Great Debate!

Wow, I've never read such well thought out and even tempered political arguments on a blog before. I'm kind of excited to be taking part in it.

The following is an edited response I wrote to a friend who expressed some similar ideas to the comments section from my last post. This is geared toward people who want to lay the majority of the blame for today's financial crisis at the feet of Fannie and Freddie.

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First off, I like fiscal conservatives. I just wanted to start with that. I know it sounds like I don't sometimes, but that's only because there aren't any real fiscal conservatives left in the world. I'd vote for a true fiscal conservative, but I haven't seen one with any clout in my lifetime.

A true fiscal conservative would recognize that the role of government has pushed us well past the free market. That may be sad, but let's face it: Public aid is a reality. So policy must take that into account. There are insured institutions aimed at aiding the public (those institutions make conservatives angry), and there are private institutions aimed at making money for investors.

While public aid for home investments is high risk, the state views it as a more complex investment than a typical home loan. New home owners increase the tax base, stimulate growth, improve local schools, and create more stable communities. That's why the state can argue for a propping up of state insured institutions.

I don't like the way Frank & co. defended Fannie & Freddie, but to call those "companies" instrumental in the meltdown is shifting the blame way too far to the left.

It was the private firms that packaged the toxic debt and sold it as assets. Meanwhile other private institutions modeled F&F's lending practices without obtaining the same kind of backing of the government. During all that, it was a bi-partisan decision to look the other way while these large companies leveraged themselves to the hilt.

It was the fall Bear Stearns, AIG, and Lehman Brothers that signaled how intertwined the system has become.

That intertwined quality is not a result of F&F. It is a result of uninsured companies wanting to take the same risks as insured companies, then swapping risky assests around the world. Without insurance, however, those risks have serious consequences. And not just for the companies, but for the global economy.

If you place the blame on F&F, you are placing Fannie & Freddie on the same playing field as Bear Stearns. Six months ago, anyone at Bear Stearns would have been deeply insulted by that. Six months ago a true fiscal conservative would have been insulted by that.

Private firms over-reached. That same true fiscal conservative would let them fail. But at what expense?

I respect the view that government often impedes business. But the firms that froze the credit markets and inflated oil and housing prices are now impeding governments: Iceland, Hungary, and the US are just a few examples.

While I see where you're coming from, I think you've let partisan thinking cloud your judgment. There is not a party or public institution that can shoulder all the blame for this mess. Fannie and Freddie are not innocent, but if they had fallen alone, this would not be a crisis. The Dems didn't stop this, but the Republicans didn't either.
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As for the CRA argument, I never suggested anyone had the power to overturn CRA. I don't think the act should be overturned. I think a bank chartered within a community should serve that community. It is up to them to find an appropriate business model to do so.

CRA strikes me as the latest in a line of strawmen set up by conservative thinkers who want to pretend the private sector didn't do anything wrong. But if that were the case, then why do the private firms need public assistence? If you want to place blame, you are left with an odd choice: Blame the boy who tripped in the mud, or blame the girl trying to help him back up.

I love this kind of dialogue. I want to say this to those who disagree: Thank you for presenting real arguments. I find that these debates often devolve very quickly on the blogs. I really like real arguments devoid of insults.

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

The Crunch in Hungary and Where It's Coming From

The payment on my home loan was up about 35% this month. Kind of.

It's complicated.

The Hungarian currency, the Forint, has been taking a beating lately. Our home loan, however, is calculated in Swiss Francs. So the amount of Forints we were charged this month is up significantly. It is fortunate, therefore, that I landed a job that pays in Euros.

All this leads to the question, 'Why is the loan in Swiss Francs?'

It is that question, and its absurd answer, that has kept me abreast of the global financial meltdown. In an attempt to keep it simple, I'll just say this: Due to a serious deficit, the Hungarian National Bank won't lower interest rates (currently at 11.5%), even if a rate cut would stimulate local lending. For this reason, it is much cheaper for people seeking credit in Hungary to borrow in a foreign currency. But when the Forint lost value last month after the credit markets froze, anyone earning in the local currency got pinched hard on this month's repayments. And it doesn't look like a one-month issue. Recovery is going to take some time.

While I'm normally not the kind of person who pays attention to financial news, having to keep track of currencies and national lending rates has changed the way I read the morning papers a bit.

That being the case, I've recently raised some objections to the way the US dealt with the approaching crisis. I've stayed fairly informed for a layman. My opinions are based on real numbers and actual policy. I don't think the way forward is going to be easy, but I am happy about the Obama camp's take on the issue. The only thing I wasn't too sure about was how the opposition felt about things.

Then last night a good friend sent me an article from The National Review Online. My friend knows I'm not much of an NRO reader, but I send him NPR pieces, so all's fair. Anyway, the article he sent, by Mark Steyn, is titled "The Death of the American Idea." I had to ignore Steyn's bitterness over the sound thumping the GOP received in the election, but the focus of his piece exposed an interesting blind spot in current conservative thinking.

Steyn's complaint is concerned with the ever-expanding Federal Government, a legitimate concern, especially for a fiscal conservative. But what struck me was the evidence Steyn used to put his argument over the top. He described the bailout package as the US Government’s latest step towards the left.

As someone who admires the values of fiscal conservatives, I can understand Steyn's objections to the bailout package. However, it is the policies of 'small-government' conservatives that have been peeling away at government regulatory powers over the past two decades. Those powers had been put in place to keep companies from slipping into an AIG-like situation. The value of such regulation has never been as clear as it is today.

On top of that, Steyn feels comfortable ignoring the fact that the bailout is propping up companies whose failure would wreak havoc on the global economy.

Steyn probably hasn't had to sit across from a Hungarian colleague - a colleague already angry with her own government for botching the local economy - and listen to a diatribe on unchecked American greed. Greed that is, according to my colleague, destroying what little progress the Hungarian economy has made in the past few years. Even with an IMF loan, the EU bailouts, and the US bailout in place, the Hungarian economy is tapping the pocketbooks of its citizens, and American greed has a lot to do with that.

Personally, I will probably weather Hungary's economic downturn, but there are a lot of people earning in Forints right now, and they may have some harsh questions for Mr. Steyn.
"You want to let these companies fail, huh? Then what happens next? You want to let my nation's economy fail?"

It was laissez-faire policies that got us into this situation. Fiscal conservatives may be upset that those same policies can't get us out, but anger or blame pointed at election results is misplaced and ill-spent.

It is very easy to be fiscally conservative when the crisis is under a microscope. But I'm on the wrong end of that microscope. The loan I took out was described as the most economically responsible loan available. When the repayment on such a loan jumps 35% in one month, there is something wrong with the system. If we trace the problem to its roots, we find two things:

A mismanaged Hungarian economy (no big surprise there)

&

Unregulated US banks and investment firms packaging bad loans and selling them for a profit around the world.

This is not a problem that will go away if we just ignore it. Men like Steyn can moan about how their ideology has been violated, but they ought to look at where their ideology has taken the world economy. Their time is up, and now the governments they scorned are left to clean up the mess. I’m just glad the US has a leader whose approach is about inspiring the best rather than fearing the worst.

Visits and Vacations

This last weekend in Hungary was a four-day holiday. On the 23rd the country celebrated the Revolution of 1956 , during which the Hungarians booted the Soviets out of the country for a full seven days (before the Soviets came back with their tanks and guns).

The holiday has taken on a political bent over the past few years. For three years running, on the date of the anniversary the opposition party here in Hungary has held a large rally in Budapest's city center. Two years ago there was some serious violence. Last year there was a little trouble, but it was was much more subdued. This year there was a rally, but no major violence.

Even if events were more civil this year, I did get to see the event through a different, and slightly disturbing lens. My long-time friend Brad is here in Hungary on a visit. He took a walk with Dóra, me, and the dogs on the 23rd. On the walk we skirted the rally itself.

Having a visitor in town always forces me to take a closer look at the city I've called home for four years now. I think the same is true for Dóra, and as we passed the rally we found ourselves in a reflective mood.

The rally was held at Deák Ferenc tér, right where all the major streets and Metros intersect. Meaning the city was effectively shut down so the opposition party could pay homage to the bravery of those who rose up against tyranny some fifty-two years ago. A part of me knows that's a good thing. I'm happy Hungarians are passionate about their nation's history opposing totalitarianism.

But those positive feelings were tempered when Dóra told us that the man at the podium who was addressing the crowd was the leader of Hungary's far-right party - the same party that sponsored the marches that recently spiraled out of control, where police were injured and racist chants were bandied about. Once we knew the speakers affiliation, it was hard to ignore the other signs of intolerance. Shaved heads were peppered throughout the gathering. The red and white stripes of the nationalist flag were much more prominent than the red, green, and white bands of the national flag. At one point the speaker instigated a call-and-response that had the gathered crowd bark out a slogan, and while I know that happens at political rallies, the crowd's tone had an unsettling edge to it. Members of the Magyar Garda, a right-wing militia group, were lined up and ready to parade through the assembly.

Brad was stunned. The combat boots and hairstyles spoke a creepy international language. For someone in from the US, this gathering was an eye-opener. Dóra was more disappointed than stunned. She remembered how this anniversary was once commemorated. In the mid-90s there was little-to-no political posturing. The citizens of Hungary marched the same route that protesting students and workers marched in 1956. Dóra doesn't remember anything from this holiday in the 90s being as divisive as what we saw last week.

After the walk, Brad, Dóra, and I took the dogs out to the countryside and enjoyed a weekend away from the city. It gave us a chance to clear out heads and relax. Something perhaps more people should do.

Who's Right? Whose Wrong?

Disasters help people see clearly.

Even if only for a moment, people always cling swiftly and surely to what they value most just as the proverbial shit hits the fan.

Two very different disasters struck last week, one in my country and the other in my adopted country. I've come to better understand the character of the people involved as a result.

Last weekend there were several political rallies here in Budapest. The most publicized event was held by the Hungarian Democratic Charta. It was held almost in concert with a demonstration of several Roma organizations. Those rallies were held to protest against the menacing rise in influence of the far-right here in Hungary.

Far-right extremists held a counter-protest which allegedly threatened the safety of people leaving the Hungarian Democratic Charta rally. The counter-protest led to a violent clash with the police. Petrol bombs and cobblestones versus riot gear and tear gas. Property was damaged. Police and citizens were injured.

A disaster.

Since the anti-government protests of 2006, the extreme right has been gaining political traction - slowly perhaps - but such progress is alarming nonetheless. The ideology of the far-right in Hungary is not something many Americans would recognize as a legitimate part of political discourse. Many of the far-right protesters arrive at rallies wearing swastikas or other symbols harkening back to the days of fascism. At the protest last week, anti-Semitic chants were interspersed among the anti-government chants. The far-right is proudly racist, hating both the Jewish population and the Roma population with equal vigor. And the violent enthusiasm with which they threw themselves into last week's protest shed some light on what they're all about.

The far-right here in Hungary is cornered, threatened, and frightened. They are lashing out at anything that resembles a threat to their twisted anachronistic values, and they are doing so with the strength of an animal in its final throes.

I would normally think this was a positive sign, but I know a cornered animal is dangerous. And I thought fascism went through its final throes last century.

I am happy the left came out to protest the influence of the far-right. In a country of very reserved people that is progress, but I think it is time for more unified action against such extremism. Fidesz is the mainstream party on the right, and they will certainly win the next Parliamentary elections. They have no need for the votes of extremists. So now is the time to put that dying animal out of its misery. Now is the time for Fidesz to condemn the extremists outright... But where are the Party's leaders? No one can say. What are those leaders saying when they fail to condemn violent racist behavior?

Speaking of party leaders, what the hell is Congress doing about the impending financial disaster? The Republicans can't govern their own, and the Democrats seem to have forgotten they have the majority.

What I've learned about America's political leaders from this disaster is making Hungary look pretty good right now. It seems the panic in D.C. is going to cost Americans even more than the past decade of incompetence.

Let me try and sort this out. For all the politicians who read my blog (none), here's my advice:

Republicans: You have failed. Your fiscal policy has led to a disaster of epic proportions, and the solution is going to run counter to your core principles. So sit back and watch the Democrats make the painful choices needed to put this right again. Oh, and by the way, thanks a lot.

Democrats: You do not have to accept the Administration's Bailout Plan. If you do and people don't like it, the Republicans are going to pin the blame on you. You are the ruling party in terms of legislation. Draw up a plan that illustrates your party's commitment to the middle class.

Here's the plan:
1) Be realistic. Make it a trillion dollars.

2) Buy up the bad mortgages and re-write them, helping %80-%90 of at-risk Americans keep their homes (primary residences only).

3) Extend lifelines to troubled banks on the following conditions:
a) loans are paid back with interest, or if the bank becomes profitable again taxpayers get a percentage of that profit (whatever benefits the taxpayer more)
b) cap executive salaries for three years, but give a substantial loyalty bonus to execs who weather the storm (we need talent now more than ever)
c) Until the loans are paid, banks that receive aid must give monthly reports to a panel of financial experts appointed by a bi-partisan committee, this panel then offers recommendations to the committee which may exercise control of the bank

4) Establish a regulatory apparatus capable of overseeing the financial sector that emerges after this crisis passes

5) Use remaining funds to give a cash infusion into sectors that have been neglected while the housing market was being inflated artificially.

That should do it. Any questions.
Now playing: OK Go - It's a Disaster
via FoxyTunes

Not So Funny Stuff

I have the Wall Street Journal here at my desk. I get this cute little version over here, not the big broadsheet they publish in the US.

I was reading about the financial turmoil. And I'm surprised to find that the story has me in a vice grip. I don't know why. I'm not invested in much of anything beyond my apartment. So the fall of Lehman Bros. is not going to reach into my pocket much. Still, I can't turn away.

I think it's the enormity of the thing. Markets around the world were shaken. Uncertainty is the only certainty. And everyone who is plugged into an economic system anywhere in the world will be touched by this. It's a world event, right? But it's not like any of the world events we've experienced in my lifetime.

It doesn't have the feel of an attack or a war. It's not like a government falling. I'm tempted to link it to a natural disaster, but I'm afraid that's disrespectful because tsunamis and earthquakes takes lives. I just can't place where this sits in my understanding of current events. But I am straining to do so - It's just so big. So I read and I thought about it, and I think I might have been making progress.

But then what happened? The presidential candidates started talking about it, and I started thinking about politics and the political side of the economy. I started to get angry. And so I watched the following.





I don't know how to fix this, and when I look at the campaigns I do not feel reassured.

They aren't speaking to the issues, as usual. But I guess these events are the issues speaking out of turn.

I just hope we can elect someone who will put the right people in place to find our balance again. My thoughts aren't worth much, but for what they are worth: I think we need to reintroduce regulation (duh), but I don't think it would be useful to go back to the stuff Clinton repealed at the end of his term. That stuff was from the 1930's, and the repealing of it was part of what has fueled the last 10 years of worldwide economic growth. I guess someone should have thrown cold water on the mess before we got to this point, but I don't want to place blame (yet). It's too easy to say someone should have been watching. I don't think we have the kind of regulatory apparatus in place to have seen this coming. I guess we have to watch and learn (and when the market hits the bottom, get your money in there).

Seriously, however, best wishes and my sympathy go out to all who are going to be affected by the job losses and the financial strain that's troubling the world right now.

You can't eat the Venetian blinds.

There's a story in the news about some high-end medical equipment that has gone missing from hospitals here in Budapest. The equipment was obviously stolen, and stealing it was easy because the hospitals in question are currently in the process of closing down. You see, the Hungarian government is trying to fix a broken economy, and part of that process involves closing hospitals.

To their credit, those responsible for the equipment's disappearance knew what they were doing. For one thing, only the most expensive inventory is missing. For another thing, selling this particular stolen equipment is going to be a breeze. Most medical equipment would easy to track down, but because the purchase of high-end equipment for these hospitals was sponsored by private doctors and financed by medical foundations, the paper trail for the equipment is difficult (if not impossible) to follow.

The story screams inside job.

A related story, while not as visible, hit us closer to home last month. Dóra’s colleague Mark recently finished renovating his apartment here in the city. The work was nearing completion just a few weeks ago. All that remained was the installation of the major appliances: stove, oven, refrigerator, water heater, dishwasher, etc. The equipment was delivered the night before it was to be installed, but before that night was over, someone kicked in the door and hauled off all seven of the large appliances.

Again, the story screams inside job.

I've heard more of these stories in Hungary than I ever did in the other places I’ve lived. I realize this kind of crap happens all over the world, but in corruption-plagued countries like Hungary, it happens more often and at more levels of society. Everywhere you turn in Hungary there are people seeking to infiltrate the systems where money or goods are exchanged. They find their way in and skim what they can, be it medical equipment from a pediatric hospital or some guy’s refrigerator. I used to find myself wondering why.

Then, during a recent lecture on academic integrity, one of my students made the following argument: If a student is clever enough to cheat and not get caught by the teacher, then that is reason enough for the student to get a passing grade.

The majority of the class started nodding enthusiastically. They waited for my response, and I managed a reasonable rebuttal. I don’t, however, harbor any illusions. Most of them still believe their peer won that argument.

Interestingly, many of my students come from countries where corruption is an issue at every level of government. Many of them come from cultures where business transactions are hampered by a crippling lack of trust between parties.

It would surprise me if either the thieves from the hospital or the thieves from Mark’s apartment were ever apprehended. They studied the system. They identified a weak spot. And now thanks to their efforts, Hungary lacks machinery for its hospitals. As a result of their talent, homeowners in Budapest can’t trust contractors.

Meanwhile, Hungary’s government is trying to fix a broken economy.

Finally, please check out my brother Myles's music store. He's quite good, and by quite good, I mean excellent. But you don't have to take my word for it...

Clarity, From a Distance

This is a shot Lili, Szóda, Dió, and me on the island of Brač. That was the last trip of the summer, and it was a good one. Dóra’s got the album up here on Picasa if you’re interested.

We’ve been back for over a week now. School’s started up, and I’m teaching two classes of seventeen. Twelve different countries represented in the classroom, and a theme of inter-cultural exchange in the Writing Skills course. It makes for an interesting day at work.

Dóra’s folks are here in Hungary until the middle of October, and we’ve spent some quality time with them. So things are busy, but there is one thing we can’t escape: The US elections.

I’m fairly certain our exposure is not as overwhelming as it is for those in the States, but it is exhausting none-the-less.

Exhausting for two reasons:

First, people actively seek out my opinion because I’m actually able to vote.

Second, and certainly the more exhausting reason, the European view of American politics is so skewed that I’m often asked to re-explain the issues I'm concerned about. "You mean it about more than just race?"

I’m not saying I live in a vacuum or that I am the only expert over here. I have friends at work who are more up-to-date on this than I am.

Then there’s Dóra, her folks, and the e-news all keeping me humble. But the repeated experience of breaking down my views for people who are unfamiliar with America’s issues has had an effect on me.

Warning! This post will now address politics!

I’ve been politically-minded for years now, and my opinions are important to me. However, I’ve always done my best to hear out and weigh the arguments of those who disagree with me. Not only is this the polite approach, it also allows me to shift my stance if I come across hard evidence that runs counter to my opinions. I don’t think such a maneuver signals weakness, but strength.

You see, I have close friends and family who sharply disagree with my politics. I respect the intelligence and opinions of these people. And in deference to them, I try to keep an open mind on the issues. When they are correct, I’ve learned to swallow my pride and accept their take.

But then yesterday I experienced something for the very first time. I was explaining my choice for president to yet another European who thought a white person was more qualified to be president than a black person (he didn’t seem to care about who the candidates were). I was halfway through my bare-bones explanation of the issues when I experienced – for the first time – absolute certainty and complete clarity.

It was mind-blowing. For the first time in my life, I realized that nothing could change my opinion: The Republican Party as it exists today cannot run the executive branch of the US Federal Government.

I think I reached the tipping point when I started describing the FDA’s inability to contain the Salmonella outbreaks, but it might have been when I got through summarizing the complete lack of oversight on Federally-insured loans.

Whatever it was…

Funding a war with borrowed money,

Failing to maintain basic infrastructure,

Allowing speculation to drive up the cost of oil,

A weak-dollar policy,

Bailing out buddies at a private investment firm with taxpayer dollars (which creates expectations from other firms that want the same kind of treatment) despite the Party’s hard line against government interference in the private sector,

Expanding the powers and size of the central government despite the party’s claim to favor small government…

…I cannot think of any reason someone would vote for the Republicans. The blunders I listed are not Bush blunders. He may have taken us to a war on false intelligence. He may have over-politicized the judicial branch. He may have made more mistakes than that. He’s administration has stumbled, sure. But the Republican Party’s arbitrarily enforced small-government policies are responsible for too many of America’s largest problems today.

I will remain registered an independent and keep an open mind on other matters. But this issue is closed for me. You can like or dislike McCain. You can feel energized or deflated by whoever that disaster of a VP nominee is. You can say Obama is the president we need, or completely un-presidential. But you cannot get me to believe that the Republican Party is capable of wielding executive power at the Federal level in its current state.

Finally, please check out my brother Myles's music store. He's quite good, and by quite good, I mean excellent. But you don't have to take my word for it...

Summer's end

All right. So summer is coming to a close.

I visited Africa: Animals. Culture. Family time.

I spent some time in Wisconsin (& Chicago): Radiohead. Funky New Year. Friends & Family time.

I got some research done for this academic year. Not very exciting blog material there.

And I finished a major rewrite of my novel. I'm thinking about a title change from "Mifflin" to "Miffland." (That link is important if you want to understand the change). The book has become something of a reflection on the legacy of the activism and protests from Madison's heyday in the late 60's and early 70's. The title is supposed to suggest a theme, right?

Now it's back to work. I'm excited about the upcoming academic year. I'll try and get back into my rhythm of one entry a week here at Hogs. The novel kind of took all my writing time this summer.

Anyway, let me know how your sumer was.