Wednesday, August 19, 2009

I hope we learn from a recent huge mistake.

If you have bad credit, is home ownership a right? I think that the subprime mortgage crisis showed everyone that home ownership is not a right. Check out this article from the New York Times published on Sept. 30, 1999.

Fannie Mae Eases Credit To Aid Mortgage Lending

Published: Thursday, September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

A version of this article appeared in print on Thursday, September 30, 1999, on section C page 2 of the New York edition.

Clearly, this program was one of the worst mistakes in the recent history of this country. Home ownership for the credit-unworthy is not a right. Ten years later, some tell us that healthcare is a right. Maybe we can learn from this mistake instead of repeating it. Imagine where our economy and our country would be now if the loosening of standards to extend mortgages had been greeted with as much furor as healthcare reform is being shown now? I bet that Obama would not have been elected President.

Tangent alert: On Charlie Rose tonight, I watched an interview with an author named Jim Collins. His most recent book is called How The Mighty Fall: And Why Some Companies Never Give In. He studied how huge, massive businesses fail. His writing can be expanded to apply to a huge, massively successful country like ours. He lists five steps that a company undergoes on the way from being on top of the world to no longer existing or, even worse, becoming irrelevant. The step that reminds me of the current push for healthcare reform is "Stage 2: Undisciplined Pursuit of More". This step is marked by a poor decision to expand too fast into an area where the consequences of failure are not worth the risks. Expansion by the government into the healthcare industry strikes me as classic over-extending.


Not much original thought from me at the moment (and its a months-long moment, I fear), but I will use this blog to stockpile really great articles from other people. At the very least, I will be able to read them again and reflect.

This article comes from the San Antonio Express-News, a newspaper I only look at to read Brent Zwernerman's Aggie sports blog. I went from reading about Von Miller being compared to Ray Childress to this. I feel like this author captures some of the frustration of the public at this pivotal time without applying a partisan filter to the events of the day. I will be reading his stuff in the future.

Dissent OK, unless it's against Obama's plans

Jonathan Gurwitz

Remember when dissent was considered to be the highest form of patriotism? That would have been during the era that began after George W. Bush's inauguration.

It was the summer of 2002, in fact, when leftist historian Howard Zinn — not Thomas Jefferson, to whom the saying is frequently misattributed — popularized the dissent-equals-patriotism formulation in a magazine interview. That era ended on Jan. 20, 2009, the day of Barack Obama's inauguration.

Today, if you merely disagree — dissent is too strong a word — with the policies being formulated by the Obama White House and the unchecked Democratic majorities in Congress, you could be some sort of mindless Nazi. That's what House Speaker Nancy Pelosi seemed to insinuate when she referred to Obamacare protestors as “AstroTurf” who were “carrying swastikas and symbols like that.”

Well, yes. There have been a few protestors who in very poor taste have utilized Nazi symbols, mostly with the universally recognized, crossed out red line to indicate what they are against — an unprecedented expansion of government power.

If you assume, charitably, that Pelosi was merely expressing disgust at the casual use of symbols of hate to express a political disagreement, ponder this: Where was her sensitivity over the years when explicitly equating Bush with Hitler was considered to be an elegant expression of political thought?

Suggesting that the U.S. government is in any way comparable to the Nazi government and shouting down opponents, as a handful of ignorant Obamacare protestors have done, is offensive and wrong. But it is surely no more offensive or wrong than the suggestion by one of the most powerful political figures in the nation that peaceful citizen protests are an artificial manifestation of stormtrooper mentality.

In case that suggestion was in doubt, Pelosi clarified it in an op-ed she penned last week for USA Today with Majority Leader Steny Hoyer. “Drowning out opposing views,” they wrote, “is simply un-American.”

Drowning out? Un-American? Perhaps they had in mind the Service Employees International Union, whose blog declares the imperative, “We must fight back against lies and fear-mongering to drown out the opposition.”

No, wait. SEIU mans the barricades for Obama and supports one or all five of the unsettled health reform bills in Congress.

Perhaps they were referring to Kenneth Gladney, an African American who was roughed up outside a town hall meeting near St. Louis. Police made two arrests for assault.

No, wait. Gladney was giving out “Don't Tread on Me” flags and the goons who allegedly attacked him were Obamacare advocates and, in video of the incident, appear to be SEIU members.

Perhaps they had in mind the speaker at a recent political rally in Virginia. “I don't want the folks who created the mess to do a lot of talking. I want them to get out of the way.”

No, wait. That was Barack Obama, president of the United States, telling opponents to shut up and move. The same president whose White House has set up an Internet tip line for patriotic citizens to report “fishy” criticism of the yet to be defined health reform plan. This is no way to restore civility and elevate the debate.

The official White House blog instructs informers to rat out suspicious dissent by emailing Get it? Rally around the flag. There's liberal nuance for you.

Remember when a false appeal to patriotism was considered to be the last refuge of a scoundrel? This saying actually did come from Samuel Johnson, an 18th century British conservative. The era for scorning such appeals evidently came to an end in the United States on Jan. 20 as well.

Friday, August 14, 2009

I will now shop at Whole Foods whenever possible

If this guy ever runs for any office I will vote for him. His list of things to do is partly recycled (who isn't in favor of Medicare reform?), but it is complete and the commentary after the list is especially good.

From the Wall Street Journal:

The Whole Foods Alternative to ObamaCare

Eight things we can do to improve health care without adding to the deficit.


"The problem with socialism is that eventually you run out
of other people's money."

—Margaret Thatcher

With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people's money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan's costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor's visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

Many promoters of health-care reform believe that people have an intrinsic ethical right to health care—to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That's because there isn't any. This "right" has never existed in America

Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.

Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor's Business Daily. In England, the waiting list is 1.8 million.

At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly—they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an "intrinsic right to health care"? The answer is clear—no such right truly exists in either Canada or the U.K.—or in any other country.

Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.

Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.

Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.

Mr. Mackey is co-founder and CEO of Whole Foods Market Inc.

Very good stuff. And extra good because he is causing reactions that, at least to me, color his opponents as not too bright. Says one pissed off former Whole Foods customer:

"While Mackey is worried about health care and stimulus spending, he doesn't seem too worried about expensive wars and tax breaks for the wealthy and big businesses such as his own that contribute to the deficit," said Lent.

So diversionary. If a supporter of Obamacare, or even Obama himself, can't come up with a more reasoned response to the points put forward by Mr. Mackey and others, this attempt at reform will cease soon. Earlier today I thought about making a post saying that the Obama administration was already sewing the seeds of blame for the failure of health care reform (insurance companies mobilizing armies of bought and paid for mercernaries to show up to town hall meetings, those vicious viral emails that spread lies unchecked, accusations of astroturfing) with its actions over the past few days. If you look at that first link, you will notice that the first part of the story is confirmation there were not lobbyist funded buses outside the meeting.

Obama's approach to this whole topic was a serious overestimate of the magnitude of his electoral mandate.

Friday, August 7, 2009

Bush/Obama Jokers

Apparently there was one of Bush last year, but it didn't get the attention Obama's is. Bush's published in an actual magazine: Vanity Fair.

Tuesday, August 4, 2009

Grassroots Propaganda

There's an image of Obama circulating on the Internet in which he's made to look like the Joker from the latest Batman movie. Below the image is the word "socialism" in bold black letters. The image has also been posted on telephone polls and walls around Los Angeles. I chose not to post the image here.

I haven't seen the latest Batman movie, which shouldn't be a surprise to anyone. I don't know what the Joker does in that movie, or why someone would make a connection between that character and the current President. Is the author going for a physical resemblance, or is the Joker a socialist in the movie? I don't know. The article intimates that the Joker is more of an anarchist in the movie. It makes sense to me that a period of anarchy, or at least violent revolution, is likely at some time after socialism sets in, especially in a nation accustomed to the greatest freedom in human history.

I've only seen one scene from the new Batman movie, and in it the Joker is robbing a bank, and he or his partner in crime murders the driver of a bus that arrives to be the vehicle to whisk away the money being stolen from the bank. I don't know what happens to the Joker (I honestly don't). I hope good triumphs in the end.

Monday, August 3, 2009

Participatory Democracy

I believe it is too difficult to get involved in politics in this country. Politicians are demonized, and rightly so, because the game is so cutthroat. There are 535 jobs in Congress. There were 219 million people in this country of voting age in 2004. That means there is one person in Congress for every 411,165 people of voting age. That is a large pool to draw from for one job. The competition drives candidates to spend outrageous amounts of money and make outrageous promises to get elected. They then must go to Congress and bring huge amounts of money to their district so they will be re-elected. Sometimes, they are not re-elected, but it turns out that is does not matter. The cast changes, but the script stays the same.

So how can this be changed? Political office is viewed as a publicly ridiculed pursuit that requires nearly life-long dedication because of the competition for jobs. I would like to change this country, but not at such a high personal cost. I have other goals in my life besides becoming a politician. What if there were ten times more seats in Congress? In fact, how many seats were there in Congress 200 something years ago, when the country was founded, and how many citizens were there in the country then? Well some quick research tells me there were 132 electoral votes in 1792, which is equivalent to the number of seats in Congress, and that the total population in the 1790 census was 3,797,231. That averages out to 28,767 citizens per Congressional office. 411,165 divided by 28,767 equals 14.3. How much more participatory would our democracy be if there were 7,646 seats in Congress?

Right now there are a very small number of elite politicians who are paid, legally and illegally, exorbinant amounts of money to direct our country. Expand that group so that it is no longer such an exclusive club, cut their benefits and maybe their (legal) pay, and limit the amount of time one person can serve. Dilute the power one individual can have. Stop politics from being a profession, and return it to being a public service.

I am not posting links to the data I used because I am not confident in its absolute accuracy. I welcome anyone to find reliable data and post it. Even better would be to show the average total population per Congressional seat from 1792 to 2004 (or 2008 if the data is available).