Tuesday, March 31, 2009

Why We Call Them These Names, Part Two

For those needing it, here is the link to "Part One:"

http://pontificating-randy.blogspot.com/2009/02/why-do-we-call-them-these-names.html

I'm limiting this part to only two words, as I'm still doing research on some others.

Vandals-Old (Proto) Germanic had “Wandal,” which meant “wanderer,” and this Germanic tribe used that name for itself. In Old English, they were called “Wendlas.” The Romans took the basic Germanic name into Latin and called them the “Vandali.” Unfortunately for the Romans, they got to know these Germanic warriors too well, as they captured and sacked Rome in 455 A.D. The amount of actual destruction caused by the Vandals in Rome has been debated by historians, but needless to say, the association of the Vandals with deliberately destroying fine and beautiful objects and property stuck with their name. During the 1600s, the word was borrowed into English from Latin and it has been with us ever since. I “assume” the Old English word died out, but I can’t find any further details on it. “Vandalism” seems to have come into use in the late 1700s, and was borrowed from French “vandalisme.” The Vandals have quite a history, for those interested in the period of the late Roman Empire, as they certainly lived up to the original meaning of their Germanic name, “wanderers.” Not only did they invade what is now modern Italy, but also Gaul (essentially much of what is now modern France), Spain (giving their name to the Spanish province of “Andalusia,” and even North Africa!!!

Franks-This was a large Germanic tribe, probably formed by the inclusion of many smaller Germanic tribes. “Supposedly” the tribal name itself derives from their particular type of spear or javelin, called a “frankon.” Old English had “Franca,” and Old High German had “Franko.” The meaning is not a certainty, as they also used a throwing ax called a "francisca/franciska." Some linguists feel that instead of their tribal name being derived from their spear, that it was really the other way around; that is, the tribal name was applied to their main weapon. The main elements of the Franks conquered much of Gaul, eventually giving their own name to the territory, “France,” and to the people and language, “French.” Interestingly in German, the word for France is “Frankreich;” that is, “empire of the Franks.” Gaul (named after the Celtic people, “the Gauls”) had been a Roman province for centuries by the time the Franks arrived, and the population spoke a form of Latin. Ever so gradually over a few centuries, the conquerors became the conquered, so to speak, as the Frankish language essentially was absorbed into the existing and more widespread Latin dialects. Frankish, however, did give many words to the “new” French language before it disappeared as a separate language in that area. Another part of the Franks settled in the region around Nuremberg (Germany), and to this day, that area is still known as “Franken,” (usually rendered in English as "Franconia") and the regional dialect is a descendant of the Frankish spoken centuries before, still called “Fränkisch” (pronounced like “Frenk-ish). Again, note the similarity to our word “French,” which was also spelled “Frensch” in England by some folks up until a few centuries ago. Another note, historians (confirmed by archaeologists) say there were also a number of Franks who accompanied the Angles, Saxons, and Jutes in their eventual conquest of much of Britain and their founding of England. In those times, circa 450-500 A.D., the various Germanic dialects had “probably” not yet so differentiated that one group couldn't understand the others; at least in most cases.

The Latin speaking Gauls borrowed the name for the Franks into Latin and it took on the meaning of “freeman, free” as during Frankish rule, only people of Frankish background had full rights and status in their kingdom. This was borrowed into English during the 1300s from Old French, along with the meaning “free,“ and by the 1500s, it came to be used in the sense of “outspoken:” that is, “to speak freely,” which we still have today. Remember this line? “Frankly my dear, I don’t give a damn!”

To be continued....

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Friday, March 27, 2009

Understanding The Crisis, Part Five

This part should really be more straightforward for you, but many people may just not have thought of applying the same basic procedures we use at times in our own lives to the huge sums of money and the fancy titles involved with corporate financial dealings. Let's say you need some bucks and off you go to a friend or a relative (not always the same thing). You ask them for a certain amount, and you offer to let them hold your vehicle title until you repay them the amount you want to borrow. They accept. You have just "secured" the loan you wanted; that is, "secured," meaning that you have given them the ability to take your vehicle if you don't repay them. There isn't any magic to the way things are done by businesses either. If you go for a mortgage, you're going to sign a note to the lender giving them the right to the property if you don't pay. The main thing is, if you loan money to someone, you want to be able to get that money back, plain and simple.

When Wall Street investment banks bought mortgages from loan originators, they put these mortgages into "bundles" so that they could then sell them to investors.*** Okay, so YOU are an investor. What do you want to know about the securities issued and backed by these mortgages? Naturally, you want to know the chances of getting your original money back (the "principal"), plus the interest amount (your profit). What this comes down to is "risk;" that is, you want to know the risk you're taking by investing in these securities. If you buy some sort of U.S. bonds, you essentially have no risk (unless there's an upheaval that replaces the existing government, or a foreign invader takes over), because, in a worse case scenario, the government can print money to pay you the amount you are owed. With corporations, or even state or local government entities, they can't legally print money to pay you back, so there is a varying amount of risk, and the way investors decide upon that risk is by checking the rating given to whatever security they are looking to invest in.

There are a number of "ratings agencies" in the country, but probably most notable are "Moodys" and "Standard & Poors." I'm sure you've heard these names many times, but especially in the last year or two. Ratings agencies put a "grade" on various investments, with "AAA," aka "triple A," being the highest "grade," meaning that you would have very little risk of not getting paid if you invested in whatever security that was rated such. They are "supposed" to check the credit worthiness of the issuer (investment banks) and the actual products being used to "secure" the investment product. In most cases, the securities backed by American mortgages^^^ were given the highest rating, "AAA." Wall Street aggressively marketed these investments all over the world, including to foreign governments and foreign local government entities.+++

So what happened? There may well be more to come out on this story, as the country searches for answers to the economic meltdown, but there were problems with how these securities were rated. Two things seem to stand out: First, the investment banks paid the agencies to rate these securities they, the bankers, were issuing. This was not against the law, except the law of common sense. Let's say you are interested in buying a car from me. You naturally would want to know if it has any problems, and I tell you, "MY mechanic has checked it out and he says its in perfect running condition." Now, it may well be in perfect running condition, but just the fact that MY mechanic gave it his approval should be a red flag to you; after all, I paid him for his evaluation. The Wall Street investment banks and the ratings agencies had a very cozy relationship.### Secondly, how much the ratings agencies really knew about the mortgages backing these securities is highly questionable, and with Wall Streeters having bought just about any subprime mortgages they could lay their hands on, it just doesn't seem credible that the ratings agencies could have given these securities a "Triple A" rating.

Whatever comes to light in the future, the fact that these mortgage securities were rated "AAA" made investors flock to them in the belief that they were "safe," later much to their (and OUR) detriment. (A "Word History" is below)

To be continued....

*** See "Part One" for basic flow of mortgage business.

^^^ I say "American mortgages," because these securities were marketed all over the world, not just in the U.S. Most often, large groups of investors, rather than individuals, directly invested in these mortgage securities, as they were seen as "safe;" although many individuals may have indirectly participated through these investment groups. What this means is, you didn't buy into these securities yourself, but you went through Company XYZ, which had many investors, and the company did the actual investing.

+++ CNBC, a cable business channel owned by NBC, specifically did a story on Narvik, a city in northern Norway, that invested in these American mortgage backed securities. The city has had to cut services due to losses suffered on these securities.

### I'm sure you remember "ENRON," for example. While this was a different subject, the basic principle was the same. The auditors of ENRON's book were "supposed" to be independent; thus giving investors a true picture of the company's finances, but in fact, they had a very cozy relationship with the company. The relationship was so cozy, that it wasn't until just days before ENRON's collapse that the auditors issued a "warning;" that is, they downgraded their assessment of the company's finances.

Word History:
Rich-This word goes back to the Indo European root word "reg," which served as the basis of a whole series of our words (and I hope to deal with these in future installments), but in this case, the notion of "rule" was the underlying meaning. Hmm, "rule" and "rich," can you imagine that? Anyway, Old Germanic seems to have borrowed the word from Celtic (another Indo European language group related to Germanic, and thus to English, but a bit further down the "family tree"), probably from Gaulish. The Germanic form was "rikijaz." The developing Germanic dialects/languages had various forms of the word: Old High German had "rihhi," Old Norse had "rikr," Old Frisian had "rike," Gothic had "reiks," and Old English had "rice" (not pronounced like the grain, but seemingly like "rye-keh"), all of these forms with the general meaning of "rich, powerful, mighty, ruler." Further, Frankish (another Germanic dialect) bequeathed its own form of the word, "riki," (also meaning "wealthy") to French as "riche." The French pronunciation, like "reesh," influenced English, softening the hard sound of the "c," and gave us our modern way of saying the word. The connection between "wealth" and "power" went back to ancient times, but it began to fade in English, and left us with just the notion of wealth, and then further, during the 1300s, of food being "rich." Even in Old English the wealthy were called "the rich." Other modern Germanic languages also use their own forms of the word: German has "reich," Dutch has "rijk," Swedish and Norwegian have "rik," Danish has "rig."

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Friday, March 20, 2009

NBC Dateline Sunday, March 22

Just a note to all readers: PLEASE watch "Dateline" on your local NBC station this Sunday, March 22. It is an investigation into the housing and financial mess. I saw a few previews, and I would say that it is well worth watching. So, if you aren't going to be home, or if there's another program on another station at the same time, set your recorder (whatever type you have). Americans really need to know everything possible about this terrible mess we're in.

Just a comment about this same overall topic:

In my opinion, the President needs to cleanse his administration and the COUNTRY from ties to Wall Street. Timothy Geithner, the Treasury Secretary, needs to go. There's plenty of hypocrisy to go around for both political parties, but this WALL STREET CRAP NEEDS TO END!!! Greenspan, Bernanke, Paulson, Geithner!!! All entangled with Wall Street!

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Wednesday, March 18, 2009

Understanding The Crisis, Part Four

This will deal with “Credit Default Flops“...I mean...“Swaps,” although "flops" might be a better term. You’ve undoubtedly heard this term on television news or read it in newspapers or magazines. This whole subject is VERY complex, and to be quite honest, I don’t understand all aspects of it, but I want to go through the basics, so that you understand what the term means, and what role they’ve played in the current crisis. What it really is, is insurance on various securities; that is, like bonds or mortgage backed securities, or loans, for example. The basic system is just like any other type of insurance. You have, say, some corporate bonds and you want to insure them. You get a “credit default swap” (aka “CDS”) on which you pay “premiums.” The insurer then agrees to pay you if the corporation fails to pay you; for instance, if it files bankruptcy, but it can be for just about any reason stipulated in the contract. This is easy to understand, right? Sure, but that’s “easy,” so far.

I’m not much for conspiracy theories, but I’ve got to admit, when you have insurance on something and you call it some far fetched name like a “Credit Default Swap,” it makes me wonder. The insurance industry is REGULATED. Credit Default Swaps are NOT regulated. Do you think perhaps the folks who devised “Credit Default Swaps” figured, “If we don’t call them insurance, maybe no one will notice?” Let’s face it, “Credit Default Swaps”....what the hell does that mean?^^^

Anyway, with no regulation, “Credit Default Swaps” became a big industry; so big, that “AIG” (American International Group)*** especially is in financial trouble, and U.S. taxpayers now own 80% of that company at least in part because of “Credit Default Swaps.” “Ah, do I see a hand? You have a question?”

“Randy, why is AIG in trouble because of “Credit Default Swaps?”

“I thought you’d never ask.” (I’m going to use “CDS” for “Credit Default Swap” for most of the rest of this article.)

Well as I said, the CDS business became big and AIG was THE biggie in that business. They insured anything and everything in the financial world. The thing was, they insured them for businesses or individuals who didn’t even OWN THEM!!! They also issued these “insurance policies” to many different companies and individuals on the SAME security!!! What does this mean?


In simple terms, they essentially bet that any failures on these various securities (bonds, loans, and “mortgage backed securities,” etc) would be small; after all, that’s the basic insurance business. Get a large pool of customers wanting insurance, and, if you get your calculations right, only a small percentage will need to collect on the policies, leaving the insurer with the rest of the money. For example, if an insurer collects a million dollars on a certain type of policy in a year, and only had to pay claims for a hundred thousand, they made $900,000.

The thing was, a CDS doesn’t need to be sold by an insurance company, or by any kind of certified agent. AIG had/has a financial services unit which marketed CDSs. Further, besides those who held some mortgage backed securities, for example, and wanted to play it safe by “insuring” these securities against default (non payment), those of “the investor class,” (aka “the sit on their ass class”)or others might want to buy a CDS in the expectation that a weak company might not be able to meet its obligations, and they too could get a payoff on a bond or other item they didn‘t even own. So, in other words:

You own some bonds in Company XYZ and get your “insurance” from a CDS transaction with AIG. You pay AIG premiums for the “insurance.“ I say, “Hmm, the issuer might not be able to meet the obligations on these bonds eventually.” (And here you thought "gambling" was only legal in certain places!) I too take a CDS on the same bonds and pay AIG premiums. Company XYZ hits a rough business cycle and can’t pay on the bonds. AIG now has to pay BOTH you and I.

From what I’m understanding, many in the CDS business thought they’d struck gold, as they were collecting premiums from all sorts of people, often on the same bonds or other security, especially in more recent times on “mortgage backed securities,” which were securities backed by American mortgages. They felt that the chance of having to pay out much was very low risk (Hey, they were backed by AMERICAN mortgages), and so they didn’t keep enough money on hand to pay potential claims. In the REGULATED insurance business, an insurance company has to keep a certain percentage of possible payouts in reserve to be able to meet obligations should the need arise. When the mortgage business began to collapse, the “mortgage backed securities” lost value and payments on these securities were missed. Now the companies that had all of these “swaps” out had to pay off. In the case of AIG, they suffered huge losses and the actual money making parts of their business had to help cover the losses in their financial business, which still wasn’t enough....enter the U.S. taxpayer. The feelings among many in government and the Federal Reserve has been that with AIG not only being a big player in the American financial and insurance markets, but also with large holdings overseas, if they collapsed, that it could cause a world panic. So, we have another business that’s “too big to fail.”


A side note: In the Fall of 2000, Senator Phil Gramm (R-TX) and Senator Richard Lugar (R-IN) sponsored a bill that barred most regulation of credit default swaps. Democrats weren't innocent, and many supported the bill, as did some in the Clinton Admiinistration, which was about to leave office, and it had especially strong support from "The Deregulation King," Fed Chairman Alan Greenspan.

To be continued... And if I learn more details about Credit Default Swaps that seems appropriate, I'll do another article.

^^^Actually it means this: if you buy a bond, for example, you now are at risk to lose your money if the bond issuer doesn’t pay you. By getting “insurance” for the bond, the risk has now been traded (swapped) to the insurer. They have to pay you if the bond issuer doesn’t pay.

***AIG is a huge international corporation that also sells “traditional” insurance, like life insurance, and consists of a number of component companies, including outlets overseas.

Word History
Credit-Believe it or not, this word only came into use in English during the 1500s, although some of its relatives came to English somewhat earlier. It goes back to Latin "credere," which meant "to trust, or entrust, or believe," whose participle form gave Latin "creditum," which meant "something entrusted to another person, a loan." This was passed on to Italian as "credito," and then onto French as "credit," and then onto English.

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Friday, March 13, 2009

Understanding The Crisis, Part Three

I hope that all of you will try your best to follow this series. I also hope that I’ll explain things in a way that you can understand them, although certain aspects can be VERY complex. I know, too, that there is some really DRY stuff here, but please try to stick with reading it, as it is all VERY important, as I’m sure Congress and members of BOTH parties will be trying to assess what has happened in recent times, and to then put in place new laws to govern banks and various investments.

During the Great Depression of the 1930s, banks failed by the thousands. In an effort to prevent, or to at least control, such things from happening again, the Glass-Steagall Act was passed and signed into law in 1933.*** First, it established the Federal Deposit Insurance Corporation (better known to most of us as the “FDIC”), which insured bank deposits (then up to a limit of $100,000, which was quite a sum for those times); that is, if you had $5000 in a bank and that bank collapsed, you still got your $5000 back. Why would this help? Okay, one of the reasons for bank failures was “a run on the banks;” that is, many people were fearful of losing their money, sometimes their life savings, from a failing bank, and they withdrew their money. Now, there’s no question that some banks were shaky for a variety of reasons, but when a few banks collapsed, it caused even “healthier” banks to fail, because depositors withdrew their money. In such situations, even rumors (whether true or false made no difference) could cause bank failures, because depositors were terrified of losing their money, and thus the fear of a bank collapsing brought about the reality of that bank collapsing. With deposits insured, and the public aware that they could get their money even if their bank failed, it was hoped that “panics,” with mass bank withdrawals, could be curtailed, or even stopped, thus preventing the collapse of “healthy“ banks.

The new law also gave more power to the Federal Reserve in regulating interest rates, but that’s another matter. Further, “Glass-Steagall” separated banks into commercial banks and investment banks, with rigid barriers against mixing the two. Part of the reason for the Depression was seen by many, but not all, as banks having gotten too involved in investments in the stock market (including “speculation“ in stocks), for one thing. In those pre-Depression times, many banks often had brokerage departments, which often issued various securities, including stocks and bonds for corporate clients, while the rest of the bank took care of the more traditional banking roles of deposits and lending. By assuming so much risk in the brokerage area, investments gone sour could pull down the whole bank, rather than just the brokerage part. So what does this mean? Well, let’s say that you have your life savings in bank XYZ. The bank also has a brokerage unit which takes a major hit during “The Crash.” The losses from the brokerage unit have to be covered by the whole bank, not just the brokerage part. Ahh...cough, cough....guess whose money is now at risk?

Further, collapsing banks, the resulting jobs losses and the financial losses to depositors fed into the “depression” mentality that kept the downward spiral going, and as mentioned above, often caused mass withdrawals from other banks, even though some of those banks might have been sound, causing these banks to either fail or teeter on the brink. So you see, there was kind of a chain reaction. When you hear, “Your money is safer under your mattress, than in a bank,” this is more or less what is meant.

I won’t get into too much more on this part of the subject, but there were additions to the Glass Steagall Act made later in the 1950s, prohibiting bank holding companies that owned two or more individual banks from buying banks in another state.+++ Further, these bank holding companies were restricted to more or less traditional banking practices and restricted banks from the insurance business .

Many bankers didn’t like the laws, and over time, there were attempts to get aspects of the laws changed or repealed, with more intense efforts beginning during the Reagan years. In 1987, the Federal Reserve Board voted to loosen restrictions on some banking activities, including the issuance of....“mortgage backed securities.” Then Fed Chairman, Paul Volcker, dissented, fearing that banks would lower the standards for loans, then market shady loans to the public, all to make money from these securities they would then sell. (See Part One, for the basic workings of the mortgage lending business) Also in 1986/1987, the Fed broke the precedent of Glass-Steagall by allowing banks to again engage in certain limited investment activity, but limited such activity to no more than 5% of their gross business. In 1989, the Fed, now under Alan Greenspan, a strong advocate of deregulation, increased the percentage to 10%, and in 1996, to 25%. Gradually the banking laws were being dismantled.

In 1999, Senator Phil Gramm (R-Texas), Rep. Jim Leach (R-Iowa) and Rep. Tom Bliley (R-Virginia) introduced a measure in Congress that would effectively repeal much of “Glass-Steagall.” It permitted banks to outright own investment firms and insurance companies. The basic bill, also known as “The Financial Services Modernization Act,” had the support of the Clinton White House and Treasury Secretary Robert Rubin.^^^ The first vote in the Senate was 54-44, with 53 Republicans and one Democrat voting for the bill, and 44 Democrats against. The House passed a somewhat different version by voice vote; that is, there was no roll call to indicate how individual members voted. The bill went to conference committee to get an agreement between the two versions and the final bill was then passed by the Senate 90-8 and by the House 362-57. Clinton signed the bill into law. The walls between various financial sectors were shattered.

To be continued...

(No "Word History" this time)

***This was actually Glass-Steagall #2, as a previous act was passed in early 1932 and was known by the same name.
+++One could certainly argue that this prevented any banks or bank holding companies from becoming “too big to fail.”
^^^Rubin was a former exec of Wall Street investment firm "Goldman-Sachs." Not long after Glass-Steagall was repealed, he went to work for one of the beneficaries of the new law, Wall Street financial conglomerate "Citigroup." Hmm, now you people don't think....there could have been some tie....oh come on!!! You folks are cynical!!! (But so am I!)

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Tuesday, March 10, 2009

Understanding The Financial Crisis, Part Two

With such a massive force befalling the American economy and financial system, I’m not sure, at this moment, that we can pick a starting point for the beginning of the events that have led us to where we are now, but I’m going to start with the time around the 9/11 attacks on the U.S. At that time, the American economy was already weakened by a slowdown. The attacks by Muslim extremists sent a major shockwave through the American economy. In an effort to combat the already slow economy, and then the aftermath of 9/11, the Federal Reserve, under Alan Greenspan, lowered interest rates. Credit of all types became relatively cheap, including credit for mortgage loans. Of course, by “cheap,” I’m meaning the cost of borrowing money; that is, interest charges, had come down substantially. Many American consumers became potential customers of the mortgage industry for a variety of reasons: many with existing mortgages sought to refinance those mortgages at lower rates, even being able to take out some “cash“ for part of their equity, others wanted to remodel existing homes in some way, others wanted to buy a home for the first time, while some existing property owners wanted to acquire additional properties for perhaps a vacation home, or to rent out for income, or to “flip.”

“Flipping property” is a form of real estate speculation; that is, buying property with the express hope that it will rise in value quickly so that it can then be sold for profit. I’d say the key terms here are “quickly” and “with little or no expense.” Further, the buyer doesn’t want to be a landlord, at least not for long. Now to differentiate here, every property buyer hopes that the property they buy will increase in value so that at some time in the future they can sell it either to “cash in,” or to upgrade their own residence. Further, there are people who buy “fix up” properties, who often actually serve a good purpose, as they take over homes in need of repair, make the renovations, and then sell the now more saleable property for a profit. In “flipping,” the buyer seldom wants the house for a residence, except perhaps very short term, since the key is being able to sell quickly and for a profit. Now “flipping” isn’t something new, but it became a potent force in the housing market in the last decade or so. Remember, too, these folks don’t care a “hoot” to whom they sell the property, as they sell it and wash their hands of it.

Home prices rose during the 1990s, after the recession of the early part of the decade. As the economic cycle slowed at the end of the 1990s and early 2000s, however, prices were a bit more stable, but with the super low interest rates of this decade, home prices took off, escalating faster than most Americans’ incomes; a dangerous situation.

I said it is tough to pick a place to start about this subject, and I chose the time “around” the 9/11 attacks, but I need to backtrack just a tad to the late 1990s. Remember in “Part One” about Fannie Mae and Freddie Mac helping to set the standards for mortgage loans? Well, besides those two “government sponsored” companies, there were many purely private companies that served the same role as Fannie and Freddie. Remember, too, Fannie and Freddie were PRIVATE companies, but with an “assumed” amount government backing; “assumed” by investors, that is.

To generalize here, the Great Depression brought about a major political realignment, with Democrats becoming the dominant party. One of the reasons for this was, Franklin Roosevelt chose to put himself and his administration on the side of non wealthy Americans. At a time when many Americans were either destitute, almost destitute, or fearful that they would soon be destitute, wealthy folks and their supporters were on the outs. With the Depression having occurred on the Republicans’ watch, and with Roosevelt and many Democratic followers having “hogged” so much of the political highway, it left little room for Republicans.*** This tendency by Democrats (and liberal Republicans) to support “the little guy” frequently helped many Americans to achieve that vague status of “middle class.” It also brought Democrats to advocate help for lower income folks, even long after the Depression had ended.

So why is this important? Politics is ALWAYS important! You don’t think people give millions and millions of dollars to political candidates just to have something to do, or because they feel charitable to politicians, do you? They want a point of view to prevail, or to actually get something more specific in return for their money.

In the late 1990s, the Clinton Administration made it clear that they wanted Fannie and Freddie to relax some of their high standards for lower income Americans. Simultaneously, in what was then a slowing housing market, investors in these companies wanted profits to remain on the upper end, and likewise wanted standards adjusted. The basic feelings were, these two could adjust their standards, but still keep lower income loans from being too risky. The problem was, the truly “private” mortgage part of the industry was on a path to wide open loans that would eventually lead to them feeling a person’s chest for a heartbeat, and then giving them a mortgage. With this part of the mortgage industry so wide open, Fannie and Freddie began to lose business to these companies.^^^

Loans to lower income, riskier borrowers are termed “subprime.” Understand, initially these loans were most often made to many folks with good credit and verifiable income, so it was assumed that the risks were also not that great. Some credibly reasoned, however, that as long as the economy was fairly sound, that few problems would ensue, but that if the economy entered into more than just a slight downturn, and unemployment escalated substantially, that defaults would also seriously escalate. Further, as private companies took more and more business from Fannie and Freddie, the two “standards setters” for mortgage loan approval, lost control of that all so important process, and in fact began to join in the growing business of buying mortgages made to VERY risky borrowers, that were truly subprime. The private companies, for example, allowed mortgages to be offered to potential home buyers for no down payments or interest only payments for a specific term. Further, many folks offered a mortgage had bad credit and in many cases didn’t even have verifiable income!!! They only had to state their income on the application, with no sources to verify that income. What this means is, you come to Randy and say, “Hey, how about loaning me $100,000?” And I say, “What’s your income?” You reply, “$75,000 a year.” I hand over 100 grand to you.

President George W. Bush announced that he wanted America to be the “ownership society,“ with more low income people and minorities becoming home owners. It was an admirable goal, and he signed a large tax credit of about two and a half billion dollars into law in 2002, which provided tax credits to home builders that built affordable single family dwellings in poorer neighborhoods over a five year period. Further, a bit later, he signed into law a measure that provided grants to help home buyers meet down payments and closing costs over a three or four year period. Further still, Bush made major increases to funds to help people, primarily minorities, build their own homes, through programs like Habitat for Humanity. All of these goals and programs were laudable and none of these things I’ve cited going back to the Clinton Administration individually brought about the crisis of today, rather they all helped to feed into the home building, home buying, home selling mentality that overtook common sense in the country. They also contributed to more risk exposure for Fannie Mae and Freddie Mac, which bought up the mortgages.

***Not all Democrats were taken with FDR, either out of conviction or out of jealousy (Jealousy? In politics? No! I can’t believe it!), with, for instance, the Democratic presidential nominee from 1928, Alfred Smith, of New York, being adamantly opposed to much of the New Deal. On the other hand, Fiorello LaGuardia, another New Yorker, and a Republican, supported much of FDR’s program.

^^^ Once a trend is established in business policy, no matter how irresponsible, even those NOT inclined to such behavior more or less have to follow or lose business, or even go out of business. If, for example, you make some product and pay your employees, let’s say, $12.00 an hour and offer a benefits package, too, but your competitor or competitors make the same product, even if of less quality, overseas and pay their employees $1.00 an hour and give them no benefits, you’re in a real pickle! There’s a good chance that either you move production overseas, or you draw up an ad for “Going Out Of Business Sale.”

Word History:
Buy-verb-The forms of this word are only found in the Germanic languages, and no connection has been made with other Indo European languages thus far. In Old Germanic, it was "bugjan" or "bugjanan," and it had the meaning of "obtaining something at a price." In Old English it was "bycgan," with the past tense being "bohte," seemingly pronounced "bow-ta" (vs. modern "bought"). Old Saxon, spoken by the Saxons who remained on the Continent (to differentiate between those who founded England), had "buggjan." Originally in English, it was pronounced much like "bidge" or "budge," depending upon the location in England; that is, by dialect. Interestingly, the pronunciation that ended up winning out and giving us today's way of saying it came from the southwestern part of England, and that "seems" not to have happened until the 1500s. All sources say how it is purely a Germanic word, and one mentions forms in other Germanic languages, but then gives no examples! Do you want to smack 'em, or should I? To my knowledge, standard German does not have a form of the word, but that doesn't mean a form of "buy" isn't used in German dialect, either "high" or "low." If I happen to find some examples, I'll post them.

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Monday, March 09, 2009

Not In "Mint" Condition

For those of you who are unaware, York Peppermint Patties, a famous and popular American line of candy produced by Hersheys, will no longer be produced in America. If reports are correct, the production plant in Reading, Pa, had 300 workers, and also produced "Fifth Avenue" and "Zagnut" candy bars, and "Jolly Rancher" candy. If I remember one of the ad lines from the past for the York Patties, it said something like "a York patty is like a cool, refreshing breeze." Well it will now feel like some hot air from "south of the border, down Mexico way," as Hershey's is transferring operations to that country for the chocolate-covered mint candy, and supposedly for the other candy types mentioned above, too.

"OLE!!!" That's what you shout when the "bull" comes out.

Word History:
Slump-verb, also used as a noun in certain contexts. Pretty common word, but not a lot of info on it. Likely related to Low German "schlump," although could be borrowed from a relative in the "Scandinavian languages;" that is, North Germanic, as both Norwegian and Danish have "slumpe," which means "to fall/fall upon." Swedish, another North Germanic language, has "slumpa." Originally, it seems to have meant more specifically, "to fall into a muddy area, or into a bog." Linguists seem to feel that the word is a Germanic original and that it is "imitative;" that is, the word is imitative of the sound made when falling into mud or a bog. It seems that the word didn't come into common usage in English until the 1600s. The noun usage for a decline in the economy comes first from the 1880s, when it referred to big drops in stock prices, but that notion broadened to business activity in general during the sharp, post-World War One recession of the early 1920s. By the way, German has "schlumpe(n)," which seems to be a fairly obscure word for them, and whether this is the same word as our "slump," or just a coincidence, I don't know, but the German word means "be untidy, sloven." If it is the same word, if you fell into some mud, you would certainly be "untidy," and that could be the connection.

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Sunday, March 08, 2009

Tarzan, Escape From Reality

First published in March 2009, modified with photo and Word History, 6/1/2016

We all need to get away from the grueling events going on around us on a daily basis; maybe its work, maybe its NO work, maybe its financial, maybe its illness, maybe its an issue with a loved one. This is true, not only in trying economic times, but even in better times, as harsh reality never rests and it spares no one, regardless of background, from at least an occasional smack upside the head or an out and out punch in the nose. To avoid a knockout blow, we often retreat to something that makes us forget, however temporarily, the troubling aspects of life. Just don’t forget to return to Planet Earth afterwards, no matter how much the other option appeals to you. Movies are one way to escape from reality, and “Tarzan” certainly provided many a person with a path through their own personal jungle to a place where these immortal characters of the screen gave us temporary shelter in the world of fiction.

Edgar Rice Burroughs, an American born in Chicago, wrote a series of books about the main character, Tarzan, a man of the African jungle, with the strength of the apes he lived around. Burroughs’ Tarzan stories differed from the later movies, and one of the reasons for that was, Burroughs signed a deal with Metro-Goldwyn-Mayer Studios, known to many simply as “MGM,” that permitted them to use his characters, but NOT his stories. I happen to think that this worked out for the better, as Burroughs’ Tarzan was educated, and was thus very different from the character many people around the world came to know. While there had been previous Tarzan films, it was when “MGM” developed a series of six movies between 1932 and 1942, centered around the Tarzan character, his companion Jane, and a mischievous chimp by the name of Cheeta, that Tarzan became a mainstay. After three movies, the studio decided to add another character, “Boy,” who was not their natural born son, as Tarzan and Jane were not legally married, a subject as “taboo” to the movie censors, and likely to much of the public of those times, as many things were to the native tribes depicted in the Tarzan movies. In order to get around such a touchy subject, the writers had Boy’s parents killed in a plane crash, the baby found by a group of chimps and eventually taken to Tarzan and Jane by Cheeta. Just to make note here, neither Boy nor Cheeta were original Burroughs’ characters, but simply developed by the MGM writers.

When I was a kid Tarzan was BIG stuff! Attempts by so many of us to imitate, however badly, the “Tarzan yell,” were commonplace. Up along a steep hillside near my neighborhood, someone had draped a heavy, thick rope over a huge tree branch in an attempt to provide us with a swinging vine, as depicted in the movies. We simply called it “The Tarzan Swing,“ and need I say, a few broken arms came as the penalty for those unskilled enough at using it, although their “yells” may have ended up being closer to the true Tarzan yell, so elusive previously.

While commercial television got under way after World War Two, it wasn’t until the 1950s and 1960s that virtually EVERY American home had a television. Whether this is true or not, I’m not sure, but I remember it being said back then that more American homes had televisions than had telephones. Hey, at least some folks didn’t have their favorite shows interrupted! Television stations found a great source of entertainment for viewers by airing old movies, and since color programming didn’t become pretty much standard until the mid 1960s, the old black and white movies of the 1930s, ‘40s, and ‘50s were easily transferred to the small screen. I can’t say exactly when, but I’ll just say circa 1960, the Tarzan movies were released to television, and they were a SMASH HIT! To me, to many of my generation, and to many from the generations when the movies were first released to theaters, Olympic swimmer Johnny Weissmuller WAS Tarzan. Any other actors who portrayed the “Ape Man,” no matter how competent, were purely imitators. Maureen O’Sullivan was Jane, but I think we came to later accept others in that role, but not easily. Cheeta was beloved by all, maybe even more than Weissmuller, as the chimp character showed us the close similarities, but also the dissimilarities, between humans and our closest relatives, chimpanzees.

The Tarzan movies gave us a chance to escape to a place where this monumental jungle man figure could communicate with the animals in his jungle habitat, especially the elephants, chimps, and apes; where Tarzan, Jane, and eventually Boy, shared the jungle with creatures large and small, vicious and meek, and where there seemed to be a true natural balance between all involved. Trouble almost always came when other humans, usually ruthless, greedy white men (and sometimes women)* intruded into Tarzan’s paradise to exploit some aspect of its environment, including in the last MGM episode, Boy, who was snatched for a circus act.

To those unaware, these films were shot at the MGM studios in Hollywood, with occasional location filming done in Florida for some underwater scenes. They were NOT shot in Africa, nor in New York, even though the one story has Boy taken to New York for the circus. The scenes of vast animal herds and prowling lions or leopards were added to the movies from previous footage that was actually filmed in Africa for another movie. The scenes of New York in the one movie, are just that, scenes of various NY buildings, but the actors weren’t present for filming there. MGM had a “jungle” put together at its studios, complete with a large water tank and even a river for those water scenes in the various pictures. They also had Tarzan and Jane’s “tree house” built there. Johnny Weissmuller didn’t swing through the trees “with the greatest of ease,” they used a professional acrobat. Tarzan’s famous underwater fight with a huge crocodile (the footage was used over in several episodes) was a fight with a mechanical croc, with dye sacks attached to it, so that when Tarzan stabbed the beast, it looked like blood flowing into the water.

Cheeta was portrayed by several different chimps during the course of the entire twelve episode Weissmuller series, and while Cheeta is usually referred to as a female in the stories, most of the chimps used were males. How they got those chimps to do some of things they did, truly amazes me to this day. I recall in the early 1960s, not long after the release of the movies to television, Weissmuller made a national tour and was welcomed everywhere by big crowds. As I recollect, he told of how he met Cheeta, although I don’t believe he said which Cheeta, since, as I mentioned, there were several different chimps used during Weissmuller’s career. I believe part of the reason for this was, they used younger chimps, as from what I’ve read, a chimp’s “personality” can change pretty dramatically after a certain age, and they can become aggressive, as unfortunately recently happened when a chimp viciously attacked a woman, almost killing her. Anyway, by all accounts, all of the chimps used to play Cheeta absolutely LOVED Johnny Weissmuller. Of course, he was a huge man, I think 6’ 3,” and he learned to quickly assert dominance over the chimps, as instructed by their trainers. Weissmuller’s son related a story in a book about his father, saying how much this one “Cheeta” loved his father, and Johnny would go and visit him in the zoo after the studio retired the chimp. The chimp died and Johhny told his son that it was almost like losing a child.

On the other hand, Maureen O’Sullivan wasn’t all that taken with the chimps, and they weren’t taken with her. From various things I’ve read and from interviews of O’Sullivan, since the chimps were usually males and they had been trained by male humans, they therefore connected well with the strapping Weissmuller, and later with Johnny Sheffield, who played Boy, but they grew jealous of O’Sullivan when she was too close to Weissmuller in some scenes. O’Sullivan noted in a couple of interviews and articles about a publicity picture taken with Weissmuller, Johnny Sheffield, Cheeta, and O’Sullivan. She said they had to make sure Sheffield separated her from Cheeta and Weissmuller, and that there was a rope or a chain on the chimp’s leg to prevent him from going after her. If you watch the movies, Cheeta will go to Jane, whisper in her ear and even give her a kiss on the cheek, but to my recollection, Weissmuller is not in the scene with them, so I guess the jealousy dissipated when he was not around.

Maureen O’Sullivan left the series in 1942, and MGM, having lost interest in the series, because of declining audiences in Europe due to World War Two, didn’t pursue a new agreement with Burroughs, who signed a new accord with RKO Pictures. This studio also produced six more movies, featuring Weissmuller in the lead. The first two, done in the midst of the war, had no Jane actually present. The storyline was that she was home in England helping the war effort, although she frequently wrote to Tarzan and Boy. Then RKO signed Brenda Joyce to play Jane in the final episodes. Johnny Sheffield also left the series, as it was felt that he was getting too old for the Boy role, so the script said he was off at school. RKO also had a jungle built for the series, complete with tree house. Interestingly, the RKO episodes no longer had Tarzan and his family in contact with the natives tribes in central Africa, but rather with people in areas in and around the Sahara Desert; that is, northern Africa. Why this was, I’ve never known.

‘Til next time....AhhhhhhhhhhaaaaaaAhhhhhhhhhhhh!!!!!!

*You have to remember, these movies were made in the time of European colonialism, so “the enemy,” if you will, were usually white Europeans trying to exploit the area for personal gain. Americans, having successfully removed themselves from British colonial rule, were certainly not offended by the characterization of white Europeans playing “the bad guy” role. Further, four of the six Weissmuller MGM films were released during the Depression, a time when greed was easily seen as “the enemy.”

Photo is from the 2005 Turner Entertainment/Warner Home Video DVD set release

WORD HISTORY:
Jungle-The ultimate origins of this word are unknown, and its meaning has changed greatly from the original meaning. It goes back to Sanskrit ^ "jangala," which meant, "dry wasteland." This gave Hindi/Urdu,^^ "jangal," with the same meaning, but the meaning of which began to evolve to "area overgrown with trees and brush," from the notion of "wasteland." It was borrowed into English in the latter part of the 1700s (British presence in India, which included both Pakistan and Bangladesh, in those times).

^ Sanskrit is an ancient Indo European language, still in use to some degree, especially in India. It is related to English, but much further down the family tree.

^^ Hindi is an Indo European language and one of the main languages of India, while the closely related Urdu is the main language of Pakistan, but with a presence in India also. 

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Saturday, March 07, 2009

Understanding The Financial Crisis, Part One

While most Americans are certainly aware of the financial crisis that is rocking the nation, I doubt that very many understand what has brought us to this crisis; a crisis that is not only ravaging our own country, but has now spread abroad, too. When Americans watch television, listen to the radio, or read newspapers or magazines, they encounter words and terms involved in this crisis that are not easily understood, unless you happen to be a Wall Streeter, mortgage executive, or banking official. I’m going to try to go through the basic process that has brought us to this devastating economic collapse, and put things into simple, every day language that all should be able to understand. This will by no means be a comprehensive history of the subject, as details are still emerging as to things that took place, and, to be quite honest, the consequences of the breakdown of the financial system are still ongoing, with no end in sight, so we don’t know the outcome, as yet. Further, the subject has some VERY complex aspects to it, and I’ll try to keep it as simple as possible.

Since home mortgages are at the center of this crisis, we need to understand the basic system of mortgages. So, you’ve found a house that you like and you’ve made an offer to the seller, who has accepted that offer. The mortgage company (usually with an affiliated bank) gives you a loan, you sign on the dotted line and you get the keys to the property, in a process referred to as a “closing;” that is, the deal has been completed; you have signed for the loan, any fees owed by the buyer or seller to whomever have been paid, the seller gets their money, and you get the property. How you got the loan is the important part. In times past, two “government sponsored enterprises,” (just for the record, also known as a “GSE,” for short) Fannie Mae and Freddie Mac, two names I’m sure you’ve heard before, were at the center of how you qualified to get your mortgage loan.

Fannie Mae started in the late 1930s as part of the effort to spur home buying during the Depression. It was government owned at that time. In the late 1960s, Fannie Mae was made private. Freddie Mac was established as a private corporation in 1970 to provide the now private Fannie Mae with competition. They buy mortgages from APPROVED loan originators. They then receive the mortgage payments and interest from these mortgages, which they then form into “pools.” Then they sell securities backed by these mortgage money pools to investors, guaranteeing the investments, even if people do not make their mortgage payments. The securities are called “Mortgage Backed Securities, or MBS, for short. Originally, Fannie Mae was government owned, and therefore, these securities were backed BY the United States Government, which made them highly desirable for investors, since they were safe (the Government can print money to cover costs, but private companies or individuals can't; legally, that is). The Great Depression had been so traumatizing, that loans of any type were hard to come by, as people were afraid. With Uncle Sam willing to buy mortgages from loan originators, this took the originators off the hook for the loan, placing the risk on the U.S. Government. Further, by guaranteeing the securities that were then issued, investors loved them, as they carried essentially no risk. When Fannie Mae was made private in 1968, and then Freddie was formed in 1970, the U.S. Government no longer actually guaranteed these securities, but investors felt that the guarantee would still apply, if for no other reason than that the government would NEVER let either or both companies fail. Both Fannie and Freddie charge a fee for these guarantees, which is one of the ways they make money. Fannie Mae and Freddie Mac are important, but I don’t want to get too bogged down in the details of their operations, as they are complex. So, we’re going to stick with the very basic info here.

These two giant companies bought mortgages from APPROVED loan originators; that is, the companies (or banks) that made the initial loans to home buyers. Between the two companies, they bought a very large proportion of American mortgages and I‘ve seen various percentages, but certainly at least 50% of all home mortgages, and perhaps higher. As such, they were able to have a big influence on how mortgage loans were made to Americans; that is, they were able to set “the guidelines.” Fannie Mae and Freddie Mac maintained strict guidelines for mortgage loans; that is, how consumers qualified for loans, including detailed proof of income, credit history, etc.

What does all of this mean? Well, let’s bring this down to a personal level that‘s easier to understand. This is only for the purpose of example: You have $200,000 and you want to make some money from it by loaning it out. Aunt Mary asks to borrow $100,000 to buy a house. Cousin Bob asks to borrow $100,000 for the same purpose. So you make those two loans at some set of interest rates and terms. Now, Uncle Henry asks to borrow some money to buy a house. Well, you don’t have any money to loan to him, because you’ve got all of your money out in other loans. Hmm, what to do? That’s where Fannie Mae and Freddie Mac come into the picture. One or the other buys the two mortgages from you (remember, this is an example only, and you’d have to be on their list of approved loan providers), which gives you back your original $200,000, plus some fee that is your profit. Further, you no longer have to worry if Aunt Mary or Cousin Bob pay their mortgages. You’re out of it. Now you can loan money to Uncle Henry and the whole process starts over again.

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Thursday, March 05, 2009

Foreclosures & Rabbits

Foreclosures and rabbits go together, because they both multiply so quickly. Below is the link to an article about how foreclosures have skyrocketed and how they are now spreading to areas that hadn't seen particularly high foreclosure rates.

http://www.msnbc.msn.com/id/29528856/

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Tuesday, March 03, 2009

The Banking System

For "Word History" followers, I'm still working on "Part Two," and I'm getting close to finishing it, but it does take quite a bit of time to research each word through various sources; so I hope to have it posted soon; there is, however, a single word history at the end of this article.

As we all know, many of the banks, including many of those "too big to fail," are in trouble. Any regular readers here already are well aware that I'll NEVER be mistaken for a supporter of any wealthy big business venture, but first, we all need to ask ourselves two questions: "What kind of banking system do I want?" And, "What is in MY self interest?" As to the first, I guess I'd have to say that we only have a couple of "broad choices;" the basic system that has evolved during the history of the country, or some other very different system. The key to what I'm saying here is "broad." I am not for a total overthrow of the basic banking system, but I do believe that it needs to be regulated. Since the time of The Great Depression and the subsequent regulation imposed because of that fiasco, the bigwigs have stomped around huffing and puffing about how unfair government regulation is. I equate them with criminals who get shot or clobbered breaking into someone's home and then they, or their families, argue how unfair it is that they were injured, and that people shouldn't be able to hurt someone breaking into their home unless there is clearly "a threat to their safety;" as if someone breaking into your home ISN'T a clear threat to a person's safety. Criminals always seem to feel they are being treated unfairly, and of course, there's always that premise that comes to mind: "self interest." If criminals can make things safer for themselves, hey, they're going to do it; it is in their interest to do so. Such is the case with rich bankers and their "investors," frequently those of the "sit on their ass class." No regulation means they can do anything they want, including to you, and legally get away with it. Make no mistake about it folks, that's why all of the whining about regulation by bankers and their investors over the decades. Like those home robbers, they have NO concern for YOUR well being, only their own. As to the second point, I don't see it in non rich people's interest to have the whole banking/financial system come crashing down. I know you're mad, and YOU SHOULD BE!!! So am I, but sometimes we have to swallow hard and move on, hoping to avoid an even worse calamity. If greater banking regulation to avoid such nonsense is the result, we'll all be better off for it.

Okay, but the point is, if you favor the basic system, but re-regulated, and probably with even more enhanced regulation than that of the New Deal era, because times have changed so much since then, well we're going to have to have more money for bailouts, because they've gotten themselves (ad we're the "collateral damage;" get it? Banks....collateral!) into one hell of a mess, and that mess has helped to bring the country down with it. The conservative free market people who at least are consistent say no taxpayer money should be used to bail out bad banks and that we should just let them go under. In an ideal world, and this is NOT an ideal world, that would be true, and even since the New Deal era, banks have been taken over by government regulators due to insolvency, but these were generally a few banks here and there, and their demise didn't cause a potential depression, or even much of a ripple in the lives of most Americans. The situation now is much different. So many big banks are in trouble that their collapse would undoubtedly send shock waves around the WORLD, not just in America. The same argument can be made for American automakers. In an "ideal world," they could be left to go under, but not only would that give Americans a jolt to their pride, but certainly hundreds of thousands, if not millions, of Americans whose jobs are tied to the auto industry would go under too. Like we need a couple more million jobless Americans. Add the banking system jobs to the unemployed, if the banks go under, and you got probably a couple of more million. There's no doubt in my mind that the resulting catastrophe would surpass the Great Depression, which might happen even if we continue the bailouts. So, as I see it, we've got our backs to the wall. These last eight years, especially, have put us in what may well be a "no win situation" about the entire economy, not just the banking system.

Some conservatives are saying that with all of the spending being done by government, that in a few years, inflation could be a big problem. They "may" be right, but that can't be a reason for inaction, folks. If the doctors told you, "You have to have this surgery, or you are likely to die," would you say, "Let me think about this....hmm....This surgery is going to cost the insurance company a bundle, and they may raise my rate?"

Word History:
Bolster-This comes from Indo European "bhelgh," which meant "to swell." The Old Germanic offshoot was "bolkhstraz/bolkstraz," which gave English "bolster," which seems to have been spelled in Old English just as it is today, and also gave German "Polster." The original meaning in Old English was "long pillow stuffed with some material" (You can see the "to swell" meaning in this.) Later, in the 1500s, a further development came about from this "stuff something so that it puffs up" meaning, so that it took on the meaning of "support something." German "Polster" still means "pillow, or padding."

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Sunday, March 01, 2009

Conservatism Unravels, Final

This is the final installment of "Conservatism Unravels," and as such it is a bit of a recap, too.

A little “Reaganism” goes a long way and in the early 1980s, we probably needed a “little Reaganism.” There was some pretty intense anger towards the government back then, even among self identifying Democrats. Republicans, especially conservative Republicans (there were still some liberal Republicans, like Senators Chaffee, Cohen and Weickert, back then), had gained much political ground by pointing to New Deal agencies still functioning in the 1970s, cases of fraud in welfare, and the growth of government workers in general. Cutting the size of government had tremendous appeal to many Americans, including, as I said, a fair number of Democrats, and the Reagan policy was not without merit. To say otherwise would be saying that progressive/liberal programs always work, never need adjustments, or never need to be scrapped, EVER, and that’s not my belief. Democratic congressmen/women and senators were not as likely to make the necessary changes in many programs, as these programs had constituencies who voted Democratic. It took the opposing philosophy of Reagan to make changes, just as now, it will take Democrats to make changes in the Republican programs, and hopefully change the way Americans view the recent Republican anti-government, pro-business, pro-wealthy tax cut philosophy. If you recall the recent election campaign, Republicans were often shown saying to “Make the Bush tax cuts permanent.” They were too leery of saying what that really meant; that is, “Make the tax cuts for wealthy Americans permanent.”

Remember, I said “a little Reaganism” was needed. Like your family budget, you can only cut the government’s budget so much before it hurts. If you rein in your own budget, you trim this and you trim that, but if you keep trimming, eventually your quality of life suffers. It all comes down to each person. When any one of us needs government help, we want Uncle Sam and taxpayers to treat us kindly (Just ask the bankers and auto executives of today). All too frequently, when we’re doing alright, we bash government, but we often forget that perhaps our neighbor, or someone else out there needs help, but now that we’re okay, we get selfish, and it was upon this human failing of “selfishness” that conservatives pushed the envelope that brought us to today’s mess.

Political parties have one main function: to gain and to keep power (Okay, I guess that’s two, but I can’t help it, I count like Joe Biden). The parties themselves are really made up of coalitions of voters at any given moment, even though a fair number of Americans identify with one of the two major parties.^^^ Before the Great Depression, which may now have to be renamed, the Republican Party had two large generalized segments: a conservative wing which was pro-business (especially pro-BIG business, dating to the post Civil War era) and fiscally conservative (for those unaware, that means they watched the purse strings). The other wing was progressive (by the 1930s, the term “liberal” began to replace “progressive” in general usage) with the desire to regulate business abuse, to support organized labor, and to use the Federal Government to help spread prosperity throughout the country. As I said, I’m generalizing here,*** but if you are unaware of American political history from times past, black Americans were about 100% REPUBLICANS back then, and many labor unions and labor leaders also voted consistently Republican. As you can see, the two major segments of the Republican Party were pretty much at cross purposes, but after Teddy Roosevelt (a progressive Republican) departed the presidency, the conservative wing grabbed the upper hand, and they have remained in control to this very day, although, as I‘ll be pointing out, with other non traditional Republican conservative elements joining, and then taking control of the Republican Party. (I’ll stick with basically economic and some social issues here, but naturally foreign policy issues can also dominate political agendas at times, too, and maybe I’ll do an article on that aspect of the two parties in the future.) The 1920s saw the pro-business Republicans in control, not only of the Republican Party, but of the country. Led at first by President Warren G. Harding, but brought to their apex by his successor, Calvin Coolidge, there is a scary similarity between those times and the era of George W. Bush. Only a few months after Republican Herbert Hoover took over as president from Coolidge, the economic system gave way in a major collapse that lasted for more than a decade. Hoover had strong ties to the progressive wing of his party, having supported Teddy Roosevelt when he bolted the Republican Party in the election of 1912 and formed the “Bull Moose Party,” but Hoover also had a traditionalist, conservative side, and during the economic collapse that occurred on his watch, that conservative side too often won out. Even when he finally accepted certain progressive policies, he got little or no credit, since he had at first opposed the measures. By not seizing a truly progressive agenda, Hoover wasted the last chance to wrestle the Republican Party from the clutches of conservatives. In fact, after finally moving in a more progressive manner on some policies, Hoover made what many historians and economists see as a fatal mistake; he moved back to a more traditionalist, dogmatic approach to economic downturns, and raised taxes and cut spending in an effort to balance a budget that was growing ever more out of balance due to higher expenditures and falling tax receipts.@@@ This from a man who had advocated government spending and deficit spending to combat economic downturns not long after World War One, well before John Maynard Keynes developed his economic theory.

The Depression brought major changes to the two political parties, as many progressive Republicans crossed the political boundary and voted for Franklin D. Roosevelt, with a fair number eventually even registering as Democrats, or at least declaring themselves independents. Black Americans gave their votes to FDR in his first reelection bid in 1936. This was the FIRST time in American history that the “Party Of Lincoln” lost the black vote, and Republicans have NEVER gotten it back. American labor, somewhat split in the previous election in 1932, became one of the pillars of Roosevelt’s Democratic Coalition after the 1936 election. Still a good number of progressives remained as Republicans, although their feelings favored many of the Democratic plans.+++ With fewer progressives in the party, conservatives pretty much took control by default. Progressives/liberals gradually dwindled in number in the GOP over time until the Vietnam War, which was very divisive for Democrats, but also was divisive, to a lesser extent, to Republicans. With many progressives gone, the Republican Party became increasingly conservative, but these were still essentially fiscal, pro-business conservatives.

In 1964, before Vietnam became a major issue, Barry Goldwater, a conservative (and kind of libertarian on social policy) senator from Arizona claimed the GOP nomination for president. Goldwater’s philosophy, which at least he didn’t hide (he was brazenly outspoken), had strong appeals to Americans’ patriotism (this was the era of “The Cold War”) and to their increasing desire for law and order. Goldwater didn’t shy away from something that had bugged many conservatives for decades, Social Security. He favored voluntary participation in this program, instead of participation by law. Conservatives loved it, but most of the country was terrified of Goldwater’s brashness in both foreign and domestic policy. Lyndon Johnson won an enormous victory, bolstered not only by the country’s fear of Goldwater, but by the country’s sympathy for Johnson who had taken over for the assassinated John F. Kennedy just a year earlier. Goldwater, however, broke through Democratic domination of the “Old South,“ in a portent of what was to come later with Ronald Reagan. My maternal grandmother, a Republican, voted for Johnson, fearing that if Goldwater won the election, that he would take her Social Security away.%%% If I remember right, she also admitted at that time to voting for FDR in 1936, something she NEVER told my grandfather while he was alive. He was a Republican committeeman in our ward. My grandfather was a Republican by tradition, rather than by self interest, as he worked hard most of his life in a tile factory as a working class American, getting nothing from the Republicans until just a few years prior to his retirement, when one of his best friends, and staunch Democrat, told him to apply for a state job, as the Republicans had won the governorship (1956) and had control over many patronage jobs (saying “patronage jobs” is NOT meant as a slam to Republicans, as Democrats did the same thing). He got the job for those four years, and then the Democrats won, and he was out, but he was old enough to retire anyway. My father, a VERY staunch Republican, also said to me about his father-in-law many years ago, “The Republicans just used your grandfather.“ My grandfather retired to a small pension from his non state job and to of course.....Social Security!

The mid to late 1960s brought lots of turmoil to the country, as anti-war protests and civil rights demonstrations often turned violent. Riots occurred in many major American cities like Los Angeles and Cleveland. With Americans viewing such acts on their televisions on a regular basis, there came a call for law and order, often led by Republican politicians. (Americans finally got “Law & Order” when NBC brought the show to television about 25 years later... Ah... just thought I’d add a little.... humor.) Democrats controlled both Houses of Congress and the presidency, with Lyndon Johnson, until 1968, when Republican Richard Nixon won the presidency. With some splits by liberal Republicans with Nixon, mainly over war policies, conservatives sought to oust liberal Republican officeholders from both houses of Congress. In one case that I remember distinctly, longtime and respected liberal Republican, Senator Jacob Javits of New York, was defeated by conservative James Buckley, brother of conservative guru William F. Buckley. Also somewhere in the earlier 1970s, Leon Panetta, then a congressman and now the head of the CIA, switched from the Republican Party and became a Democrat. Nixon, ever the astute political strategist, saw a chance to gain potential Republican voters in the South, as this Democratic stronghold was becoming disaffected with many Democratic policies, ranging from the Vietnam War, foreign policy in general, a number of social issues, and certainly racial issues, including one of the red hot issues of those times, the busing of school children to try to gain some kind of racial balance in schools. Americans, both black and white, were frequently unhappy that their child or children were forced to leave neighborhood schools and sent by bus to another school, at times clear across town. The issue was devastating and it favored the Republicans, most of whom openly opposed it, while many, but not all, Democrats favored the plan or tried awfully hard to avoid taking a stand either way. In 1972, Nixon swept the South. The once “Solid South” of the Democratic Party was gone. “Let me make one thing perfectly clear,” to coin a phrase, Nixon wasn’t all bad, and he certainly was not a conservative ideologue. He was a politician, however, and a good one. He developed or went along with certain programs to help low income people and he started a dialogue with both the Soviet Union and China, then known to many Americans as “Red China,” to try to lessen world tensions.

The “Watergate Scandal” and Nixon’s subsequent resignation (his vice president, Spiro Agnew, resigned about a year earlier, after criminal evidence was uncovered from his time as Governor of Maryland) gave Democrats a big victory in the congressional elections of 1974, but in many ways, the election results were deceiving, in my opinion, as many Americans voted AGAINST the Republican scandals, rather than FOR Democratic policies. Further, many Republican voters, discouraged and feeling betrayed by the scandals, stayed home on election day. Congressional Democrats misinterpreted the election results, in my opinion, and went on a legislative tear, causing Republican President, Gerald Ford, to wear out his veto pen. I’ve got to tell you that I had an admiration for Ford, who lost his bid for election in his own right in 1976 to southern Democrat Jimmy Cater. Carter won the popular vote by about two million, as I recall, but the “Electoral College” was very close, and Carter’s narrow win in Ohio by only a few thousand votes gave him the presidency.

The troubling term of Jimmy Carter as president helped Republicans overcome any lingering bad feelings about the Nixon years. More and more, Democrats also became associated with government spending, at pretty much all levels of government, and the passage by voters in California of an anti-tax measure should have given them a smack upside the head, but they seemingly failed to “get it.” Republicans “got it!” They saw that Americans were increasingly upset by government spending and the taxation used to support it. Further, the so called “permissive society” of the 1960s carried over to the 1970s, and there most certainly was a reaction to the overt display of sexual matters in American society, as well as abortion, which has proven to be a very divisive issue for the country. These kinds of social issues brought Republicans many new voters, especially among an emerging political force...the Religious Right.

Religious leaders like Pat Robertson and Jerry Falwell became nationally known because of their advocacy of strict interpretation of biblical verses. Their strong anti-abortion stance proved a powerful tool to recruit voters to the conservative cause, which was the Republican cause. The Roman Catholic Church denounced abortion, and many a former Democrat from this Christian sect voted Republican over this one issue alone. Up until a couple of decades ago, if you had interest in politics, and you heard family names of certain ethnic derivation like Polish, Slovak, Croatian, Irish, or Italian, you knew there was a good chance that these were likely reliable Democratic voters. By the time of Reagan, this most certainly had changed to the point that while many “old time ethnic voters” remained as Democrats, they may have voted Republican for president, and their children may have even been registered as Republicans. Again, I want to emphasize that I’m generalizing, but the change most certainly took place, and some of this can probably even be traced back to the tumultuous 1960s, but the process was slow back then, and the Nixon scandals of the 1970s made many Democrats who had crossed over to vote for him leery of voting for Republicans again.

By 1980, many in the country were angry at government and government’s supporters, who were seen mainly as Democrats. Reagan urged Americans not to see government as a solution to our problems, but to see “government IS the problem.” All of the complaints Americans had about government, large complaints or small complaints, found refuge in Reaganism. Republicans were on the rise as a new political coalition formed. Democrats, fairly or unfairly, were seen as having caused America to lose Vietnam to Communism, to go too softly on the Soviet Union, to unleash racial discontent, to cater to immigrants (mainly Castro’s deported Cubans), to support abortion, to support “gay rights,” to support “women’s rights,” to be against adequate defense spending, to be anti military, to be pro minorities, to be pro “big” labor, to be pro business regulation, to be too willing to help out any group with government aid, to be too open about sex, and to be just plain too much for “big” government. Believe me, I’m sure I’ve left out quite a few more, so if your complaint isn’t there, I apologize. There’s no question that Democrats, just like the Republicans of today‘s mess, stood guilty of many of the charges, some by a larger degree than others. Carter lost, Reagan won, and this new form of conservatism, a strident, anti-government form of conservatism began to take hold, even though Reagan himself was not particularly strident towards his opponents.

The Religious Right loved him, but Reagan was not particularly religious in public, nor did he ever really take up, or expend political capital, to see the major issues of the Religious Right succeed. He gave verbal support, but that was about it. He often publicly declared his opposition to abortion, and the Religious Right cheered, but he never pushed to have pro abortion laws overturned. Likewise, he touted balanced budgets, but ran up record deficits (records for that time). His economic policy was certainly the forerunner of George W. Bush’s, as he cut taxes, with big benefits going to the wealthy, but he started a simultaneous huge build up in military spending. At least back then we MADE THINGS in America, and they weren’t imaginary or just listed on an accountants ledger as “paper gains;” they were real products. But there’s no question that his policies conflicted and they weren’t called “Voodoo economics” without reason. Reagan wanted to cut government, but as I noted way back at the start of this, you can only cut so far, and even in those early years of conservative resurgence, his administration found out that cutting some things can cause problems, and in order to make things come out they way they wanted, his administration declared ketchup a vegetable for the purpose of school lunches, much to the laughter of many Americans. I won’t go on about Reagan, as I covered his years in office, as well as Bush, Sr., and Clinton in other articles in this "Conservatism Unravels" series.

What we see as the legacy of this whole conservative era are various government agencies that were gutted and then blamed for not doing their job. I doubt that it was a conspiracy, but it certainly had the same effect, since budgets were cut by conservatives who didn’t much believe in government being efficient anyway, and that by cutting those budgets, they proved their point; government doesn’t always work efficiently, especially when understaffed. This doesn’t surprise me, as these pro business people have that mentality. To me, we’ve been heading in this direction for years in the PRIVATE SECTOR, too. You go into a store, they don’t have enough clerks or customer service people. Or, they have clerks stocking shelves or cleaning up so that they don’t have to pay other workers for these jobs. Even if you’re a staunch conservative, you’ve got to admit to some of this. Of course, this is all done in the name of being able to pay more money to investors, also known by me as, “The Sit On Their Ass Class.“ Remember folks, 75-80% of all stocks are owned by the wealthiest Americans. This cut, cut, cut to the bone stuff is just part of their make up. In my opinion, too, these business people and investors saw where workers in some countries made $2.00 a day, and they couldn’t wait to get businesses opened in those countries, get “free trade” policies passed in America, and then start reaping the benefits. All the while they began cutting American jobs, or cutting wages and benefits claiming how overpaid American workers are, then further touting how America will become just a service economy. This mentality was just a recipe for eventual disaster. Even business people who didn’t like what was going on had little choice, but to go along. The Bush policies were at war with themselves. With no one to stop the insanity, they ballooned to dangerous levels.

First, tax cuts for the wealthy, but then two military actions, aka, wars. No call by Bush to pay for the wars, only that oft used Reaganism, “We’ll cut spending, and then grow ourselves out of deficits. Lower tax rates mean more tax revenues.” Of course, they didn’t believe in regulation of business to start with, so what better place to start cutting than with business regulatory agencies. This then triggered all sorts of shenanigans by business people, including these various mortgage and other loan packages that now threaten our entire financial system. You had people making loans, who never had to worry about the loans getting paid back, since they sold of the loans to someone else. The other day, I saw a story on CNN about a guy who made about $8,000 a year. The originator of the mortgage loan falsely upped the guy’s income to like $15,000 a year. Now, assuming he had no other debts, he could probably qualify for a loan on a used car, but not an expensive one. What do you think they gave him? Get this! A mortgage loan for over $300,000!!! He never made one payment on the loan, which was almost immediately sold to someone else. He is now faced with foreclosure. Now, was the guy wrong to sign on the dotted line? Yes!!! But the real culprits are those who made this loan to start with, and then whoever bought the damned thing, which was then probably diced up and put into some “bundles” of mortgages and sold off to some investors. The system was circumvented! The firewall is this, if you went to your boss or your brother or your mother-in-law for a $10,000 loan, it is up to them to make a proper judgment about whether you can pay the loan back. If they check your income or your history and find bad things, they have to say, “NO!”

Then the greedy pushed free trade, leaving American workers to the mercy of the “free markets” and unfair agreements with countries where labor protections are no where near on the level as in America or Europe. And Bush cut worker retraining programs, too. What they've done to us is just incredible!!!

Of course, the business people, including the mortgage business, couldn’t wait to sign people up for loans, which they did, some times unscrupulously, and then later when some of these folks lost their jobs, or took pay cuts due to foreign competition, guess what, they couldn’t pay the damned loans.

Their sheer, obsessive greed blocked any common sense into what was going on, and into what was eventually going to happen if things weren’t halted. If you go to your boss and say, “I’d like to borrow $10,000 against my pay for “X” number of years,” and he/she grants you the loan under some payment agreement, but then at some point, they cut your pay, or ship your job off, guess who can’t pay the loan back? This has been what’s going on, one policy conflicting with another. Its insanity!!!

^^^ There are certainly several other political parties involved in American politics. Some have long traditions, while others have had a temporary or short life span, when the two major parties can’t (or won’t) face the issues troubling the country, but only somewhat rarely in modern times have so called “third parties” had impacts. I know that’s a broad statement, but I can only type so much....Hey, my keyboard’s overheating!!!

*** I can only generalize, because, while there certainly are discernible trends in why Americans support one party or the other at times, the fact is, we frequently vote the way we do for any number of reasons; at times voting for a Republican for president, but voting for Democrats for Congress in the same election. There are some logical reasons for this, but this all remains outside this article today.

@@@ It doesn’t in the least surprise me that many of today’s pro-business, pro-wealthy Republicans disavow Hoover. He actually TRIED to do something about the developing economic downturn of those times. They HATE government intervention. They like that he wanted to finally cut government spending, because this bunch HATES the government, but they also HATE the fact that he raised taxes, primarily on the RICH!!! (You weren’t always wrong, Herbert!) So much of the modern Republican economic philosophy is based upon the notion that Republicans never met a tax cut for the rich that they didn’t like. Its interesting that in the recent debate about stimulating the American economy and Obama’s efforts to get some Republican support in the Senate, that the Obama tax cut, which favors middle income people (not enough, however, in my opinion), was negotiated DOWNWARDS, not upwards, in an effort to get Republican support. Hmmm, do you think if the president had offered a big tax cut to the rich that he’d have gotten more than three Republican votes in the Senate? Would Republican “deficit hawks,” absent for the most part during eight years of George W. Bush’s budget deficits and budget shenanigans (like not counting the Iraq War spending in the budget), have shouted “YIPPEE!!! The hell with the deficit if the wealthy get big tax cuts!” Think about it folks. There’s something wrong here.

+++ After a while, many of these progressive/liberal Republicans basically accepted the New Deal programs, but argued that they could manage the programs better and make them more efficient. Neither Alf Landon, FDR’s 1936 opponent, nor Wendell Willkie, his 1940 opponent, nor Thomas Dewey, his 1944 opponent was some kind of rightwing ideologue. I’ll have to do a separate article about the Democratic Party and its basic philosophies and composition, but for today, just the Republicans.

%%% As brash as Goldwater was in his Social Security policy, Democrats were just as brash in exploiting the fear in many American voters, but I really believe, Democratic exploitation or not, this was one instance where “self interest” by non wealthy Americans triumphed. George W. Bush got a cold shoulder after his reelection in 2004, when he too tried to push for partial privatization of Social Security. His plan went nowhere, which is where Social Security would now be if he and Republicans had gotten their way, as the stock market collapse would have left the program gasping for air. Bush can be thankful that he didn‘t get his way, or he and Republicans would now CORRECTLY be blamed for the destruction of many Americans’ Social Security by his “free market“ philosophy.

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