samedi, juillet 19, 2008

Old scars

I took the kids to the "Praise in the Park" concert in Downingtown tonight. They kept pestering one another, which made me more stressed than should have been. The music was very good.

I wish I'd been more consistent in exposing them to the positive praise song messages than some of the real trash they get on the radio. Because I listen with them, I find myself continously explaining, critiquing, and changing the channel.

I know B considers some many praise songs overly focused on people rather than on God. That's certainly true for some of them, but not for most.

Scanning the folks in lawn chairs for people I know, I thought about a former friend who lived not far from Downingtown. After his marriage fell apart, he eventually got engaged to a young woman who made herself into a strong candidate for the position of second wife. Perhaps she just saw further ahead than he did. As I understand, it's a very happy marriage.

Hearing the band play "Sanctuary" a praise song standard, I realled the time he had mischeviously riffed on the lyrics, amusing the rest of our staff, who had a tendency to take ourselves way too seriously sometimes.

Our friendship dissolved when he shared a rather testy email I had written him, asking about his lag time in responses, with his fiancee- "what shall I do with this?" he asked her. (I happen to know this because when he responded to me, her equally disturbing response to him was attached.)

"What shall I do with this?"

He was exposed in a way that few of us would ever want to be exposed. But it was clear that there was nothing left of our friendship. I wondered, then, if it had ever existed.

Betrayed as I felt then, I wondered if perhaps this was not so much about me as about his relationships with the powerful women he dated and married.

I tried to forgive him, and her, long ago. We all have baggage.

And what should I do, tonight, with the hurt from this unhealed relationship? I suppose I should accept it as a wound I shall carry, as I have undoubtedly inflicted them on others.

Lord, help me to see the log in my own eye-and to ask for forgiveness from the people I have hurt-deliver me from thinking of myself as righteous. My righteousness is as unclean rags before you, but your grace can deliver me.

Be scared---and then be proactive

I was in NYC yesterday, moving some furniture out of mom and dad's home. I figured it would be as good a time as any to chat with one of our realtors. Not wishing to have my anxities about the market stoked any more than they are, I called the laid-back one.

People are really nervous, he told me, particularly in the financial industry. The market for homes like the brownstone in which our middle class parents reared their three children is quiet right now.

Let's not make any possible price-lowering moves until the fall, after we see if more people want to see the house, he suggested.

We are in unmapped areas, I think-no one is sure what will happen in the next few years, except that it isn't going to have the same euphoric fizz, the Jazz Age unnatural exuberance of the past four or five.

I've included this article from the Times in its entirety because it may answer some of your questions-and perhaps provoke new ones.

Just remember that the people who come out of frightening years like these somewhat whole are those who are willing to move forward with prudent hope--continuing to keep their goals in mind.

Nothing fancy-a mortgage we can pay, clothes for our kids, a few days at the shore or the mountains now and again.

Do you want more than this? It doesn't hurt to be ambitious. But nothing comes without a price. Sadly, for many homeowners right now, the price is becoming very steep.

July 19, 2008
Uncomfortable Answers to Questions on the Economy
You have heard that Fannie and Freddie, their gentle names notwithstanding, may cripple the financial system without a large infusion of taxpayer money. You have gleaned that jobs are disappearing, housing prices are plummeting, and paychecks are effectively shrinking as food and energy prices soar. You have noted the disturbing talk of crisis hovering over Wall Street.
Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead.
Job losses will probably accelerate through this year and into 2009, and the job market will probably stay weak even longer. Home prices will probably keep falling, shrinking household wealth and eroding spending power.
“The open question is whether we’re in for a bad couple of years, or a bad decade,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, now a professor at Harvard.
Is this a recession?
Officially, no. The economy is not in recession until a panel at a private institution called the National Bureau of Economic Research says so. Unofficially, many economists think a recession started six or seven months ago, even as the economy has continued to expand — albeit at a tepid pace.
Many assume that if the economy expands at all, then it isn’t a recession, but that’s not true. The bureau defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months.” If enough people lose their jobs, factories stop making things, stores stop selling things, and less money lands in people’s pockets, it is probably a recession.
Whatever it is called, it is a painful time for tens of millions of people. Indeed, this may turn out to be the most wrenching downturn since the two recessions in the early 1980s; almost surely worse than the recession that ended the technology bubble at the beginning of this decade; perhaps worse than the downturn of the early 1990s that followed the last dip in real estate prices.
But, despite what some doomsayers now proclaim, this is not the Great Depression, when unemployment spiked to 25 percent and millions of previously working people woke up in shantytowns. Not by any measure, even as your neighbors make cryptic remarks above dusting off lessons passed down from grandparents about how to turn a can of beans into a family meal.
How bad is housing?
Bad in many markets, awful in some, and still O.K. in a few.
The downturn has its roots in the real estate frenzy that turned lonely Nevada ranches into suburban ranch homes and swampland in Florida into condominiums. Speculators drove home prices beyond any historical connection to incomes. Gravity did the rest. After roughly doubling in value from 2000 to 2005, home prices have fallen about 17 percent — and more like 25 percent in inflation-adjusted terms — according to the widely watched Case-Shiller index.
Even so, most economists think house prices must fall an additional 10 to 15 percent to get back to reality. One useful measure is the relationship between the costs of buying and renting a home. From 1985 to 2002, the average American home sold for about 14 times the annual rent for a similar home, according to Moody’s By early 2006, home prices ballooned to 25 times rental prices. Since then, the ratio has dipped back to about 20 — still far above the historical norm.
With mortgages now hard to obtain and speculation no longer attractive, arithmetic has replaced momentum as the guiding force for housing prices. The fundamental equation points down: Even as construction grinds down, there are still many more houses on the market than there are people to buy them, and more on the way as more homeowners slip into foreclosure.
By the reckoning of, enough houses are on the market to satisfy demand for the next two-and-a-half years without building a single new one.
The time it takes to sell a newly completed house has expanded from an average of four months in 2005 to about nine months, according to analysis by Dean Baker, co-director of the Center for Economic and Policy Research.
And many sales are falling through — more than 30 percent in some parts of California and Florida — as buyers fail to secure financing, exacerbating the glut of homes, Mr. Baker said.
No wonder that in Los Angeles, San Francisco, Phoenix and Las Vegas, house prices have in recent months declined at annual rates of more than 33 percent.
When will banks revive?
So far, they have written off more than $300 billion in loans. Many experts now predict the toll will rise to $1 trillion or more — a staggering sum that could cripple many institutions for years.
Back when home prices were multiplying, banks poured oceans of borrowed money into real estate loans. Unlike the dot-com companies at the heart of the last speculative investment bubble, the new gold rush was centered on something that seemed unimpeachably solid — the American home.
But the whole thing worked only as long as housing prices rose. Falling prices landed like a bomb. Homeowners fell behind on their loans and could not qualify for new ones: There was no value left in their house to borrow against. As millions of people defaulted, the banks confronted enormous losses in a bloody period of reckoning.
In March, the Federal Reserve helped engineer a deal for JPMorgan Chase to buy troubled investment bank Bear Stearns. Many assumed the worst was over. But, this month, the open distress of Fannie Mae and Freddie Mac — two huge, government sponsored institutions that together own or guarantee nearly half of the nation’s $12 trillion in outstanding mortgages — sent a signal that more ugly surprises may lie in wait.
To calm markets, the government last weekend hurriedly put together a rescue package for Fannie and Freddie that, if used, could cost as much as $300 billion. The urgent need for a rescue — together with another round of billion-dollar write-offs on Wall Street — has unnerved economists and investors.
“I was a relative optimist, but I’ve certainly become more pessimistic,” said Alan S. Blinder, an economist at Princeton, and a former vice chairman of the board of governors at the Federal Reserve. “The financial system looks substantially worse now than it did a month ago. If the Freddie and Fannie bailout were to fail, it could get a hell of a lot worse. If we get more bank failures, we have the possibility of seeing more of these pictures of people standing in line to pull their money out. That could really scare consumers.”
In one respect, Mr. Blinder added, this is like the Great Depression. “We haven’t seen this kind of travail in the financial markets since the 1930s,” he said.
More than two years ago, Nouriel Roubini, an economist at the Stern School of Business at New York University, said that the housing bubble would give way to a financial crisis and a recession. He was widely dismissed as an attention-seeking Chicken Little. Now, Mr. Roubini says the worst is yet to come, because the account-squaring has so far been confined mostly to bad mortgages, leaving other areas remaining — credit cards, auto loans, corporate and municipal debt.
Mr. Roubini says the cost of the financial system’s losses could reach $2 trillion. Even if it’s closer to $1 trillion, he adds, “we’re not even a third of the way there.”
Where will the banks raise the huge sums needed to replenish the capital they have apparently lost? And what will happen if they cannot?
The answers to these questions are unknown, an unsettling void that holds much of the economy at a standstill.
“We’re in a dangerous spot,” said Andrew Tilton, an economist at Goldman Sachs. “The big threat is more capital losses.”
Banks are a crucial piece of the economy’s arterial system, steering capital where it is needed to fuel spending and power growth. Now, they are holding tight to their dollars, starving businesses of loans they might use to expand, and depriving families of money they might use to buy houses and fill them with furniture and appliances.
From last June to this June, commercial bank lending declined more than 9 percent, according to an analysis of Federal Reserve data by Goldman Sachs.
“You have another wave of anxiety, another tightening of credit,” said Robert Barbera, chief economist at the research and trading firm ITG. “The idea that we’ll have a second half of the year recovery has gone by the boards.”
Is my job safe?
Economic slowdowns always mean job losses. Unemployment already has risen, and almost certainly will increase more.
The first signs of distress emerged in housing. Construction companies, real estate agencies, mortgage brokers and banks began laying people off. Next, jobs started being cut at factories making products linked to housing, from carpets and furniture to lighting and flooring.
But as the real estate bust spilled over into the broader economy, depleting household wealth, the impacts rippled out to retailers, beauty parlors, law offices and trucking companies, inflicting cutbacks throughout the economy, save for health care, farming and energy. Over the last six months, the economy has shed 485,000 private sector jobs, according to the Labor Department. Many people have seen hours reduced.
The unemployment rate still remains low by historical standards, at 5.5 percent. And so far, the job losses — about 65,000 a month this year — do not approach the magnitude of those seen in past downturns, particularly the twin recessions at the beginning of the 1980s, when the economy shed upward of 140,000 jobs a month and the unemployment rate exceeded 10 percent.
But Goldman Sachs assumes unemployment will reach 6.5 percent by the end of 2009, which translates into several hundred thousand more Americans out of work.
These losses are landing on top of what was, for most Americans, a remarkably weak period of expansion. From 1992 to 2000 — as the technology boom catalyzed spending and hiring — the economy added more than 22 million private sector jobs. Over the last eight years, only 5 million new jobs have been added.
The loss of work is hitting Americans along with an assortment of troubles — gasoline prices in excess of $4 a gallon, over all inflation of about 5 percent, and declining wages.
“In every dimension, people are worse off than they were,” said Mr. Roubini, the New York University economist.
Are consumers done?
That is a major worry.
The fate of the economy now rests on the shoulders of the American consumer, whose spending amounts to 70 percent of all economic activity.
When people go to the mall and buy televisions and eat out, their money circulates through the economy. When they tighten their belts, austerity ripples out and chokes growth.
Through the years of the housing boom, many Americans came to treat their homes like automated teller machines that never required a deposit. They harvested cash through sales, second mortgages and home equity lines of credit — an artery of finance that reached $840 billion a year from 2004 to 2006, according to work by the economists James Kennedy and Alan Greenspan, the former Federal Reserve chairman. That allowed Americans to live far in excess of what they brought home from work.
But by the first three months of this year, that flow had constricted to an annual rate of about $200 billion.
Average household debt has swelled to 120 percent of annual income, up from 60 percent in 1984, according to the Federal Reserve.
And now the banks are turning off the credit taps.
“Credit is going to remain tight for a time potentially measured in years,” said Mr. Tilton, the Goldman Sachs economist.
This is the landscape that has so many economists convinced that consumer spending must dip, putting the squeeze on the economy for several years.
“The question is, will it get as bad as the 1970s?” asked Mr. Rogoff, recalling an era of spiking gas prices and double-digit inflation.
Long term, Americans may have no choice but to spend less, save more and reduce debts — in short, to live within their means.
“We’re getting a lot of the adjustment and it hurts,” said Kristin Forbes, a former member of the Council of Economic Advisers under President George W. Bush, and now a scholar at M.I.T.’s Sloan School of Management. “But it’s an adjustment we’re going to have to make.”
Who’s to blame?
There is plenty to go around.
In the estimation of many economists, it starts with the Federal Reserve. The central bank lowered interest rates following the calamitous end of the technology bubble in 2000, lowered them more after the terrorist attacks of Sept. 11, 2001, and then kept them low, even as speculators began to trade homes like dot-com stocks.
Meanwhile, the Fed sat back and watched as Wall Street’s financial wizards engineered diabolically complicated investments linked to mortgages, generating huge amounts of speculative capital that turned real estate into a conflagration.
“At the end of this movie, it’s clear that the Fed will have to care about excesses,” Mr. Barbera said.
Prices multiplied as many homeowners took on more property than they could afford, lured by low introductory interest rates that eventually reset higher, sending many people into foreclosure.
Mortgage brokers netted commissions as they lent almost indiscriminately, offering exotically lenient terms — no money down, no income or job required. Wall Street banks earned billions selling risky mortgage-linked securities around the world, aided by ratings agencies that branded them solid.
Through it all, a lot of ordinary Americans borrowed a lot more money then they could afford to pay back, running up enormous credit card bills and borrowing against the value of their homes. Now comes the day of reckoning.

mercredi, juillet 16, 2008

Jess doin' my job

My daughter went to a barbeque tonight at the Catholic school she attends. Driving home, we have the radio on, with her favorite station, Q 102-trashtalk. "Everyone's singing this but some of the language is inappropriate", sais Sian demurely. I listen more closely. Some guy named Shorti (slang for lover, I suppose) is moaning about how he is his woman's "lollipop."

I start to address this with her, then shut up when I recall it's nothing, at ten, that Mr C needs to hear. Even if he often acts like a wise old man.

Actually, I'm a little pissed that I have to have this conversation with S. After all, she's only thirteen. But all of her classmates are dating, she tells me, and I want her to be...well-as innocent as a dove, and wise as a serpent.

She tells me her drama camp friends like to joke about sex. My theory-that they joke because they aren't yet comfortable-is met with incredulity. She thinks most of her friends just have it easier, because mom isn't always setting limits.

"Emily (a classmate) stays up until two, instant messaging her friends and watching TV," she says as I lie on her bed before she goes to sleep.

Does that sound fun? I ask. Yes, but I can't do that, because I have a mom who is over protective," she asserts.

Overprotective, am I? Well, I reflect, as we share "I love yous" and I close the door half way so S can see the bathroom light-there are many worse things a parent could be called.

No guilt here tonight.

What about faith?

I've been reading Anne Lamott's "Plan B: Further Thoughts on Faith." It's not as compelling a read as her first collection-it's hard to compete with a conversion story right out of Frederick Buechner or Michael Malone.

Lamott is so talented, almost anything she writes is worth at last a quick glance.

But the collection of essays, or essayetes, is suffused with her dislike for the Bush Administration and it gets me grumpy after a while. I'm not making a brief for Bush and Cheney-I share many, if not most of her feelings.

I heard former Wall Street Journal reporter Jane Mayer interviewed yesterday. Her book "The Dark Side" has just been published. While not defending the administration, she did say they weren't a band of criminals...instead, she asserted, the fear suffusing the White House after September 11, 2001 may have led them to commit war crimes by allowing the military to torture prisoners.

Of course, we also don't know how badly our country has gone off course since Bush took office. They were wrong on so many things. There's an idea to cause some sleepless nights- all of the IOUs this gruesome group sold on our behalf haven't come due yet.

mardi, juillet 15, 2008

Broken lives

This editorial (see link) speaks for itself.

I would like to challenge civilians who support the Iraq war to read it undefensively.

Then imagine that we now have tens of thousands of veterans who saw what Private Downes saw-acts of violence no man or woman should ever have to see.

Would you have volunteered yourself, or your precious children, to go to Iraq, aware that they might return fatally wounded?

Then why was it so easy to let other people's children go?

dimanche, juillet 13, 2008

A tide of red

Maybe if Fannie Mae and Freddie Mac had been advertised by a half naked SI pinup girl, we might have paid more attention to what they were doing.

Fannie and Freddie, who buy mortgages from banks to free up capital that can make new loans, hold the majority of American mortgages.

But there's nothing sexy about two private lending agencies chartered, but not owned, by the US government. Unless you want to get a mortgage so you can buy a house, thus buying into the great American dream of home ownership.

I didn't pay much attention to the mortgage giants until it became apparent, in the past month or so that they were also enmeshed in the financial crisis-a red tide washing over too much of the financial industry not to be really scary.

Read the article above to see what occurs when regulators decide not to regulate. I assume that it was a decision based on a philosophy that unfettered capitalism will self-regulate. Either that, or the men at the top of the Fed, gnomic Alan Greenspan and scholarly Ben Bernanke took the gathering stormclouds as seriously as I did.

Of course, I wasn't paid to supervise the banking system and regulate the flow of capital through the American economy-they were.