Great Speeches

This is from the TV series 10 Days to War: Episode 8; Our Business is North.  Kenneth Branagh portrays Lt. Col. Tim Collins.  This speech is based on the actual speech delivered by Lt. Col. Collins to his troops on  19 March 2003 prior to the start of the second Iraq War.






Jack Nicholson as Col. Nathan R. Jessep in A Few Good Men.  Tom Cruise got top billing, but c'mon.  Nicholson's the real star.  In the film, Jessep is portrayed as the heavy; the bad guy.  But after this speech, there's no doubt in my mind that he's the hero. 


 

Kenneth Branagh again, this time as the title character in Shakespeare's Henry V. The mother of all inspirational speeches.




Churchill was a master of the motivational speech. So many to choose from. But this one is illustrative of the man's power to inspire. The last line is history.



A very dignified recital by Jeff Daniels of one of historie's shortest and most eloquent speeches; Lincoln's Gettysburg Address.





The Great Communicator, Ronald Reagan. Ignore the title at the top. This is not a famous speech, but the genuine character of the man shines through.



Margaret Thatcher was for Britain what Ronald Reagan was for America. The embodiment of character. She knew what she believed and was proud of it.

Interview with Charles Krauthammer

This is a link to a Der Spiegel interview with Charles Krauthammer, who I believe is one of America's best opinion journalists.

Der Spiegel

Jess

Connecting the Dots

I connected some dots yesterday.  I read an article online, and that led me to another article.  That led me, in turn, to several Wikipedia entries, and when I was done, I'd discovered a few interesting connections that had not been obvious to me before.  I knew most of the individual pieces of information, but I hadn't seen the big picture.  I hadn't connected the dots.  Here are the links to yesterday's reading list in the order that I read them.  Kind of odd.  The bibliography coming before the article instead of the other way around.

Obama Team Ignores Volcker at its Peril. by Bill Fleckenstein on MSN Money
Volcker Fails to Sell a Bank Strategy  by Louis Uchitelle at the NY Times
Glass-Steagall Act  on Wikipedia
Gramm-Leach-Bliley Act  on Wikipedia
Community Reinvestment Act  on Wikipedia 

Some of you might see where this is leading.  I chose to read the Fleckenstein article because the title intrigued me.  Paul Volcker is the 82 year old former Chairman of the Federal Reserve Board under Ronald Reagan who is often credited with having had the insight and the courage to raise interest rates to rein in the runaway inflation of the Carter years.  He is currently the head of the president's Economic Recovery Advisory Board.   This is the same advisory board, by the way, that includes General Electric CEO Jeff Immelt.  I only mention this because some of you may be familiar with this group as Glenn Beck frequently refers with derision to the potential conflict of interest that Immelt's position on the board represents.  But anyway, the crux of Fleckenstein's article was basically to highlight and support the position of Louis Uchitelle's NY Times article, to wit:  Paul Volcker is an advocate of re-regulating large financial institutions to limit the combination of banking, insurance, and investment activities in one enterprise, but his advice is being ignored by the Obama administration.  He's essentially saying we should bring back Glass-Steagall in some form.  That's a bold step, but Volcker's opinion should count for something.  Volcker is saying that if Glass-Steagall hadn't been abandoned, Citigroup, and Bank of America, and many of the other huge financial conglomerates couldn't have gotten so big, and they couldn't have used FDIC guaranteed depositor's money to participate in the riskier areas of the market, essentially placing bets that would make them rich if they won, and make taxpayers poor if they lost.  Or as it has been referred to elsewhere, privatizing the profits, and socializing the losses. 


So here's a short history lesson.  In 1933, during the Great Depression, Congress passed the Glass-Steagall Act.  Glass-Steagall created the Federal Deposit Insurance Corporation (FDIC), to guarantee the public's bank deposits and restore confidence in banks.  But its main goal was to prevent a recurrence of some of the most egregious banking practices that are widely believed to have led to the market crash of 1929 and the subsequent bank failures of the 1930's.  Most famous of the restrictions imposed on the banks was a prohibition on any financial institution from participating in more than one of the following three businesses:  Commercial banking, investment banking, and insurance underwriting.  In 1999, the Gramm-Leach-Bliley Act essentially removed these restrictions allowing the banks to incorporate the other riskier activities into their business model.  So for instance, Citicorp, which used to be just a bank, could merge with insurer Travelers Group which had already merged with or bought investment houses Salomon, Shearson, and Smith Barney.  Citicorp thereby became Citigroup, a huge financial behemoth, and a major participant in the recent financial meltdown. 



That's the short history.  The black and white version.  Now let's add a little color.  When financial deregulation/reform was being debated in Congress in 1999, the Senate and the House each passed their own version of the bill, and so it went to a conference committee which had a difficult time reconciling the two versions.  In order to garner more Democratic support for the joint bill, Republicans agreed to measures that would  strengthen the pre-existing Community Reinvestment Act (CRA).  Congress originally passed the CRA in 1977 to reduce discriminatory credit practices called redlining.  Banks would routinely refuse to offer loans and other banking services to residents in certain neighborhoods if those neighborhoods demonstrated a higher than acceptable default rate.  Charted on a map of the community, the "bad areas" would be surrounded by a red line, hence the name.  Even people and businesses that were otherwise creditworthy might be refused banking services if they lived within the red lines.  Democrats argued that this effectively discriminated against low income and minority borrowers.  Democrats insisted that a provision be added to the Gramm-Leach-Bliley financial reform legislation to further enhance the ability of the CRA board to influence banks to provide riskier loans in the name of equality in lending.    In order to coerce banks into making loans that they did not feel were good risks, the legislation that emerged out of conference stipulated that any application from a financial institution seeking a merger, an acquisition, or additional branch expansion would not be favorably considered if any of the entities had a less than satisfactory rating on its most recent CRA exam.  This tremendously increased the leverage that the CRA board had on the lending practices of banks.  The CRA essentially had veto authority over any bank expansion activity.  They could compel (blackmail) the banks to do their bidding as regards high risk lending or face the consequences of restrictive regulatory decisions.  The CRA used this authority to promote their agenda of expanding low income and minority home ownership, by compelling banks to make risky loans that they might not otherwise have made.  Further promoting these risky practices, Democrats in Congress turned a blind eye to the increasing warning signs at Fannie Mae and Freddie Mac.  These were the quasi federal agencies that were buying these bad mortgages from the originating banks using funds raised by selling bonds with an implied federal guarantee.  We know how that movie ended.  When inflated housing prices started to decline, highly leveraged individuals started defaulting on mortgages they could never afford in the first place.  Fannie and Freddie, were left holding larger and larger numbers of non performing mortgages, and soon could not make the payments on the bonds they had issued to buy these ill conceived obligations.  The bonds, having an implied guarantee from the federal government, couldn't be allowed to default, so the taxpayer stepped in at huge expense to make good on the debt.  

Click here to see video of Congress in denial of problems at Fannie and Freddie



The analogy of the perfect storm is inescapable.  The combination of multiple factors, each posing a limited threat in and of itself,  coming together at the same time to create an overwhelming disaster.  The Federal Reserve lowers interest rates to aid the economic recovery from the dot.com stock market crash in 2000. Low rates promote a feeding frenzy in home purchasing creating a bubble in that market.   Glass-Steagall is eliminated.  That allows banks to get bigger, as in too big to fail.  It allows them to take on risky investments, and do it with taxpayer (FDIC) guaranteed depositor money.   The very legislation that eliminated Glass-Steagall is, by coincidence, the same legislation that puts the teeth into the CRA.  Banks are compelled to make riskier and riskier loans to over-extended buyers at the height of the bubble.  They are further encouraged to make these loans because Fannie and Freddie, acting under pressure from Congress, are buying them up as fast as they can.  Risk takers at the big banks do their part by creating complicated and mysterious derivatives such as collateralized mortgage obligations (CMO's).  Rating agencies who don't have a clue what the potential hazards are with this toxic paper bless it with a triple A credit rating.  And it all works just fine until housing prices start to drop.  Then it all comes crashing down.  As Warren Buffet says, "Only when the tide goes out do we get to see who has been swimming naked."

I had most of this information prior to yesterday morning.  I already knew about how low interest rates led to the housing bubble.  I knew that banks had capitalized on the frenzy with risky loans and riskier derivatives.  I knew that, with Congress' encouragement, the CRA and Fannie and Freddie had played a role, as had the rating agencies.  I knew a little bit about Glass-Steagall and Gramm-Leach-Bliley.  But until today, I had never seen the relationships between all these different factors.  I hadn't seen the bigger picture; the flow of events; the cause and effect.  I had never connected the dots.


So what happens now?  Is Paul Volcker right?  Should we re-regulate the financial institutions ala Glass-Steagall?  Congress and the Obama administration are contemplating financial reform to ensure that something like the recent crisis doesn't happen again.  They apparently favor a regime that keeps the bank structure as it is in this post Glass-Steagall world, but imposes complex layers of regulation and bureaucracy to limit the potential for a repeat disaster.  Separating the entities as Volcker suggests sounds simpler.  Should the KISS rule be applied here?  Keep It Simple Stupid?  Or was H.L. Mencken correct when he said, "For every complex problem there is an answer that is clear, simple, and wrong?"  I'm not proposing an answer, just proposing the question.

Click here to hear bank analyst Chris Whalen on an alternative solution.  This guy is really good.  I understand about half of what he says.  Starts at 49:10 into the video---about 14 minutes.

Perhaps as important as the question of how we change the regulation of the financial industry, is the question of should we change it.  For many, this might be a no brainer considering what we've just been through.  But when I consider the issue, I'm coming from the point of view of a libertarian.  As a matter of principle, I prefer to err on the side of less government intervention in the free market as opposed to more.  But what of the equally vital principle of protecting the interests of the taxpayer and the consumer?  Its worthwhile to consider the merits of all the arguments.  A balance must be struck between the two competing principles.  If the FDIC provides a guarantee of the banks' depositor funding, then the government has an obligation to limit the risk that can be taken with taxpayer guaranteed money.  Certainly, FDIC guarantees are not going away.  Furthermore, if the banks, abetted by the rating agencies, provide inadequate or fraudulent disclosure of the risks they are taking with investors money, then that is surely a matter for government intervention.  Laissez faire does not imply abandoning the consumer to dishonest practices on the part of the financial industry.

This is not a partisan issue.  Democrats are largely to blame for the abuses associated with the Community Reinvestment Act and the lax regulation of Fannie and Freddie.  But Republicans are largely responsible for Gramm-Leach-Bliley and the repeal of Glass-Steagal protections.  The real culprit here is probably the financial services industry itself and the tremendous lobbying clout that it commands.  The big banks also contribute heavily to both Republican and Democratic lawmakers.  Both parties have been co-opted  by money from the financial industry.  This is more an integrity in government issue that a partisan issue.  I wish I could say that I had confidence that our political class had the vision and the integrity to get this right.  I do not believe they do.   When the last dots are connected, my guess is we'll find ourselves well shy of a sensible resolution.

Jess
                                                                                                            

The Tea Party Becomes a Documentary

On September 12, 2009, thousands of Americans came to Washington, DC to tell our politicians that we objected to their reckless spending, their mortgaging of our children's future, and their attempt to grow the power of the federal government at the expense of individual liberty.  I was there that Saturday along with my wife and son, and I have to tell you, it was one of the most inspirational experiences of my life.  My greatest fear while driving into DC that morning was that there would not be much of a crowd.  I felt morally compelled to join this demonstration, but would anyone else share my sense of obligation?  I was afraid that Americans would be too apathetic to stand up and protest the blatant grab for power that was taking place in Washington.  My fears were unjustified.  As we reached the New Carrollton Metro Station, we were greeted with a full parking lot and had to drive on to the overflow area.  There were lines ten to twenty deep at the ticket machines.  I generally shun large crowds, but I have never been so happy to be lost in a sea of humanity in my life.  I was not alone.  Overwhelming numbers of my fellow Americans shared my concerns and were prepared to do something about it.  Marching down Pennsylvania Avenue and standing in front of the Capital with thousands of like minded souls gave me hope that we might yet stop this juggernaut of big government out of control.
 
There was no one single cause driving this throng of people.  Everyone had their own specific motivating issues.  It may have been taxes, spending, immigration, gun control, health care, home schooling, abortion, vaccination, energy policy, cap and trade/tax, the fairness doctrine, prayer in schools, or card check. There were lots of people who were generally just fed up with a perceived lack of integrity in Washington, and yes,  there were even a few who had questions about the president's birth certificate.  There were people who were mainstream and some who were closer to the fringe.  I doubt that in that crowd of thousands there could have been more than a handful of people who shared my views on all of these issues.  But that was irrelevant.  We didn't have to agree on everything.  We were a coalition of individuals, each with their own significant issues; the issues that were important enough to them to bring them out there that Saturday morning.  Not just the issues about which they might have had an opinion, but the issues that were important enough to determine how they vote.  And even if no two of us could agree on all the issues before us, we were united under one common belief; that government has grown too big, too intrusive, and has forsaken the principles upon which this country was founded.

Today I learned that Tea Party: The Documentary Film will be released directly to DVD on Thanksgiving Day (watch movie trailer) to tell the story of the Tea Party Movement and the 912 Project.  I can only hope that the film will help encourage and inspire yet more Americans to rise to the challenge to take back our country from elements who want to abandon the principles of free markets, limited government and fiscal restraint.  There may be thousands or even millions of people out there who feel the way that I did;  people who hate what is happening to this country but feel helpless to stop it.  Maybe this film will restore the hope for them that the 912 March on Washington restored for me, and encourage them to take action to keep this a country that promises equal opportunity, not equal outcomes, and values individual responsibility above group entitlement.

Jess

What's Old Will Become New

I was sitting in my family room watching the news this evening.  The story they were covering at that moment wasn't particularly interesting, and my mind began wandering.  I started thinking about how I haven't played Solitaire with an actual deck of cards in years.  Make no mistake, I play lots of Solitaire, but its all on the computer now.  I have my oft repeated computer routines.  I bounce back and forth between news, commentary, finance, e-mail, and the occasional Google search on this topic or that.  Perhaps you're like me.  The transitions between these various endeavors are often punctuated with several games of Solitaire. 

Now I know that there are a myriad of variations on the game, but I am a purest.  I only play the original version.  Its not that I doubt the appeal of the newer games, its just a matter of habit.  Or, as his detractors often said of former president George W. Bush, perhaps you would accuse me of a lack of intellectual curiosity.  I prefer to believe that I'm simply an old fogey who is comfortable with my current practice , and I'm not going to fall victim to every new fad in single player digital entertainment that comes along.  I won't even play the version that comes with Vista.  When you move a card in that version, the program automatically flips over the hidden card underneath.  I hate that.  I prefer to do that myself with an additional click of the mouse as is required in the previous XP version of the game.  Is it just me, or does that make anyone else crazy?  Playing the Vista version for me is like kissing with your eyes open.

But that is not to say that I am totally lacking in imagination.  I have always introduced my own subtle twists to the rules of the game.  When I was young, I used to play with a conventional deck of cards.  But I soon came to appreciate that this could be very frustrating indeed, as I would typically lose far more games than  I ever won.  This was especially disappointing when I was a child.  I soon hit upon the perfect solution.  I would cheat.  I would change the order in which I took the cards from the deck to facilitate making progress in the game.  Or I would peek at one of the hidden cards to gain an advantage.  These, and any number of other liberties with the conventional rules, were sanctioned in my version of Solitaire.  And then I would count the number of times that I cheated in order to eventually complete a successful round of the game.  This way I had the satisfaction of always winning.  And the fewer cheats required, the greater the satisfaction.  And to win a game without cheating at all?  Well, that was a rare, and exhilarating experience.

Of course these days, that's impossible.  The digital game won't allow you to cheat.  I don't understand that.  Could I be the only one who cheats at Solitaire?  I can't imagine that everyone didn't occasionally "revise" a move and try another one that was more conducive to  victory.  How hard could it be to program in a "Cheat Option" for Solitaire.  C'mon Microsoft.  Surely I'm not the first to suggest it.  Maybe I'll write a letter to Apple.  Even with eighty gazillion I-Phone apps, I bet there is room for one more.  But even with Microsoft's Solitaire, my wife and I have our own peculiar rules.  And oddly enough, our rules make it even harder to succeed rather than easier.  Before I started playing digital Solitaire, I didn't even know that there were rules to keep a numerical score.  But on the computer, every move of a card earns points.  Each time you flip over a card in the lower array after having moved the card on top to another column, you earn five points.  Each time you find a place for a card from the deck in the lower array of cards, another five points.  And every time you bring a card from the lower array up into the four stacks on top, that garners you another ten points.  The maximum score, therefore, is 745.  That is a perfect game.  But to accomplish that, you can never move a card from the deck directly onto the upper four stacks.  If you do, you forego the five points you would have earned for placing it on the lower array first.  My wife and I will intentionally ignore the opportunity to move a card from the deck directly to the upper four stacks because that is essentially conceding defeat.  In addition to those scoring rules, the game also starts to deduct 20 points for every rotation through the deck after the fourth.  Once we have been through the deck four times, and we get to the last card, we'll usually just start a new game.  We will not see the Promised Land on this journey.  Time to start anew.  There is no telling how many games we could complete if we didn't follow these additional rules.  Notice I said how many we could complete, not how many we could win.  To us, a completed game with a score of less than 745, is just that; a completed game.  It is not a win.  To you, a glorious victory; to us, victory perhaps, but a hollow victory.

When we do win, though, my wife and I have a ritual that we share.  No victory lap, no loud celebrations, no back slapping, or trash talking one another with arrogant braggadocio.  We simply leave the completed game on the screen with the prominent 745 displayed at the bottom of the playing field, and walk away.  We each just walk away and wait for the other to haplessly wander to the computer screen to be greeted with the taunting proof of the other's triumph.  A testament to our superior skill.  A subtle, if somewhat mocking, "in your face".   Always good for a grudging smile.

Now let me back up just a bit.  I started this post with the revelation that I had not used an old fashioned deck of cards to play Solitaire in years.  That in turn led me to this epiphany, and the reason I started writing this piece in the first place.  There are probably children today who have never used a deck of cards to play Solitaire.  Someday soon, if we're not there already, there will be children who don't even realize that it is possible to play Solitaire with a deck of cards.  I am looking forward to the day when I can interupt my grandchildren playing computer Solitaire with the words, "Let me show you a card trick."  Then I'll proceed to deal out the cards in the standard Solitaire arrangement, all the while watching their faces and waiting for that look in their eyes when they first spot the familiar pattern. Then I'll start moving cards here and there according to the accepted rules, and in a few minutes, I'll invite one of them to take the deck and finish the game.  If I've misread the likely outcome, they'll groan and say, "Not now grandpa.  Were playing on the computer."  But in my imagination, they're fascinated with this new and totally unexpected discovery.  They'll demand that I teach them how to deal out the cards, as the computer game does that for them, and they'll have no idea how to proceed.  Pop quiz:  How many columns do you deal out in the lower array?  Once they've mastered the rules, they'll argue with each other over who gets to play the next game.  They'll beg me for a second deck of cards so they can both play at once.  They'll take a deck of cards to school with them to teach their friends this "new" way to play Solitaire.  They will thrive on the attention, as all their friends gather around in admiration to learn the secrets that only they can reveal.  What's old will become new.  And who knows; if they get frustrated with the new game, as we all do from time to time, maybe I'll even teach them how to cheat!

Jess

Quiz Answer: 7