(The following was published in the March 22nd edition of the Asheville Citizen-Times.)
Evolution versus Intelligent Design continues to be another either/or issue. But the problem is that people are arguing about two different things. Science focuses on how we got to where we are as human beings. The Spiritual focuses on why we are here at all. Science focuses on the mechanics of how we look like we do and how our motor parts enable us to function. The Spiritual focuses on why human beings were created in the first place, assuming that some “One” intended for it to happen in a purposeful way for an intended outcome (e.g. everlasting life in heaven). Science is consumed with that which is visible, thereby “provable and knowable”; the Spiritual assumes a greater force that invisible to the eye, thereby “improvable yet knowable.”
I do not know how one can sit on a beach and watch the waves continually roll in from as far out as one can see, or sit on a mountain and watch a brilliantly colorful sunset, without knowing that this is all well beyond man’s capabilities. I do not know how a scientist, peering through the highest powered lens at cellular images, cannot but be continually amazed at the intricate design conceived in order to make our incredibly sophisticated life form work.
Creationism is about the Design of earthly existence. Evolution is about the Mechanics for how the Design is fulfilled. New buildings are constructed using everything we have learned about physical laws, materials composition and the art of color and angles. Modern day computers can solve problems, create images and transmit information over thousands of miles in a near-instant using logic, mathematics, and electrical principles. An automobile can move us in style, safety and comfort based upon principles of combustion, inertia and mechanics. Behind each of these was an architect, a computer programmer, or an engineer with a Visionary Design and Great Idea who knew what needed to come together to make it happen.
The birth of a human being is a spectacular convergence of component parts and intangible thoughts. To look at mind, thought and body and their interactions at the detail level of their complexity is as spectacular as that overwhelming view from the mountaintop. But the human being also first needed a Design, followed by the Mechanics necessary to carry out that design.
It is very clear that part of the Mechanic is for human beings to evolve into their form. Gradual, step-by-step growth to becoming fully formed is the rule in all life forms. A human being does not emanate from the womb as a whole and completed adult. An infant began at a cellular level in a union of sperm and egg. That simple cell evolved over time in shape, color, substance and volume to ultimately become the baby we see. We then evolve over the course of our lifetime, gradually changing, almost imperceptibly, from birth to adulthood to old age, one moment and one day at a time. Given what we see in our own individual lives, is it not safe to assume that the whole of humanity would have evolved in some manner over the full history of our ancestors? Evolution serving as the tool by which Intelligent Design is made to happen?
How do we reconcile the poetry of creation stories with the science? Easy. For example, I could describe on multiple levels the fried chicken dinner my Mother used to make. I could describe how she took pieces of chicken and fried them within a detailed recipe of flour coating; boiled potatoes, mashed them with added milk, covered them with gravy; opened a can of peas and heated them on the stove. Or I could describe the entire “farm-to-plate” production chain that brings the chicken’s egg to its ultimate place on my plate. Finally, I could detail how the molecular structure of a chicken changes in hot oil in a skillet. Each version of my dinner’s creation story is correct and compatible, yet told from different vantage points.
We may argue over who truly knows the Great Designer that created the human plan. We may argue over how much science remains to be discovered before really knowing how our human thing works. We can never fully know that which we call God. Science will always have one more level to discover. In the end, both God and Science are needed to create all that we see. And both remain unknowable mysteries in our human lifetime.
Tuesday, April 28, 2009
Thursday, April 16, 2009
Welfare and Socialism for Whom?
Soon, the debate over the future delivery of healthcare to Americans will move into full swing. It will be a long and contentious discussion. Hopefully access to good health care as part of American citizenship will be an accepted baseline in the coming discussion. There will be many good differing opinions about the role of governments in a future healthcare structure. Unfortunately, we can also count on hearing some screams about government-provided healthcare being “socialized medicine,” or how such would create new “welfare entitlements.” I suggest that whenever we hear these words, we are listening to nothing of value in this most critical discussion. When one has no real understanding of the very real human needs or has no intellectual understanding of the difficulties and complexities yet opportunities involved in this arena, then we will see this jump to empty codewords. Codewords intended to scare working people into believing that they will lose control over their own lives (socialism). Or that lesser-deserving people will get what they have not paid for and thereby do not deserve (welfare). Except virtually everyone has now become prisoner to a healthcare system that is out of control, and is not getting access to the healthcare that they need in a financially responsible manner.
If the argument is that government provided services are socialism, and underwriting services for those who cannot afford them is welfare, then what are we to do with all of the socialism and welfare that is already in place that we all enjoy and take for granted? The Constitution charged the federal government to provide for the common defense, so it maintains a military to protect us. The US government has provided a postal service since Ben Franklin started it. They do a remarkable job taking my scrawled handwriting on a paper envelope and delivering it 2-3 days later to someone’s mailbox nailed to their house out in the countryside thousands of miles away. All for 42 cents. The FAA keeps track of thousands of airlines and millions of passengers in the air everyday. In spite of how badly run the corporate US airlines have become, we have a minimal occurrence of accidents and deaths from that congested travel. The federal government already extensively and successfully provides direct healthcare to millions of military personnel and their families, to veterans, and to Congressmen/women – care not available to most of us. It provides health insurance to millions of senior citizens. It provides additional health care and/or insurance to other millions of disabled people and children. So let us please stop talking about government-sponsored health care as if it is some brand-new invention the devil.
It is a long list of services the US government provides every day. Sometimes bungled by obscure bureaucrats buried in the bowels of the organizational charts, out of touch with the diverse realities of small-town America. But what have been your experiences of late trying to navigate customer services in free-enterprise corporate America? Hello, India! Both government and private enterprise have their successes and failures.
If “welfare entitlement” is supposedly about something for nothing, then what about all of the corporate and personal welfare we all take advantage of every day. Our tax code is filled with special treatment for selected businesses and classes of individuals, which is why Warren Buffet and his peers pay less percentage income tax than his secretary. The Department of Agriculture pays subsidies, “not to grow” programs, and price supports for farmers, most of which goes to big agri-business growers and passive investors (David Letterman a farmer?), not the family farmer of our mythic dreams. Who among us is willing to give up our mortgage interest deduction, originally written for the home construction industry to stimulate home ownership. A deduction none of the millions of renters enjoys. And, of course, our employer-provided health insurance which is free and non-taxable, even though it is worth thousands of dollars in additional compensation. Explain that supposed fairness to the millions of Americans unemployed or employed-without-benefits.
And, of course, there are all the civilian jobs created by the Pentagon for procurements and defense bases across the country that even the military says are not needed. Or the biggest of all socialistic actions by our government – the first governmental commitment in the world, honored to this day, that all citizen children will receive a basic education regardless of their family’s ability to pay, underwritten by all adult citizens who thereby give back to others the gift they received, even while private enterprise schools also successfully coexist side-by-side for those parents who wish to pay over and above.
The list goes on endlessly. One person’s socialism is another person’s entitlement. So if some critic wants to stand up and yell “socialism” or “welfare,” then the only logical response should be, “So what government entitlements you now get are you willing to give up?” There can emerge many different ways to tame this healthcare beast. Let us allow for both private industry and government roles where each is best positioned. Let individual initiative do what it does so marvelously, while common social fabric needs are being concurrently met. But speak to me of substance, of ideas that lead to outcomes, without labels. Let us all drink from a cup of humility, commit to intellectual honesty, and level the playing field equally for everyone before we stand on the dishonest stage of the rhetorical demagoguery of codewords.
If the argument is that government provided services are socialism, and underwriting services for those who cannot afford them is welfare, then what are we to do with all of the socialism and welfare that is already in place that we all enjoy and take for granted? The Constitution charged the federal government to provide for the common defense, so it maintains a military to protect us. The US government has provided a postal service since Ben Franklin started it. They do a remarkable job taking my scrawled handwriting on a paper envelope and delivering it 2-3 days later to someone’s mailbox nailed to their house out in the countryside thousands of miles away. All for 42 cents. The FAA keeps track of thousands of airlines and millions of passengers in the air everyday. In spite of how badly run the corporate US airlines have become, we have a minimal occurrence of accidents and deaths from that congested travel. The federal government already extensively and successfully provides direct healthcare to millions of military personnel and their families, to veterans, and to Congressmen/women – care not available to most of us. It provides health insurance to millions of senior citizens. It provides additional health care and/or insurance to other millions of disabled people and children. So let us please stop talking about government-sponsored health care as if it is some brand-new invention the devil.
It is a long list of services the US government provides every day. Sometimes bungled by obscure bureaucrats buried in the bowels of the organizational charts, out of touch with the diverse realities of small-town America. But what have been your experiences of late trying to navigate customer services in free-enterprise corporate America? Hello, India! Both government and private enterprise have their successes and failures.
If “welfare entitlement” is supposedly about something for nothing, then what about all of the corporate and personal welfare we all take advantage of every day. Our tax code is filled with special treatment for selected businesses and classes of individuals, which is why Warren Buffet and his peers pay less percentage income tax than his secretary. The Department of Agriculture pays subsidies, “not to grow” programs, and price supports for farmers, most of which goes to big agri-business growers and passive investors (David Letterman a farmer?), not the family farmer of our mythic dreams. Who among us is willing to give up our mortgage interest deduction, originally written for the home construction industry to stimulate home ownership. A deduction none of the millions of renters enjoys. And, of course, our employer-provided health insurance which is free and non-taxable, even though it is worth thousands of dollars in additional compensation. Explain that supposed fairness to the millions of Americans unemployed or employed-without-benefits.
And, of course, there are all the civilian jobs created by the Pentagon for procurements and defense bases across the country that even the military says are not needed. Or the biggest of all socialistic actions by our government – the first governmental commitment in the world, honored to this day, that all citizen children will receive a basic education regardless of their family’s ability to pay, underwritten by all adult citizens who thereby give back to others the gift they received, even while private enterprise schools also successfully coexist side-by-side for those parents who wish to pay over and above.
The list goes on endlessly. One person’s socialism is another person’s entitlement. So if some critic wants to stand up and yell “socialism” or “welfare,” then the only logical response should be, “So what government entitlements you now get are you willing to give up?” There can emerge many different ways to tame this healthcare beast. Let us allow for both private industry and government roles where each is best positioned. Let individual initiative do what it does so marvelously, while common social fabric needs are being concurrently met. But speak to me of substance, of ideas that lead to outcomes, without labels. Let us all drink from a cup of humility, commit to intellectual honesty, and level the playing field equally for everyone before we stand on the dishonest stage of the rhetorical demagoguery of codewords.
Friday, April 3, 2009
Regional Diversity
Over the past four months I had the good fortune to spend this year’s winter in Southern California instead of my home in Western North Carolina. Given all of the extended nightmarish weather experienced across the country this winter, going without snow for the first time in 40 years was a welcomed change. To get to Southern California from North Carolina, there are only two options: on I-40 across middle Tennessee / Arkansas / Oklahoma and northern Texas / New Mexico / Arizona, or the deep south route on I-10 through southern Mississippi / Alabama / Louisiana / Texas / New Mexico / Arizona. Either route over the 2500 miles will display a vast array of images, vegetation, distances of view, and varying weather conditions, often dramatic and sometimes bordering on the extreme. From such a visual contrast mile by mile, one is reminded of the extraordinary differences in this country’s landscape, yet its unifying beauty.
I have often said that to truly understand a people, you have to go to their place: stand on their land; feel the wind, the cold and the heat of the place; walk the flatness or the rises; eat the native food God made available on that land. Then, as you listen to them talk about their history – of migration, of wars, or desperate struggles for survival, of periods of alternating power & prosperity and then weakness & desperation – their stories, values, opinions, politics and cultural way of life begins to come alive within a context. Without that critical understanding and appreciation of their context, you hear their story only through your own lens, thereby not really understanding it at all.
Unlike most except the biggest of countries, the U.S. does not have one topography that molds a common context for us, such as Japan’s experience for example. Surviving the land means something far different to the New Englander than to the New Mexican. Shelter requires something very different for the Floridian than for the North Dakotan. The commute to work is a different regimen to the office worker in Huntington Beach, California than to the farmer in Van Wert, Ohio. The dusty heat of El Paso, Texas summers calls for a different rhythm and tolerance than the deep snows of winters in Buffalo, New York around the Great Lakes region. And the 90% humidity of Fort Smith, Arkansas creates a different form of heat than the extreme 15% dryness of Tucson, Arizona, regardless of the thermometer reading.
Basic values of patriotism, faith and religious observances, compassion towards others, charity to those in need, and respect for law and democratic process can be shared universally. Yet how those values are expressed and fulfilled cannot, and should not, be the same, given our incredible diversity of situations. Nevertheless, I continue to be amazed at the ongoing efforts of some people to try to enforce an ill-fitting homogeneity at a detailed level across this land. Be it a faceless bureaucrat dictating educational standards and teaching methodologies; a building code based upon big-city realities pushed out to rural communities; a religious denominational belief and practice attempted to be made a secular standard; architected homes completely mis-fitted in style to the land they sit on and the historical culture they embody; or the mandated allocation of governmental budgets applied to specific local action programs – all of these reflect a supposed knowing of “what is best locally” without any real understanding of what local really means.
Tip O’Neil’s famous observation was that “all politics is local.” Over the past years we have dangerously tried to turn that on its head. The idea was not to tell the locals what to do, but to listen to the locals and then give them a wide swath and meaningful support to pursue their individual directions. Allow people to respond as best appropriate to local conditions and priorities. We should remember that our view is our own, but other views are not necessarily a disagreement with us. They may rather reflect a life that is often outside of our own field of vision, and thereby outside of our real understanding.
I have often said that to truly understand a people, you have to go to their place: stand on their land; feel the wind, the cold and the heat of the place; walk the flatness or the rises; eat the native food God made available on that land. Then, as you listen to them talk about their history – of migration, of wars, or desperate struggles for survival, of periods of alternating power & prosperity and then weakness & desperation – their stories, values, opinions, politics and cultural way of life begins to come alive within a context. Without that critical understanding and appreciation of their context, you hear their story only through your own lens, thereby not really understanding it at all.
Unlike most except the biggest of countries, the U.S. does not have one topography that molds a common context for us, such as Japan’s experience for example. Surviving the land means something far different to the New Englander than to the New Mexican. Shelter requires something very different for the Floridian than for the North Dakotan. The commute to work is a different regimen to the office worker in Huntington Beach, California than to the farmer in Van Wert, Ohio. The dusty heat of El Paso, Texas summers calls for a different rhythm and tolerance than the deep snows of winters in Buffalo, New York around the Great Lakes region. And the 90% humidity of Fort Smith, Arkansas creates a different form of heat than the extreme 15% dryness of Tucson, Arizona, regardless of the thermometer reading.
Basic values of patriotism, faith and religious observances, compassion towards others, charity to those in need, and respect for law and democratic process can be shared universally. Yet how those values are expressed and fulfilled cannot, and should not, be the same, given our incredible diversity of situations. Nevertheless, I continue to be amazed at the ongoing efforts of some people to try to enforce an ill-fitting homogeneity at a detailed level across this land. Be it a faceless bureaucrat dictating educational standards and teaching methodologies; a building code based upon big-city realities pushed out to rural communities; a religious denominational belief and practice attempted to be made a secular standard; architected homes completely mis-fitted in style to the land they sit on and the historical culture they embody; or the mandated allocation of governmental budgets applied to specific local action programs – all of these reflect a supposed knowing of “what is best locally” without any real understanding of what local really means.
Tip O’Neil’s famous observation was that “all politics is local.” Over the past years we have dangerously tried to turn that on its head. The idea was not to tell the locals what to do, but to listen to the locals and then give them a wide swath and meaningful support to pursue their individual directions. Allow people to respond as best appropriate to local conditions and priorities. We should remember that our view is our own, but other views are not necessarily a disagreement with us. They may rather reflect a life that is often outside of our own field of vision, and thereby outside of our real understanding.
Thursday, March 19, 2009
Quiet, Please!
In the past two months, folks in Washington, D.C. have moved from the defining (and decrying) stage of problem recognition into the proposal stage. Multiple solutions to our economic woes are flying around everywhere, alongside all the variations of criticisms leveled against every proposal being offered up. Economic doom dominates all of the daily commentary. Many prior hot buttons and social issues that were supposedly critical to our national survival have virtually disappeared from discussion – illegal immigration, Iraq, Afghanistan, abortion, evolution/creationism, etc. Even supposedly new national priorities for energy and clean air are struggling for attention, while health and education seem to be holding their own. Given all of the daily slicing up, promoting, defending and finger-pointing going on, I am surprised that anyone has much time left over to actually THINK conscientiously about any of these problems.
Many politicians are lining up to claim that “too much is on the plate, we need to focus on one thing.” These folks are dead wrong. Frankly, if 535 Congressmen/women can’t split up, divide and conquer, and step to the national plate when they are needed, then we are facing a much bigger problem of competency and attention. Very few crises come neatly packaged for convenient handling.
I believe that Obama is right that a) economy and energy and health and education and environment are long overdue items precisely because we have refused to deal with them previously and now they are all ganging up on us; and b) each problem is part of the solution to the other. They are in fact interdependent among each other, and solving one is part of solving the others. “Solving” one problem at a time will take us baby steps when we desperately need to take the giant step that is now available to us. And have you noticed that the ones screaming that we should be focusing only on the economy right now are either a) the politicians who overlooked the economy for the past several years, or b) the economists or corporate career folks – they make it sound good and easy, but they are just like everyone else, pushing their own parochial agenda and perspective.
Of course, my favorite object of scorn – the cable news media – are in a feeding frenzy over all of this. Hour after hour, it is one doomsday scenario after another, poll after poll about how fearful Americans are, conspiracies uncovered one after another, 24-hour tracking of the latest embezzler of note. It is like watching those crazy weather folks in hyper-mode when the hurricanes are coming. It is also numbing to our brains, and the value-added of all this (dis-)information diminishes by the day.
Are there good people hurting these days, many of them reasonably innocent bystanders and/or casualties to the irresponsible actions of others? Yes. But we would be better-served not just to run feature stories about their hurts, but to focus on other people and organizations who are trying to help these neighbors find transition relief.
I suggest that we all turn down our TVs, skip over a few internet “timely news updates,” and ignore for awhile some of the hyper bloggers out there (except for this blog, of course!). The truth is, 90% of the American workforce is still working, even if working harder for less money in a less preferable job. Most family bills are being paid. Freebie living on borrowed money is slowing down, if not ending. Gasoline is still holding at @$2. Restaurants are still serving food, even if they are full only 5 nights instead of 7. Tomorrow the sun will rise again, as it has always managed to do. In a few weeks, one of those big magnificent full moons will dominate the night sky. Tomorrow (March 20), spring arrives yet again, ending our long winter and beginning yet again another year’s seasons. Planting, growing, harvesting and resting is a year's process, it is not done in a day. Life will refresh and renew itself in its annual ritual as it has for eons.
So let us quiet down a bit. Get back in balance. Act wisely for ourselves, and compassionately towards others. Use our adversity to move us to a better place we should go, not hunker down in a place in which we should not stay. Let our innate good and strong character come through yet again. And if we do, this too will pass. Turn off the noise, and listen to the music that is still playing our song.
Many politicians are lining up to claim that “too much is on the plate, we need to focus on one thing.” These folks are dead wrong. Frankly, if 535 Congressmen/women can’t split up, divide and conquer, and step to the national plate when they are needed, then we are facing a much bigger problem of competency and attention. Very few crises come neatly packaged for convenient handling.
I believe that Obama is right that a) economy and energy and health and education and environment are long overdue items precisely because we have refused to deal with them previously and now they are all ganging up on us; and b) each problem is part of the solution to the other. They are in fact interdependent among each other, and solving one is part of solving the others. “Solving” one problem at a time will take us baby steps when we desperately need to take the giant step that is now available to us. And have you noticed that the ones screaming that we should be focusing only on the economy right now are either a) the politicians who overlooked the economy for the past several years, or b) the economists or corporate career folks – they make it sound good and easy, but they are just like everyone else, pushing their own parochial agenda and perspective.
Of course, my favorite object of scorn – the cable news media – are in a feeding frenzy over all of this. Hour after hour, it is one doomsday scenario after another, poll after poll about how fearful Americans are, conspiracies uncovered one after another, 24-hour tracking of the latest embezzler of note. It is like watching those crazy weather folks in hyper-mode when the hurricanes are coming. It is also numbing to our brains, and the value-added of all this (dis-)information diminishes by the day.
Are there good people hurting these days, many of them reasonably innocent bystanders and/or casualties to the irresponsible actions of others? Yes. But we would be better-served not just to run feature stories about their hurts, but to focus on other people and organizations who are trying to help these neighbors find transition relief.
I suggest that we all turn down our TVs, skip over a few internet “timely news updates,” and ignore for awhile some of the hyper bloggers out there (except for this blog, of course!). The truth is, 90% of the American workforce is still working, even if working harder for less money in a less preferable job. Most family bills are being paid. Freebie living on borrowed money is slowing down, if not ending. Gasoline is still holding at @$2. Restaurants are still serving food, even if they are full only 5 nights instead of 7. Tomorrow the sun will rise again, as it has always managed to do. In a few weeks, one of those big magnificent full moons will dominate the night sky. Tomorrow (March 20), spring arrives yet again, ending our long winter and beginning yet again another year’s seasons. Planting, growing, harvesting and resting is a year's process, it is not done in a day. Life will refresh and renew itself in its annual ritual as it has for eons.
So let us quiet down a bit. Get back in balance. Act wisely for ourselves, and compassionately towards others. Use our adversity to move us to a better place we should go, not hunker down in a place in which we should not stay. Let our innate good and strong character come through yet again. And if we do, this too will pass. Turn off the noise, and listen to the music that is still playing our song.
Monday, March 9, 2009
Homeowner Life Preserver
I recently commented on this blog site that Obama’s stimulus package had to be seen as one leg of four. We also needed a home mortgage response, a new budget (long-term and short-term), and a banking restructuring plan. We now have a proposed plan for dealing with the home mortgage issue that was the original thorn that pricked this economic bubble.
Fiscally, the Obama mortgage plan looks like a right step (even if long overdue) to keep as many people in their homes as possible. The method: refinance current mortgages to a payment level that can be handled by the homeowner, assuming that the new mortgage meets certain limits and profiles. Non-resident mortgagees (i.e. speculators) would be excluded from this program, which seems reasonable. Unfortunate, all of these restructured loans would still flow through banks, who are not required to restructure but will be “incentivized” (whatever that means!) to do so.
This program follows the lead of Shelia Bair, head of the FDIC. She has been commendably fearless and the only sane voice for the past year in leading loan restructuring as the right way to resolving mortgage failures in her takeover and resolutions of failed banks. It is a good step, and will hopefully convince banks to convert their bad loans into good, and thereby be lending once again. For me, though, I would go even further on the premise that having homeowners staying in their homes and paying a mortgage every month is the key to both ending the slide in home values as well as resolving the instability of banks.
Firstly, I would require the banks getting taxpayer dollars to make every possible loan rewrite; it is the price of them playing with our money. Or, if banks will not rewrite, then I would use Fannie Mae or some other agency to go into the business of making loans directly to these consumers. Lending competition from the US Government should force the banks to choose to become competitive once again sufficiently to drive the federal government back out of the marketplace (which ideally it should not be in). The overriding necessity is that problem home loans need to be restructured, by whoever will do it. Ideally, let the banks beat the government at their own game in order to resolve the problem they caused in the first place.
Secondly, I would throw out any means test for these problematic homeowners. Yes, I know that sounds crazy. But a lesson I learned years ago is that it is the consumer that holds the key to a bank’s success, just like any other business. If a bank does not lend money, it goes out of business – which is exactly what is happening now. NOT lending is unprofitable. Once I figured out that premise, I no longer thanked a bank for “approving” me for a loan; I expected them to thank me for choosing to borrow from them. And if one bank will not loan me the money, I am confident that someone else will.
The practical application of all of this is that:
· hardly anyone keeps an initial mortgage for 30 years anymore; they either continually refinance it, creating in effect a life-long revolving line-of-credit, or they sell and move and start a new mortgage;
· banks are constantly encouraging mortgagees to refinance so they get new loan fees and high interest income;
· banks invented the balloon mortgage – i.e. low payments now in exchange for higher payments 3-5 years later when loans are in effect “automatically refinanced.”
So we need to quit playing games: find a payment amount these hurting people can handle, write a 5-year loan to fit that amount, and automatically rewrite it again 5 years out. Continue this indefinitely. In 5 years the bank is just going to be looking to lend the money again to someone anyway. What do we or the bank care whether the same person or a different new buyer holds this loan a few years from now – it’s all the same mortgage money. The outstanding balance (perhaps with some smaller loss) can be finally made up at the point of future sale or death. Even if losses ultimately result, we will have spread them out over years instead of all at the same time right now.
This approach stops the loss of home values. It stops foreclosures. It keeps people in a mortgage, not defaulting. It keeps them in their homes in a “normal” and continuing life, not a disrupted one. And banks now make money (or at least substantially reduce their losses).
Is this “fair” to current homeowners who have managed their mortgages steadily and in good faith? Perhaps not. I have been paying on some form of a mortgage for 25 years, and am scheduled to do so with my latest loan for another 29½. My current mortgage is on reasonable enough terms, assuming I do not suffer an economic setback. It is the loss in home value that hurts me far more directly than whether my neighbor’s troubles provide him with a more generous deal than I got. But if I can help that person stabilize his/her mortgage situation, that indirectly helps me in the long run.
We are where we are. And there but for the grace of God go I. I can shoot myself in the foot by attempting to punish my defaulting neighbor, or I can suck it up, be generous to that neighbor, hoping that my generosity today will come back to help me later if/when I may need it. Or I can do this just because selfishly his/her new deal will thereby help me, whereas foreclosure will most certainly come back to hurt me. Ultimately we will all sink or swim together in this rather overwhelming situation. So we might as well all share a life preserver and swim to shore together instead of arguing about who steered the ship into the rocks.
Fiscally, the Obama mortgage plan looks like a right step (even if long overdue) to keep as many people in their homes as possible. The method: refinance current mortgages to a payment level that can be handled by the homeowner, assuming that the new mortgage meets certain limits and profiles. Non-resident mortgagees (i.e. speculators) would be excluded from this program, which seems reasonable. Unfortunate, all of these restructured loans would still flow through banks, who are not required to restructure but will be “incentivized” (whatever that means!) to do so.
This program follows the lead of Shelia Bair, head of the FDIC. She has been commendably fearless and the only sane voice for the past year in leading loan restructuring as the right way to resolving mortgage failures in her takeover and resolutions of failed banks. It is a good step, and will hopefully convince banks to convert their bad loans into good, and thereby be lending once again. For me, though, I would go even further on the premise that having homeowners staying in their homes and paying a mortgage every month is the key to both ending the slide in home values as well as resolving the instability of banks.
Firstly, I would require the banks getting taxpayer dollars to make every possible loan rewrite; it is the price of them playing with our money. Or, if banks will not rewrite, then I would use Fannie Mae or some other agency to go into the business of making loans directly to these consumers. Lending competition from the US Government should force the banks to choose to become competitive once again sufficiently to drive the federal government back out of the marketplace (which ideally it should not be in). The overriding necessity is that problem home loans need to be restructured, by whoever will do it. Ideally, let the banks beat the government at their own game in order to resolve the problem they caused in the first place.
Secondly, I would throw out any means test for these problematic homeowners. Yes, I know that sounds crazy. But a lesson I learned years ago is that it is the consumer that holds the key to a bank’s success, just like any other business. If a bank does not lend money, it goes out of business – which is exactly what is happening now. NOT lending is unprofitable. Once I figured out that premise, I no longer thanked a bank for “approving” me for a loan; I expected them to thank me for choosing to borrow from them. And if one bank will not loan me the money, I am confident that someone else will.
The practical application of all of this is that:
· hardly anyone keeps an initial mortgage for 30 years anymore; they either continually refinance it, creating in effect a life-long revolving line-of-credit, or they sell and move and start a new mortgage;
· banks are constantly encouraging mortgagees to refinance so they get new loan fees and high interest income;
· banks invented the balloon mortgage – i.e. low payments now in exchange for higher payments 3-5 years later when loans are in effect “automatically refinanced.”
So we need to quit playing games: find a payment amount these hurting people can handle, write a 5-year loan to fit that amount, and automatically rewrite it again 5 years out. Continue this indefinitely. In 5 years the bank is just going to be looking to lend the money again to someone anyway. What do we or the bank care whether the same person or a different new buyer holds this loan a few years from now – it’s all the same mortgage money. The outstanding balance (perhaps with some smaller loss) can be finally made up at the point of future sale or death. Even if losses ultimately result, we will have spread them out over years instead of all at the same time right now.
This approach stops the loss of home values. It stops foreclosures. It keeps people in a mortgage, not defaulting. It keeps them in their homes in a “normal” and continuing life, not a disrupted one. And banks now make money (or at least substantially reduce their losses).
Is this “fair” to current homeowners who have managed their mortgages steadily and in good faith? Perhaps not. I have been paying on some form of a mortgage for 25 years, and am scheduled to do so with my latest loan for another 29½. My current mortgage is on reasonable enough terms, assuming I do not suffer an economic setback. It is the loss in home value that hurts me far more directly than whether my neighbor’s troubles provide him with a more generous deal than I got. But if I can help that person stabilize his/her mortgage situation, that indirectly helps me in the long run.
We are where we are. And there but for the grace of God go I. I can shoot myself in the foot by attempting to punish my defaulting neighbor, or I can suck it up, be generous to that neighbor, hoping that my generosity today will come back to help me later if/when I may need it. Or I can do this just because selfishly his/her new deal will thereby help me, whereas foreclosure will most certainly come back to hurt me. Ultimately we will all sink or swim together in this rather overwhelming situation. So we might as well all share a life preserver and swim to shore together instead of arguing about who steered the ship into the rocks.
Monday, February 23, 2009
The Politics of Stimulus
So now we have a 780+ billion dollar plan to stimulate the economy. Tax cuts, safety net supports, and infrastructure investments. Stimulate consumer buying to re-stimulate economic growth while promoting new strategic priorities. Two major questions arise from this bill’s passage: 1) will it accomplish its stated goals for our economy? 2) What can we expect to see in the future based upon this legislative experience?
I do not know if the stimulus will accomplish its goals or not. Most state and local governments are behind it for their constituencies, minus 3 Republican governors thus far who are refusing funds because they think strings will be attached to the dollars. Well, damn right there had better be! Isn’t that our complaint now – that $350B was given to banks by George W. Bush with no strings or accountability attached, never to be seen again?
I am certainly not a professional economist. Yet my instinct is that this package will help with our overall financial mess IF spent wisely on the investment part. The other two parts are no-brainers to help people have more to spend. But I am in the school that worries that this package is not big enough proportionately to the size of the problem. In this instance, underfunding is a bigger problem than overfunding. If we are over, we can always opt to scale back partway through the effort. But if we are underfunded, people will not see the real jolt needed to stop the downward slide, and consumer confidence in the economy (which is the ultimate key to our solution) will not move up; the stimulus will not have succeeded and it will be hard to get more money to see it through.
I also think that the stimulus will not be enough by itself without: a) a smart mortgage relief plan to stop the original housing slide that precipitated this crisis; b) some banking deadheads lending out the federal money they have already been given and may be given in the future; and c) a long-term budget that begins to get our federal spending back into a normal annual budget planning framework. Specificity about all three of these additional components is supposedly forthcoming over the next few weeks. We will have to wait and see what these will look like.
On the political side, what can we expect for a future decision process from Washington politicians? Certainly there were missteps from all governmental parties. Many White House errors looked like rookie jitters on Opening Day all agog finding themselves in the big stadium – nervousness, inattention to detail, execution plans not fully thought through. Necessary homework was not done and political vetting of what was being inserted into the bill was entrusted to untrustworthy legislators, so the bill’s sponsors were left vulnerably on the defensive arguing over Mickey Mouse stuff. Staffers did not touch enough bases in advance with key players in order to smooth the way. It all smacked of too big a bite too soon on the job before people had a chance to settle into their chairs and figure out how to even use their out-of-date desktop computers; but urgency is calling.
House Democrats got greedy and slipped traditional pet projects into what was a tough-enough fight already, thereby sidetracking people’s energies. Pelosi played hardball with House Republicans sooner than necessary because she knew she ultimately had the votes needed at the end. This allowed the freeze-out to become the temporary headline instead of economic stimulation. Some dissenting votes from House Democrats were actually good to see for overall balance.
The sorry spectacle was with the Senate Republicans. One would prefer not to kick someone when they are already down, but when they beg to be kicked again one feels almost obligated to do so. The hypocritical calls for non-partisanship inclusion while acting completely partisan and stuck in a past history of their own making was shameful. After 12 years of controlling the game and completely freezing out the minority Democrats, winning at all costs with no quarter given, their complaints about “not being included” rang pretty hollow. Especially when efforts were made to include them, particularly from President Obama. But to these Senate Republicans, , non-partisanship apparently means the same old “do it my partisan way or no way at all.” In Congresses of old, it was understood that nonpartisanship meant everyone bending a bit in order to find reasonable compromises where everyone takes away something worthwhile while the country gets forward movement for the overall good. With the thankful exception of Republican Senators Collins, Snow and Specter – who came, negotiated in good faith, found such compromises while others stood around whining at being left out, and thereby became critically included players in shaping the final bill’s outcome – it seems to have been a lesson lost on this Congress. Inclusion requires getting constructively involved.
The truth is that roughly 35% of this stimulus bill is in tax cuts, seemingly the Republicans’ only answer to any problem that comes along. That is a pretty good percentage of worthwhile compromise. Conversely, grand arguments about mortgaging our grandchildren’s future did not seem to be important for 8 years when we turned budget surpluses into 1 trillion dollars of annual debt. Hollering about deficit spending didn’t seem to stop these same Republicans from spending $600B for an unfunded war in Iraq, financially irresponsible regardless of whether the war itself was a right or wrong thing to do. Protesting against spending as a tool to financial downturns denies economic history. The reality is that no economic downturn, including the 1930s depression or the major 1980s recession, was ever solved by cutting spending or making tax cuts. They all required deficit spending to bring us out. Including by the Republican’s patron saint Ronald Reagan, who grew the budget deficit each year in office through deficit spending as well as in actuality growing the size of government! So much for tax cuts and smaller government. Despite his wonderful rhetoric, even he could not prove the smaller government theory, and “trickle down economics” was just the “voodoo economics” George H.W. Bush accurately predicted in 1980 that it would be.
We have a lot of hard legislative and personal work still in front of all of us. Hopefully lessons will be learned by all. But this kind of rhetorical grandstanding and negativism that we saw will not be helpful to these efforts. By the polls, the Republican nay-saying is only registering positive with the less-than-25% of the population that are already committed Republicans; the only folks they are winning are the same folks they have already won, which November 2008 demonstrated is not enough to win elections. So is this the face and the soul of the to-be-reinvented new Republican Party that we can expect to see? One that looks remarkably like the same old one that spent us into oblivion and threw out all Congressional oversight of the Executive Branch and Wall Street? If so, it is a embarrassing face with a voice that few care to hear anymore.
I do not know if the stimulus will accomplish its goals or not. Most state and local governments are behind it for their constituencies, minus 3 Republican governors thus far who are refusing funds because they think strings will be attached to the dollars. Well, damn right there had better be! Isn’t that our complaint now – that $350B was given to banks by George W. Bush with no strings or accountability attached, never to be seen again?
I am certainly not a professional economist. Yet my instinct is that this package will help with our overall financial mess IF spent wisely on the investment part. The other two parts are no-brainers to help people have more to spend. But I am in the school that worries that this package is not big enough proportionately to the size of the problem. In this instance, underfunding is a bigger problem than overfunding. If we are over, we can always opt to scale back partway through the effort. But if we are underfunded, people will not see the real jolt needed to stop the downward slide, and consumer confidence in the economy (which is the ultimate key to our solution) will not move up; the stimulus will not have succeeded and it will be hard to get more money to see it through.
I also think that the stimulus will not be enough by itself without: a) a smart mortgage relief plan to stop the original housing slide that precipitated this crisis; b) some banking deadheads lending out the federal money they have already been given and may be given in the future; and c) a long-term budget that begins to get our federal spending back into a normal annual budget planning framework. Specificity about all three of these additional components is supposedly forthcoming over the next few weeks. We will have to wait and see what these will look like.
On the political side, what can we expect for a future decision process from Washington politicians? Certainly there were missteps from all governmental parties. Many White House errors looked like rookie jitters on Opening Day all agog finding themselves in the big stadium – nervousness, inattention to detail, execution plans not fully thought through. Necessary homework was not done and political vetting of what was being inserted into the bill was entrusted to untrustworthy legislators, so the bill’s sponsors were left vulnerably on the defensive arguing over Mickey Mouse stuff. Staffers did not touch enough bases in advance with key players in order to smooth the way. It all smacked of too big a bite too soon on the job before people had a chance to settle into their chairs and figure out how to even use their out-of-date desktop computers; but urgency is calling.
House Democrats got greedy and slipped traditional pet projects into what was a tough-enough fight already, thereby sidetracking people’s energies. Pelosi played hardball with House Republicans sooner than necessary because she knew she ultimately had the votes needed at the end. This allowed the freeze-out to become the temporary headline instead of economic stimulation. Some dissenting votes from House Democrats were actually good to see for overall balance.
The sorry spectacle was with the Senate Republicans. One would prefer not to kick someone when they are already down, but when they beg to be kicked again one feels almost obligated to do so. The hypocritical calls for non-partisanship inclusion while acting completely partisan and stuck in a past history of their own making was shameful. After 12 years of controlling the game and completely freezing out the minority Democrats, winning at all costs with no quarter given, their complaints about “not being included” rang pretty hollow. Especially when efforts were made to include them, particularly from President Obama. But to these Senate Republicans, , non-partisanship apparently means the same old “do it my partisan way or no way at all.” In Congresses of old, it was understood that nonpartisanship meant everyone bending a bit in order to find reasonable compromises where everyone takes away something worthwhile while the country gets forward movement for the overall good. With the thankful exception of Republican Senators Collins, Snow and Specter – who came, negotiated in good faith, found such compromises while others stood around whining at being left out, and thereby became critically included players in shaping the final bill’s outcome – it seems to have been a lesson lost on this Congress. Inclusion requires getting constructively involved.
The truth is that roughly 35% of this stimulus bill is in tax cuts, seemingly the Republicans’ only answer to any problem that comes along. That is a pretty good percentage of worthwhile compromise. Conversely, grand arguments about mortgaging our grandchildren’s future did not seem to be important for 8 years when we turned budget surpluses into 1 trillion dollars of annual debt. Hollering about deficit spending didn’t seem to stop these same Republicans from spending $600B for an unfunded war in Iraq, financially irresponsible regardless of whether the war itself was a right or wrong thing to do. Protesting against spending as a tool to financial downturns denies economic history. The reality is that no economic downturn, including the 1930s depression or the major 1980s recession, was ever solved by cutting spending or making tax cuts. They all required deficit spending to bring us out. Including by the Republican’s patron saint Ronald Reagan, who grew the budget deficit each year in office through deficit spending as well as in actuality growing the size of government! So much for tax cuts and smaller government. Despite his wonderful rhetoric, even he could not prove the smaller government theory, and “trickle down economics” was just the “voodoo economics” George H.W. Bush accurately predicted in 1980 that it would be.
We have a lot of hard legislative and personal work still in front of all of us. Hopefully lessons will be learned by all. But this kind of rhetorical grandstanding and negativism that we saw will not be helpful to these efforts. By the polls, the Republican nay-saying is only registering positive with the less-than-25% of the population that are already committed Republicans; the only folks they are winning are the same folks they have already won, which November 2008 demonstrated is not enough to win elections. So is this the face and the soul of the to-be-reinvented new Republican Party that we can expect to see? One that looks remarkably like the same old one that spent us into oblivion and threw out all Congressional oversight of the Executive Branch and Wall Street? If so, it is a embarrassing face with a voice that few care to hear anymore.
Tuesday, February 10, 2009
Limiting Executive Pay
President Obama recently announced the imposition of a $500K cap on the base pay for executives at financial institutions receiving substantial US taxpayer funds. Additional compensation in the form of stock options continues to be allowed, but with longer time restrictions before such stock can be cashed in. Regulations regarding large bonus payments in companies with a net operating loss are probably also forthcoming.
As expected, a cry of protest went up from different quarters about the unfairness or supposed ineffectiveness of the new regulation, though perhaps more muted than I might have expected. Conversely, the decision was greeted enthusiastically by the general public, still reeling from a strong belief that they are underwriting the business failures of rich CEOs. My guess is that not too many CEOs have wanted to appear in public to argue for their current compensation levels, opting instead for backdoor grousing.
Most of the stated objections centered around:
- the federal government should not be micromanaging businesses;
- these failed companies and CEOs are simply victims of the overall meltdown of the economy, and should be given an opportunity to bring their companies around;
- this announcement was just a public relations bone tossed to the public by the President, without substantive impact;
- $500K is not competitive pay, and will not keep or attract the quality of executives needed by these companies.
Each of these arguments is pretty easily refuted, though they miss the larger point we should be focusing on.
Yes, the federal government should normally not be dictating executive compensation pay scales. At least for successful businesses. But these are not successful businesses. These are companies that would be bankrupt today if not for the infusion of US tax dollars to prop them up. And when you are bankrupt, one of the many things you give up is the ability to control your own destiny; your creditors are now in the driver’s seat. The rule is, if you want to operate on your own, earn a profit. If you want a bailout, the bailers are understandably going to dictate the terms. And for better or worse, the federal government is now the bailer.
Victims? No. Banks and financial institutions got into their mess (and now our mess) by not minding the store. They chose to ignore long-standing rules of risk management, quality credit expectations in loan-making, and oversight of the financial products being created and the line people making these products. All using other people’s money. Their attention was on the quantity of sale numbers, not the quality of those numbers. The result is no different than irresponsible Chinese milk product manufacturers or peanut producers in Georgia. No pleas of victimhood allowed. (Note: they executed the milk producers in China.)
A good public relations move by the President? Absolutely. It was easy to do because it was right to do. And the American people know it is right. Given that virtually NO CEO has stepped forward and acknowledged, “I blew it” and taken responsibility for his/her mismanagement, then someone has to try to force that acknowledgement onto the desks of executives. That there is responsibility to be taken for your actions, and consequences for the failure of that responsibility. It is a message seemingly lost on a significant number of executives and Boards of major corporations. American common sense knows better.
Is $500K an appropriate salary for an executive of a $50B+ corporation? No, assuming that company is making a profit from that $50B! But there are two larger issues that this limitation really brings forth:
1) Executive pay has been and should be the province of the company’s Board of directors. But this principle has been effectively undermined because Boards’ pay decisions and their ultimate financial impact are typically hidden from the public and the stockholders. And many Board members all come from the same pool, members of the same big club who all think the same and look out for each other. I support you here if you support me there. Where are all the stockholders in all this voting who might rightly say that $5-10 million is a pretty adequate style of living; salary above that is eating into my stock dividend, thank you. Any greater compensation should be based on long-term company success, not short-term accounting games played while the CEO is in charge.
2) That $500K hopefully will in fact drive out a bunch of people who did not do their jobs, who did not perform to expectations. Apparently too many Boards do not seem capable of exercising this most basic responsibility: holding leaders accountable for performance.
Not all CEOs are created equal. There are different CEO skills needed for different companies at different points in a company’s existence. The startup CEO is a very different animal and skill set from the “steady state” CEO from the visionary “next plateau” CEO. What is needed now in these companies is a turnaround CEO. One who knows how to take a company that is on a downward spiral and reverse and reprioritize itself strategically, focus its efforts on prime activities, and shift its connections to a new sustaining market. This is a specialized skill. $500K and a significant bonus for success will fine with this brand of CEO because it will be the challenge that will be the prime appeal, not the dollars. These people are around. But these are clearly not the people currently running the automobile and financial companies. We need to get this old guard out, those whose time has come and gone, and get the right people in the right job at the right moment.
If a $500K salary cap helps to make that happen, then I am all for it. These are the new guys who will truly deserve the big bucks if they are successful.
As expected, a cry of protest went up from different quarters about the unfairness or supposed ineffectiveness of the new regulation, though perhaps more muted than I might have expected. Conversely, the decision was greeted enthusiastically by the general public, still reeling from a strong belief that they are underwriting the business failures of rich CEOs. My guess is that not too many CEOs have wanted to appear in public to argue for their current compensation levels, opting instead for backdoor grousing.
Most of the stated objections centered around:
- the federal government should not be micromanaging businesses;
- these failed companies and CEOs are simply victims of the overall meltdown of the economy, and should be given an opportunity to bring their companies around;
- this announcement was just a public relations bone tossed to the public by the President, without substantive impact;
- $500K is not competitive pay, and will not keep or attract the quality of executives needed by these companies.
Each of these arguments is pretty easily refuted, though they miss the larger point we should be focusing on.
Yes, the federal government should normally not be dictating executive compensation pay scales. At least for successful businesses. But these are not successful businesses. These are companies that would be bankrupt today if not for the infusion of US tax dollars to prop them up. And when you are bankrupt, one of the many things you give up is the ability to control your own destiny; your creditors are now in the driver’s seat. The rule is, if you want to operate on your own, earn a profit. If you want a bailout, the bailers are understandably going to dictate the terms. And for better or worse, the federal government is now the bailer.
Victims? No. Banks and financial institutions got into their mess (and now our mess) by not minding the store. They chose to ignore long-standing rules of risk management, quality credit expectations in loan-making, and oversight of the financial products being created and the line people making these products. All using other people’s money. Their attention was on the quantity of sale numbers, not the quality of those numbers. The result is no different than irresponsible Chinese milk product manufacturers or peanut producers in Georgia. No pleas of victimhood allowed. (Note: they executed the milk producers in China.)
A good public relations move by the President? Absolutely. It was easy to do because it was right to do. And the American people know it is right. Given that virtually NO CEO has stepped forward and acknowledged, “I blew it” and taken responsibility for his/her mismanagement, then someone has to try to force that acknowledgement onto the desks of executives. That there is responsibility to be taken for your actions, and consequences for the failure of that responsibility. It is a message seemingly lost on a significant number of executives and Boards of major corporations. American common sense knows better.
Is $500K an appropriate salary for an executive of a $50B+ corporation? No, assuming that company is making a profit from that $50B! But there are two larger issues that this limitation really brings forth:
1) Executive pay has been and should be the province of the company’s Board of directors. But this principle has been effectively undermined because Boards’ pay decisions and their ultimate financial impact are typically hidden from the public and the stockholders. And many Board members all come from the same pool, members of the same big club who all think the same and look out for each other. I support you here if you support me there. Where are all the stockholders in all this voting who might rightly say that $5-10 million is a pretty adequate style of living; salary above that is eating into my stock dividend, thank you. Any greater compensation should be based on long-term company success, not short-term accounting games played while the CEO is in charge.
2) That $500K hopefully will in fact drive out a bunch of people who did not do their jobs, who did not perform to expectations. Apparently too many Boards do not seem capable of exercising this most basic responsibility: holding leaders accountable for performance.
Not all CEOs are created equal. There are different CEO skills needed for different companies at different points in a company’s existence. The startup CEO is a very different animal and skill set from the “steady state” CEO from the visionary “next plateau” CEO. What is needed now in these companies is a turnaround CEO. One who knows how to take a company that is on a downward spiral and reverse and reprioritize itself strategically, focus its efforts on prime activities, and shift its connections to a new sustaining market. This is a specialized skill. $500K and a significant bonus for success will fine with this brand of CEO because it will be the challenge that will be the prime appeal, not the dollars. These people are around. But these are clearly not the people currently running the automobile and financial companies. We need to get this old guard out, those whose time has come and gone, and get the right people in the right job at the right moment.
If a $500K salary cap helps to make that happen, then I am all for it. These are the new guys who will truly deserve the big bucks if they are successful.
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