Here are the 12 DEREGULATORY STEPS TO FINANCIAL MELTDOWN:
http://www.commondreams.org/view/2009/03/07-3
Wall Street’s Best Investment – Part II

by Robert Weissman

http://www.commondreams.org/view/2009/03/07-3

Fighting the Financial Crisis, One Challenge at a Time
By HENRY M. PAULSON Jr., NYT, November 17, 2008
http://www.nytimes.com/2008/11/18/opinion/18paulson.html?th&emc=th

“More access to lower-cost mortgage lending is the No. 1 thing we can do to slow the decline in the housing market and reduce the number of foreclosures. Together with our bank capital program, the moves we have made to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit, will promote mortgage lending. We are also working with the Department of Housing and Urban Development, the F.D.I.C. and others to reduce preventable foreclosures.”

If you are familiar with Kaiser HMO then you may also be familiar with the need for more than just affordable health care for all… but also health care that is not controlled HMO’s. I’m 75 and I recall good health care and good doctors. Doctors that you could call when you had a problem and knew you and your family Doctors that even came to your home or met you at ER in an emergency and did not work just a 40 hour week as they do at Kaiser.

A friend of mine just about died last week because following a simple operation (that took months to set up and should have been a one day in and out). Luckily he was kept over night and his blood pressure dropped. Turned out he was bleeding internally. He was placed on a blood thinner by one doctor, has had by-pass surgery by another, and another did this simple operation. Having so many doctors that had no idea about his medical history nearly resulted in his death.

I have been there also but thanks to having the same doc for 20 years I am still alive. With Kaiser I have two broken Achilles tendons that were not properly treated. My son in law had a tumor that was ignored for months and nearly cost him his life. It takes two weeks to see your primary doc who can’t even do a simple surgery removing a cist. Instead you’re sent to a specialist that takes month.

Kaiser totally controls my Medicare funds…I have no say in how they are used but do get cost figures that Medicare is often over charged or charged for services that were not provided or were wrong. There a lot more needed to provide a good health care syste. My doctor is assigned 2000 patients. That alone should be a crime. There is no way she can provide good health care for that many people. It’s simply a money making scheme

Yes, greed is not good. No, not all americans are greedy. I was born in1926, listened to FDR on the radio constantlly while he brought us out of the Depression. I have many moments when I reflect on memories. Stood in line for sugar, flour, sack dresses, silk stockings, and shoes which were rationed. It was l939 or maybe early forties before things were back in supply. Then WW11 came along. Most of the boys in my senior class went into the service. Think my graduating class had 80 girls and 12 boys. Two of my crushes in high school never came back.

I write this because I am not alone, the majority of people I have met in life have been on the same road. They are Americans. My mother loved America and never wanted to go back to Europe even for a visit. Hopefully we will get our thinking straight and we Americans will police the greedy again. Maybe we had to go through tough times do realize we are suffering from inaction, and need to watch our leaders more closely by what they do and not by what they say.

Project Vote smart has this information on Senator Don Benton

Abortion
2008 Has received no points for issues on Abortion and has no history with any points He also received no points in previous years.

Labor
2008 Based on a point system, with points assigned for actions in support of or in opposition to Washington State Labor Council, AFL-CIO’s position, Senator Benton received a rating of 40.

Agriculture
2008 Based on a point system, with points assigned for actions in support of or in opposition to Washington Farm Bureau’s position, Senator Benton received a rating of 100.

Business
2008 Based on a point system, with points assigned for actions in support of or in opposition to Association of Washington Business’s position, Senator Benton received a rating of 91.

2008 Based on a point system, with points assigned for actions in support of or in opposition to Washington National Federation of Independent Business’s position, Senator Benton received a rating of 85.

2007 Based on a point system, with points assigned for actions in support of or in opposition to JobMakers’s position, Senator Benton received a rating of 45.

Civil Liberties and Civil Rights
2001-2002 Senator Benton supported the interests of the First American Education Project 65 percent in 2001-2002.
No record since 2002?

Conservative
2007 Based on a point system, with points assigned for actions in support of or in opposition to Washington Conservative Union’s position, Senator Benton received a rating of 73.

Education
2005 Senator Benton supported the interests of the Washington Education Association 55 percent in 2005.

Environmental Issues
2007-2008 Based on a point system, with points assigned for actions in support of or in opposition to Washington Conservation Voters’s position, Senator Benton received a rating of 46.

Family and Children Issues
2008 Based on a point system, with points assigned for actions in support of or in opposition to Washington Children’s Alliance’s position, Senator Benton received a rating of 67.

Government Reform
He has no score posted for 2006, 2007 or 2008.

Gun Issues
He has no score posted for 8 years

Women’s Issues
He has no score posted since 1998 (scored 33)

TOTAL = 534 OUT OF 1200= 44%
That is an “F” on any report card

I agree with most of the observations. This financial crisis has been brewing for a while. As early as 2006, there were people sounding the alarm that home prices were rising way out of proportion with the rise in family incomes. And speculators were buying homes just so that they could flip them. Sounded like the alarm that Greenspan sounded in his “irrational exuberance” speech, years before the Dot Com bust in 2000. But no one did anything to tighten credit at that time, when it could have been much cheaper, just as no one did anything to curb day trading and option trading in the late 1990s. Increase in products like derivatives (a very appropriate term borrowed from Calculus, which can very easily model the departure from the norm, and predict violent swings in prices) is a symptom of increase in speculation. When speculation rules price action, the normal market forces of supply and demand for ACTUAL GOODS AND SERVICES take a back seat. If I were to call the shots, any government economist who did not take action two years ago should be fired. I see the role of the government as the guardian of free market forces, which we preach all over the world. But we fail to practice it at home. Instead, we have crony capitalism, where the government looks the other way when the big donors repackage debt into complicated financial instruments and resell them for profit.

By the way, the same can be said about the other side of the equation. If capital is being squeezed by the debt crisis, which Democrats are quick to blame on crony capitalists, most of them Republicans, the supply of quality labor is being pinched by the pubic education system. Yes, the same system that supports democratic candidates for the most part. Trade unions belonging to teachers and other employees are quick to take the role of the victim when they see excesses on Wall Street. But I think this is just another smoke screen to hide the job it has not been doing for the last 40 years. I have not seen any politician who has ventured to turn this rock to see which worms crawl out – the rock is too big, the worms too many. My take on this is that they are afraid of losing the endorsement of large voting blocks the unions control. Since you claim to not take any help from big donors, I feel you are in a unique situation to make an impact here. The K-12 public education is at the bottom of the industrial world today, and soon it will be at the bottom of fast developing countries – in the bottom 25th percentile of the world population. Why do I say this? Because no matter what the state and national leaders have done, they have not been able to break the monopoly of the unions. Without free market forces in action in education, I don’t think you will see any tangible improvement. You are an economist, so I am sure you understand what happens when a monopoly takes hold of a system. I assert that no leading economy can afford to continue leading, with a system that is worse than what we used to call the 3rd world, just 10 years ago. States like Texas, Massachusetts, California, Arizona, have all woken up and started taking decisive action. The states of Oregon and Washington have not. And we are paying the price, with one of the highest unemployment rates, highest college remediation rates, and lowest college graduation rates in the nation. I don’t know about you, but I think this cannot continue if we were to do what is right for the local economy. Shortage of capital AND quality labor are about to create the perfect economic storm. Hold on for a very rough ride during the next few years.

The education establishment is just as guilty of bringing about these problems on themselves, as wall street hedge fund executives were for theirs.

You are an economist, so as an aspiring state Senator representing me, I count on you to call a monopoly’s bluff. After all, any entity that has over 90% of a market is a monopoly, as per the justice department. This is not idle talk. There has been data for over 40 years supporting what a bad deal the public education system is.

For example, did you know:
Public education is a lousy investment of tax dollars. Since 1960’s, the SAT scores per real(inflation adjusted) dollar has gone down 71%!! That means we squandered all that exta money and did not gain any performance whatsoever. We got exactly the opposite. In fact, SAT scores went down so much between 1960’s and 2000, that College Board added 100 points to the SAT baseline to artificially inflate the scores. If public education was a true enterprise, it would have gone bankrupt a long time ago.

Pet peeves of the system as to why it is so completely miss the mark. Smaller class sizes and increased salaries for teachers and administrators are not correlated to student performance. Even merit pay is a feeble attempt at tinkering around the edges. High performing nations like Korea, Finland, Singapore and Netherlands have a lot lower spending per student, and much larger class sizes. The data are independent of ethnicity, race, gender, and country of origin.

One of the biggest factors that have been proven to work, is the selectivity of schools of education (a subject matter that hardly ever gets brought up). Today, even the bottom 25%ile can get into the schools of education (and they do). The schools of education themselves are filled with professors with similar backgrounds, so what they teach is not much better. Graduating with teacher credentials is easy – if you have the time. And the system that hires teachers, and unions that represent them, defend this piece of paper with their life. When schools of education have high standards for admission, and a rigorous curriculum with strong subject matter content, then the entire system will transform. Eventurally. This is a necessary, but not sufficient condition.

Most district level decisions are made by the district officials, and later “validated” through “rubber stamp” activities called community input. No substansive changes come out of these inputs, they are just noted and filed away. If any parent or parents try to be vocal, then the T-cells of the system fire up, and the person who complains gets marginalized. Most give up and take their kids to private schools, or home school them. School board members are sent to brain washing sessions where they are told to just approve what the superintendent or the administration proposes. I know several active and ex school board members in three different states that have confirmed this. Publicly however, the officials will never confirm this.

On the issue of salary, however, I feel the jury is still out. I think it makes sense to pay higher salaries for better teachers. It is a dirty little secret that the schools of education have been making it too easy for anyone to get in, make it easy for them to get through, and way too easy to graduate. Once the teachers spend a couple of years teaching, then they get tenure, they get raises based on union rules of seniority, not performance. If a teacher does not produce results, it takes years and dollars ($150,000 is a number I have seen quoted) to remove one from work. I am yet to see a teacher removed for poor performance myself. I assert that if good teachers get into the system, eventually, they will see that the system is stacked against them, with no incentive to perform any better than the mediocre ones already there. This is not new, and has been going on for decades, by all accounts. On the compensation side, if you count the job security, time off from work over the summer, pension and health benefits, teachers get comparable pay as any other college graduate. This is the symptom of being a long entrenched monopoly. Just as a matter of comparison, under your own nose, Kings Way Christian and Cornerstone Christian schools turn out much better educated students with lower teacher pay. One of the public school teachers I know sent their son to a private school, because she thought the public schools were not doing a good enough job. They are not alone. A nationwide survey has found that about 25% of the public school teachers send their kids to private schools. In Milwaukee, where the government provides private school vouchers, this number is about 43%. Doesn’t that tell you something?

So, the following would be my recommendation, in the specific case of increasing teacher pay. School employees, especially teachers, need to be measured on the results they produce, based on the improvement in standardized test scores of student performance, and a 360 degree review (reviews by students/parents, principal, and peer teachers). Those who show the largest improvement should get higher raises. Those who get marginal reviews must be placed on probation. If the probation is not successfully completed, they need to be removed. Then, I think the money we put into the system is spent wisely. If the money is spent with no strings attached, you will have to answer to the millions who are getting laid off from private businesses. They will have time on their hands, and fires in their belly, and no sympathy for anyone with the job security and benefits that the teachers have. The unions have made a career out of painting the teachers as the victims. With this as the tool, they have been very successful at getting and maintaining perks for their members. The democratic party has been the unwitting victim of this incessent propaganda, which appears to be showing in your letter.

David – You seem to be an intelligent guy, who should be able to look beyond this BS that is being thrown at you. The system will never improve student performance if you just throw money at it. There will be a million excuses why students cannot improve – poverty, ADHD, lack of parental support, just to name a few. But in the end, the system is responsible for educating our children to be competitive in the job market. I feel you need to be one of the champions of improving student achievement, and not get bogged down in the same old tactics that got us here in the first place. Public education is a monopoly, and has been behaving like one for several decades. There is no reason why the same kind of remedies that worked on breaking up AT&T cannot work with this system. Only we seem incapable of mustering the will to do so.

On a bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks. They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary. After 55 minutes of discussion, which can now be heard on the Web sites of the agency and The Times, the chairman, William H. Donaldson, a veteran Wall Street executive, called for a vote. It was unanimous. The decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later.

With that, the five big independent investment firms were unleashed. In loosening the capital rules, which are supposed to provide a buffer in turbulent times, the agency also decided to rely on the firms’ own computer models for determining the riskiness of investments, essentially outsourcing the job of monitoring risk to the banks themselves. Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt…

To be frank, the administration has a credibility and trust gap as big as that of Wall Street. If the crisis was as severe as they claim, why didn’t they propose a more credible plan? With lack of oversight and transparency the cause of the current problem, how could they make a proposal so short in both? If a quick consensus is required, why not include provisions to stop the source of bleeding, to aid the millions of Americans that are losing their homes? Why not spend as much on them as on Wall Street?

Do they still believe in trickle-down economics, when for the past eight years money has been trickling up to the wizards of Wall Street? Why not enact bankruptcy reform, to help Americans write down the value of the mortgage on their overvalued home? No one benefits from these costly foreclosures.

The administration is once again holding a gun at our head, saying, “My way or the highway.” We have been bamboozled before by this tactic. We should not let it happen to us again. There are alternatives. Warren Buffet showed the way, in providing equity to Goldman Sachs. The Scandinavian countries showed the way, almost two decades ago. By issuing preferred shares with warrants (options), one reduces the public’s downside risk and insures that they participate in some of the upside potential.

This approach is not only proven, it provides both incentives and wherewithal to resume lending. It furthermore avoids the hopeless task of trying to value millions of complex mortgages and even more complex products in which they are embedded, and it deals with the “lemons” problem – the government getting stuck with the worst or most overpriced assets.

Finally, we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won’t have to be called upon again to finance Wall Street’s foolishness.