Broken Promises

Much has been made in the financial media about attempts to break contacts.  Of course, the focus is on the AIG bonus contracts.  Frankly, I think there is a problem with a society that decides to stiff payments which were contractual obligations.  Not that I agree with the AIG bonuses, but I think we begin to walk down a path which we need to closely and thoroughly examine, before we begin breaching contractual obligations.

Many pundits have made excellent points that while it seems "wrong" to break the AIG contacts, there seems to be no problem in breaking contacts with union represented employees of General Motors, Chrysler, or Ford.  And now there are municipalities which are gearing up to break contracts with police, fire professionals, and other employees.  The most perplexing thing is the Obama Administration's desire to force General Motors to restructure the health care obligations to retirees.  I keep wondering whether I misread this statement, because isn't one of the tenants of this Administration providing quality health care for all Americans?

That said, it is the promise we made and continue to make to our most valuable citizens, seniors, that after enduring years of hard work, they can retire, live a comfortable life doing the things they dreamed about while breaking their backs earning a living, putting children through school, volunteering in their communities.  It is that promise that we are breaking.  More and more seniors are being forced back to work because the retirement savings crashed and burned in the stock market or real estate, along with the inflation in fuel costs, medicines, and other necessities.  We are, as a society, breaking a promise.  

While the addition of valuable and experienced voices in the work place is important, this is not how most seniors envisioned their lives.  Just as the GM workers did not realize they would have to scramble to find health insurance and come up with the extra money for monthly payments.

Meanwhile, we still seem to keep promises to those who make a whole lot of money.

Meanwhile, Real People Are Being Foreclosed

Yesterday was spent with friends who have purchased their dream lot.  Right on Puget Sound.  The view is breathtakingly spectacular.  In a year, maybe two, there will be their house.  Rock fireplace, nice wood beams, wood garage doors.   It was quite wonderful, almost like spending a few minutes in a bubble, to talk with them about their plans.

But the reality for many Americans is still stomach churning.  Layoffs beget delays in paying bills, a monthly juggling act that keeps anyone awake at night.  Frequently, the bill that does not get paid is the largest, the mortgage.  And so, while my friends enjoy their dream, many people's homes have become their nightmare.

And, so far, nothing effective is being done to stop foreclosures.  The fear is that with these recent and soon to be more layoffs, people who lose their homes will also not have sufficient money to rent or find other housing.  And thus, this country begins to spiral into a greater disparity of homelessness, the haves and the have nots, the wealthy and poor.  We may worry over Mexico becoming a failed state, but from where I sit, we may become Mexico in the gap between rich and poor.

While our policy makers jet about, dealing with auto manufacturers, trying to patch up failed financial institutions, and engaging in the elegance of international dialogue, real people, your neighbors, your cousin, a family friend, is staring at a Notice of Foreclosure.  His or her stomach is in knots.  Many tears have been shed.  Fear gnaws at them.  Every day they receive letters from predators telling them they can help them out of their problems when really, letting them in the door will only make matters worse.  Greed and corruption know no bounds and no one is doing much to stop this nightmare.  

It's time for a moratorium.  If the White House can ask Rick Wagoner of General Motors to quit, they can tell the financial institutions to stop foreclosures all together.  Just stop.  Let's gather our wits, not trying to apply band-aids, but rather find solutions for every single one of these foreclosures.  We can do it.  Yes we can.

Right Direction?

Perhaps it is just my simple mind, but I keep thinking that trying to merely right the ship and add a few more crew members to monitor the sails, isn't going to create a healthy economy.  But it seems that is the direction the Obama Administration is taking.  It is their hope, through guaranteeing private investors buying up the so-called toxic assets on financial institutions ledger sheets, and by adding more regulatory authority, more referees if you will, that the same markets that got us into this mess will get us out of this mess.

While I am all for innovation and creativity, I keep wondering whether those attributes are a good thing in the financial sector.  It seems to me that every boom and bust we have had during the past two decades have been caused by reckless innovation in the financial markets, whether it was using leveraged money to come about with whacky ideas for Internet marketing during the dot.com boom and bust, or whether it was the slicing and dicing of mortgages and other debts (consumer credit, student loans, Lord knows what else) into securities that were sold, insured, and leveraged more times than probably anyone knows, it seems the financial industry's creativity knows no bounds.  While that may be fine and good if they are gambling with their own money, their own retirements, their own homes, it's not good when it is playing with teacher's retirements, a janitor's home, and deposits in a bank.  

I keep coming back to a more holistic view of economy.  That is, we can not continue to rely on selling services.  Over 70 % of our economy was about consumer spending.  And what we exported became the Lords of Wall Street, financial services and the related businesses such as lawyers.  In order to create something fundamentally sustainable, to avoid these huge, massive, booms and busts, it seems to me we need to reign in the financial industry's creativity and develop more production of stuff, things other people will buy, here and abroad.  

Stocks and securities must be about long term investments in companies that are, to use an overused word that essentially has no more meaning, transparent.  We should invest based on profit and earnings, not some wild idea that goes public, makes a few kids under the age of 30 millionaires and later goes bankrupt leaving retirement accounts empty.  We should not allow mortgages and credit card debt to be traded like baseball cards, but rather the lender assesses the risk and holds the card.  It's the only way loans can be made responsibly.  

Until we all learn how to behave I think righting the ship isn't enough.  We need to come to shore, get off, and learn how to sail, safely.  In the meantime, to join the world economy, we need to stop being the consumer and begin, again, to produce.  We can not continue being reckless in our consumption, ruining other countries as we binge on buying cheaply made crap.  

These changes are to the very core of an economy.  It's time we realize the fixes will be an over haul.

Newspapers and Journalism

Last week, Seattle became a one newspaper town.  In early January, the Hearst Corporation, who owns the Seattle PI, warned it would close the newspaper if it didn't find a buyer.  Meanwhile, the surviving newspaper, the Seattle Times, struggles under a mountain of debt and vultures are swirling overhead waiting for it, too, to die.  With the early warning from Hearst about the Seattle PI, the city's journalists and "thinkers" went into a hum of activity.  Seminars, panel discussions, wikis (I sense to demonstrate to the tech-hip that even journalists know how to work really cool cloud computing technologies), blogs, even tweets buzzing with what to do, what will be the next model for news production.  Earnest op-ed pieces were written by the usual suspects, opining that the demise of the newspaper foretold the end of civilization.

Laid off journalists gathered to begin investigations into what is the next BIG thing, what ways can they make a living and still practice what they believe to be "the craft of journalism."  So-called people "who have been in the business" forever were called upon for sage wisdom and advice.

In fact, all over this country this same discussion is occurring.  But similar to the melt down of the financial institutions, there seems to be very little self-reflection on why the newspaper, heck maybe even the news business itself, is going broke.  It is this lack of self-reflection that I think will not help establish any new "models" where news can be commodified and monetized, much less accepted by the public.

Here is my effort to push that self-reflection.  

Up until 1889 there were no schools of journalism.  Rather, people like Henry David Thoreau, Mark Twain, John Muir, John Burroughs, Henry Adams, Theodore Roosevelt, wrote for newspapers.  In 1889, Walter Williams founded the first journalism school at the University of Missouri.  And the professionalization of writing about news began.  Up until then, if you had something to say and could write, you usually got published.  

As with many "professionalization" experiences, barriers were put up.  If you weren't educated as a journalist, you were generally excluded in the news business.   Of course, many journalists neglected to educate themselves on issues other than producing copy, so over time we have seen pieces that pass for news which are really quite uninformed or simply wrong.  But if it made a headline, that was fine, because it sold news.

The so-called firewall between "news" and the commodification of news, or advertising was and is, well, a joke.  As one former editor of a weekly paper and an on-line venture once told me: "well, I have to think of the investors..."  Another journalist once told me about his story of a strike being yanked because the advertiser (who was being struck) called his editor (note, not the publisher).  We can all find these kinds of stories.

Simply put, between the professionalization of news collection and the lack of real protections between news and money, over time, people lost faith or maybe just got bored with news.  Not only did the models fail, but the so-called journalists failed.

Of course, there are obvious examples of these failures: Judith Miller, the run-up to the Iraq war, the current financial melt down, Bernie Madoff, Enron, the list goes on.  Additionally, I think people have grown weary of "gotcha" journalism.  The kind where the reporter seems delighted to have captured a political figure with a hooker, or failing to show empathy.  Locally, several years ago, there was a story about a crane that collapsed into near-by condos.  The Seattle PI ran story after story about the crane operator who apparently had a decade old conviction for drugs.  The conviction history had nothing to do with the accident, but they delighted for days, it seemed, in ruining this man's life.  That kind of journalism is, what, good for us?  Come on.

I think we may want to not just look at the "models" for the production of news, but the actual journalists themselves.  The Internet has obviously democratized many professions (you can do your own will, attempt to diagnose your own illness).  We see this now in the news collection business.  There are a lot of Mark Twains and John Muirs out there, once excluded, but now able to find audiences and write.  Or, as they now say, produce Internet content.

For news to thrive, now, I think we need to realize it's not an exclusive club who gets to provide the news (a relationship that has created things like press credentials, monopolized access to production) but rather open the doors for more people, invigorate the content and allow the public to find sources that stimulate discussion in the public sphere.  We need to encourage more Mark Twains and Ralph Waldo Emersons and less Judith Millers who see their jobs as hob-nobbing with the very people they are reporting on, who are not using critical thinking or analysis, but rather trying to cozy with power.  

It is because of breaches of faith like the Miller event that I think people are seeking different ways to obtain and digest news.  The fear is, of course, that we only seek news through our own lens, creating an echo chamber effect.  So the trick is, I think, to find people who can tell a story, write a narrative, that is compelling, analytic, and certainly from a viewpoint, but without a bent.  

All of this shakeout will be interesting.  We are truly living in revolutionary times.  Unfortunately, there are unemployed journalists, printers, newspaper delivery folks.  Real people caught up in this.  As the discussions continue on the "elite levels," lets not forget, also, it took a lot of regular folks, not with Columbia journalism degrees, to produce a newspaper.

Populist Anger

Well, it's starting.  Populist anger taking the form of vandalism. The former head of the Scottish Bank apparently refused to return his huge pension after the British Government bailed out his bank.  Last night, a group broke the windows to his home.  

In a carefully negotiated press conference last night, President Barack Obama agreed that people have a right to be angry over the AIG bonuses, but that investors also have a right to make a profit.  In other words, be angry, but not too angry.

In today's Wall Street Journal, Thomas Frank, the author of What's Wrong With Kansas? opines that the regular folks got it right about Wall Street.  That the  anger we all feel is spot on in analyzing the "case study" of poor management, absent risk assessment, and sheer greed that controlled most if not all the financial institutions for the past two decades.  Many "populists" manage the family finances, weighing risks in light of obligations, and while they may enjoy making a profit, they don't sink the ship for short term and short sighted gains.  Therefore, in examining what it is we know so far about the individual behaviors of management in AIG, Citibank, Goldman Sachs, Lehman Brothers, Bear Stearns, Merill Lynch, Bank of America, IndyMac Bank Countrywide...down to the shark mortgage broker keying in on making a big killing on an outrageous refinance...most populists realize the folks in charge were, well, only trying to make as much money off the back of the rest of us as they could.

I suspect if the Obama Administration neglects to listen to this anger, and adopt policies which not only prevent future behaviors but also lean heavily to help the average person dig out of this morass, there will be more broken windows.  

What was the line? I'm madder than hell and I'm not going to take it any more!

Corporate America

As we begin digesting the Obama Administration's financial industry bail-out plan, I am struck by the lack of debate concerning the relationship between government and private investors.  Certainly there are discussions about the large guarantees and actual cash the Federal Government is contributing in order to lure private money (something like 9¢ on the dollar, in other words, the government is contributing  91¢) in buying the so-called "toxic assets" off the financial institution's books.  But there is scant discussion about the new partnership that is created.  In other words, the United States Government is now partners with private investors who will be eagerly trying to maximize their profits.  

Aside from the distaste of how those profits are going to be maximized (assume that some of those toxic assets are mortgages which are "submarined" or that are secured by real estate worth far less than the face value of the promissory note) by foreclosing and selling people's homes, developer's half baked projects, and overly-leveraged businesses like Donald Trump.  But there are real people behind those toxic assets, with real homes, kids in neighborhood schools, struggling to afford a loan sold to them on dreams and more than likely fraudulent practices.

In the middle of these discussions, about how do we want corporate America intwined with our government, we also should look at corporate "solutions" to other issues.  For instance, in yesterday's New York Times I noticed a full page ad from IBM.  The ad gave a litany of food problems: mad cow, salmonella, e. coli.  And, IBM touted it's solution, of tracing food from production to market as a way to trace and track problems.  Of course, this tracking would require Federal legislation and regulation.  Interestingly, many proponents of local foods, people in the slow food movement, oppose tracking system because, ah-ha, it benefits the conglomerates who can afford the IBM systems!  It will, essentially, put the small producers out of the market.  

And then we have the in vogue with transportation planners, congestion pricing.  IBM is running commercials, which have to be expensive, on the NCAA basketball championships, regaling viewers with how much time we waste stuck in traffic.  How European countries have solved this problem (cut to happy Norwegians) with congestion pricing.  Of course, IBM is all to happy to sell you lots of expensive technology to solve this "problem."  

Let me tell you how IBM sales work.  For years they sold main frames to Boeing.  And they were so in bed with Boeing, that IBM sales force had offices in Boeing corporate offices.  Same thing with Nordstrom, selling them point-of-sales machines.  You just know IBM marketing folks are wining and dining transit planners, agriculture, food, and drug regulators, and of course, Congress, to legislate "solutions" to "problems."  

We have to remember, these corporations have lobbyists.  Lots of them.  They are good at what they do.  Many of these lobbyists used to be Congressmen, Democrats and Republicans.  They are friends with the current Administration.  When they yell "fire," everyone is conditioned to listen, even if there is no fire or a small flame easily extinguished.

So, we then must wonder...what are these toxic assets that we have to so urgently buy?  What is the problem that corporate America is whispering to our "leaders?"  And is it a good thing we are now partners with the very investors who were so eager to make a buck off of sub-prime mortgages?  What, really, is this fire?

It's All Toxic Now

The Obama Administration's plan to help stabilize American financial institutions was announced just a few moments ago.  It calls for lending money to private investors who will purchase the so-called "toxic assets" from banks.  The idea is having those assets off the bank ledgers will free up cash and prime the bank lending pump.

The stock market, as I write this, is up over 300 points.  Wall Street goes wild, thinking, finally, the cavalry has come to the rescue.

But really, according to this fascinating article in Rolling Stone, it seems all we have done is rescue the very companies that continue to tell us they are too big to fail, that we are too naive to understand their products, and what is good for them is good for us.  All of these lines we have heard before.  I continue to believe that anything that is too big to fail is too big to succeed, and question the value of propping these behemoths up when really their foundations seem rotten.

What we are doing, by lending money to hedge funds and other private investors is continuing the desperate efforts to make money off of money off of leveraged money.  If these same financial institutions warn about the "moral hazard" of helping individual borrowers by lowering interest charged on credit cards or cram down provisions to modify mortgages in bankruptcy, how can they be so arrogant to not see the moral hazard they are asking us to endorse?  

I keep wondering where is the outrage?  Why are we not banging on the doors of this Administration, of Congress, telling them to forget focusing on the easy targets, the bonuses, and rather it's time to re-do the whole corrupt system.  We can not be held hostage, like the Americans in the Iranian embassy, by these corrupt and unethical corporations.  But oh, that's right, we don't have expensive lobbyists paid to make sure our interests are protected.

Dealing with Population Booms

2007 saw 4.3 million births in the United States, topping the greatest population increase in the 1950s.  In other words, we're increasing our population.  And that doesn't include increases from immigration.

Usually these kinds of topics are sensitive.  But population issues impact economics, culture, the environment.  For instance, if we're worried about how to pay Social Security and Medicare for the aging Baby Boomers, what are we going to do for this whole new generation?  

And, from an environmental standpoint, no matter what we try to do to reduce carbon emissions, frankly, increases in population increase our contribution to the human enhancements to global climate change.  More housing, more transportation, more food...

The news of the population increase was buried.  And the actual article focused on the high percentage of births by unwed mothers (40%) rather than the mind numbing idea that there are 4.3 million new Americans (not including immigration numbers).  

Where is the discussion about what are we going to do with this boom in relation to a life that seems to be going bust?

Boom and Bust

While we continue to be fixated on the AIG bonuses, which I want to again plead that while it is unconscionable those bonuses were paid, it is still a distraction from issues that really need our collective attention, there was a fascinating and demonstrative news item originally reported a week ago.  In Bozeman, Montana, a gas line exploded, destroying a number of historic buildings on the main street of town.

For those of us who get to Bozeman, this is sad news.  Those buildings were indeed lovely.  Bozeman was one of those places that was seemingly immune from the economic nightmare devastating the country.

But the blast brought attention.  And a realization that indeed, all is not well in Paradise.  The bankruptcy of The Yellowstone Club, the moratorium on Ameya Preserve, (another land based development catering to not only the extremely rich but wealthy people who consider themselves into "sustainable" living by eating only foods "designed" by Alice Waters) along with other wealthy land owners beginning to collapse is causing a ripple effect in the Bozeman/Gallatin county economy.

Why do we care?  Couple of reasons.  More than likely as Bozeman begins to feel the impacts of the depression, many other rural areas will descend quicker and longer.  To come out of a depression in a rural area takes longer.  

But even more importantly, Bozeman is really a case study (as they say in MBA schools) on boom and busts.  Without doing the research to determine when boom and bust economies started in the US, I feel safe to say we have a long history of them.  Think gold and silver mining, and logging.  In fact, early in our history, booms and busts were natural resource dependent.  Come in, strip the area of the resources, make a lot of money, and leave a ghost town.  

We have, over time, managed to level out the booms and busts until the past twenty years.  Now we have dot.com booms and busts, the real estate boom and bust and it's safe to say without changing our economic models drastically, there will be another boom and bust within the next ten years.  

So here is Bozeman, on the rural/small town edge of a showy wealth driven boom and a last gasp of egos slide bust.  Strangers came into town, convinced the locals that these swanky real estate developments would enhance the economy over time, and now hundreds of carpenters, tile layers, ski lift operators, art gallery owners, interior designers, architects, escrow officers, are all beginning to understand what a bust feels like.  They attend bankruptcy hearings where formerly wealthy people who leveraged other people's money try to hold onto control of developments that were never real in the first place.  

There is gold in them there hills!

We clearly need a new economy to make sure we are not constantly re-enacting the creation of ghost towns.  You would think we'd learned our lessons from 1849.  Guess not.

Education and Basketball

It all comes down to this!  Tomorrow, the Men's NCAA College Basketball Championship begins and on Friday, the Women's.  The tournaments are a big deal.  In almost every place I've worked, we have had office "pools" on the men's tournament.  Even all my fly fishing buddies run a pool (very cool prizes, lots of dry flies!).  

As President Obama begins his campaign on education reforms, it's interesting that our First Basketball Fan and Recreation Player, hasn't mentioned some interesting facts as we begin our orgy of watching basketball.  Graduation rates.  

The men's graduation rates, according to the NCAA, averages at 59%.  The women's of course is much higher, with at least fourteen teams in the women's tournament having 100% graduation rates.  

Given that a majority of teams in both tournaments are public schools and most if not all the players are on scholarships, isn't it outrageous that we are not doing enough to keep the kids in school?  The problem is, of course, that for the men, the lure of huge monetary rewards of playing in the NBA far outweigh a college degree.  The women don't have that problem.

So while President Obama is telling high school students they don't have an option about dropping out, maybe he should also tell men's college basketball players that they have a privileged place in our society.  A scholarship to study at some of the best schools in the country: Duke, University of Connecticut, Michigan State, Louisville, University of Washington.  And that indeed, a college degree is worth something.  Just look at Obama's aide and Duke football and basketball star, Reggie Love.  He graduated.

While you're enjoying the games think about how we can encourage higher graduation rates, lower attrition to the NBA, and of course, less corruption because of all the big money.

Now, go fill out your bracket.

What We Have Become

In a very cleaver picture essay, this artist demonstrates with quick wit what we have become.  Attached to all things electronic!  

A few days ago I did a presentation to a 3rd grade class on forestry and what foresters do.  Of course, like anyone in this field, I got into forestry because I loved being outside, but I finished my photo presentation with a picture of my desk, because, like everyone else, that is where I spend most of my time.

We have become complicated by the cables.

All those lines of wire are symbolic, of course, of the fact that we really are no longer an economy or culture that actually produces something tangible.  We produce ideas, concepts, but nothing that we can stick into a container and ship overseas, load onto a truck, or even sell at the local market (as much as we talk local produce, really, most local is miles away from where you are shopping with your chic canvas bag).

Yesterday I heard, again, the number that just sends chills through me.  Over 80% of our economy is based on consumer spending.  Much if not all of what we spend money on is not produced here in the United States.

When I was talking to the 3rd graders I realized that very few of them knew paper came from forests.  They didn't mention logging when I asked them what happened in forests.  It's simply not "politically correct" to talk about manufacturing or producing anything other than locally grown lettuce.  Growing lettuce at a scale of selling it at the local Sunday market can not sustain a family.  We simply must figure out how to create middle class jobs with healthy wages.  This will and must include manufacturing things.  Using our resources.  Learning to live simply.

Unwinding this mess will be as tricky and frustrating as untangling all the cables underneath my desk.

The AIG Debacle

And now, more news that really shouldn't surprise us.  AIG, the recipient of the largest amount of our money, taxpayer dollars, to allegedly bail them out of financial demise, is giving $165 million in bonuses to the very same Lords of Wall Street who sold the large insurance company on participating in credit default swaps.  In an amazing display of "deaf" the Chairman of AIG said: "we need to give bonuses to keep good people."  Predictably there is a populist uproar, fueled by the media who is thoroughly enjoying this type of news.  The villain wear pinstripes the good guys wear blue collars, it makes for easy stories.

In my email in box this morning came an inquiry from one of my friends who I consider extremely smart.  And his question, more an editorial than a genuine question, wondered why it is Congress (and I will edit here and add the Administration) is unable to write in conditions on the federal bail out money.  He said, with Congress filled with so many lawyers, you would think they could write contracts with conditions (and to the six folks on the email many lawyer jokes swirled around between us).   

He's right, of course.  But that "failure" to condition the bail out money on how it is used is not negligent.  Follow the money and follow the lobbyists.  You see, we can have all our populist anger we want.  Huff and puff.  And the Members of Congress will now, almost like a well directed play, call for hearings, yell at executives of AIG, demand someone's head.  But really, those same Members of Congress, presidential candidates, and even wanna-bees currently working in the Administration, get lots of money in their campaign coffers from AIG, Citibank, Bank of America.  Even now.  

So, this latest brouhaha, well, it's for show.  It gets us distracted.  It gets us upset.  Meanwhile, bankruptcy cram-down  provisions get watered down (which could really help troubled homeowners, you know, those blue collared folks), the mark-to-market accounting provisions that actually help tell individual investors what banks are solvent are probably going away...in other words, while the populist anger is storming off to the side, the real action to help us, is not happening.  

Score?  Banks and financial institutions - 10  Individuals - 0.

Get angry.  But keep calling and yelling at your Congressman or woman.  Tell them you're watching.  Not the showy hearings or press conferences, but their votes on issues that will actually help you, your friends, your kids, your neighbors.

Laughing All The Way To The Bank

One of the standard ways for media to draw attention to itself is to pick a fight with other, perhaps rival, parts of the media.  Readers of New York tabloids know this strategy well.  Last year we witnessed an MSNBC news "anchor" constantly flame a Fox News commentator.  Ratings, apparently went up all around.

It's not surprising then, that this past few days Jon Stewart of Comedy Central has taken on financial media types like Jim Cramer of CNBC, accusing them of fueling the economic bubble from the past 8 or so years and failing to take responsibility.  Stewart's Exhibit A is Cramer's endorsement of Bear Stearns stock days before the company went belly-up.  

NBC, the owner of CNBC, loved the attention, just as Fox did when their commentator was attacked by MSNBC.  In this game, the idea that attention, good or bad, is good for ratings, holds true.  Jon Stewart invited Cramer on his show, and NBC milked it.

While Stewart apparently was not a comedian with Cramer, and engaged in some fairly serious accusations about media types failing to investigate the extent of the financial institutions failures and hyping the "bubble," it's still odd, in some conventional sense, to think of a comedy show doing the work of journalists and opinion "leaders."

In reality, Stewart makes his living off of current issues.  And the economy is front and center.  Picking on Cramer (who is way too hyperbolic for my taste) was like shooting fish in a barrel.  Easy pickings for Stewart, especially since he probably couldn't get John Thain or any other Lord of Wall Street on the show.  It was a win-win for Stewart as well as Cramer.

However, the economy is a real problem impacting everyone.  It's global reach is devastating.  And there are serious details in the reconstruction work that needs to be done, which require attention of everyone, pushing leaders to do the right thing, not short change us as they have in the past.  One of those issues is quite technical but extremely urgent if we want to have a long term sustainable economy built on (to use the current vernacular which I think has lost meaning) transparency.  Mark-to -market is an accounting rule that requires financial institutions to value assets on what they could get on the market, not what they paid for the asset.  In other words, what it is worth.  It is like saying the 10 year old Ford you own is still worth what you paid for it, rather than what you could get if you listed it on Craigslist.  

Financial institutions, now scrambling to demonstrate to Treasury and the Federal Reserve that they are solvent (to avoid federal take-overs and loss of that oh-so sweet corporate jet and huge salaries), want to mark the assets value at something closer to what they paid, rather than what the market will bear.  In other words, fluff up their assets.  Then they can claim they have the reserves to function and voila, the financial problems go away.

The problem is, some Members of Congress are actually listening to them (remember I have discussed the lobbying advantage these banks have over us?)!

So while Jon Stewart and Jim Cramer can "fluff" up their ratings railing at each other about who is responsible for the economic debacle, we all need to keep our eyes on the ball, follow what our leaders are doing, to make sure it doesn't happen again.  This is serious stuff.  And only we can make sure the right policies are set into place so we are not here, again, or our children are not left picking up the pieces.

On Greed

This morning, 12 adults, from a female fire fighter to a international banker, sat in front of a elementary school student body to explain what they do for a living.  There was a woman, trained as a hair stylist who founded a children's theatre, a camera man for documentaries seen on The Discovery Channel, a chef who opened his own oven roasted pizza restaurant after being an elementary school teacher, an architect designing affordable housing, a immunologist, a forester (me!), and a director of operas.  Each person spoke passionately about following the things in life that make you happy.  About giving to the community.  Not one student asked about how much money we made (although one precocious child asked if I got to shoot wild animals!).

And so, on this day, when Bernie Madoff was shackled and taken to a Federal Detention Center in Manhattan, when his victims cheered and clapped when he was hauled away, this piece by Tim Egan, says it all.   

I met Patsy Collins (referenced in the article) and worked with Bill Gates, Sr.  Both were and are amazing people.  We have a lot to learn from folks who understand commitment to community, family, and that following your passion is far more important that how much money you can make.  Greed was prevalent throughout our society, especially the past few years.  We're all in the mess together.  And it will take all of us to get us out of it.

Now, now it the time for us, in Patsy Collin's words, to "give forward."   

Trusting

Bernie Madoff.  Pfizer.  Peanut butter.  Banks.  The former Governor of Illinois.  The list could go on for institutions and people who seemed to have broken our trust in just the past two months!

Today, we learn another saga in the pharmaceutical companies paying researchers.  In this case, a noted anesthesiologist who had published research about post-operative pain killers, admitted that he fabricated results which were beneficial to Pfizer.  Of course, Pfizer paid for his work.  

The large pharmaceutical company denies any involvement, and in fact, they probably didn't sit down with this researcher and demand certain results, but he clearly wasn't stupid and realized the more his result showed success in post-operative pain relief with Pfizer's non-narcotic drugs, the more likely he would get continued funding, prestige, and probably a larger salary than most anesthesiologists.  

It seems that many of the foundations of our lives are crumbling under daily revelations that our fundamental systems are not working.  Financial institutions, using our deposits, speculated wildly, made irresponsible loans, preyed on people with teaser loan rates, and awarded huge bonuses for short term success and long term devastation.  Our food supply system is broken.  Sucked in by our own greed or need to sustain income levels in order to just keep up, we handed money to not one but many many suave and cultured "investment advisors" who concocted elaborate Ponzi-schemes which eluded regulators for years.  And government officials, from Illinois to Washington, DC, continue to flaunt their power and avoid accountability.

All of this makes things like the Ford Pinto or Chevrolet Corvair seem contained.  We managed to catch those problems, convince the auto companies to build safer cars, and everyone believed they could trust again.  

Now, well now, who would you trust?  

Our collective cultural belief in trust, that people will do the right thing, is broken.  There are somethings government can begin to fix, like insuring that food production is safe, enforcing banking regulations (or creating a new regulatory structure), increasing ethics oversight on government officials, perhaps even increasing government funding for health research.  But really, trust is a covenant between each of us.  We must find ways to put aside our own greed and understand that concept.  Because, as all our mother's once said, when trust is broken....

Conspicuous Consumption Makes the News!

In today's New York Times came an article about the demise of conspicuous consumption because of the recession.  I am shocked!

What these kinds of articles do, however, is set up a dynamic (a conflict if you will) between the folks who believe this recession (I really really want to use the "d" key instead of the "r" key, and then a few "p's") is a cultural policy window and those who, like the current and past federal administrations, understand that unfortunately, our economy is dependent upon consuming.  Those who see this as a cultural policy window are savoring the moment of  "I told you so."  They saw the worst of the worst, the McMansions, the expensive cars, the gaudy jewels, the $1,000 Sex In The City Jimmy Choo shoes, and consistently (in their minds) said our culture was far too out on a consumption limb.  They are thoroughly enjoying the idea that we'll all give up our cars, our McDonald's Big Macs, and our Nordstrom credit cards for a simple life growing lettuce instead of grass in our front yards.

But then there are the folks who are coming late to this debate.  Laurie David and her stopglobalwarming.org who is currently on a rant about toilet paper.  This from a woman who lives in a huge mansion in LA and probably spends on clothing in a month what many of us spend in a year!  Or Arianna Huffington, who once wrote a piece about how many Blackberry phones she owned.

Culture wars or divisions will always be a part of our society.  And this combined rush for "sustainable" living (local food sources, green architecture, transportation etc) along with an energized policy initiatives on the environment, we may gradually move our culture toward a renewed sense of "just enough" rather than "too much."  But I think pundits expounding on how everyone else should live is not good.  If it's one thing we do well it's seeing through hypocrisy.  In order to sway a cultural shift, we  need to let the impacts of this depression (oops, recession) seep in as well as provide positive answers.  In other words, yes, we can all live well with two pairs of Jimmy Choos not four!  The reality is while this depression will alter all of our lives, it will not be a radical change in our culture.  Radical takes time.  A major concern is that while this depression will alter lives, it may also further expand the disparity between the rich and poor, further eliminating the middle class.  And that is not good at all.

But the good news is, we're beginning to have discussions in the "public town square" about how much stuff is enough.

How Big Dealers Deal With Foreclosure

In fairly remote areas (at least for this kind of money) wheeler-dealers began breaking ground on high end investments.  From McCall, Idaho to Big Sky, Montana, developers created special enclaves for the wealthy like The Yellowstone Club (Bill and Melinda Gates own property there) and Tamarack, in Idaho.  The Yellowstone Club boasted that you could only become a member if your net worth was over several million, then of course you had to spend hundreds of thousands every year in fees, much less what it cost to design and build your faux McMansion Log Cabin.  

These resorts carved golf courses, private ski areas, ponds, re-shaping the physical landscape as well as the economic topography of the regions.  Enormous wealth quickly sprung up in small towns across the Mountain West, such as Bozeman and McCall, where carpenters, plumbers, and log home contractors became instant celebrities and luscious magazines like Western Interiors tripped over themselves to show the world that the West was finally on the map with taste and wealth.

But as we know from physics, what goes up must come down, almost every one of these resorts are now in bankruptcy.  And the only ones making money are lawyers, expensive bankruptcy lawyers who fly in from New York, San Francisco, Chicago, to represent the lenders trying to figure out how to satisfy the investors who actually hold the promissory notes on the loans.  In other words, litigation is flying all over the place.  Of course, "the help," the carpenters, plumbers, and even the log cabin builders, all who are unsecured creditors, are left figuring out how to pay their own bills much less hire attorneys.

Meanwhile, these fancy resort bankruptcies show one thing.  While Congress continues to debate whether to reinstitute the ability of  bankruptcy judges to modify the terms of individual home owner's loans (called cram down provisions) which would help individuals maintain their homes, allow lenders to continue making a profit, these high powered borrowers have always been able to have judges modify their loans.  Why?  Because they are not individuals.  Corporations and owners of second homes do have the right to seek modifications.  But not an owner of a primary residence!  

Are you choking on your coffee, yet?

So instead of lessons about moral hazard which lenders argue is the problem with allowing individual cram downs, perhaps we out to be looking at the lessons of when the so-called wealthy file bankruptcy.  Where is the moral outrage?

What Economists Are Thinking About

Sometimes the best news isn't on the front page.  Yesterday it was in the New York Times arts section.  The article was entitled Ivory Tower Unswayed By Crashing Economy. 

While the article was about academic economists, it is also applicable to most disciplines, that exploring new ideas or theories is nearly impossible in an academic setting because of the intransigence of "elder" academic advisors.  But that is another piece of writing for another day.

What is clear is that both the mathematical modeling and the reliance on traditional economic theory, that is, people make rational economic decisions and the market automatically adjusts to respond to those decisions, is the prevailing overarching belief system of economists.

As a friend dryly said a few days ago, "corporations are not people."  Despite judicial precedent that allows corporations to have the same "rights" as individuals in this country, indeed, a corporation is not an human.  Rather it is a composition of many many people, making many many decisions, most of them based on their own self interest rather than the interests of shareholders, other employees, or even the so-called health of the company.

Behavioral economists, a "new" branch of economic theory, much disdained by the Free Market theorists, believe that economists must also evaluate decisions by using theories from psychology.  I would add anthropology and sociology.  Hopefully, these new behavioral economists become prevalent and the reliance on both Free Marketeers and mathematical modeling (which tends to make assumptions based on free market theory) diminishes.  

It will, I think, be interesting in time to read what these academicians begin to dissect as the causes of this current economic debacle.  There is plenty of places and people who made so-called rational decisions.  But clearly they were not in the best interests of anyone other than their pocket books.  But the irony is there are no such thing as free markets, and those who lined their own wallets did so with assists from tax breaks and now with bail outs.  Hopefully, economists begin to think about that, too.

There's Something Reassuring About a Robin

As soon as there was a hint of light this morning, I heard Robins.  Robins, wrens, sparrows.  But it was the Robins that particularly caught my attention.  "Spring is on it's way," I said to myself, dodging the sudden shower while I ran uphill (is there no justice?).  

Our world right now is changing so rapidly my head feels foggy trying to keep up with the news.  Today, General Motors issued it's Annual Report and stated, essentially, that it's very existence is problematic.  I am young enough to remember "what's good for General Motors is good for the country."  And certainly that line has become even more evident as the policy makers count the number of jobs that will be in jeopardy if General Motors fails.  

In a magnificent display of gravity, home values continue to plummet, causing many people who believed they were accumulating some savings, to realize not only their security is gone, but the owe more than the house is worth.  

And the one economic sector which a mere two years ago was hot (retail sales) is now posting dismal figures, reminding us that we are all too afraid to spend money, much less credit.

But, this morning, there were the Robins.  As if to say life does go on, seasons do change, and sooner or later we will understand why the world seems so chaotic right now.

Hey, It's America!

I would never begrudge anyone trying to find silver linings in a disaster.  But, I think, there is something, well, er, distasteful in making a lot of money off the disaster you caused.  In an article that must have some public relations counsel squirming, former highly paid and highly placed executives of Countrywide Mortgage have a new company which acquires "sour" mortgages for pennies on the dollar.  The business model is to then contact the borrowers and work out a plan.  

Essentially this is the privatized model for what President Obama is proposing for the so-called toxic assets on banks books.  But here is the rub.   More than likely many of the sour loans this new company is acquiring were originated by Countrywide and it's progeny.  It's sort of like causing the tsunami then selling towels for the victims to dry off.  The sub-prime loans, teaser rates on adjustables, piggy-back loans, all those ideas originated with Countrywide and other "smartest men in the room."

Hey, it's America.  But really, isn't it time for us to question the morality of this business plan?

In This Economy

Ok, this will come off as some sort of advertisement, but...

Several months ago, I had problems with my Internet connection.  I contacted the provider, spending hours on the telephone with someone overseas.  The end result was nothing got fixed and all I got was a run around.  Of course, I was not the only person to have had this problem with this company, so I yanked my account, finagled getting out of the cancellation fees, and ordered up another provider.  

Voila, Internet service.  In connecting it, I ran into some configuration problems which Comcast determined Apple would be better at helping me (or, really, Comcast hadn't a clue so they passed me to Apple).

On the other end of the phone was a young woman, who was fabulous.  Problem solved.

Today, I had a small issue, but since I was having a bad day, I didn't want to spend the hours it would take for me to figure it out.  I called Apple.  Instantly, problem solved.  I understood the young man, he walked me through it, we laughed, he told me how much time I had left on my warranty, made a cute joke about "planned obsolescence" which I didn't think anyone under the age of 50 knew about, and I was on my way.

Which leads me to this...I wonder why it is we Americans have put up with large corporations that give crap customer service.  The "banks too big to fail" where no human has answered the phone for years, the Internet providers who, being frank, don't care whether they help you or not so you're routed to some other country and frequently disconnected.  I could go on and on.  Our acceptance of cheap products, or professional sports teams that are heavily subsidized with tax breaks and state funded stadiums yet want to charge the public to watch games on TV or an arm and a leg for crappy seats...

Hopefully one result of this depression will be companies that come out of it understanding their success is dependent upon good customer service.  Same thing for our government (don't get me started about the City of Seattle's Public Utility customer service.  Perhaps basic math skills need to be a job requirement?).

In the meantime, thank goodness for Apple.

And This Is Important Because?

For the past several days there have been skirmishes by leaders in the Democratic Party over Rush Limbaugh, the polarizing talk show host who recently said he hopes President Obama fails.

Over the weekend, Mr. Limbaugh spoke, as he does almost every year, to a convention of conservatives and on the Sunday morning talk shows, the President's chief of staff announced that Limbaugh was effectively, the leader of the Republican Party.  

While it seems to me the recently GOP has been bereft of ideas, for instance dredging up the old ideas of more tax cuts rather than spending money to stimulate the economy, I believe most Americans other than Limbaugh's ditto-heads generally agree that the Republicans are clueless right now.  That is, unless the White House knows something we don't know.  So it seems that trying to pull the plugs on the GOP life support by closely allying them with Rush Limbaugh is a waste of time.

Memories are short. I think the White House may be forgetting that only a few years ago, the Republicans were anxious to dance on the Democrat's graves.  This kind of behavior really isn't, I don't think, the change American's voted for in November.

Besides, we only have a vibrant democracy when there are thoughtful and energized opponents.  That's what we want.  Not feeding Rush Limbaugh's enormous appetite for attention.