Saturday, October 31, 2009

The Peril of the Savior State

In demanding that our rulers provide for all our material needs and rescue us from the consequences of our own folly and the normal risks of existence, we are paving the way for a totalitarian regime that strips us of the last of our rights and enslaves us to the ruling oligarchy. Charles Hugh Smith at Of Two Minds warns of the dangers to our basic civil rights and constitutional freedoms in his latest post, When the Savior State Becomes the Enemy of the People. 

Smith reminds us that we can't have it both ways. If we desire to retain the liberties guaranteed us by our constitution, then we have to be willing to pay our own way, take our our risks, and accept the results of our actions and judgments.

He says,"In granting the state the power to become a Savior State, you also grant it the power to be a repressive regime or corrupt kleptocracy which openly serves an Elite and is accessible only via bribes/ political donations."

Where would you say we are now on the Nanny State Enslavement Scale? Are we now a "corrupt kleptocracy"  where the citizens exist to serve a dominant oligarchy empowered to strip them of their remaining wealth by means of government force? And at what point will the "corrupt kleptocracy" become a "repressive regime"? A convincing argument could be advanced that that is exactly what we are now and have been for quite a while.

If so, we became so with the enthusiastic co-operation of our citizens, who traded away their rights for the illusion of security and perpetual plenty regardless of the means used to maintain the facade, or the price paid for it. People who want the benefits of a Nanny State should consider if they're willing to front the price- the invasion of our privacy by maintaining health records (the national health plan), the suspension of our constitutional rights for a specious security (the USAPATRIOT Act), the seizure of our property for the sake of the "public good" or "economic development" by eminent domain, or hundreds of other abuses and outright violations of our constitutional rights that have become commonplace and acceptable.

Wednesday, October 28, 2009

How the Chicago Showdown Failed

As was expected, the Chicago Showdown, the massive protest against the efforts of the financial industry to lobby against reform of the financial system, drew many thousands of protesters from across the country to engage in three days of protests against the government support of the greed and larceny of the banking industry.

It was a pretty good protest, as they go, what with the requisite marches and chanting and prayer vigils and some really great costumes, though somehow it failed to evoke enough guilt among the attendees to ruin their enjoyment of a Roaring-20s-themed party, the irony of which was not lost on anyone but the party-goers themselves. Obviously, no one at the American Bankers Association convention gave much consideration to that first great American debt debacle that ended with a decade-long depression, or at least not enough to see any parallels between the multiple speculative bubbles of the 1920s, in land and financial instruments alike, that parallel the vastly more intricate, layered, and global scams of the 2000s.

But the message of the protest was lost, for it was too obvious that many of the protesters suffered from the same disease as the financial fraudsters, which was the idea that somehow the universe owes them "gimmes" and guarantees against losses and respite from the consequences of bad judgment, thoughtless risk-taking, and yes, greed. But the protesters seemed oblivious to the parallels between the greed and deliberate insanity of the financial maniacs who raked in the obscene profits from the ten-year rampage, and their own greed, gullibility, and willful blindness.

The bulk of the protesters were demanding, not an end to the entire structure of socialistic housing "affordability" programs and alphabet soup of federal agencies and GSAs that enabled the greed stampede, but only that they, too, be "rescued" from the consequences of their greed, delusional thinking, and bad judgement, as Senator Durbin and the protesters demanded that the $23 Billion in bonuses being given out to Goldman Sacks executives instead be donated to help people stay in homes in foreclosure. Nobody suggested that those bonuses instead be remitted back to the treasury and to the taxpayers at large, who paid them.

Granted, many people there were genuine victims- people who lived and operated honestly and borrowed prudently within their means, only to be done out of jobs and then homes by the vicious reversal of the fake good times produced by the spate of debt-driven "growth". However, for every person who is losing his home to business reversals or job losses, there are four or five who are in foreclosure because they bought much more house than they ever had reason to think they could afford with loans that they knew, or should have known, were suspect, or who withdrew all the equity in their houses to buy cars and boob jobs and other extravagances,and are no more deserving of gifts from the public till than the financial managers attending the convention were to their bailouts and mega-bonuses.

As in most con games, most of the victims here were absolutely complicit in their destruction, and are not entitled to be "rescued" from foreclosure and loss of homes they never honestly owned to begin with. But most of all, we have all, from the low-income buyers borrowing to buy middle-bracket homes on subprime pay-option loans clear up to the Goldman Sachs bonus babies who are enabled by our government in skimming the taxpayers for decades to come to pay this year's bonus, contributed to the mentality that produced the casino economy of the past 20 years, a mentality made up in equal parts of greed, magical thinking, and a boundless sense of entitlement to unearned rewards.

Tuesday, October 27, 2009

Let's Reduce the Number of Chicago Aldermen: Help Circulate the Petition

The great people at Second City Cop blog have started a movement to reduce the number of Chicago aldermen to 25, one for each police area. A petition has been started, and you can print up copies here and go to work gathering signatures.

Remember, in order to be valid, all signatures must be those of City of Chicago residents who are registered voters, and you must, after getting signatures, attest to their validity by getting your own signature, as a petition circulator, notarized.


If we can just get one 1000 people gathering 125 signatures each, we can get this on the ballot. Gather 200 just for good measure, in case of overlap or invalid names. Ask if the signer is a registered voter and resident of Chicago, always

Stay tuned to SCC for a collection point for the petitions.

If Los Angeles, a city larger than Chicago and at least as difficult to run, can get by with 15 aldermen, why do we need 50? Estimates of cost savings range from $10 million to $50 million. My own guess is closer to $50 million, if you include the costs of wasted time and corruption. Time to make this $100K-plus-per-annum job into a full-time job.

Friday, October 23, 2009

The Nuclear Energy Option:A Nuclear Power Primer

The Nuclear Energy Option (Dr. Bernard L. Cohen, Professor Emeritus, University of Pittsburgh) an online book summarizing current nuclear power technologies and their costs, benefits, and hazards, is a short summary of the history of civilian nuclear power development, current nuclear technologies and their costs, comparisons of costs and benefits of nuclear with other forms of power generation, the management of nuclear waste, and the regulatory framework and politics of nuclear power generation.

The short booklet is, while not exactly "light" reading, a well-written and easy-to-comprehend summary that translates technical jargon and lucidly explains complex technologies for the non-technical reader. It's essential reading for policymakers and interested citizens.

Thursday, October 22, 2009

Obama Endorses Nuclear Energy

President Obama is learning.

According to a Reuters report, the president, at a public meeting in New Orleans, said that he would like to see increased production of electrical power in the United States and that he recognizes that nuclear energy could play a key role in reducing greenhouse gases

"There's no reason why technologically we can't employ nuclear energy in a safe and effective way. Japan does it and France does it, and it doesn't have greenhouse gas emissions, so it would be stupid for us not to do that in a much more effective way," Obama said.

It appears that Obama is beginning to sort out the arguments against nuclear, and listening to top scientists and engineers instead of lawyers such as Amory Lovins. It might be beginning to dawn on the "greens" that such "soft" technologies as wind and solar will not only not be able to supply more than a third of our current power needs under the best circumstances, and that the denizens of France, which 80% dependent upon nuclear, are not exactly glowing in the dark.

Now that Obama has endorsed nuclear, perhaps Illinois leaders will wise up and repeal the state's foolish moratorium on nuclear development, and give Illinois a fighting chance to regain lost economic ground and compete with other states in economic development.

Tuesday, October 20, 2009

Showdown in Chicago October 25-27

Some people are asking "Where's the outrage?" at the wholesale plundering of the American population by the banking cartel and the U.S. Treasury, to support the banking cartel.

We can show our outrage at the protest this weekend downtown, concurrent with the annual meeting of the American Banker's Association, October 25-27.

So far, the financial bailout has cost us over $3 Trillion dollars, and our leaders are concocting new schemes to strip the American public of the last of its wealth, by offering more E-Z FHA money and an $8000 tax credit to gullible buyers ,for yet another bailout in a couple more years. We have about 7 million foreclosures before us yet, not counting recent FHA borrowers who are already delinquent- all to maintain housing prices and assure profits for loan originators and home builders. The taxpayers are theoretically on the hook for up to $24 Trillion, though $12T is a likelier number. Each $8000 tax credit is costing the taxpayers $40,000- true government efficiency here.

The results are more Americans impoverished since the Great Depression, 10% U3 unemployment across the nation, and fabulous profits for the banks.

Below is the Showdown Chicago Schedule of Events:

Get hyped for the Showdown...
Listen to our podcast!

Schedule of Events
Note: all times are approximate and subject to change

If you wish to join us on Sunday, please fill out a Sunday Registration Form. Attendance for Monday or Tuesday does not require registration.
3:30pm – Welcome & Conference Orientation
4:30pm – Put People First: Showdown in Chicago
Hundreds of everyday Americans come together to launch the Showdown in Chicago. A peoples’ Commission will hear testimony and evidence from everyday Americans, well known public figures, and elected officials on how Wall Street banks created the foreclosure crisis and sent the economy into a tailspin. Commission findings will be shared with the Obama Administration, Members of Congress, and the Angelides Commission.

11:30am – American Bankers Association convention, 301 East North Water Street.
Big banks are spending billions to prevent reforms that would protect taxpayers from their future abuses. Nearly a thousand Americans will take our message directly to the American Bankers Association at their annual convention.


10:00am - Prayer vigil on Wacker, east of Michigan Avenue
10:30am - March: starting at Stetson and Wacker
11:00am - Rally at the Sheraton Hotel (301 East North Water Street, Chicago)
No registration required for the Tuesday march. For more information, visit www.stopbankgreed.org or contact rozwadowskik@seiu1.org

Saturday, October 17, 2009

The Price of the New Housing Mini-Bubble: The FHA Will Need to be Bailed Out

Since I work at a stock brokerage firm, I get to listen to Kudlow and Cramer crowing about the "recovery" of the housing market, and how housing prices have "bottomed", which surely means that we're on back on track to house price Nirvanah... that is, from a current homeowner's viewpoint. Aspiring buyers might view the situation differently.

I have a lot of thoughts when I hear Kudlow & Cramer. Mainly, I think about how many ordinary 'merikuns, mostly male, regard their show as the font of all economic wisdom and how they get paid 7-digit salaries to mouth this crap and don't even have to register as Investment Advisors or Broker/Dealers. So if you lost your ass and are in foreclosure as result of following their idiotic rantings over the past 8 years, you have no redress. I, on the other hand, have to exercise a little care about the advice I dispense for pay because I have securities registrations to protect and can't afford the legal fees to defend myself in the event of a complaint.

 What was before hidden from view and justified as a process of the "free market" is now out in plain view, which is that the current flurry of house purchasing is a result of blatant government manipulation, and it will probably produce the same results as the multiple government manipulations that gave us the mega-rampage of the 2000s.

At least the Democrats have some baseline level of honesty regarding the role of the government in creating debt bubbles and driving house prices to unsustainably high levels, whereas the Republicans who ruled in the past decade unblushingly referred to the Fed manipulation of interest rates, the subsidies provided borrowers and lenders through the FHA and the GSAs (FNMA, GNMA, Freddie Mac, et al), and the bailouts that financiers knew they could always count on, as the "free market". The Dems very openly state that they are trying to elevate housing prices by means of heavily subsidized FHA loans on very easy terms, while talking out the other side of their mouths about making housing "affordable".

The lower illustration is one of the signs we've been seeing on parkways all over Edgewater and Rogers Park. I called the number on the sign, and was told that you come in with a FICO of 680 or better and $500 cash, and receive your $8000 tax credit to use as your down payment at the closing. Given the required down payment of 3.5%, and current underwriting rules that permit a housing expense ration of 40%, a borrower with an income of $60,000 a year can pay up to $260,000 for a place with a $500 down payment out of his own pocket. 

Click on the upper image in order to enlarge it so it can be easily read. What it is, exactly, is the underwriting summary for a recently-issued FHA loan, with the borrower's personal information blacked out. It is not a loan for a new house purchase, but is an ADJUSTABLE LOAN for an EQUITY EXTRACTION of $133, 292 from a home appraised at $193,750.  The LTV ratio for this equity extraction (or Home Equity Loan) is over 67%. The Housing Expense Ratio is 41% of the borrower's gross income. The borrower's total expense ratio is 53%. The stated purpose of the loan is CASH OUT REFINANCE.

How long do you think the borrower will be able to service this loan? Do you think that he will make it past the first reset? Or will the loan recast as the house continues to drop in value? Do you think someone with an income of $60,000 can afford a $260,000 home? Do you think that perhaps many of these loans will become problems early on and that delinquency and default rates on the recent generation of FHA loans will equal those on all the subprime, Alt-A, adjustable, interest-only, and pick-a-pay loans that got us into this mess to begin with?

If you are a renter waiting for an opportunity to buy a reasonable place at a sensible price with a loan you can really afford, do you resent your taxes being used to subsidize more bad loans for more marginal borrowers, just to create another tower of unrepayable debt that the taxpayers will once more have to make good on in a couple of years?

Do you think that the housing "gains" based on this kind of borrowing are sustainable, or do you think that the recent surge in home sales and slight bump in prices is a government-manufactured Bull Trap and that we are poised for another steep leg down in prices, as well as the further degradation of our currency and another tax-funded bailout?Do you think that the FHA can survive a combined delinquency and default rate of 24%?

This time, the Dems will not be able to blame the previous administration for the next wave of defaults or the next round of bailouts. Obama and his advisors own the situation now, and not only haven't done anything to reverse the disastrous fiscal policies of the past 10 years but are reinforcing them and building new stories on top of the tottering tower of loans that will never be repaid. And nobody's questioning team Obama on how you can strive to raise housing prices while making housing more affordable, but that is what the tax-credit-subsidized loans are all about.

Tuesday, October 13, 2009

Daley Offers No Alternative to CTA Fare Hikes

Mayor Daley says that the proposed CTA fare hikes and service cuts are "very ugly", but offers no alternative or solution to the the agency's budget problems.

Strange- Da Mare had the funds ($86 Million) to buy the Michael Reese hospital property to be redeveloped as the Olympic Village, but can't find the funds for one of the city's most essential services?

Daley has always considered the CTA to be something of a "frill", and now that the Olympic Games are off the table, he has no interest in repairing or expanding Chicago's once-excellent service, thus condemning our city to second-tier status in the future. There has even been talk of cutting Owl service, which would put at least another 50,000 cars on the streets and put Chicago on the same steep downhill path as other formerly great Midwestern cities such as St. Louis and Detroit, both of whom deteriorated rapidly after all-night transit was eliminated. In St. Louis, the last "owl" ran in 1965, and what had been a gentle glide downhill became a cliff dive into depopulation, disinvestment, and poverty.

Daley was originally opposed to free rides for seniors, but now has nothing to say about this absurdity, and there is no discussion of raising the city's funding contribution to the agency to reflect inflation since the early 80s. Now that we won't need to spend $500 Million or more on costs related to the Games, could we direct some of the TIF slush funds towards our essential services? Our transit, our police department, our schools, and our essential sewer and water infrastructure are in tatters. We need to be replacing 80-year-old water mains, we need to put more police on the street, and we badly need improved transit and to get those improvements in place before the next round of gasoline price hikes, which are coming very soon, and which may come sooner than anyone was figuring if oil ceases to be denominated in the dollar.

While Chicago's transit and that of other large cities is starving, it's competition, auto transit, is more lavishly funded than ever, and at the expense of our largest cities and their needs. Over 60% of the road-building stimulus money being doled out by the Feds is being allocated to the most lightly populated areas of the country to build unnecessary highways. Why are these funds being so allocated? 65% of this country's population lives in the 100 largest urban areas, and 75% of the country's economic activity takes place in them, yet our tax money is being allocated for mega-highways through semi-desert wastes with the lowest population densities in the country. This has been the funding pattern for the past 60 years, to the great destruction of Chicago and other cities.

Chicago is one of the country's largest net taxpayers, behind only NYC and Los Angeles, yet ranks near-to-last in federal givebacks. In other words, we are being taxed to fund mega-highways and heroic water diversion projects in the middle of the Big Nowhere, the better to lure millions of denizens out of livable Midwestern cities to mega-cities in the middle of the high desert that are bound to fail catastrophically as water problems deepen and as the massive water infrastructure becomes impossible to maintian in a fuel-short future- while our services deteriorate and our city, which is one of the world's greatest metropolises, is decimated to pay for all of that. And electing a Chicago machine politician as our president has not helped us get our share.

It's time to get our share of the tens of billions of dollars, or at least get benefits that equal the taxes we send to Washington on a dollar-for-dollar basis. Same thing goes for the State of Illinois- why is the state's largest city treated like a poor, unwanted cousin in Springfield? We need to demand the end of free senior fares and demand that our state and city governments give us something of value in return for our taxes- and adequately fund and manage conscientiously this essential service.

Saturday, October 10, 2009

Celebrating North Coast Artists During Chicago Artists' Month: Andy De La Rosa of Rogers Park

October is Chicago Artist's Month, and our city has a lot to celebrate, with a huge community of visual artists in all media. Our North Coast neighborhoods- Rogers Park, Edgewater, West Ridge, Uptown, and Lakeview, contain great artists working in every sort of media imaginable. I'll be featuring local artists and designers, and so will other local websites, so if you are working in the visual arts or know of a local artist whose work you like and think should be featured, let me know at lauralouzader@yahoo.com.

People who like to hang at Ennui Cafe at the corner of Lunt and Sheridan may remember the numerous beautiful and colorful sculptures that used to embellish the corner on both sides of Lunt, as well as the courtyard of the apartment building containing the Cafe. You will be glad to know that their creator, Andy De La Rosa, is alive, well, and making art in Rogers Park still, now on Glenwood Ave. just south of Morse Ave, where he can be seen working in the yard among his latest fantastic creations, pictured here.

Andy is a very quiet, soft-spoken young man and I did not discover much about his history, but what does that matter? Like all art, these sculptures speak for themselves, no explanation necessary.

What Hath the Loyola TIF Wrought: The Blighting of Sheridan Road by Loyola University

Your Devon-Loyola TIF dollars at work at 6610-28 N. Sheridan Road- still a blighted eyesore three years later, pictured at the left.

The recent destruction of the two charming old commercial buildings at 6572-90 by Loyola University was an unpleasant reminder, to me, of the monstrous misallocation of taxpayer money that is the Loyola-Devon TIF, a $50 million taxpayer-funded windfall for the university that is paying for the renovation of four buildings on the campus and gives Loyola University control over 270 parcels of land lining Sheridan Road from Devon Avenue to Farwell, and along Devon Ave. from Sheridan to Clark. I

Why didn't the university buy and demolish the blight-pit pictured above instead? We would love to see this reeking slum kicked down and replaced with a garden.

It's rather difficult, at first blush, to discern a connection between the economic leverage the TIF granted the university, and the demolition of these buildings. These buildings have been Loyola's property for years, after all. But it's difficult not to think that the economic power and spare funds granted the university by the TIF were a big factor in the university's decision to demolish the properties instead of renovating them. Worse, the loss of these buildings augers very ill for the beautiful, colorful little building that remains, for the TIF grants Loyola control over the entire block, and given modern developers' preference for over-scaled mega-buildings in preference to small ones, it is likely that the university has plans for this block that don't include quirky little buildings.- plans it couldn't contemplate were it not for its access to tens of millions of dollars in public money. If there are plans afoot for a large building down the road, then this building will fall, too, and cost us a beautiful, irreplaceable building and two fine old local businesses.

There was a public meeting concerning the demolition, which was by this time a done deal, and the the university promised to install a garden, which promise they are now talking about reneging on. There was no legal ground to stop the demolition, for these two buildings, while lovely, were not "significant", and the university pointed out that rehabilitating them would cost $500K while demolishing them would cost only $100K. So last week, down they came, and what was once a solid wall of charming, densely decorative old buildings is a gap-toothed block of gravel and dirt lots. The only remaining buildings are the el station building with Harris Bank and McDonald's, Beck's Books, and the incredibly decorative and charming building containing two great local businesses, Affordable Optical and Carmen's. This little building has an incredibly colorful terra cotta facade and it is difficult to imagine that anything built beside it in the future will come near equalling it in beauty and charm.

Thus the charm and character of a neighborhood is lost, and the economic power granted the university by the TIF is used not to improve the area and foster local economic growth, but to blight the neighborhood. Developer Daniel McAffrey's The Morgan at Loyola Station, the beautiful new rental apartment building that went up on Sheridan just south of the Loyola el is a major plus for the area, but it's not a sufficient offset to the destruction the university is wrecking elsewhere along the street. It could also be argued that McAffrey could have developed this building without the TIF, though the funds could sweeten the near-term losses this property is no doubt suffering in the current soft rental market. The rehabilitation of the old Village Theatre-with $200K public money- as the new 400 Theatre is another plus, even though it's not particularly well-done, but it is offset by the blighted 4-plus-1 at 6628 N. Sheridan, whose rehabilitation is being funded by funds from the TIF, and at this point is, three years later, a decrepit eyesore. The construction is proceeding so slowly as to be invisible, and the building appears to be partially inhabited and is advertising apartments as being available for rent. The parkway in front of the building is a weedy patch strewn with litter. 1200 W. Pratt, the very last building in the strip of land controlled by the TIF, was a decrepit slum purchased at an absurdly inflated price and rehabbed slowly into overpriced condominiums by Lohan Realty, and is now a market rate rental. The ground floor retail spaces are still under renovation, and the broad plaza in front of the building, which could easily be renovated into a beatiful focal spot for this street corner, is still a patch of cracked old concrete. While nobody was gladder to see this mangy slum vacated and renovated than I was, except for perhaps my landlord, it's difficult to see how the TIF funding made any difference in the fate of this building.

In summary, the Loyala TIF district has produced very little in the way of economic development relative to the allocation of public money,and has done more to destroy the tax base than add to it; all in all, the only winner is Loyola, which has managed to get the taxpayers to pay for the reno of four large campus buildings with money that is badly needed for municipal services such as police protection and infrastructure repair. Such development as has taken place, like the Morgan, arguably would have taken place without it and might even have taken place sooner were it not for the university's control over the strip. The eyesore at 6610-28 was better kept and occupied before "rehabilitation" began. The corner of Devon and Sheridan is still occupied by a former fast food outlet, which has now been rented to yet another fast food outlet. The Weinstein Funeral Home is now vacant, and the property with its four parking lots fronting (and defacing)Devon Ave., are for sale, with no plans in place for the development of these blighted parcels.

In arguing for the Devon-Loyola TIF, aldermen Moore (49th Ward) and O'Connor (40th Ward), argued that the university is a good neighbor that Rogers Park should be grateful for and that we should extend ourselves to keep the university here by tossing this well-endowed institution $46 million to improve tax-exempt property, which is not an appropriate use of funds under a program specifically designed to expand the tax base. However, their argument is pretty specious in view of the fact that Loyola has been here since 1878, through all the years of Rogers Park's early development and its later deterioration. What was the university doing, exactly, to combat the blight that spread rapidly through Edgewater and Rogers Park in the 70s and 80s? In any case, it's doubtful that Loyola would trash investments it has made on its campus here over the past 100 years simply for lack of a windfall it is not morally or legally entitled to, nor would it be at a loss to fund these projects without the TIF money.

This would be a good time not only to challenge the Devon-Loyola TIF, but the city's other TIF districts that have notably failed in their stated purpose and moreover have fostered ugly, inappropriate development that often fails economically, at massive cost to the public in both money and degradation of the civic envirnonment. The Berwyn-Broadway TIF gave us the strip mall slum at that corner with its incredibly ugly buildings and vast expanses of black asphalt, thus further degrading the blight-pocked Broadway streetscape. The Ashland-Diversey TIF destroyed dozens of charming old apartment buildings that could have been renovated into desirable housing and replaced them with another strip mall of overscaled suburban-styled Big Box retailers. The Broadway-Lawrence TIF is paying for the renovation of two exquisite old Uptown commercial buildings, but the major retailer, Border's Books, which was the beneficiary of local subsidies, will be vacating its space on Broadway as soon as it sublets its space, and will leave a huge vacant space that is unsuitable for a small local business and will probably sit vacant for many years.

But to to challenge these TIFs and to prevent other TIF districts from being formed, we need to not only make use of every law that would enable us overturn existing TIFs, but we need most to attack at the root, which is the 1952 legislation passed by Illinois that enables the formation of thse districts. We need also to demand legislation that protects property owners from eminent domain proceedings.