because everybody else is doing it.

This makes me think we’re completely out of control. Ordinary homeowners encouraged to commit what amounts to fraud. We’re going to wind up with an economy run on Monopoly money.

In fact, it’s pretty easy to imagine an Armageddon style disaster movie where people start using Monopoly money after civilization has collapsed. You just keep printing it. It doesn’t matter what it looks like. Welcome to another Weimar Republic. Every banker becomes another Bernard Madoff, and nobody can get caught.

Or, if you will, imagine a civilization maybe forty light years away that doesn’t have the concept of fiat money at all, only “karma”. (Maybe it’s on a smaller planet, like the History Channel’s “Arinelle” with one side facing it’s sun all the time.) That’s another good sci-fi or Ion Channel premise. Such a civilization probably watches our movies and TV shows from a few decades ago and can tell where we’re headed. It would scoff or laugh at us, knowing in advanced extraterrestrial wisdom that all money-based economies have not just business cycles but real business depressions.

Anyway, given Ignatius’s pessimism that Bailout America can continue to function, I still wonder how we can have infrastructure programs without almost another dictator. After all, FDR was practically a dictator himself, however benevolent. Is that what we expect of Barack Obama?

So, maybe we’re headed for a Sci-fi Channel style world without money at all. We're headed, at best, for a "free market cultural revolution." Pay your bills and pay your dues.