EDITORIALS / OPINION
Go straight to your favorite columnist
- Andrew FoisYearning to breathe free
- Edwina Rogers
“Mental Recession?”
RANTS
By the georgetowner
July 2008
Sitting at the table next to the Wisc. & M Street corner at Nathans last week during a 45 minute lunch, over 15 busses turned the corner, coming down Wisconsin Ave., turning left onto M, right in front of Nathans. Most of the busses are those double-decker red ones, with the open top (you read about the accident of one of these busses going to a Nats game, two men were killed when they stood up just as the bus was going under an overpass). In addition to the red tour busses (which enter Georgetown via P Street from Dupont Circle, hanging a left onto Wisconsin Ave., stopping at the Georgetown Inn to pick up passengers, and zooming down to the Wisc. and M intersection, where they hang a left, heading downtown again. No one seems to ever get off of these busses......just get on. If the busses are not bringing people to visit Georgetown, and shop in Georgetown, why are they here? So the tour company can give their customers a five minute tour of Georgetown (P Street, lower Wisc., and half of M)? It is time for our BPAG and BID and ANC and CAG to take a close, hard look at some of these tour busses that just “travel through” our village.
Think of the pollution and extra traffic congestion they cause when added to the city busses, the trollies, the blue busses, and several other tour busses coming through, not to mention half of Virginia’s commuters.
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Hey, the stimulus checks from the government are in the mail. Did you get yours? Have you spent it already? Ours was so small we gave it to the man begging for money in front of The Gap. We don’t need stimulus checks. We need a stimulus in rational solutions to real problems. We need something that a government must earn, not confiscate, and not secure through a bribe. It’s called trust. It’s called confidence. And while you’re at it, how about helping the poor guy begging for money in front of The Gap. Or the one across the street in front of PNC Bank, or the one that sits under a tree in plain view of diners at the Subway at Potomac and M....
“Mental Recession?”
By Edwina Rogers
July 2008
As of the writing of this column, former Senator Phil Gramm (R-TX) has just resigned as economic advisor to the John McCain Campaign. A politician with Mr. Gramm’s twenty-four years of Congressional experience should have known better than to use such crass phraseology—“a nation of whiners”; “mental recession”—in his economic analysis. The comments were especially damaging as they undermine McCain’s message of “I feel your pain” to a crucial segment of voters; those traditional issue-conservatives who have been hit hard by trade-related job loss and mortgage default that are moving towards Senator Barack Obama’s candidacy.
The politics of the situation made it impossible for Gramm to stay on, as is the nature of our sport. But the frenzied media response, and clever Obama talking points aside, Gramm’s analysis is similar to what many experts and insiders are saying. The perception of our economic viability goes a long way to determining it, and there should be no reason for the level of shrieking panic we hear from most media analysts and some (former and current) Presidential contenders. As the stock market looks to have found its real bottom after a frenetic end-of-week rally, it is obvious we are much stronger fundamentally than we were on the eve of past recessionary periods (1929, 1980, 2001), contrary to the doomsday scenarios you hear peddled from pillar to post. The only thing that will stymie a full and swift recovery is panic; indeed it is what got us into this rut to begin with.
Take for instance, the question of lending. Only two percent of all mortgage holders in the United States are subprime borrowers who are behind in their monthly payments, far fewer are actually anywhere near foreclosure (the foreclosure rate of the 90% of us that have regular mortgages is steady at about one percent). Correspondingly, a vast majority of the securitized assets based upon this lending is viable and still generating positive revenue flow. The problem is, after a few of these assets have collapsed, mortgage backed securities formulated in the same manner as the few that went under are all being called into question. Nobody wants to buy these things, and their liquidity has plummeted, causing their value as a tradable security to decline—or to be “written down.” But the borrowers whose mortgages are wrapped up in these financial instruments are still making monthly payments, which are funneled up to holders of the securitized debt obligation. In essence, the panic created by relatively few defaults has had a cascading effect of undermining our confidence in the mortgage backed security mechanism that has been around for years, and that is still distributing risk among many economic actors so that more Americans can afford to borrow. The lending situation is neatly paralleled by what happened at an Indiana bank last week, when one lawmaker’s comments caused a run that lead to its collapse, even though the customers’ accounts were all insured by the Federal Government. One of the symptoms of a “mental recession” perhaps?
That’s not to say, however, that ordinary people did not actually sign up for ambitious loans, and due to whatever unfortunate circumstances that arose, were tragically not able to keep up with their payments. But the cacophony of clamoring from legislators, bankers, purchasers of debt, real estate speculators, downstream construction suppliers, local government, and homeowners (everyone basically) for a government sponsored do-over are perhaps who Phil Gramm was identifying as whiners. Freddie Mac and Fannie Mae are examples of two of the biggest whiners that are about to be rewarded for all their mewling. The fact is it doesn’t matter if either of those two stocks is worth one cent, they both own a variety of assets that they can transparently verify are based upon sound investments, loans to one of 90% of mortgage holders on top of their payments. They also have plenty of capital to cover some of their biggest potential losses. Their stock value is simply an estimate based on the Street’s sense of the liquidity of their holdings.
On the other hand, you also have folks whining for more regulation—it’s the typical big government hoax: beg for the Fed’s financial support for an institution or sector entitling it to regulate and interfere with that institution or sector. So will begin a lengthy legislative and regulatory process that will inevitably restrict the market’s ability to creatively spread risk over willing participants (institutional investors, rich hedgefund holders and investment banks) to serve the liquidity needs of the many. The uncertainty that will result from a protracted partisan struggle over how to proceed will only hamper our economy’s recovery.
Since the beginning of time people have borrowed money, and occasionally they have done so unwisely. The only way to end that practice is to impose rules that make lending a zero-risk, zero-reward enterprise, or to reintroduce the “debtor’s prison.” Neither one of those solutions can address the underlying lack of confidence we are currently trying to recover from. What will help is better collective understanding about the factors that are driving the current scare, and better information about the mortgages that are used to fashion these securitized bundles of debt. A reasoned and calm appraisal of the facts will show us that we are not in such bad shape as we might believe.
Edwina Rogers served at the National Economic Counsel at the White House under the current administration.
Yearning to breathe free
By Andrew Fois
July 2008
In the beginning there was immigration, the creation story in America’s Book of Genesis. We are all immigrants; some more recent than others, of course, but go back far enough and even Native Americans are immigrants. Despite the critics of their contemporaries, immigrants have brought many offerings to our cultural altar: a different voice in the choir, another color in the glass window, new prayers in the pews.
Three of my five grandparents were immigrants. Yes, five: one was a step-grandfather. They all came from southern Italy, what northerners called “terrone,” to Ellis Island, Brooklyn, the whole thing. They came with nothing, spoke no English upon arrival and lead rich American lives.
My father’s stepfather came from “the old country” as an adult and found work as a messenger “boy” in the steep peaks of Manhattan. He was an old fashioned Italian man: pasta, vino, espresso and Sambuca, preceded every night by a grateful prayer of “God Bless America.”
No one knew much about my paternal grandfather: he died very young before the son he had sired was born. My mother’s mother convinced me that he jumped off a ship in New York Harbor, swam ashore and was killed in a gunfight. It’s probably not true but it was the operative theory most of my life.
My maternal grandmother was born in the small town of San Andreas, proud that it bore her Italian Naval officer- grandfather’s name. A statute stood in the town square to pay him respect. To get there, she would tell me, you had to take a plane, a boat, a train, a bus, a donkey and then walk! You can’t get there at all anymore. The town was swept away in an earthquake as it rested on the hills south of Naples.
My grandmother bore the surname of the town’s regione and her Christian name was Lucia (Lu-chee-ah). Her mother gave her life giving birth to baby Lucia who unsurprisingly grew up adoring her doctor-father. His new wife was only too glad to ship her off to relatives in America at the first opportunity.
Navy Street in Brooklyn was the home of the Brooklyn Navy Yard as well as the Neapolitan mafia. The Sicilian mafia settled in Manhattan’s Little Italy. My grandmother raised my mother and her extended family in a house on Navy Street with a chicken named Henrietta on the roof. They made uniforms for the U.S. Navy until the base closed. The pasta pot was always simmering for the Monaco Boys, one of whom went on to play Barabbas in a Hallmark Hall of Fame Easter special. One night Uncle Frank came home with a bullet hole through his wrist. No one asked him why.
My grandmother later moved to a house my grandfather built in Ozone Park, Queens. Hard to imagine “ozone” and “park” going together, but there you are. John Gotti lived in the neighboring town and kept his “suburban” headquarters, the Ravine Hunt and Fish Club, nearby. One time a man in a suit chased another man through my grandmother’s backyard.
When you get a government security clearance the FBI contacts your family to confirm that you are who you say you are. One night, while my first clearance was in progress, I got a phone call from my grandmother. Something was up because since she was the Madonna I almost always was the one to call her. “Andy,” she said, “the FBI called.” “Yeah,” I said, holding onto the word the way you do when you are waiting for the other shoe. She went on: “I don’t know what you did, but I told them I never heard of you!” It took me quite a while to explain to the corn-fed FBI agent that the Italian people have a healthy suspicion of the government.
When the huddled masses of my immigrant grandparents could finally breathe free, they brought much more color to the national table than I have. So do today’s.
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