Ken sent me some articles with opposing views on what's being commonly referred to as the "bailout" bill.  The one that failed in the House yesterday and sent the stock market into a 770 point dive.  (I'm somewhat heartened to see that we're up about 200 points so far today, but I fear we're one piece of bad news away from another nosedive.)

I wrote him a lengthy response to the first article, Bankruptcy, Not Bailout is the Right Answer.  The article's author, the somewhat dishy Harvard lecturer Jeffrey Miron, makes the case that apparently many Americans bought into about letting Wall Street pay for Wall Street's misdeeds.

I'm posting my (slightly edited) response to Miron's arguments here because I think it's a better encapsulation of my thoughts on the matter than my previous post.  I hope it helps to have these contrasting points of view (you'll want to read Miron's article too by clicking on the link above).

(And I'd also urge each of you who frequent this page to express your own opinion to congress via congress.org.  It's easy.  But more than that, it's necessary.)

First, it's important to keep in mind that Miron is a libertarian.  So he's predisposed to be against government intervention of any kind.  This shows up in his list of "solutions" to the crisis.   My first objection to his position is that he describes this as a simple "bailout."  I don't agree, especially as the legislation ended up prior to defeat, that it was a simple bailout.  There was participation for the taxpayers/government in future profits from the "bad debt" assumed by the government.  There were caps on the wages and severance packages of those who presided over risky lending practices.  I agree with Pelosi that these changes made the program an investment rather than a bailout.   Also, as a historical point, this type of thing has been done before.  When Dan and I were involved with a major bank, the bank spun off its bad debt into a "bad bank" to improve liquidity and allow us to keep lending.  This saved the bank and the "bad bank" eventually proved profitable.  On a larger scale, a number of other nations saved their economies in recent years by doing similar bailouts or even by nationalizing the financial system.  By contrast, we have the Great Depression where government did too little, too late.   My second objection is his idea that letting these companies fail would merely mean that "someone else would own them" via the bankruptcy process.  Not what happened with Enron, if I recall.  And he ignores the fact that more than just the investors get hurt in bankruptcy.  Rank and file employees get wiped out and there's a ripple effect as their financial meltdown affects those with whom they do business.   I think yesterday's 770 point drop in the DOW shows that those who believe a bailout will prevent widespread economic collapse are NOT "ridiculous fear mong[ers]."   Lastly, I don't agree with his final (brief and, I'd argue, flippant) two paragraphs of prescriptions for what to do instead of the bailout.   "So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.  The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer."  1.  I agree (as I blogged) with the idea that "abandoning the goal of home ownership independent of ability to pay" is a change we need to make, philosophically.  But that doesn't fix the current problem.  2.  Get rid of Fannie Mae and Freddie Mac?  Why on earth would he propose that?  The function of Fannie Mae and Freddie Mac (as parsed out this morning by Dan and I) is to provide liquidity to mortgage lenders by packaging like loans into securities.  If we eliminated the FM twins, private packagers would take over their function in a much less efficient manner due to their size constraints.  What makes more sense is to regulate FM/FM more closely, to severely restrict sub-prime lending (which is happening already as a natural function of the market).   And again, this doesn't address the current problem.  3.  Get rid of CRA?  Why?  The Community Reinvestment Act requires banks to develop means of investing in poorer communities by providing "B" level loans with the profits they make from "A" level loans.  It's a reasonable program and not at all responsible for the current crisis.  Although it's easy to understand why a libertarian would be against it.  And again, this doesn't address the current problem.

4.  Miron's final statement that "someone" has to pay for the subprime lending that shouldn't have taken place in the first place is a statement of fact.  The idea that it shouldn't be the "American taxpayer" is, imho, subterfuge. 

If the American taxpayer is also the American worker, employee, business executive, etc., (and he/she is), the American taxpayer will pay one way or another.  The question is, will we pay as a nation in a measured, controlled way with government oversight and (I believe) appropriate intervention?  Or will we pay as individuals through lost jobs, plummeting retirement investments, severe economic recession and reduced opportunity?

That's the true choice.  To pretend otherwise is disingenuous and naive.

Not much to report today...we went antiquing (Dan, Dotty and I) at a little town called Sanford.  We had an inexpensive and tasty lunch at a little ice cream store followed by the best praline ice cream I've ever had. 

It also seems to have had as much sugar as I've ever had because I've been in sugar shock ever since.  We shopped a bit more in Sanford and then headed home.  I stretched out and read for a luxurious, self-indulgent couple of hours and then we jetted on over for dinner with Steve and Kevin at a local Chinese eatery.

Too much blood around my (very full) stomach right now to have a coherent comment on today's bailout debacle.  I have enjoyed all of the replies to the Sunday question and will get back to you on those tomorrow.

Here's hoping the stock market settles down tomorrow.  But I'm predicting not.

I had a lovely (early) surprise birthday party last night over at Steve and Kevin's house.  The food was delicious.  There were balloons and presents.  All very festive including a delicious chocolate birthday cake with raspberry filling (prepared by Steven). 

My very first surprise birthday party!

Which leads me to today's Sunday Question:

George Bernard Shaw said, "Youth is wasted on the young."

What do you think he meant by that...and do you agree?

Last night, while many of you were watching the first of three Presidential debates, Dotty, Dick, Dan and I went to the Film Noir series at the North Carolina Museum of Art. 

The film, Nightmare Alley, starred Tyrone Power and a trio of women he used (and who used him) over a seedy lifetime of manipulating gullible people with carnival tricks.  It was quite fun and quite predictable, as old film noir often are.

This morning, I sat before the television with coffee in hand and watched a DVR of the Presidential Debate.  I hadn't made the connection until I started blogging...but there, too, I witnessed the attempted manipulation of gullible folks with a collection of carnival tricks.  And a candidate perfectly willing to use a woman (in this case Sarah Palin) for his own gain.

I'm referring to John McCain, who resorted to his stump speech and "fact based" sleight of hand to accuse Barack Obama of everything from inexperience to naivet'e to being for losing the war in Iraq.

McCain made allusions to his own p.o.w. history at least three times, wrapped himself in the WWII flag on two occasions and brought out his show n' tell bracelet worn in honor of a dead soldier.  That played well to his Republican crowd but didn't do much to sway anyone else.  And I thought McCain made a huge verbal misstep when he said that the lesson of Iraq is that "You cannot have a failed strategy that will then cause you to nearly lose a conflict."  Huh?

This is the guy who is supposed to be the experienced military leader?  For him to have a deer in the headlights response to that question in a foreign policy debate is downright incredible.

Obama, by contrast, made his only misstep of the night when he said, "I have a bracelet, too."  It played well with Democrats, but missed with everyone else.

Still, I personally score the debate as a tie.  Primarily because Obama missed a couple of opportunities.  When McCain said Obama had put in $932 million in earmark requests for Illinois, Obama should have shot back that McCain's own running mate had requested far more on a per capita basis than Obama ever did. 

He should have had one or two examples of the requests and why they were needed.  And then he should have done what he did, which is point out that earmarks account for a relatively minor component of government spending.

The other opportunity Obama missed was when McCain came up with his off the cuff idea of a "spending freeze on everything but defense, veteran affairs and entitlement programs."  Obama scored points with some by pointing out that a spending freeze is a hatchet when we need a scalpel, and by having examples at the ready.  But he would have scored even bigger if he'd said something along the lines of, "This type of sound-bite, reactionary thinking is exactly the type of leadership we don't need in the 21st Century.  It sounds good on first hearing, but it's completely ineffective in the long term."

Obama did extremely well in arguing foreign policy, showing his leadership ability by broadening the discussion of current economic and world situations beyond the band-aid approaches advocated by McCain.  And I believe that he came off as calmer, better informed and more of a forward thinker than McCain.

Where McCain seemed to do best was attack and belittle Barack Obama. His constant refrain was that "Senator Obama just doesn't understand."  Unfortunately, much of what he said just isn't true and the format allowed him to get away with it.  Obama batted back some of the salvos but would have looked petulant if he'd argued every misstatement and "fact based" inaccuracy.  

Today's polls show that some folks disagree with me, giving the win to Obama.  That makes me happy but doesn't sway my opinion.  The proof will be in the polling numbers next week.  If Obama gains points, he won.  If things stay tight, it was a tie.

In any case, McCain did not win (except among those already voting for him).  The next debate, Obama simply needs to be as prepared and calm as he was today.  Unless McCain's handlers are able to change an old dog in quick fashion, he will continue to come across as condescending, backward looking and peevish.

Which reminds me...some have said that McCain muttered "horseshit" under his breath during part of Obama's comments.  Here's the link.  You decide.

I traveled to Fuquay-Varina this morning for coffee with my sister-in-law, Cindy.  (Well, only in a "fact-based" way is she my sister-in-law.  In a technically true way, she is Dan's sister-in-law, married to Dan's brother, Ken.)  I had a couple of nice surprises upon arrival.  First, Ken was home so I got in a quick visit with him as well.

Second, Ken had thoughtfully "purchased" for me (as part of his health care rewards program) a self-stirring coffee mug.  This because I blogged some time back about the questionable "green-ness" of using throw away stir sticks at coffee establisments.

After coffee and a visit to the local art store, I headed home to join Dick, Dotty and Dan for an empanada lunch.  Yum!

Since then, I've been doing a bit of political research.  There was the Couric-Palin interview.  A good op-ed piece offering an opposing view on the bailout.  But nothing I really felt like writing about more than McCain's 60 Minutes interview segment talking about his ads.

I blogged about these ads a week or more ago, and how fact-checking organizations had labelled them as "misleading" or "pants-on-fire" (as in Liar, Liar). 

When interviewed by Scott Pelley about these ads, particularly the ones that say Obama will raise taxes on the middle class (the opposite of what the Democratic nominee has expressly pledged), McCain hid behind a new euphemism--"fact based."

McCain:  "I dispute that any of the spots we have run are not fact based."  Huh?  What happened to the captain of the Straight Talk Express?  Wouldn't it just be easier, if the ads were true, to say, "All of the ads we've run are true"? 

Problem is, of course, they're not.

So here's what McCain meant by fact based.  While Obama has said he won't increase taxes on anyone making less than $250,000 per year, he has in the past voted to raise various taxes.  Therefore, Obama is a tax raiser.  And therefore, we can say, in a "fact based" way, that he wants to raise your taxes.

So, in a "fact based" way, I could also say that McCain wants to raise your taxes.  After all, he was originally against the Bush tax cuts.  Or I could say that McCain is a flip-flopper since he's going to debate Obama tonight when he pledged not to do so unless there was a resolution to our financial crisis.

I guess the fifth commandment under McCain will read, "Thou shalt dispute that any of your assertions are not fact based."

Sheesh.  I hope this is the guy that gets exposed at the debates tonight.

One benefit of flying long distances and vacationing in your in-laws' house is that you get plenty of time for reading.  So that's what I've been doing, today focusing for the main part on articles about the Bush Bail-out Plan for Wall Street.

I'd been studiously avoiding commentary until I had a better handle on what was being proposed, what Congress was doing with the proposal and what the long-term implications of such a large intervention might be.

I must disclose that my reading has only partially answered the first and second questions...and not provided much illumination at all about the last.  Lacking a degree in economics or a long-term professional background in finance, I'm not capable of providing an expert opinion.  But I am capable of providing a reasonably well-informed opinion (which is all I ever claim to do anyway).  So here goes.

My instinct, after watching last week's gut-twisting, roller coaster ride on Wall Street, is that Treasury Secretary Paulson's plan to prevent wide-spread financial sector failures with a buy-out of bad debt is exactly the right bitter medicine to stabilize a seriously ill economy.

Some on the left (and on the far right) have characterized the plan as a bail-out of Wall Street at the expense of Main Street.  They question why everyone should pay to stabilize (and redeem) greedy companies that got themselves into this mess.

It's a rare thing for me to agree with Bush, but a quote from his speech yesterday summarizes my gut reaction:  "With the situation becoming more precarious by the day, I faced a choice, to step in with dramatic government action or to stand back and allow the irresponsible actions of some to undermine the financial security of all."  (As a minor aside, I think his speech writer would have made a better choice if the government action was described as "drastic" rather than "dramatic," but that's another topic.)

Simply put, we need intervention or the whole financial sector would impolde a-la the Depression.  It's a storm we could weather in the long term.  But the short term would be brutish indeed.  And while it may be that a deep recession or depression would have a deeper psychological impact on our American addiction to easy credit and religious fervor for consumerism, I find it more palatable to consider an intervention and rehab than a cold-turkey withdrawal.

There's also an underlying fallacy to the Wall Street versus Main Street argument.  Populists are arguing that Wall Street reaped all of the reward of our recent housing binge while homeowners (and taxpayers) are left holding the bag.

Andrew Foster, a Law professor at Duke University, puts it this way.  "Certainly some of these consumers might have been irresponsible in taking on more debt than they could handle.  The vast majority, however, were simply trying to buy a piece of the American Dream.  Instead of building wealth and enjoying the security of homeownership, they now find themselves trapped in a nightmare of predatory debt and foreclosure."

What Foster fails to note is that the "vast majority" who were "simply" (read innocently) trying to buy their piece of this particular American Dream...well, many of them were doing so by taking on more debt than they could handle.  An act that is, according to Foster's own reasoning, irresponsible.  There's granularity here in terms of responsibility. 

Yes, financial institutions are responsible for not properly vetting borrowers as credit worthy and able to repay.  Yes, government is responsible for not providing effective oversight in an excessively laissez faire market.  And yes, individuals are responsible for betting on the come--for expecting housing prices to ever rise, thus guaranteeing their decision to buy a bit more house than they needed...or even to buy at all.

I am glad that congress is adding some balance to Bush's original proposal.  We should restrict the compensation for failed executives who will benefit from taxpayer-supplied bailouts.  We should reap the future profits of the risk taxpayers are ponying up to today.  And there should be limited relief for homeowners who are genuinely struggling to pay mortgages due to adjustable rates...but not for those who, despite being able to pay, want the government to mark down their debt to current market values.

Bush also indicated in his speech that there would be time later to assess blame.  I suppose he's hoping for after January 2009.  In this, I disagree with him entirely, regardless of his motive.  Yes, we need to craft a plan to absorb the bad debt and protect financial markets.

But if we don't start parsing the causes of our current crisis now, the solutions are likely to be poorly aimed and only partially effective.   As I said above, there is plenty of blame to go around.

One concept we need to seriously reconsider is the sacred American Dream itself.  Not everyone can, or should, be a homeowner.  And certainly not everyone can, or should, borrow huge amounts of money at exorbitant interest rates in order to fulfill a dream that can, on a down market, turn into a nightmare.

I used to be vaguely amused by the customers who came into my bank to complain about a twenty-five cent service charge.  I would muse that they were survivors of the Depression and so they wanted to hold onto every penny.

In today's market, they look pretty astute.  I am positive that not a single one of them is defaulting on a predatory mortgage.

We are off to North Carolina for a week, so yesterday (after an early golf game) was concentrated office work.  Hence, no blog.

I also took a look at the latest episode of TrueBlood on HBO.  A friend recommended the show and it's been pretty enjoyable so far.  Lots of cable eye-candy and an interesting story about vampires.  In this world, synthetic blood that can sustain the vampires has been developed, so they no longer need to feed on humans and can come out of the closet.

The vampires are a clear metaphor for gays...there's even a sign in the credits that reads "God hates Fangs" like the familiar (and repulsive) God Hates Fags signs courtesy of the small-brained Fred Phelps.

Before I digress...the show is worth checking out if you have HBO.  The first two episodes were a bit uneven but I think they've hit their stride in the third.  And by the third episode, the viewer is familiar enough with the characters and various supernatural plot points that she spends less time going "huh?" and hitting the rewind button.

I'll be blogging from NC.  Maybe even will get some political research done!

Now, to pack.

It was one of those sorts of days where everything you have planned goes slightly askew.  Not enough to make you question the fundamental underpinnings of the universe.  But certainly sufficient to allow for frustration and embarassment.

We had a 7:10 a.m. tee time (in our frantic effort to get in as much golf as possible before Dan goes back to work on 10/2/08).  Great plan.  Only we cancelled yesterday's tee time at our home course and had no way to get our clubs out this morning in order to go play at Oak Creek (where we were scheduled today). 

So, we adjusted our tee time to later in the morning and came home.  Where I promptly had a nap.

I, by the way, don't nap.  It does bad things to my brain.  I wake up with fuzz in every nook and cranny of the grey matter.  And usually with an upset stomach to boot.

Today was no exception.

So with a fuzzy brain, a stomach ache and a hotter-than-expected forecast, I played 18 holes of golf.

Thankfully Dan had the good sense to suggest that we stop keeping score on the back nine.  And I was just fuzzy-headed enough to agree.  The second half of the game was much more pleasant as a result (and also because we got ahead of the VERY slow twosome in front of us).

Home to relax and unwind, followed by a simple dinner of salad and bread.

Except at 6:30 the people I thought we were meeting for dinner tomorrow night called from the restaurant to find out where we were. 

No simple dinner for us!  Off we went to have Italian food at Spasso's.  We had a lovely evening of chatting about music, politics and golf over pasta and libations.

So...no politics for the blog tonight.  Too tired.  And since it was what I had planned?  Not happening, obviously!

Would I trade anything about the day? 

No.  It went just as it should have gone.  And not at all like I planned.

Had a great day watching the nail-biter Ryder Cup with Dan.  Then we went to an organ concert at the Orange County Performing Arts Center with friends.

Over dinner, a discussion of movie preferences (combined with Dan's and my viewing of Burn After Reading) informed today's Sunday Question.

Is there a value to "dark comedy" that is not provided by other types of entertainment?  What is that value?

Happy Sunday everyone!

Nice, relaxed Saturday.  We started the day with nothing more stressful than a 10:00 a.m. tee time.  Coffee appropriately consumed, we headed for the course.

Our partners this morning, Chip and Fujo, were in their early thirties, late twenties.  And they played from the back tees (aka the "tips").  Dan and I played respectively from one less than the tips and...well, let's just call them the "forward tees." 

We played well enough...and yet not spectacularly.  Chip and Fujo played about the same for their chosen tee boxes.

We were supposed to go to the grand opening of the club tonight but ended up opting for a quick dinner at a local pub before coming home to the Ryder cup.  It was a choice between cocktail attire and lounging on the couch in (less than) cocktail attire.  No contest.

Seems like it was an equally "par"-ish day in politics.  No wars were started.  No territory given up.

Sometimes a day like that is just what's required.