Faith

We are hearing a lot of talk about Faith this election season.

Faith is necessary to allow us to make decisions about our life in matters where there is a lack of definitive factual data.   We often have to rely on faith to make decisions because some things are unknown or unknowable.  The exact nature of God is a big unknowable.  But whatever Gods exact nature, we are endowed with a brain and I think it is because we are supposed to use it.

Unfortunately, for many people these days it seems like "Faith" has become an excuse to ignore data, or as a shortcut to avoid thinking about complex issues, or disturbing their preconceived notions.

Some facts pertinent to Drug Policy

Facts selected from an article in the Economist, June 4, 2011. pp  70-71, which was reviewing the findings of the Global Commission on Drug Policy, a group that includes the ex-presidents of Mexico, Brazil, Columbia and Switzerland as well as officials from the UN and some former US officials.  The findings called for deregulation of all drugs and experiments with legalization of drugs, begining with cannibis.

Findings - for the period from 1998 to 2008 drug consumption continues to rise throughout the world.  The US Federal Government spent $15 billion in 2010 on drug control, another $25 billion on other public spending related to drug control.  Campaigns to drive Narcos out of one country just drive them into another.

Giving out clean needles reduces greatly reduces the incidence of HIV (comparing countries with clean needle programs with those without such programs).  Switzerland and the Netherlands have demonstrated that prescribing heroin to to addicts reduces the total number of addicts as it cuts the tie between pushers trying to get people hooked on drugs and casual customers.   Decriminlaizing cannibis in in Western Australia and Portugul  had no effect on consumption but saved lots of money, and when England tried it for a few years, consumption dropped.  A study looking at different states in the US found no link between the level of enforcement and number of drug users.

The Audacity of Hype

Republicans have taken to referring to President Obama as the "food stamp President" claiming he chooses dependancy over personal initiative.  Their audacity is astounding in the face of simple basic facts.

Republicans controlled government policy from 1995 when they took over both house of Congress until 2009 when Mr Obama took office.  During that 14 year span they controlled both houses of Congress for 12 years and for the last 8 years they had a Republican President.  The housing bubble burst in 2007 after 6 years of complete Republican control of both houses of Congress and the Presidency.  The country began losing jobs in April of 2007.  The ensuing financial meltdown gathered steam into 2008 until the collapse of Lehman brothers and the bailout of the financial markets began in 2008.

Mr. Obama was sworn in January of 2009.   Between April of 2007 and the date Mr. Obama was sworn in  the country had lost 4.6 million jobs.   Mr. Obama clearly didn't cause the loss of those 4.6 million lost jobs.  Blaming Mr. Obama for the staggering economy we find ourselves in like blaming a firefighter for not rebuilding the damage to your house as he fights the flames.   No human can stop a once in a generation financial meltdown on a dime.  Obama has seen more people on food stamps during his Presidency because he inherited a disaster from 14 years of Republican policies that left millions of Americans with no jobs, houses lost to foreclosure and life savings decimated by the financial collapse.

Yet the architects of the great recession point the finger at Obama.

How Big business Republicans use Christians for their own purposes

In the 1920's the Republican party used strong Christian support for prohibition (and drugs it should be noted - the war on drugs was started in the 1920"s) to grab control of both houses of Congress and the Presidency.  Although big business in general could care less about alcohol abuse, the Republican party took a strong position years earlier favoring prohibition, and had played a big part in pushing through the Constitutional amendment in 1918.  Although by 1922 the crime problems inherent in any kind of prohibition of activities some people enjoy had begun to become apparent, the Republican party platform pledged absolute support for prohibition to pull in the Christian vote and continued to use prohibition as a source to get Christian voters riled up and active.  In the meantime the Republican Congress undermined regulations that protected workers, consumers and, in the end, the health of the economy.  After the 1929 Stock market crash and a couple years of the great depression Christian voters turned back to voting for what made sense for them economically and in 1932 the voters handed both houses of Congress and the Presidency to Democrats.  A year later prohibition was repealed.

60 years later history began repeating itself.  Younger Christian voters with no memory of the great Depression or the events leading up to it began putting personal moral beliefs over their economic self interest by voting for Republicans as long as they promised to overturn the Supreme Court limitations on regulating abortions, and to defend marriage from homosexuals.  Again big business Republicans saw a tool they could exploit to grab control of the levers of government and in 1996 took control of both houses of Congress for the first time in 40 + years.  By continuing to exploit voters emotional feelings about abortion and gays they held onto power for 10 years, during which they once again undermined laws that protected homeowners, public safety and fair treatment for workers.  They set in motion the forces that caused the housing collapse in 2007, the financial meltdown in 2008 and the ongoing economic difficulties that will probably be with us for the better part of a generation.

The country would be better off if Christians spent a little less time trying to impose their moral beliefs on others and a little more time learning about how to avoid being exploited by the folks who care only about money.

What caused Fannie Mae and Freddie Mac's problems

In the finger pointing to assign blame for the housing and financial collapse of 2007 and 2008 Republicans - being in the difficult position of having been in control of government for the decade leading up to the collapse - have tried to deflect blame for the crisis onto Freddie Mac and Fannie Mae, the two gigantic Corporations that enjoy a bizarre quasi governmental status.  Republicans point specifically at changes made back in the Clinton administration to try to encourage more loans to low income folks.

As I have contemplated the Republican arguments about Fannie Mae and Freddie Mac's culpability, I realized I was pretty fuzzy about the exact nature of Fannie Mae and Freddie Mac, so I went out to gather some basic information.  On the assumption others may also be fuzzy about what sort of beast Fannie and Freddie are, here is a quick overview.

Fanny Mae was created in 1938 (Chapter 13, Feb 3, 1938) as an supplement to the FHA and FDIC which were created in 1934 (PL 84-345 - Chapter 847, 6/28/34).  The 1934 Federal Housing Act was in response to the fact thousands of banks had gone out of business early in the Depression resulting in lots of people losing lots of money they had in the banks.  So people were loath to put their money in banks, and the banks were loath to lend what money they had.  So Congress created FHA as Federal loan guarantee program and the FDIC to insure peoples bank accounts.  The goal was to give people confidence so they would put their money back in the banks (FDIC) and then give the banks confidence through FHA so they would loan money to people to buy houses.

The plan worked, but slowly, so Fannie Mae was created in 1938 to create a secondary mortgage market to buy mortgages from banks and thereby free up the funds so banks could use the proceeds to make more loans.  It was created as a government entity with no private investors involved.

In 1954 the law was amended to bring private investors into Fannie Mae.  (Aug 2, 1954, Chapter 649, Title II).

In 1968 Fannie Mae was converted to a publicly traded company by Lyndon Johnson to get the debt off the Government books - I presume to disguise the true cost of the Viet-nam war.  At this point the parts of Fannie Mae that handled VA loans and Farm Home Loans were spun off into Ginney Mae.  (PL 90-448, Section 801, Aug 1, 1968)

Since after 1968 Fannie Mae was now a huge publicly traded, profit oriented monopoly, in 1970 Freddie Mac was created to provide competition for Fannie Mae.   Freddie Mac went public in 1989.

With regard to the more recent history, there is an excellent and detailed article at Wikipedia (just do a web search for history of Fannie Mae).  Re the question of Fannie Mae and Freddie Mac's culpability in causing the housing and financial collapse, it seems pretty modest.   The problem was less the desire to expand the pool of borrowers and more that Fannie and Freddy had serious problems from CEO's infected with the make as much money as possible so ignoring financial realities (like many financial CEO's at the time).  (The economist in 2013 did a review of the many causes of the financial collapse - Fannie and Freddy don't make the cut in the laundry list of the primary causes.   http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article )

It was a growth of totally private businesses moving into the secondary mortgage market that touched of the really crazy loans and "bundles" of loans that caused the collapse.

To me the  big mistake was bringing in private investors in 1954.  Those of you who read my blog regularly know I view public/private partnerships as virtually always dead certain to end up costing taxpayers a lot of money - government and the profit motive do not fit well together.  Government is not inherently a problem and for many things absolutely necessary, but Government being controlled by folks with a profit motive is always a problem

Local Government should create an alternative home finance system

For decades the housing market has been at the mercy of big banks. Currently much of the country is languishing in the mess created by big banks. Many people can't afford the house they own, but can't sell it because the far away financial institutions that created the problems in the housing market still control the mortgage markets. The only people that can afford to buy a house are speculators with cash, because few people can qualify for a mortgage. Big chunks of our cities are slipping into a future of transitory populations and cheap rental housing.

The conventional mortgage market is not going to help solve this problem. Buried deep in the heart of the complex mortgage markets the Wall Street smart guys created are a bunch of entities that own mortgages that are paying 6 to 8% interest. They have no interest in refinancing a mortgage that pays 6 to 8% and replacing it with a mortgage that pays 4 to 5%. So they make qualifying for a mortgage impossible.

Local agencies in the hardest hit areas need to make the conventional mortgage market irrelevant by creating an alternative refinancing mechanism. The Cal-Vet home loan program provides a model. For over half a century the Cal-Vet home loan program has been selling bonds, using the money from the bonds to make home loans to veterans, then using the interest payments on the mortgages to pay the costs of the program and pay off the bondholders.

In that 60 years or so that the Cal-Vet program has been quietly chugging along putting people in homes it has never cost taxpayers a dime, to my knowledge, nor has it ever caused a financial bubble or burst in the housing market.

The private mortgage market, on the other hand, left US taxpayers with a $700 to $800 billion dollar bill following the Savings and Loan meltdown in the 1980's, not to mention imposing a lot of financial pain on millions of homeowners.  Then 20 years later we find ourselves in the current housing collapse where the ultimate bill to homeowners and taxpayers will be in the many trillions of dollars, and millions of people have been financially devastated.

Every city should have the power to take whatever steps are necessary to set up a city refinance agency that can sell bonds then use the bond funds to make loans to people who want to own their own home. Set up strict underwriting criteria, insulate the administration of the program from political meddling, insulate the salary structure from efforts to bump up administrative salaries to match the private sector. Making home loans doesn't require innovation, or out of the box thinking, or any of those other corporate buzz words. It should be a color by the numbers, follow the instructions process. You don't need to pay anyone hundreds of thousands of dollars a year, you just need to hire people who take pride in their work, want to make a decent living, and are rewarded by doing a public service.

A city that set up such a program could become a magnet for young, ambitious, bright people who want the opportunity to own a home and build a life. Local business that invested in housing bonds would be building their future at the same time they are guaranteeing a tax-free return on investment funds. It could revitalize the city.

Things Republicans could do to make me take them seriously - labor relations

Republicans need to develop a view of labor relations that learns from the past, rather than seeking to return to the past.

Unions are just another special interest group out for whats best for them.  But unions are a less than ideal solution to a very real problem - before unions market forces often led companies to treat their employees as little better than slaves.  Unions evolved out of working folks banding together to protect themselves from abusive management practices.

Because governments approach has always been reactive, our current labor relations laws are based on an adversarial relationship between management and labor.  This seems to me to be nuts.  It is sort of like building a football team by making the linemen and the ball handling players fight it out to see who gets steak and who gets gruel.

Republican don't seem to acknowledge the function Unions serve, so they propose solutions that history has already demonstrated allows market forces to push companies toward paying their employees as little as possible for as much work as possible, and then the ensuing race to the bottom destroys the consumer base that companies need in order to sell their products.  Republican solutions are to abolish or hobble unions, but offer no ideas for protecting workers from abuse by newly empowered management.

What if instead of trying to abolish or hobble private sector unions we made them irrelevant?  What if government used Corporate tax policy to counteract the market tendency to reward the companies that pay their employees the least.  A company with a pretty flat pay scale, that shared the wealth up and down the payroll, could qualify for a lower corporate tax rate than a company that pays its management enormous salaries and its workers minimum wage.

Public Sector unions offer a special problem.  When public sector unions bargain they don't bargain with people who will ultimately foot the bill, they bargain with other public employees.  The public employees bargaining on behalf of taxpayers often have conflicting loyalties - they may need the public sector unions support to maintain their political position.  Recent history is replete with public sector contracts that granted far more in long term compensation than the public entity can afford.

So what if instead of trying to abolish public sector unions we made them irrelevant.  We tie public sector compensation to the average private sector compensation.  By law politicians would be limited in their ability to buy votes by either paying public employees to little or to much.