Re: Philip Klein's Warren Buffett Told You So:
In his otherwise interesting piece on Warren Buffett, Philip Klein notes in passing that conservatives "aren't generally fans of Buffett" because he's a "loyal Democrat" who supports higher taxes and, lately, Barack Obama. I certainly agree that Buffett's application of "simple Midwestern common sense to complex financial matters" is admirable so far as it goes. The trouble, for me (and perhaps for most other "conservatives"), is that such shrewdness doesn't go very far, and seems often to be tied to a peculiar moral obtuseness -- evidence of which is only faintly on display in public support for higher taxes.
The deeper trouble is the ethics on display in, for example, the creepy population control policies and politically correct educational systems supported by the generous "philanthrophy" of Mr. Buffett and his friend Bill Gates. Ambrose Bierce's famous definition of a philanthropist as a rich man who has taught himself to smile while his conscience picks his pocket doesn't quite measure up to the colossal smugness of Mr. Buffett's philanthropic vision for a better world. It is the vision of a geek moralist who has never thought deeply about any non-techie issue and has come to mistake his cleverness for wisdom.
Klein says that the "Oracle of Omaha" knows enough "to stay away from the latest fads" in the disposition of his shrewd investments. Too bad Mr. Buffett is not as deeply connected to literature and philosophy and theology as he is to the markets. His philanthropy might then be less faddish.
-- John R. Dunlap
San Jose, California
Mr. Klein is right, Warren Buffett told us so. He was right that current financial practices in the lending industry would one day cause a collapse. The reason: the world of financial lenders was not built on the bedrock of liquid, or even semi-liquid collateral, but upon the shifting sands of unsecured promises. As one promise went unmet, this caused another to slide away, then another and another and another. Until, like quicksand, everything sinks out of view. While people admire the man who is clever, it can be dangerous to be too clever. And the people running these institutions were clever. Clever enough to be able to walk away with millions while their investors end up with either squat or taxpayer money.
Oh, don't hold your breath for any criminal investigations or even official investigations or Congressional hearings. These financial institutions are too tightly connected to high ranking politicians, most especially Democrats.
Yes, we were warned. But no one in a position of power was going to do anything about it. They were all making too much money.
-- Michael Tobias
Really, now. The Wall Street Journal's editorial page has been harping on the problems at Fannie and Freddie for years. Why not give them some kudos? Further, the Federal Reserve board issued a study in 2003 (!) showing that the benefits of the taxpayers' guarantee went to the shareholders and management, not the homebuyers. As we all know higher leverage in good times means higher profits. With the implicit, now explicit, guarantee by the taxpayers, it was a classic "heads I win, tails you lose."
I have always been amused by Mr. Buffett's disparaging of derivatives. Insurance is, by its very nature, a derivative! Insurance happens to be the core of his investment empire. Are derivatives only good for him, but no one else?
The current mess is based on two things: excessive leverage and so-called fair value accounting, FVA, coupled with Sarbanes-Oxley rules. They reinforced each other as problems arose. FVA required firms to value their assets at the best price offered for them, or go to jail under the Sarbanes-Oxley travesty. Even if the securities in question were performing well, a low-ball offer became the market price. This caused firms to write down the assets. This writedown came straight out of capital. This is where leverage came into play. A firm leveraged 25-to-1, say, would have its capital wiped out with 4% writedown in its assets. Add into the mix the fact that banks' balance sheets are almost as opaque as re-insurance companies are.
To show how ludicrous the current situation is, consider the following: the total of subprime mortgage debt in mid-2007 was about $1 trillion. The announced write-offs are close to that. Does anyone seriously believe that the whole subprime mortgage market is going to default and that the underlying assets, the houses, will have zero value? This is the type of nonsense that FVA has brought us to.
I'm not trying to remove any culpability from the execs at these firms. They weren't forced to leverage themselves to the hilt. Also, it would have helped if they paid attention to what was going on down in the trenches. It appears they took the Barings Bank' management view: as long as accrual accounting showed we were getting richer, don't ask any questions.
-- James M. Mulcahy
Grand Island, New York
Thank you for "Warren Buffett Told You So" by Philip Klein. However, I have to disagree with his analysis to some degree. The derivatives involved in the current crisis, the Mortgage Backed Securities (MBS), are a very small part of the total derivatives market. Derivatives used to be called futures and options, which began life in the17th century Dutch Republic. They have been used extensively since then without causing any crises. Boone Pickens used derivatives in the mid-'80s to protect his company against falling oil prices. Southwest Airlines has used them to protect it from rising fuel prices. So I don't think it's fair to blame derivatives in general, or the MBS derivatives, either.
The author states in the article that "...financial firms lost sight of what they actually owned, and became overleveraged." That's the key -- overleveraged. The derivatives didn't cause firms to become overleveraged. That was a conscious choice based on the low interest rates from 2001 to 2006, a policy of the Feds. Unnaturally low interest rates cause many businesses to borrow too much. Then when the crunch hits, they have to unload that debt and some can't so they fail.
Remember that the current financial crisis began as a housing crisis. Homeowners became overleveraged and defaulted. They became overleveraged because they thought housing prices would rise forever. They didn't realize that the Feds had goosed the demand for housing with unnaturally low interest rates. When the Feds raised interest rates, demand fell along with prices.
The common thread running through all booms and busts like what we have experienced recently with housing is the Fed. The Fed giveth with low interest rates. Then, when prices rise, the Fed taketh away by raising interest rates. Blessed be the name of the Fed for giving us this current financial crisis.
-- Roger D. McKinney
Broken Arrow, Oklahoma
I would have to agree with Philip Klein's assessment of Buffett's warning concerning derivatives. The only additional point I would like to interject is the role the Federal Government played in all of this. The mortgage giants Freddie Mac and Fannie Mae are quasi public/private mortgage institutions. They carry over $5 trillion of mortgages, and are just as susceptible to political pressures as they are market pressures. If there ever is a reason to balk at future calls for public-private "partnerships," these 2 institutions should be evidence enough. Two weeks ago as Freddie and Fannie were going into receivership, Barney Frank (D-Mass.) defended Freddie and Fannie, and balked at any mention of selling off their assets and dissolving them completely.
The other organization (or actually person) that comes up for scrutiny is the former Fed Chairman Alan Greenspan. By cutting short-term interest rates to 2% in the wake of 9/11 and keeping them low for so long, he created the conditions for the housing bubble. Banks and financial institutions borrowed at 2% and charged anywhere from 6% (mortgages) to 30% (credit cards). Firms like AIG, Bear Stearns, and Morgan Stanley used the mortgage backed securities bundles to spread the risk (from high risk borrowers underwritten by Fannie Mae/Freddie Mac), while pulling down high margins. The inflated real estate valuations were a direct result of low short-term interest rates set in place by Greenspan. He set in place the expansion of money and credit totally tied to real estate. Consumers who saw their home equities double in a space of a few years borrowed against the inflated assets (usually through equity loans) and went on a spending spree. With real estate values now plunging many of these consumers are walking away from both their original mortgages and home equity lines of credit leaving firms like Bear Stearns and AIG footing the bill.
Yes, Buffett was correct -- but only half correct. I wonder if the old wizard today still believes in that old liberal canard of public/private partnership?
Liberal Democrat vulture capitalists like Warren Buffett, George Soros and Democrat hedge fund managers are part of the problem. These men make their money by destroying economies and people's lives then they have the effrontery to tell us we need to have our taxes raised while they protect their wealth from the tax man by donating to one another's liberal non-profits. Who cares what a supporter of Obama thinks when like his political allies his one motive is helping himself and to hell with the country? Buffett's advice will wreck the economy and make the Great Depression look tame, but that's exactly what Warren Buffett wants, because it makes him and other liberal carrion richer. Despite the current financial troubles, thanks to supply economics, low taxes and a pro-business administration, America will weather the current correction and come out ok. Had Buffett's buffoons been in charge he'd be getting richer while the rest of us would be in the poor house.
Simply Freddie Mac and Fannie Mae are in trouble, because they've been run since the 1990's by corrupt Democrats more interested in getting undisclosed bonuses and personal perks than fulfilling their fiduciary responsibilities. President Bush suggested reforms, but the Democrat darlings of Buffett and Wall Street blocked him, because it benefited them and their financial patrons.
As for the housing market and the rest of the economy it only took a nose dive when Buffett's inept Democrats took control of Congress and did absolutely nothing except push for higher taxes, terrorist appeasement, costlier energy and expansion of the government. When banks are compelled to loan money to high risk individuals as part of a social egalitarian experiment the end result is obvious and you don't have to be a vulture capitalist to predict the future. While working Americans struggle Warren Buffett will keep raking in the cash and then sheltering it from taxes by funneling it to liberal non-profits on a mission to socialize America.
I have a suggestion for Warren Buffett, George Soros and the wealthy liberal elite: give all your money to real charities that help people and quit profiting from the pain of others if you're so damn altruistic. Maybe President Bush should take a page from the Warren Buffett playbook and seek legislation to strip the vulture capitalists who caused this problem of all their profits and wealth -- I mean if Warren Buffett thinks it's good enough to destroy the family farm and small businesses with the death tax maybe its time we stuck it to him like he wants to stick it to us.
Re: Lisa Fabrizio's Those Who Forget the Past:
Ms. Fabrizio writes of her experience at a party in Connecticut that she attended with her fiance. She recounts the bitterness, hatred, and bile that was directed at her and her finance' during the party. She then writes; "Once again we witnessed the phenomenon where otherwise perfectly nice people were transformed into fire-breathing attack dogs at the mere mention of the GOP."
It constantly amazes me that otherwise sane conservatives and Republicans continue to submit to this kind of insulting behavior, and harassment. No, Ms. Fabrizio, these are not nice people. These people are not friends. Friends do not act that way towards their friends.
I will never understand why people that belong to the Republican portion of the activist class, and the public part of society seem so willing to submit to this treatment. Surely there are Republicans and independents in Connecticut who also give parties. I hear the same stories from Laura Ingraham on her radio show, and she keeps telling her audience that these harridans are "nice people." I have come to believe that you folks that time and again present yourselves to be treated thusly must be true masochists. What else would you call someone that continually submits to the attacks of their vicious, sadistic, mentally unbalanced members of their social circle. I would find a new social circle within which to spend my time, one where the people are more congenial, and more circumspect But then I am not a masochist, even if I do live in the Peoples' Republic of New England..
-- Ken Shreve
I would add only one other example of liberal media malfeasance. I refer to Mr. Obama's slip of the tongue when he said that he had visited "50 of the 57 states."
Mr. Obama is a devout Christian, but you know, I read that in the Islamic world there are 57 states. Oops! Could this be a slip of that theology he never espoused but, according to one of his biographies, would follow if things got bad?
-- Jay Molyneaux
Denver, North Carolina
KEEP AN EYE ON HIM
Re: Peter Ferrara's Obama Can't Be Trusted On National Defense:
It is funny how these things work. Weeks went by after the Obamessiah's tour of the world with no word of his trying to undermine our country's Iraqi foreign policy. Then Woodward reports that we listen in on everything the Iraqi leader does. All of a sudden, we hear about Barack's perfidy. And they are ready to quickly deflect concerns.
I think there is a tape that we should demand the government release. Woodward has already blown any need to keep this secret. And letting the people know the truth about this is a matter of national security.
Please start the national caterwauling for the public release of this recording.
-- Jim Bailey
FIRST DUDE, UNION BOSS
Re: Doug Bandow's Labor Goes for the Brass Ring:
I understand the article. I understand Union management. It's always about lining the honchos pockets and of course power. It's never about the rank and file.
If, and a big if, the unions truly had their members' best interests at heart they would be throwing Democrats under the bus right now and supporting "drill here, drill now...drill everywhere." They would also toss the environmental movement under said bus.
Hey, you steel workers, teamsters, electricians, tradesman, dock workers. etc, etc, etc; if you wake up, you just might see a real, live, goldmine, out there on the horizon, not only for your membership, but the rest of the country as well! I've read somewhere that ANWR alone could create a million new jobs across the entire country.
I've never belonged to a union, but over the years have met many who do. I've never understood blind obedience to corrupt leadership, always with a hand out to and the other hand in, the rank and files pocket. Then they give the money to political hacks who block job creation.
Maybe if McCain/Palin wins they put Todd in charge of Labor or EPA.
-- Jim Woodward
Re: Stephen Zierak's letter (under "Time Not to Choose") in Reader Mail's Us and Them:
Sorry Steve, but leaving a line blank on a Presidential Ballot is "doing something" by omission. It is taking a passive aggressive action to intentionally do damage. Two questions:
In both case where you "blanked" a line, (and assuming you are not saying the outcome was because of you) please tell me where the country was improved and not damaged because of it. By opting out, what exact moral responsibility do you entail for your non-actions, or is saying "I blanked don't blame me" enough? You are still doing nothing, not even saying by using your vote, "I stand here and resist evil men."
Hint from the real world Steve: if Dems retain Congress and gain the presidency the chances are that they will legislate the Stupid Party out of existence. Yes, it is that bad! Don't think so? You have not listened to them talk about criminal prosecution of Bush for policy decisions; Obama trying to shut down radio stations that host his critics with brown shirt thug tactics and the current Dem Congress refusing to allow Republicans access to congressional staffing, money, or even the bills to be voted on prior to votes. If this evil party gains ultimate power they will NOT give it up ever again. They openly state they have learned their lessons after loosing to Bush twice, just like here in King County Washington, they will keep "finding" votes until they win. Voting will be a Roman Circus where the outcome is bought and paid for years before the event. They will "blank" your vote for you.
Blank you for voting.
-- Craig Sarver
THE UPPERCASE FOR GOD
Re: M. Hans Liebert's letter (under "Best Yet") in Reader Mail's Us and Them:
Someone needs to tell reader M. Hans Liebert that his polemic was somewhat unconvincing, as it's hard to make the case for one's religiosity when one uses the lower case when invoking God's name. O.K., I just did. Also, I hope he doesn't take offense at my chuckling over the notion that he, and folks like him, are "moving in the direction of hope and faith." Pardon my skepticism, but to sneer at fellow Christians by calling them "right-wing extremists" and hate speech mongers, would appear to be a detour in direction. Or am I missing something here? I sense a certain velvet gloved, iron-fisted absolutism to the direction of "hope and faith" that Liebert and his fellow travelers want to go. You'll pardon me if I don't wish you all a bon voyage.
-- A. DiPentima
Mr. Liebert is aghast that Jeffrey Lord would suggest that those who attack Sarah Palin's faith are not Christian. (Personally, I don't think he said that, but let's grant the point). Mr. Liebert would do well to understand that Mr. Lord's opinion is not what he should be concerned about. I would commend two pieces of reading to Mr. Liebert. The first is in the Gospel of John, Chapter 3. It is the conversation between Jesus and Nicodemus on the subject of what does or does not constitute being a Christian. What Mr. Liebert would discover, if he had eyes to see, which he obviously does not, is that identifying oneself as a "good Christian" does not make you one, any more than sleeping in a hen house makes you a chicken.
The second is in the Gospel of Matthew, Chapter 24. In that chapter, Jesus explicitly states that there are "many" who call themselves "Christian," but are not, and will eventually be cast into outer darkness.
The "faith and hope" to which Mr. Liebert says the country is moving is a "faith and hope" that is responsible for the murder of 50 million infants, inside and outside their mother's wombs. It is a "faith and hope" that is espoused by a charlatan who actually spoke in opposition to a bill that would have provided for minimal care of infants born alive as the result of a botched abortion. In other words, infanticide.
No one, Mr. Liebert -- no one who is truly born again, would ever dream of supporting a candidate or party that espoused such barbarism that is in total opposition to all that Jesus Christ taught. In fact, Jesus said that you and your fellow travelers would be better off having a millstone tied around your necks and be cast into the midst of the sea than to face him on the Day of Judgement.
My opinion on this subject counts for nothing, Mr. Liebert. The opinion about which you need to be concerned is that of the Judge of all mankind, Jesus Christ. It is him you will face very soon.
Be afraid, Mr. Liebert. Be very afraid.
-- Keith Kunzler
When M. Hans Liebert writes, "Ignorant of the fact that one can have a liberal social view and still believe in god," one has to wonder if the use of the lower case "g" in "god" was a Freudian slip or purposeful disrespect. Or it may reflect that the Left's god is secularism and need not be capitalized.
-- Ira M. Kessel
Rochester, New York
Mr. Karr claims that a lot of kids in farm country drive trucks and tractors at age 11 and thus "By the time they reach 16 they have had five years of driving experience."
Uhhh, no sale. Driving a tractor on the side of some country road at 10 MPH with nothing but an occasional produce truck to contend with doesn't really qualify as driving experience.
I grew up in southern California where driving meant being on the I-5 freeway. Indeed, we all were required to do some freeway driving in high school driver's ed. When you take your driver's license test you have to show you can navigate a car in city traffic -- not maneuver a row crop tractor down a deserted dirt road or drag a hay merger over to the neighbor's farm.
Driving experience means operating a motor vehicle in moderate to heavy traffic conditions. It means understanding and complying with traffic laws while moving at speeds often exceeding 40 MPH.
I'm not sure how many 11 year old kids can claim they've done that. If not, then they can't claim to have driving experience than means anything.
-- Garry Greenwood
FROM INGMAR BERGMAN COUNTRY
Re: Larry Thornberry's McCain in the Sunshine:
Thank you for a very informative and fun article. You easily get it all said and it would be good if it was more of your style.
Many regards from Sweden.
-- Marianne Andersson
MR. TOUGH GUY
Re: The Prowler's Obama-Biden Reservations Confirmed:
I listened to the Roberts and Alito hearings. If that is the best that Biden can manage, Palin has nothing to worry about.
-- John Schuh
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