Friday, March 27, 2009
Chantelle would have loved this piece by George Carlin I found today. It's so appropriate, because it's exactly the way she would have wanted to live her life!
The most unfair thing about life is the way it ends. I mean, life is tough. It takes up a lot of your time. What do you get at the end of it? A Death! What’s that, a bonus? I think the life cycle is all backwards. You should die first, get it out of the way. Then you live in an old age home. You get kicked out when you’re too young, you get a gold watch, you go to work. You work forty years until you’re young enough to enjoy your retirement. You do drugs, alcohol, you party, you get ready for high school. You go to grade school, you become a kid, you play, you have no responsibilities, you become a little baby, you go back into the womb, you spend your last nine months floating... and you finish off as an orgasm.
-- George Carlin
Wednesday, March 25, 2009
Just another Tuesday, like any other;
Spring just starting, auspiciously
Hinting at new beginnings
And the end of those things known.
Struggling to survive, to understand
Amidst the scatterings of yesterday,
Aloof and unaffected, engaged and in pain;
Knowing the worst, trying to forget.
The gods look after natural fools
And those desperately being foolish;
We feel doubly blessed, yet naked,
For the gods do not fear mortality.
A lifetime spent dreaming, unaware,
Awakened only to flee to sleep again,
Fitfully, uncertainly, in fear of hurting, but
Destined to arouse refreshed and clear.
Standing before the vessel
Holding her spirit in bondage, with
Deadened voices, numb minds,
Our hearts bricks in our chests.
Family, friends gather close,
Whispering words we’d never shared;
So wonderful and terrible, this Thing
Which brings families together.
Seeming to be merely napping,
Comfortable and peaceful in your quilt.
Everyone arrives; it is time.
The harpist plays softly.
Her breathing slows,
The body’s struggle to remain
Amazing, difficult to watch.
Life, so precious, so tenacious, so tenuous.
Whispers, “We’re here, mommy”,
“We love you, mommy”.
We tell stories, remembering her life,
Holding her hands, caressing her cheek.
Oh, that familiar cheek, often kissed,
Giving, receiving the precious Touch
So often more happily remembered
When she laughed, wept.
Remembering her hands, so soft,
Gently touching, bearing love, now still,
Her blue eyes, bright and laughing,
Now dimmed and empty.
Now we must give you over
To complete your journey,
As the last efforts cease
And the room grows still.
“Goodbye mommy” we say.
The pastor prays, comforts.
A final tear courses down your cheek,
Matching the tears on ours.
The harpist plays a final note,
Carrying your last breath to the heavens.
Last touches, final caresses,
Prayers, comforting words, hugs.
Awakening from a lifetime of dreams,
Believing we’re immortal, godlike,
Finally realizing the Purpose of living:
To embrace every precious moment.
Tuesday, March 24, 2009
Monday, March 23, 2009
Sunday, March 22, 2009
It amazes me how resilient Julie has been these last couple of days. Of course, I know she has such boundless inner strength, but too often she doesn't see that in herself. Her mom, her best friend, her companion for not only her childhood, but much of her adulthood as well, lays quietly in a hospital bed, surrounded by nurses and doctors, unaware of all the bustle and attention as she walks the shadowed ways between life and death.
The doctors have been kind and very informative, taking care to explain in detail all that is happening, as well as what most likely will happen. Chantelle is in a deep coma, her body still functioning; heart and lungs and all the rest are doing just fine, but her brain has undergone such severe damage that they fear there is little hope for her survival, much less her recovery, over the course of the next few days. Her brain is like a computer whose hardware works fine, but all of the programs have been damaged, so that when you try to run them, they crash the whole system. When they try to bring her out of sedation, she goes into horrible seizures all over her body; this tells those experts upon which we must depend that massive areas of her brain are dead and will never come back. And it is these very areas of dead tissue that most likely will accelerate her progress towards her Final Transition.
I spoke in my last post about the brain as the vessel needed to hold the Form that is Chantelle. Today, the doctor told us that the vessel is broken, shattered into a hundred pieces, and that optimism is not even a word they would use right now. Chantelle may recover. We should know something more definite in the coming days. However, the word "may" has taken on a meaning that more resembles a mystical wishfulness than any real possibility. We must now prepare ourselves that the light-hearted, joyful 65-year-old gem of a person who had a 20-year-old outlook on life will never return, no matter what occurs next.
I think that's the hardest, to see someone who had come this close to realizing her dreams of retiring to Denver, starting a new life there, and maybe even finding someone to share the twilight years of life, taken just a week before her Grand Adventure. Perhaps this, more than anything, is why we weep so.
Hope and prayers all have their place, and should never be abandoned even when all seems lost; in fact, even when the object of those prayers is no longer with us, we must keep praying for ourselves and each other: for understanding, for forgiveness, for clarity, and for peace. But honesty forces us to know, in that deepest recess of our soul, that spontaneous recoveries and waking from a coma 5, 10, or 20 years down the road happen more often in Hollywood than they do in the studios of life. Perhaps it would be better if we didn't have these kinds of fantasy images placed there by sensationalized media; it would better prepare us for the reality we must all live from day to day, that gritty substance that gets into the fingernails of our souls as we grapple with the pain and the joy of just living in the here and now.
The beauty of the Now. When all of the facades fall away, the tears flow, the love overcomes the bitter walls of pent-up grudges and petty selfishness. When we step up, and give over to the raw experience of moving past ourselves, and just see everyone around us as another Human, Be-ing.
So sad it takes these kinds of events to bring this about. But so precious all the same, and so life-changing. I suppose it's up to us to determine whether the changes are for the better.
Saturday, March 21, 2009
My mother-in-law, Chantelle Princeton, is retiring next week, and has been looking forward to moving to Denver for well over a year. Julie and I too have been looking forward to a change of scenery (and an escape from 10.8% unemployment doesn't hurt) so we have likewise been jazzed about the move. Chantelle has been like a little kid, proudly showing us websites for the Boulder Farmer's Market or some entertainment or ballroom dancing activity she is looking forward to doing. She sees the move to Denver as a start to a new life after retirement for herself, and though we'd miss the ocean, Denver has a lot to offer us as well. We are less than one week away from the move, with trucks and car transports and new apartment rented and even utilities and everything else set up. The house is nearly completely packed, and we are committed at this point, emotionally, financially and physically.
Or, maybe not.
Friday, March 20, 2009 -
6:00pm: Chantelle was finishing up her daily swim at the gym with Julie, got in the car, put it in reverse, and then just slumped over, no warning, no nothing. One second she was complaining that somebody was blocking her pulling out of the space, the next she was unconscious. Julie called me in a panic, and like a dummy I called 911 instead of having her do it. Luckily it didn't waste more than a minute or so, but that goes to show how no matter how clearly you think in normal times, when stress goes through the roof in an instant, clear thinking often gives way to the muddled.
I was at home, about ten minutes from the gym, so I dropped everything and drove there, arriving just in time to witness the paramedics administering CPR and preparing her for the ambulance ride to the hospital. The chaplain who had accompanied them was obviously no newbie to this sort of thing. He kept his calm and carefully explained what we needed to do next.
6:40pm: We followed her to the hospital, and it didn't take long for a doctor to come out and announce that they hadn't been able, after more than 40 minutes, to get her heart going again. He was warning us about possible (or dare I say it? probable? likely? almost certain?) brain damage. Jana, Chantelle's older daughter, arrives.
6:50pm: In the middle of talking to us, the doctor gets a call saying they had restarted Chantelle's heart. Another half hour goes by as we wait for more news.
7:20pm: The cardiologist comes in and introduces himself. He explains the situation in pretty grim detail. They are going to have to perform an angiogram and hypothermia treatment to try to give the heart and brain some healing room. They are prepping her for the move upstairs and we'll get a chance to see her briefly on the way. Meanwhile, a bustle of activity as various staff come ask us for information and sign forms.
7:50pm: Chantelle is wheeled out on a gurney, a forest of tubes and wires covering her body, breathing tube sending oxygen to her starving cells. We get maybe 30 seconds to see and touch her before they hurry her off. A nurse leads us to CCU to wait for news as they complete the angiogram, which will take anywhere from one to two hours.
8:20pm: I run back home to gather some things for the wait (and put away the makings of dinner that we'd gotten out, so they don't spoil), and hurried back to the hospital with my "care package" in case we needed to spend the night.
9:15pm: I arrive back at the hospital and find Julie and Jana in a private waiting room, where we sit and just talk, worry, think, cry, and talk some more. We are told that they're getting Chantelle set up in a room and it'll be anywhere from 15 to 30 minutes. It actually takes more like an hour, but we finally get a chance to go in and see her.
10:15pm: Bending hospital rules, they let all three of us in at once. Chantelle is staring blindly at the ceiling, alternately opening her eyes and closing them, fighting the breathing tube and the cold ice packs they've used to cover her body to cool it down for healing to take place. The nurse is very helpful and explains everything that they're doing, and takes some more information from Julie about her mom's health history.
10:20pm: We spend time talking to Chantelle, stroking her hair, saying the things you never know whether they are being heard or not, but you need to say them anyway. We all hug each other and try to take encouragement from every muscle movement or apparent sign of "Mumzie" in those staring, unseeing eyes. It seems that she hears us sometimes, or feels our hands on her skin, because she seems to react when we touch her forehead or shoulder, and sometimes to words we say; coincidence or connection, nobody can say.
It is hard, but at least we still have her with us, selfishly relishing this chance to touch her and see her still, knowing that she wasn't wisked away with no chance to at least say goodbye, much less hope for a recovery and her continued presence in our lives. The question is only how much of her is still there, and how much is lost to us. Nobody knows nor can even guess; even the doctors can only shrug and offer platitudes, because this is beyond medicine, it is the realm of spirit now. Chantelle is still with us in body, but her mind is lost in a fog of unconnected memories and thoughts, like a vast random dream, and we are just part of that jumble, Plato's Formless Void not coalescing into Form. Perhaps that is how we are in the womb; thoughts and dreams and time itself in an endlessly swirling mist of limitless possibilities and infinite randomness, just waiting for a vessel to give it Form.
We pray that Chantelle's vessel will heal enough to allow that Form we know and love so dearly to once again take shape. Only time, and the mysteries of the body and spirit, will determine the direction of our lives from here onward.
Denver? Maybe. We're still committed, and still working through all that that means, but right now, we have to reformulate that committment around whether it is now or later, and with Chantelle or without her. Oh, God, please, let it be the with her.
Monday, March 16, 2009
Oregon unemployment hit 10.8% for February, a full percentage point above last month. It was less than 6% last June. It's jumped 3% JUST SINCE DECEMBER. And although I can't find info on the Portland-Vancouver Metro area for February, in January it was 9.1%, and it'll probably show more than 10% for February when the numbers come out.
I should know, I've been looking for work in the Portland area since September, and Julie has been since October. Nada, unless we want to flip burgers or stand on a corner in a funny suit holding a sign (not that we haven't considered the lucrative nature of these pursuits, however I would probably get tossed for constantly providing my own recipe hints to the restaurant manager, and although Julie likes stuffed animals, she'd prefer not being the stuffing).
By contrast, Colorado (we're moving to Aurora, CO in about two weeks) went from 4.4% last June to 6.6% in January (February's stats aren't available yet). The Denver Metro area is 7.4%, nearly 2% lower than the Portland area.
Towards the bottom of the Forbes article was an interesting tidbit:
This makes a case for diversification of a state's economy all right. Mississippi and other Southern states relied on cotton for the textile industries. When textiles went overseas, it brought the entire Southern economy to its knees. Oregon and other states have relied on IT, software, and silicon manufacturing industries for their economic base, and when things went in the toilet during the DotCom Crash in the early 2000's, they just rode it out and essentially reformed around the smaller, but still powerful tech industry.
"State economists say Colorado is not hurting as bad as some states because it has a diverse economy, meaning fortunes don't rise and fall based on a single industry. Colorado's chief economist, Alexandra Hall, said the state also has been spared the biggest drags on the national economy - manufacturing jobs and the housing collapse. 'Manufacturing has never been the most dominant employer here, and we also didn't suffer the overbuilding we saw in California and other places,' Hall said."
But now that the entire economy is on the skids, and nobody is buying consumer goods (including electronic gizmos that require all those chips and computers and software), states that relied on the tech industry as their economic core are adrift and headed for the rocks, with nobody on board sure of how to steer the ship to safety.
The only answer is what Colorado and other states have done: diversify your economic base. Oregon, Washington, and other "silicon forest" states have made efforts to add new core industries, such as biotech, nanotech, solartech, windtech, healthtech, and more, but they're still in the nascent stages of this and are going to go through a tough time recovering. States that have developed a strong diversification posture not only ensure that on a whole the state's economy can withstand a heavy recession hit, but it helps ensure that even the sectors most effected have a strong government and social infrastructure to rely upon and help keep them afloat during tough times.
Friday, March 13, 2009
Latest from David Sirota:
Sirota: GOP’s Jekyll-Hyde act on health care
"Don’t Republicans insist that “competition solves health care?” Yes, ad
Haven’t they been telling us that government programs are obviously worse
than private health insurance? Yes again.
Then, don’t they welcome a private-versus-public competition, believing
that the former will easily trump the latter? Well ... uh ... no."
Oy vey. The Republicans: they drove the car into the ditch, and all they seem to want to do is rant and rave at the tow truck driver.
Read David's whole column. You'll be as perplexed as he is, or you'll laugh yourself to death with the irony of it all.
Sunday, March 8, 2009
I just love Christopher Buckley. Just when it seems that the news each day is making sticking your head in an oven a positive development, he comes along with this over at the Daily Beast.
Maybe he's on to something! Perhaps we can have a National Make Up Your Own News Day?
Republican Minority Whip Eric Cantor on today's CNN "State of the Union":
Ummm... could it be that the reason the Republicans are fading away like the Whigs is because they can't chew gum and walk at the same time? C'mon, it's called multitasking! I know you guys can't bear the thought of joining the 21st Century, but at least catch up to the 90's!!!
A top congressional Republican on Sunday criticized President Barack
Obama's expected decision to reverse the Bush administration's limits on
embryonic stem-cell research, calling it a distraction from the country's
..."Why are we going and distracting ourselves from the economy? This
is job No. 1. Let's focus on what needs to be done"...
Seriously, though... there is SO much yet to get done after 30 years of gratuitous mayhem. So maybe it would help "focus on what needs to be done" if folks like Cantor would just get the heck out of the way.
The Past is Present Again: Perhaps We’ll Learn This Time
John S. Cline
The current financial crisis could have been avoided or at least mitigated had political and financial elites avoided deregulating the financial industry, gutting oversight protections, retained transparency, and overhauled, rather than repealed, the Glass-Steagall Act. Following a history of United States commercial regulation, I will specifically examine financial regulation, comparing the effects before and after the repeal of the Glass-Steagall Act and discuss how its supposed "replacement", the Gramm-Leach-Bliley Act, created the current atmosphere for economic crisis. I will conclude with recommendations for 21st Century upgrades to all of our regulatory infrastructure.
The regulation of commerce has had a long and storied history, ranging from the Code of Hammurabi to Sarbanes-Oxley. From the rigid, regulate-everything Communist dogma to the Dickensian "are there no workhouses?" anything-goes free-for-all of the early Industrialization era, business regulation has played a greater or lesser role in political systems throughout history. Since the American Revolution, business regulation in the United States has taken many forms, has undergone sometimes radical changes as various progressive movements have exerted their power, and has especially been moving from a strictly local and state issue to a more national purview over the last century.
In this paper, we will examine how business regulation came about in the United States, conduct a historical overview of the rise of financial industry regulation, examine in detail two of the most important regulatory acts, the Glass-Steagall Act and the Gramm-Leach-Bliley Act, and demonstrate that the combination of the repeal of Glass-Steagall with poor oversight, over-speculation, poor transparency, and lax compliance created the conditions for the current financial crisis.
Death, Taxes and Regulation
Like death and taxes, it is impossible to avoid regulation in just about every aspect of daily life. There are two basic types of business regulation: economic and social (Litan). The first deals with price controls and entry limits, such as what maximum price can be charged for a product or service, or who can enter a field (board certification for doctors and lawyers, for instance). The second type of regulation has mostly to do with externalities (outside influences the company or industry may have, either acting upon it or how its actions will impact society). These range from employee safety standards to product quality controls, financial disclosure requirements to corporate governance, and unionization rules to environmental restrictions, as well as regulations covering a whole host of other arenas where the business may impact or be impacted by externalities. The (ideal) goal for government-imposed regulation is two-fold: it enforces competitiveness in the marketplace, which fosters innovation and retards complacency, while at the same time, it seeks to prevent abuses and overreaching by the business community to protect workers, consumers, and society as a whole (Feulner; Litan).
Business leaders’ reactions to government-imposed regulation range from one extreme to the other: unmitigated horror and unconcealed hatred for any attempt at governmental "interference" to tepid or even whole-hearted embracement of regulation. Even though most grudgingly agree that it is required in many cases to ensure a vibrant, competitive, and generally honest business environment, most simultaneously feel that government tends to err on the side of over-regulation, resulting in unnecessary increased costs and potential legal liabilities for their businesses (Litan).
As we will see, there is truth found on both sides of the argument for more or less regulation; too much regulation can stifle industry and discourage innovation, growth and market penetration, while too little regulation or oversight can result in abuses of consumer protections and even bring down entire economies (Feulner). The events of the last few months have increasingly focused international attention on the role of regulation in the marketplace, specifically on the affects of deregulation and lack of oversight.
Gaining the Power to Regulate: The New United States
In the economic and political shambles created by the American Revolution, the national government had little if any say in regulating commerce. Left by the Articles of Confederation without the power to tax, regulate interstate commerce, or enforce contractual obligations between individuals or states, Congress was basically side-lined to negotiating very limited diplomatic (typically non-commercial) treaties, managing Indian trade (outside the states’ jurisdictions), and regulating weights, measures and the value of coinage (Bernstein, Articles of Confederation, Articles IV, VI, VIII, IX, XII). In this environment, the national government was held hostage by the individual states; it was a "gentlemen’s agreement", wherein each state controlled its own affairs and Congress had no real power to enforce compliance with the Articles. Needless to say, in the decade it was in effect, the Articles resulted mostly in confusion and acrimony rather than cooperation and harmony. States erected ever more restrictive tariffs on other states’ goods, made exclusionary trade agreements with other countries, and usually failed to pay their share of monies to keep the national government solvent. These and other practices, along with debtor’s riots and popular uprisings, ground the fledgling nation’s economy to a near-standstill (Bernstein 12).
When the delegates came together in 1787 to hammer out a solution to the economic and political mess that the country found itself, they had one chief overriding goal: make the central government stronger. In almost every area, the final product of the Constitutional Convention dealt with removing the states as the primary source of power in economic and military matters. In the Constitution, the national government, not the states, now controlled the national currency, the ability to make treaties with foreign nations (both trade and diplomatic), to raise federal revenue through taxation, to borrow money on the credit of the United States, to regulate intellectual property and interstate trade, to maintain tariffs and duties, and to maintain a standing national military to enforce order (all sworn to uphold the Constitution, which meant enforcing these restrictions on the states) (Bernstein, U.S. Constitution, Article I, Sec. 8-10).
With this newfound power, the regulation of commerce immediately took a sharp detour towards the central government (Government Regulation). States could still enter into international trade agreements, but the national government had the power to regulate them. States could still manage commerce within their own borders, but could not enact protectionist tariffs and duties against other states. These changes emboldened the elite trade factions, which had seen the hodge-podge of state regulations a hindrance to profit, and ensured the landed elites that popular uprisings like the recent Shay’s Rebellion would have less chance of starting, or if started, of causing them harm. Therefore, with the ratification of the Constitution of the United States of America, the stage was set for the next 220 years of federal government regulation of business.
Financial Regulation: Walls Go Up, Walls Come Down
The first century of the new United States saw little national interference in business affairs other than maintaining tariffs and guarding port traffic. By the end of the 19th Century, however, we begin to see the increase in regulation due to interstate commerce concerns, such as railroads, monopolies and trusts, and banking (Government Regulation). Although the 20th Century saw a sharp rise in regulation of almost every industry (from food processing to environmental concerns to labor), for the purposes of this paper the focus will turn to the financial sector and the constant battle between regulators and deregulators.
Beginning in 1863 with the National Bank Act, the federal government established a national banking system which permitted banks to operate subsidiaries that were "incidental to banking", essentially allowing banks to offer services beyond simply deposits and loans (Wilson). By the 1920’s, banks were involved in securities, investments, real estate, insurance, and a whole host of other financial dealings, with little direct interference from Washington. A few regulatory attempts were made, such as the 1927 McFadden Act which prevented banks from expanding beyond state lines (Wilson), but overall this free-for-all atmosphere of conglomeration and unregulated growth was spurred on by the financial and political elites of the day, exacerbated by the lengthy reign of Republicans in both Congress and the White House.
The stock market crash of 1929, the freezing of lending, the massive foreclosure rates, and the collapse of industries across the globe led directly to the Great Depression which lasted nearly a decade. The Great Depression (along with the public outcry from the widely-publicized investigations of the frauds and abuses by commercial and investment bankers) made these elites take a good hard look at what had led to the obliteration of all they held dear, and as reformist sentiment grew, called for protections in the financial marketplace (Hendrickson III, IV). Herbert Hoover, whose administration oversaw the entire debacle and did nothing constructive, passed this job over to Franklin Roosevelt and his strong Democratic majorities in Congress. With a broad sweep, Roosevelt pushed through regulations, infrastructure programs, and social-safety nets to help spur the economy and halt the decline (Government Regulation; Krugman).
The most important of these to the financial sector was the Glass-Steagall Act (Kaufman). This act forced banks to separate into commercial banking (deposits and loans) and investment banking (securities and other financial instruments), thereby protecting consumers and businesses from investment risks. Along with the creation of the FDIC in the Banking Act insuring the value of deposits, this provided a means for investors (who knowingly run the risk of losing everything to a bad investment) to be separate from non-investors (people and businesses who simply want a place to deposit their money and obtain loans). This greatly increased public confidence in the banks, resulting in the slow recovery of both lending and investment (Krugman).
For the next sixty-six years, Glass-Steagall was the primary source of stability in the financial services industry. Many other banking and investments regulations followed in the coming decades, including but not limited to: the 1956 Bank Holding Company Act, the 1960 Bank Merger Act, the 1977 Community Reinvestment Act, the 1978 International Banking Act, the 1980 Depository Institutions Deregulation and Monetary Control Act, the 1982 Banking Affiliates Act, the 1987 Competitive Equality Banking Act, the 1989 Financial Institutions Reform, Recovery, and Enforcement Act, the 1991 FDIC Improvement Act, and the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act (Wilson). All of these sought to regulate certain aspects of the banking and investments industry, to update regulations that were outmoded, or to provide deregulation in areas that were considered over-regulated.
Beginning in the late 1970’s, bank regulation reformers started pushing for deregulation of the financial industry. Many complained that they were unable to compete effectively with newer banks and investment firms, which had found loopholes in Glass-Steagall that the older firms were unable to utilize (Wilson). Others felt that Glass-Steagall was outmoded and that other regulations put in place in the intervening years provided adequate protections for banks to safely diversify (McTaggart). This upswell of deregulatory fervor was championed by conservatives in the Reagan years, but regulatory stalwarts prevented passage of any meaningful changes until the last years of the Clinton era. Finally, in 1999, Congress passed the Gramm-Leach-Bliley Act, effectively repealing Glass-Steagall and allowing banking, insurance, real estate, and investment firms to consolidate and introduce cross-industry products (McTaggart).
Essentially, this meant that under strict guidelines and regulatory controls, commercial banks could now combine with insurance companies, real estate developers could combine with securities firms, or any combination of the above. Over the course of the next decade, huge conglomerates began to form, just as they did in the lead-up to 1929. Despite the existence of regulations meant to prevent problems from developing, which were the primary justification for repeal of Glass-Steagall, the 21st Century saw a dramatic decrease in regulatory oversight and a dramatic increase in an inherent faith in the "corrections of the marketplace" under the Bush administration. Glass-Steagall was dead, Gramm-Leach-Bliley had torn down the fences, and the overfed cows of the financial industry were roaming freely in the corn. To top it off, the strong economic growth of 2002-2006 had led many to believe that turning the cows loose wasn’t any cause for alarm, and even reveled in the destruction of the fields. The events of 2007 and 2008 would rapidly change that view.
Laissez-Faire Capitalism Explodes (Again)
The first sign of trouble came in the form of sub-prime mortgages. Thanks to easy credit and the ability to roll these mortgages into securities which could then be traded as investments, commercial lenders (here in the United States, as well as around the world) began offering sub-prime mortgages at ever-increasing rates. Housing prices increased dramatically, sometimes five to eight times their original value, but that didn’t stop lenders from offering mortgages to less-than-qualified buyers. Everybody wanted to cash in on the housing boom, not thinking that for every boom, there is inevitably a bust. And bust it did, in 2007 (Becker, Stolberg & Labaton). An increase in defaults on mortgages led to tightened lending, but not before millions of homeowners were already in mortgages designed to increase in cost as the mortgage matured (so-called "adjustable rate mortgages"). This built-in failure mechanism assumed that a buyer could enter a mortgage, stay in the home for a few months, then re-sell and reap a huge profit as housing prices continued to climb. For many, this was true; it offered a ticket to homeownership and real financial power to those who got in at the beginning. For most, however, when prices began to fall, defaults only increased as consumers found they could neither sell for what they owed, nor keep up the increasingly-large payments. Millions lost their homes to foreclosure in 2007 and 2008, causing the value of the sub-prime mortgage backed derivatives to drop dramatically. As banks throughout the world were investing in these derivatives, often making them a huge part of their portfolios, banks began to file for bankruptcy, seek mergers, or fail outright (Blinder; Bailey, Litan & Johnson, 44-45). Credit ceased to flow, lending stopped, and the effects began to spread throughout the economy in every sector. Manufacturing, services, transportation, real estate, even state and local governments began to grind to a halt. It has begun to look like a repeat of 1929 (Krugman). To see that this is not an exaggeration, one need only know what the leading economist of at era had to say. In his article, "The Great Slump of 1930", John Maynard Keynes sounds ominously as though he is speaking of today’s events:
"At this moment the slump is probably a little overdone for psychological reasons. A modest upward reaction, therefore, may be due at any time. But there cannot be a real recovery, in my judgment, until the ideas of lenders and the ideas of productive borrowers are brought together again; partly by lenders becoming ready to lend on easier terms and over a wider geographical field, partly by borrowers recovering their good spirits and so becoming readier to borrow.
Seldom in modern history has the gap between the two been so wide and so difficult to bridge. Unless we bend our wills and our intelligences, energized by a conviction that this diagnosis is right, to find a solution along these lines, then, if the diagnosis is right, the slump may pass over into a depression, accompanied by a sagging price-level, which might last for years, with untold damage to the material wealth and to the social stability of every country alike." (Keynes, Pt. II)
These financial institutions had become "too big to fail", which was predicted by detractors of the Gramm-Leach-Bliley Act (Weissman). Hence, when they inevitably did fail, the only financial institution powerful enough to prevent them from taking down the entire economy was the federal government. One after another, failing institutions asked for help from the Federal Reserve. This led to the controversial "TARP" (Troubled Asset Relief Program) which was to dole out $700 billion to ailing banks for the purpose to loosen up lending and instill confidence bank into the banking system. As of Feburary 2009, $350 billion of the money has been given, largely without any controls or oversight, to banks with no appreciable result (Blinder). Adding bone-headed insult to our national injury, numerous reports indicate that banks and other institutions that received federal bail-out money used it to provide bonuses to executives, attend fancy retreats, spend lavishly on office redecorations, and other such bacchanalian pursuits. Public outrage at these reports is at a level not seen since the last Great Depression, and is causing political and financial elites to take public stands to curb these abuses (Angry). There is a great reluctance on the part of any politician, however, to bite too hard on the hand that feeds them (Kaufman).
Regulation, Deregulation and the Boom-Bust Cycle
What this demonstrates is that financial industry regulation which is prudent, efficient, transparent, and especially well-overseen by attentive regulators and outside watchdog groups to ensure compliance, leads to economic stability for the entire country, and by extension, the world. It also demonstrates that regulation that is lax, non-existent, uncoordinated, or poorly overseen leads to economic instability and events such as the current financial meltdown. At the very least, we can extrapolate that poor regulatory efforts leads to more violent boom-bust cycles in various industries, as in the most recent case of housing. Greater financial industry regulation is needed, but it should be designed to meet the needs of 21st Century technology and globalization realities. As we have seen, over-regulation leads to calls for deregulation, which if done precipitously can lead to drastically dangerous economic outcomes when externalities are ignored, dismissed, or overlooked. The financial industry must be returned to a modernized version of the Glass-Steagall Act, with much more streamlined ability for institutions to merge, diversify, grow, and prosper in a globalized world; however, they must also be placed under extremely strict controls to prevent over-securitization, over-leveraging, and the creation of complex derivatives (Bailey, Litan & Johnson, 44-45).
Regulation of commerce has followed civilization from its earliest days. The major failing of the Articles of Confederation was that it lacked any central authority on regulatory matters. This was rectified in the Constitution, with the establishment of a strong central government with the ability to regulate commerce in all aspects of national policy. Over time, the national government gained greater and greater influence over the regulation of commerce, especially the financial industry. With the inept failure of the government to regulate investment firms and banks leading directly to the stock market crash of 1929, the Glass-Steagall Act and other legislation and regulations aimed at the financial industry were enacted to shore up public confidence and restore the economy. Over the next sixty-six years, along with other regulations, the Glass-Steagall protected the economy from another outburst of "too big to fail" institutions; however, with its repeal and the adoption of the Gramm-Leach-Bliley Act, the way was cleared for the creation of mega-mergers and consolidations of unprecedented scale between commercial banking, investment banking, real estate, and insurance firms. The combination of cheap credit and the securitization of sub-prime mortgage assets led to an artificial housing boom, which collapsed in 2007. As millions of homes began to fall into foreclosure, and these "assets" soon became worthless, the "too big to fail" started to go under, and the cries of wrath and doom began. Left with no alternative, the U.S. government agreed to bail these hat-in-hand companies out to the tune of $700 billion, but so far there has been little activity seen other than massive abuses of the top-level executives and complete lack of transparency as to where the money has gone. In the end, the lesson we have learned is that regulation, whether financial or otherwise, if left to the "corrections of the marketplace" or lax oversight nearly always result in disaster or at least severe boom-bust cycles; therefore, tough but fair regulation with consistent oversight, modernized for the 21st Century, is the tool that needs to be implemented with the financial industry (and by extension, all other industries) from this day forward.
"Angry senator wants pay cap on Wall Street 'idiots'." CNN.com. January 30, 2009. January 30, 2009. LINK.
Bailey, Martin N., Robert E. Litan and Matthew S. Johnson. The Origins of the Financial Crisis. (November 2008). Brookings Institution. December 20, 2008 LINK.
Becker, Jo, Sheryl G. Stolberg and Stephen Labaton. "White House Philosophy Stoked Mortgage Bonfire." The Reckoning. The New York Times December 21, 2008. January 26, 2008 LINK.
Bernstein, R. B. (Introduction). The Constitution of the United States, with the Declaration of Independence and the Articles of Confederation. New York: Barnes & Noble, 2002. Print.
Blinder, Alan S. "Six Errors on the Path to the Financial Crisis." Economic View. The New York Times (January 25, 2009).January 25, 2009 LINK.
Feulner, Edwin J. "Regulated to death. (government regulation of business) (Above the Beltway)." Chief Executive (U.S.) n85 (May 1993 n85): 14(2). Academic OneFile. Gale. National University Library System. January 25, 2009 LINK.
Gilb, James. LMSC, LAN/MAN Standards Committee (Project 802). n.d. January 25, 2009. LINK.
"Government Regulation of Business." Encyclopedia of American History. Answers Corporation, 2006. Answers.com January 27, 2009. LINK.
Hendrickson, Jill M. "The Long and Bumpy Road to Glass-Steagall Reform: A Historical and Evolutionary Analysis of Banking Legislation. (Other Articles)." The American Journal of Economics and Sociology 60.4 (Oct 2001): 849(31). Academic OneFile. Gale. National University Library System. January 26, 2009 LINK.
Kaufman, William. "The Bi-Partisan Origins of the Financial Crisis: Shattering the Glass-Steagall Act." Opinion. CounterPunch (September 19, 2008). January 26, 2009. LINK.
Keynes, John M. "The Great Slump of 1930." London: The Nation & Athenæum, December 20 and December 27, 1930 (First Edition). Project Gutenberg Canada ebook #197 produced by Dr. Mark Bear Akrigg, 12 November 2008. December 20, 2008. LINK.
Litan, Robert. "Regulation." The Concise Encyclopedia of Economics.2008. Library of Economics and Liberty. January 27, 2009. LINK.
McTaggart, Timothy R. "Financial Services Modernization Legislation: One for the Century, If Not for the Ages." Bank Accounting & Finance 13.2 (Winter 1999): 31. Academic OneFile. Gale. National University Library System. January 26, 2009 LINK.
Weissman, Robert. "Deregulating Finance." Multinational Monitor (Oct 1999): 6. Academic OneFile. Gale. National University Library System. January 26, 2009 LINK.
Wilson, Gregory. "Getting beyond Glass-Steagall." The McKinsey Quarterly n2 (Spring 1995 n2): 108(8). Academic OneFile. Gale. National University Library System. January 26, 2009 LINK.
Thursday, March 5, 2009
This is in response to a few folks who've commented/emailed about my Social Darwinism paper from December, wanting to know how I support my assertion that our current financial crisis is directly attributable to the concepts behind Social Darwinism and its related philosophical thought forms. I've included a few links to background and informative sites. I hope you find this both informative and entertaining:
How we got to our current financial crisis, in pictures:
He might be forgiven this, because in his day things weren't always pretty...
But then along came the world's first official economist, who, along with others, laid the
foundation for the idea of "laissez-faire" economics, or the "invisible hand"...
And then in the mid-1800's, along came another fellow who liked what he heard from Darwin's evolution ideas, and started thinking maybe it could apply to societies, not just birds and frogs... you know, kind of a "Social Darwinism". He thought up a peachy-keen catch-phrase for it: "survival of the fittest"...
Because, after all, they considered themselves "The Masters of the Universe", while everyone else were mere moochers...
Which tended to make them somewhat unpopular with the "moochers"...
Until it lead to this kind of stuff...
Which really made people think it wasn't such a good idea after all...
So Social Darwinism was discredited and pretty much left the (outwardly visible) scene... except the free-market parts, of course... because for some true believers in the free-market, the laissez-faire aspects still seemed like a great idea (shhh... but we don't want to call it Social Darwinism any more... it's just good old-fashioned "capitalism" now)...
Resulting in policies which have really been a bang-up success for everybody...
Or, in the opinion of a disgruntled few, feeling a little dumped on...
Although some were still better off than others...
As they Rush to proclaim their new leader...
Who commands the remaining true-believers...
The vast majority of the rest of the nation...
Chose someone who promised Change to lead them...
Even though he's probably wondering what the heck he was thinking...
He seems to be on the right track, and hopefully, so is the global economy...
Which just goes to show that for every person who believes that life is "solitary, poore, nasty, brutish, and short"...
And possibly a chance for a new view of how we should live in the world...
Wednesday, March 4, 2009
As was pointed out to me by a recent commenter, I have once again fallen prey to the deadly affect/effect error. I corrected my last post after finding this very useful guide.
I recommend clicking the link at the bottom of that page, as you'll discover hundreds of other common English language usages that folks (even former English majors like myself) mess up every day. It would behoove anyone writing more than a quick email off to granny to slap this up in Favorites and review often.