It looks obvious

“Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending.”

The former chairman of the organization that many people hope will assume more responsibilities of oversight over the financial markets.

Short, and right on the money:

That’s how much Paulson’s plan might cost. That’s a lot of zeros. But, hey, no one said socialism was cheap, did they?

It is sad to see how the promise of individual liberty and freedom being destroyed, not because it failed but because it was poorly represented.

Recently the voices that calling for tighter control of the government on the market are much louder than usual. The crashing of investment banks and the threat of spreading the credit crisis into a full recession, along with massive tax money given as bailout to failing business, are among the reasons for such calls. But while many rushing to blame the risks of the free market, and the unreasonable greedy private sector, as a main reason to more government oversight - they are forgetting that the government had a major role in creating the credit crisis:

Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more “affordable” loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.

[...]

The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending. Subprime loans are targeted toward borrowers with poor credit, and they generally carry higher interest rates than conventional loans.

[...]

In 1995, President Bill Clinton’s HUD agreed to let Fannie and Freddie get affordable-housing credit for buying subprime securities that included loans to low-income borrowers. The idea was that subprime lending benefited many borrowers who did not qualify for conventional loans. HUD expected that Freddie and Fannie would impose their high lending standards on subprime lenders.

So maybe instead of increasing government oversight we should do the opposite and simply reduce it?

With the stock market continue it is diving today it might not be popular, it might be not popular but I’m still praising greed. I have to credit McCain and say that his attacks on selfishness and the so called greed predate the current crisis, but it doesn’t change the fact that he is no better in this respect than his opponent (some might even argue that he is worse). What I found as more offensive, and stupid, is the believe that the regulatory work McCain did, as a member of the commerce committee, had any positive contribution to the creation of the BlackBerry.

It was much more thanks to selfish greed than any regulatory work that contributed to any invention, including the BlackBerry and the day that McCain will start to grasp that will be the first day I might consider him as the lesser of two evils.

Last month I learned that we are all Georgians now dragged into another stupid conflict without any clear understanding of the region, the forces and the consequences. Now I’m reading that I’m to be blamed in the credit and real estate crisis:

Liberals are blaming the banks, and conservatives the government, for the push into no money down housing purchases. But the fact is, we’re all at fault. Everyone in the country–buyers, sellers, financial advisors, bankers, regulators–became convinced that owning a home was a surefire ticket to wealth, and that therefore everyone could and should buy one. Now we’re surprised that we’ve gotten into exactly the same trouble as everyone else who thinks they’ve got a way to make money without working.

I’m sorry to disappoint those who are seeking to create false solidarity here - it isn’t my fault and taking my money to bailout people who made irresponsible decision is immoral. I took responsible loan I bought a smaller house than I would have wished too so it will be in my calculated budget, the only reason I’m being included in this mess is by making it harder on me to pay my own mortgage while saving other people - mostly bankers who were blinded by greed.

You might argue that providing safety net to those who cannot afford the house they bought and that saving the banking system is crucial for the economy. I would disagree with this argument but I think it is a valid one; however arguing that we are, all of us, in fault - and as a result should morally responsible to pay for the recovery effort - is plain simple wrong.

Is the inflation, and the declining dollar, under control? The credit crisis is not a problem anymore? or the fact that the American taxpayers are going to bailout banks that waisted their investors money irresponsibly is such an achievement that the chairman of the Fed can expend to other areas?

Bolstering the performance of the U.S. health care system is one of the biggest challenges facing the country, Federal Reserve Chairman Ben Bernanke said Monday.

[...]

Challenges, he said, fall into three major areas: improving access to health care for the 47 million Americans — or about 16 percent of the population — who lack health insurance; bolstering the quality of care; and controlling costs.

[...]

The Fed chief didn’t talk about the Fed’s next move on interest rates or the state of the U.S. economy in his speech or during a brief question and answer session afterward.

Or maybe, just maybe, the honorable chairman should stick to what he responsible too. It is damaging enough as it is, so any expansion will be unwelcome.

It was obvious from the beginning that the massive banks bailout, with the deceiving name American Housing Rescue and Foreclosure Prevention Act, has very little to do with protecting the interests of the American taxpayers. Trying to hide the true purpose of the bill, bailing out banks that lost billions of dollars in idiotic investments, as trying to prevent poor people from loosing homes they should could not afford buying - all with tax money of those who otherwise might have been able to get better mortgage.

But even I didn’t realize the level of Chutzpa of “public servants” that lost all shame:

Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.

Or in other words: Senator Dodd, the chairman of the banking committee that pushing the bailout act received preferred loans from one of the banks that will be most benefited from the proposed bailout. Sweet loans  indeed - It is a simple investment for the bank (with very promising return on investment), and the Senators will return the favor with my money.

Simply disgusting!

George Will looks at the housing crisis and find resemblances to another high profile crisis:

The housing perhaps-not-entirely-a-crisis resembles, in one particular, the curious consensus about the global warming “crisis,” concerning which, the assumption is: Although Earth’s temperature has risen and fallen through many millennia, the temperature was exactly right when, in the 1960s, Al Gore became interested in the subject. Are we to assume that last year, when housing prices were, say, 10 percent higher than they are now, they were exactly right? If so, why is that so? Because the market had set those prices, therefore they were where they belonged? But if the market was the proper arbiter of value then, why is it not the proper arbiter now? Whatever happened to the belief, way back in 2007, that there was a housing “bubble”? Or to the more ancient consensus that, because of, among other things, the deductibility of mortgage interest payments from taxable income, too much American capital flows into the housing stock?

[...]

Everyone knows that there is only one commodity the price of which always rises — major league pitchers. Concerning the market for them, Congress should do something

Are Neoconservatism a Jewish movement? No:

It is a matter of record that a small group of Jews played a leading role in the 1970s and 1980s in originating what has come to be known as neoconservatism, and many of neoconservatism’s most prominent spokesmen today are Jewish. The sensibility or persuasion they cultivated did in some measure grow out of reflections on Jewish ideas and experiences: the biblical teaching that all human beings are created in God’s image; the importance of tradition, family, and education; the horrors of the Holocaust; the enduring need for free nations to stand ready to take action, including military action, against the enemies of freedom; and Israel’s struggles against terrorism, autocracy, and religiously inspired fanaticism.

Yet no account of neoconservatism would be respectable if it omitted mention of eminent non-Jews such as Senator Daniel Patrick Moynihan, Democrat from N.Y. state and, as assistant secretary of Labor in 1965, author of The Negro Family: The Case for National Action, which created a national storm by arguing that the deterioration of the black family was a central cause of black poverty; Senator Henry “Scoop” Jackson, Democrat from Washington state and Cold War liberal around whom many emerging neoconservatives rallied in the 1970s; Ambassador Jeane J. Kirkpatrick, a professor of government at Georgetown who staunchly represented the U.S. at the United Nations under Ronald Reagan; Father Richard John Neuhaus, founding editor of First Things and incisive analyst of religion and public life; William Bennett, former Secretary of Education in the Reagan administration, author of the bestselling Book of Virtues, and today host of a popular talk radio show; and James Q. Wilson, for many years a professor of government at Harvard and for decades an outstanding scholar of American politics.

More important, however, than the diversity of backgrounds of those who have elaborated it, is the fact that neoconservatism does not rest on Jewish premises. Nor does it seek to advance specifically Jewish goals.

George Will remind us that the Economy is always in ‘Crisis’ in election years and that we should keep some sober perspective:

In 1935, when Congress enacted Social Security, protracted retirement was a luxury enjoyed by a tiny sliver of the population. Back then, Congress did its arithmetic ruthlessly: When it set the retirement age at 65, the life expectancy of an adult American male was 65. If in 1935 Congress had indexed the retirement age to life expectancy, today’s retirement age would be 75.

[...]

So far during this “crisis,” the homeownership rate has declined just three-tenths of 1 percent since it peaked in 2004. At 67.8 percent, it remains higher than it was when President Bill Clinton left office.

Subprime mortgages are a small minority of mortgages, and only a minority of subprime borrowers are not making their payments. Casting this minority of a minority as victims of “predatory” lending fits the liberal narrative that most Americans are victims of this or that sinister elite or impersonal force, and are not competent to cope with life’s complexities without government supervision.

The politics of this may, however, be more complex than the compassion chorus supposes. The 96 percent of mortgage borrowers who are fulfilling their commitments, often by scrimping, may be grumpy bystanders if many of the other 4 percent — those who found the phrase “variable rate” impenetrably mysterious — are eligible for ameliorations of their obligations.

Ed Mlavsky take a critical look at Churchill’s famous statement that “Democracy is the worst system of government, except for all the others.”:

The very basis of the democratic process is, of course, the one(old enough)-person, one-vote axiom, but with some de facto assumptions like sufficient literacy to cope with registration procedures and ballot forms that are frequently unnecessarily (and deliberately?) complicated. Interesting idea really, since about half of any group of people – especially large ones like electorates – are, by definition, of below average intelligence, and that lot are tacitly expected to make ‘informed decisions’, despite clear evidence that many of them – and, for that matter, no few of the above average group too – don’t have the appetite for becoming well-informed, as evidenced, for example, by the sensitivity of the polls to the latest most often basically irrelevant gaffes by each of the contenders for office. Those gaffes may prove decisive, however, but how can they be avoided during campaigns as long and tedious as that in which the current adversaries have been engaged?

A should be simple upgrade of the blog’s platform become a rather hectic mess today, but with the assistant of my hosting service everything seems to be in order now. In the meantime here are some links I collected today: 

A new research that checked people cooperations in different cultures had rather interesting finding:

Researchers use economic games to investigate how people cooperate in real-life. Now a team led by Benedikt Herrmann, at the University of Nottingham, have identified striking differences in the way university students from different countries play one such game known as The Public Goods Game. Compared with students from developed Western nations, students from less democratic countries like Saudi Arabia, Oman and Belarus tended to punish not only free-loaders, but also cooperative players, with the result that cooperation in their groups plummeted.

[...]

When players had the option to punish, the groups tended to display more cooperation, which is consistent with past research showing that the ability to punish can help foster cooperative behaviour. However, in some countries, ’selfish’ players also punished cooperative players, perhaps as a means of revenge for punishments they had suffered, or maybe as a way of punishing do-gooders for showing them up. The researchers called this ‘anti-social punishment’, and the groups where this occurred tended to cooperate less.

Anti-social punishment occurred more in those countries, including Belarus and Saudi Arabia, shown by surveys to have less faith in the rule of law and less belief in civic cooperation. In a commentary on the findings, published in the same journal, Herbert Gintis of the Sante Fe Institute, said the results challenge the way people have tended to view capitalist democracies. "The success of democratic market societies may depend critically upon moral virtues as well as material interests, so the depiction of civil society as the sphere of ‘naked self-interest’ is radically incorrect," he wrote.

I saw two interesting stories related to Clinton’s campaign today. The first, how ironic, discuss the fact that Clinton’s campaign is failing to pay its share in its employees healthcare insurance:

Among the debts reported this month by Hillary Rodham Clinton’s struggling presidential campaign, the $292,000 in unpaid health insurance premiums for her campaign staff stands out.

Clinton, who is being pressured to end her campaign against Barack Obama for the Democratic nomination, has made her plan for universal health care a centerpiece of her agenda.

[...]

But the unpaid bills to Aetna were at least two months old, according to FEC filings.

They show the campaign ended last year owing Aetna more than $213,000 for “employee benefits.”

During the first two months of the year, the campaign did not pay down any of that debt. In fact, it accrued another $16,000 in unpaid bills last month, and it finished the month owing Aetna $229,000.

The second story is about Clinton’s campaign manager involvement with the same sub-prime mortgages Clinton now attacking so fiercely:

WASHINGTON - Hillary Rodham Clinton’s campaign manager, Maggie Williams, earned about $200,000 on the board of a Long Island subprime lender that charged prepayment penalties - a practice that Clinton, a critic of the subprime industry, now seeks to eliminate.

Williams, who took over the reins of Clinton’s campaign in early February, served as a director on the board of the Woodbury-based Delta Financial Corp. from April 2000 until the firm declared bankruptcy in December, according to Securities and Exchange Commission records. 

[...]

Williams, 53, isn’t the only Clinton insider who made money from an industry the candidate has demonized. A month ago, The Wall Street Journal reported that Clinton ally and former HUD Secretary Henry Cisneros grossed more than $5 million in stock sales and board compensation from Countrywide Financial, one of the nation’s largest subprime lenders. 

The truth is that both stories aren’t, in by themselves, important at all. The importance of these stories, for me, is to demonstrate how during political campaign we are being distracted by flood of unimportant information that aim in creating images that have very little with the reality. We are being told that Clinton is amazing executive, which she might or might not be - her struggling campaign isn’t the best demonstration of high quality management. And we are being bombarded with guilt by association which is many times completely irrelevant.

One comment about the sub-prime mortgage is due here. The fact that Clinton, and many other politician, choose to attack the practices of lending for minorities is noting but typical hypocrisy. Well into the crisis, lender were encouraged to use easier criteria when lending to minorities and poor families, a practice that is now being called predatory and irresponsible. I’m not arguing that those lenders aren’t guilty of being horrible bankers, but the involvement of other , political, motivations played major role in the creation of those lending practices - as we can see from the occupations of those Clinton’s aides.

When discussing political campaign, and campaign rhetoric - I find this story, which I scanned from William F. Buckley book - The Unmaking of a Mayor - hilarious: