"Bad Bank?" Bad Idea.

SCENARIO 1: I tell my son that if he washes the car, he can use it on the weekend. Will he be more or less likely to wash the car?

SCENARIO 2: I tell my son that he can NOT use the car unless he washes it first. He never washes it because he gets wrapped up in video games. So, I wash it for him, and then hand him the keys and tell him he can use it since it's clean. What lesson is learned there?

People respond to incentives, and people generally prefer to pass burdens on to others if they can get away with it. Why are these simple economic lessons so difficult for our thick-skulled politicians to understand?

On Wednesday, U.S. Treasury Secretary-designate Timothy Geithner suggested creating a so-called "bad bank" which would buy nonperforming loans. This bank would buy the worst loans that banks made, infusing cash into those banks (thus rewarding the financially wicked) and taking ownership of non- and under-performing real estate loans. Most estimates are certain that this will be a net cost to the taxpayers, with some estimates to the tune of $3 trillion to $4 trillion.

So, if I get this right, Banks made insane loans to non-credit-worthy people, lied about asssessed valuations, and engaged infraud; and then, sold them to other reckless banks in a grand game of hot potato. Speculators in the financial industry played the game, and many got caught with an awful lot of bad loans.

Geithner's proposed response? Let taxpayers absorb that loss, and give the banks a 'free ride.'

How is this different than Scenario 2 above?

This proposal permits banks and financial institutions to walk away from their own misdeeds, and pass the full burden on to innocent taxpayers. Instead, we should consider the OPPOSITE approach: Require banks to hold the loans that they make.

Suddenly, it will become very apparent who the prudent investors and lenders are, and who is out to play Roulette with taxpayer money. If Banks are forced to bear the burden - and enjoy the success - of their own practices, it will be a long time before we see a repeat of the current debacle.

San Francisco Wrong to Tax Roman Catholic Church

In San Francisco, Tax Assessor Phil Ting has decided that the Roman Catholic Church owes over 15 Million dollars in taxes because the Archdiocese was restructured and consolidated a number of properties seven months ago. Each of the properties was technically incorporated seperately, as would be expected when a Church operates schools, family centers, day cares, hospitals, monestaries, church buildings, etc. Since, claims Ting, this consolidation involved the transfer of "separate legal entities," a real estate transfer tax applies.
Nonsense.

There are those, of course, who are cheering: anyone who has an axe to grind with the Roman Catholic Church is applauding the fact that San Francisco is going to 'take the churches money:' many gay activists mad at the Church's support of Proposition 8, those who have left the RC Church because the Church did not bend their theology to their own ideas, those who dislike "organized" religion, those with an imaginary view of history and RC atrocities somewhere in the past, those burned by the clergy sex abuse scandals. But disliking an institution is not an appopriate basis for deciding to use the coercive force of government to confiscate its assets via taxation.

Ironically, this flies in the face of a recent court decison in the same state.

On January 5, the California Supreme Court ruled that breakaway Episcopal parishes do not have the right to keep church property if they secede from the national denomination; they held, quite strongly, that all the various properties of the Episcopal Church belong to the national Episcopal Church, not the local congregation.

This was an appropriate ruling, as the Episcopal Church - like the Methodist, Orthodox, and Roman Catholic Churches - is, in fact, "Episcopal" in government, meaning that the local congregation is really an administrative unit of the National Church. If a local congregation secedes, they can not take the church building or property with them. (This is the opposite of "baptist" and "Bible" Churches, which hold that the ultimate authority resides in local congregations.)

So here is the incredible - and disingenuous - contradiction:

On the one hand, the California Court has stated that all Church Property belongs to the Larger Church when that Church has an episcopal governing structure.

On the other hand, the City of San Francisco (or at least Assessor Ting) has stated that all of the units under the administration of an episcopal-governed Church are independent, so any 'consolidation' is a transfer of real estate from one entity to another, and, therefore, taxable.

These positions are mutually exclusive. It's one or the other, and the California Supreme Court has spoken.

As usual, Liberals are being inconsistent: they are cheering the decision in the Episcopal Church case, because it helps liberals within the Episcopal Church structure. But they are also cheering the San Francisco action, because it gets the 'big bad ctaholic church' (Isn't that the church that operates more hospitals, orphanages, and aid services than any other in the world? Oh, yeah...)

In other words, the sides being chosen in the battles are based on who people want to win, rather than what is good law.

The Episcopal Church case is correct, and good solid law with much precedent behind it. The San Francisco action is a raw abuse of government power.

Perhaps thats why non-profit organizations - such as churches - are not normally taxed in the first place: the power to tax is the power to destroy, and once government has 'authority,' it uses it UNEQUALLY to punish those it dislikes and favor those who are its friends.

There are those who support taxing the Roman Catholic Church because of its supposed 'political involvement' in conservative ballot issues. I wonder if these same persons would support revoking non-profit tax status for all of the churches that ran the civil rights marches in the 1960s....or revoking the tax status of HIV Service agencies who reguarly lobby for an increase in federal funding?

Best to keep the arms of government taxation far away, and not let them near non-profits of *any* kind.

"Big 3" Auto Bailout? How many mistakes can one Congress make?

A step back in History:

It's 1979, and Lee Iacocca, Chairman of Chrysler, has successfully convinced Congress to guarantee 1.5 billion in loans to the corporation, with taxpayer dollars, because this would help revive the all-American Corporation. There was even a specific plan - Chrysler's "K-Car" would catapult the company into profitability forever, and an american icon would be saved.

Wrong.

Today, the so-called "Big Three" - GM, Ford, and yes, Chrysler...are seeking billions more in assistance, using the same tired arguements and promsiing the same eventual victories if they could just get "a little help."

It is one of those cases where if you say things often enough, people believe it. "Big Three?" You can find this phrase repeated over and over in the media.

But here are October's auto sales figures:

GM: 168,719 units sold
Toyota: 152,278 units
Ford: 132,278 units
Chrysler: 94,530 units

Some Lessons:

1) They are NOT "the Big 3." Consumers have clearly spoken, and they've been saying "Toyota" for some time. Congressional action to prop up Ford is tantamount to using taxpayers dollars against the taxpayers themselves. We have already spoken: Toyota has given us what we wanted, at a price we want. Don't force us to bailout the companies we did NOT choose.

2) GM is the largest auto manufacturer world-wide. Since when does the Government seek to bail out the largest company in a competitive field? If GM can not make a profit when it has more car sales than any other company, it is time for them to radically change: split up, reorganize, bust the UAW - but dont seek tax dollars for "same old same old."

3) Ford, GM, and Chrysler ceded the small car market to Honda and Toyota. They lost, folks. That's what business is all about. In the 1500s, Spanish Monk-Economist De Albornoz wrote that "when businesses experience profit and loss, and since when they make a profit, they keep it, they must not transfer a loss to the people."

The Market has clearly chosen. Congress, the UAW, and the so-called "Big-3" don't like the results.

Too Bad. Live with it. Capitalism doesnt guarantee success, and neither should Congress.

The Republican Party - Which Way Now?

The Republican Party – my party – has just been delivered a well-earned knockout punch. Reliable “red” States in the west and south have been taken by Democrats. Here in New England, there is not a single Republican Congressman and only one Governor left. And in New Hampshire, once a Yankee Republican bastion, you can count on the fingers of one hand the number of state or federal Republican figures left.

Republicans did not lose simply because of large numbers of young people and African-Americans voted. In fact, as a percentage of the total electorate, African-Americans and young people made up almost precisely the same percentage of the electorate as they did four years ago. No, Republicans lost because average Americans from all walks of life, especially self-described moderates and independents, and even some lifelong Republicans, turned to the Democrats.

Where did the GOP go wrong? And what must we do to rebuild?

The party needs a clear philosophy and vision. An entire generation of new voters came to the polls believing that the Bush administration represented Republican ideals. Republicans spent eight years defending sickening deficits, exploding budgets, and “big-government” programs that they would have railed against had they been proposed by a Democratic Administration. We were inexcusably silent as America, the great hope of the world, became represented by images of torture and Guantanamo Bay. Republicans should have been outraged…but instead, we defended “our guy” in the white house, and earned the public’s disdain. They grew tired of the Bush administration’s vision of America.

We must articulate in clear terms positive, pro-active solutions for the problems and concerns that the American people have. Access to health care and secure retirement provisions are national concerns: We cannot simply be ‘against’ universal health care or social security, we must present clear, pragmatic, appealing alternatives.

As these proposals are formulated, we must be careful not to fall prey to the idea that we must choose to side with either the “moderates” or the “conservatives” within the Party. A lukewarm, “me-too” version of the Democrats is not a solution, but neither is cliché-ridden pandering to a shrill religious right. Rather, Republicans must forge a new path, a path that is consistent with both the Republican philosophy and the American spirit, and which resonates with voters of all stripes: we must combine fiscal responsibility and social tolerance. The Republican Party claims to be the party of small government and maximum personal freedom. It’s about time we reclaimed that heritage in a consistent manner.

As we present our alternatives, we must eradicate the mean-spiritedness, the innuendos, the mud-slinging, and the anger from our speech. We must offer vision, hope, and a future to all. If we want young people, minorities, and immigrants in the party, then we need to really want them, not just tolerate them and accept their contributions.

In 1980, Ronald Reagan articulated a clear vision, and spoke in positive terms of hope and freedom for all. Americans responded, as disaffected Democrats and independents swelled Republican ranks. In 2008, Barack Obama rode to victory on those Reaganesque concepts. It should serve as a wake-up call to the party to reclaim its heritage of individual liberty and prosperity for all, delivered with clarity and compassion.

Why the Bailout is wrong.

Listening to some of our nations top political leaders, one gets an uneasy feeling that The Great Depression II is right around the corner, unless we entrust the federal government to engage in a massive 700 billion bailout plan that will ultimately save ‘main street’ from Wall Street’s mess. But if that’s the case, why have over 200 leading economists from Harvard, MIT, Northwestern, the University of Chicago, and other respected institutions signed a petition opposing rapid passage of this bailout?

In basic English, the argument in favor of the bailout goes something like this: banks and other financial institutions have purchased mortgages which, for many different reasons, are now worth far less than their purchase price. As a result, banks have lost money buy purchasing them, and they can’t convince anyone else to buy them. If they can’t sell their ‘paper securities,’ they can’t raise cash. This, in turn, means they have no money to lend, and credit markets will be so tight that ‘Main Street’ will grind to a halt: businesses will not be able to borrow funds to meet payroll or expand their enterprises, and consumers will be unable to purchase homes and cars or pay their college tuition bills.

This line of reasoning scares many Americans (as its meant to), but is faulty for several reasons.

First of all is the cost. What is not being revealed to the American public is that over the last 5 months, the Federal Reserve Bank has already provided over 1.1 trillion dollars to financial institutions, in exchange for paper securities, in order to inject cash into the banking system. The 700 billion bailout is in addition to that which has already been injected – with an accompanying bill of over $17,000 per American household before this is over.

Second is the risk. I asked a spokesperson for the Federal Reserve Bank of Boston why Washington Mutual didn’t take advantage of the Federal Reserve’s Bank’s cash offer over the last few months. I was told that there were financial criteria that needed to be met in order to obtain that funding: in other words, the less credit-worthy, the less stable institutions were unable to partake. That means that the 700 billion Congress is about to authorize will be used specifically for those institutions whose paper is the most worthless, leaving the US Taxpayer with nothing in return for its “loan’ to these inept banks. Some commentators suggest that in reality, the taxpayer will make a profit on this paper, but if that was a realistic possibility, there wouldn’t need to be a government bailout: some enterprising institution would have purchased that paper already.

Third is the Moral Hazard created by helping the inept. No one is guaranteed success in a market economy. In the rough and tumble of competition, some win and some lose. If the most ineffective, negligent, inattentive and even fraudulent activities are rewarded by a bailout, what message does this send to the banks who were prudent in their decision–making over these years? The well-run banks ought to profit, and ought to be stronger and inept banks close; instead, we, the taxpayer will be helping the most irresponsible institutions stay afloat, and will pay interest for the ‘honor’ of so doing.

Fourth is the unfounded fear that credit will completely dry up. The fact is, banks do not lend their own money; they lend their depositors funds. Institutions may crash and burn, but their depositors funds are insured by the FDIC, and those depositors will simply place their funds elsewhere. Keep in mind that when Merrill Lynch was subsumed by Bank of America, there was no catastrophe: there was simply an efficient movement of resources. The Market worked without a taxpayer bailout. Similarly, when Washington Mutual ‘collapsed,” they opened the next day as part of JP Morgan. Not one depositor lost money, not one customer lost their line of credit – and not one dollar of taxpayer was required.

The Bailout is an unnecessary, expensive return to Feudal Britain, where the “Crown” owned title to all the land and used tax money to keep its favorite business partners afloat. This is precisely the time to allow the Marketplace to weed out poor investment firms and negligent banking facilities – and allow the rest of us to enjoy the prosperity that can be gained by resting secure in the knowledge that the best and brightest firms have been allowed to carry on financing activities

Christian singer Ray Boltz Comes Out....

Popular Christian Singer Comes Out by Kilian MelloyEDGE Contributor

Monday Sep 15, 2008

Gospel singer Ray Boltz has come out of the closet.The singer gave and interview to the Washington Blade, which posted an article on Boltz’s disclosure on Sept. 12. Boltz, the article said, has had a devoted following within the Christian community, having sold around four and a half million copies of his recordings over a two-decade career. The article said that Boltz, who came out to his family in 2004, began to emerge from the closet more publicly last Christmas." I’d kind of had two identities since I moved to Florida, where I kind of had this other life, and I’d never merged the two lives," Boltz said in the interview.

For a long time--33 years--Boltz lived as a married man, a husband and father; the cost, however, was depression, even a suicidal turn of mind, the article said.Said the singer of his gay identity, "I thought I hid it really well."Added Boltz, "I didn’t know people could see what I was going through, the darkness and the struggle."After I came out to my family, one of my daughters said she was afraid to walk in my bedroom because she was afraid she’d find... that I’d done something to myself."And I didn’t even know they’d picked it up."Finally, in 2004, Boltz told his family his secret. As it happened, he came out to them the same day as a catastrophic tsunami was in the news.Said Boltz, "I thought, ’Well, I can just do what I always do and hide the truth or I can take a risk and be honest.’"Added the singer, "That day, with the tsunami, has become very symbolic in our family."Boltz sketched out a life of struggle and secrecy, saying, "I’d denied it ever since I was a kid."I became a Christian, I thought that was the way to deal with this and I prayed hard and tried for 30-some years and then at the end, I was just going, ’I’m still gay. I know I am.’"And I just got to the place where I couldn’t take it anymore... when I was going through all this darkness, I thought, ’Just end this.’"Continued Boltz, "You get to be 50-some years old and you go, ’This isn’t changing,’" the Washington Blade article said."’I still feel the same way. I am the same way. I just can’t do it anymore.’"Though he never officially engaged in any "ex-gay" programs, Boltz reckoned, "I basically lived an ’ex-gay’ life--I read every book, I read all the scriptures they use, I did everything to try and change."The Blade article said that Boltz’s inner turmoil came through in his songwriting.Acknowledged Boltz, "It’s there on every single record."Continued the singer, "That struggle of accepting myself and my feelings. There’s a lot of pain there and it connected with a lot of people. "They weren’t struggling with the same thing necessarily but we all suffer with our humanity."Boltz’s professional career as a Christian singer was only helped by a 1997 appearance before a crowd of over a million men who had gathered for a Promise Keepers event, the Blade reported.As a Christian married man himself, Boltz said, his family life was based on genuine love."Sex was based on the fact that we loved each other and I wanted to make her happy," he told the Washington Blade. "I had sexual drives as well. You know, it’s like I never had to talk myself into having a relationship with her or that I was going, ’Oh God, here we’re going to bed again’--it wasn’t that. "I loved her and we had a very full life; it’s just that inside, deep inside, it really wasn’t who I was."And that had an impact: said Boltz, "[H]ow can you truly be intimate with someone when you don’t know who they are, when they won’t reveal themselves to you[?]"Added the singer, "I thought, ’If I can’t say this to the people I love, then what kind of life is this?’"After he came out to his family, Boltz and his wife separated; he went to Florida, and that’s where the latest chapter of the singer’s story picks up.Said Boltz, "I had a lot of questions, but at the bottom of everything was a feeling that I didn’t hate myself anymore, so in that sense I felt closer to God."Added the singer, "If you were to hold up the rule book and go, ’Here are all the rules Christians must live by,’ did I follow every one of those rules all that time? Not at all, you know, because I kind of rejected a lot of things, but I’ve grown some even since then."Continued Boltz, "I guess I felt that the church, that they had it wrong about how I felt with being gay all these years, so maybe they had it wrong about a lot of other things."Eventually, Bltz found himself performing once again for Christian audiences, bringing his personal and professional lives full circle.However, "I don’t want to be a spokesperson, I don’t want to be a poster boy for gay Christians, I don’t want to be in a little box on TV with three other people in little boxes screaming about what the Bible says, I don’t want to be some kind of teacher or theologian," Boltz said."I’m just an artist and I’m just going to sing about what I feel and write about what I feel and see where it goes."The article pointed out that Boltz is the most successful Christian musician to come out, leaving it an open question how the demographic that once embraced him would respond to any future recordings.Said Boltz to the Blade, "This is what it really comes down to: If this is the way God made me, then this is the way I’m going to live. "It’s not like God made me this way and he’ll send me to hell if I am who he created me to be."Added Boltz, "I really feel closer to God because I no longer hate myself."Kilian Melloy reviews media, conducts interviews, and writes commentary for EDGEBoston, where he also serves as Assistant Arts Editor.