Alkahest my heroes have always died at the end

Like a lot of other people, I’ve been pretty stressed out recently.  Nothing too terrible is going on for me personally, but I’m concerned about the U.S. financial situation, I’m concerned about how that will affect me and my company (if at all) and I’m concerned about the current political happenings in part since I think that they will have the biggest affect on the first two issues.  I’ve been obsessing over politics and polls for the past few months when I would probably be better off “drink[ing] herb tea and play[ing] with [my] screensavers.” At this point, I’m fairly confident that Obama will win (yay!), but watching the McCain campaign’s negative attacks is annoying – in particular since the negative ads are aimed at Obama personally and not his policies (as opposed to Obama’s negative ads which appear to be aimed at McCain’s policies).

The irritating thing is that the political attacks on Obama, from both McCain’s campaign and conservatives in general, are constantly shifting.  First you hear, “Obama’s a Muslim.”  That gets debunked.  Then it’s “Obama’s preacher is a radical Christian.”  Again, someone takes the time to put things into context and debunk the lies and the topic changes again.  “Obama’s is a celebrity.”  Er, never mind that this is based on the number of people that want to hear him speak on policy issues and not, say, on his television or movie career (try comparing the IMDB entries for McCain and Obama sometime).  Turn around and then it’s – “well, no one goes to an Obama speech for anything but the rock concerts.”?!  No, wait, we’re back to “celebrity.”  Then he’s “inexperienced” except when compared to Palin.  etc., etc.

It’s like the Obama attackers have the attention spans of squirrels on meth.  For gods’ sake, pick an attack and stick with it.

Of course, you see this in other contexts too.  Perhaps my (least?) favorite is climate change.  “No, global warming is not real.”  “Okay, maybe global warming is happening, but it’s not caused by people.”  “Okay, it is caused by people, but isn’t anything we can stop.”  Oh wait, then we turn back to, “98% of the green house effect is due to water vapor.”  No it isn’t.  “CO2 lags temperature in ice cores!”  True, but irrelevant.  It’s almost impossible for the lay person to debate the contrarians since they keep shifting their line of attack.  It’s all still wrong, but unless you’re carrying an encyclopedia of climate change, you just aren’t going to be able to counter the crazy.  It’s whack-a-mole with arguments.  The sad part is that the skeptics aren’t stupid.  Many are very intelligent people whose politics (for some reason) cause them to be intellectually lazy about this issue.  Arguments that they wouldn’t accept from a high school student are suddenly too obvious to dispute.

I’ve even heard from a few skeptics in scientific fields and they seem to assume that either a) climate science isn’t a real science, or b) climate scientists just aren’t as smart as the political talking heads you see on the television, or c) climate scientists are all in on a giant conspiracy to keep getting funded and so they are lying about the true state of the world.   Just bizarre.

Bringing it back to politics, you see the same things in McCain’s actual campaign.  He keeps changing his proposals.  Let’s see, during last week’s debate, we heard about a new $300b bailout to help home owners.  Then it turned out that the bulk of the money was yet another bad bank bailout plan (the govt would be buying the loans from the banks).  That got dropped.  Then this weekend, we heard that McCain was going to have a new policy proposal geared toward the middle class.  It was going to include tax cuts on dividends and capital gains.  Huh?!  Now, I consider myself and K to be upper middle class, but I guarantee you that cutting taxes on capital gains and dividends will not help us to any significant degree.  Then on Sunday night, the McCain campaign announced that it wasn’t going to announce any new policy proposals this week.  But now today we learn that McCain is proposing a new plan that features those exact same tax cuts that we part of the non-plan from this weekend.

Seriously.

McCain’s campaign is acting much in the same way I would in a boxing match.  They are doing the political equivalent of screaming like a child and running around the ring, hoping that the punches will land where they were and not where they’ve currently shifted.  It’s pathetic.

All of this makes me wonder what kind of brain rot has infected the republican party.  Did it start with the appeals to anti-intellectualism and rot it’s way up to the policies?  Did it start with crazy policies which attracted anti-intellectuals?  David Brooks seems to think that the republicans just drove away all of their intellectuals and this is what’s left.  I suppose I can buy that.

Anyway, I think it’s time to make some red zinger and see if I can get that 3d fractal screensaver working.

Okay, this is probably the last of the foreseeable posts on the Wallstreet bailout – and probably the most serious.

I spend the last week extremely pissed off about the bailout. Here were a bunch of idiots absurdly inflating the price of housing, with other idiots actually loaning them money to do so, more idiots treating the bad loans as assets and still more idiots insuring them against loss under ridiculous assumptions. It’s not really a surprise that the whole thing blew up. The only surprise is that it took as long as it did. Hell – 5 years ago in late 2003 when K and I bought our current place, we were worried that there was a housing bubble inflating prices beyond what the properties were really worth. And this was in North Carolina which didn’t have the hottest housing market.

But here we are, we’ve got banks going defunct left and right and we’ve got republicans arguing that they really, really have always supported more federal regulation. The latter is one of the signs of the apocalypse for those keeping score at home. So along comes Paulson saying that he needs $700 billion to keep this from truly going in the crapper. The reason I’m so pissed off is that I agree.

Let’s put it this way – the U.S. economy (GDP) is on the order of $14 trillion. In other words, the bailout proposal was 5% of GDP. Now in real terms $700 billion or 5% of GDP are insanely huge amounts of money. Something like $7,000 per household. But if the economy collapses or if we go into a deeper recession than we otherwise would have, 5% of GDP is chump change. The economy could easily slow 5% in a year (or 2.5% each over two years, etc.). In other words, the proposed cure is cost effective compared to letting the disease run its course without intervention.

Given that we need some form of intervention to prevent a complete meltdown, there are a few questions that have to be addressed:

1. What is the proper size of the intervention?  How much do we need to spend?
2. How will the plan work?  How will assets be valued?  Who has oversight?  etc.
3. Who pays for it?

In all of these, the original (3 page) Paulson plan was completely inadequate.  Paulson picked the $700 billion number out of thin air.  Hell, for all I know he thought it should be 5% GDP and backed out the $700b from there.  The original plan said nothing about how the assets would be valued – essentially, the govt would likely pay the original value of the assets regardless of their actual worth.  Paulson was to have no oversight and all decisions were to be final with no appeal to judicial recourse.  Finally, for the plan to have worked, taxpayers would have to lose money which means that the benefits would primarily go to those of us with money in the stock market (401k retirement funds, etc.) or to the financial institutions themselves and the burden would fall on our standard tax system which places only a slightly higher burden on the rich than it does the rest of us.

So that plan won’t/shouldn’t fly.

What about the new plan?  On Sunday, the congress and the whitehouse finalized a new proposal.  Caveat lector – I haven’t read it yet, I’ve only looked at excerpts.  But from what I’ve seen, it is better in almost every way to the original Paulson plan.

The new bill grants the Treasury $350b up front and the rest isn’t guaranteed.  Congress will have significant oversight.  There are two ways that Paulson can buy assets: 1) conducting a reverse auction to find the true worth of the assets; or 2) essentially buy equity in the company equal to the amount of money received for taking the assets.  The former is likely to generate smaller amounts of money for the companies, but does allow them to get the bad assets off of their books.  The latter may be useful for companies in worse financial shape.  In either case, the govt is essentially getting something of value for the money it’s spending.  Oh – and companies that participate in the bailout have to agree to reductions in executive compensation which is a good thing.  I still wish they were required to participate in credit counseling – along the lines of that required for consumers under the 2005 bankruptcy law, but I might just be thinking punitively.

So, what’s not to like?  Probably quite a bit – like I said, I haven’t had a chance to read the 110 page draft.  One thing that’s probably not to like is that the bill allows the SEC to temporarily suspend Mark-to-Market accounting.  This is just dumb.  It would allow the SEC to look the other way while companies pretend that they are worth more than they really are.  It’s a way to allow the companies to claim that their assets are worth more than the market would pay for them, allowing the companies to appear healthier than they really are.  That’s not really helpful.

So, I’ll probably read through the full bill tonight, but for the most part I think I support it.  It’s not perfect, but it seems to be both necessary and significantly better than the original Paulson bill (oh, and much better than the silly House Republican proposal, but we won’t get into that).

As a public service announcement, I am hereby warning the people I know that in light of the bailouts of Fannie Mae, Freddie Mac, AIG, and the entire freaking banking system, all of which will cost tax payers about $1 trillion, the next person that tells me that deregulating markets will provide a solution to anything will be asked to STFU.

thank you and good night

I hope everyone’s having a great 4th of July (at least those of us in the States, folks from other countries can be forgiven for not thinking too much of it).

July 4th, along with Thanksgiving, is one of my favourite holidays.  That may surprise some folks.  It’s not like the house is decorated in red, white and blue.  I’m not wearing a flag pin, the Pledge of Allegiance makes me uncomfortable and I’m not that into fireworks.  But external trappings aside, I consider myself to be a very patriotic person.  I just don’t define patriotism as being synonymous with “flag waving.”

Patriotism to me is not about loving your flag, or thinking that your country can do no wrong.  To me, patriotism is the love of the ideals that founded the country.  Thinking that your country can do no wrong or that you should love the flag or say the Pledge of Allegiance is no more than nationalism.  If you had been born in any other country, you would be equally “patriotic” to that nation.  The United States was not born from such nationalism, instead we were founded with a belief in 18th century enlightenment values.  The first paragraphs of the Declaration of Independence are filled with such ideals:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

As a country, we have not always lived up to these ideals, but it is the ideals themselves and not the trappings that are important.  This is the reason that the president is subject to the rule of law.  This is the reason that criticism of the government is a patriotic act and that refraining from such criticism when justified is an act of cowardice.  It is only when citizens criticize and elected officials act on such criticisms that the country can improve and come closer to the ideals that we were founded upon.

Have a happy 4th of July.

Oh, and an ironic follow-up to the republican filibuster of the Lilly Ledbetter Fair Pay Act: apparently, the senate unanimously voted for a bill barring genetic discrimination in hiring and insurance. I wonder if anyone’s told them that your gender is based on your genes. Not that I would accuse senate republicans of being misogynistic in their concern over discrimination. Well, okay, yes I would.

Yesterday, the U.S. Senate took up the Lilly Ledbetter Fair Pay Act which the House had already passed.  The act was pretty reasonable.  It essentially clarified the 1964 civil rights act to say that if you are being discriminated in terms of salary equity, you have 180 days from the date of each paycheck to file a claim.  So, essentially it defines the act of discrimination as occurring with each short changed paycheck and not just with the initial salary setting.

The case stems from Lilly Ledbetter who was a manager at Goodyear.  She was paid significantly less than her male counterparts for the same job.  Everyone agrees that she was discriminated against on the basis of her gender.  She was awarded $3.5 million in back pay and punitive damages.  Goodyear appealed and the supreme court ruled that congress had written the law so that you had to file suit within 180 days from the first discriminatory paycheck not the most recent.  Ledbetter, who didn’t know her colleagues’ salaries until years later was SOL.

The bill seems pretty simple, clarify that the clock resets with each discriminatory paycheck.  But unfortunately, that didn’t work for the republicans who filibustered it on Wednesday.  It was pretty much a straight party line vote.  Both of the democratic candidates for president voted for the bill, most of the republicans voted to uphold the filibuster.  One exception, that mavericky maverick John McCain.  McCain believes that women should be paid equitably, but doesn’t want to encourage lawsuits, so rather than take a stand and vote for or against the bill… he dodged and didn’t vote at all.  Way to take a stand!

The republicans claim that they too want to see equal pay for equal work, but that they don’t want to encourage lawsuits.  Well, guess what – that’s just tough.  There are two ways to deal with corporate bad behavior: regulations (where the executive branch can fine a company) and the your-on-your-own approach of allowing lawsuits.  For as long as I can remember, republicans have been campaigning against both of these means to rein in bad business behavior.  They campaign against regulations (“they make our businesses less competitive”) and they campaign to limit your ability to sue when they break the law (“tort reform to keep money out of the hands of trial lawyers!”).  So apparently it’s the official position of the republican party that companies should be able to do what they want and if you don’t like it, you can go to Canada.

My hope is that the democrats use the republican’s opposition to the Lilly Ledbetter Fair Pay Act to beat the snot out of the republicans in the general election.