The individual and our economic crisis

If you had never met Milwaukee County Executive Scott Walker, you'd be hard pressed to spot him in a crowded room.  Mr. Walker is an average-looking man, with plain features and an unassuming demeanor. Even his name is common. He looks like millions of other guys. I made his acquaintance last year after he introduced himself before a debate with his election opponent, Ms. Lena Taylor.


Scott Walker
Wikipedia image

Yes, a common guy he is, but don't be fooled -- Mr. Walker packs a wallop and his piece in this morning's Wall Street Journal, "Why I'm Not Lining Up for Stimulus Handouts" defines his fiscal moorings and shows why he has drawn acclaim among conservatives and scorn from progressives.

Mr. Walker mentioned what other politicians know -- but often fail to highlight -- which is that our current fiscal calamities, were abetted by individuals -- not just banks, not just regulators, not just mortgage brokers, not just government. Those were all culpable parties to be sure, but what Walker reminds us today, is that our current turmoil began,

"...when millions of people were allowed (or encouraged) to spend borrowed money on homes they couldn't afford and were later forced into foreclosure." 

Amen.  I've been dismayed by the lack of discussion about individual responsibility and reckless borrowing.  In due course, we'll see more acrimony coming from the public, or at least the part of it that still believes in living within one's means.

There are two arguments currently offered to defend bailouts for homeowners who bought too much house, or who should have remained renters until their income and assets warranted otherwise, or who foolishly sucked all the equity out of their homes to buy stuff they couldn't afford. Here are those arguments:

Argument #1) "This is no time to teach people a lesson."

Who said anything about teaching? This isn't about vengeance either. Those who advocate for mortgage bailouts are appropriating money from responsible Americans to pay for the mistakes of others. Bailouts simply perpetuate that pattern.

The only way to help a heroin addict is to take away his opiate (in this case easy money), then encourage him or her to live healthfully. I see no reason why the responsible many should pay the freight of the irresponsible few, simply because the irresponsible few no longer meet their obligations. And in the cases I reference, we're discussing a self-induced foreclosure on a house, not a death sentence visited upon the falsely accused.

Many foreclosure so-called "victims" are personally responsible for their circumstances. There was too much predatory borrowing going on that is now being characterized, as predatory lending.  Yes, I know there were exceptions, people who were truly duped, lost their jobs, became seriously ill, or were improperly foreclosed upon -- but do you think that those cases constitute the majority of borrowers who suffered a foreclosure (I ask rhetorically)?  

Argument #2) "If we don't have mortgage bailouts to stem foreclosures, housing prices will continue to fall precipitously, including yours, so you should support this plan."

Markets work if we let them work. If housing prices continue to fall, they'll only be receding to a current level of value. The continuing collapse of our financial system and our way of life, which appears to be careening toward Euro-Socialism, is as disturbing as the trajectory of home values.

However, if we allow the eggs to break and take our necessary economic pain, the values of our homes could appreciate again one day. Things get better after the hangover. The reality that too few wish to acknowledge is this: we can't have a painless hangover.

Although the thrust of Mr. Walker's piece today is not about individual responsibility, it's about government's financial stewardship -- he gets it. We cannot, individually, or as a society, continue to kick the debt can down the road. It's immoral and stupid.

Our current state Governor, unfortunately, wants to leverage our future, reward his supporters like public teachers' unions and expand government programs we don't need and can ill-afford.  It's widely speculated that Mr. Walker will run for Governor in the next election. If he does run, I intend to support him. I hope like-minded voters in this state will do the same, unless a stronger candidate emerges.

Right now, I don't see a stronger one.

What sequence of events caused the mess?

Hedge fund executive Oscar Schafer in a Barron's interview (January 12, 2009, "Hang on Tight!") described our current economic condition thus: "The world is experiencing a giant margin call."

Yes, a giant margin call enabled by easy credit extended to millions of people who couldn't afford as much home as they purchased, or as much cashed out equity to finance a lifestyle they couldn't afford, before defaulting on their mortgages. 

These mortgages would be bundled into what equated to securitized time bombs gobbled up by over-leveraged financial institutions. 

How did it all happen?


Policy makers in Washington wanted to guarantee home ownership for anyone with a pulse. Then the Fed left open the spigot of cheap money by keeping rates too low for too long and America became intoxicated by illusory home price appreciation. Money center moguls and central bankers made enormous bets upon this whole sorry misuse of credit, until the system collapsed.  

Millions of people, who either ought to have remained renters until their income and assets could justify their mortgage, or who should have purchased more modest homes and received loans at fixed rates, were enabled by government-coddled institutions like Fannie and Freddie and populist legislation to "invest in our communities". 

The risks they took (policy makers, investment banks...and millions of  Americans), have poisoned the well that the rest of us must drink from -- perhaps for decades. Now we hear that the other shoe to drop will come from commercial credit busts, or the next highest risk level of mortgages above subprime.  

Grandma warned us when we were children.  If you can't afford it -- don't buy it. If you can't afford to lose it -- don't risk it. In short, live within your means.  Greed is the same thing that destroyed Rome. How will we get treatment and beat our addiction to debt before we all go down in flames?

A president's farewell

I felt sorry for him as he approached the lectern with a sheepish smile.

As Kissinger reminded Nixon, history will treat him better than his contemporaries. His policies precluded another attack since 9/11. To conclude otherwise is to posit that the other side simply stopped trying to harm us after 9/11.  The President deserves credit and at least grudging acknowledgement from his political opponents for stalwart efforts to fight terrorism and protect Americans.  

I'm reminded of another parallel with Nixon. Richard Nixon asked readers this question in one of his later books: if America does not lead in this world -- who will?

I repeated the question in one of my columns and a rebuttal came from a letter writer who declared that the correct answer to this question is -- the "leaders" of other countries.  Unfortunately, the world has always been replete with 'leaders' like Stalin, Hitler and Hussein that refuse to back down.  

This President did not have the luxury of presiding over a relatively peaceful world and the safety of American citizens has been this President's overriding concern.  That fact will endure as a positive part of his legacy, even if the Iraq invasion does not. 

George W. Bush

Finally, his administration failed to stem the profligate federal spending we have seen during the last eight years -- punctuated with a new drug program we can ill afford; but that's a trend the new administration appears destined to continue.

Monday morning quarterbacking

If the economy, the war, an opponent with more cash and an unpopular President in office, all were not enough to doom his campaign -- any chance of victory went irretrievably south after Senator McCain selected Governor Palin as his running mate.  Bold choice? You betcha.

I was hopeful after Ms. Palin's rousing convention speech, but I still worried that Joe Biden would wipe the floor with her at the debates -- he did not and I kept hoping.  My heart sunk after those Katy Couric interviews.  I became an impostor by my silence.

Katy Couric's interview revealed a vacuous performance from a candidate who is supposed to be a heartbeat away from the Oval Office.  Ms. Palin will have a future in national politics, but she was not at all ready for this experience. Don't blame her, blame McCain's advisers. Having the "right views" and no skeletons, is not enough. 

Yes, Ms. Palin has a fine record as Governor, yes she appeals to my Midwestern values and yes I was invigorated by selection of a conservative woman on the ticket, but she simply doesn't know enough and she is not yet equipped to think fast enough on the national stage.  

As Peggy Noonan aptly put it in her October 17 Wall Street Journal column (Palin's Failin') -- "She just. . . says things."  

One thought for future GOP campaign strategists:  even if the research does suggest that your candidate's running mate should be a female-outside the Beltway-gun toting-strident Pro-Lifer; you must look harder than your predecessors did in 2008.

The infamous AIG party

AIG logo

The outing in question, was the same type of company outing that many other American companies fund each year. There were perhaps a dozen AIG people in attendance.

Unfortunately, due to the timing, the issue has become a a silly media-driven frenzy. Even the White House couldn't resist criticism and CNN keeps blaring, "Spa treatments! Spa Treatments!"

Any other insurance company that employs a business model of selling through independent reps holds a similar conference to reward and motivate top performers (Note: they are not employees).

These events are planned months, or years in advance. It has nothing to do with the loan program -- it wasn't even funded by the holding company. It is...a cost of doing business. Should AIG shut down incentives for independent sales agents?  If so, there's no incentive to sell their products, ipso facto.

I own shares of AIG, but even if I did not, my reaction to this storm would be the same and I did not like the bailout. However, I reject some of this populist furor because it paints the AIG event with the same brush used for the Dennis Kozlowski Toga bash. Different deal.

Hillary Clinton, Peggy Noonan (and me)

I owe Wall Street Journal columnist, Ms. Peggy Noonan. My infatuation with the tenacious campaign of Hillary Clinton almost made me lose my senses.  Sometimes Peggy Noonan's work brings me back to earth, other times not so much, but always....she intrigues me. First, a few minor quibbles...

For me, one of the most memorable parts of the disastrous Dukakis campaign in 1988, was when Dukakis mocked the famous Noonan line written for George Bush, about "a thousand points of light." Mr. Dukakis asked derisively, "What does that mean?" A question fairly asked, in my opinion. 

Similarly, I was baffled by the recognition Ms. Noonan received for a phrase she crafted for President Reagan to describe Washington D.C. as, "that shining city on a hill."  

On TV she's occasionally a little cheeky, leaving the impression that she is trying to hide some nervousness. Stage fright (if that is indeed the culprit here) breeds gaffes. Case in point, I spotted Ms. Noonan on a TV program years ago expressing doubts that Lyndon Johnson was a humorous man. Presidential historians and anyone who's read enough about our 36th President will warrant that Johnson was often hilarious.  (A brilliant mimic and comic story teller for starters).  It wasn't a difference she needed to have with her TV co-panelists that day. 

However, as an Op-ed reader, I look forward to Peggy Noonan's Saturday column in the Wall Street Journal.  She incisively expressed her views about the actions and character of Hillary Clinton in several columns and today's piece, "Recoil Election" -- is another fine example. 

Ms. Noonan understands how both Clintons are brilliant, cunning and hopelessly deceptive. Although I remain awed by Ms. Clinton's durability, the playing of the gender card as a reason for her downfall overshadows some of the virtue behind her campaign effort. 

In her piece this morning, Ms. Noonan makes comparisons to the character of an equally tenacious Golda Meir. (I might add Margaret Thatcher to that list).  The point is this: other high profile women in politics face equally daunting gender challenges without falling prey to so much excuse-making.  Noonan nailed it.


Monday, May 19, 2008--- True grit

I've been hard on the Clintons for a long time. A sample of my dissatisfaction with Mrs. Clinton's persona can be found in this post and an equally frank assessment of Mr. Clinton can be found here.

Even if I set aside their policy positions, it's their pathological dishonesty and smugness that leaves me cold again and again. I see Bill and Hillary Clinton as one person who has never stopped disappointing me. With all that as the backdrop for this post, I am about to go positive on one of them...

Yes, I began to feel something inspiring while contemplating Hillary Clinton recently.  I find it redemptive to have had so much disdain for a person and then find something to admire. Strange feeling. My positive revelation is this: she's stronger than I ever realized.

It's not Mrs. Clinton's usual pluck that I am referring to -- the in-your-face type of retort she is both admired and reviled for.  I'm talking about her tenacity. The type of thing that reveals itself after one is knocked down again and again. Some people get hit harder each time and still manage to rise. Think of Richard Nixon in his teens as the tackling dummy on the football team. Yes Mr. Nixon had tenacity too. 

One must respect another person who has taken so many punches and keeps coming back.  It would be intellectually dishonest to ignore it, no matter how much contempt one has for her attitudes, ethical deficits and woke policies. I called the Democratic race over almost exactly 3 months ago - Mrs. Clinton will not be her party's nominee for president, but the lady has courage.

What I didn't predict and never expected, was that she'd stay in the race this long, after so much bombardment, and still credibly come back for more. It's fascinating to watch. Iran has cause to be afraid...very afraid.

Vinegar in your morning cup of coffee

When I was first learning to write essays, our teacher stressed the importance of grabbing your readers' attention early on in your work, like a compelling "lead" to a news story. Consider columnist Jessie Eisinger's recent piece in the latest edition of Portfolio magazine in which his very first sentence will punish the reader harboring any sense of financial security...

"The worst Wall Street turmoil in a generation is going to wipe every other issue off the table for the next president."

Be warned, it gets scarier. Mr. Eisinger predicts calamity and he put it simply:

"There will be blood."

Common sense dictates that one can only cop a dangerously free ride for so long. At the end of that ride there is an inexorable crash that brings great pain to the free-riderers. Unfortunately, there will also be pain felt by those who paid for others' free rides because paid passengers are tethered to the free-riders. 

We will pay for the free-riders' avarice, their lack of discipline, their recklessness.