AMERICAN CONSERVATISM IN 2008 AND BEYOND

foxfire wrote :

Quote:

The fact remains that under a capitalistic free society, it is those very rich who take the risks

you might remember that far more "ordinary" people take far greater risks .
they take dangerous jobs in mines , on oil rigs , working as lumberjacks , pumping gas ... you name it . they often leave their families behind to do those jobs in remote areas . what happens to them when the lumbermill closes down (just as ONE example) : they lose their job and may have little chance of finding another one for quite some time .

what happens to the "very rich" in similar circumstances ? very few - if any - have invested all their money in a single enterprise that goes completely belly-up and makes them lose their house . even if they lose 90% of their wealth , they still have much more than the "ordinary" people ever dared dream of . they can still go on living a comfortable life .
i don't know of any "very rich" that have lost all and living in poverty .

btw the NY Times just had an article in saturday's edition reporting that many universities have seen their gifts etc. from the "very rich" shrink greatly .
it seems that those "very rich" are not quite as generous any more .

i have nothing against "capitalism" but think that "excesses" have sometimes the consequence of writing their own death-sentence (or at least judgement)

imo "capitalism" means "responsible capitalism".
there are plenty of responsible capitalists , but it seems to me that over the last several years (perhaps even decades) the "irresponsible capitalists"have started to give capitalism a bad name - too bad imo .

there is nothing wrong with making money but "excess" (i'd call it greed) can never be good imo .
hbg

Quote:

Medieval theologian Thomas Aquinas said of Greed: "it is a sin directly against one's neighbor, since
one man cannot over-abound in external riches, without another man lacking them...
it is a sin against God, just as all mortal sins, inasmuch as man contemns things eternal for the sake of temporal things."

Greed is listed as one of the seven deadly sins. So is envy/covetousness. Where do you draw the line between the two in establishing government policy?

Well, and in my opinion ... Never mind.
Heil conservatism!

Leftists admire communist ideals, overlook barbarism

Grove City College publishes an excellent newsletter titled "Visions and Values." Its July 2006 edition features an interview with Dr. Richard Pipes, acclaimed Russian historian and Harvard University professor of Sovietology. The interview was conducted by Grove City College professor of political science Dr. Paul Kengor.

Pipes, who served on the National Security Council during the Reagan administration, explained that there are actually only a few communists among academics. At first glance, that's a puzzling observation, given the leftist bias at most college campuses. Pipes and Kengor explain the puzzle in a way that makes perfect sense.

While academic leftists, and I'd include their media allies, are not communists, they are anti-anti-communists. In other words, they have contempt for right-wingers, conservatives or libertarians who are anti-communists. Why? Academic leftists, and their media allies, are in agreement with many of the stated goals of communism, such as equal distribution of wealth, income equality and other goals spelled out in Karl Marx and Friedrich Engels' "Manifesto of the Communist Party." Leftist elites love the ideas of communism so much that they are either blind to, or tolerant of, its many shortcomings.

In practice, communism is nothing less than sheer barbarism that makes even the horrors of Nazism pale in comparison. Professor Ru- dolph J. Rummel of the University of Hawaii outlines that barbarism in his book "Death by Government," a comprehensive detailing of the roughly 170 million people murdered by their own governments during the 20th century. From 1917 to its collapse in 1991, the Soviet Union murdered about 62 million of its own people. During Mao Zedong's reign, 35,236,000, possibly more, Chinese citizens were murdered. By comparison, Adolf Hitler's Nazis managed to murder 21 million of its citizens and citizens in nations they conquered. Adding these numbers to the 60 million lives lost in war makes the 20th century mankind's most brutal era.

At home and abroad, leftists have done a thorough and commendable job documenting and condemning the horrors and crimes of Hitler and his fascist Nazi regime, but when have you heard them direct similar condemnation of Josef Stalin, his successors and Mao Zedong? By and large, they've chosen to overlook the horrors of communism.

The reason for their reluctance to condemn the barbarism of communism is simple. Pipes says, "Intellectuals, by the very nature of their professions, grant enormous attention to words and ideas. And they are attracted by socialist ideas. They find that the ideas of communism are praiseworthy and attractive; that, to them, is more important than the practice of communism. Now Nazi ideals, on the other hand, were pure barbarism; nothing could be said in favor of them."

Often, when people evaluate capitalism, they evaluate a system that exists on Earth. When they evaluate communism, they are talking about a nonexistent Utopia. What exists on Earth, with all of its problems and shortcomings, is always going to fail miserably when compared to a Utopia. The very attempt to achieve the utopian goals of communism requires the ruthless suppression of the individual and an attack on any institution that might compromise the loyalty of the individual to the state. That's why one of the first orders of business for communism, and those who support its ideas, is the attack on religion and the family.

Rank nations according to whether they are closer to the capitalism end or the communism end of the economic spectrum. Then rank nations according to human rights protections. Finally, rank nations according to per capita income. Without question, citizens of those nations closer to capitalism enjoy a higher standard of living and a far greater measure of liberty than those in nations closer to communism.

Walter E. Williams is a professor of economics at George Mason University.

Debra Law wrote:

OMG. Tell me it ain't so, Ican! CI is a commie? and he hates the Constitution?

It ain't so! He only values equality of results far more than he values equality of rights in the pursuit of happiness.

But ... maybe ... he's a coveter!?

How about this compromise with taxes, raise the marginal rates for individuals somewhat, but eliminate all corporate or business income taxes?

MARCH 6, 2009
Obama Repeats Bush's Worst Market Mistakes
Bad accounting rules are the cause of the banking crisis.
By STEVE FORBES

What is most astounding about President Barack Obama's radical economic recovery program isn't its breadth, but its continuation of the most destructive policies of the Bush administration. These Bush policies were in themselves repudiations of Franklin Delano Roosevelt, Mr. Obama's hero.

The most disastrous Bush policy that Mr. Obama is perpetuating is mark-to-market or "fair value" accounting for banks, insurance companies and other financial institutions. The idea seems harmless: Financial institutions should adjust their balance sheets and their capital accounts when the market value of the financial assets they hold goes up or down.

That works when you have very liquid securities, such as Treasurys, or the common stock of IBM or GE. But when the credit crisis hit in 2007, there was no market for subprime securities and other suspect assets. Yet regulators and auditors kept pressing banks and other financial firms to knock down the book value of this paper, even in cases where these obligations were being fully serviced in the payment of principal and interest. Thus, under mark-to-market, even non-suspect assets are being artificially knocked down in value for regulatory capital (the amount of capital required by regulators for industries like banks and life insurance).

Banks and life insurance companies that have positive cash flows now find themselves in a death spiral. Of the more than $700 billion that financial institutions have written off, almost all of it has been book write-downs, not actual cash losses. When banks or insurers write down the value of their assets they have to get new capital. And the need for new capital is a signal to ratings agencies that these outfits might deserve a credit-rating reduction.

So although banks have twice the amount of cash on hand that they did a year ago, they lend only under duress, or apply onerous conditions that would warm Tony Soprano's heart. This is because they know that every time they make a loan or an investment there is a risk of a book write-down, even if the loan is unimpaired.

If this rigid mark-to-market accounting had been in effect during the banking trouble in the early 1990s, almost every major commercial bank in the U.S. would have collapsed because of shaky Latin American and commercial real estate loans. We would have had a second Great Depression.

But put aside for a moment the absurdity of trying to price assets in a disrupted or non-existent market, of not distinguishing between distress prices and "normal" prices. Regulatory capital by its definition should take the long view when it comes to valuation; day-to-day fluctuations shouldn't matter. Assets should be kept on the books at the price they were obtained, as long as the assets haven't actually been impaired.

Mark-to-market accounting does just the opposite. When times are good, it artificially boosts banks' capital, thereby encouraging more investing and lending. In a downturn it sets off a devastating deflation.

Mark-to-market accounting is the principal reason why our financial system is in a meltdown. The destructiveness of mark-to-market -- which was in force before the Great Depression -- is why FDR suspended it in 1938. It was unnecessarily destroying banks.

But bad ideas never die. Mark-to-market was resurrected by the Financial Accounting Standards Board and became effective in the fall of 2007 (FASB rule 157) to the approval of the Bush administration, its Treasury Department, and the Securities and Exchange Commission. Even as FASB 157 began to take its toll on financial institutions last year, Mr. Bush refused to kill or suspend it. When Congress voiced displeasure last fall, the administration and regulatory authorities made some cosmetic changes, but the poisonous essence remained.

Another horrific Bush policy that Mr. Obama has left untouched concerns short selling. In 1938, the SEC, created by FDR, enacted the so-called uptick rule, which held that investors could not short a stock unless it went up in price. In July 2007, the SEC, whose commissioners were handpicked by the White House, got rid of the rule. Market volatility exploded.

Compounding this lunacy was the SEC's inexplicable failure to enforce the rule against "naked" short selling. Before an investor can short a stock, he is supposed to borrow the shares and pay a broker or stockholder a fee. What sellers soon realized was that the SEC was turning a blind eye to naked short-selling, thus adding even more pressure to beleaguered bank equities. Short sellers quickly saw how mark-to-market made seemingly invincible companies vulnerable to destruction. They picked their targets and relentlessly sold financial stocks short.

If the president really takes Roosevelt's legacy seriously, he should suspend mark-to-market accounting rules, restore the uptick rule, and enforce the prohibition against naked short selling. If he doesn't, historians will look back in utter amazement at Mr. Obama's preservation of Mr. Bush's worst economic policies.

Mr. Forbes is chairman and CEO of Forbes Inc. and editor in chief of Forbes magazine.
http://online.wsj.com/article/SB123630304198047321.html

Just about says it all really ...


Hillary Transue was 14 when she carried out her prank. She built a hoax MySpace page in which she posed as the vice-principal of her school, poking fun at her strictness. At the bottom of the page she added a disclaimer just to make sure everyone knew it was a joke. "When you find this I hope you have a sense of humour," she wrote.

Humour is not in abundance, it seems, in Luzerne County, northern Pennsylvania. In January 2007 Transue was charged with harassment. She was called before the juvenile court in Wilkes-Barre, an old coal town about 20 miles from her home.

Less than a minute into the hearing the gavel came down. "Adjudicated delinquent!" the judge proclaimed, and sentenced her to three months in a juvenile detention centre. Hillary, who hadn't even presented her side of the story, was handcuffed and led away. But her mother, Laurene, protested to the local law centre, setting in train a process that would uncover one of the most egregious violations of children's rights in US legal history.

Last month the judge involved, Mark Ciavarella, and the presiding judge of the juvenile court, Michael Conahan, pleaded guilty to having accepted US$2.6m from the co-owner and builder of a private detention centre where children aged from 10 to 17 were locked up.

http://www.guardian.co.uk/world/2009/mar/07/juvenille-judges-cash-detention-centre


So much for "tough on crime" -- a brainless response promoted by tabloids and conservative politicians where, all too often, the wrong people end up in jail.

Sure the judge was corrupt, but why on earth did the people think this was ok? Why was it left up to the mother to raise hell? Because stupid people take the word of ratbag media and ratbag politicians as truth. For the lazy and the braindead, it's easier that way.

Murf

Mark to market, I believe, means to revalue the assets on their books to current market value. However, that's an impossibility in today's market, because most values are headed downwards, and different areas suffer greater decrease in value. There's no practical way to do that with so much flux in the market.

cicerone imposter wrote:

Mark to market, I believe, means to revalue the assets on their books to current market value. However, that's an impossibility in today's market, because most values are headed downwards, and different areas suffer greater decrease in value. There's no practical way to do that with so much flux in the market.

As long as the loans are being serviced, that seems to be more important in my opinion. If applied to car loans, half the loans or more would never be made, which might be advisable actually. How many people in the country are upside down on car loans? I bet a ton.

Firms Blame Financial Woes On Accounting Rule
by David Kestenbaum

Mark-to-market accounting sets the value of an asset according to how much it would sell for today.

Morning Edition, October 29, 2008 ·

American banks are filing their quarterly financial statements this month, a process that normally draws little attention from the general public. But these days, a lot of banks are in trouble. Wachovia's newest financial statement includes a loss of $24 billion.

Some banks insist the situation isn't as dire as their balance sheets suggest. They blame a bookkeeping rule known as mark-to-market accounting " a rule that regulators may soon change.

The issue came up again when Martin Sullivan, former president and CEO of the insurance giant AIG, testified before Congress about his company's collapse. AIG had just received an emergency loan for $85 billion, with more to come, from the Federal Reserve. Sullivan could have blamed the housing market or poor choices by management, but he trained his sights elsewhere.

"To assist the committee, I would like to focus on one particular factor, the role played by one accounting rule applied to corporations," Sullivan told lawmakers. The rule requires companies to value any given asset according to what they believe someone else would pay for it. They then record, or "market," this "market value" on their financial statements.

The problem, Sullivan explained was that some of AIG's assets simply were no longer trading. AIG sold credit default swaps, for instance, basically insurance policies on bonds. In September, when the credit crisis struck, no one wanted to own a credit default swap. It would have been like insuring beachfront houses as a hurricane bore down.

If AIG had been forced to sell its credit default swaps then, Sullivan said, the price would have been artificially low. With the market value plummeting, he argued, mark-to-market accounting turned AIG's balance sheet into a nightmare. Suddenly, a company with $1 trillion of assets was reporting tens of billions in unrealized losses.

As part of the $700 billion bailout, Congress ordered the Securities and Exchange Commission to review the requirement for mark-to-market accounting. The language in the Troubled Assets Relief Program, or TARP, gives the SEC the authority to suspend the rule.

Not everyone thinks that would be a good idea. "It would be a terrible mistake that would make the current crisis worse, rather than better," says Barbara Roper, director of investor protection at the Consumer Federation of America.

Roper says mark-to-market accounting makes it possible for investors to trust what companies report about themselves. "If people don't trust financial statements " and today, people do not trust financial statements " they're not willing to invest and not willing to lend," Roper says. "Part of the reason banks haven't been lending to each other is they don't know who the next to fail is, and they don't trust the information they're getting on bank balance sheets."

She has a name for the alternative to mark-to-market. She calls it "mark-to-myth."

In an odd twist, the current regulation doesn't require mark-to-market accounting in every situation. Banks are allowed some leeway to use computer models in gauging the real value of assets that, for whatever reason, aren't trading. The question is when they can exercise that leeway, and when they can't.

Some bankers insist that occasionally varying from the normal practice makes sense.

"I think the people that think mark-to-market accounting is the end-all and be-all have never tried to run a financial services company," says Sarah Moore, chief financial officer of Alabama-based Colonial Bank. "Banks have to use their own judgment about when to use mark-to-market."

Moore says that strict mark-to-market accounting tends to make balance sheets look overly rosy in good times, when the market overvalues things. In bad times, she says, the rule sends balance sheets into an overly steep decline.

Like a lot of banks, Colonial Bank holds some mortgage-backed securities " the kind of assets that investors are fleeing. Moore says Colonial doesn't plan to sell those securities right away. She plans to keep holding them in the hopes that the market will recover and their value will rise. Why be tied to what the market thinks at the moment, she asks?

"Say you're a dentist, and you have a building that you're running your dentist office [out of], using that building," Moore hypothesizes. "You have no intent to sell that building. That building is housing your practice " you don't intend to move. But if you had to mark that building based on what you could receive for it, the financials of your dentist practice would look a lot worse."

The government may be as divided on the issue as bankers and watchdogs. Within the past few weeks, two government agencies issued competing "clarifications" of the mark-to-market rule. The American Bankers Association liked one but thought the second made things more confusing.

As the debate over mark-to-market accounting continues, investors wanting to know how bad a bank's losses really are will have to consider the very fine print in the latest financial filings.
http://www.npr.org/templates/story/story.php?storyId=96229610