Wednesday, December 11, 2013

The Ed Show ?

I just watched the Ed Show show  yesterday on the day the government sold its last block of stock in GM.  He was praising the auto industry "loan" from the government and how successful that turned out and never referred to it as a bailout .

While I agreed with what the government did with the auto industry ,  why did Ed keep referring to  that action as  a "loan" rather than a bailout.  Ed always refers to what was done for the banks as a  "bailout ". 

 Both actions were the same. However characterizing one as a loan, is  benign; the other, as a bailout, is evil.

The banks repaid all their loans/bailouts with a $40 Billion Dollar plus profit to the taxpayers. The auto industry loans/bailouts resulted in an acceptable $10 Billion Dollar loss.

By the way, the banks employ many more workers than the auto industry.

Why the disparate treatment by Ed ?

Just saying.


Tuesday, May 14, 2013


Based on what  I heard as a young man of the 60s from the SDS and other left wing radicals , it appears to me that the leadership and extreme supporters of the NRA also hate America. The anti -US and anti- military rhetoric of the NRA borders on the kind of thing that was called treasonous as applied to radicals by conservatives and others back then.

The term "love it or leave it" was popular then , and easily applies as a response to the kind of stuff we hear from the NRA leaders and their extreme followers today about America.

While they clearly hate Obama and the democrats, they aren't so happy with Bush and the republicans either. These zealots apparently do not trust the police or the military to protect us . In truth , they seem to view the government as more of a threat to their safety than criminals !

I know they would differentiate between the country and the government , but what is a country if not it's elected government ?

They are no less revolutionaries than the SDS or other radical groups of the 60s and 70s that I witnessed. Those radicals also "loved" the country but "hated" the government. They were attacked as being disloyal by the media and the politicians . Why aren't these right wing radicals treated the same way?


Monday, May 6, 2013

Higher Education Opportunity Myth

There is a pervasive myth, mostly in progressive media, but also accepted in the mainstream, that higher education opportunities in America are getting worse for minorities, and lower and middle classes students, than what they used to be .

The mantra is that the "level playing field" in higher education was better in the past then now.

I think not. Memories appear to have faded, but not mine.

When I went to college in the 60s and 70s, the "unlevel playing field" was much worse then it is today.

First of all, there was no such thing as diversity or affirmative action, and, outright discrimination still existed. At elite schools, the "greased skids", "old boys network" still predominated.

There were few African Americans, Hispanics, Asians, or even Women, at elite schools. In fact there were still thought to be quotas for Jews, at least unofficially, at many such schools, including Northwestern. Even good, but not elite schools, had few minorities.

Women did have their own restricted "separate, but equal" elite schools - with few, if any, African Americans, Hispanics, Asians and a limited number of Jews.

Here's an example from personal experience how the traditional elites were more advantaged then than now. My Dad was a high school math teacher, so while we didn't have a lot of money, education was always a priority for my sister and me. We went to Proviso East High School in Maywood , Illinois, a racially mixed , working class suburb of Chicago.

It's long story, but I began dating a girl from New Trier High School, a highly regarded pubic high school in one of Chicago's wealthiest old line North Shore suburbs. It was our senior year in high school and she told me that 33 boys in her class were going to Harvard, with a proportionate number going to the other Ivies and girls to the Seven Sisters.

I now live in that school district , and I know that if 3 or 4 ( boys and girls) go to Harvard a year from New Trier , that's a lot. While it's true family connections and support are a critical advantage, at least today's well connected kids have to be very smart and accomplished to get into the best schools.

No one from my very racially and economically diverse high school class went to the Ivy League when I was there. Frankly, you never even thought about it. If you wanted to go to college , you went to "The Pier" ( today UIC) or Northern Illinois ; if you were good in math, maybe you thought about IIT; and if you were really smart, you went to the University of Illinois in Champaign.

That was it. I know this because I asked a college guidance counselor at Proviso East about going to an Ivy League school and he just about thought I was out of my mind ( yes, my grades and test scores were good enough). Few students from Proviso East went out of state , let alone to the Ivy League. Of course there was no financial aid to speak of , but it's true costs where a whole lot less. My parents valued education, and my sister and I went out of state to Big Ten schools, but that was rare at Proviso.

Today, top students at Proviso East, and similarly racially diverse schools in low income neighborhoods, are very much in demand by elite colleges across the country, with great financial aid available.

Turning to my own law school experience at Northwestern University School of Law, 1968-71. Out of a class of 150, there were 10 women ( only 1 woman in the class ahead of me), 3 African Americans, 2 Hispanics, no Asians and, in fact, only 3 or 4 Poles and Italians. A group of us liberal law students actually did that analysis.

It's clear that  there are many more women, minorities and lower income students in elite schools today than in the not so distant past when I went to school. Nevertheless the myth of the worsening of the level playing field persists and is getting stronger than ever.

Have we gone through a complete collective loss of memory in this country?

Of course things need to improve for minorities and poor and middle class kids, and the cost of higher education is the biggest problem; but that doesn't mean we have to harken to a past that didn't really exist.

Why can't we acknowledge that advances have been made, even if more needs to be done?

Instead we have another example of people talking about  the "good old days" that doesn't square with what really went on.


Tuesday, March 19, 2013

Iraq War 10th Anniversary

On this 10th anniversary of the the Iraq War, here is what we know:


No Oil.

No Saddam Hussein.

However, what did it all mean and what were the consequences, intended or otherwise?

There was no WMD.

Contrary to popular belief,  it appears that we didn't go to war because of Oil,  since even though we won, we  haven't gotten any Oil  from Iraq. 

While Saddam Hussein , a bad guy, is gone; the "democracy" there now isn't very good for us. But is for Iran.

Thousands of lives were lost, with  many more injured,  and  we spent, and will continue to spend, many billions of dollar.

What was accomplished?

Are we safer?  Maybe, but how can we tell? 

Do we have more Oil?  No

We're clearly not more well liked or regarded. Much of our foreign policy "political capital" have been spent, and we are withdrawing from other global responsibilities.

Query-- If Saddam Hussein were still in power, would there have been an Arab Spring when it happened and was that a good, or not so good, thing?  It clearly was for Islamists.

Oh the irony of  unintended consequences.


Friday, March 8, 2013

Drones in the USA

Other than as political theater, I don't understand the whole "using drones for killings on US soil" brouhaha?

The whole reason we use drones is to (1) protect our pilots from getting shot at and (2)  not actually physically entering another country's territory . Since we wouldn't shoot down our own pilots and we clearly aren't intruding onto another country's territory, those reasons for use of drones do not exist.  It's more akin to firing artillery shells across borders, but with more range and better accuracy.

The issue of killing Americans in this country without due process goes way beyond use of drones.

Why aren't  there similar calls for banning  use of  satellites,  helicopters, fighter planes, FBI agents, police, national guard, etc.

What's the difference?

Isn't it the killing that is the issue, not the type of  weapon used?

Whether you are for or against use of drones abroad, the whole domestic use thing seems like just trumped up political theater of the absurd.


Entitlement Adjustments

Frankly I don't understand the problem the President and Democrats have with making adjustments to entitlements that will enhance the likelihood those entitlements will be there for our kids and grand kids.

Recall that we ( or at least me) said that we will never get our Social Security. Guess what, I am ; because it got "fixed" by making adjustments . We can do so again with comparably little real "pain".

Why are President Obama and the Democrats resisting entitlement reform which mostly impact the rich ?

Here are some of the ideas that should get broad support :

1. Raise the eligibility age for Social Security and Medicare-- people are living longer and healthier lives - exceptions can be made for some jobs. Since poor people don't live as long as rich people and blue collar people don't live as long as white collar people and have less "healthy" retirement years, means testing may be the answer there, along with exceptions for more strenuous jobs.

2. Means test Medicare premiums. Maybe even receiving Social Security should be means tested while you're still working at a certain income level.

3. Adjust CPI if it would really be more accurate. This was designed to keep up with inflation, not be an added benefit. If current CPI is viewed as a needed benefit for the poor, means test those individuals getting CPI adjustments altogether.

4. Raise the payroll tax income cut off for Social Security without raising benefits ; and face up to the fact that it's a tax and not insurance, as originally structured . I understand that Obama and liberal Dems would do this in a second if they thought it would pass Congress . However I haven't heard them even propose it . Yes I know it would be considered a tax increase , but at least it won't be that onerous and it would really shore up the system.

5. All means testing should be based on cumulative lifetime income , which information is readily available from the statements we receive from the government periodically.

None of these changes if phased in over time would be catastrophic, and would go a long way towards solving the solvency problem of both programs.

Why are President Obama and the Democrats resisting this , especially for the benefit of the "rich" ?


Monday, March 4, 2013

One Way To Reform Tax Code

While everyone agrees we need to reform the tax code, that's about where the agreement stops.

Since it's likely that rates will not be raised beyond the recent  limited expiration of the Bush tax cuts, , the new mantra is closing loopholes and tax breaks.

 Again while everyone agrees we should close loopholes, doing so mean different things to different people.

For liberals, tax reform is code of higher taxes, mostly for those they consider to be rich. They want more revenue to grow government , combat income inequality and maybe reduce the deficit a bit.

For conservatives, it's broadening the base to lower the rates. However, the GOP wants the reforms to be revenue neutral because they don't want to grow government , and don't believe the new revenue would be used to reduce the deficit and the debt.

So what can be done that isn't actually harmful to the economy?  My guess is plenty, but we need "cracker jack" high powered corporate tax lawyers to tell us. These guys spend their lives figuring out how companies and the wealthy can minimize their tax bill. Who better to tell us what those mostly tax saving driven provisions are and how to eliminate them ?

I'm not talking about "loop holes" for home mortgage interest, charitable contributions , employer health insurance contribution, and state and local taxes. Those effect relatively ordinary people, and can have very adverse public interest consequences.

I'm talking about all the exotic stuff that only big time tax lawyers know about, but which could generate billions of dollars of revenue. So much of what businesses and wealthy people do is  tax driven. Let's just stop , or at least rein in, all of that .

Billions and billions of dollars have been saved by skilled tax lawyers for their corporate and wealthy clients. Who better to figure how that money can be freed up for the government, without curtailing vital public interests.

Example #1 of course is the treatment of carried interests as capital gains rather than ordinary income. But there are lots more examples and I'm sure they add up to big big dollars.

Even a regular real estate lawyer like me can come up with at least one big example . Eliminate the so called 1031 like kind exchange in connection with sales of property. Structuring sales in compliance with  Section 1031 of the Code ,  results in the deferral of millions and millions of dollars in taxes. I cannot think of any significant public purposes that arises from these " like kind " exchanges. People don't really exchange things much these days , and this is just primarily used a tax deferral technique.

Another easy one is the step up in basis upon death. Why can't the basis just carry over so taxes are not lost forever?

Just think what a group of high powered tax lawyers could come up with.

Those tax structures may be legal, but most don't seem to have any compelling public purpose beyond saving taxes. If that truly is the only reason, then eliminate it. Yes, I know that already is the law, but all too often the spirit of the law is sacrificed to the letter of the law. This is an area where those tax experts can really help tightened things.

Let these lawyers come up with their ideas before the politicians and special interest group get involved.

I know I'm way beyond my depth here , so I'd like to hear what more knowledgeable people think.


Tuesday, February 26, 2013

Generational Mobility in the USA

The current concern among many Americans is that it is no longer true that every generation does better than the one before. That no doubt is a valid concern.

However let's exam the context of this proposition a little further.

Using my family as an example, of those first generation Americans, only one of six of my mother, aunt and uncles went to college. I'm sure that many other Americans of my generation have similar experiences.

On the other hand, most of my cousins have gone to college; consequently it wasn't too difficult to financially do better than our parents. That created a lot of social/economic mobility.

Said another way, most of our kids' parents went to college; unlike the prior generation. As such it's not surprising that while our kids too have gone to college, some may not surpass their parents financially.

This generational change among families of  relatively recent immigrant status, drive a good deal of this phenomenon, I suspect.

I throw this out there once again in my role as a contrarian observer, even though I too recognize the problems our kids face.


Tuesday, February 19, 2013

Shrinking Middle Class - Part 2

This is a follow up regarding my post on the Shrinking Middle Class- Two Directions.

Here's a relevant quote from a Pew Research Survey:

According to the report, released Wednesday, the middle-income tier of Americans included 51 percent of all adults in 2011, down from 61 percent in 1971. It said middle-income Americans had moved into economic tiers both above and below the middle, "with slightly more moving into the upper tier."

As you may recall, my point was that the public is not aware that part of the shrinkage in the middle class is in two directions;  not just down as we are lead to believe by the conventional narrative. More than half went up and are no longer in the middle class.

We still have a problem, but it's  one of a growing division of "haves and have nots" , as opposed to the 1%-99% narrative.

Why can't we be told this by the media and our politicians?


Tuesday, January 22, 2013

Mortgage Foreclosure Abuse Proceeds

In my view lenders are not the only mortgage foreclosure abusers. The public has not been made aware that significant  mortgage foreclosure abuses have been perpetrated by borrowers. Many defaulting borrowers have been living in their homes (often having not put much money down in the first place) rent free for months and even years. In essence, because of the delays occasioned by "messed up" foreclosure actions or otherwise, and just the long delays in judicial foreclosure states, many borrowers have already actually benefited from this crisis.

I understand the need to discipline the lenders for shoddy, improper, and even dishonest, foreclosure processing, but if I were the judge I'd ask the complaining borrowers two questions--

Did you get the money? Did you pay it back?

According to an article in the New York Times, a Florida foreclosure defense attorney said he had basically three types of borrower clients:

1. Those who lost jobs or had medical problems and through no fault of their own and are unable to pay. Clearly the kind of borrowers who should be given loan modifications.

2. Those who can pay but don't . This happens usually where the value of the home  is currently less than the amount of the mortgage; otherwise known as "underwater". They are just staying put "rent free" for as long as they can hold out, often with an attorney's help. Afterward when the foreclosure is final, which is usually months and even years, they will just find an apartment to rent.

3. Those who could pay but won't, and in fact have rented out the homes. They are keeping the rent and still  not paying the mortgage!   Aggressive lawyering in those situations can delay the foreclosure for a long time. Hopefully this is an aberrant situation.

Even in states that allow for personal deficiency judgments after the foreclosure, the banks have not gone after borrowers for loan deficiencies. This is typical even where borrowers have substantial assets. By the way, there may be a shareholder suit somewhere out there for the failure of the banks to go after those who can pay.

The Times article said that this phenomenon of living in homes rent free has acted as a kind of "silver lining" in the financial crisis, creating  an  economic boost to the economy that had not been reported.

I believe that many lenders and their servicers acted improperly and should be heavily fined for not following proper legal procedures. The lenders, attorneys and the courts, got overwhelmed with loan defaults when the economy collapsed, and, while inexcusable, that was a big factor with regards to the shoddy foreclosure processing.

However, I don't see why borrowers should get anything, unless of course they can show actual damage.

I guess the good news is that the various multi-billion dollar settlements with the banks are more of a private sector economic stimulus, and in that sense maybe helpful for the recovery. Kind of a reverse TARP, but one that doesn't get repaid at a profit like the one the banks paid!

However, who gets the money and for what?

It's going to be like hitting the lottery for some borrowers (worthy or otherwise), compliments of the banks. The Times is already complaining that too much money may go to higher income borrowers. Excuse me, but isn't that an oxymoron? How do high income borrower even need help of this kind?

The real question is, were borrowers actually damaged by "robo" signings and other shoddy practices?

Did anyone lose their home who were paying their mortgage payments? I haven't heard about them, and believe me we would have.

Listen, I'm not saying that any borrowers wanted to default on their loans. But many who took those subprime  NINJA loan weren't completely innocent either. They did walk out of the bank with a lot of money, which they haven't paid back.

The whole economy crashed, lead by the collapse of the housing market. Maybe these lawsuits regarding improper foreclosure practices are just a proxy for  punishing banks for  having made subprime loans in the first place.

 The banks should be punished for improper foreclosure practices , but the money should be better spent and not go those who may not have been  damaged, and may even have been abusers of the foreclosure process themselves.

I have a better solution. As to what to do with the many billions of dollars of settlement proceeds from the banks, rather than giving it to borrowers (all of whom clearly defaulted on their loans, and who may or may not have suffered damages as a result of lenders' enforcement efforts), why don't we give the money to the poor, feed the hungry, shelter the homeless, educate our children or even pay down the debt and reduce the deficit?


Thursday, January 3, 2013

What is a Bailout?

What is a bailout?

For example, AIG and GM. What does it mean that AIG and GM got bailed out?  Shareholders got wiped out.  All of the senior executives got fired. Creditors lost money (certainly in GM). Isn't that plenty of moral hazard?

What's left of AIG and GM beyond the name and the business that continues to operate with the jobs of  workers below senior management?  Assuming the business had intrinsic value and the shareholders got wiped out  and senior management got fired, what is the basis of complaining about bailing out "fat cats"?

I recently read a piece which said:

"A bailout (in my book) means the shareholders benefited from the government action. I don't see any shareholders of AIG and GM saved, I see them obliterated. As such I disagree with the term bailout and prefer restructure."

I dwell on this issue because I think it is important that people know the truth of what a bailout means so if needed in the future politicians' and peoples' judgment will not be distorted by the demonized use of the term.