aardvarkcola

Posts Tagged ‘Congress

Someone, God knows who, bought my breakfast this morning. I went to pay and the waiter said, “It’s covered.” I have no idea who paid for it. Thank you, whoever you are. You made my day. It’s been a great morning.

I drive a lot to write.

From home, 3 1/2 hours north, hoping the weather is good, so it takes only that long and not more. Last week a 2 1/2 hour trip I take regularly became a six hour slog. I gave up at one point and pulled over for a sleep until the blizzard quit. I watched small cars and larger trucks, most with hazard lights blinking, as they powered through the flurries. Across from me, on the rural intersection, a commercial haul truck did the same thing I did, pull over until the flurries calmed. Why take a chance? I slept for an hour or so. When I woke the snowstorm had passed. I took to the road again.

When there is snow on the road, light snow whips up every time a heavy truck goes by. It makes seeing the highway impossible for a few seconds. Two or three trucks in a row make it harrowing. You can’t speed. Some do. I don’t know how they do it. Speed, and it will catch up to you. Once, years ago, I counted 27 cars and trucks in the ditch in a a half-hour stretch I’d driven a thousand times. Winter driving is different.

Yesterday the roads were good for the entire drive, no snow fell, and for the most part the roads were clear. Only on  a few sections did light snow swirl up and make seeing impossible for those precious few too-long seconds when the highway cannot be seen.

I came up to take a single photograph. There is more to that, a story I could  tell another time, perhaps, but how it was taken is simply the way things happen in the communities I cover. Then, after talking to people I knew, jotting things in my small notebook, taking a few more spontaneous photographs, I drove another hour and a half to an office to type and to download my photographs to the print shop where they were published this morning. It was a sparse day’s work: four stories and a half dozen photographs. I started late, 7:00 a.m., and finished the day at 11:30 p.m. First days of the week are typically long.

It will be another long day today. I’m chasing stories all day. I have a municipal meeting in this community at 7:00 p.m., then I’ll be writing it up right after.

It is -36 Celcius in the community I just left yesterday. Here, an hour and a half south, it doesn’t feel that cold. But this morning it was at least -30. I could tell by the clear clank when I closed my truck door; it makes a different sound when it gets cold. When it is warmer it is a much fuller sound.

It’s almost noon. The Environment Canada website tells me the temperature outside is -29. It’s a beautiful day. No cloud. Full brilliant sun. Gorgeous virgin-white snow covers everything, everywhere. It is the sort of day you thrill to be alive just to see it.

And now, back to work.

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The mystique of cult Obama, the rockstar politician who emails, will eventually corrode. It is the nature of all politicians to eventually tarnish, no matter how much spin can polish.
Where will this corrosion first take hold?
I think I see where it might.
In the United States, the head politician, the president, will be immortalized, go down in history, have his name ranked in encyclopedias for easy reference, During his term he will personify the country itself. For good or ill, the country will be a reflection of the president. He will become his time. His image will be the image of the country.
Think of FDR. Dashing, jaw jutted, confident, cigarette holder in bared smiling clenched teeth. Truman. Quick stepped, deliberate, decisive, reporters on the run to keep up with him as he walked each morning from Blair House, where he lived, to the White House where he worked. Calvin Coolidge, quiet, reserved, lassez-faire, hands off manager of a country of unregulated and unbridled confidence that would run into a wall to end the roaring 20s. Kennedy, a superstar politician who challenged America to go at least to the moon in an era where America seemed capable of anything.
Was it Leacock who wrote about the 1930s banker, who was asked, as he rushed into a restaurant from his limousine how the depression had affected him.
“Terrible, just terrible,” he said on the fly.
Like that banker, we have seen Obama less in the oval office, where he is needed, and more in exotic locales. He is needed to repair America’s damaged self among its allies, and he is doing, it seems, a refreshingly remarkable job.
But the image of the president on an endless honeymoon, flying off to Broadway on a jet from Washington and back for the only and specific purpose to date his wife in the middle of a recession laying off millions, may be the chip in the mystique that eventually begins the inevitable corrosion.

One mayor of a municipality I covered for a small newspaper told me that no one new on council ever asked questions about the budget. Budgets for the municipality were under $30 million. Sure enough, budget time rolled around and the new councillors looked thoughtful, listened to the debate, but asked no questions.

Why?

There really is too much to ask. When you have volumes of pages of budget line items in binders on your desk and it’s the first time you’ve dealt with these matters, you have so many basic questions that diving into details more complex is a few episodes ahead. So you sit on your hands and try to learn. The learning curve is steep.

The same thing may be happening in the United States. Americans are faced with landmark financial institutions that have been wiped out overnight, face mergers or have been propped up by their federal government. Reportedly $900 billion has been spent in all including direct buyouts and that figure may include the January prime-the-pump cheques to Americans to spend.

Now the U.S. government has a plan to spend $700 billion more in a single plan to remove the bad debt from the system. It’s necessary and an auction should have been set up months ago to do it.

The media has a job to do in explaining this issue to Americans who have never in their lives wondered about a day in the life of Wall Street brokers. It will be a steep learning curve.

The subprime crisis was on the radar for a while.

Subprime lending refers to borrowers who were not “prime”, that is, not ideal. A glitch in their credit history could get them turned away from traditional loans from the local bank. But if they couldn’t afford a car or a house or credit card, there were avenues to take that were outside the traditional lending practice guidelines. The initial rates may have been attractive. But the fine print in subprime lending tightens if you are late in a payment, interest rates can skyrocket. But the rising prices in the real estate market – a bull boom from 2000 to 2006- made it tempting to get into the market for many with these available mortgages.

Already there were problems in subprime. The United States had a spike in credit card defaults in 2002. That could have raised alarm bells.

The subprime market is foreign here. Canada doesn’t have it. That’s why our banks are relatively unaffected by the American banking crisis. We do have some of this subprime market, though. Look at some of those advertisments for cars in the Sun newspaper chain. Bad credit history? No problem. Buy a car from us anyway. That’s subprime. You’ll pay through the nose in interest because you have risky credit.

Money brokers need a boom and the American home buying binge was certainly one. Even we saw the ads late at night. Buy a house with no money down, flip it, buy another. It seemed the U.S. had gone crazy over house purchasing. Sure, it was all a risk for average men and women, but if it’s a chance to own that nice house, why not?

The problem isn’t with Mr. and Mrs. Average American. The problem was with the money brokers.

The mind-boggling issue in all of this is not that warning signals for upcoming trouble were not heeded, it’s more than that. They were actually ignored as investment banks leveraged themselves into serious debt to lend even more because profits were so good in the subprime market.

I’ve written about this before- some investment banks were lending over $30 in borrowed money for each dollar of shareholders money. It’s no wonder when the crunch came that it all became a house of cards. There was no money anywhere.

That’s why the United States Federal Reserve, the Treasury department and the Congress are now considering the biggest bailout in history, that could cost a trillion dollars to prime the money-starved banks and separate the bad debt from the system.

Investment bank Bear Sterns was first. It’s history included weathering the crash of 1929 when it was just a six-year-old trading house. By 2007 it had over 15,000 employees, $350 billion in assets. In July 2007 two subprime hedge funds evaporated and the company then had to face over $1 billion in write-downs. The loss of confidence in the investment banking giant was swift and caused a melt-down in its stock price from a high of $172 in 2007 to just $2 by March, 2008. J.P. Morgan Chase swallowed Bear Sterns whole for $10 a share, bumping up its offer from $2 to add the worth of its newly-built New York office tower.

But it was this past week that was history making.

To begin last week the news was already surprising and grim with the federal government takeover of two corporations, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) that backed five to six trillion dollars worth of the $10 to $12 trillion mortgages in the United States.

On Monday, September 15, Lehman brothers, founded in 1850, and with assets of $639 billion, filed for bankruptcy under crushing debt. By Wednesday the prized LEH stock offering was taken off the roster of stocks traded on the New York stock exchange. Barclays bought the Lehman building and much of its trading operations. There is no choice about the bankruptcy as it is made clear there will be no bailout by the federal government. Bank of America buys Merrill Lynch.

On Tuesday, with Wall Street reeling from the news of the Lehman Brothers bankruptcy, more hard news followed. AIG, the 18th largest corporation in the world, faced a similar fate. The company had underwritten much of the subprime mortgage affair. It now needed tens of billions to continue operating. Deemed too big to fail, a federal loan bailed it out, but at the cost of 80 per cent control of the company.

Wednesday. Treasury bills paid almost zero as the flight of capital sought safety as the Wall Street everyone knew seemed to be crumbling.

Thursday. The rate banks lend money to each other at is relatively high, indicating there is little trust or willingness between banks to lend money. The U.S. Federal Reserve, helped by foreign banks, pump billions into the system to thaw frozen capital. The rate comes down.

On Friday the U.S. Treasury Department announces a plan to buy up all the bad debt out of the system. The rescue plan is estimated to cost $700 billion.

The U.S. Congress about to debate the measure. The clock is ticking. The debate will be interesting. There will be members of Congress who will be learning as they go. They will not ask questions. They will give the proper sound bites, say they are studying the issue, in meetings over it, but like that mayor I spoke to said, some issues are so complex you don’t want to look stupid, even if you are the one voting on the measure. Expect the matter to pass spiced with just the right amount of sound bite grumbles on behalf of the American taxpayer who is going to have to pay for the whole thing.

Thank you for reading Aardvarkcola



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  • wordbeeps: No, he doesn't deserve an apology. Who tweets during a funeral? If you do, expect feedback. I didn't say the mourners were faking it. I think they we
  • Holly Stick: Look you fuckwit, are you too stupid to realise that Ghomeshi was an actual friend of Layton's, when you tweeted to him that the mourners were faking
  • aardvarkcola: Thank you. I see the rest of your message now. i'm honoured to to have your words on my blog. That alone is a delight. Lawrence

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