Saturday, December 22, 2007

Sunday Music: 21st Century Christmas

The Christian pop singer Cliff Richard (also known as the "Elvis of Great Britain") came out with a new Christmas song last year. I hope you like it.

I am back home in Oklahoma for the Christmas weekend and I stayed in my home that I am selling for the last time last night (with no heat except for the fireplace as the pilot light went out on the central heating and air while I was gone -- brrr!).

Have a Merry Christmas everyone!

Sunday, December 16, 2007

American Gata Kamsky Wins FIDE World Cup Chess Championship

Shirov and Kamsky discuss the final game post-mortem.

From American GM Gata Kamsky has won the FIDE World Cup.

Normally, the winner of the FIDE World Cup would be crowned the FIDE World Champion, but reports that last year FIDE changed the rules so that the winner of the World Cup would have to play the previous winner -- Bulgaria's Veselin Topalov -- to become FIDE's World Champion. The match may end becoming something of a spectacle if Gata brings his dad, Rustam, along. Rustam was well-known during Gata's early years. From

A number of readers have suggested that the Kamsky-Topalov match could become really exciting if the American reactivates his famously belligerent father Rustam, to counter the activities of Topalov's manager Silvio Danailov. "That would be a wonderfully thrilling matchup," wrote one wag, "with explosive off-the-board play. We look forward to daily blow-by-blow reports on your news page."

I remember seeing Rustam at the 1993 FIDE candidates in Biel/Bienne Switzerland during a weekend that I took off while I was at Oxford University. I still have a picture of Gata playing against a long-haired Vladimir Kramnik. Maybe I will scan it in and post it sometime. I don't remember Rustam causing any trouble at the tournament; but there was always the fear that he would. I had a lot of great memories of that tournament. Every morning I would have breakfast with many of the Grandmasters all sitting at the same table. During one breakfast, German GM Eric Lobron animatedly explained his preparation in his win over GM Judit Polgar. I also had dinner with Former many-time U.S. Champion Yasser Seirawan and French GM Joel Lautier and Lautier's father. But I digress.

In any case, it is exciting to have an American at the top of Chess World again. Maybe this will spur some interest chess in the United States unlike we have seen in quite a while.

If I get a chance to talk to Gata between now and the match with Topalov, I will try to post that, too.

Sunday Music: Christmas Wrapping

How about some Christmas Wrapping from The Waitresses to with those Gift Certificates?

Don't Know What To Buy? Try Gift Certificates has sent me an e-mail with a special announcement: I get a whopping 6% return if you buy a Gift Certificate through my site (this month only). So, if you are one of those people who have trouble thinking of what to buy for Christmas, Hanukkah, Kwanzaa or any other special occasion, would you consider a Gift Certificate?

Friday, December 14, 2007

Chess World Cup Update: Kamsky Wins Game 2

American Gata Kamsky won the second game of the finals match over Spain's Alexei Shirov for the FIDE World Cup Chess Championship. The first game was drawn. With two regular games yet to be played, Kamsky is in a very strong position as Shirov will have to win one of them to send it to a playoff. Kamsky started out with the black pieces and won his game today while playing the white pieces.

You can see the full report with an analysis of the game by Grandmaster Dorian Rogozenko at

Nice New Ad By John Edwards

Thursday, December 13, 2007

Eating the Seed Corn

After reading this short article today, Employees Raiding 401(k)s, CFOs Say (hat tip Calculated Risk), all I could do was shake my head. From the short article:

The survey finds that nearly 20 percent of companies have seen increased hardship withdrawals from 401(k) accounts, often to cover mortgage payments or to avoid personal bankruptcy.

"In the last four or five months we have seen an absolute onslaught of people trying to do hardship withdrawals and loans out of 401(k)s," Mark Anderson, CFO of Granite City Electric, told CFO magazine in October. "What has happened with housing and the economy has really blown up for people at the lower end of the spectrum."

Considering that 401(k) accounts are almost always exempt in bankruptcy proceedings, my first thought is that people are eating their seed corn. There are rare situations where this is to the debtor's benefit. But something tells me most of these cases don't fall into those rare exceptions.

Lately, I have been thinking of the song Santa Monica by Everclear. In my own way I can identify with some of the lyrics of the song. The song is actually about a bad relationship breakup; but for me the selected lyrics sound somewhat like my new life by the Gulf Coast.

With my big black boots and an old suitcase
I do believe I'll find myself a new place
I don't want to be the bad guy
I don't want to do your sleepwalk dance anymore
I just want to see some palm trees
(I will) Go and try to shake away this disease

We can live beside the ocean
Leave the fire behind
Swim out past the breakers
Watch the world die


I'll walk right out into a brand new day
Insane and rising in my own weird way
I don't want to be the bad guy
I don't want to do your sleepwalk dance anymore
I just want to feel some sunshine
I just want to find some place to be alone

We can live beside the ocean
Leave the fire behind
Swim out past the breakers
Watch the world die

Monday, December 10, 2007

An American Reaches the Finals of the FIDE World Cup Chess Championship reports that Gata Kamsky, who took a long sabbatical from competitive chess to obtain a law degree, has knocked out Norwegian wunderkind Magnus Carlsen to reach the finals of the FIDE World Chess Championship.

I have little doubt that the talented Norwegian will become World Champion himself someday. Having just turned 17 years old, he still has plenty of time to hone his skills.

Gata will face either another child prodigy, Ukrainian Sergey Karjakin, or Spanish GM Alexei Shirov.

Karjakin is already saying it is his generation's turn.

Sunday, December 09, 2007

Sunday Music: My Grown Up Christmas List

My Grown Up Christmas List

Stuck In the Middle

Being a logical, rational person comes naturally for me. From my expertise as a chess player to my legal training, my mind is geared toward acceptance of scientific truths. I am probably unique in that I see no conflict between evolutionary theories of science and a faith that accepts the likelihood of a supernatural creation. Science can answer the question of how we got here; but it is up to philosophy and faith to attempt to explain the why.

Here is how Mark Heard explained his journey and conflict between faith and reason (from the liner notes to Stop the Dominoes):

You referred earlier to your days as a skeptic. Is skepticism a sin, or does it seem to you a plague of sorts to those so minded?

Skepticism doesn't have to be viewed as a liability . Unfortunately, most of the time Christians see it that way. I have had hard times in the past because of that -- my questions were equated with sin by most of the believers around me, and that caused still more questions, like, ''well, shouldn't God's people be concerned enough about me to help me instead of crossing their arms and waiting for me to see things their way?" It bothered me for a long time. When a person has no rational basis for his faith, or feels that he has lost that rational basis, it is quite painful . It's hard to believe with your heart if there is conflicting information in your mind. To ignore the mind and brush off the questions is wrong, and is more an Eastern idea than a Christian one. So finally I figured, "well, if Christianity can't stand up to questioning, it's not the truth, and if it's not worth scrutiny, it's not worth believing." So my skepticism continued and led me to look deeply into the matters in question. Most of my answers came from quiet study. Skepticism was an asset to me in that it forced the roots of my faith to grow deeper.

Like Mark Heard, I have decided to forge my own path. And like Mark, I'm Stuck In the Middle.

Stuck In the Middle

It's a funny world we live in
It's funny every day
Half the world prays like the preacher
The other half don't even pray
So no one understands you
If you pray in your own way

Now I'm stuck here in the middle
Everything is in a jam
Stuck right in the middle
Doors on both sides seem to slam
No one seems to want me
Only God will take me like I am

Well my brothers criticize me
Say I'm just too strange to believe
And the others just avoid me
They say my faith is so naive
I'm too sacred for the sinners
And the saints wish I would leave

Now I'm stuck here in the middle
Everything is in a jam
Stuck right in the middle
Doors on both sides seem to slam
No one seems to want me
Only God will take me like I am

Written by Mark Heard
© 1981 Bug and Bear Music (ASCAP)

Friday, December 07, 2007

The Cost of War

This video will just make you shake your head in disgust or make you angry at the stupidity of unnecessary armed conflict.

Wednesday, December 05, 2007

Birthday Bash

Today at work, my co-workers threw me a "surprise" birthday party. (I kind of halfway expected it.)

Going to today, I found out that I share a birthday with:

* Martin Van Buren (1782-1862): 8th President of the U.S.

* Walt Disney (1901-1966): of Mickey Mouse fame

* Frankie Muniz (22): actor, Malcolm in the Middle

And at, I discovered I share the birthday with former FIDE World Chess Champion Rustam Kasimdzhanov.


I forgot that I share a birthday with blogger Charles Smith of Of Two Minds. He also pointed out that the King of Thailand has the same birthday.

Friday, November 30, 2007

Domino Theory

Back in February, I posted on of Mark Heard's songs One of the Dominoes. From the song:

Heaven help a seeker of truth
In an age of lies
Gonna make himself believe
That the truth is whatever he buys
Gonna buy what the world says to buy
In a monotone
Gonna cry when the whole world cries
And the truth is known

Heaven heaven help me
I'm one of the dominoes
Chain reaction coming
Blow by blow

Some economic blog commentators that I read have been mentioning a kind of economic "Domino Theory" of their own. A series of cascading financial failures through derivatives and debt instruments that will lead to potentially horrific economic losses. I'm not sure I'm smart enough to understand all this stuff. I'm trying to educate myself on macroeconomic theory and wade through the complexities. Hopefully, I've made the right decisions.

Heaven heaven help me. I'm one of the dominoes.

Traditional Propaganda has come out with some new demotivators. Here are my favorite two:

You know, if I were smarter, I'd convince Dr. E. L. Kersten that I should get a percentage of the sales from the references from my blog like I do from But I guess I'm just too big a sucker for that. From his latest e-mail to me (edited for grammar):

Why shouldn't you get suckered again? You're great at it! Marketing people like myself love that part of you!

"Really? You love me? Even though I'm a big-time chump?"

Not "even though." Because.

Tuesday, November 20, 2007

Toy Soldiers

I originally entitled this post "Outrage of the Decade." I have since thought that the current title is more appropriate for the story.

Wounded Soldier: Military Wants Part Of Bonus Back:


The U.S. Military is demanding that thousands of wounded service personnel give back signing bonuses because they are unable to serve out their commitments.

To get people to sign up, the military gives enlistment bonuses up to $30,000 in some cases.

Now men and women who have lost arms, legs, eyesight, hearing and can no longer serve are being ordered to pay some of that money back.

One of them is Jordan Fox, a young soldier from the South Hills.

He finds solace in the hundreds of boxes he loads onto a truck in Carnegie. In each box is a care package that will be sent to a man or woman serving in Iraq. It was in his name Operation Pittsburgh Pride was started.

Fox was seriously injured when a roadside bomb blew up his vehicle. He was knocked unconscious. His back was injured and lost all vision in his right eye.

A few months later Fox was sent home. His injuries prohibited him from fulfilling three months of his commitment. A few days ago, he received a letter from the military demanding nearly $3,000 of his signing bonus back.

"I tried to do my best and serve my country. I was unfortunately hurt in the process. Now they're telling me they want their money back," he explained.

It's a slap for Fox's mother, Susan Wardezak, who met with President Bush in Pittsburgh last May. He thanked her for starting Operation Pittsburgh Pride which has sent approximately 4,000 care packages.

He then sent her a letter expressing his concern over her son's injuries, so she cannot understand the U.S. Government's apparent lack of concern over injuries to countless U.S. Soldiers and demands that they return their bonuses.

If the Pentagon wants their money back, then give the soldiers their original limbs back. And their mental health back. And the time they lost with their families back.

I guess this is how the Bush Administration interprets "Supporting the Troops."

Monday, November 19, 2007

How Many Tears

This song, from the Dry Bones Dance CD, sure sounds like an anti-war song.

How Many Tears

Gunmetal grey for golden rules
White hot steel for the comfort of fools
Molten wills in iron hands
Forge new sons for the Motherland

How many tears will fall down
How many tears must fall
How many tears will stain this ground
How many tears must fall

Hidden mounds in jungle dust
Youthful voices forever lie hushed
Poets and peasants know the truth
But what in the world can one man do

How many tears will fall down
How many tears must fall
How many tears will stain this ground
How many tears must fall

A mother’s eyes ache with her hatred
Her lips they are crippled with fear
She waits for the news that she don’t want to hear
How many tears
How many tears
How many tears must fall down

Ain’t no funerals
Ain’t no prayers
Ain’t no blood in the Government Square
Reign of terror
True and tried
Dries the eyes before they’ve cried

How many tears will fall down
How many tears must fall
How many tears will stain this ground
How many tears must fall
How many tears
How many tears will fall down

Written by Mark Heard © 1990 Ideola Music

The song can be heard at It is song #8 at the link.

New "Elephant" Oil Field Discovered in Brazil

From Business Week:

Petrobras announced Nov. 8 it has found between 5 billion and 8 billion barrels of light oil and gas at the Tupi field, 155 miles offshore southern Brazil in an area it shares with Britain's BG Group and Portugal's Galp Energy. Tupi is the world's biggest oil find since a 12 billion-barrel Kazakh field was discovered in 2000, and the largest ever in deep waters. Perhaps more important, Petrobras believes Tupi may be Brazil's first of several new "elephants," an industry term for outsize fields of more than 1 billion barrels.

Initially, Tupi will produce about 100,000 barrels a day but may ramp up to as much as 1 million before 2020—more than the biggest U.S. field in Alaska's Prudhoe Bay, says Hugo Repsold, Petrobras' exploration and production strategy manager. "It's monstrous," says Matthew Shaw, a Latin America energy analyst at consultant Wood Mackenzie in London.

The oil industry is known for its "boom and bust" cycles. There is little doubt that the high oil prices are fueling the current boom. Although the article touts that this kills the idea of "peak oil," in reality it doesn't completely disprove the theory. The real idea of peak oil -- as I understand it -- is that oil will become increasingly expensive to extract.

Furthermore, the increasing use of hydrocarbons produce other environmental challenges due to the pollutants its use creates. These costs are externalities and cannot easily be quantified.

The high oil prices will also spur investment and study into alternative sources of energy. This will also reduce demand for oil as these alternative energy sources come into use. So far, the biggest impediment to alternative energy uses has been the NIMBY problem and (up to now) relatively large start-up expense. The latter issue is quickly resolving itself; what remains is to convince the public that some scenic views may have to be sacrificed, and (in the case of nuclear energy, if needed) that disposal of nuclear waste will have to be effected.

At some point, we will need to consider public financing of infrastructure to support the alternative energy sectors. I would find an analogy in the creation of railroads and highways. The real problem is how to avoid the problems of the past, namely: private profits underwritten from the socialization of costs.

Tuesday, November 13, 2007

Hydrogen Technology Now More Feasible

From Yahoo News: New technique creates cheap, abundant hydrogen: report:

CHICAGO (AFP) - US researchers have developed a method of producing hydrogen gas from biodegradable organic material, potentially providing an abundant source of this clean-burning fuel, according to a study released Monday.

The technology offers a way to cheaply and efficiently generate hydrogen gas from readily available and renewable biomass such as cellulose or glucose, and could be used for powering vehicles, making fertilizer and treating drinking water.

Numerous public transportation systems are moving toward hydrogen-powered engines as an alternative to gasoline, but most hydrogen today is generated from nonrenewable fossil fuels such as natural gas.

The method used by engineers at Pennsylvania State University however combines electron-generating bacteria and a small electrical charge in a microbial fuel cell to produce hydrogen gas.


In the past, the process, which is known as electrohydrogenesis, has had poor efficiency rates and low hydrogen yields.

But the researchers at Pennsylvania State University were able to get around these problems by chemically modifying elements of the reactor.

In laboratory experiments, their reactor generated hydrogen gas at nearly 99 percent of the theoretical maximum yield using aetic acid, a common dead-end product of glucose fermentation.

"This process produces 288 percent more energy in hydrogen than the electrical energy that is added in the process," said Bruce Logan, a professor of environmental engineering at Penn State.


One of the immediate applications for this technology is to supply the hydrogen that is used in fuel cell cars to generate the electricity that drives the motor, but it could also can be used to convert wood chips into hydrogen to be used as fertilizer.

The study appears in the Proceedings of the National Academy of Sciences.

Warren Buffett: Raise My Heir's Taxes

From CNN Money: Buffett: Tax my kin, please:

"Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit," Buffett told the New York Times in 2001. "[Repeal would be like] choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics."

Buffett also joined a campaign in 2001 to preserve the estate tax alongside 119 other wealthy Americans, including George Soros and Bill Gates' father, William H. Gates, Sr..


Typically, fewer than 2 percent of deaths result in estates sizeable enough to be subject to the estate tax. In 2006, for example, less than 1 percent resulted in taxable estates.

For more see my previous post: Estate Tax Reasoning.

Tuesday, November 06, 2007

Mortgage Servicers Gouge Debtors

A report in today's New York Times, Dubious Fees Hit Borrowers in Foreclosures, shows how mortgage servicers can profit from the foreclosure process to the detriment of not only the borrower, but the economy as a whole.

Because there is little oversight of foreclosure practices and the fees that are charged, bankruptcy specialists fear that some consumers may be losing their homes unnecessarily or that mortgage servicers, who collect loan payments, are profiting from foreclosures.

Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.

Here are some of the examples from the story:

In one example, [Katherine M. Porter, associate professor of law at the University of Iowa] found that a lender had filed a claim stating that the borrower owed more than $1 million. But after the loan history was scrutinized, the balance turned out to be $60,000. And a judge in Louisiana is considering an award for sanctions against Wells Fargo in a case in which the bank assessed improper fees and charges that added more than $24,000 to a borrower’s loan.


On Oct. 9, the Chapter 13 trustee in Pittsburgh asked the court to sanction Countrywide, the nation’s largest loan servicer, saying that the company had lost or destroyed more than $500,000 in checks paid by homeowners in foreclosure from December 2005 to April 2007.

The trustee, Ronda J. Winnecour, said in court filings that she was concerned that even as Countrywide misplaced or destroyed the checks, it levied charges on the borrowers, including late fees and legal costs.


Loan servicing is extremely lucrative. Servicers, which collect payments from borrowers and pass them on to investors who own the loans, generally receive a percentage of income from a loan, often 0.25 percent on a prime mortgage and 0.50 percent on a subprime loan. Servicers typically generate profit margins of about 20 percent.

Now that big lenders are originating fewer mortgages, servicing revenues make up a greater percentage of earnings. Because servicers typically keep late fees and certain other charges assessed on delinquent or defaulted loans, “a borrower’s default can present a servicer with an opportunity for additional profit,” Ms. Porter said.

The amounts can be significant. Late fees accounted for 11.5 percent of servicing revenues in 2006 at Ocwen Financial, a big servicing company. At Countrywide, $285 million came from late fees last year, up 20 percent from 2005. Late fees accounted for 7.5 percent of Countrywide’s servicing revenue last year.

But these are not the only charges borrowers face. Others include $145 in something called “demand fees,” $137 in overnight delivery fees, fax fees of $50 and payoff statement charges of $60. Property inspection fees can be levied every month or so, and fees can be imposed every two months to cover assessments of a home’s worth.


Jeffrey M. Norton, a lawyer who represents the Trevinos, said that although MERS pays a flat rate of $400 or $500 to its lawyers during a foreclosure, the legal fees that it demands from borrowers are three or four times that.


Based on the study, mortgage creditors in the 1,733 cases put in claims for almost $6 million more than the loan debts listed by borrowers in the bankruptcy filings. The discrepancies are too big, Ms. Porter said, to be simple record-keeping errors.

Michael L. Jones, a homeowner going through a Chapter 13 bankruptcy in Louisiana, experienced such a discrepancy with Wells Fargo Home Mortgage. After being told that he owed $231,463.97 on his mortgage, he disputed the amount and ultimately sued Wells Fargo.

In April, Elizabeth W. Magner, a federal bankruptcy judge in Louisiana, ruled that Wells Fargo overcharged Mr. Jones by $24,450.65, or 12 percent more than what the court said he actually owed. The court attributed some of that to arithmetic errors but found that Wells Fargo had improperly added charges, including $6,741.67 in commissions to the sheriff’s office that were not owed, almost $13,000 in additional interest and fees for 16 unnecessary inspections of the borrowers’ property in the 29 months the case was pending.

“Incredibly, Wells Fargo also argues that it was debtor’s burden to verify that its accounting was correct,” the judge wrote, “even though Wells Fargo failed to disclose the details of that accounting until it was sued.”

And to think that this is probably just the tip of the iceberg. Examples like these show why regulation of the mortgage industry is sorely needed.

Tanta, at Calculated Risk, has her own take on the article -- including her questioning of some of the assertions made in the article.

The Next Gold

With the advent of global warming, potable water will become an increasingly scarce commodity. As the arctic and antarctic ice caps begin to melt in summer, sea levels will begin to rise. Couple this with poor urban planning (much like what is happening in Atlanta right now) and you have the makings of a potential crisis for millions of people.

There is one thing America is known for: ingenuity. We need to apply our ability to come up with innovative solutions to known water problems. An idea that I think should be given consideration is building desalinization plants along the coasts and pumping converted sea water into potable -- or at least non-potable, but usable -- water.

Certainly the main obstacle to such a project is its capital-intensiveness. And critics could argue against it either because the cost is perceived to be prohibitive and unnecessary based on the premise that global warming doesn't exist (the conservative argument) or because it could become just another case of private profits and socialized losses.

Something that many people don't know is that in the Native American tradition, things that are produced by the earth or nature belong to everyone and should not inure to the benefit of private companies or individuals. The question that begs to be asked in this line of thought is this: Who made the water? Who made the air we breathe? Who made the soil? (Did man make the water, air or soil -- and by extension, the minerals produced by natural processes?) It goes to the heart of property rights that have formed the basis of our legal system.

Ultimately, we must recognize that we owe it to our country -- and our world -- to make the best use of our natural resources. The implementation of a water supply from converted sea water will take many years to implement. The point in its favor, however, is that the need is foreseeable years -- even decades -- in advance.

Obviously, there are other problems related to increasing use and need for other commodities. Energy demand is growing every day, not only due to developing economies in Asia (which, long term, may end up becoming the center of the next empire), but also due merely because of an increasing global population and the energy needs to grow crops to feed them. Overfishing is causing a natural food supply to become more scarce and innovative techniques are needed there as well. That will require a non-polluting and renewable energy source.

As a result of these challenges, we need to create a national energy policy based on sustainable technologies. This problem, too, is foreseeable. There are many technologies based on sustainable energy: wind, solar, hydroelectric, tidal and geothermal. The effectiveness of each of the natural energy supplies vary depending on location. What is needed is a national program to maximize the use of these various natural energy supplies.

I haven't been writing much lately. I told you I've been thinking a lot. See what happens when I do that?

Wednesday, October 31, 2007

How To Spot A Scam, Part 4

As a follow-up to my post on How To Spot A Scam, here is a link to a website dedicated to helping potential victims spot fake checks:

Here is a PSA advertising the site:

There are more videos here.

Tuesday, October 30, 2007

Inflating the Beast

One of the things I have been thinking about is the reason for the inflating of the money supply. Conservatives have been arguing that cutting taxes increases tax revenues using the Laffer Curve argument. How could this sleight-of-hand be accomplished? Inflate the money supply. With the combination of nominally more money in the economy and the effect of the AMT tax hitting the middle class, there would be an increase (nominally) in the amount of tax revenues. Combine this with social security payments kept virtually the same (and doing the most harm to low income retirees) and you end up effectively starving the beast.

It's dishonest, of course. But I expect conservatives to tout this come next year.

Predatory Lending PSA

Debt Bomb

From CNN Money's The $915B bomb in consumers' wallets:

(Fortune Magazine) -- This past summer's subprime meltdown involved about $900 billion in now-suspect securitized debt, reckless lending, and consumers who buckled under the weight of loans they couldn't afford. Now another link in the consumer debt chain - credit cards - is starting to show signs of strain. And the fear that the $915 billion in U.S. credit card debt (an uncannily similar figure) may blow up has major financial institutions like Citigroup, American Express, and Bank of America strapping on their Kevlar vests.


The doomsday scenario would play out something like this: Just like CDOs and other asset-backed securities, credit card debt is sliced, diced, and sold off again as packages of securities. Rising delinquencies would hurt not only the banks involved but the securities backed by the credit card receivables. Those securities would decline in value as consumers defaulted, leading to bank losses as well as portfolio losses in the hedge funds, institutions, and pensions that own the securities. If the damage is widespread enough, it could wreak havoc on the economy much as the subprime crisis has done.

To be sure, there are key differences between the subprime market and the problems brewing with credit cards. The first is that while rising mortgage delinquencies were apparent for months before the subprime market blew up, credit card delinquencies are actually coming off unusually low levels.


But credit card debt is different from subprime debt in another way: Unlike mortgages, credit card debt is unsecured, so a default means a total loss. And while missed payments are at a historical low, they show signs of an uptick: The quarterly delinquency rate for Capital One, Washington Mutual, Citigroup, J.P. Morgan Chase, and Bank of America rose an average of 13% in the third quarter, compared with a 2% drop in the previous quarter.


If there is an international precedent the U.S. should be watching, it's actually that of the U.K. British consumers are just as overstretched as Americans, but since the real estate market there rose faster and fell earlier, they're about 18 months ahead in the credit cycle. Since the last quarter of 2005, credit card delinquencies and charge-off rates in Britain have risen as much as 50%, forcing banks to take huge write-offs.

It's a sign of the times that, according to one survey last month, 6% of British homeowners have been using their credit cards to pay their mortgages. That's suicidal, of course, given that credit card interest rates are more than double even the heftiest mortgage. Keep your fingers crossed that it's not a trend that crosses the Atlantic.

That doesn't sound good. At. All.

The T.V. pundits tell us that the housing meltdown is not the entire market. But let's see: so far we have seen a problem in:

1. An almost nationwide mortgage and housing meltdown; and

2. Credit card delinquency rates rising and interest rates and fees rising; and

3. Fuel, food, health care and education costs rising far faster than "core" inflation; and

4. A rapidly falling dollar; and

5. Drought in much of the country and flooding in others; and

6. Wages and social security payments not keeping up with inflation; and

7. A crumbling infrastructure (bridges failing and bridges to nowhere).

The credit problems are not the economy. It's just the tip of it.

Monday, October 29, 2007


I apologize for not posting. If it's not one thing, it's another. My computer was having problems with random access memory this time. I think it's fixed now. I think.

I've also been doing a lot of reading and thinking; and spending my weekends traveling and cleaning.

I am back to posting about one of the issues that got me to start this blog: health care. Michael Moore has started a new web site wherein he is trying to start an organized movement to pressure candidates for national office into taking a stand for universal health care.

A question for Hillary Clinton:

A question for Barack Obama:

A question for John Edwards:

And the Daily Kos has a new post today regarding Americans and Britons going overseas to India and other parts of Asia for cheaper health care. From the post:

You don't have to go far to find someone - George Bush, for instance - who will spout the typical propaganda: America has "the best health care system in the world." True enough if you're a Congressperson or hoi oligoi who can afford to pay for treatment at one of the nation's top medical centers. But, compared with other nations in the developed world, the U.S. does a rotten job of delivering good care to hoi polloi. As plenty of us know firsthand, even Americans with fairly decent health coverage often find it hard to get the treatment the "best health care system in the world" should be providing. When it comes to delivery, the American health care system is ... an outrage.

Tuesday, October 23, 2007

Bob Herbert: The Long, Dark Night

Read The Long, Dark Night for a sad story of financial disaster due to medical debt.

He reeled off a long list of charges that are coming at him like machine-gun fire, bills that he cannot afford to pay.

“So we’re selling the house,” he said. He sat quiet for a moment, then added in a soft voice, “You shouldn’t have to go live in a tent somewhere just because you don’t have insurance.”

Sunday, October 21, 2007

Garry Kasparov on Real Time With Bill Maher

This one has real substance discussed. Maher's comment about needing the KGB at the beginning referred to a group of protester's at his show disrupting the program. They were conspiracy theorists who allege that the World Trade Center's tower #7 had to have been brought down by demolition explosives and Maher had called these people crazy on a previous program. Maher had to have security people called in to remove them.

Friday, October 19, 2007

Garry Kasparov on the Colbert Report

Not much of substance was discussed.

Best line:

Kasprov: "In chess there are rules. In Russian politics there are no rules."

Both Stephen Colbert and Garry Kasparov have new books on the market.

Tuesday, October 16, 2007

You Could Lie To Me

Here is a Mark Heard song that seems to have some relevance to our times. From Stop the Dominoes:

You Could Lie To Me

You could lie to me with a ring of truth
And I would not understand
You could lead me on to the pits of Hell
I'm a less-than-perfect man

Oh - Who's gonna warn me
Oh - How can I tell
Oh - It's so easy
Believing the lies you tell

You could take my heart, turn it into stone
And I might not even know
You could season me until my feelings are gone
And the pain is felt no more

Oh - Who's gonna warn me
Oh - How can I tell
Oh - It's so easy
Believing the lies you tell

I do not see the casualties
I don't know what might have been
You're making friends out of my enemies
And enemies of my friends

Oh - Who's gonna warn me
Oh - How can I tell
Oh - It's so easy
Believing the lies you tell

Written by Mark Heard
© 1981 Bug and Bear Music (ASCAP)

Sunday, October 14, 2007

eMusic Spotlights Mark Heard

Taken from Mark Heard: Orphan of God:

Mark Heard: Orphan of God

by Michael James McGonigal

When one of my editors asked me to write a column on the talented singer, producer and songwriter Mark Heard, I was elated to learn that so much of his discography had recently been added to eMusic’s catalogue. Frequently compared to the likes of Townes Van Zandt, Tom Petty, Leonard Cohen and Bob Dylan, Heard’s stature has increased steadily since he passed away from heart complications fifteen years ago.

Bruce Cockburn called Heard “America’s best songwriter,” while the alternative adult contemporary music magazine Paste argued in a lengthy 2003 feature that “no artist has crafted three consecutive albums with both the lyrical radiance and the musical vibrancy to rival Dry Bones Dance, Second Hand and Satellite Sky.” I wouldn't go quite that far myself, but those three records really are exceptional — poetic, slice-of-life stuff by any standard. Heard is an original, an iconoclastic figure who presaged the work of artists like Chris Rice and Jeremy Enigk. In a two-sentence biography on All Music Guide he is casually called “brilliant.” Heard’s 1982 long-player Victims of the Age album was ranked in the top third of CCM magazine’s list of the all-time greatest Christian albums. And yet Mark Heard remains something of a cult figure.

Heard came of age in contemporary Christian music’s infancy — the late ‘70s and early ‘80s. CCM had yet to become a multi-million dollar industry, and in many ways was still a holdover from the so-called Jesus Rock movement of the ‘60s. Rear-guard CCM artists often questioned the nature of faith, but newer singers like Amy Grant had begun to proffer a simpler, more saccharine approach to mixing faith and music. Heard must have known that, in this context, his work had power and deserved to be heard by as wide an audience as possible — certainly by as many people who purchased Bob Dylan’s 1980 album Saved. “I'm not looking for votes, and my music isn't only for Christians,” Heard told New Christian Music in 1984.

The fact that Heard had songs with titles like “Everybody Loves a Holy War” might clue you in to his approach. In a series of amazing advertisements for his 1979 album Appalachian Melody, Heard wrote that “most Christians would say that the music should in some way glorify God… [however] one assortment of notes on the scale can't glorify God more than another. Neither can certain assortments of words... If you are an up and coming Christian singer and you have to sing for a Christian audience, you'd better throw as many words like "saved" or "hallelujah" or "sweet Jesus" as you can, otherwise your spirituality will be discussed behind your back. But anybody can [simply] say the words. Like Groucho says, 'Say the secret woid, the duck comes down, you win a hunnid dollas.'”

Heard’s early work is in the folky vein; he was often compared to James Taylor, and not always favorably. In his later recordings, he veers towards flat-out rock in a country-tinged Tom Petty-ish style that also encompassed Appalachian folk, Tex Mex and zydeco on that great Dry-Hand-Sky trilogy. Even his best albums feature the gated drum sound, reverb-saturated vocals, U2-ish guitar leads and other elements of mainstream ‘80s rock production. His voice is strong, though, especially on his sadder ballads. But what really propels his work is his way with words. Take “Fire” from Dry Bones Dance: “Oh, to find love's hiding place/ We are beggars and bootleggers/ Fading embers caught out in the rain/ Wondering what's it take to burst into flames/ And meanwhile hammers fall on anvils of grief/ Molten souls in madmen's cauldrons.”

Heard was struck down during his creative peak, and his spirit and wit are as much missing from contemporary Christian music as his exceptional songcraft. In that series of ads for Appalachian Melody, Heard said he liked “to write songs about things which cause me to glimpse the worth of God. Sometimes that might be the ocean, sometimes it is love for my wife, sometimes it can be absurdly simple things… We shouldn't search for a spiritually symbolic rationalization for [every] activity we enter into. It is not evil to enjoy a good laugh or a hike in the Sierras for what they are.” Having suffered the banalities of one too many well meaning but excruciatingly boring CCM acts (not to mention anemic praise and worship performances), these words still ring loud and true for me, nearly thirty years after the fact.

I am going to add a few words to the bolded quotes above. I have had (and even still have) the same complaint about Christian music played on the radio. Almost all of it comes down to variations of: "Jesus loves me this I know; for the Bible tells me so." Before getting an e-mail notifying me of this review of Mark Heard's work, I had been thinking about this very issue this week and had been thinking about writing about it anyway.

I realize there is a time and place for simplistic Christian songs; and America is increasingly moving toward a business model of exploiting niche markets (of which Christian music is one). There was a time when a Christian artist couldn't make a decent living producing strictly Christian music. But, on the other hand, the drive for a Christian artist to become monetarily successful requires that they conform to certain social norms within that Christian audience they are trying to convince to buy their music. That means -- all too often -- that they must water down any lyrics that might challenge the Christian audience of long-held orthodoxies. True artists move society forward by challenging their prejudices. Religions, by nature, are conservative -- or even reactionary -- forces on society. Contrarily, art almost always is a progressive force that changes and shapes perceptions toward societal evolution by showing injustices because of conservative ideas.

Back when I was in high school, there were Christian musicians like Randy Stonehill who challenged us about being susceptible to the American culture with its fixation on Fast Food and cosmetic appearances. Where are all the Christian artists today that challenge us to move toward changing our culture? Almost all of them are giving us the message to conform to the culture around us (at least the dominant Christian culture with all of its trappings combined with economic orthodoxies). Sometimes I wonder how Jesus himself would react to a McDonald's inside of a church? (Thoughts of Jesus whipping the moneychangers come to mind.)

(By the way, I would like to point out that the one time I got to see Mark Heard perform live, it was as an opening act for Randy Stonehill. I got to meet Mark after the show and talk to him for a few minutes.)

Anyway, I guess one of the reasons I liked Mark Heard's music so much was that I am the kind of person who likes to be challenged mentally. Even St. Paul wrote: "When I was a child, I used to speak like a child, think like a child, reason like a child; when I became a man, I did away with childish things." 1 Corinthians 13:11. But I feel like too many Christians today in their emphasis on conformity also create an insulated culture that resembles child-like reasoning in areas of science, politics, economics and law. . .even when that means serving mammon rather than God.

Thursday, October 11, 2007

We're All Subprime Now

Today, blogger Tanta, who writes for Calculated Risk, today wrote about predatory practices in the mortgage industry in HMDA Data on High Priced Loans. A clip:

This whole dynamic may be hard for the WSJ and its fellows in the Big Paid Media, so let me explain this very clearly. In 1975, some folks accused lenders of redlining, which means not granting credit at all to some people. The lenders said they weren't doing that. Congress passed HMDA, and then there was actual data about geographic lending patterns to analyze instead of anecdotes. Once we got some HMDA data under our belts, the Community Reinvestment Act came into being (in 1977) precisely because it was clear that redlining had been going on. CRA in essence forces lenders to show that they are willing to make loans in neighborhoods in which they are willing to take deposits (i.e., those deposits need to be "reinvested" in the neighborhood they came from in the form of loans, not just mortgage loans, to that neighborhood. You can't extract deposits from poor people and use them exclusively to fund loans to rich people.) CRA does not mandate price levels, or even address the question of price levels.

You may be surprised to hear this, but over time accusations of discriminatory lending practices did not go away. In a number of cases, "mystery shopper" tests were performed, in which a white applicant and a black applicant each applied for credit at the same instutition with identical credentials (employment, income, credit history, loan terms), and the results showed that black applicants were more likely to be turned down. This cast some doubt on the lenders' claims that loan rates in minority neighborhoods were a function of the lower credit quality of those borrowers. That became a hypothesis in need of some testing, you see, not an accepted explanation.

So the 1989 revision to HMDA forced collection of demographic data, for the precise purpose of testing the assumption that poor and minority people are just always bad credit risks. This resulted, as you might expect, in conjunction with CRA and other fair lending laws, in much higher rates of home mortgage lending in those areas that were once redlined.

But were these poor and minority people happy, at last? Why no, they weren't. Turns out, anecdotal evidence began to emerge that while these good people were finally getting loans, they were getting them at much higher interest rates than higher-income folks and whites generally got, and that this could not be accounted for by the difference in creditworthiness of the borrowers or the quality of the collateral (the latter proxied by census tract).


The bottom line is, as [Calculated Risk] notes, that "high-risk" lending was everywhere in the boom years. Of course there is a desire to collapse it all into the easy category of "subprime." And there has for a long time been a lot of political pressure to keep the association of "subprime" and "urban minorities" in place, because it has functioned as a good excuse for the subprime lenders (they "help" the poor and minorities, remember?). My view is that a whole lot of parties are very interested in maintaining rather than seriously analyzing a lot of faulty assumptions about risk, rates, and borrower credit characteristics. If this ain't "just a subprime problem," then an entire debt-based economy in which even the middle and upper middle class cannot afford homes given [real estate] inflation and wage stagnation is suddenly in question. The last thing certain vested interests want to hear is that, basically, "we are all subprime now."

My favorite comments:

At least then, when they say the problem is contained to subprime, they'd be correct.
daveNYC | 10.11.07 - 10:47 am |

What about the revelations coming forward that a lot of these sub-prime loans were to people who would/could /should have qualified for prime loans. My gut feeling is that the lending industry realized that there was more money to be had in the sub-prime market and rationalized the use of the product by telling borrowers your can always refinance. So while I can see the possibility that we are all becoming sub-prime candidates because of high LTV due to lack of down payments or low rates to buy the MacMansion, I cant help but feel it was the lenders looking to sack the borrower for higher fees and on top of that being bale to book unrealized profits from the fully adjusted loans. Now there is a racket!!
formerly known as... | 10.11.07 - 11:41 am | #

Down where the rubber met the road, '04-06 subprime was a broker-dominated and refinance-oriented business. Those brokers tend to chase after big fish. Which would you rather do? ONE loan for a cardiologist with a bunch of lates thanks to the ex-wife or TEN deals involving city bus drivers with gambling problems, immigrant cleaning ladies with thin credit files, single moms with three jobs, dancers with cash wages and voracious drug habits? - oh, wait, that's alt-a - anyhow, you get the gist. It's not that subprime was ever AIMED at low-income - quite the contrary - it's just that median income of those with impaired credit happens to lower.
Shnaps Parlor

The last paragraph raises an interesting point. We have been told that FICO scores are not related to race, sex or economic status. However, it is also true that women, minorities and lower-income individuals not only have less economic power as a group, but also are at a greater risk that the above examples and medical problems/debt are more likely to adversely affect their ability to pay their bills. Hence, lower credit scores.

The end result is that it contributes to the disparity between the wealthiest (who have the highest credit scores, due to the ability to weather unexpected expenses, and therefore who borrow at lower interest rates), and the poor (whose credit scores crash after one adverse event and have to borrow at higher interest rates). (BTW: I have been meaning to write about how banks charge fees on small balances that can quickly sap wealth from poor patrons.)

The answer is to provide social insurance on some costs (medical debt and education) and living wages that allow for even the poorest to save for the future. There are some costs which cannot be defrayed: rent, electricity and natural gas, food, transportation and personal hygiene. Even the lowest wage should be enough to cover these costs and provide enough to save for the future.

Tuesday, October 09, 2007


From a link over at Sudden Debt, I found this quote today at

While many pros have been spending their time telling us why this market can't possibly continue to be so strong, the foolish bulls who harbor no doubts have been racking up some great profits. With the credit problems, slowing economy, real estate meltdown, high oil and weak dollar, it has been very easy to make a strong case that this market will likely crack and start downtrending. The logic is compelling but for one very important fact: prices keep going up. For whatever reason, buyers continue to buy.

I always worry about the fact that we have a tendency to be so stuck on our biases and preconceptions of how things are and how things work that we fail to see other truths beyond our scope of vision. In this Information Age, we are prone to congregate with like-minded people. As a result, we reinforce each others beliefs. However, because we think so much alike, we fail to take into consideration entire chunks of information outside of our predispositions.

I have generally been in the bearish camp in economic matters. I have thought that the amount of debt that is outstanding is unsustainable at either a personal or national level. However, I come to the table with my own bias of having been a bankruptcy attorney and having a series of tragic incidents color my judgment. But now that my luck is starting to change, I am starting to wonder if such beliefs will prevent me from maximizing my opportunities.

Let me make it clear: I still think I am right, but I am open to other information that would change my bias.

Monday, October 08, 2007


Sometime today I received my 10,000th hit. Thank you to all my readers who have supported my blog over the last year.

Sunday, October 07, 2007

Alarming Parallels

An anonymous commenter over at Sudden Debt has alerted me to an article in The American Prospect entitled The Alarming Parallels between 1929 and 2007.

Testimony of Robert Kuttner
Before the Committee on Financial Services
Rep. Barney Frank, Chairman
U.S. House of Representatives
Washington, D.C.
October 2, 2007

Mr. Chairman and members of the Committee:

Thank you for this opportunity. My name is Robert Kuttner. I am an economics and financial journalist, author of several books about the economy, co-editor of The American Prospect, and former investigator for the Senate Banking Committee. I have a book appearing in a few weeks (The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity) that addresses the systemic risks of financial innovation coupled with deregulation and the moral hazard of periodic bailouts.


Although the particulars are different, my reading of financial history suggests that the abuses and risks are all too similar and enduring. When you strip them down to their essence, they are variations on a few hardy perennials -- excessive leveraging, misrepresentation, insider conflicts of interest, non-transparency, and the triumph of engineered euphoria over evidence.

The most basic and alarming parallel is the creation of asset bubbles, in which the purveyors of securities use very high leverage; the securities are sold to the public or to specialized funds with underlying collateral of uncertain value; and financial middlemen extract exorbitant returns at the expense of the real economy. This was the essence of the abuse of public utilities stock pyramids in the 1920s, where multi-layered holding companies allowed securities to be watered down, to the point where the real collateral was worth just a few cents on the dollar, and returns were diverted from operating companies and ratepayers. This only became exposed when the bubble burst. As Warren Buffett famously put it, you never know who is swimming naked until the tide goes out.


A second parallel is what today we would call securitization of credit. Some people think this is a recent innovation, but in fact it was the core technique that made possible the dangerous practices of the 1920. Banks would originate and repackage highly speculative loans, market them as securities through their retail networks, using the prestigious brand name of the bank -- e.g. Morgan or Chase -- as a proxy for the soundness of the security. It was this practice, and the ensuing collapse when so much of the paper went bad, that led Congress to enact the Glass-Steagall Act, requiring bankers to decide either to be commercial banks -- part of the monetary system, closely supervised and subject to reserve requirements, given deposit insurance, and access to the Fed's discount window; or investment banks that were not government guaranteed, but that were soon subjected to an extensive disclosure regime under the SEC.

Since repeal of Glass Steagall in 1999, after more than a decade of de facto inroads, super-banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s -- lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way. And, much of this paper is even more opaque to bank examiners than its counterparts were in the 1920s. Much of it isn't paper at all, and the whole process is supercharged by computers and automated formulas. An independent source of instability is that while these credit derivatives are said to increase liquidity and serve as shock absorbers, in fact their bets are often in the same direction -- assuming perpetually rising asset prices -- so in a credit crisis they can act as net de-stabilizers.

A third parallel is the excessive use of leverage. In the 1920s, not only were there pervasive stock-watering schemes, but there was no limit on margin. If you thought the market was just going up forever, you could borrow most of the cost of your investment, via loans conveniently provided by your stockbroker. It worked well on the upside. When it didn't work so well on the downside, Congress subsequently imposed margin limits. But anybody who knows anything about derivatives or hedge funds knows that margin limits are for little people. High rollers, with credit derivatives, can use leverage at ratios of ten to one, or a hundred to one, limited only by their self confidence and taste for risk. Private equity, which might be better named private debt, gets its astronomically high rate of return on equity capital, through the use of borrowed money. The equity is fairly small. As in the 1920s, the game continues only as long as asset prices continue to inflate; and all the leverage contributes to the asset inflation, conveniently creating higher priced collateral against which to borrow even more money.

The fourth parallel is the corruption of the gatekeepers. In the 1920s, the corrupted insiders were brokers running stock pools and bankers as purveyors of watered stock. 1990s, it was accountants, auditors and stock analysts, who were supposedly agents of investors, but who turned out to be confederates of corporate executives. You can give this an antiseptic academic term and call it a failure of agency, but a better phrase is conflicts of interest. In this decade, it remains to be seen whether the bond rating agencies were corrupted by conflicts of interest, or merely incompetent. The core structural conflict is that the rating agencies are paid by the firms that issue the bonds. Who gets the business -- the rating agencies with tough standards or generous ones? Are ratings for sale? And what, really, is the technical basis for their ratings? All of this is opaque, and unregulated, and only now being investigated by Congress and the SEC.

Yet another parallel is the failure of regulation to keep up with financial innovation that is either far too risky to justify the benefit to the real economy, or just plain corrupt, or both. In the 1920s, many of these securities were utterly opaque. Ferdinand Pecora, in his 1939 memoirs describing the pyramid schemes of public utility holding companies, the most notorious of which was controlled by the Insull family, opined that the pyramid structure was not even fully understood by Mr. Insull. The same could be said of many of today's derivatives on which technical traders make their fortunes.


A last parallel is ideological -- the nearly universal conviction, 80 years ago and today, that markets are so perfectly self-regulating that government's main job is to protect property rights, and otherwise just get out of the way.


One last parallel: I am chilled, as I'm sure you are, every time I hear a high public official or a Wall Street eminence utter the reassuring words, "The economic fundamentals are sound." Those same words were used by President Hoover and the captains of finance, in the deepening chill of the winter of 1929-1930. They didn't restore confidence, or revive the asset bubbles.

The fact is that the economic fundamentals are sound -- if you look at the real economy of factories and farms, and internet entrepreneurs, and retailing innovation and scientific research laboratories. It is the financial economy that is dangerously unsound. And as every student of economic history knows, depressions, ever since the South Sea bubble, originate in excesses in the financial economy, and go on to ruin the real economy.

That is a lot of parallels to think about; and they are alarming parallels at that.

Congress Seeks To Limit White Collar Prosecutions

From the story U.S. Prosecutors Say New Limits May Help Future Enrons Go Free:

Oct. 1 (Bloomberg) -- U.S. businesses, with the help of civil libertarians, are on the verge of outmaneuvering federal prosecutors and persuading Congress to limit the government's power to pursue corporate fraud.

Lawmakers are considering a measure that would, among other things, bar the government from demanding that companies reveal confidential talks with their lawyers in order to win leniency in plea deals. It would also prohibit federal agencies, including the Securities and Exchange Commission, from demanding that companies fire or cut off legal support for employees under investigation.

Such tools were crucial in helping prosecutors pry loose valuable information in hard-to-prove cases against WorldCom Inc. and Enron Corp. Curtailing them may mean fewer such investigations in the future, putting investors more at risk.

``Pre-Enron, U.S. attorneys never brought these cases, and after this bill is passed, they will quit bringing them again,'' says Lynn Turner, a former SEC accounting chief. ``This is a very clear message from Congress: Don't touch white-collar criminals.''

The Justice Department's guidelines for corporate cases were crafted as it and the SEC sought to cope with the explosion of financial scandals early this decade by offering companies leniency in exchange for cooperation.

That typically means a company reports potential illegality, conducts its own internal probe and waives the attorney-client privilege. Prosecutors say they need such confidential information to ensure against cover-ups and, if necessary, help them freeze assets that might otherwise be hidden or squandered.

No Secret

``It's no secret that cooperation from defendants of all types is a very effective tool we need to use in getting the bad guys,'' says Karin Immergut, U.S. attorney in Oregon and head of a Justice Department white-collar crime committee.

Immergut says the waiving of attorney-client privilege played a vital role in the prosecution of former Chief Executive Officer Bernard Ebbers for the $11 billion WorldCom fraud --he's now serving a 25-year prison term -- and helped the government locate and seize $80 million in cash from financier Martin Armstrong, who pleaded guilty in an investor fraud.

Company documents aided accounting probes at Enron and Adelphia Communications Corp., and helped convict 11 former executives in connection with a $67 million fraud at online real-estate seller Homestore Inc., the Justice Department says.



In the absence of an all-out defense by the department, prosecutors on the front lines are mobilizing to fight the legislation. ``This bill would certainly make it harder for prosecutors to protect victims and the investing public,'' says Immergut. Pointing out that drug defendants are routinely asked to waive their rights if they want leniency, she asks why executives deserve special treatment.

``I frankly find it kind of baffling that people are proposing legislation that protects corporations and corporate officers like CEOs more than other individuals,'' she says.

I think this just shows you who our elected officials really work for. Do you ever get the feeling that it is their own self-interest they are voting on?

Saturday, October 06, 2007

Sunday Music: Kevin Max

Kevin Max is another one of the members of DC Talk besides Toby Mac and Michael Tait. (He is also a Mark Heard fan, by the way.) His major solo hit, Existence, got regular airplay on the Christian stations. Here is the video:

Kevin Max -- Existence

A fan of his created a video featuring his song Fade To Red to Lord of the Rings clips.

Kevin Max -- Fade To Red

I Just Wanna Get Warm

This song is another one by Mark Heard that has a kind of Cajun style to it. It appears on his Second Hand CD and again on the High Noon compilation CD released after his death. You can listen to the song at It is song number 8 on the Second Hand CD.

I Just Wanna Get Warm

The mouths of the best poets
Speak but a few words
And then lay down
Stone cold in forgotten fields
Life goes on in this ant farm town
Cold to the lifeblood underfoot
All talk and no touch
And I just wanna be real
I just wanna be real

The colors here are monochrome
Studies in one shade of grey
The good times and the hard times
Cut from the same grey cloth
And all the fires that crackle here
Consume but do not burn
All light and no heat
And I just wanna get warm
I just wanna get warm

The days they rattle past me
Like a tunnel round a train
Landscapes and heartaches
I don't know what I feel
All I know is my condition
Is worse than I can tell
The small talk and the slow burn
And I just wanna be healed
I just wanna get well

There are things I should remember
But I have forgotten how
I'm all tied up with no time
Trying do too much
And the thoughts that I've avoided
Are the ones I need right now
Like a warm wind and love's hand
And I just wanna be touched
And I just wanna be real
And I just wanna be well
And I just wanna be healed
And I just wanna be warm

Written by Mark Heard
© 1991 Ideola Music/ASCAP

Gulf Coast Travels: Adventure Swamp Tours

A few weeks ago, I had the pleasure to be taken on a guided tour of the swamps along the Texas-Louisiana border. The tours cost is reasonable (about $25) and lasts about two hours. This pictorial post will take you through the tour in the order that I remember it.

Here is a flower that our guide showed us just before the tour began:

Here is an example of the kind of trees that grow in the brackish water (water that is part salt water and part fresh water). Their roots grow upward out of the water.

Our tour guide (I believe it was Eli Tate) explained that the Spanish moss that grows on the trees here is not really a moss at all, but is really part of the pineapple family.

On the tour you visit an old, abandoned shipyard used to build ships during World War II.

If you are lucky enough, you just might spot this eagle on your tour. Right before you get here, you will be taken through a maze of sunken ships that stick up out of the water.

This is a strip of land that had some unique cattle that are not easily tamed.

My photo does not show it well, but this area here was filled with lots of spiders with large webs in between the trees. (If you look just above the palm plant at the bottom of the photo, you can barely make out the spider.) I think the locals refer to the colorful spiders as "banana spiders" -- although I don't think that is what they really are.

And now the moment you take the tour for: our tour guide kept hitting the side of the boat and whistiling like a bird. Then he threw a white ball on a string out into the water to attract the alligators. (Cue the Jaws music....):

Nice alligator, nice alligator....

Finally, after showing an ancient native burial ground and attracting yet another alligator to the boat, he took us to an area with lots of lilies and lily pads.

Finally, I was surprised that mosquitos were not prevalent here. Apparently, they are in Louisiana, but not here along the Texas border. That's not to say that they are not prevalent elsewhere in southern Texas.

So if you are in the Orange, Texas area and want to learn more about the swamps, give Mr. Tate a call. He gives a very pleasant and informational tour of the swamps.

Congratulations Two-Headed Blog

Congratulations to Two Headed Blog for winning the Best Commentary Award at the Okie Blog Awards. The runner-up was Bounded Rationality.

Congratulations to all the other winners and nominees.

Prisoner's Debt

You all have heard of Debtor's Prison, but how many of you were aware of the fact that many convicts come out of prison with more financial debt than they can repay (and rarely is it dischargeable in bankruptcy).

The New York Times today brings light to this rarely discussed topic in an editorial today.

The scope of the ex-offender debt problem is outlined in a new study commissioned by the Justice Department’s Bureau of Justice Assistance and produced by the Council of State Governments’ Justice Center. The study, “Repaying Debts,” describes cases of newly released inmates who have been greeted with as much as $25,000 in debt the moment they step outside the prison gate. That’s a lot to owe for most people, but it can be insurmountable for ex-offenders who often have no assets and whose poor educations and criminal records prevent them from landing well-paying jobs.


A former inmate living at or even below the poverty level can be dunned by four or five departments at once — and can be required to surrender 100 percent of his or her earnings. People caught in this impossible predicament are less likely to seek regular employment, making them even more susceptible to criminal relapse.

Here are the proposed solutions as reported by the Times:

The Justice Center report recommends several important reforms. First, the states should make one agency responsible for collecting all debts from ex-offenders. That agency can then set payment priorities. The report also recommends that payments to the state for fines and fees be capped at 20 percent of income, except when the former inmate has sufficient assets to pay more. And in cases where the custodial parent agrees, the report urges states to consider modifying child support orders while the noncustodial parent is in prison. Once that parent is released, child support should be paid first.

The states should also develop incentives, including certificates of good conduct and waivers of fines, for ex-offenders who make good-faith efforts to make their payments. Where appropriate, they should be permitted to work off some of the debt through community service. Beyond that, elected officials who worry about recidivism need to understand that bleeding ex-offenders financially is a sure recipe for landing them back in jail.

Here is what bothers me about this aspect of the penal system: the people who need to pay hefty fines -- those that commit white collar crimes, for instance (for example: insider stock trading), rarely have to pay fines and restitution equal to the amount they stole, swindled or conned from their victims and many times they are quite capable of paying it (even though it may mean that trusts that they created to be exempt from creditors have to be "pierced").

This is another reform that needs to be addressed, in my opinion.

Friday, October 05, 2007

Relief Bill for Homeowners Passes House

Relief Bill for Homeowners Advance

WASHINGTON (AP) -- Financial relief for homeowners facing foreclosure or in bankruptcy advanced in the House Thursday when the House approved legislation to help financially strapped homeowners.

The bill, passed by a 386-to-27 vote, would give a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. No taxes would be owed on the value of any debt forgiven or written off. Currently such debt forgiveness is taxable income.

While the measure is anticipated to reduce taxes of some strapped homeowners by $650 million, the cost to the government would be offset in part by limiting a tax break available on the sale of second homes.


The House vote was the latest congressional reaction to a mortgage crisis touched off this spring by a blowup in high-priced home loans for risky borrowers, throwing a pall over the economy. Foreclosures are at record highs and late payments are spiking. Lenders have been forced out of business and investors have taken huge financial hits.

An estimated 2 million to 2.5 million adjustable-rate mortgages - worth some $600 billion - will jump from low initial "teaser" rates to higher rates this year and next. Steep prepayment penalties have made it difficult for some to get out of their mortgages, and some overstretched homeowners can't afford to refinance or sell their homes.

To help offset the $650 million in tax revenue, the legislation makes it harder to get breaks on capital gains taxes for the sale of second homes. The White House supports the measure but wants mortgage relief to be in effect three years, not permanent as approved in the House. Bush also is opposed to limiting tax breaks on the sale of second homes.

The Mortgage Bankers Association expressed strong support for the bipartisan tax-relief bill but fiercely criticized another measure, opposed by Republicans on a House Judiciary subcommittee that narrowly approved passing it to the full committee.

That measure, which faces a contentious future in Congress, would revise the bankruptcy code to aid homeowners facing default and foreclosure. If enacted, it would further trim profits at hard-hit mortgage lenders.

The bill would allow judges to order mortgage lenders to ease terms for homeowners in bankruptcy proceedings. Currently, mortgage lenders can foreclose against a homeowner in default 90 days after a bankruptcy filing.

Mortgage lenders would be "terrified" of getting wrapped up in bankruptcy proceedings, said Brian Gardner, a research analyst with investment firm Keefe, Bruyette & Woods.

The MBA said in a statement: "Lenders will have no choice but to move to foreclosure right away to ensure that they are not covered by the onerous provisions of this bill. In the longer term, investors and speculators who overpaid for homes at the height of the housing bubble will have an incentive to file for bankruptcy, walk away from the loan and property, and reap an undeserved windfall."

The tax-relief bill is H.R. 3648.

The bankruptcy-related bill is H.R. 3609.

In response to the MBA, so the MBA should reap a windfall for engaging in what they knew -- or, at least, should have known -- was an overheated market (that they helped create)? Secondly, if you are in bankruptcy, where is the "windfall?" After all, isn't that a risk that lenders take when they make loans?

Thursday, October 04, 2007

Rising Inequality

I found a statement made by Alan Greenspan recently quite disturbing. Greenspan Book Criticizes Bush And Republicans:

Greenspan worries that rising income inequality could undo “the cultural ties that bind our society” and even lead to “large-scale violence.”

His solution to remedy this situation is “not higher taxes on the rich but improved education”, which, he claims, “can be helped by paying math teachers more.”

It might help, though, if rich people paid at least comparable rates as working class people do.


Today, over at Sudden Debt, an anonymous commenter named Bernard left a comment on the post A Tale of Two Recessions:

Under the Basel Accord for every $100 of AAA securitized assets, a bank need only hold $0.60 of equity, to back up that debt. The theory is AAA assets are among the highest rated and thus the risk of default is virtually nil. However, for every BBB securitized asset, a bank would have to hold almost $5.00 of equity for every $100.

Gold: The Collapse of the Vanities

In other words, if a AAA-rated security is downgraded to BBB, the bank will have post up almost 10 TIMES MORE CAPITAL.

Where are they going to get that capital from at that point?

Are they going to sell the security?

I don't think so--there will be NO BID.


The blog's author, Hellasious, responded thus:


You have hit upon a very important element in the whole MBS/ABS situation. While AAA paper won't be downgraded to BBB in one step, the combination of a series of consecutive downgrades and SIV assets going back onto balance sheets (and thus having to be covered by equity) means that the process of painful adjustment will take a long time. In other words, the credit crunch will last.

THIS IS NOT a replay of LTCM, for the simple reason that in its case the banks saved LTCM, so as not to get hurt themselves from the fallout. Today it is the banks/brokers that are in trouble: who's going to save THEM?

Or, to look at it another way: Who will save us from them?

A Response to Alex Taylor III

Today, Alex Taylor III wrote an article posted at CNN Money wherein he criticized Thomas Friedman of the New York Times in his article Debunking auto industry myths. That all fine and good; but in the process he made (I feel) an unfair statement:

It has been argued here before that if the government wants to be serious about improving fuel economy, all it has to do is boost the tax on gasoline. The revenue generated could be rebated to lower-income drivers who are truly disadvantaged or invested in mass transit. The auto companies aren't going to argue for such a tax because it would give them a black eye with consumers. And the government won't do it either, because of its anti-tax bias.

But Friedman, using his column as a bully pulpit, could argue for such a tax with impunity. And it would be a whole lot more effective than perpetuating the old myth about the ignorant luddites in Detroit who are withholding the small, fuel-sipping cars that Americans really want to buy.

But he has argued for a tax on gasoline. Here is a quote from his column back in February:

But at the same time, we have to impose a tax that creates a floor price of $3.50 a gallon for gasoline — forever. This is also about leverage. It says to all the parties: we are going to conserve enough gasoline and spur enough clean alternatives to fossil fuels that no matter what you all do in the Middle East, we will not depend on you for energy.

Another thing I take issue with is his statement that U.S. automakers and Americans don't need to change their habits:

That's wrong...and wrong. Forcing people to buy more efficient cars by ordering car companies to make them is like forcing people to lose weight by banning food companies from selling Big Macs and pizzas. The reason Americans consume so much gasoline is that they like their big pickup trucks, SUVs, and V-8 engines. The reason the automakers make them is because people want to buy them.

He also tries to defend them by saying:

American manufacturers DO build fuel-efficient cars but Americans don't buy them.
Ford (Charts, Fortune 500) is currently offering cut-rate financing on the 2008 Escape Hybrid, while GM (Charts, Fortune 500) is subsidizing the smallest car in its lineup, the Chevy Aveo. And GM can brag all it wants about having more models - 30 of them - than any other manufacturer that get more than 30 miles per gallon on the highway, but it gets precious little credit for it in the marketplace.

The reason people (like me) don't buy them is because the quality is not as good as a Honda or Toyota -- even if it is cheaper. Furthermore, the Aveo's fuel economy is not as good as the Honda Civic or Fit or Toyota Echo or Yaris. (I know, I checked.)

Don't believe me? Here is the fuel economy for the Chevy Aveo:

City 26
Highway 35

And the Honda Civic:

City 30
Highway 38

You need only look at Consumer Reports or a similar opinion poll by consumers on what kind of car they want to buy to know that GM's economy cars have a ways to go in terms of quality. And as for the Escape Hybrid? It's hybrid engine is designed not to increase its gas mileage but instead to increase its power. That misses the point of hybrid technology.