Just some Sunday morning philosophy

1967 -- Dustin Hoffman -- The Graduate My husband and I watched this movie on Friday night. How weird. Last time I saw this I was The Graduate. Dustin Hoffman's annoying elders were my annoying elders. The Establishment (everyone and everything made or born before 1946 or so) - was: old, 'square', prejudiced, pedestrian, xenophobic, stupid, wasteful, mean spirited, (of course - annoying) warmongering, capitalist - and had a bad ear for music - and just did not understand us at all.

You have to remember how different our lives were -- 1966 marked the year that contraceptives became available to all. And a year or so before birth control pills were readily available. I grew up during a time that girls that got pregnant were not accepted in the community and would only be married by the lowest form of man. (A girlfriend of mine was raped and her mother bemoaned the fact that the community knew it because now her daughter was damaged goods - and not a virgin).

So, watching this movie was strange -- I identified with Dustin Hoffman - but intellectually I know I am one of the voices of the annoying elders. And now it seems that the world my parents had was somehow "nicer" than the one we have now.

It seems so NASTY then, you know, Mrs. Robinson and all... kinda dirty and yucky. But if we were all free love and choices then it had to be okay. Now it has gone to the extreme that every couple of years some junior high or high school (female) teacher seduces a student. Dustin Hoffman was just out of college (turned 21 in the movie) -- fully adult, (1967 adults were not 18, they were 21), but the age difference and she was married ----- made this just strange. Now every 50 years (single mostly) woman seems to be a "cougar" and after some young man. And still, they are screaming equality in some way.

Just one other facet of the Graduate ---

The other one is that scene when the friend of the parents says "One word --- plastics" showed me something. That advice was at least a decade late. The friend was seeing the tail end of the bell curve for the growth (big bucks) in plastics. If he wanted to give the kid advice that would have paid off big he should have said -- "printed circuit board" or "video game" or "personal computer" ---- or even "insulation".

Which made me think of taking my grandson aside a few months ago and saying (practically), "one word -- green" -- since he will graduate from high school next year, and would be five years away from a degree (at least) - he would be on the falling edge of this phenomenon "green" just as the 'plastic' advice was!

1970 -- California

Our first child, Paul, was born. We had no medical insurance -- I had to quit my office job (they didn't want a pregnant woman around, so I was asked to quit). Ron had a better-than-average job than  people his age job in Printed Circuitry Design. My prenatal care and delivery were done by a very good OBGYN and I was delivered of my child in a brand new, state-of-the-art, hospital. My obstetrician gave us a bill and the hospital gave us a bill and we made payments on our child (no interest) for years. I don't remember how many years - but I do remember that I thought it was funny that our second child (born 1973) was paid off (we had insurance) before our first. You would never guess in a million years how much it cost of having our first child.... $300 for the OBGYN and $300 for the hospital.

Don't go thinking that reflects the cost of living change --- (it does, some) -- no I think it reflects the cost of malpractice lawsuits more than anything.

Our doctor was our friend and partner in the birth -- somewhere they became the plaintiff.

This leads to my next thought......

In 1975 our youngest child choked on a carrot -- it was inhaled into his lung. He immediately started turning blue. This was a life-changing moment in my life and one that I relive in nightmares still. I told my four-year-old son to go to the neighbor's house, (and until now, never gave him another thought), through the baby into the front seat of the car. I jumped in and started driving. If I had been thinking, there were two hospitals fairly close to our home... but by instinct, I jumped onto the freeway and started for the hospital where my kids had been born. I glanced at my baby and every time he was prone he stopped breathing -- so I pulled him on my lap - facing me - and DROVE -- honking my horn for anyone to just get the hell out of my way. I drove down the shoulder - I cut in and out -- and can remember thinking that if a cop tried to stop me, he would have to hear my explanation when we were at the hospital, but I was not stopping. Time flew by, I pulled into the hospital -- I grabbed my baby -- I ran in and some officious admissions lady started in -- "Do You Have Insurance?" "Name" "We have to fill these forms"---- blah blah -- I was standing there holding a baby that was turning blue!

Suddenly, this amazing man (I am sure I remember he had a halo) - grabbed my baby from me and shouted at the lady -- "Why the f**k do you think we have malpractice insurance?" and ran to the operating room. With me on his heels. Just that quick.

By luck, I was at the hospital where all the other pediatric surgeons were gathered to be taught to use orthoscopic equipment that day! So, my baby (the guinea pig), had the best pediatric surgeons in the Bay Area right there. If we had shown up at either other hospitals they would have either called for one of these or someone would have used the old-fashioned method of cutting him open to remove the carrot. As it was a little camera and a claw went down his throat and into his lungs, grabbed this thing and he was alive! He was admitted to the hospital overnight because of fear of pneumonia - but he was fine.

Today - if I was a young mother, would I hesitate and wonder "do I call the advise nurse?" - "do I have to call an ambulance?" "will I be able to pay for this?" -- "will the cops shoot me if I rush down the road?" --- or even "will I get it trouble for not putting my baby in a car seat?"

Wrongful death.... 1970 to 2009 and beyond.

So, that bell probably can't be unrung. But I can see now how tort reform would affect us all. When I worked at the insurance company prior to my first child's birth I was in the department that handled litigation -- including wrongful death. I was very impressed that people had worked out the value of a life - and the insurance companies could argue that x person, with such and such an education, could have achieved y in his lifetime, so pay z. How simple it was on those actuary charts.

Somewhere in the next two decades through judges went stupid though. Allowing lawyers and juries to decide the worth of people at million of dollars. Don't get me wrong if someone wrongly killed one of my sons, husband or father ---- I would scream that they needed to pay me MILLIONS. And I would hurt like mad to find the lawyer who finds me "justice". But a good judge would put a stop to that and tell the jury justice can not be counted in dollars, -- (well maybe in OJ Simpson's case), that actual damages must be paid and if there is malfeasance then it will be cured criminally -- negligence will get some additional nominal amount for suffering.

So food for thought - the amount paid out for malpractice in 2007 was about $47 million in Washington State alone. Each outrageous claim makes it more likely that some doctors will stop the delivery of babies - some community hospitals can not afford to deliver babies. Tort reform legislation has probably passed its moment -- but something must change.

Let's say we cut the payouts in half by averaging the price we pay for an Iraqi civilian's death by the amount we pay for one of ours. If we get $4 Million on average each and they get $2,500 each -- start by giving no more than $2 Million each here.

Maybe I was just not paying enough attention...

What did Bush know and when did he know it?

Oh, not about weapons of mass destruction….. No this is about the mortgage / banking / insurance fiasco. We are all guilty – people were trying to tell us, and until it hit in our own neighborhood most of us did not pay any attention.

I have found information that New York Governor Eliot Spitzer was trying to get people to listen about the mishandling of funds when Spitzer was brought down – this article was from February 14, 2008.

As a reminder of history – Elliot Spitzer was disgraced by being discovered in a hotel room with a very expensive call girl. He left office and the people did not have the benefit of what he was trying to say.

Elliot Spitzer, a Democrat, was previously in the DA’s office of NYC, moving up to District Attorney. In that capacity he took on the .coms, the stock market, financial organizations – and did it like prior organizations took on organized crime.

Here’s a Wikipedia link to some basic information about Elliot Spitzer.

But I am starting to think that the “people who watch people” were keeping a close watch on Mr. Spitzer in order to discredit him and shut him up. He wrote an opinion piece for the Washington Post, February 14th, 2008, in which he said:

“Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks.”

He goes on to point out that state attorneys generals in 49 states tried separately and together to prosecute issues relating to sub-prime loans. He says not only did Bush and his cronies do nothing – they worked together to try to protect the deceptive practices and keep restrictive laws from being placed on the books.

The administrations handcuffed the local prosecutors using a federal agency called the Office of the Comptroller of the Currency (OCC). Here is how they did it, says Spitzer:

“In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.”

Read the whole article by Spitzer ends with this prophetic sentence:

When history tells the story of the lending crisis and tells of the effects on the lives of so many innocent homeowners, the Bush folks will not be judged well.

Another writer did an article for the Baltimore Chronicle, Greg Palast, on March 14, 2008. The author is firmly slanted away from the Bush administration, but his facts do check out. His article was about Ben Bernake, Federal Reserve Board Chairman, secretly handing over $200 billion to mortgage bank industry speculators during the first week in March, 2008.

The point of this article is that up until about the 5th of March, there was one person making trouble for them with these risky loans – that person was Elliot Spitzer. Mr. Spitzer was making too much noise by ‘following the money’.

Here is his short form description of what happened:

“Since the Bush regime came to power, a new species of loan became the norm, the ‘sub-prime’ mortgage and it’s variants including loans with teeny “introductory” interest rates. From out of nowhere, a company called ‘Countrywide’ became America’s top mortgage lender, accounting for one in five home loans, a large chunk of these ‘sub-prime.’”

“Here’s how it worked: The Grinning Family, with US average household income, gets a $200,000 mortgage at 4% for two years. Their $955 a month payment is 25% of their income. No problem. Their banker promises them a new mortgage, again at the cheap rate, in two years. But in two years, the promise ain’t worth a can of spam and the Grinnings are told to scram - because their house is now worth less than the mortgage. Now, the mortgage hits 9% or $1,609 plus fees to recover the “discount” they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. Grinnings move into their Toyota.”

He discusses that instead of policing the banks, Bush’s OCC people went after Spitzer and anyone else that tried to get in the way of these predatory loans. The government made use of something called “federal pre-emption” (which will have to be studied on its own) – Bush’s government ordered the states to not enforce their consumer protection laws! They actually filed a lawsuit to stop Spitzer from investigating mortgage practices.

Then the poop started hitting the fan – Countrywide’s stock fell 50%, Citygroup was down 38% -- neither of which pleased the ‘sheiks of Arabe” who controlled the biggest portion of the stocks in these two businesses.

The second week in March 2008, the Carlyle Capital Group, went bankrupt! I didn’t know who the Carlyle Group were but it is apparently headed by former Bush(1)’s Senior Counsel James Baker – with partners like George Bush, the Bin Laden family and lots of other greedy disreputable people.

Michael Moore, (I know not always a reliable reference), alleges that Bin Laden family actually were forced to liquidate their interests in the Carlyle because they were causing embarrassment to the group. Moore states that the Carlyle is the 11th largest defense contractor in the USA and has line by line evidence of his information website. – I did look at the site; I did not do any fact checking. This information looked pretty interesting though.

As a result of the Feds $200 billion bailout in March, the mortgage companies’ stocks went up in price ---- Countrywide’s stock went up 17% in one day. Citygroup’s stock went up $10 billion in one afternoon!

Spitzer was arrested on the same day that the bailout occurred. Wow – what a coincident! Amazing.

On February 13th Spitzer signed papers that said in part:

“Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.”

Then he went to a hotel and apparently ordered take out food and a call girl. He was arrested. Well that did shut him up, and apparently scared off everyone else who was looking into this…..and it took about a half year to get in so deep that they had to give even more money…..

Now I have to figure out why they had to do this in the light of day this time. Was it the amount of money – was it because every place a good accountant could ‘hide’ $700 ‘KaTrillion’ dollars was used up already? Was it because an election was going to put its spin on this – and they had to do it first? Let’s find out. Please give me your input on this information.

Related Subjects:
Short Sales
My take on short sales (selling a house for less than its mortgage) – and why banks will drag there feet on many of the homes that are at risk with the subprime debacle.

Big one and one I have not heard anyone talk about is MORTGAGE INSURANCE. Many lenders have required this insurance for new buyers, people with less than 20% down payment – FHA loans – people with bad credit scores ----- unsophisticated borrowers…. You know, exactly the same borrowers who are at risk now for losing their homes with the housing market crash and burn.

Why on earth would a mortgage holder ever negotiate with a borrower to take less than then mortgage face (even if the market has reduced the price to half its price)? The home is insured for full price. The borrower was forced to purchase mortgage insurance (about $200 per month on a $200K home) as a condition of purchase; this insured the mortgage holder’s interest in the property.

So, John Schmuck, the marginal, first time, home owner pays a much higher monthly payment than his neighbor because he does not have the resources to pay more, (does that make sense?); Then when situations change - ARM adjusts up, property taxes increase, HO insurance increases – anything that makes it impossible to meet the increased payments. The bank “bye bye” we can get our whole mortgage repaid by the insurance the home owner had to buy!

So, don’t expect to find them renegotiating any loan that has mortgage insurance on it.

Secondly, if the buyer is still making full payments on the house while they are talking to them about renegotiating the mortgage – why would they do anything? The homeowner will have to be in severe default in order to get the banks to even sharpen their pencils or ask their supervisor about this.

Another thing to consider is that banks leverage themselves and sell stock. In order to borrow money at good rates they have to have strong balance sheets. The value of stock is determined by investor confidence and that is strongly determined by the value of their assets. As long as the house (asset) is on the books at mortgage value it has a value on the books that that is fixed. Whether the house is worth less does not matter – what matters is the value of the paper (mortgage). When the banks reduce the value of an asset for the borrower, they change their assets --- if they do that for a lot of borrowers, it really screws up the bottom line.

Of course, if borrowers just throw in the keys, don’t have mortgage insurance, and walk away -- Then they have a multifaceted problem. Now they own a home that is what ever value the market will pay, and they have to pay taxes, insurance, maintenance – At that point they are probably in a position to make a deal. A little too late for the displaced homeowner.