Almanac: At the Capitol

Today's liberals seem to be taking their marching orders from other quarters. Specifically, from the college and university campuses where administrators, armed with speech codes, have for years been disciplining and subjecting to sensitivity training any students who dare to utter thoughts that liberals find offensive. The campuses that used to pride themselves as zones of free expression are now the least free part of our society.

Obama supporters who found the campuses congenial and Obama himself, who has chosen to live all his adult life in university communities, seem to find it entirely natural to suppress speech that they don't like and seem utterly oblivious to claims that this violates the letter and spirit of the First Amendment. In this campaign, we have seen the coming of the Obama thugocracy, suppressing free speech, and we may see its flourishing in the four or eight years ahead.Michael Barone. Here's their cue:Source. More coming in a bit...

We Americans need real bipartisan solutions, not the "I'll reach across the aisle" mantra (never uttered by Democrats) that too many Republicans say but too often is perceived and treated as weakness by Democrats. Senators McCain and Coleman, I believe if you change your verbiage, you can increase your odds.

"I remain willing to work with ANYONE who is willing to solve problems. But, bipartisanship does NOT mean ignoring the Democrats' bad actions and oppositions that are plainly wrong.
- When Democrats block solutions to our energy problems, they are wrong.
- When Democrats block investigation into Fannie Mae and Freddie Mac because their leaders, Democrat Senator Chris Dodd's, Democrat Representative Barney Frank's, and mostly other Democrats who blocked efforts to avoid the housing meltdown, they are wrong.
- When Democrats block supplying our troops with the necessary equipment, they are wrong.
- When Barack Obama used ACORN to push through loans to people who could never afford them, he was wrong.
- When the mainstream media gives Obama passes on his questionable associates and actions over the years, they are wrong.
- When Democrats tell us government has all the answers, they are wrong; the greatest growth in American wealth, across the board, came during periods of very little government interference.
"Americans will make the right decisions if they have the right information. Unfortunately, too many are uninformed because of an admitted biased press and Democrat candidates who work against the freest people in the world. They want control, period.

"Bipartisanship is not just doing what the Democrats' want, ways that too often penalize the very people they claim to help. Bipartisanship is finding ways for all Americans."

"We are Americans; we solve problems; we create; we design; we provide environmentally sound solutions that also promote the good of all. When you Democrats choose to work with us on these issues, we welcome you with open arms."

This afternoon, Republican presidential candidate, John McCain, held a townhall meeting at Lakeville South High School. He was terrific! Among the MN politicians who spoke were: Marty Seifert, Minority Leader for the MN House; Patrick Garofalo, House Representative for Farmington/36B; former senator, Rudy Boschwitz; former US House Representative, Tim Penny; and Minnesota's Second Congressional District Representative, John Kline.

As every speaker said, this election comes down to character, experience, and leadership. Each one said, in their own way, "Hands down, McCain is the guy." He has all three traits. His opponent, Mr. Obama, has questionable character (as evidenced by his neighbors and friends), minimal experience (especially in making decisions - "present" is not a decision, it indicates the inability to make a decision); and leadership - well, when has Obama ever showed leadership? Never.

McCain took a gamut of questions from the floor, addressing such topics as: housing, life, veterans, energy, the economy, going after the culprits who caused the financial mess, China, drilling, etc. One group of junior high students asked about drilling offshore, then went into a short dance line to the tune of "Drill, Baby, Drill" to which McCain responded, "You can come on our tour!"

He was so "at home" in this venue. His answers were sharp, quick, humorous. He comes across as the real deal! Frankly, I was surprised at how human and natural he is. We sat about 25' from the center and it was like he was in your living room. IF he could come across on camera like this, his opponent would not have a prayer.

Of course, no Republican event is complete without ever present protesters. This one was no different - about 10 protesters before the session, maybe 7 afterward. As you can see from this final photo - note the signs on the ground - they had more signs than people so they just couldn't display all their "stuff" - gee, too bad.

Yesterday's edition introduced us to the new board created by someone in the Community Studies department in the back stairwell of Stewart Hall here at SCSU.  I noted while walking around the building yesterday -- I work in a remote corner of the building, so I see lots of hallways and stairwells -- that that department has new bulletin boards up awaiting material.  As the song goes, I can't hardly wait.

The board in question provides responses to a counter-poster who had responded to a set of illustrations for an essay titled "Daily Effects of White Privilege."  It is written as "this is our response"; there are names on some of the responses that are also in the student directory, so I'm going to assume the students are a member of a class (perhaps a club instead, we should admit as a possibility.)  In either case a faculty member is with them as professor (or advisor.)  Let's look at a few more of these responses.

"simle" ... who has time for proofreading?

Here's the point: I put a job description on a website for new PhDs to be new assistant professors on campus. I get a bunch of applications. The first cut of the pool is between those who are qualified for the job and those that are not. I can rank in some way, perhaps, those that are more qualified than others. But at the end of every job application process I have a tradeoff in front of me -- one candidate has a set of skills making her better in one area than the other, the other has a different skill set making him better in the other. How do I weight that? If some non-job characteristic like sex or race is counted as a criterion in the hiring process, then the process of trading off means that characteristic compensates for a lesser skill in something else. You can't say at the same time "we value diversity" and "there are no qualification differences between the diversity-preferred and diversity-unfavored candidates" because the latter means diversity had no value. A line has no width.

Again, the question -- in what way are they less qualified when we "give diversity a chance"?  Are they less qualified because they can't put a 'Y' or a '1' in the diversity box on the application screening form?  And notice the confusion here -- nothing that the counter-poster wrote said anything about quotas.  Is the professor or advisor doing any teaching here?

Now this one is very interesting. It suggests that the firm makes more profits by hiring on the basis of "goal-oriented affirmative action." (That term could mean numerous things, but in Minnesota it has a particular definition under state law.) If it really improves profits, why would a firm ever need a program? But this would allow for customer discrimination: If it improves my profits as a car dealer to have a male sales staff, I will prefer to hire only males. Now it might improve your profits because the State of Minnesota won't do business with a company of more than 40 employees on a contract over $100,000 unless you have one of thse goal-oriented affirmative action plans. But that's not the profit motive -- that's a use of the confiscatory power of the state to take tax dollars and use them to compel private firms to meet public goals.

More on Monday.

Guest Post by John A. Spry, Ph.D. Opus College of Business, University of St. Thomas

One of the major problems during the present financial crisis is the need inject capital into the banks. As Professor Greg Mankiw wrote yesterday,
“There is broad agreement among economists that what the financial system needs right now is not only an injection of liquidity but also a recapitalization. The essence of the current financial crisis is that many firms bet that housing prices would not fall; the prices fell nonetheless; and now these firms have too little capital to perform the crucial function of financial intermediation.How can the government act to get more equity capital into the banking system without the government ownership of at least part of the banks? How can we reduce the debt to equity leverage of banks and thus promote more trust in the banking system? Mankiw proposes that the government match private equity investments into banks with an one hundred percent government match of equity investment in banks that attract new private capital.
The question for the moment is, How can we get capital back into the financial system? Ideally, it would be great if more Warren Buffetts would step up to the plate and recapitalize financial firms with private money. Unfortunately, that might not happen fast enough to prevent a major economic downturn.

Some economists have proposed forcing these firms to go raise more capital from private sources. But how exactly can the government do that? It is not entirely clear how, as a legal matter, that can be accomplished. Perhaps regulators can twist the arms of the financial institutions. Call it the Tony Soprano approach. “Nice bank you have here. I wouldn’t want anything bad to happen to it.”

Other economists have suggested that the government inject capital itself. That raises several questions. First, which firms? The government does not want to put taxpayer money into “zombie” firms that are in fact deeply insolvent but have not yet recognized it. Second, at what price should the government buy in? Third, isn’t this, kind of, like socialism? That is, do we really want the government to start playing a large, continuing role running Wall Street and allocating capital resources? I certainly don't.

Here is an idea that might deal with these problems: The government can stand ready to be a silent partner to future Warren Buffetts.

It could work as follows. Whenever any financial institution attracts new private capital in an arms-length transaction, it can access an equal amount of public capital. The taxpayer would get the same terms as the private investor. The only difference is that government’s shares would be nonvoting until the government sold the shares at a later date.

This plan would solve the three problems. The private sector rather than the government would weed out the zombie firms. The private sector rather than the government would set the price. And the private sector rather than the government would exercise corporate control.

Why would an undercapitalized financial firm take advantage of this offer? Because it would need to raise only half as much capital from private sources, that financing should be easier to come by. With Warren Buffetts in scarce supply, the government can in effect replicate them, by piggy backing on what they do.
My proposal: Give new equity investments in banks made over the next 30 days a guaranteed zero percent tax rate for the next 20 years.

Given our relatively high rates of capital taxation, the IRS already is a “silent” partner as it retains a significant fraction of the upside of equity investments. Instead of, or at least before launching Mankiw’s 100% match of new equity investments in banks with government money, while retaining high rate rates on the private equity investments in banks, first eliminates the taxes on new equity issued by banks.

The 30 days limit of the proposal it to encourage banks to raise equity through new stock offerings soon, while allowing the time to issue new stock. I agree with Mankiw that new private equity investments in banks would be just wait the “economics” doctor should prescribe. This plan lets market differential the sound banks from the “zombie banks” like the Mankiw plan, but without the government ownership of private bank stock.

I will be on Joshua Sharf's BlogTalkRadio program at 1pm CT with Bill Polley, to discuss the financial situation.

HH: Victor Davis Hanson, we’ve got two minutes to our first break here. Would you define for the audience hubris?

VDH: Well, it’s a classical concept, and it’s over-weaning arrogance. And what it means is that when things, it’s a very complex idea, but it means when things are going good, the person feels somehow that those good developments, that positive feeling is because of something he did. And then does something in excess more and more. They have another word, koros, excess. And then this finally is sort of a self-delusional process, and there’s gods in the world that egg this person on because he lacks, the word is sophrosyne or moderation. And then of course, he implodes, and the words atte (sp?). There’s a succession from hubris to atte [actually Ate', from the Iliad --kb], destruction, and this is the result of Nemesis. There is a god, Nemesis, that deludes people into thinking that whatever positive things that have happened to them is entirely because of their own rarely-answered genius and not because of accidents or fate or luck. So we all, the Greeks tell us when things start going well, do not think that you necessarily, if you’re a Wall Street financier or a Fannie Mae, that you are responsible, because you’re going to just keep doing to excess. I think Obama’s had that problem when things have gone well most of his life. He’s been able, as he said in his memoirs, to talk people into trusting him, or to talk people into doing things they otherwise might not do given his record of achievement. From the first hour of Hugh Hewitt's two-hour interview of Victor Hanson.

Have you wondered how it is that Bill Ayers and Bernadine Dorn are able to work in a university? You shouldn't. In this deleted scene from the documentary Indoctrinate U we see that these and other Weather Underground terrorists were able to secure jobs in academia. Watch the video embedded at that link.

Blast from the past: Weatherwoman Nancy Rabinowitz and Hamilton College.

Matthew Parris with the Economic Crisis in Three Minutes":

The stage is empty against the backdrop of a blue sky and scudding clouds. ENTER: Joe Citizen carrying a small brick, and Jack and Jill Jones carrying a large one...

Joe Citizen (to the Joneses): That’s a nice big brick you own.

The Joneses: It’s for sale. The kids have flown the nest and we’re downsizing. We’d take £10 for our brick. What are you asking for your smaller one? 

Joe Citizen (to himself): £10? Pricey for a brick, but I guess mine must be worth more than I realised too. The market’s obviously on the up. (To the Joneses) I’d sell mine for £8.

The Joneses (conferring): Brick prices must be rising faster than we thought. If his is worth £8, ours must be worth more than £10. (To Joe) We’ve raised our asking price to £20.&c. A bubble begins, and then crashes. RTW clever T.

Listening to politicians, regardless of party, discuss economics makes me sick both to my head and to my stomach. And the only people who are not similarly affected, I fear, are persons whose knowledge of economics is sufficiently scant -- or whose ethics are sufficiently perverted -- to protect their senses from being insulted by what issues forth from the mouths of politicians speaking on economic topics.

So as an economist, I am no more interested in having Sen. Obama (or Sen. McCain) come to GMU's campus to lecture us on "how to manage the economy" than I would be, say, to have O.J. Simpson come to GMU's campus to lecture us on how to manage one's marriage.Don Boudreaux, in a letter responding to a "canvasser for Obama" asking if he could arrange a talk to explain Sen. Obama's economic plans. You wouldn't want to hear tax policies, either.

Monday I attended a session with MN’s Second Congressional District Representative, John Kline and a local Republican Party political group; Wednesday, I participated in a town hall conference call with John Kline. As most of you know, Mr. Kline voted for the “bailout” last week. His Washington and Minnesota offices received thousands of phone calls. This post is being written to clarify, as I see it, why Congressman Kline made the decision he made. Disclosure: I am the volunteer Chair of Minnesota's Second Congressional District Republican's.

The financial situation was getting bad: the Democrats blocking of Bush, McCain and Greenspan attempts to get the financial records of Fannie and Freddie under control resulted in assets at banks and investment houses being devalued. When assets are devalued, loaning institutions cannot loan as much money resulting in a credit shortage (freeze). This in turn prevents organizations from borrowing money short term to meet payroll and inventory, etc. The (freeze) was the “hidden” fiasco that was looming on the horizon. This credit crunch had to be addressed. Hence, the $700 billion dollar it will only will be paid in installments of $250, $100, and $350 based on conditions. Without this infusion of dollars, Main Street would have been hit, hard. Responsible people would have been denied funds, jobs lost, etc.

Here are some key points:
1 – Since Republicans are in the minority, the Democrats control which bills come to the floor. Net, we don’t get much to the floor – Democrat Speaker Pelosi literally prevents our ideas from seeing the light of day.
2 – What pundits said was pork is not pork – it is a series of tax breaks that for one reason or another need to be renewed every year or a tax break for an error on a previous bill.
3 – Key demands of Democrats (A slush fund for ACORN; a requirement that UNION representatives be in board rooms to determine executive compensation; a requirement that lawyers and judges determine how much of a loan should be repaid – all of these are terrible!) were eliminated from the bill.
3 – The $700 billion is tiered at three levels and is not a bailout; distributed funds will be recouped when the assets are sold. Maybe not all will be paid back but a significant portion will be recovered.
4 – One could argue that either a “yea” or a “nay” vote was principled. Some votes were political. John voted on principle to reduce what he believed was a severe and protracted recession (or worse) balanced against a much lower risk that the bill might not work.

The easy thing to do would have been to vote against the bill. John Kline could have returned to Minnesota this week and pounded his chest out on the campaign trail telling Minnesotans that this is Wall Street’s problem, not ours. But as the last two weeks have indicated, this is everyone’s problem. And John Kline spent endless hours in Washington meeting with everyone involved so he could make the best decision he could on behalf of the Minnesotans he serves. He voted with his conscience, folks. And for six years, that is one of the reasons we have supported him. He is a man of integrity and strength, and he made a courageous vote last week because he believed it was the best thing to do.

In conclusion, while we can argue the right or not-right of it, it’s now done. Our best solution is to send as many Republicans as we can back to DC. In addition, we have to get McCain elected as president so the Democrats don’t try a “renegotiation” in February of 2009. Minnesota is in play for McCain. Let’s make those phone calls and get out OUR vote.

More detail is at Look True North (www.looktruenorth.com)

It's time to follow a network.  My goal is to make more local this debate about the connections between Barack Obama and Bill Ayers, and that connection runs through Saul Alinsky.  I find the local angle interesting; my guess is in many other cities, you could also make this connection; the result will impress upon you the vast network that the Obama campaign has built to get out the vote next month.

About twenty churches in the St. Cloud area help fund a group called Great River Interfaith Partnership or GRIP.  We've talked about them before here as creators of, among other things, an affordable housing ordinance in the St. Cloud area that, by supporting the creation of new houses, may have helped create the bubble in real estate.  They are meeting on October 14th as a follow-on to an event their parent organization is creating.  More on that event in a minute.

Their parent organization is ISAIAH, also a church-based coalition.  And in this we find:

ISAIAH is one of 60 similar organizations around the country affiliated with the Gamaliel Foundation in Chicago. Our national network provides training and resources for organizing far beyond what we would have available doing this work by ourselves. It also gives us a national powerbase to influence federal legislation on immigration, transportation, and housing.I had not made that connection until fairly recently, when in reading about Barack Obama's ties in Chicago I ran across Gamaliel. In Stanley Kurtz' story from last month, we find that the Chicago Annenberg Center, self-described as a "founder-led foundation" whose founder was Bill Ayers but whose board chair was Obama, was a funder of Gamaliel institutions.
Ayers and Obama guided CAC money to community organizers, like ACORN (the Association of Community Organizations for Reform Now) and the Developing Communities Project (Part of the Gamaliel Foundation network), groups self-consciously working in the radical tradition of Saul Alinsky.

Kurtz notes elsewhere that though Ayers was not on the board -- to avoid the conflict of interest that would have come from Ayers receiving money from CAC -- he was as much in control as Obama.

Gamaliel is modeled on Alinsky principles.  Melanie Phillips works through the pathway that takes Obama from law school to Gamaliel and becoming a community organizer.  Part of that job involves spawning yourself and training other organizers.

One day at a church I was attending (it has since closed), I was invited to come to the formation of a church reading club that would look at secular works. I love to read and went. The woman who had invited me, who worked with GRIP, had a suggestion for a book: Alinsky's Rules for Radicals. (I never went back to that group.)  I'm sure this would have pleased Senator Obama, who many years ago had looked at churches as his way to power:

What if a politician were to see his job as that of an organizer, as part teacher and part advocate, one who does not sell voters short but who educates them about the real choices before them? As an elected public official, for instance, I could bring church and community leaders together easier than I could as a community organizer or lawyer. We would come together to form concrete economic development strategies, take advantage of existing laws and structures, and create bridges and bonds within all sectors of the community. We must form grass-root structures that would hold me and other elected officials more accountable for their actions.

Anyone who has seen GRIP or ISAIAH in action, with its altar calls for political candidates to come forward and take a pledge, will no doubt recognize that scene in this paragraph.  I have already reported on the events they are organizing for next week.

Their agenda will include the altar call again:

We will:

• Rejoice in our unity across denomination, faith, race and culture
• Tell the truth about the challenges that face us as a society and as a community
• Proclaim a path to a transformative and specific issue agenda
• Challenge our public officials to walk with us and to face our common challenges with courage and imagination (this is the altar call)
• Walk the Path through engaging with one another and our public officials around our Issue Agenda, aiming toward real change.

More accountable to what, though? It is reported that on a radio show Kurtz noted the book used by Gamaliel for its community organizers, Doing Justice: Congregations and Community Organizing.  One does well to review this book, whose back cover tells that it "weaves the theological and biblical warrants for community organizing into concrete strategies for achieving justice in the public arena," suggests "agitation" as a "fundamental organizing principle" and that its author was head of the Gamaliel National Clergy Caucus.  His first sentence in the book (after a couple quotes of Scripture, one of which is the fall of Babylon from Revelations 18):  "The world, as it is, is the enemy of God."  

Their view is totalitarian and apocalyptic.  And it extends from Chicago to Minnesota and wants to reach all the world, to do battle with the enemy of God.  If you're not with them...

When we last left our little board -- located in a stairwell in the building I work in -- we had had a poster placed by someone unidentified (as was the board's user or users) twice placed on it which indicated opposition to affirmative action.  Such action is an indication that someone is asserting a private property right, rather unusual in that the board is on state property, not near someone's office or classroom, and had hitherto been used for postings by the dean's office for the college in which I work.  I had asked once about its ownership to someone in the dean's office (after the initial display was made) and got in return a shrug of the shoulders.  Adverse possession might attach to the board so many months later.

So I thought I should ask what happened to the counter-poster and wrote a note "Who took down the poster that was here this morning? Who owns this board?"  I signed the note.  Rather than answer me by email or phone, they simply wrote on my note:

At the bottom the respondent noted that the poster would return next week.

It did Monday afternoon, as the centerpiece of a brand new display:

Sorry to have cut off that little bit, as you might guess the first letter on the banner across the top is a 'w', as in "White Identity and Affirmative Action". The subtitle reads as a quote, "I'm in favor of affirmative action except when it comes to my jobs." (Italics and red in original.)  This time our interlocutors made clear their mission:

By our responses, it appears, someone in the department who now claims this board has removed the counter-poster, taken it to his or her classroom (which class? we do not know) and asked the students to draw their responses.  It is interesting that the title is called "White Identity...", for as best we know the artist who drew the counter-poster could be a person of color, or of disability.  The assumption is that anyone who disagrees with affirmative action must be white.  This would be news to Thomas Sowell or Walter Williams or Justice Thomas.  And the subtitle ascribes a bad motive for the counter-poster's opposition to affirmative action:  He or she would be for it except that it was she or he who lost the job.  As John Hood noted a few years ago, what matters here is who is doing the hiring:

...I think there may be good reasons for me to engage in race-conscious affirmative action. The key distinction involves agency. Government institutions are purportedly "owned" by all of us and at least can be said formally to represent all citizens. Thus they have no business adopting policies that discriminate--regardless of whether they are designed to advance or to redress bigotry--unless those policies are narrowly tailored to the needs of specific jobs, slots, or contracts. (As Roger Pilon of the Cato Institute once put it, it's OK for fire departments to turn down wheelchair-bound applicants for the job of fighting fires but not for the job of dispatching the firefighters.) Private actors, on the other hand, should enjoy the latitude to associate or disassociate with others in a free society, even if they do so for reasons most of us would find repugnant.But judging the responses of these students, that is not OK with them:One of the classes that could have been the creator of this display is a course titled "Community and Democratic Citizenship." Nothing could be less democratic than the suggestion that one's free speech rights are dependent on someone else deciding whether or not you were 'ignorant'. But it could have been part of a different class. Would not that context help us understand the previous bulletin board and this one?

So most people are slamming John McCain's plan last night that would have government spend $300 billion to replace bad mortgages held by people who are underwater with good mortgages. The rationale is to save families that we might think did the right thing but lost money on a house anyway.
America’s families are bearing a heavy burden from falling housing prices, mortgage delinquencies, foreclosures, and a weak economy. It is important that those families who have worked hard enough to finance homeownership not have that dream crushed under the weight of the wrong mortgage. The existing debts are too large compared to the value of housing. For those that cannot make payments, mortgages must be re-structured to put losses on the books and put homeowners in manageable mortgages. Lenders in these cases must recognize the loss that they’ve already suffered.There has been since December a plan that asks lenders and borrowers to get together and renegotiate mortgages. A newer plan (described Monday in the LA Times) already has such a provision in place.
A new federal loan workout program called Hope for Homeowners (HfH) begins this month, targeting those unable to pay their mortgages. It is for homeowners who bought their homes before 2008 and now have monthly payments exceeding 31% of their income.

Under the program, banks would in many cases write down mortgages to 90% of a home's current value. Such a provision would be important in California, where many recent home buyers have mortgages that now greatly exceed their property values.

The new 30-year fixed-rate loan would be insured by the Federal Housing Administration and could not exceed $550,440.This was passed last week in the bailout bill (see page 69, Sec. 124). And I understand that Section to have been introduced by Sen. Dodd. He pitched it in March. I think this is what Ed Morrissey (whose boss is one of the people slamming McCain) was referring to initially in his post (I now see he has updated and included the HfH plan.) And the McCain page refers to the bill as part of the powers it would have to create the Resurgence Plan. Ed also mentions a post by Marc Ambinder in which the McCain campaign says this money comes out of the $700 billion in the plan. It would be a redirection of the money, not a new cost. That was certainly not clear last night (not that much of this plan really was before I sat and read the email that had the plan I'm quoting here.)

Also worth noting are the conditionalities on the plan:
The McCain Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes. By purchasing the existing, failing mortgages the McCain resurgence plan will eliminate uncertainty over defaults, support the value of mortgage-backed derivatives and alleviate risks that are freezing financial markets.

The McCain resurgence plan would be available to mortgage holders that:

• Live in the home (primary residence only)
  
  
• Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment).

Note that there is no mention of the 31% payment-to-income ratio from HfH, so to me it doesn't look really like the same plan. So buyers of homes with stated-income loans would be out (like this fellow) or people flipping properties.

There's a glut of homes on the market. A glut is reduced either by decreasing supply or increasing demand. Lee Ohanian tries to sell an increased in skilled immigrants as a way to increase demand. The McCain Resurgence Plan, at its base, tries to reduce supply by not forcing the sale of homes through foreclosures. It might be, might be, cheaper to throw a few dollars into homes directly than to support the banks through the purchase of MBSs. From the Plan:
The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner. The direct cost of this plan would be roughly $300 billion because the purchase of mortgages would relieve homeowners of “negative equity” in some homes. Funds provided by Congress in recent financial market stabilization bill can be used for this purpose; indeed by stabilizing mortgages it will likely be possible to avoid some purposes previously assumed needed in that bill.The relief of negative equity means that the banks would receive from the government the difference between the principal on the original mortgage and the mortgage "at terms manageable for the homeowner." I still need some flesh on that. I would want to know if the 31% payment-to-income ratio is the definition of manageable. I'd want to know if the government can be certain the initial purchase price on the home was not set in order to qualify someone for a shady mortgage. Those details aren't there, and don't look in Marty Feldstein's pitch from last Friday (which is not exactly the same proposal anyway, but a close cousin.)

I'll see if my contacts in the McCain campaign will provide any additional details.

Voting has begun for the office of mayor of the MOB.  I humbly seek your support and ask you to vote by finding the sidebar at the Kool Aid Report.

Kevin Hassett today: Panics stop when citizens understand that those with the disease have been identified and quarantined, know what the treatment options are and can take sensible precautions to avoid infection. If we never developed a test for SARS, we would probably still be panicked. Without such information, herd behavior can drive beliefs to crazy places, as appears to be happening in financial markets.

The Singapore response sets a goal for policy makers. They need to tell us who has the disease, how they will quarantine those who have it, what the treatment will be if it's discovered, why that treatment will work, and the steps we can all take to avoid infection. They need to do this with facts and transparency, not with spin and assertion.Hassett criticizes the Bernanke/Paulson policies for not being able to identify which banks that are troubled and which are not. But why would government be any better able to tell us this than the private sector? There is no test that tells us which banks have enough troubled assets to affect solvency when the market fails to provide a price for them. The purchase of enough of those assets to make a market price should be sufficient to provide that kind of information to private decisionmakers, who can then figure out whether or not a bank should go broke.

September madness for a financial crisis, courtesy WAL.

Thanks for playing, Los Angeles/Anaheim/Dana Point/San Ysidro/whatever. We'll see you next year.

Tampa? You're next.

Washing your car or boat in the driveway or street is a residential ritual as American as backyard barbecues. But the state of Washington is telling its local governments they must prohibit home car washing unless residents divert the wash water away from storm drains, where they say it causes water pollution. 'I understand this is something people have done for a long time,' says Bill Moore, water quality specialist with the Washington state Department of Ecology, which is requiring the ban. 'It's not something we should be doing any longer.'Source, via the Amateur Economist.

Instead of thinking of the pending bailouts and financial regulation as a new era of government supervisions of markets, think of it as preserving the system in which a Harvard elite controls other people's money. In fact, very little is likely to change. Reading the news stories about how Secretary Paulson plans to implement the bailout, it seems as though the same people will be in charge of the money. Print some new business cards, change the logo on the front from "Goldman Sachs" to "U.S. Treasury," and everything else continues as it was.Arnold Kling, who Joshua Sharf thinks is contrary to my view. He's not on this one. When I worked in Indonesia on figuring out whether the country could pay for the bailout they enacted in haste, I spent seven weeks in a hotel in Jakarta surrounded by former officials of FSLIC, the organization that had slept through the collapse of the U.S. savings and loan crisis, heretofore the largest bailout (by dollar volume) in history. It did seem odd to me that the officials who had cost the U.S. $200 billion in that bailout were now helping figure out what to do with Jakarta commercial real estate that had been flipped and re-flipped in almost identical fashion. (My role in that was as a fiscal, not a financial or banking expert.)