The 2008 Economic Crisis

I have my own reasons for disapproving of the recent bailout plan, but most of it has to do with the blatant excesses enjoyed by the CEOs and other top executives at the now-failing companies, as well as their poor business choices to engage in an extremely risky industry for sheer profit gains. But what I am going to share here is the history of how we got to where we are today, and urge you to fact-check and do your own research to come to your own conclusions and opinions about the current state of economic affairs in our country. And please, post links to relevant resources and facts that you may have come across in your own research.

1. 1982: the Garn-St. Germain Depository Institutions Act is passed and basically de-regulates the Savings and Loan industry. S&L's start handing out cheap mortgages while simultaneously making risky investments that had no standards/ models of worth and ultimately (7 years later) result in a lot of bad debt and worthless assets. (Translation: not a very good business strategy).

2. 1985: Richard Pratt, the chairman of the Federal Home Loan Bank Board, starts to see where the S&L industry might be headed and institutes a rule to limit the types of investments these companies can engage in. It should be noted that when a greedy company is already well-invested in something, rule or no rule they're probably not going to pull out when the money is (or rather "seems") good. And this is promptly what some of the S&L companies did (including Charles Keatings' infamous Lincoln Savings & Loan Association).

3. 1989: S&L companies start going belly-up. The Resolution Trust Company is formed to buy up the bad debt of some 747 S&L companies with $125 billion in taxpayers' money.

4. 1999: Phil Gramm (remember that name!) comes along and pens the Gramm-Leach-Bliley Act which clears the Senate. This bill repeals portions of the Glass-Steagall Act which was passed in 1933 to curb the speculation and bank consolidation factors that lead to the Great Depression. Good idea, huh? So now, banks are able to have more mergers and to become more directly involved in the stock market, bonds, and insurance. This means banks can be a savings bank, an investment bank, a brokerage AND an insurance provider all-in-one.

Are you getting all of this? The S&L industry set up its failure through deregulation, and now banks are being deregulated. 2 + 2 = ???

5. 2000: Phil Gramm comes up with the Commodity Futures Modernization Act and slips it into a "must-pass" spending bill on the last day of the 106th Congress. This expands the scope of futures trading, creates new modes for speculation, and limits the scope of regulation for investments. Enter unregulated "credit default swaps" (insurance that banks could exchange back and forth, but an item on which no one could pin any actual worth - name your price!).

Okay, so I said remember the name Phill Gramm. I should mention that the past couple of bills I mentioned were largely crafted with the help of industry lobbyists, aka scum-of-the-earth. The most famous direct result caused by Gramm's deregulation was the "Enron Loophole" that exempted energy trading from oversight, written by lobbyists working with Gramm. EnronOnline was born, electricity trading had no oversight or transparency, and the results were 38 Stage 3 blackouts (previously there had been only ONE of these Stage 3 blackouts in the entire history of CA), wholesale energy prices increased 3000% (despite a production capacity equal to 4X the demand), the public utility companies were going bankrupt and the governor was forced to sign private energy contracts while the state of CA lost $11 billion to Enron.

Phil Gramm was also John McCain's chief economic adviser until in the middle of our economic meltdown he called America a bunch of "whiners" making for bad press. McCain immediately distanced himself from Gramm, but up until that point he had praised Gramm as "one of the smartest people in the world on the economy."

But back to the 'real' economy!

7. Credit default swaps allowed home down payments to become 3%, 1%, 0%, no credit check necessary, no employment requirements ... are you starting to see how someone who couldn't necessarily afford their mortgage was able to acquire it in the first place? These credit default swaps made the sub-prime mortgage industry possible. And the banks started trading them like an investment that kept growing in value, collecting the fees relatively effortlessly. However, being that the swaps were completely unregulated the banks/ trading companies didn't need insurance to cover the potential losses if anyone were to default.

Here's a snapshot of the industry value last spring (2007), as discussed by business correspondent Bob Moon on American Public Media's Marketplace:

• Value of the entire U.S. Treasuries market: $4.5 trillion.
• Value of the entire mortgage market: $7 trillion.
• Size of the U.S. stock market: $22 trillion.
• Size of the credit default swap market last year: $45 trillion. (3X the whole U.S. gross domestic product!!)
  

Though it is now coming to light that these swaps may have actually totaled $70 trillion, or $5 trillion more than the GDP of the entire world!!!

8. 2008 Financial Crisis Snapshot:

• March 16: Bear Stearns collapses and is purchased by JPMorgan Chase for $2/ share (just last year shares were being traded for $170 a piece). This was supposed to curb the industry hits due to the sub-prime meltdown.
• September 6: The government seizes Fannie Mae and Freddie Mac.
  
• September 14 (Sunday): Bank of America buys Merrill Lynch for $50 billion.
• September 14 (Sunday): Lehman Brothers files for bankruptcy.
• September 16: AIG purchased by the government for $85 billion.
• September 19: President Bush announces $700 billion bailout plan to rescue banks from bad debt by purchasing illiquid assets.
• September 25: JPMorgan buys Washington Mutual for $1.9 billion.
  
• September 27: Wachovia enters talks with potential buyers as shares plummet.
• September 29: The House of Representatives rejects the "bailout" plan and the Dow Jones Industrial Average drops 777 points.
• October 1: The Senate passes "rescue" plan with an additional $110 billion in pork barrel spending, bringing the total to $800 billion in taxpayer spending.
• October 3: The House passes the "rescue" plan.

To summarize, the consistent deregulation in speculation, consolidation, trading and investments opened the doors for the very practices that we are now seeing as the root causes of failure for these large financial institutions. In a free market capitalist economy, some would argue that companies should be allowed to conduct business however they want, and that it is not the federal government's responsibility to regulate private institutions. (But the Federal Deposit Insurance Corporation is a good thing because I want my money to be protected in case the practices of my bank jeopardize my personal savings.) It is this mentality that I think is extremely dangerous and destructive in any economy; this separation of individual and consolidated wealth and the idea that one doesn't depend on the other.

Congress has a responsibility to regulate commerce based on Article I, Section 8 of the Constitution. The current crisis is the second time in the past two decades that private corporations have relied on the taxpayers to foot the bill for their predatory practices. I believe it is therefore necessary for rules and regulations to be established regarding the conduct of these large investment firms. No one likes regulation. But the fact of the matter is that money has the ability to feed greed and power and to cloud good judgment when money becomes the sole objective.

I close with this quote from Upton Sinclair: It is difficult to get a man to understand something when his salary depends upon his not understanding it.

History
More History
Bear Stearns deal
Lehman Brothers fails
AIG's deal
Dow Jones Industrial Average Historical Prices
The S&L Crisis and Its Relationship to Banking

Why Bolivia Matters

A close friend of mine landed in Bolivia in January 2008 with the Peace Corps. She was then stationed in Sacaca in the western highlands to teach about natural resources. Due to the political unrest and violent protests currently happening there, all Peace Corps members were evacuated to Peru via a cargo plane. The Peace Corps indefinitely suspended its programs in Bolivia and are giving all evacuated members RPCV (returned Peace Corps volunteer) status. In my quest to stay updated on the reality of the situation, and to uncover what the specifics of the Bolivia situation are and why this has become an international issue, I have dug up the following information.

First a quick background: Bolivia is divided along the eastern and western halves. The eastern lowlands are primarilly the urban centers, though represent an overall minority population that is fairly diverse and consists of a number of European immigrants, and controls the majority of resources. The western highlands are primarilly rural, agricultural farmlands, and home to an overall majority native Indian population, and lack technology and resources. In December 2005, Evo Morales was elected president - Bolivia's first Indian president. This past August Bolivia held a referendum recall initiated by opposition leaders, and the results favored Morales for a second time.

The media is playing the 'rich vs. poor' and 'Indian vs. white' cards pretty heavily, but that's only a small part of the larger picture - that being that Morales seeks to overhaul the constitution on the following measures:

• Unify the country/ central government (eastern provinces want autonomy and some states have already passed referendums declaring independence)
• Equalize the distribution of oil & natural gas revenues and use a portion of revenues to expand social programs (revenues are currently controlled the eastern lowland states who would in effect lose some of their profits)
  
• Redistribute landholdings to give the western highlands (and majority indigenous populations) more land
  

Talks have been going on since August 2006 between Morales and opposition leaders with regards to the new constitution.

Back in May Santa Cruz (where the current violence/ protests are mounting) passed a declaration for autonomy (with an 85% majority) which ultimately gave it international rights as an independent country of sorts. Being that they are the seat of power for the eastern lowland states, this paves the way for the remaining 3 eastern regions (Pando, Beni, and Tarija) to hold similar referendums which now makes Morales' position for a unified Bolivia even harder. Note that the Bolivian National Congress outlawed the referendum, deferring back to Morales' ruling. Santa Cruz is home to a quarter of Bolivia's population, and while the eastern lowlands combined only account for about 35% of the country's total population, they control 50% of Bolivia's economy and 85% of Bolivia's energy. So essentially, Santa Cruz is using it's possession of resources to stand up to the central government of Boliva.

Over the past year, Morales has been securing government control over the oil pipelines and natural gas fields. However, the key to maintain and invest in new infrastructure remains tied in the hands of the technological savvy eastern states. (Sound the Peace Corps horns for recognizing this huge disconnect and trying to expand the resources of basic knowledge to the western highlands to pave the way toward future education & progress, albeit it seems that the local governments very much took pride in a 'we're fine the way we are' attitude).

In order to secure the balance between resources & technology needed to make Bolivia successful, it seems the last remaining leverage Morales has to prevent secession by the eastern states is unfortunately the military who remains loyal to the central government. Making the potential of military action even more unfortunate is Hugo Chavez' support which could ultimately turn into Venezuelan military support for a unified Bolivia - contrasted with surrounding nations (Brazil's) interest in the oil/ natural gas supply (and therefore peace to the east) which could ultimately turn into support of the eastern lowlands' interests. This aspect of military intervention turns the issue far beyond Bolivia and has potential to impact the power structure between Bolivia, Paraguay, Uruguay, Argentina, Brazil and Venezuela - altering the fabric of over 3/4 of the South American continent.

Links:

http://www.stratfor.com/analysis/bolivia_0

http://geology.com/world/south-america-map.gif

http://www.cnn.com/2008/WORLD/americas/09/20/bolivia.talks/

Any comments/ additional perspectives are welcomed!

The right to birth control

As a concerned and voting citizen of the United States of America, I would like to address the current Administration's plan to undermine our Constitutional rights by enacting limitations on the access to birth control. I'd like to start by reminding you what some of these rights are.

The Constitution's preamble guarantees all U.S. citizens domestic tranquility, general welfare and individual liberty. Under the Bill of Rights we have additionally been granted the rights to freely express our beliefs (the First Amendment) and the right to security/ privacy from government invasion within the home (Fourth Amendment). Furthermore, the state shall not deny or disparage these Constitutional rights (Ninth Amendment), nor shall they enforce any laws that deprive citizens of life, liberty, or property without due process of law (Fourteenth Amendment).

In 1965, the Supreme Court case of Griswold v. Connecticut addressed the privacy of a married couple to engage in the use of birth control versus the state's law which declared contraception illegal. The Court ruled in favor of Griswold and cited rights to individual liberties granted by the U.S. Constitution. In that decision, Justice Douglas stated that "the First Amendment has a penumbra where privacy is protected from governmental intrusion." It was furthermore stated, "The present case, then, concerns a relationship lying within the zone of privacy created by several fundamental constitutional guarantees. And it concerns a law which, in forbidding the use of contraceptives, rather than regulating their manufacture or sale, seeks to achieve its goals by means having a maximum destructive impact upon that relationship. Such a law cannot stand in light of the familiar principle, so often applied by this Court, that a 'governmental purpose to control or prevent activities constitutionally subject to state regulation may not be achieved by means which sweep unnecessarily broadly and thereby invade the area of protected freedoms.'"

The current Administration in its quest to associate "birth control" with abortion will undermine our fundamental Constitutional rights. When the government is allowed to limit our personal medical choices they open the door to impose restrictions on any type of domestic tranquility, general welfare and individual liberty granted in the U.S. Constitution; they set a precedent for future decisions. It should be noted that "birth control" includes but is not limited to any of the following methods:

Pill
Tubal ligation
Male condom
Vasectomy
Injectable
Withdrawal
IUD
Natural family planning (including monitoring basal body temperatures and choosing when not to engage in sex)
Implant
Diaphragm

While the "abortion" debate is centered around what constitutes "life" and who should have decisions to alter or affect a life, "birth control" has no place for debate/ restriction by the government. Birth control is not just about individual liberty, it is about scientific and medical knowledge. Given the freedom of both men and women to alter the physical state and/ or genetic make-up of their bodies via medical or surgical procedures including but not limited to: cosmetic and plastic surgery, liposuction, tattooing, in vitro fertilization, hormone replacement therapy, chemotherapy, anti-aging cosmetics, vitamin supplements, sexual enhancement drugs (such as Viagra), makeup/ cosmetics, and the vast array of pharmaceuticals on the market, birth control methods represent just a small fraction of methods available to alter the natural state/ processes of the body. Once we allow the government to restrict one, we open all to the possibility of unrestricted limitation. Birth control is one of many medical (and sometimes even natural) options that is and should continue to be protected by our Constitutional rights to domestic tranquility, general welfare and individual liberty.

Love and Religion

What do I believe (in)? How do I address someone who places all their faith in God - the literal God from the Bible, whose word is the Bible?

I do not believe that Jesus "died on the cross for our sins" but rather he believed in something and it felt so right to him that he shared that belief/ that message with others and chose not to give in to his opressor's/ supressor's desires for him to be quiet or to renounce his beliefs and he was thus punished/ crucified. According to the Gospel of Thomas Jesus says, "If those who lead you say to you, 'Look, the Kingdom is in the sky,' then the birds of the sky will get there first. If they say, 'It is in the sea,' then the fish will get there first. Rather, the Kingdom is inside of you, and it is outside of you. When you come to know yourselves, then you will become known, and you will realize that it is you who are the children of the living father." It is exactly this sort of rhetoric that was a threat to the established Church at the time, for if the Kingdom was both inside and outside of you then it was not just in the Church, or in a specific religion or governing body. The Kingdom is everywhere. In the here and now. And every person can identify with it. This is probably why only four of the fifty-two ancient Christian gospels are included in many Bibles; the dialogues found in Thomas and others could be destabilizing to many church leaders and members.

I do not believe that the Bible is the word of God. I believe it is a story just like many stories and myths that exist to help explain where we came from and establish morals and lessons that we should all abide by to maintain peace. I believe that peace is found within, so I do not find the Bible a necessity to justify peaceable actions or to share life with God or to decipher God's message. God's message is all around us; the squirrels scavenging for food, the flow of a river, the sound of the woods, the dandelions covering fields with gold in the spring, a flower blossoming, leaves changing colors, snow blanketing the ground, the sound of your own heartbeat.

Call it God, Allah, Qi, I call it Love. When you act out of love, I suppose that is the equivalent to "carrying out God's will." Once you truly Know Thyself, the eternal, primal, hungry you, the you within, then you can know peace and love. That desire for peace and love is within every being. That is the common thread connecting all humans of every race, color, nationality, age, gender, and sexuality. The universal "god" if you will. "Love thy enemy" and thy enemy ceases to exist. Act with love and there will be no enemies. This is so simple a concept.

I just finished the January/ February issue of Utne magazine and the former editor, Nina Utne closed out the issue with a very clear message that relates to this subject I've been discussing.

The real basis of religion and the real goal of spirituality
are not building institutions or enlightenment, [Author and
entrepreneur Paul] Hawken says, but the transformation
of each of us into a person who will help save the world
through acts of kindness, compassion, and generosity.

The theme that was woven through the [17th annual
Bioneers] conference is both simple and profound. Each of
us has the ability to scatter seeds of kindness. Walking
through life with the intention to do so - and acting on it -
is the most radical and effective action we can take.

I will close with my final conclusion of what it is exactly that I believe, and believe can bridge all religions, all peoples of the world:

Love Is. God is Love.
Hatred (and fear) destroy. The devil is Hate.