Good Advice on the Bailout

I like this, though bad for mortgages?

This bailout was a terrible idea. Here's why.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Weekend Wrap-Up

Busy weekend. We saw Second City at the American Indian museum with M and friends. Very funny, though always a bit too political. There was a great FBI word-association skit that S really enjoyed; totally cracked him up.

We had dinner on Saturday with Craig & Carol; I made lasagna. I used cottage cheese. It's never as good as mom's though. We had a nice meal. Then Sunday, it was a lot of football watching, though things did not go well for the Cowboys, sadly. At least I did well in the college pool, and S did well in his fantasy.

I also joined facebook. It's a total time-burglar. But oddly, bizarrely, you just get sucked in.

I managed two runs, though I am feeling pudgier since the wedding. I guess I am eating salads all week long.

Oh, and got my haircut. It looks a lot healthier now! And I uploaded wedding photos to snapfish.

Off to Boston than Cincinnati this week. Ugh. One more week than things get quieter. Yeah! Am looking forward to seeing Paul, and I should try to reach Angela.

Hopefully be back later.

Millen: Fired!

Everyone in Detroit is rejoicing in a way they haven't since Kwame received the boot!

Links:

He's Out
What's Next.
The Curse of Bobby Layne

Chicago

Headed to Chicago on Tuesday-Wednesday for an evening event with Justice Scalia. Kept me busy, and you know how I feel about event planning!! My throat started getting sore on Monday night during the Cowboys-Eagles game, and by Tuesday afternoon I was feeling not great. Though I guess that is the case of adrenaline just keeping you up, right? I had some chicken tenders afterwards at Elephant & Castle but left earlier than the rest. Fun event, but crazy crazy. Feeling a bit better today, but I am still stuffed up. And this weekend will be a busy one!! We have plans to hear Robert Schiller at Politics & Prose tonight, and dinner with James & Christina tomorrow night. Also a full day of house hunting, of course. At least the weather will be nice this time! I also need to get the boy to finish up his thank yous. Lots to-do! We did go to bed at 8:30 last night, and I am still beat. I've avoided work-outs these last few days to give my body a chance to recover.

Wedding in Dallas

We headed to Dallas this weekend for about 30 hours to attend Steve's friend Elaine's wedding. It was a nice wedding, dampened a bit by Hurricane Ike which wreaked havoc on Houston (and all of the way to Cincinnati, too!). The wedding was nice, less free-flowing alcohol than ours. Music was good, the sea bass was terrific, and I loved the cake. I was still hungry, though, at the end. I met his old high school classmates Chris and Gus. It's so neat yet strange that there's this Harlingen network that still keeps in so close touch after 16+ years. I always wonder if there were folks I went to school with who are still friends. I suppose. Anyway, it's such a different perspective going to weddings now, because you know what goes on behind the scenes, and there's this natural sense to compare what you did and how it was better (or different!) to the wedding you are attending. Their entrees were better, probably, and maybe their cake. But our music and dancing and alcohol still killed!!!!

We also met his friend Marissa at Mi Cocina, and we met her three year old daughter Gabby. Very good tex-mex (I stuck to fajitas) and margaritas. We're such lushes, though!

Remembering September 11

From a story in today's Post: "I know how to dress for a funeral, but how do you dress for a wedding?" she remembers asking her mother one day in their home, in the Alexandria section of Fairfax County.

Seven years later, I remember being at this desk, typing out a silly email about U2, when I heard the news. I remember calling S, I remember worrying with Jenny about friends of friends who worked at the WTC, I remember walking down 18th Street with more people than ever out on the streets of Washington, DC. I remember finding out I knew a victim at the Pentagon, and I remember sitting at Lauriol Plaza that night, watching the police and the horses marching down the street. I remember the memorial at St. Matthew's, not able to enter, but reciting prayers and singing on those steps.

The headline at Fox News is "The Fight's Still On." Osama bin Laden is still out there, and terrorism is still a threat.

Remembering Barbara Olson.

More from that day.

God bless America.

Real conservative pop

I always saw his links to Drudge. Interesting to read the profile of Andrew Breitbart, and to see that there is a competitor to Huffington Post about to launch!

Movies/books of Late

First, a cool link: Hitchcock's most memorable moments.

I rented two movies this weekend. Still trying to make it through Into the Wild, which is pretty but not terribly interesting. Only 1/3 of the way in, I can tell that I much prefer the book.
I also rented The Life Before Her Eyes. Gorgeous cinematography, and both Uma Thurman and Evan Rachel Wood were fantastic. The story seemed a little thin and predictable.

Not sure if I mentioned that I finished Devil in the White City. I thought it was fantastic, a mesmerizing read. Perfect combination of non-fictionalized drama and a great history lesson. Now I'm between books and not quite sure what I want to turn to next.

Palin Power

Count me as among the very impressed with Sarah Palin's speech last night at the GOP convention. She came across as smart, biting, sarcastic, well-spoken, offensive, prepared, and incredibly poised. Already folks are thinking: why not flip the ticket :-) Seriously, she offered some wonderful lines. Among them:

• I guess a small-town mayor is sort of like a "community organizer," except that you have actual responsibilities. I might add that in small towns, we don't quite know what to make of a candidate who lavishes praise on working people when they are listening, and then talks about how bitterly they cling to their religion and guns when those people aren't listening.

  We tend to prefer candidates who don't talk about us one way in Scranton and another way in San Francisco.

• This is a man who can give an entire speech about the wars America is fighting, and never use the word "victory" except when he's talking about his own campaign. But when the cloud of rhetoric has passed ... when the roar of the crowd fades away ... when the stadium lights go out, and those Styrofoam Greek columns are hauled back to some studio lot - what exactly is our opponent's plan? What does he actually seek to accomplish, after he's done turning back the waters and healing the planet?
• There is only one man in this election who has ever really fought for you ... in places where winning means survival and defeat means death.

• For a season, a gifted speaker can inspire with his words. For a lifetime, John McCain has inspired with his deeds.

GOP Convention

Well, I didn't make in to Minnesota :-(.

But here is a great speech from last night.

And we need a President who doesn't think that the protection of the unborn or a newly born baby is above his pay grade.