Looking Back At The 2008 Financial Crisis

Financial Crisis Inquiry ReportLast weekend my son said he was binge watching movies about the 2008 financial crisis such as The Big Short. Despite this movie watching, he seemed to be struggling with the government’s proposed fixes for the crisis.  I think he wants to believe that the government was trying to do the right thing but his gut is telling him something else.  It has been eight years and our gut says we still have “too big to fail” banks and a derivative market with unknown financial risks. It looks like we did not fix anything but chose to kick the can down the road. The traditional approach to a financial crisis is to separate the good assets into a good bank and the bad assets into a bad bank. The good bank is smaller and less risky. The shareholders take the financial hit under this approach. Instead of this approach, our government chose policies very similar to those that led to Japan’s Lost Decade.

Like most economic problems, Japan’s lost decade was largely caused by speculation during its boom cycle. Record low interest rates fueled stock market and real estate speculation that sent valuations soaring throughout the 1980s. In fact, property and public company valuations more than tripled to the point where a small area in Tokyo was worth more than the entire State of California.

When the Finance Ministry realized that the bubble was unsustainable, it raised interest rates to try and stem the speculation. The moved quickly led to a stock market crash and debt crisis, as many debts fueled by the rampant speculation turned out bad. Finally, the issues manifested themselves in a banking crisis that led to consolidation and several government bailouts.

Sensing my son’s struggles I offered three resources that should provide him with additional insight into the crisis.

The Financial Crisis Inquiry Report

Unlike the typical explanation that corporate greed caused the crisis, the majority opinion said:

In our inquiry, we found dramatic breakdowns of corporate governance, profound lapses in regulatory oversight, and near fatal flaws in our financial system.

There were two dissenting opinions.

  • The first dissenting opinion focused on a worldwide credit and housing bubble that was largely composed of nontraditional mortgages and supported by questionable credit ratings.
  • The second dissenting opinion focused on government housing policy and is best summarized with this statement.

As a result of these policies, by the middle of 2007, there were approximately 27 million subprime and Alt-A mortgages in the U.S. financial system —half of all mortgages outstanding— with an aggregate value of over $4.5 trillion.

Senator Warren’s Letter About the Unindicted

In 2016 a part of the Financial Crisis Inquiry report was declassified that indicated that nine people were referred to the Judicial Department for possible indictment. According to Senator Warren these people were “former Fannie Mae CEO Daniel Mudd, former Fannie Mae CFO Stephen Swad, former Citigroup CEO Chuck Prince, former Citigroup Board of Directors Executive Committee Chair Robert Rubin, former Citigroup CFO Gary Crittenden, former AIG CEO Martin Sullivan, AIG CFO Stephen Bensinger, former Merrill Lynch CEO Stanley O’Neal, and former Merrill Lynch CFO Jeffrey Edwards-may have violated securities or other laws. Mr. Prince and Mr. Rubin were each cited in two referrals.” If President Obama was correct in describing the 2008 financial crisis as “the worst economic downturn since the Great Depression” then someone should have been indicted. By comparison, the 1980s S&L crisis resulted in 839 convictions.

Full Measure Video About The Immaculate Corruption

In the video, Immaculate Corruption, Richard Bowen discusses the testimony he gave to the Financial Crisis Inquiry Commission. Until recently much of his testimony was suppressed from the public.

When You Lose Something You Don’t Want, Is that Really a Loss?

I posted this comment to David Henderson’s article When You Lose Something You Don’t Want, Is that Really a Loss?

Last December we decided to drop our health insurance. Our reasoning was pretty simple. Which would make us feel more financially secure, health insurance or an extra $7,500 per year in a savings account?

We did think it through. My wife and I have not filed an insurance claim in over twenty years. We are the perfect health insurance customers so why not take advantage of our good health?

1. Since 2011 our health insurance has increased 13% annually. Medical cost inflation was around 5% annually over the same time period. It sure looks like the health insurance companies were raising rates because they thought they could get away with it.

2. The lowest cost bronze plan for my wife and I exceeds 8.13% of our income. It also was considerably more expensive than our grandfathered health insurance plan which also failed the affordability test. Even though the lack of affordable health insurance makes us exempt from the individual mandate, we are reminded that the ACA failed at its most important mission, affordable health care. When will the ACA or the AHCA start working on this problem?

3. For most of my life, I thought that health insurance was a no-brainer. The ACA completely reversed my position. I no longer believe that giving more money to the healthcare industry is beneficial or compassionate. Although some people maintain that health insurance is the same thing as healthcare, this insularity to healthcare costs bothers me. The politics of the situation has made it easier for the healthcare industry to ignore better-valued healthcare options. As an example when I asked my insurance company for a lower price, they said, “we do not do that”. They could not seem to grasp that healthy people do not want health insurance the same way unhealthy people do. Healthy people tolerate the cost of health insurance up to a point and then they start looking at alternatives in the same way they might change auto insurance. Healthy people are different and the health insurance exchanges are not sustainable without them.

4. How do we send a message to the healthcare industry? Our choice has been to hit them in the pocketbook. We are not trying to be heroes. Their loss is our gain. Every month my wife and I get by without a major medical expense, we win and they lose. It takes only a few months of savings to cover the AHCA pre-existing illness penalty. After a year or so we are in pretty good shape to cover most major medical expenses outside of cancer. At some point, the insurance companies will realize that chasing away their best customers is bad for business.

The #Obamagate Motive

Jail CellI was watching Louise Mensch explain what she said and did not say about the FISA warrant when it struck me. Why did someone leak this information to her? What was the plan? My first thought was that if she had published her article a little earlier it could have rescued the floundering Clinton campaign.  Oops!

The Primary Objective Of The FISA Warrant Was To Discredit The Trump Campaign

Over the last couple of days, I heard Mr. Comey and Mr. Clapper deny that the government spied on the Trump campaign. If we take them at their word then why did they allow the FISA warrant to go forward for “possible financial and banking offenses”? Mr. McCarthy found it extremely odd that they would use a FISA warrant for criminal activities. The simplest most straight forward answer is that the FISA warrant request was never expected to collect any useful information. The plan was to leak the FISA warrant request. If it was leaked in the last week of the campaign, it just might be enough to turn the tide for the Clinton campaign. It was a political hail mary pass for the floundering Clinton presidential campaign. Best of all President Obama, Mr. Comey, and Mr. Clapper had plausible deniability. It would have been the perfect plan if Louise had published a little bit earlier.

More #ObamaGate #wiretap Evidence

Jail CellOn Sunday morning Mr. Levin laid out his argument on Fox and Friends that the Obama administration spied on the Trump campaign. The administration maintains that it was looking for inappropriate contacts by the Trump campaign with Russian officials. This domestic spying operation started in January of 2016 and continued through the end of the Obama administration. At least six agencies were involved and there were two applications for FISA warrants. Considering that there are no indictments you have to wonder you have to wonder whether the FISA court was deliberately misled. Twitter is following this story under the hashtag, #ObamaGate, due to a similar abuse of power in Watergate. Mr. McCarthy in the article, FISA and The Trump Team,  expressed this concern when he said:

The idea that FISA could be used against political enemies always seemed far-fetched. Now it might not be.

At this time we have to assume the FISA warrant was used by the Administration for political purposes.

Here is the link to Levin’s clip on Fox And Friends, http://video.foxnews.com/v/5348359459001.

For those looking for more information on this subject, “Tapping Trump?” is an excellent summary of the events. The article that broke this story is “EXCLUSIVE: FBI ‘Granted FISA Warrant’ Covering Trump Camp’s Ties To Russia“.
.

If “no reasonable prosecutor would bring” a case against Hillary, who approved the Trump Tower #wiretap?

Jail CellIf we are to believe that the Judicial Department and the NSA are bastions of reasonableness, who approved the Trump Tower #wiretap and why?  I am hoping that this is fake news but considering the Flynn leak was classified information you have every right to be suspicious. This action has to be at least as stupid as Ms. Clinton having a private email server, the IRS targeting of conservative groups, and Ms. Rice going on five Sunday morning talk shows and saying the YouTube movie caused the Benghazi attack. At some point, you have to start prosecuting to cut down on the stupidity.

Sweden’s Problem With Assimilating Muslims

When the press jumped all over President Trump’s comments about Sweden’s immigration policies it reminded me of the PBS Mystery series, Wallander. For people who are unfamiliar with the series, it is about murder mysteries involving a Swedish detective named Wallander. In the 2010 episode, Faceless Killer, one of the major subplots was Sweden’s struggles assimilating Muslims into society. Although most of the Swedes enjoy a high standard of living, the Muslim community does not. The author chose to personalize the assimilation question by portraying Wallander struggling with his daughter’s new boyfriend of Syrian descent. If this episode is a reasonable portrayal of the Swedish Muslim situation in 2010 and there has been no progress assimilating Muslims then it is hard to disagree with filmmaker Ami Horowitz’s two assertions.  Sweden’s choice to accept large quantities of refugees is directly related to the surge in crime. Dumping refugees into a volatile situation is a really, bad idea.

Update

After writing this piece I ran across this article on The Federalist, Yes, Violent Crime Has Spiked In Sweden Since Open Immigration. Although I am naturally skeptical when an author chooses to remain anonymous, I did follow one of his links to the Swedish National Council for Crime Prevention (Brottsförebyggande rådet – Brå) and picked up this graph.

Rape and sex offences - BRA

Reforming The Filibuster

I was struck by this passage in the latest Imprimis issue, How and Why the Senate Must Reform the Filibuster.

But beginning in 1970, the number of filibusters exploded by a magnitude of 36-fold. There have been 1,700 in the 46 years since then. Why? Because in 1970, Senate Majority Leader Mike Mansfield instituted a “two-track” system that allowed the Senate, by unanimous consent or the approval of the minority leader, to bypass a filibustered bill and go on to another. This relieved a filibustering senator of the job of having to talk through the night and it relieved his colleagues of their frustration.

The over-use of filibusters goes against the middle-class view of a well-functioning government. If the Senate would like to get back on the good side of the middle-class voters, a good start would be to get rid of the “two-track” system.

Braised Chicken With Leeks, Peas, and Cannellini Beans

This is a Cannellini version of Real Simple’s recipe, Braised Chicken With Leeks, Peas, and Butter Beans.Braised Chicken With Leeks, Peas, and Cannellini Beans I substituted Cannellini beans since I had beans on the shelf. With chicken thighs at 99¢ per pound at Sams Club, this meal is delicious and inexpensive.

INGREDIENTS

  • 2 tablespoons olive oil
  • 6 bone-in, skin-on chicken thighs
  • Kosher salt and black pepper
  • 3 medium leeks, white and light green parts only, halved lengthwise and cut into 1-inch pieces
  • 4 cloves garlic, sliced
  • 1½ cups low-sodium chicken broth
  • 3 tablespoons sour cream
  • 1 pound cooked Cannellini beans
  • ½ cup frozen peas, thawed
  • 2 tablespoons lemon juice
  • 2 tablespoons chopped dill, plus sprigs for serving

DIRECTIONS

  1. Heat the oil in a Dutch oven or large, deep skillet over medium-high heat. ?Season the chicken with 1 teaspoon each ?salt and pepper. Cook, skin-side down, until golden brown, 8 to 10 minutes. Transfer to a plate.
  2. Add the leeks and garlic to the Dutch oven. Cook over medium heat, stirring often, until the leeks are just tender, ?6 to 8 minutes. Add the broth and sour cream and bring to a simmer. Add the chicken, skin-side up, and simmer over medium-low heat until an instant-read thermometer inserted into the thickest piece registers 165° F, 12 to 14 minutes.
  3. Stir the beans, peas, lemon juice, and chopped dill into the sauce and simmer until the beans are hot, 2 to 3 minutes. Serve topped with dill sprigs.