compatancy???compentancy??? ahhh competancy!!!!

"The swelling tide of toxic home loans is proving to be even more worrisome than initially feared"

It would be nice if some of the people who get paid big dollars because they supposedly have high skills could acknowledge that they messed up. It would also be nice if the national media did not consider it part of their job to cover up for powerful people who messed up on their job.

Yes, that headline is a a direct quote. It also is the sort of statement that has no place in a serious news article. The swelling tide of toxic loans is not proving to be more worrisome than feared. The problem is that the people who were supposed to be regulating the financial system did not know what they were doling.

The people who did understand the economy knew that an unprecedented run-up in house prices, with no remotely plausible explanation based on fundamentals, with no corresponding increase in rents, was a bubble. We also knew that bubbles burst. And, we knew that when bubbles in a highly leveraged asset like housing burst, that lots of debts go bad and that banks then take really big hits.

The NYT should be exposing the incompetence of people who were paid big dollars to know the housing and financial markets (this includes both bankers at place like Citigroup, Merill Lynch, Bear Stearns, Fannie Mae and Freddie Mac, as well as the top regulators) and completely failed in their responsibilities.

It should not try to tell readers that the housing crash was somehow an unforeseeable event that came out of the blue. It was an entirely predictable event and it was only incompetence that prevented these people from seeing it. Unfortunately, unlike dishwashers and custodians, bank executives and regulators are not held accountable for their performance. Instead, the media covers it up for them.

This goes under contending conservatives because they like to say people who earn a lot deserve it for "obvious" reasons... not so much in the real world.

Move away from sound good feel good theoretical world and conservatives have to run for the hills.



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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

getting people truly innvolved in politics and policy...

Citizen Jay comments:

People tend to place greater priority upon entertainment than serious matters. If you wish to bestow a message upon the masses, you must teach in a way in which they will be receptive to your message. People will be not only listen to your message if presented in an accessible manner, they will seek additional information.

Thats very true.

I am not the greatest in making sure I frame things in a way where people will be receptive. I'm not always accessible--I lean on hyperbole and cynicism too much.

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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

McCain...

"John McCain and his wife spend more money--$270,000--on servants in a year than the average American's house is worth. There may be 4,000 households in America today richer than John and Cindy McCain. There may not.

To say "'John McCain' means a lot of different things, but rich isn't one of them" shows an extraordinary degree of ignorance about America, and about John McCain." --Economist Brad Delong *

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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

Neal Boortz...

From his daily email...

The taxpayers of Prior Lake-Savage in Minnesota should be outraged. Their tax dollars funded the construction of a brand new $16.8 million elementary school. The people of the school district were so excited because their schools are "overcrowded." Do you know why they are overcrowded? Bluntly speaking ... too many parents having children that they (a) can't afford to raise; and, (b) won't take responsibility for. But don't get me started on that...

Question... since the Regan revolution of tax cuts... the economy that people once knew and still desire went away. Government after the Regan revolution no longer protected people and no longer empowered the economy to grow and reap rewards at all income levels. It turned our economy into an every man for themselves affair.

Unfortunately for those impacted by the Regan revolution (i.e. most everyone) economists since Adam Smith have been pointing out that an economy is a collective effort. You feel it every day and in many ways you don't even realize.

Why turn to the negative? Imagine if these people assumed the economy of the New Deal era... with all the post war growth and the newly created middle class--which the government program known as the G.I. Bill almost single candidly did... could it be possible that they were expecting the conservative revolution to pay off the way conservatives claim... and so made economic decisions that obviously seem unwise--is that a nicer way of putting it?--to Boortz.

Plus isn't behavioral economics and cognitive science addressing the question of people acting through emotion and biology rather than a reasoned and economically rational way. And if this holds true. Why would Boortz's bash people for doing that which isn't logical but is still natural.

You could simply flip it around and create incentives to do rational, efficient, and economically productive things rather than feel the need to punish and condemn. My job isn't to punish and condemn. My job is to forgive, protect those who are weaker, and empower those who need a hand up.

Boortz always seem to see a hand-out... when quite often it is really a hand-up.

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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

New Housing Market Monitor from CEPR

my highlights in bold...

Housing Starts Continue to Trend Down

August 20, 2008

By Dean Baker

"Extraordinary incompetence by top financial executives played a major role in the bubble."

Housing starts fell 11.0 percent in July, wiping out any hope that the market had begun to turn. The June data, driven by a jump in apartment construction in New York, showed an 8.6 percent increase (revised up to 10.4 percent in the July release), leading some analysts to see signs of a bottom.

Starts in July fell to their lowest level in this cycle, with starts of single-family units continuing their long downward trend. Single-family starts were 39.2 percent below year ago levels and down 62.6 percent from the 2005 average. While the West saw a modest gain in single-family starts in July, the region has been hardest hit in the downturn, with starts of single-family homes down by 67.4 percent from 2005 levels.

It is unlikely that there will be a turnaround in starts before inventories start to fall and prices stabilize. Starts will be a lagging indicator of a turnaround, not a leading indicator.

The mortgage applications index continues to trend downward, suggesting that demand is still weakening. This is likely reflecting both the weakening of the labor market and higher interest rates, in addition to the downward dynamics of the housing market itself.

The Mortgage Bankers Association reported that the average interest rate on 30-year mortgages edged down slightly from 6.57 percent the previous week to 6.47 percent last week. By historic standards, this is a low rate (especially with an inflation rate close to 5.0 percent), but it is an unusually large spread measured against a 3.9 percent 10-year Treasury rate. This reflects the ongoing turmoil in the mortgage market.

New York Times columnist Floyd Norris reported on a remarkable memo in his blog yesterday. The memo was prepared by outside consultants at Wachovia, one of the country’s largest banks, who were trying to determine how the bank managed to plunge to the edge of insolvency.

The memo indicated that the bank’s chief financial officer and chief risk officer did not realize that offering interest option ARM mortgages (you pay want you want each month, but face a higher interest rate), would attract less creditworthy borrowers. They also didn’t realize that allowing homeowners to refinance down to new zero-equity levels made them high default risks.

In the same vein, the Washington Post yesterday discussed the difficulties of Fannie Mae. It reported that it was still buying up subprime mortgage backed securities at the beginning of 2007, after the market had already begun to collapse. The article reported that Fannie had performed stress tests in which they saw no serious problems with these securities even if house prices fell by 5 percent for two consecutive years. Of course, house prices have fallen by close to 20 percent over the last two years and by more than 30 percent in many of the markets with high concentrations of subprime mortgages.

It is incredible that Fannie could invest hundreds of billions of dollars based on such an inadequate assessment of risk. There were economists who had noted the unprecedented 70 percent real increase in house prices over the prior decade. Competent management would at least have considered the possibility that much or all of this run-up would be reversed.

It was only due to extremely bad policy and regulatory decisions at all levels of government, first and foremost at the Fed, that the housing bubble was allowed to grow to the enormous proportions. However, it was the private sector that actually drove the bubble. The top executives in major financial institutions took extraordinary risks. These risks may have increased short-term profit, but they eventually led to enormous losses, which is endangering the survival of many of the country’s largest financial institutions.

These recent accounts about behavior at Wachovia and Fannie Mae suggest that the top executives at these institutions had no idea what they were doing. This is astonishing because these are huge institutions. It would be expected that the top management, who are very highly paid, would have some level of competence in their work.


--------------------------------------------------------------------------------
Dean Baker is Co-Director of the Center for Economic and Policy Research, in Washington, D.C. (www.cepr.net). CEPR's Housing Market Monitor is published weekly and provides an incisive breakdown of the latest indicators and developments in the housing sector.

Just cause you get paid a lot... or have made it to the top... doesn't mean you know whats going on.

It reminds me of a scene in weeds where one of the kids is in a debate at school. He steps up to the podium and the topic is: For/Against using the popular vote to elect the U.S. President. He stands up. Walks to podium and says.."George W. Bush." Without saying a word he walks back to his seat.

Argument for reasons why we are in the economic mess we are in:

Jim walks to the mic:

"Highly paid professionals not knowing how to read and respond to economic data. And the lack of accountability in terms of credibility and legitimacy as a voice of "educated opinion" from the rest of us...."

Jim walks away...

Lesson(and it seems blatantly obvious but amazingly enough is not... )

Requirement for a market economy: knowledge about economics...

Will we learn from the lesson? Not likely...
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Jim Nichols
A Speculative Fiction
www.JimNichols4.com

local politics... please come and and show your support...

Bush Tax cut email floating around...

From Fact-Check.org

Q: Do middle-income persons pay lower federal income taxes under Bush than they did under Bill Clinton?
I received this forwarded email from my sister... She constantly distributes this sort of stuff. I don't want to cause family dissention, however, if I could at least enlighten her, I would feel better. It is my duty to find out if this is true or not first and I thought you would be the best source.

Subject: FWD: Taxes

How about this information? Most voters are completely ignorant of the pertinent facts that should be considered when one enters the voting booth.

After watching a focus group of democrats that watched the democratic
debate the other day in Vegas, I literally wanted to puke. For the most part, all of them bashed Bush over and over again on how he is out for his millionaire friends and the big oil companies and he has totally forgotten or disregarded the little guy. So being an ex-IRS employee, I decided to look back on the tax tables to see if there is any truth to what they said and the media keeps stating as fact, "Bush is only out for the rich in this country.

Based on using the actual tax tables (see link below), here are some examples on what the taxes were/are on various amounts of income for both singles and married couples. so let's see if the Bush tax cuts only helped the rich.

http://www.taxfoundation.org/publications/show/151.html

Taxes under Clinton 1999 Taxes under Bush 2008
Single making 30K - tax $8,400 Single making 30K - tax $4,500
Single making 50K - tax $14,000 Single making 50K - tax $12,500
Single making 75K - tax $23,250 Single making 75K - tax $18,750
Married making 60K - tax $16,800 Married making 60K- tax $9,000
Married making 75K - tax $21,000 Married making 75K - tax $18,750
Married making 125K - tax $38,750 Married making 125K - tax $31,250

If you want to know just how effective the mainstream media is, it is amazing how many people that fall into the categories above think Bush is screwing them and Bill Clinton was the greatest President ever. If any democrat is elected, ALL of them say they will repeal the Bush tax cuts and a good portion of the people that fall into the categories above can't wait for it to happen. This is like the movie the Sting with Paul Newman, you scam somebody out of some money and they don't even know what happened. Now this is effective (maybe not honest) marketing or maybe a better word is brain washing.


A: Yes, middle-income taxpayers pay less, but not nearly as much less as claimed in a widely circulated chain e-mail. Moreover, both Barack Obama and Hillary Clinton propose additional middle-income cuts, contrary to what the message insinuates.
The first thing to note is that every number in that e-mail is wrong. They grossly overstate the Bush tax cuts at all levels.

The Tax Foundation, the very group this spurious e-mail cites, says the message is wrong. The link provided in the e-mail leads to a message saying: "Note: If you clicked on this link in response to an e-mail comparing income taxes under Presidents Clinton and Bush, please see this page." And that link in turn leads to an article by senior economist Gerald Prante and staff writer Alicia Hansen of the Tax Foundation. They call the e-mail "incorrect" and add that it "contains some mathematical errors," which is putting it mildly.

The Tax Foundation is an anti-tax, pro-business group and about the last place we would expect to defend the tax policies of the Clinton administration. Prante and Hansen state, quite correctly, that "federal income taxes have indeed fallen under George Bush for groups at all points on the income spectrum." No tax expert we know of disputes that. Nevertheless, to its credit, the Tax Foundation demolishes this particular comparison.

The "mathematical errors" in the e-mail actually are huge, resulting in very large overstatements of the amounts by which persons in various low- and middle-income categories benefited from the tax cuts. For example, the e-mail claims a tax cut for a single person making $30,000 a year that is nearly 10 times larger than the actual cut as calculated by Tax Foundation experts.

Here's a table we created, comparing the cuts claimed in the e-mail with the cuts calculated by the Tax Foundation.

Cut claimed by e-mail
Actual cut per Tax Foundation
E-mail over-
statement


Single making 30K $3,900.00 $401.25 $3,498.75
Single making 50K $1,500.00 $656.25 $843.75
Single making 75K $4,500.00 $1,406.25 $3,093.75
Married making 60K $7,800.00 $1,072.50 $6,727.50

Married making 75K $2,250.00 $1,664.00 $586.00
Married making 125K $7,500.00 $3,964.00 $3,536.00

Actual results would vary from one individual or couple to another, depending on circumstances. The Tax Foundation's Prante and Hansen say their calculations assume each taxpayer took only the standard deductions and had no children. They also ignored the effects of the Alternative Minimum Tax, which might have further reduced the benefit of the Bush tax cuts for some at the upper end of the scale.

The anonymous author of the e-mail made several fundamental errors, according to the Tax Foundation's experts. One error was to apply the top statutory rates for 1999 and 2008 to ALL income, even though much income would be taxed at lower rates in the lower tax brackets. The author also failed to account for any tax deductions or exemptions. A less obvious mistake was failing to realize that even under the 1999 law, tax brackets would have been adjusted for inflation every year. To get a valid apples-to-apples comparison, the Tax Foundation compared taxes due under the Bush cuts with what would have been owed under the 1999 law with brackets adjusted for inflation as scheduled.


Distorting the Big Picture


Not only does this seemingly authoritative e-mail message get all the details wrong, it also falsifies the bigger picture. It says, "If any democrat is elected, ALL of them say they will repeal the Bush tax cuts." It goes on to say that people in the income categories specified are about to experience a "scam" and suggests they have been subjected to "brain washing."

Actually, neither Barack Obama nor Hillary Clinton has said they favor the repeal of all the Bush tax cuts. They've only proposed repealing them for high-income taxpayers. In fact, both are promising additional tax cuts for most or all of the persons who fall into the groups itemized in the e-mail.

Obama promises a $500 tax cut for the large majority, according to his Web site:

Obama Web site: Obama will restore fairness to the tax code and provide 150 million workers the tax relief they need. Obama will create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family. The "Making Work Pay" tax credit will completely eliminate income taxes for 10 million Americans.
And Clinton says she'll "let the Bush income tax cuts expire for those making more than $250,000," while further lowering taxes for "middle income" families:

Clinton Web site: Hillary will extend middle class tax relief, the child tax credit and marriage penalty relief, and reform the AMT to ensure people don’t face stealth tax increases.

We can't say whether either of the leading Democrats actually would deliver on these promises. We haven't forgotten Bill Clinton's undelivered promise of a "middle-class tax cut" from his first run for the White House. In a 1991 speech at Georgetown University in Washington he said: "I will offer middle-income tax cuts. ... The average working family's tax bill will go down about 10 percent, a savings of about $300 a year." He included the idea in his early advertising, too, but then ditched it after sewing up the Democratic nomination. He eventually pushed through a large tax increase, though it fell almost exclusively on the top 1 percent or 2 percent of incomes.

Nevertheless, whether one believes Obama or Hillary Clinton or not, both are promising just the opposite of what this factually challenged mass e-mail states.

- Brooks Jackson

Sources
Gerald Prante and Alicia Hansen, "Comparing Income Taxes under Bill Clinton and George Bush" Tax Foundation 19 Feb 2008.

"The 1992 Campaign: On the Trail; Clinton Disavows Idea of Middle-Class Tax Cut," New York Times 19 June 1992.

Michael Kelly, "CLINTON'S ECONOMIC PLAN: The Campaign; Gambling That a Tax-Cut Promise Was Not Taken Seriously," New York Times 18 Feb 1993.

Hillary for President. "Shared Prosperity for American Families." 14 Feb. 2008.

Hillary for President. "Hillary Clinton’s Economic Blueprint for the 21st Century: Rebuilding the Road to the Middle Class." 27 Oct. 2007.

Its time to take control from the Republican Economic Policy

Inequality is reaching levels not seen since the 1920's. Not only does it mean that hard work and determination don't pay off for the majority of Americans, but it sends up red flags. Dramatic levels of inequality harm the economies productivity and long-term sustainability.

Its time we say no to people like John McCain who think business as usual is good for our Country.

I'll just hat-tip over to Dana Milbank for more on this issue...

Poor Lurita Doan...

Oversight is a pain to put up with...actually being held accountable, imagine the nerve. But don't feel badly for her she probably won't remember any of this tomorrow! Watch it for a good laugh...

more on the oversight hearing here where you get to watch Rep. Bruce Braley (D-IA) walk Doan through basic interpretation of documents.