Category: Uncategorized

Congratulations to the Mountaineer footballers.  Nice win over UConn.  CBS Sports predicts that we will win the Big East and go to the Orange Bowl in Miami to play Georgia Tech.  I’ll take that.

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If Obama loses WV to McCain by a few points and yet Anne Barth wins against Shelly Moore Capito that would be a troubling statistical reflection on cultural bias in the state.

 

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It appears the races to watch will be the Attorney General race and the Supreme Court race.  If Beth Walker and Margaret Workman win then I imagine WV will be the only state in America where a majority of its supreme court justices are women!

 

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In olden days epidemics often resulted in rapid burials of bodies that were overwhelming the local burial businesses.  Tragically, some were buried before they died.  This resulted in the practice of tying a string to a finger of the corpse, running the string through a hole in the casket up to the surface where it was attached a bell.  Hence, the saying “saved by the bell.”

Credit default swaps or CDS’s apparently contributed to or some say caused the present financial crisis.  Invented by Wall Street in the 1990’s, these contracts made subprime mortgages saleable.  In essence, financial institutions that should have known better agreed to pay an investor if his investment went sour.  This “insurance” meant that it was unnecessary to perform much due diligence on these mortgage backed securities because, after all, the risk was covered by the credit default swap.  This meant bad mortgages could be funded and sold.  Over time more and more “subprime mortgages”(predatory loans, bad loans, etc) steadily flowed into the mortgage backed security markets because the CDS covered the risk.  When the housing bubble burst, the mortgage back securities went into default.  This triggered the CDS.  The payors of the CDS (AIG for example) didn’t have the money to pay.  The collapse then had a domino effect.  94% of American mortgages are not in default.  The best way to handle this crisis is to educate the American people as to how this happened and why.  People are fearful now (with good reason) but if the average American can understand what happened and why, the panic should subside.  Wall Street has long known that knowledge is power.  Insider trading is the unlawful use of information not known to the general public.  That shows the power of knowledge.  Accordingly, if our leaders and the media can present a balanced analysis of what went wrong and why, this knowledge will give us the power to (a) control the panic and (b) prevent similar mistakes in the future.

I pity the poor guy who is unfortunate enough to win the presidential race this year.  There are so many problems facing our country that it will be impossible for the next president to be fairly measured by his efforts as opposed to events and problems caused by others.  In order to have a successful term, the next president must communicate, communicate and communicate some more.  Politicians are not trained in economic theory.  Politicains are not trained to be a quick study.  Politicians are ill suited to demand performance as opposed to loyalty from those around them.  What invariably happens is that the “coach is measured by the team.”  If America happens to experience good times, whomever is president gets all the credit.  If America struggles, the president is blamed.  Go team.  Let’s hope America wins more of these battles than it loses over the next four years. 

I would not presume to tell anyone how to vote.  In West Virginia we have three candidates for two seats on our Supreme Court.  I suggest that you vote for the candidate or candidates whom you believe will preside with dignity, calmness and consummate politeness to all involved.  A court has no army, no money to hand out.  It only has respect for its decisions.  Judicial temperment is the idea that a judge must be patient, respectful and restrained in his or her conduct and comments.  They must not appear to be aligned with any party, any cause or any lawyer.  In the “good old days” the local judge was the lonliest person in town because he or she felt constrained not to “socialize” with folks since they needed to remain impartial.  In those days, a judge would never talk to a reporter let alone engage in any overt political activity.  Judicial temperment is what I look for when I cast a vote for judge.

I thought the Democrats were going to stop the war whereas the Republicans prefer to continue until a victory (however that might be defined) is obtained.  In listening to McCain, Palin, Obama and Biden it appears that both parties now favor “moving” the war to Afghanistan and perhaps Pakistan.  I find this disappointing.  The Russians were chewed up in Afghanistan.  I don’t see why Afghanistan will be any different from the kind of sacrifice now being made in Iraq.  The enemy there as in Iraq is not a country, a government or even a defined, identifiable group.  We are sending soldiers who must follow the Code of Military Justice with reporters in tow to “fight” against thugs, murderers and low lifes.  The war on terror needs to be “fought” using intelligence agencies, infiltration, paid informants and must be fought largely in the dark.  How sad that more Americans soldiers are going into harm’s way.  Neither party seems to think that “ramping up” in Afghanistan is a bad idea.  I do.  You don’t send a tank to “capture” a murderer – you send a marshall, a deptuy sheriff or a bounty hunter.

At last, commentators (not politicians) seem to have analyzed the “bailout” and how it works.  This morning a financial analyst stated that the government was buying assets that are worth more than the purchase price.  Over time, the government (the taxpayers) will make money.  If that is true then the complicated bailout at least becomes “understandable” to Joe Six Pack.  It also appears that the problem was created in large part by well meaning politicians who wanted to have more home ownership for the country.  The regulatory pressure on banks (Community Reinvestment Act) to stop “redlining” poor neighborhoods and start making loans to those who normally could not access capital was allowed to “mushroom” out of control.  President Clinton tried to rein it in during his second term but Congress stopped that.  President Bush proposed similar adjustments a few years ago which again were stopped by Congress.  My one lingering fear is that the present crisis is merely one of a continuing series of “bad news” financial waves that will start hitting the American beach.  I pity the person who wins the presidential election. 

I am told my bank owns some of the subprime mortgages that the government intends to buy.  The bank’s stock (of which I own none) recently dropped 32%.  I have had my mortgage with the bank for years and have never missed or been late with a payment.  Ok, as I understand it, some of my tax dollars will be used to buy those mortgages from my bank.  The bank’s stock I assume will go up.  My mortgage will remain the same.  How exactly do I benefit from this?  Short answer is that I don’t.  I guess the “thinking” is that this is for the “greater good.”  Now I guess after the bailout, my bank can now lend the money paid to it for the “bad” mortgages (prudently I hope) to a customer.  That benefits them.  How does that benefit me?  Not sure that it does.  I guess the borrower could use the loan to open a store.  I might shop at that store sometime in the future.  Maybe the owner of the store will hire me to do some work for the store.  I guess that benefits me …. if it happens.  Is that the “greater good” they are talking about?  Maybe so. 

It is very disappointing that no one seems able to “translate” the economic issues so that the average person can understand (a) what is happening and (b) why the bailout/rescue plan is the required solution.  From President Bush on down, the inarticulation of those whom you see on the TV is shocking.  The media is not doing much better.  Much of this is probably an outgrowth of instant communication meaning that better answers will be forthcoming as time passes, the hysteria lessens and more discussion occurs.  The “spin” and “posturing” that accompanies any discussion of these issues is disappointing. 

Rather than give 700 billion to bailout bad loans, why don’t we put that money into the system by allowing homeowners to submit a form to the feds showing their name, the name of their lender and the amount owed on their non-defaulted home loan.  The feds would then issue a two party check (homeowner and lender) for each homeowner’s pro rata share of the 700 billion.  This gives added liquidity to those institutions that did it right (lender), rewards those who have not defaulted (homeowner) PLUS the reduction the mortgage will allow the homeowner to buy something and stimulate the economy.  I can’t image any homeowner voting against a Congressman or Senator who approved this package.  It gets the needed liquidity into the market but does so by rewarding those who took out and made prudent loans not by “bailing” out those who caused the problem!

This has to be a true politician’s nightmare.  A little more than a month before the voters go to the polls, federal politicians must actually take actions, make decisions and produce something with the whole country watching and involved.  Making promises on the campaign trail and shaking hands is one thing, but actually having to perform to retain one’s seat is unprecedented.  In a sense it’s like the “combine” where college players try out for the NFL.  You perform, you get drafted.  You don’t; you go home.