Friday, October 03, 2008

VP Debate

I think it is clear that Joe Biden won the VP debate hands down. Unlike Sarah Palin most of the time, Biden actually answered the questions. He also gave effective rebuttals to Palin's attacks while her typical rebuttal was to say "No, I disagree," and then change the subject.
Honestly, you can't expect to "win" a debate if you don't even answer the questions being asked by the moderator. On several occasions Palin simply ignored the question posed by Gwen Ifill and launched into some prepared statement that was totally unrelated to the topic at hand. It got old quick.
I used to debate in high school. Then I judged debates at UIL speech competitions years later. You can't just ignore the topic at hand and talk about whatever you want to talk about. Palin may not have fallen flat, like many people feared (or hoped), but exceeding such low expectations does not automatically result in a win.
The early polling showed a clear victory for Biden. I expect that won't change, but I also don't expect it will change many minds one way or another either.

Thursday, October 02, 2008

Subprime crisis recalls S&L scams of the past

The subprime lending crisis has its roots in the S&L Crisis of the late-80s, early-90s. When I read descriptions of the lending schemes that were going on they remind me of stuff that was happening back in the Reagan-era. Here is a good description of the current crisis:

It is useful to reflect on the nature of the crisis. It is a tale that can be as complicated as you wish to make it, but it is in essence simple and elegant. As interest rates declined in recent years, investors — particularly conservative ones — sought to increase their return without giving up safety and liquidity. They wanted something for nothing, and the market obliged. They were given instruments ultimately based on mortgages on private homes. They therefore had a very real asset base — a house — and therefore had collateral. The value of homes historically had risen, and therefore the value of the assets appeared secured. Financial instruments of increasing complexity eventually were devised, which were bought by conservative investors. In due course, these instruments were bought by less conservative investors, who used them as collateral for borrowing money. They used this money to buy other instruments in a pyramiding scheme that rested on one premise: the existence of houses whose value remained stable or grew.

That is not terribly different from what was happening with the S&L Crisis. I have my own personal connection to that crisis that I want to relate here.

Everybody remembers Madison Guaranty. That’s the Arkansas-based Savings and Loan that was run by Jim and Susan McDougal in the late 1980s. We remember it because the McDougal’s were partners with the Clintons in the Whitewater land deal that went sour. When Madison Guaranty failed during the S&L crisis it cost the government an estimated $60 million to go in and pick up the pieces.

But does anyone remember Chas. Schreiner Bank of Kerrville, Texas? It too failed around the same time period and its collapse cost the U.S. government $154 million — more than twice what Madison Guaranty cost.
And yet, no one remembers Schreiner Bank or the details of its failure. A Google search will come up empty.
But I remember because I was there in 1993 working at the Kerrville Daily Times covering the aftermath of the collapse.
On Sept. 14, 1993, I wrote a story detailing a lawsuit filed by the Federal Deposit Insurance Corp. (FDIC) against the seven former directors of Schreiner Bank. In the lawsuit, the FDIC alleged that the former bank officials were negligent and that “imprudent operations and unsafe and unsound lending practices” led to the bank’s demise.
That was putting it nicely. What these folks were really doing was running a scam operation and treating the S&L like a great big government-guaranteed cookie jar. The following is an excerpt from my story minus the names:

As an example of unsound lending practices, the FDIC complaint details a series of loans to two of the bank’s directors, and to a principal shareholder. The suit alleges that the former bank officials approved lines of credit to (the bank directors and shareholder) “without even a minimal amount of underwriting.” Further, it alleges that these loans did not comply with the bank’s lending criteria and were subject to numerous extensions and rollovers before ultimately culminating in charge-offs....
“Typically, the lending scheme involved a systematic pattern of origination, renewal, extension, rollover and consolidation of loans, rubberstamp approval, no reduction in principal whatsoever and final charge off of unpaid loans,” the FDIC said in the complaint. During the five-year period, there were 296 specific instances of loan renewals and extentions (to the bank directors and their companies) without reduction in principal.

I wrote another story the next day further detailing how these “loans” worked for the bank directors:

As a specific example of alleged improper conduct by the former directors of the Charles Schreiner Bank involving an insider loan, the FDIC details a series of loans to (a company owned by a bank director - let’s call it Mohair Inc.)
On Jan. 14, 1985, the bank originated loan 9048 for $100,000 to Mohair Inc. and funded it the next day, before the loan committee had reviewed and approved the loan application per bank policy. On Jan. 23, 1985, this process was repeated for loan 9049, also for $100,000. The purpose for the loan was reportedly for working capital and was purportedly secured by the inventory of Mohair Inc., which consisted mostly of wool and mohair stored in a warehouse in Ingram.
The original term for the loans was six months but they were repeatedly renewed and extended six times over a three-year period between 1985 and 1988. The extensions were approved each time by a single loan officer without review by the loan committee. To maintain credit, the company was only required to make interim interest payments without any reduction in principal.
“This cycle was repeated like clockwork every six months,” the FDIC complaint states. In January 1987, (the director) added his personal guaranty to further secure the loans and at final maturity in July 1988 the two loans, 9048 and 9049, were consolidated and rolled over into a new loan 9070 for $200,000.
Loan 9070 was extended for one year until December 1989 when the bank charged it off as a loss. This same pattern was repeated over and over again on numerous loans, according to the FDIC complaint.

Pretty sweet deal, huh? The bank was able to make it look like it was retiring old loans by simply rolling them over and consolidating them into new loans. Over time these loans added up to millions of dollars. And this entire ponzi scheme was backed up by a warehouse that was supposedly filled with mohair and that nobody ever bothered to look at. That warehouse, by the way, mysteriously burned to the ground around the time that the Schreiner Bank failed. How convenient!

What was most maddening about all of this was that these bank directors eventually got off scott free. The FDIC decided that it had too many other bigger fish to fry and determined that Schreiner Bank wasn’t worth the time and effort it would take to pursue its case. Remember that the Schreiner collapse was twice as big as Madison Guaranty.
As it turns out, the only punishment the bank directors suffered was the slight embarrassment from having me write up their story in the local paper. When I look them up today I find many of them are still doing quite well, making big financial donations to the Republican Party of Texas.
Yes, these bank directors were big time Republicans, no doubt. And how did the politicians respond to this mess back then? Republican State Rep. Kenny Marchant sponsored a law the next year EXEMPTING bank directors from future charges of negligence. Ain’t it wonderful?

Wednesday, October 01, 2008

Is Sarah Palin pro-choice?

Does this mean Sarah Palin is pro-choice now?

Palin on Early Show:

COURIC: Palin says she makes no apologies for her pro-life views and opposes abortion, even in the case of rape or incest.

Gov. PALIN: I'm saying that personally I would counsel that person to choose life, despite horrific, horrific circumstances that this person would find themselves in. And if you're asking, though, kind of foundationally here should anybody end up in jail for having had an abortion, absolutely not. That's nothing that I would ever support.

Doesn’t she realize that the whole point behind Republican opposition to abortion is to make it illegal? To criminalize it and punish people who would defy the law? Has she never thought this through?

It makes you wonder.

Monday, September 29, 2008

Another spectacular Republican failure

I think the whiny House Republicans may have just sealed the fate of John McCain’s floundering presidential campaign.
Two hours before Republican leaders failed to deliver the number of votes they said they would, McCain was on the stump taking credit for building a winning coalition in support of the bill.
After the bill fell short in the House, the Dow tumbled 777 points, the worst single-day drop at least since the day after 9/11.
The bailout legislation, while extremely unpopular, is vitally necessary. The Democrats are not going to approve the package cleaning up Bush’s mess without substantial Republican support as well. At the same time, both parties want to protect their weaker members from the wrath of voters who will get stirred up by populist sentiments on the right and left. So the leaders cut a deal such that Democrats would produce a certain number of votes and Republicans would too, just enough to pass, and allowing members in unsafe districts to vote no. But the Republican leadership fell short and didn’t produce the number of votes they said they would. Afterwards they whined and threw a fit and blamed Speaker Pelosi saying she gave a “partisan” speech just before the vote that hurt their widdle feelings. BooHoo.
And so, Republicans admit that they place petty, partisan politics above the economic health of the nation.
So what is next? Does McCain suspend his campaign again? Does he send Sarah Palin to Washington to negotiate with House Republicans so that she can skip Thursday’s scheduled debate with Joe Biden? The possibilities are endless.
Meanwhile, I though Barack Obama’s response was the most reassuring.

"It's important for the American public and the markets to stay calm, because things are never smooth in Congress, and to understand that it will get better...We are going to make sure that an emergency package is put together, because it is required for us to stabilize the markets... So I'm confident that we are going to get there, but it's going to be a little rocky."

Obama pulling away

It is quite heartening to see the latest polls showing Obama pulling away from McCain here in the final leg of the race. He is at 50 percent or better in three of the four major daily tracking polls while McCain’s is dwindling in the low to mid-40s.
It is like the last leg of a marathon when one of the runners suddenly breaks away and opens up a large lead right at the finish.
The so-called-liberal media has been trying very hard to convince everyone that the first presidential debate was a tie. But the polls have consistently shown that a substantial majority believes that Obama won.
I think there was no question that Obama won. He came across as being smart, knowledgable and consistent. He had a clear and logical response to every one of McCain’s attacks and his counterattacks were rarely deflected in return.
By harping on $18 billion in earmarks while ignoring the $300 billion in tax cuts for the rich that his economic plan calls for, McCain came across as disconnected and foolish on the economy.
He seemed more knowledgable on foreign policy, but even then he focused on one thing “the surge” in Iraq, as if that was the trump card and the answer to everything. The “surge” did indeed reduce violence in Iraq, but that was just a tactic towards a strategy - to give the Iraqi government “breathing room” to reconcile its differences between Sunni and Shia and Kurds - and that has ultimately failed. So as a tactic the surge worked, as a strategy it did not. McCain is hoping that most people won’t be able to distinguish the difference.
But ultimately, what should clue people in is that if the surge had really worked then we would be able to withdraw our troops now without having everything unravel and fall to pieces. Since that is not the case, it clearly has not worked as intended.


I’ve been watching E.R. on television almost since it began nearly 15 years ago. But I haven’t always been happy with the choices the show’s writers make. I always hate it when a popular show feels the need to arbitrarily kill off a major character, like they did to Dr. Green (Anthony Edwards) some years ago with a long drawn out death from brain cancer. Or the time they had a helicopter arbitrarily fall on Dr. Romano, another one of my favorite characters.
But this season’s premier, which aired last week, is probably the worst I have seen. Last season, they ended with an ambulance exploding. You knew that either Dr. Pratt or Nurse Taggart was on board, but you didn’t know which one.
When the show started, they quickly showed that Nurse Taggart was fine. But then there seemed to be some hope when Pratt was found still in one piece in the front of the bombed out ambulance. But that was just so that they could drag out his death through the entire show as first one thing went wrong and then another until he died on the operating table.
I knew they would kill off Pratt (Mehki Phifer). Why? Because he was happy, and the first rule of TV writers these days is that you cannot have happy characters. If a character has something good happen to them, you can bet that a tragedy is just around the corner. If there is a happy couple, they are guaranteed to be broken up. It never fails. Pratt was about to become the new chief of the ER and he was about to propose marriage to his long-time girlfriend. So naturally he had to die.
I’ll finish watching the 15th and final season of E.R., but after this pathetic beginning I won’t be nearly so sad to see the show go away.

Sunday, September 28, 2008

Voluntary regulation

In the NYTimes the other day, I read that SEC Chairman Chris Cox is
admitting that maybe the oversight and deregulation of the Securities industry was a problem.

“The last six months have made it abundantly clear that voluntary regulation does not work,” Cox said in a statement. The program “was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate” of the program, and “weakened its effectiveness,” he added.

What!?! Voluntary regulation??? What genius came up with that bright idea in the first place? And why did it have to come to this before they figured out that it was a stupid idea to begin with???

The program Mr. Cox abolished was unanimously approved in 2004 by the commission under his predecessor, William H. Donaldson. Known by the clumsy title of “consolidated supervised entities,” the program allowed the S.E.C. to monitor the parent companies of major Wall Street firms, even though technically the agency had authority over only the firms’ brokerage firm components.
The commission created the program after heavy lobbying for the plan from all five big investment banks. At the time, Mr. Paulson was the head of Goldman Sachs. He left two years later to become the Treasury secretary and has been the architect of the administration’s bailout plan.

Voluntary regulation was the genius idea of a Republican administration and a Republican congress. Just remember that.

In the meantime, it seems that eliminating the rule now is pointless since all the major investment banks it applied to are now gone - either gone belly up, or changed their charters to become normal commercial banks under federal regulation.

Paul Newman

Paul Newman, who died yesterday at age 83, was one of my heroes.
He had a long and wonderful life, but if anyone deserved to live into their 90s it was him. He was a wonderful actor, but that was only a small part of his character. An outspoken liberal, he defied all the Hollywood stereotypes and put his money where his mouth was. His nonproft foundations funded by his "Newman's Own" brand food products gave away more than $200 million in profits to numerous charities and worthy endeavors.
If he had to go, he picked a good time. Now he will get a good write up in all the Sunday papers and I look forward to reading them. I'll also have to go out and get some more of his movies to add to my collection. I have Butch Cassidy and the Sundance Kid, The Hustler, Hombre and Cool Hand Luke, but there are many more I need to get and watch.