Barack Obama’s Odd Easter Service.....

The First family attended Easter Services at the Shiloh Baptist Church (pictured above) in D.C. on Easter Sunday, but the Reverend Dr. Wallace Smith came off sounding strangely reminiscent of Reverend Jeremiah Wright.

“[Pastor Smith] talked about how his baby grandson’s gurgling is actually “talking” because he is saying ‘I am here...they tried to write me off as 3/5 a person in the Constitution, but I am here right now...”

Oh boy!

Where to begin?

Is it really possible that there are people so STUPID (and stupidity - the inability to comprehend properly - differs greatly from ignorance - the lack of information) that they don’t know that the “3/5^th’s compromise” was an ANTI-SLAVERY resolution?!

Apparently so.

First, a little history about the “3/5^th’s compromise” – It was proposed by two northern delegates James Wilson (PA) and Roger Sherman (CT) so that Southerners couldn’t use slaves to increase their representation in Congress.

As you might expect, the delegates opposed to slavery generally wished to count only the free inhabitants of each state, while the delegates supportive of slavery, on the other hand, generally wanted to count slaves in their actual numbers, since those increased numbers (of non-voting slaves) would deliver the benefit of increased representation in the House and the Electoral College.

The final compromise of counting "all other persons" as only three-fifths of their actual numbers reduced the power of the slave states relative to the original southern proposals.

So NO, “they didn’t try to write off Reverend Wallace or any free blacks (ironically enough there were many freed blacks who WERE counted as whole citizens even back then) as 3/5^ths of a person.” Abolitionists from the north forced a compromise on the south that decreased southern representation, WITHOUT WHICH, the slavery debate would’ve been greatly delayed in America and given that chattel slavery STILL exists in much of the world even today (in the Arab Mid-East, in large tracts of Asia and ironically enough, in sub-Saharan Africa), that delay could’ve been a long one indeed!

Apparently a lot of people who SHOULD “know better,” simply DON’T.

And that’s called STUPIDITY.

Since it can’t possibly be argued that people like Reverend Wallace Smith “don’t have access to that information” (which would be mere IGNORANCE), the only possible conclusion one can reach is that such people are “too stupid to actually understand the facts and use them correctly.”

More troubling still is Barack Obama’s penchant for seeking out these kinds of radical and rabidly anti-American “Reverends.”

That doesn't seem to be a very promising way to kick off the 2012 re-election campaign.

Does The New Government Mortgage Fix (QRM) Undermine Disparate Impact?

The recent “Mortgage Meltdown” was rooted in decades of “Fair Lending” lawsuits that forced banks via both litigation and legislation to make more loans available to “low-income Americans,” often referred to as “subprime borrowers.” Virtually ALL of those lawsuits were predicated upon the legal concept of “disparate impact,” given that traditional lending criteria (requiring expensive PMI or private mortgage insurance on purchases with less than 20% down, higher credit scores to procure the lowest interest rates, three years of tax returns, a lending cap of no more than 2½X your annual income, etc.) had and HAVE a “negative and disparate impact” on low-income Americans/subprime borrowers.

But NOW, all that has changed! Those old lending criteria, along with their “negative and disparate impacts” on low income Americans” appear to be back...and back with a vengeance!

Beyond the 20% down-payment requirement there are additional parameters in what’s being called the QRM or the “Qualified Residential Mortgage.” These include;

• Strict mandatory debt-to-income limits. Under the proposal, to get the best mortgage rates, you’d need to spend no more than 28 percent of your gross monthly income on housing-related expenses, and you couldn’t have total monthly household debt that exceeds 36 percent of your income.

• To refinance your existing mortgage and replace it with one carrying the best available interest rate, you’d need no less than a 25 percent equity stake in your house to qualify. If you sought to take any additional cash out through a refi, you’d need 30 percent equity. Today’s typical requirements for a conventional refi are nowhere near as strict.

• Pristine credit standards. For example, if you were 60 days late on any credit account during the previous 24 months, you’d be ineligible for a mortgage at the best available terms.

According to Kenneth Harney, the executive director of the National Real Estate Development Center, These are all core features of what may be the most sweeping and controversial set of changes in decades for the housing and mortgage markets. The so-called “qualified residential mortgage” (QRM) proposals were released at the end of March by banking, securities and housing regulators, along with the Department of Housing and Urban Development.”

If banks were to blame and government’s intervention in the mortgage market via “fair-lending” lawsuits was positive, wouldn’t the proper solution be even MORE government involvement, even further micromanaging of the mortgage market?

You’d certainly think that it would be.

BUT, as one Treasury Department spokesman said on Friday, the U.S. government has had “too big a footprint” in the mortgage market and the Obama administration intends to make it smaller.

That puts the Obama administration right in line with the likes of Rep. Scott Garrett (R-N.J.), who recently took over a House committee overseeing housing finance, who recently endorsed the idea of lowering loan limits in a keynote address to the conference back in February (2011). It would seem that politics certainly DOES make for some strange bedfellows.

Garrett said he wants the government to exit the mortgage market entirely, though he acknowledged it was a long-term proposition. “I realize that this will not be an easy or immediate goal, but it is one I feel strongly about,” he said.

Even Federal Deposit Insurance Corp Chairman Sheila Bair wants to require 20 percent down payments to thwart the excesses that fueled the financial crisis. If the banks had supported “loose money” or “more loans to more low-income Americans,” you’d expect them to oppose such a stance, but industry heavyweight, Wells Fargo, has proposed an even tougher standard – a 30 percent down-payment requirement.

Moreover, none of this looks like a temporary stop-gap measure, with an eye toward eventually loosening such criteria to allow more low-income Americans back into the mortgage market.

As Reuters recently reported, “We may be entering a permanent age of 20 percent down payments. High down payments may not just be a temporary post-crisis response limited to the high-end of the market. One of the long-term reform proposals being bandied about Washington would require that any loan a lender wants to sell outright into the secondary market be secured by at least a 20 percent down payment. Anything below that amount and the lender would be required to hold onto at least 5 percent of the loan value in its own investment portfolio. That’s how you keep lenders from doling out high-risk loans. A good move for the financial system, to be sure. But one that could ultimately make home buying a more expensive proposition in the future, raising the allure of renting rather than buying for many, no doubt.”

SEE: http://www.reuters.com/article/2011/02/04/us-usa-housing-mortgages-idUSTRE7136K120110204

All of this begs the questions; IF “disparate impact” has been abandoned in one area where it’s been proven a disaster (home mortgage lending), than how can its use be justified in any other context?

There’s no doubt that the deeply flawed legal concept of “disparate impact” created the “subprime mortgage crisis,” where subprime borrowers received what then HUD Secretary Andrew Cuomo called “Affirmative Action in lending.” (SEE Andrew Cuomo's April, 1996 Pres Conference lauding "affirmative action in lending"; http://www.youtube.com/watch?v=Lr1M1T2Y314&feature=PlayList&p=529CA6593D352484&playnext=1&playnext_from=PL&index=97)

Can anyone actually conceive that its use would be any less disastrous in any other venue, and if so, WHY...and HOW?!

But it’s not like “disparate impact” and loose lending parameters/lowered standards don’t have their supporters. Recently, Michael Calhoun, president of the Center for Responsible Lending, argues that if adopted in its current form, these QRM proposals will make it much tougher for lower-income consumers to afford a first home, while Jerry Howard, CEO of the National Association of Home Builders, claims that government agencies and the administration have strayed far beyond Congress’ intent, and their proposals threaten to undermine any recovery in housing and force millions of Americans to rent rather than to own.

Still, facts are stubborn things. It was government’s meddling in the mortgage market to undermine those traditional lending criteria, in the name of resolving that “disparate impact” on lower-income Americans that caused the mortgage meltdown of 2008 and the subsequent and ongoing housing collapse.

Those standards obviously served a very useful purpose and undermining them had catastrophic results!

There’s little question that the lowering of ANY standards has the potential to be equally disastrous, if not worse.

Standards are more than mere barriers to those who can’t meet them. They are, all too often, the minimum criteria needed to be able to bear the burdens they’re used to measure.

Disparate impact may have been well-intentioned, but as they say, “The road to hell is paved with such good intentions.”

In a Government-Regulated, Government-Assisted (Corporatist) Economy, Why SHOULDN’T Government Set Profit/Compensation Rates?....

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We need to accept reality – we don’t have a free market economy in America. We haven’t had one since 1912, when J. P. Morgan and Bernard Baruch helped usher in the modern Corporatist economy to America.

The reason it’s so important that we accept this is because too many people erroneously believe that the economic ills that have impacted the USA since 1912, from The Great Depression to the current and ongoing global credit crisis are failures of America’s NON-EXISTENT Capitalism.

Today, America, like Western Europe and Japan has a modern Corporatist economy - a partnership between business and government.

Yes, ALL of America’s incredible rise to economic world power to its pre-1912 free market-driven explosion in economic power can be attributed to free-market Capitalism, just as you can attribute all the failings since 1912, from The Great Depression to the inflation-driven “economic malaise” of the 1970s to the current and ongoing global credit crisis squarely on America’s Corporatist economy.

Still, the fact is, we HAVE a Corporatist economy NOW!

The only question is, since government sets and controls the compensation of those who directly work for it (ie. teachers, firefighters, police officers, etc.) then why shouldn’t it also set the compensation of those it assists, bails out and otherwise regulates. These would include virtually all banks and brokerages, most auto-makers, physicians and other health care professionals and every other business that has been bailed out, financially assisted (even with tax breaks) and regulated...as all such entities are in some way dependent upon government protection.

In one regard, it would be a good thing to “dispense with the pretense” of our non-existent “Capitalist economy.”

For another, it would also move us to a more equitable wage scale backed by the power of government...and MAYBE, in the process, outrage enough Americans to galvanize enough of them in opposition to this very flawed system.

After all, why SHOULDN’T businesses that are regulated and often fiscally dependent upon government, also have their compensation levels set by the state?

Today, more than 60% of our medical dollars come from Medicare and Medicaid – our two existing “public options.” One sure way to reduce the escalating costs of health care is to have government cap and set the compensation of physicians and all other health care workers, and given how highly regulated the health care industry is, there’s no reason government shouldn’t set compensation levels for all health care workers.

Currently, social welfare benefits make up 35 percent of wages and salaries in 2010 America. That’s up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data. By way of comparison, the U.K., another modern Corporatist state has social welfare benefits making up 44 percent of wages and salaries, according to TrimTabs’ economist Madeline Schnapp.

SEE: http://www.cnbc.com/id/41969508

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis.

With our highly regulated and government controlled economy and with more and more Americans depending on the government for their incomes/compensation, why shouldn’t the government cap the compensations of ALL those working on government-regulated/partnered industries?

Indeed, ONLY within the confines of a free market economy do bankers, physicians, attorneys etc. have a right to earn “whatever compensation the market will bear for their skills.”

With so many Americans already having their compensation rates set by government, it’s certainly worth considering expanding government’s control over compensation to all those who work in all the other government-regulated industries.

For one, it would certainly more honestly represent our real existing (Corporatist) economic system and for another it might engage more of those previously unaffected by direct government control, once their own compensation is capped.

Corporatism Done Wrong

Corporatism unlike socialism, CAN work, but it must be reined in and since it relies on the advantaged (those in government and partnered businesses and industries), to in effect rein themselves in, that generally doesn’t happen.

In the U.S. the current NFL negotiations demonstrate this. Despite the hard economic times, NFL revenues are rising and rising fast. Despite that the owners, with sweetheart tax deals a Congressional anti-Trust exemption and stadiums often paid for with taxpayer funds, want to keep more of the revenues for themselves. They’ve demanded the players take an 18% cut in compensation that would go to the owners.

In a free market, in which the owners paid the going tax rate, paid for their own stadiums and foregone that anti-Trust exemption, they’d be free to rake in as huge a portion of hat pie as they wished...but once they’ve taken the money and protection of the government (and the people), they must operate under whatever rules are set for them.

Similar scenarios are going on throughout both the private and public sector.

In a Corporatist economy (like OURS), business “owners,” who’ve been given access to public lands, sweetheart tax deals, often even taxpayer funded bailouts and most of all protection from the hordes of leaner, hungrier, more avaricious entrepreneurs barred from the market via government regulation, the PRICE of those protections is a limited/capped personal share of “the winnings.”

Perhaps the NFL owners AND the owners of all American businesses and industries should be allowed a 25% to 30% margin of the profits, including their operating expenses! In some extreme growth-scenario cases, another 20% to 25% could go toward expansion, but the other 50% would go to the workers and retirees.

Perhaps THAT is the proper COST of the government-protections under Corporatism.

Did Class Envy Bring Down the American Public Sector?.....

For eons we’ve heard the cries from liberals that “Wall Street greed caused Main Street need.”

The Left, led by its AFL/CIO, SEIU, along with its other Public Sector Union allies assailed Wall Street’s “Money Machine” at every opportunity and many honest, hard-working employees went along with it, as the “fixed economic pie” (“there’s only so much money to go around”) argument resonated with many of them.

Wittingly or, more likely not, those folks were pressing for the eradication of the same “Money machine” that supplied the revenues that funded a very bloated public sector and the very generous entitlements (defined benefits pensions, paid health-care, etc.) that often came with those jobs.

For years automation on Wall Street (online trading replaced thousands of big-buck stock trading jobs) was slowly, but steadily eroding many once high-paying, highly-taxed Wall Street jobs.

When the mortgage meltdown and the subsequent global credit crisis it spurred , caused by government’s micro-managing the banking industry (legislating and litigating what Andy Cuomo, then head of HUD, called “affirmative action in lending” in the form of subprime lending), occurred in 2008, it triggered “the end of Wall Street as we knew it.”

That’s a done deal.

Today, Wall Street is forever changed.

The stock market will go on. Sound investors will still reap huge profits (and rightly so) and new companies will continue to emerge and grow or fail as they will, but Wall Street’s high-income generating “Money machine,” which was responsible for so much of the revenues that we all depended upon (New York sent far more TO Washington than it ever got back thanks to that “Wall Street Money machine”) is gone for good.

It isn’t coming back...and neither are all those revenues that once supported all those public sector jobs.

Wall Street, GM, Ford and most of America’s private sector has already contracted greatly. It’s bloodletting and job-shedding is mostly done, but the public sector’s is only just beginning!

For better or worse, and for many people it’s going to get much, MUCH worse. Our public sectors (federal, state and local) are going to contract. Pension and other benefits like pensionable overtime, retirement after 20 years are going to be eradicated.

These benefits packages DID attract many higher skilled, more motivated people into the public sector, but with sharply reduced revenues they can no longer be afforded.

The irony is that after years of bashing “fat cats” and Wall Street’s “Money machine,” the Left has finally gotten what it’s wanted, but it’s come with some very serious “unintended consequences” – one being the ongoing decimation of America’s once bloated public sector.

Just as we witnessed "the end of Wall Street as we knew it," we will almost certainly also witness "the end of America's vaunted public service sector, as we knew it."


Cynical Politics

The Left is banking on this Public Sector bloodletting fracturing the Tea party and (hopefully, from their vantage) bringing many Independents back to their side in time for 2012.


Unfortunately, neither the facts, nor the logistics on this issue are in their favor. Numerous Democratic Governors (from Cuomo to Brown) are looking to pare down their own public sectors and a recent Rsmussen Poll shows that over 60% of Americans believe that public sector employees should pay as much of a portion of their pension and health-care benefits as private sector employees do. 

Moreover a full fifty percent (50%) of voters favor reducing their home state’s government payroll by one percent a year for 10 years either by reducing the number of state employees or by cutting the pay of state workers, while only twenty-eight percent (28%) oppose a cut of this nature. Another 23% aren’t sure about it.

The "end of Wall Street as we knew it" has made the "end of America's vaunted (and often bloated) public sector as we knew it," all but inevitable. BOTH Democratic and Republican Governors are slashing state payrolls, AND the public seems very much in support of that.

Apparently Even Unions DON'T "Buy Union" - Michigan Carpenters Union Outsources Protesters

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In one of those "sweet ironies" of life, a Michigan Carpenter's Union has hired NON-UNION protesters to walk their picket line! I guess the Union members were just too expensive.....

Defending Andy Kessler

Andy Kessler, a former Hedge Fund manager with a new book called "Eat People And Other Unapologetic Rules for Game-Changing Entrepreneurs," has a piece in today’s (Thursday, February 17^th, 2011) Wall Street Journal that does an excellent job of assessing today’s changing job market.

He begins by noting that we are in the midst of yet another “jobless recovery,” the 2^nd within this past decade. He opens by opining, “So where the heck are all the jobs? Eight-hundred billion in stimulus and $2 trillion in dollar-printing and all we got were a lousy 36,000 jobs last month.”

As he states that number isn’t enough to keep up with population growth.

While there are a number of factors (Sarbannes-Oxley crafted by the Bush administration after bringing so many Corporate crooks to justice back in the summer of 2001 has been an albatross around business’s neck – killing jobs in the process), Kessler focuses on what he sees as the primary cause – technology killing off more and more service jobs.

Opponents argue that, “As a hedge Fund manager, Kessler doesn’t understand the value of those service jobs and the cost of job loss to people.”

That’s utter nonsense; (1) neither business nor government exists to create jobs for people and (2) service jobs are always going to vulnerable, whether it’s the guy shuffling product from one side of a store to another or the Radiologist charging high fees for reading scans that computers can break down in seconds.

In Andrew Kessler’s view the economy is broken down this way: “There are two types of workers in our economy: creators and servers. Creators are the ones driving productivity—writing code, designing chips, creating drugs, running search engines. Servers, on the other hand, service these creators (and other servers) by building homes, providing food, offering legal advice, and working at the Department of Motor Vehicles. Many servers will be replaced by machines, by computers and by changes in how business operates.”

In the “war over globalization” we’ve seen the initial backlash against the erosion of the service sector, but the charge that “globalization and technology are ‘stealing jobs’ and destroying our economy is a false one.”

With the global economy now permanently ensconced, once it is no longer practical to produce a specific product in one place (ie. the industrialized West) it will no longer be produced there, and will be produced in cheaper locales.

Same with technology - innovators aren’t looking to “kill off jobs,” they’re looking to provide their consumers (business and government) with more efficient (less worker-driven) means of conducting their business.

Ultimately the world needs and will reward more innovators and will life will be tougher and tougher for service-sector workers.

As Kessler concludes, “Like it or not, we are at the beginning of a decades-long trend. Beyond the demise of toll takers and stock traders, watch enrollment dwindle in law schools and medical schools. Watch the divergence in stock performance between companies that actually create and those that are in transition—just look at Apple, Netflix and Google over the last five years as compared to retailers and media.

“But be warned that this economy is incredibly dynamic, and there is no quick fix for job creation when so much technology-driven job destruction is taking place. Fortunately, history shows that labor-saving machines haven't decreased overall employment even when they have made certain jobs obsolete. Ultimately the economic growth created by new jobs always overwhelms the drag from jobs destroyed—if policy makers let it happen.”

Innovation is tied to productivity and productivity is intrinsically tied to economic growth. America’s shifting demographics (more Baby Boomers retiring and the number of women in the workforce leveling off) real GDP growth will be expected to drop from its historic average of 3.3% per year to 2.2%...to prevent that (and to prevent the next generation from seeing slower gains in their standard of living than their parents and grandparents did) productivity must be increased to 2.3% per year, a rate we haven’t achieved since the 1960s!

Yes, a LOT of existing service sector jobs are going to go away in order to create the new jobs of tomorrow. As is always the case, the most dynamic and flexible workers will probably transition the easiest, while the most rigid and intractable will have the hardest time adjusting to the new realities.

SEE Andy Kessler's WSJ article:  
http://online.wsj.com/article/SB10001424052748703439504576116340050218236.html?mod=WSJ_Opinion_LEADTop

NFL Collective Bargaining Agreement is an Omen for the Rest of Economy....

From the outside the NFL’s current CBA negotiations which seem headed toward a lockout on March 4^th, 2011 seems to be an argument between billionaire owners and millionaire players, but it’s far more than that.

These negotiations offer a window into the “new economy,” and the consolidating of power among the haves and downsizing of wages for workers across the board – from the highest to the lowest end of the spectrum.

The owners have decided that despite the fact that the NFL has only seen revenues increase over the “Great Recession,” the owners need a greater piece of the pie, to “keep the players in their place.”

But this is NOT merely about “Union-busting owners versus greedy, over-paid players,” far from it. What it’s about is the consolidation of power by the “owner class,” and the shrinkage of what they almost universally see as “excesses,” that is “excessive compensation,” paid to workers that’s seen as unsustainable going forward.

The primary dispute centers around the amount of money that the owners want to take as “credit” from the revenue pool. In the previous agreement, the owners took $1 billion (“off the top”) from the pool of approximately $9 billion, but now the owners are looking to increase that to $2.4 billion, claiming “the economic realities of the era” require that shift.

This would effectively cut the players' share of the revenue by 18 percent, and that doesn’t sit well with the players.

And even though many players DO understand how the increased funding of the owners might well lead to an increased annual revenue thanks to new and improved stadiums, there are no assurances of that AND the owners have refused to open their books to the players.

Beyond that is concern, on the part of the owners, that some player behavior is and has been counter-productive to growing the sport, already America’s #1 Revenue-producing sport.

The owners argue that today’s players are being paid like they’re CEOs and executives at major corporations. CEOs don’t moonlight as reality TV stars. High-profile executives get canned for sexual harassment and multiple accusations of sexual assault. Good executives work year-round.

As Jason Whitlock of Fox Sports notes, “They don’t want to share half of their revenue with people they don’t believe have the necessary character to collectively act in a way that allows them to economically grow the game at a rapid pace. If the players want half the revenue, the owners want to believe the players have a sincere interest in being equal partners in the growth of the game.”

While the players would want some form of self-policing, the owners see an 8 percent to 10 percent shared-revenue cut for players across the board as better insurance than trying to predict who might be the next Brett Favre, Albert Haynesworth, Ben Roethlisberger or Chad Ochocinco.

In fact, there are only a couple of things both sides can agree on, better benefits for retirees and a rookie pay scale so that proven players can get better salaries in their middling years when they are in their prime and their bodies haven't worn down yet.

Ironically enough, and in the spirit of our all being “our own worst enemies” is that Carolina Panthers Owner, Jerry Richardson (the ONLY former player among the NFL owners) is the biggest hawk among the owners.

Richardson is adamant about the owners taking this opportunity to press the players and take control of their league. And just as the vast majority of fans are on the side of the owners, the voters have rewarded the biggest cutters (Governors like Chris Christie, R-NJ and Andrew Cuomo, D-NY) with huge approval numbers.

Which is why that very same dynamic is now in play in the public sector  - the private sector long ago commenced with its own blood-letting. Today, major cities are laying off teachers, cops, firefighters wholesale and looking to scuttle the defined benefits pensions for future and even existing public employees.

Corporations and Municipalities are divesting themselves of healthcare costs and as much of their “future costs” (worker’s defined benefits pensions) as they can) in order to become more streamlined and competitive in the existing global economy.

As painful as this downsizing is, it’s also inevitable.

Bet on the NFL owners...and the public sector managers.