Crisis Explained

I've heard a lot of explanations about what's caused the current financial crisis, and now I've heard several reviews on why the bail-out plan failed, and what that means.

This blog article does the best job I've seen describing the situation:

http://silentclarity.livejournal.com/376012.html

Summary: We'd better pass some bail-out legislation sooner than later.

Animal Propaganda 2.0

Looks like real money is behind the effort to discredit the King County animal shelters. The effort to dismantle the shelter is becoming all the more desperate now that changes instituted (changes which, frankly, needed to occur!) are beginning to bear fruit. You'd think folks concerned with conditions at the shelter would be excited their effort has been rewarded with action.

But it's exactly the opposite. It seems like they really won't be happy until the KCACC shelter is a smoking crater. I'm not exactly sure what the forces behind shutting down KCACC think will happen if they succeed--but I suspect they believe they or or their friends will get to swoop in and grab the financing currently supporting the shelter. If so, then this is nothing more than a cynical money grab, and really has nothing at all to do with animal welfare.

I say that real money is behind this ongoing effort to discredit the shelter for many reasons, not least of which is the launch of a new web page titled KCACC "Exposed." This is no simple free Google Blogger blog like mine or KCAS Creatures (run by someone who volunteers at the shelter)--someone spent some money putting together a site whose sole goal is to tear down the county shelter. I mean, come on, the site actually has a logo! They've branded their effort!

The site includes several pages, and is interactive... well, interactive so far as you are prompted to send in your own stories of "KCACC failures." Comments are NOT enabled on any of the pages, which indicates the page owners don't want people like me showing up there and calling them on their spin.

Why do I know the effort to shut down the shelters consists of spin and in some cases outright lies? Because I am intimately familiar with conditions in the shelter; my wife is the Volunteer Program Manager (or, as the KCACC "Exposed" propaganda blog identifies her, the volunteer coordinator) recently recruited to sift from the shambles an actual volunteer program. Several other people, including former CEO of the Humane Society and a newly installed head of the shelter with a reputation in the country for getting things done, are also newly installed. They are committed to fixing the shelter, and are making great progress to that end.

Of course, when you start from shambles, it takes a while to build actual programs and institute new policies and procedures. Maybe even several months. Apparently, KCACC "Exposed" regards the money spent on bringing in new management as a waste, and that the money should have gone to the animals. Ok... like, what, should that money have been just shoveled into the kitten cubbys? Knitted into $10 Bill blankets? What?

Oh, wait, I have a guess... given to managers of a DIFFERENT shelter that the KCACC "Exposed" blog is working with.

One final question--how much money did the KCACC "Exposed" site spend on its spiffy logo and web page design? Perhaps they'd consider donating an equal amount to some animal shelter just to show that, you know, they actually do care more about animals than winning.

How About This Plan, Mr. McCain?

I wonder of John McCain will deign to debate if the following is the plan passed to save the economy? (Or, is it just that the elderly senator from Arizona is too old to call up enough gumption to multitask during times of crisis?)

10 Ways to Bail Out Wall Street (and Main Street) Without Soaking Taxpayers in Debt, By Chuck Collins and Dedrick Muhammad

Who says we need to borrow a trillion dollars to save Wall Street from its own excesses?

As Congress debates the particulars of the Bush-Paulson bailout, one key question has gone largely unexplored: Who will pay for this mess?

Lawmakers in Congress appear to have assumed that the federal government will simply borrow more money to foot the bill for the bailout. The national debt ceiling will rise to a whopping $11.3 trillion, up from $8 trillion a year ago.

But this rush to borrowing merely shifts the bailout burden onto the backs of future taxpayers. Congress needs to change course -- and develop a "pay as we go" plan that makes Wall Street pay.

The lion's share of bailout funding should come from the high-finance gamblers and the wealthy CEOs who have so profited from our casino economy.

Read the full article here:
http://www.alternet.org/workplace/100223/?page=entire

Say No to $700 Billion Bailout?

There may be other ways to save the world from economic collapse (especially the current plan, which has all the makings of a grand screw up). I'd like to see more of these alternates discussed before we move forward. Alternate plans such as those suggested by economists Brian S. Wesbury and Robert Stein (hat tip to Sharon Cordell)

I have a feeling I know why the following won't fly. It is because it doesn't assuage our genetic urge to see those who've transgressed the boundaries of fairness immediately reap the consequences of their decisions, even if this ends up hurting everyone else in the process.

But here's the idea:

The Treasury Department has told members of Congress that the US faces a financial tsunami if a bill to allow the government to purchase up to $700 billion of toxic financial securities from financial firms is not passed – this week.

Unfortunately, this solution of giving the US Treasury almost unlimited power to buy distressed securities could be avoided if the government made some simple (and temporary) changes to mark-to-market accounting rules. So far, and for many unknown reasons, these changes have been considered off limits.

Why drawing such a hard line in the sand is so important, is a real mystery. Certainly, firms that took excessive risk should be punished. And the US should avoid creating moral hazard whenever it can. But saying; “I told you that you would stay in your room for a whole week if you disobeyed, and I don’t care if the house is burning down…you are going to spend an entire week in your room,” is absurd. If we are really talking about the end of the world as we know it; who should really care about relaxing the rules for a short time to get us through.

Let’s not take this the wrong way. Mark-to-market accounting is a good thing. It makes sense most of the time, and for most financial instruments that are traded frequently, and in the open. But there are special circumstances. And today’s financial market problems would meet any definition of the word special.

It is true that home foreclosures have risen, but a vast majority of mortgages are still paying on time. As a result, the market prices of subprime loan pools today have absolutely no relationship to the actual performance of the bonds. If every subprime loan went bad, and banks recovered just 40 cents on the dollar, the bonds would still be worth 40 cents. But the market has pushed bonds well below that level, taking down venerable firms and causing the government to consider draconian solutions.

In other words, mark-to-market accounting, not the reality of the economy or the actual credits, has created much of the financial turmoil that has shaken the world. Imagine if you had a $200,000 mortgage on a $300,000 house that you planned on living in for 20 years. But a neighbor, because of very special circumstances had to sell his house for $150,000. Then, imagine if your banker said you had to mark to this “new market” and give the bank $80,000 in cash immediately (so that you would have 20% down), or lose your home. Would this reflect reality? Not at all. Would this create chaos? Absolutely.

And it is happening all over Wall Street. Merrill Lynch was forced to sell $30.6 billion of illiquid mortgage securities to Lone Star Funds for just $6.7 billion, or 22 cents on the dollar. If it did not sell, these bonds might have fallen to 18 cents and further eroded its capital on a mark-to-market basis. It couldn’t take the chance.

But what if Merrill was allowed to hold those securities on its books, without marking them to an illiquid market? The company would not have had to take a $24 billion loss. And maybe investors in Merrill Lynch would not have had to settle for a $29/share buyout from Bank of America, a 60% mark-down from the share price less than a year ago. After all, everyone knows those loans were worth more than 22 cents. The actual performance of the bonds was much better than the price, and Lone Star was able to take advantage of the fact that Merrill was over the proverbial knee of accounting rules.

All of this can be avoided if a system were put into place that allowed private companies to hold these distressed assets. Rather than a centralized holding place, why not use a decentralized one? Why not allow financial firms with structured (Tier 3) assets issued between December 2003 and August 2007 to suspend mark-to market accounting for those assets, and receive government insurance as a backstop? This would be a temporary solution, not requiring any ultimate change in Sarbanes Oxley or mark-to-market accounting rules, and the government could even make money by selling insurance with less risk to the taxpayer than buying them outright.

In essence a firm could sequester, or firewall off these specific assets from the rest of its balance sheet, and either finance this itself, or bring in outside financing. The firm would promise to hold the securities to maturity, or until government insurance was no longer needed when it liquidated the assets. All of these deals could be settled in the private sector, in multiple locations with the government looking over the shoulder of each deal.

If the rules had been relaxed a little bit for these specific assets, Merrill Lynch could have created its own private equity investment fund inside its corporate structure instead of selling at a huge loss to Lone Star, which created its own holding vehicle.

This plan would leave mark-to-market accounting regulations intact. It would be a temporary change in the rules. Its most important attribute is that it leaves taxpayer powder dry for another day. It also allows the private sector to price assets in an environment that is not contrived and will help avoid the loss of, or government takeover of, more private firms.

Even if the Treasury initiates an RTC-type vehicle, the slight changes in the accounting rules for these specific assets should still be made. If a firm does not want to accept the government bid for its distressed assets it would have an alternative. It would also create a level playing field because the Treasury does not have to mark-to-market. A competitive marketplace for these securities would insure the current holders that they would get a price that is not based on a fire sale.

This plan stops the mark-to-market meltdown without undoing the good that mark-to-market accounting has done, protects the taxpayer, stops the losses at financial firms at a crucial time, and therefore helps end the shorting of stock and bonds that has kept the financial system on the rocks without making it illegal. Best of all it keeps the government from a massive and draconian step toward financial socialism.

Brian S. Wesbury - Chief Economist

Robert Stein, CFA - Senior Economist

Approved for Public Use

Fool Me Twice, Shame On Me

Decisive action to stem the continuing financial meltdown is required. However, let's be certain "decisive" isn't a synonym for "rushed" or "rash." As long as the markets know something will be done, we have a little time to think about the bailout and stem longer-term undesirable consequences a simplistic 'get 'er dun' bailout is likely to lead to.

Steve Fox of Steve Fox of the American Freedom Campaign Action Fund sums it up well:

If we have learned one thing over the past seven years, it is this: Do not EVER trust the Bush administration when the question of executive power is at issue! From the Patriot Act to the authority to use force in Iraq to the need to pass a new FISA law, the Bush administration is always saying some kind of crisis necessitates urgent action, which inevitably leads to the administration being given -- and abusing -- unprecedented power.

This week, the Bush administration is at it again. With the specter of a complete Wall Street collapse hanging over our heads, Treasury Secretary Henry Paulson is seeking 700 billion taxpayer dollars to bail out the financial industry. While the American Freedom Campaign is not taking a position on the financial details contained in the Bush administration legislative proposal, we are outraged by one specific section related to executive branch accountability.

Section 8 of the legislation provides, "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

Yes, the Bush administration is asking Congress to give the Secretary of the Treasury the authority to spend $700 billion as he wishes, without any real oversight or accountability. With respect to Congress, the proposed legislation requires the Secretary to merely submit reports about his activities starting three months after the first purchase of mortgage-related assets and semi-annually thereafter. That's like giving a gambling addict your life savings and asking him to send you a postcard from Las Vegas every once in a while.

If you believe, as we do, that it is time for Congress to actually serve its constitutional function and guide and oversee the activities of the executive branch*, please click on the following link to send an email to your members of Congress.

http://salsa.democracyinaction.org/o/2165/t/1027/campaign.jsp?campaign_KEY=25969

After you send your email to Congress, please be sure to forward this email along to friends and family or use the Tell-A-Friend option on our site. It is critical that members of Congress hear from their constituents before they adopt any legislation related to this crisis.

Thanks for taking action.

Best,
Steve

Steve Fox
Campaign Director
American Freedom Campaign Action Fund

Politics Closer To Home: KCAS Witch Hunt

You may recall that I've talked about no-kill shelters before, and how that feel-good label actually works to many animals' disadvantage. See my no-kill summary at the bottom of this post for a refresher. It's relevant to my larger point.

Anyhow, there seems to be a witch-hunt in King County to close down the King County Animal Care and Control shelter. It is one of the remaining open admission shelters in the area now that the Humane Society in Bellevue has been perverted to "no-kill." And, the King County shelter is vulnerable because of past poor management.

Leading the charge on this poorly thought-out mission is apparently one Claire Davis of the Coalition for a No Kill King County. Recently, one of Davis' stalking horses, a Dr. Brad Crauer, blasted the King County shelter in a Seattle Times article for a variety of lapses, apparently in an effort to get the place shut-down or taken over (perhaps by the aforementioned Humane Society?).

However, it turns out Brad Crauer may have been a poor choice for the the Coalition because... well, Crauer isn't the most credible of people. For instance, you might think twice about listening to the recommendations of a vet who "prescribed pain and muscle relaxant medications for himself, using his deceased dog's name."

Ho boy.

And that, my friends, is not even the least of it. Heart worm is potentially in Washington state thanks to Dr. Crauer. For a full list of Crauer's many credibility issues, check out this post from the KCAS CREATURES blog.

It's true that the King County Animal Shelter has had issues and still has them--several people have been brought on board to put the shelter on the right track, including Nancy McKenney, former CEO of the Humane Society. In any case, turning the place into a no-kill shelter is not the solution, because it will ill-serve thousands of animals every year (see below).

And even more to the point, lying and smearing to get your way says a lot about the validity of your goal.

No-Kill: "No-kill" is nice spin term that gets folks riled up for its emotional content; politicians find it easy to get behind because most people don't know what no-kill really means. If a shelter bills itself as no-kill, it is purposefully ignoring the realities of the animal welfare world, where there are (sadly) many many sick, aggressive, terminally ill, or otherwise non-adoptable animals who deserve a more humane end than death by starvation or exposure.

There is certainly a place for no-kill shelters, especially for a group that has limited funds. But no-kill shelters pass the buck by not taking in animals they see as having poor adoption probability. They get to keep their 'no-kill' status by sending animals to open admission shelters. (Actually, the truth is, no shelter is no-kill; a whole other layer of prevaricating going on with that.) If there are no open admission shelters in an area, what do you suppose happens to the stray dog you found on the road? Well, you might take it home... or, you take it to an open admission shelter. What happens when Claire Davis makes the whole county no-kill? A lot of suffering animals, that's what.

Take a Look

(hat tip to Paul Kemp)

Here is Obama just talking about what's been happening with the big banks lately. Take a look.

The Reason Reporters Were Arrested at RNC?

Guess what? It turns out there were preemptive arrests during the 2004 RNC, similar to the arrests perpetrated against journalists just last month at the 2008 Republican National Convention.

However, in 2004, I-Witness Video, a media watchdog group that monitors the police to protect civil liberties, video-taped many of these preemptive arrests ("premptive"--is that a legal term? Sounds like Minority Report's Precrime...).

Anyhow, in 2004, I-Witness Video worked with the National Lawyers Guild to gain the dismissal of charges or acquittals of about 400 of the 1,800 who were arrested during the 2004 Republican National Convention in New York, which ended up costing the city millions in lawsuits.

It's so darn pesky being video-taped breaking the laws you're supposed to be enforcing.

Now that we know that history, it makes a little more "sense" (and makes my stomach churn as I think on it) why MN police preemptively moved in on the I-Witness Video team at a house they were staying out 2 days before the 2008 convention started. What other purpose could they have had but to harass and scare the reporters into silence?

If the citizens of this country understood the ramifications of these and similar events, I doubt they'd be OK with the eyes and ears of their democracy being closed, arrested, or worst of all, owned and embedded.

Large Hadron Rap

Are you ready for the Large Hadron Collider to be switched on tomorrow? Here's a little primer, rapped by CERN researchers, for your edification and enjoyment:



More on this video from the Youtube Info pane:

There has been a lot of interest in the original mp3, lyrics, and vocals for remixing. You can find all that here:
https://www.msu.edu/~mcalpin9/lhc_rap...

Images came from:
particlephysics.ac.uk, space.com, the Institute of Physics, NASA, Symmetry, and Marvel

The talented dancers doubled as camera people, with some work by Neil Dixon. Stock footage is CERN's.

Will Barras is responsible for the killa beats:
http://www.ling.ed.ac.uk/~s9527813/

And thanks to MC Hawking, who first thought of using computer-voice to bring Stephen Hawking to the world of rap :-)
http://www.mchawking.com/

The rapper has a day job (we agree this is a good thing) as a science writer.
http://www.katemcalpine.com

They'll have a lot of data to sort. 15 million GB per year, actually. Want to get involved and donate your computer's downtime? Try LHC@home:
http://lhcathome.cern.ch/lhcathome/

A Wider Perspective

I have an acquaintance who often rails about Democrats and their evil schemes to "socialize" America. This fellow is retired and draws benefits from Medicare, Social Security, and a pension his union helped negotiate for him.

Hmm, remind me, which side of the political spectrum did the former two programs originate, and from which side of the political spectrum is the latter most supported by?

But, come the election this fall, he's voting McCain, baby!

When I ask him if he's OK with the mess the last 8 years of Republican rule has caused, he and his wife say, "What're you talking about? We're doing fine." Meaning him and his wife.

I think that response defines parochial. He is getting by, which means he sees no reason to "change teams" after all these years. To do so would, to his way of thinking, somehow invalidate himself.

The thing is, he's not doing fine. Most immediately noticeably: he can't go see his grandkids as often as he'd like because of high gas prices. He can't sell his house for the price he'd like because of the mortgage industry crash. And his savings are being drained by health issues, despite his Medicare, because of a lack of a comprehensive single-payer health care plan. But he's doing fine.

Ok, but what about those grandkids? The administration has only contributed to plummeting test scores with its moronic 'No Child' initiative, which forces educators to teach to tests as opposed to allowing educators even the potential to teach kids how to reason.

The administration's disastrous War Against Terror sent us into Iraq on a pack of lies, the repercussions of which we have been and will continue to deal with for a long time. Not least being how America's reputation has been punked. And don't get me started on the money we've thrown into this fiasco, billions of which have simply disappeared with no accounting. Billions of dollars of money sapped from our paycheks--gone!

And finally, my perpetual cause: the ecosystem that generates the air we breath and the food we eat. The Republican administration of the last 8 years has waged a war on the science that underlies strategies to save it. Why? So the administration's friends and supporters can make a buck, that's why.

Though my acquaintance may not live to reap the repercussions of our failure to get on board with saving the planet, his grandchildren certainly will.

From my point of view, he's not doing fine. From a wider perspective, it seems to me he might be in trouble.

Sarah Palin Controversy

So, if it weren't for the fact that Palin's Abstinence-Only stance failed even inside her own household, she'd otherwise be the perfectly qualified choice for Vice President? [insert ironically raised eyebrows and disbelieving smile]

(hat tip to Dee)

Amy Goodman of Democracy Now arrested Outside RNC

The free press is being arrested outside the Republican National Convention.

Amy Goodman is one of the most well-known and well-respected journalists in the United States. She has received journalism's top honors for her reporting and has a distinguished reputation of bravery and courage. Feeling a little sick to my stomach.