"Restore(s) a little sanity into current political debate" - Kenneth Minogue, TLS "Projects a more expansive and optimistic future for Americans than (the analysis of) Huntington" - James R. Kurth, National Interest "One of (the) most important books I have read in recent years" - Lexington Green
Chicago Boyz is a registered trademark of Chicago Boyz Media, LLC. All original content on the Chicago Boyz web site is copyright 2001-2013 by Chicago Boyz Media, LLC or the Chicago Boyz contributor who posted it. All rights reserved.
I was a teenager when the Manson murders went down, in the autumn of 1969 – of course, the cruel and inexplicable murder of a movie star and several of her friends made all the headlines, and had lots of law-abiding citizens looking over their shoulders and being very careful about locking the doors and windows of their homes at night. It wasn’t until some time later that the associated murders of an elderly retired couple also hit the headlines of the LA Times, and other national newspapers. A blood-drenched, hippy cult with a weirdly charismatic leader had committed those murders in order – so they claimed – to trigger a devastating racial war, which they termed ‘helter-skelter’ from a Beatles song moderately popular at the time. Read the rest of this entry »
These guys always seemed to be a bunch of juvenile, self-righteous assholes who enjoy the fruits of a modern transportation system while pretending to be above it all with their bicycles and simpleminded cultural leftism. The core of the Critical Mass experience are the massive traffic-fouling group bike rides on urban streets. By now CM is mainstream and tolerated by the powers that be with, I assume, the understanding that any daring transgressions will be restricted to off-peak hours. So it becomes just another annoying street event like the parades and art fairs and filming the hot TV show that are given dispensation to block traffic and inconvenience drivers. Of course I would never participate in such a thing. However, it turns out that some of my friends do these rides, and they asked if I wanted to join them. So I said, sure, sounds like fun.
Cynic that I am, I am deriving a great deal of amusement from some of the media-political-general public storms whipped up in the wake of the horribly tragic Newtown shootings, and the deaths of two firefighters in an ambush set by an ex-convict in upstate New York. As if the shootings weren’t horrible and tragic enough in themselves, now we get to enjoy the reflexive Kabuki dance of ‘we must ban those horrid gun-things!’ being played out – especially since some of the very loudest voices in this chorus are politicians and celebrities who live with a very high degree of security at their workplaces and homes, and whose children attend rather well-protected schools. Such choruses appear to be completely oblivious to the fact that for many of the ordinary rest of us, poor and middle-class alike, the forces of law and order are not johnny-on-the-spot in the event of an attempted robbery, rape, break-in or home invasion. To rely on the oft-used cliché, when moments count, the police are minutes away. In the case of rural areas in the thinly-populated flyover states law enforcement aid and assistance might be closer to being hours away. Read the rest of this entry »
I am continually amazed by the level of fear, contempt, and anger that many educated/urban/upper-middle-class people demonstrate toward Christians and rural people (especially southerners.) This complex of negative emotions often greatly exceeds anything that these same people feel toward radical Islamists or dangerous rogue-state governments. I’m not a Christian myself, or really a religious person at all, but I’d think that one would be a lot more worried about people who want to cut your head off, blow you up, or at a bare minimum shut down your freedom of speech than about people who want to talk to you about Jesus (or Nascar!)
It seems that there are quite a few people who vote Democratic, even when their domestic and foreign-policy views are not closely aligned with those of the Democratic Party, because they view the Republican Party and its candidates as being dominated by Christians and “rednecks.”
What is the origin of this anti-Christian anti-”redneck” feeling? Some have suggested that it’s a matter of oikophobia…the aversion to the familiar, or “”the repudiation of inheritance and home,” as philosopher Roger Scruton uses the term. I think this is doubtless true in some cases: the kid who grew up in a rural Christian home and wants to make a clean break with his family heritage, or the individual who grew up in an oppressively-conformist Bible Belt community. But I think such cases represent a relatively small part of the category of people I’m talking about here. A fervently anti-Christian, anti-Southern individual who grew up in New York or Boston or San Francisco is unlikely to be motivated by oikophobia–indeed, far from being excessively familiar, Christians and Southern people are likely as exotic to him as the most remote tribes of New Guinea.
Equally exotic, but much safer to sneer at…and here, I think, we have the explanation for much though not all of the anti-Christian anti-Southern bigotry: It is a safe outlet for the unfortunately-common human tendency to look down on members of an out group. Safer socially than bigotry against Black people or gays or those New Guinea tribesmen; much less likely to earn you the disapproval of authority figures in school or work or of your neighbors. Safer physically than saying anything negative about Muslims, as you’re much less likely to face violent retaliation.
(From the archives of the Daily Brief – a meditation on living in the borderlands. Business is suddenly jumping for the Tiny Publishing Bidness, and I suddenly have a lot of editing to do and a short time to do it in. I honestly don’t have anything else to say about the debate last night that the other guyz haven’t already said.)
It’s part of the tourist attraction for San Antonio, besides the Riverwalk and the Alamo. Even though this part of South Texas is still a good few hours drive from the actual physical border between Mexico and the United States, the River City is still closer to it than most of the rest of the continental states. It falls well within that ambiguous and fluid zone where people on both sides of it have shifted back and forth so many times that it would be hard to pin down a consistent attitude about it all. This is a place where a fourth or fifth-generation descendent of German Hill-Country immigrants may speak perfectly colloquial Spanish and collect Diego Riviera paintings…. And the grandson of a semi-literate Mexican handyman who came here in the early 1920ies looking for a bit of a break from the unrest south of the border, may have a doctoral degree and a fine series of fine academic initials after his name. And the fact that the original settlers of Hispanic San Antonio were from the Canary Islands, and all non-Hispanic whites are usually referred to as “Anglos”, no matter what their ethnic origin might be, just adds a certain surreality to the whole place. Read the rest of this entry »
Rural society has been romanticized for millenia, especially in the West, where rural communities have usually been portrayed as idylic. However, the community in rural society is actually both compulsory and coercive.
One recent example. My family and I lived in rural Vermont only fifty years ago, in the late 1940s. At that time the most highly popularized character in the nation was the local telephone operator in the ads of the Bell Telephone Company. She, the ads told us every day, held her community together, served it, and was always available to help.
The reality was somewhat diferent. In rural Vermont, we then still had manual telephone exchanges…But when finally around 1947 or 1948, the dial telephone came to rural Vermont, there was universal celebration. Yes, the telephone operator was always there. But when, for instance, you called up to get Dr Wilson, the pediatrician, because one of your children had a high fever, the operator would say, “You can’t reach Dr Wilson now; he is with his girlfriend.” Or, “You don’t need Dr Wilson; your baby isn’t that sick. Wait till tomorrow morning to see whether he still has a high temperature.” Community was not only coercive; it was intrusive.
And that explains why, for millenia, the dream of rural people was to escape into the city. Stadluft macht frei (city air frees) says an old German proverb dating back to the eleventy or twelfth century. The serf who managed to escape from the land and to be admitted into a city became a free man. He became a citizen. And so we, too, have an idyllic picture of the city–and it is as unrealistic as the idyllic picture of rural life.
… that there was some kind of secret high-sign or signal that we could give to other conservative-libertarian-Tea Party adherents in casual social situations. Even in Texas, a mostly red-state and stronghold of prickly independent free-marketers, there is enough of a leavening of blue-state Dems and Obama worshippers that one need be constrained in discussing politics … by good manners, if nothing else. Especially in the neighborhood where one lives; there are, I know, at least a few Democrats sufficiently enthused about the One to actually display bumper-stickers and yard signs. Read the rest of this entry »
From time to time Dan and I just agree to “give up” on certain types of blog posts because they are repetitive. One of those types of posts involve journalists missing the entire point and purpose of what they are writing about.
And yet this article from Chicago Magazine was such an egregious offender that it caused me to need to write a post on it.
The article starts with the traditional journalistic chestnut – the protagonist. In this case, it is how Mr. Patton, the corporate counsel of the city of Chicago, can adjust the gun control laws as little as possible to meet the terms of the latest court decision that gives citizens access to firearms. In the end, the counsel for the city of Chicago “doesn’t anticipate” any further legal challenges to the gun laws, a comment that the reporter accepts at face value. And finally, the article ends with this:
“We’re committed to achieving the greatest extent of gun control that’s lawfully possible while still complying with the Second Amendment,” he says. “It’s something we can do in the city’s overall effort (against) gun violence. It’s a plague, and we’re doing everything we can to fight it.”
And with that final quote from the protagonist, the “article” is ended.
Note how this article likely sailed through “fact checking”, because the corporate counsel really did say all those things, and the events listed did occur in that chronological row. However, the FACTS ARE WRONG.
Even the most cursory analysis of the situation on gun control by this “journalist” would have turned up salient facts that were completely relevant to the situation. The NRA does intend to aggressively fight and issue lawsuits against the City of Chicago and all other municipalities that limit second amendment rights, and this could be found everywhere on the internet or by spending even 5 seconds calling the NRA, which the writer didn’t bother to do.
More subtle than that obvious issue, is the fact that Chicago, which has among the strictest handgun laws in the country, is among the leaders in carnage caused by handguns, indicating plainly that these laws do not work in terms of keeping guns out of the hands of criminals and only work to deter law-abiding citizens from the ability to protect themselves from these criminals.
I won’t even bother to link to the latest articles showing shootings in Chicago which spike every weekend; they are everywhere and available to everyone, even this “journalist”.
While Chicago is a notorious hotbed of handgun violence, all the states around us have embraced concealed carry and limited restrictions on citizens, without the “wild west” shootouts promised by detractors. Chicago citizens travel every day into Indiana and now Wisconsin without fear of regular citizens harming them, while they would be scared to venture into their own neighborhoods “protected” by these city laws supposedly limiting gun violence.
The ideas that guns can be banned from a small corner of the populace is just irresponsible and ludicrous given that there are hundreds of millions of them across the US and that the tide of the second amendment has passed through almost every state of the union except for Illinois which ought to be a salient fact.
The gentle author of a small blog called Spitalfields Life has been mining the early work of a photographer named John Claridge, who came up from the East End to become successful in advertising. His pictures of the East End were taken between 1959 and 1982, many of them when he was no more than a boy.
This week in the neighborhood where I live was designated for the annual bulk-trash pickup – so residents were notified a week or more ago. Once a year we can put out on the curb … well, just about anything except concrete rubble and chunks of stone. The city sends out a couple of long open-topped trailer trucks, and a special truck with a large mechanized claw that reaches down and gathers up the bulk items. Read the rest of this entry »
Wolf Point is a famous piece of land that is a penninsula where the Chicago River is on three sides, right in front of the Holiday Inn and adjacent to the Merchandise Mart. Recently the Kennedys, who own this land, proposed building three giant high rises on the site, as described in this article.
Of all the habitual liars in this world, one of the most odious has to be the “traffic consultant”. One of these firms, hired by the Kennedys, gave a report on the impact of traffic, and per the article:
Residents also suggested the development would further clog already-congested streets and mocked a traffic consultant’s conclusion that the project would not significantly worsen traffic.
To some extent, per the picture above, it is impossible to further “worsen” traffic. This is a photo taken during rush hour that is relatively typical; the bridge going north on Orleans (it is one-way) is completely gridlocked leading towards the Wolf Point site and backed up into Wacker drive, blocking both streets. Thus to some extent the consultant is right, because you can’t get worse than gridlock.
Since Johnathan posted a picture of the Captin’s Market last week, I thought I may as well post a picture of my favorite corner gas-station and mini-mart. The exterior is … deceptive. The inside of it is very different from what you would expect, just driving past. Read the rest of this entry »
So – the blog kerfuffle du jour is John Derbyshire and the internet essay that he wrote for another obscure blog-magazine, the topic of which has raised such a general ruckus among the right-thinking side of the blogosphere, that it got him dumped over Easter weekend from the National Review and has the Breitbart conglomerate all in a twitter, and many of the rest of us on the libertarian/conservative/free-thinking side of the spectrum seeming to be thinking thoughts pretty much split three ways; cringing and thinking ‘oh, s**t’ or ‘about damn time’ and ‘ ‘OK then – if representatives of the capital ‘B’ Black community can witter all over the print media and the intertubules about their worries about their children running afoul of the 21st century version of the KKK – can those of us from the race of pallor worry frankly and openly about getting lost in certain neighborhoods, the odds on survival when taking the wrong exit off particular interstates in big urban areas, or the wisdom of going to certain sports venues without being armed to the teeth?’ Read the rest of this entry »
A favorite writer, usually seen at National Review but widely published, has created a firestorm of political correctness by an article he wrote for another magazine. John Derbyshire is a mathematician and curmudgeon of the satiric variety. I think I have read all of his books, several of which are not an easy read. His We Are Doomed had me laughing so hard I cried. My review is here.
His current outrage is to have said “There is a talk that nonblack Americans have with their kids, too. My own kids, now 19 and 16, have had it in bits and pieces as subtopics have arisen. If I were to assemble it into a single talk, it would look something like the following.
* * * * * * * * * * * * *
(1) Among your fellow citizens are forty million who identify as black, and whom I shall refer to as black. The cumbersome (and MLK-noncompliant) term “African-American” seems to be in decline, thank goodness. “Colored” and “Negro” are archaisms. What you must call “the ‘N’ word” is used freely among blacks but is taboo to nonblacks.
(2) American blacks are descended from West African populations, with some white and aboriginal-American admixture. The overall average of non-African admixture is 20-25 percent. The admixture distribution is nonlinear, though: “It seems that around 10 percent of the African American population is more than half European in ancestry.” (Same link.)
(3) Your own ancestry is mixed north-European and northeast-Asian, but blacks will take you to be white.
Derbyshire’s wife is Chinese and his kids are mixed race Chinese-Caucasion
(4) The default principle in everyday personal encounters is, that as a fellow citizen, with the same rights and obligations as yourself, any individual black is entitled to the same courtesies you would extend to a nonblack citizen. That is basic good manners and good citizenship. In some unusual circumstances, however—e.g., paragraph (10h) below—this default principle should be overridden by considerations of personal safety.
(5) As with any population of such a size, there is great variation among blacks in every human trait (except, obviously, the trait of identifying oneself as black). They come fat, thin, tall, short, dumb, smart, introverted, extroverted, honest, crooked, athletic, sedentary, fastidious, sloppy, amiable, and obnoxious. There are black geniuses and black morons. There are black saints and black psychopaths. In a population of forty million, you will find almost any human type. Only at the far, far extremes of certain traits are there absences. There are, for example, no black Fields Medal winners. While this is civilizationally consequential, it will not likely ever be important to you personally. Most people live and die without ever meeting (or wishing to meet) a Fields Medal winner.
So far, despite the outrage, this seems pretty benign to me. (Probably evidence of my own racism)
Here comes trouble:
(7) Of most importance to your personal safety are the very different means for antisocial behavior, which you will see reflected in, for instance, school disciplinary measures, political corruption, and criminal convictions.
He is writing about means but few readers made that distinction and many may have no idea what a “mean “is. Read the rest of this entry »
There was a shooting in Florida this week that has now accumulated all the “usual suspects” for a racial extravaganza. The bare details are that a Florida neighborhood had had a high number of burglaries in the previous year. The neighbors had instituted a “neighborhood watch.” The watch member on duty saw a black teenager in a “hoodie” sweatshirt acting in a way that he thought was suspicious. He called 911. The 911 call was recorded but the record may not be clear. A new eyewitness has said that the shooting victim was attacking the shooter and was on top of him as the shooter called for help. The shooter was not arrested and now the local police chief has removed himself from the case. The shooter is in hiding, afraid for his life. Was this a terrible mistake ? Surely the shooting was not done in malice. The shooter is Hispanic and a local resident. Local neighborhood watches are common in Florida, which has a “stand your ground” law. Self defense does not require retreat but this was on a public street, not the shooter’s home. I suspect neighborhood watches are about to be disarmed in Florida.
This may be the substitute for the failed contraception ploy the Democrats attempted. Maybe there really was a crime committed by an excited neighborhood watch member. If so, the magnitude would be voluntary manslaughter, hardly a reason for the attempted lynching now going on in Florida and Washington. It is ironic that the group, which suffered 100 years ago from lynching, now seems to promote it. I think the Republicans would do well to stay away from this case with the exception of the usual sympathy for the victim. It is getting ugly and the facts are far from established.
We lived in Athens for nearly three years, my daughter and I. She was only three years and a few months old, when we arrived there, and just short of kindergarten when we left. This is the place that she remembers clearly as a child. I was assigned to the base at Hellenikon, which was merely an acre-wide strip between Vouligmeni Boulevard, and the airport flight line, wedged in between a similar strip which was a Greek Air Force facility, and a couple of blocks of warehouse and semi-industrial facilities of the sort which cluster in the vicinity of busy urban airports. Once – at the end of WWII, or so I was told by people who remembered that far back – the airfield had been away out in hell and gone in the wild and rolling scrub-brush country, south of the city. One very elderly American retiree recalled that the airfield was so far from the city that he was advised to carry a pistol for self-defense purposes, when he had reason to venture out that far from the American Embassy. Read the rest of this entry »
Morning Dew, by Bonnie Dobson. She wrote it, and she did the original recording, which is just her and an accoustic guitar, live. This version, recorded later, in the studio, has a more emotional vocal performance. A beautiful evocation of the period, in my not so humble estimation.
There have been an enormous number of covers of this song.
This version by Nazareth takes an earnest folk song about nuclear war, and turns it into a blisteing, trippy, fuzz blues, acid-rock jam. Such strange permutations.
The weirdest thing is that until about 48 hours ago I had never heard of “Morning Dew”. I have been a devotee of rock and pop of the 1960s for the last 35 years or so, but this song, which has the status of a standard, has been under my radar all these years.
In a way, it is good to know that I have not exhausted the riches of that era.
James C. Bennett, author of The Anglosphere Challenge (Rowman & Littlefield, 2004), and Michael J. Lotus (who blogs at Chicagoboyz.net as “Lexington Green”), are proud to announce the signing of a contract with Encounter Books of New York to publish their forthcoming book America 3.0.
America 3.0 gives readers the real historical foundations of our liberty, free enterprise, and family life. Based on a new understanding of our past, and on little known modern scholarship, America 3.0 offers long-term strategies to restore and strengthen American liberty, prosperity and security in the years ahead.
America 3.0 shows that our country was founded as a decentralized federation of communities, dominated by landowner-farmers, and based on a unique type of Anglo-American nuclear family. This was America 1.0, as the Founders established it. The Industrial Revolution brought progress, opportunity and undreamed-of mobility. But, it also pushed the majority of American families into a new, urban, industrial life along with millions of unassimilated immigrants. After the Civil War, new problems of public health, crime, public order, and labor unrest, on top of the issues of Reconstruction, taxed the old Constitution. Americans looked for new solutions to new problems, giving rise to Progressivism, the ancestor of modern liberalism.
America 3.0 shows that liberal-progressive solutions to the challenges of America 2.0 relieved some problems, and kicked others down the road. But they also led to an overly powerful state and to an overly intrusive bureaucracy. This was the beginning of America 2.0, the America we grew up with, which dominated the Twentieth Century.
America 3.0 argues that the liberal-progressive or “Blue State” social model has reached its natural limits. Even as it continues to try to expand, it is now dying out before our eyes. We are now living in the closing years of the 20th Century “legacy state.” Even so, it has taken the shock of the current Great Recession to make people see the need for change. As a result, more and more Americans are calling for a return to our founding principles. Freedom and individualism are on the rise after a century-long detour.
America 3.0 shows that our current problems can be and must be transcended with a transition to a new America 3.0, based on modern technology, decentralized communities, and self-reliant families, and a reassertion of fiscal responsibility, Constitutionally limited government and free market economics. Ironically the future America 3.0 will in many ways be closer to the original vision of the Founders than the fading America 2.0.
America 3.0 gives readers an accurate, and hopeful, assessment of our current crisis. It also spotlights the powerful forces arrayed in opposition to the needed reform. These groups include ideological leftists in media and the academy, politically connected businesses, and the public employees unions. However, as powerful as these groups are, they have become vulnerable as the external conditions change. A correct understanding of our history and culture, which America 3.0 provides, shows their opposition will be futile. The new, pro-freedom, mass political movement, which is aligned with the true needs and desires of Americans, is going to succeed.
America 3.0 provides readers a program of specific “maximalist” proposals to reform our government and liberate our economy. America 3.0 shows readers that these reforms are consistent with our fundamental culture, and with our Constitution, and will make Americans freer and more prosperous in the years ahead.
America 3.0 provides a “software upgrade” for the Tea Party and for all activists on the Conservative and Libertarian Right. It provides readers with historical evidence and intellectual coherence, to channel the energy and enthusiasm of the rising mass political movement to renew America.
America 3.0 shows that our capacity for regeneration is greater than most people realize. Predictions of our doom are deeply mistaken. We are now living just before the dawn of America’s greatest days. Within a generation, positive changes beyond what we can currently imagine will have taken place. That is the America 3.0 we are going to build together.
This article was featured on Drudge today (do you really have to hat tip Drudge anymore?). It is about the library staff all mad at Mayor Rahm for cutting the budget to the libraries.
In the comments, one guy (I think smartly) said the title of this post.
I think he is partially right. The new Kindle Fire (which I have an order in for and will review when it gets to me sometime later this month) is only $199. The cheap Kindles are only $79 now. Kindles come with tens of thousands of free titles of classic books that everyone should be reading anyways. That is the most exciting part of getting a Kindle Fire for me, the ability to have this immense database at my fingertips, for free (after the initial cost).
I imagine if you took the list of “frequent flyers” who actually USE the library (not just hang out there, I mean those who really check out books and return them) and bought them ALL Kindles for $79, or even the nice new version for $199, that you would be WAY ahead of the budget it costs to run all of those brick and mortar relics, the staff, and all the rest.
This way, a library would still be partially subsidized, but part user fee as well (if you don’t like the classic titles, buy your own), so folks like me, who haven’t set foot in a real life library in decades would perhaps feel a bit better about paying for libraries.
In the last 20 years, conservative ideas, including the value of all work, which binds us to each other through the strange beauty of commerce and voluntary exchange, have done more to turn around American cities than four decades and hundreds of billions of dollars of welfare entitlements, social programs, and public housing ever did. More than 10,000 minority males are alive in New York City today who would have been dead, had New York’s homicide rate remained at its early 1990s level. A policy triumph doesn’t get any more concrete than that.
The Administration will soon propose legislation to address the future of the US housing finance system, and it’s a sure bet that this will include re-incarnating Fannie and Freddie in some form. Prominent Republican politicians have also recently called for “privatizing” these entities. This is sheer folly. The problem with keeping Fannie and Freddie or an alternative government sponsored capital market hybrid that seeks to limit and/or price government backing is that policymakers have always done just that! It was investors, not policy-makers, who conferred “agency status” on Fannie and Freddie in spite of their prior ill designed privatizations.
Regardless of whether you believe they were leaders or followers in the sub-prime lending debacle—and the evidence overwhelmingly favors the former view–they have always represented a systemic risk and are inherently inconsistent with a competitive financial system. There are significant roles for government in a competitive market oriented housing finance system, but this isn’t one of them.
Public deposit protection is here to stay. Nobody is suggesting getting rid of the Federal Deposit Insurance Corporation, but public protection requires appropriate regulation.
Whether homeownership subsidies such as the mortgage interest deduction are appropriate is an ongoing debate. Nobody is suggesting getting rid of all homeownership subsidies, but credit subsidies for low-income borrowers and other politically preferred groups should be budgeted, targeted and separated from finance.
Discrimination in lending that is not based on the ability to pay is illegal. Nobody is suggesting relaxing current anti-discrimination laws and regulations, but competition often mitigates all forms of inappropriate lending discrimination better than regulation.
Capital market financing will remain necessary. Nobody is suggesting getting rid of the FHA/Ginnie Mae program or the almost equally massive Federal Home Loan Bank System, but reforms of these programs are necessary after the housing markets recover.
Private label mortgage securitization contributed to the sub-prime lending debacle. Nobody condones the abuses, but private label securitization worked well until regulatory distortions encouraged securitizers to bypass the private mortgage insurance industry, the traditional gatekeepers responsible for preventing excessively risky lending.
A competitive market oriented system serves qualified home borrowers and lenders best but has few political constituents. Politicians much prefer the deferred off budget costs of Fannie and Freddie but the long run costs of delivering subsidies that way far exceed the benefits.
The four steps necessary to restore a stable competitive market oriented housing finance system are:
I have a ritual on elections. I volunteer to be a pollwatcher. I have done this several times. It makes me feel like I am “doing something” even though it is probably, on the margin, nothing. I am in a state of suppressed hysteria and can’t sit still or focus on Election Day, anyway.
This time I signed up with the Republican Lawyers Committee. They had a meeting a week or so before the election at the Union League club. It was a class, basically a primer on election law. It had CLE credit, too. Woo hoo. I went to that, and it was pretty good, and I met some cool people.
One guy there was acting really weird, demanding to know why he could not challenge a voter who did not speak English and “does not belong in this county.” His demeanor was all wrong. He slumped in chair, talked too loudly and was offensively argumentative. Other people argued back against him in a sane way. Maybe it is not paranoid to think he was a plant, from some Lefty blog or something, fishing for a chance to talk about how the Republican lawyers are bigoted against Spanish-speakers. He got nowhere, and left in the middle of the presentation. Strange.
That the US financial system crashed and almost collapsed in 2008, causing a globally systemic financial crisis and precipitating a global recession is accepted fact. That US sub-prime lending funded the excess housing demand leading to a bubble in housing prices is also generally accepted. That extremely imprudent risks funded with unprecedented levels of financial leverage caused the failures that precipitated the global systemic crash is a central theme in most explanations. All of the various economic theories of why this happened, from the technicalities of security design (Gorton, 2009) to the failure of capitalism (Stiglitz, 2010) can be reduced to two competing hypotheses: a failure of market discipline or a failure of regulation and politics.
While still sifting through the wreckage and rebuilding the economy in mid July, 2010, the Congress passed the 2,315 page Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to prevent a reoccurrence of this disaster. The disagreement in the debates regarding the appropriate policy prescription reflected the lack of a consensus on which of these two competing hypotheses to accept. The risk was that, following the precedent established in the Great Depression, politicians will blame markets and use the crisis to implement pre-collapse financial reform agendas and settle other old political scores. By having done just that, this Act worsens future systemic risk.
That there was little or no market discipline is obvious. Contrary to the deregulation myths, regulation and politics had long since replaced market discipline in US home mortgage markets. Regulators didn’t just fail systemically to mitigate excessive risk and leverage, they induced it. This didn’t reflect a lack of regulatory authority or zeal, as politicians openly encouraged it.
The politically populist credit allocation goals that promoted risky mortgage lending, whether or not morally justifiable, are fundamentally in conflict with prudential regulation. The system of “pay-to-play” politically powerful government sponsored enterprises (GSEs) was a systemic disaster waiting to happen. The recent advent of the private securitization system built upon a foundation of risk-based capital rules and delegation of risk evaluation to private credit rating agencies and run by politically powerful too-big-to-fail (TBTF) government insured commercial banks and implicitly backed TBTF investment banks was a new disaster ripe to happen. Easy money and liquidity policies by the central bank in the wake of a global savings glut fueled a competition for borrowers between these two systems that populist credit policies steered to increasingly less-qualified home buyers. This combination created a perfect storm that produced a tsunami wave of sub-prime lending, transforming the housing boom of the first half decade to a highly speculative bubble. The bubble burst in mid-2007 and the wave crashed on US shores in the fall of 2008, reverberating throughout global financial markets and leaving economic wreckage in its wake.
By the time the financial system finally collapsed bailouts and fiscal stimulus were likely necessary even as they risked permanently convincing markets that future policy will provide a safety net for even more risk and more leverage. Given this diagnosis, how to impose market and regulatory discipline before moral hazard behavior develops is the most important and problematic challenge of systemic financial reform.
The public policy prescription is simple and straightforward. Prudential regulation remains necessary so long as government sponsored deposit insurance is maintained, which seems inevitable. Prospectively the traditional regulatory challenge of promoting market competition and discipline while safeguarding safety and soundness remains paramount. But the prudential regulation of commercial banks needs to be de-politicized and re-invigorated, with greater reliance on market discipline where public regulation is most likely to fail due to inherent incentive conflicts. This means sound credit underwriting and more capital, including closing the off balance sheet loopholes typically employed by big banks and eliminating the incentives for regulatory arbitrage. Universal banking should remain, but divested of hedge fund and proprietary trading activity. In addition, firms that are “too big to fail” (TBTF) are probably too big to be effectively controlled by regulators and should either be broken up or otherwise prevented from engaging in risky financial activities by reducing or eliminating their political activities.
Most importantly, the two main sources of TBTF systemic risk and subsequent direct government bailout cost, Fannie Mae and Freddie Mac, no longer serve any essential market purpose. The excess investor demand for fixed income securities backed by fixed rate mortgages that fueled their early growth is long gone and now easily met by Ginnie Mae and Federal Home Loan Bank securities alone, as fixed nominal life and pension contracts have largely been replaced by performance and indexed plans. Fannie Mae and Freddie Mac should be unambiguously and expeditiously liquidated subsequent to implementing an adequate transition plan for mortgage markets.
Kevin Villani is former SVP/acting CFO and Chief Economist at Freddie Mac and Deputy Assistant Secretary and Chief Economist at HUD, as well as a former economist with the Federal Reserve Bank of Cleveland. He was the first Wells Fargo Chaired Professor of Finance and Real Estate at USC. He has spent the past 25 years in the private sector, mostly at financial service firms involved in securitization. He is currently a consultant residing in La Jolla, Ca. He may be reached at kvillani at san dot rr dot com.
The city of Philadelphia, Pennslyvania is home to USS Olympia:
USS Olympia was a protected cruiser in the United States Navy during the Spanish-American War. She is most notable for being the flagship of Commodore George Dewey at the Battle of Manila Bay. The cruiser continued in service throughout World War I and was decommissioned in 1922. As of 2010, Olympia is a museum ship at the Independence Seaport Museum in Philadelphia, Pennsylvania. Olympia is the world’s oldest steel warship still afloat.
Now the Olympia – the last surviving vessel from that 1898 conflict – could face an ignoble end as an artificial reef off Cape May if a new benefactor cannot be found.
The Independence Seaport Museum and the Navy have already checked with officials of New Jersey’s Artificial Reef Program on the possibility of sinking the ship, once a source of national pride.
“Another option would be scrapping Olympia,” said James McLane, interim president of the museum, which owns the ship and is adjacent to it at Penn’s Landing. “But the Navy has told us that ‘reefing’ is better because it would allow divers to go down on it and would preserve Olympia.”
The museum can no longer afford the ship’s upkeep, McLane said. At least $20 million is needed to tow, restore, interpret, and endow the deteriorating vessel.
Fortunately, as Dmitri Rotov points out, the state of Pennsylvania has its priorities straight:
Tough economic times – but the $20 million needed to rehab the Olympia is exactly the amount allocated in the new state budget for an Arlen Specter library and a John Murtha “Center for Public Policy.”
I think the answer is simple: It give the mayors external actors to blame so they don’t have to answer for their own incompetence.
Think about it. What is every one of those mayors really saying when they talk about disarming the citizenry? They’re really saying, “Hey, it’s not my fault our city has become a shooting gallery, it’s the fault of those rednecks three states over! You can’t blame me because I can’t control what those rednecks do! Oh, if only we could overturn two centuries of Constitutional law we would have safe streets! Until that happens, don’t even think of voting me out! It wouldn’t be fair!”
