Is President Obama Responsible?

I read that David Siegel wrote a letter to his employees telling them if Obama is elected, there will be layoffs. At first I was a bit shocked — I mean here is someone with wealth (and by extension power) who is shamelessly attempting to sway an election. I know a little about him — in large part from the documentary, The Queen of Versailles which outlines the rise of his timeshare empire (Westgate) and its near-collapse after the industry-orchestrated real-estate disaster in the late 00's.

His argument is that higher taxes under Obama will cripple big business and force a loss of jobs. But scratching a little deeper, and you'll see that his fortunes were through his hard work and diligence in exploiting the absurdly under regulated real-estate market. The concept of fractionally selling a luxury apartment in a major city — timeshares — was a novel and lucrative endeavor. I applaud his resourcefulness in doing so and have no issue with money he earned that way. But his largest gains were achieved by borrowed money against inadequate collateral.

He was able to mortgage over-valued properties and take that money to build more properties. For instance, in the film, he has mortgaged his partially-built second-home "Versailles". How was that even possible? The place has no value until it's built, yet he was able to mortgage it anyway?

It was slack regulations from (at least as far back as) Clinton's presidency that allowed this all to happen. And who gets stuck with the bill? Well, a foreclosure goes to the mortgaging bank, and then into this nebulous network of sold, bundled, overvalued mortgages, and ultimately right to people who are paying mortgages on jeir primary properties — their first and only homes.

So while building an empire — and creating jobs — based on creating value by offering a desirable service at a price that affords a window of substantial profit is a noble one, building an empire on the backs of hardworking Americans is a fraud.

And the bulk of Siegel's wealth is just that: fraud. Even the seemingly legitimate sales of timeshares is based on a foundation of fraudulent lending. Now, to his credit, Siegel is playing the game well and is legally in the clear. Nonetheless, this is how the rich get rich: not through hard work in the sense of producing a desirable, quality product, but through exploiting legal loopholes.

So these are the 1%ers who are so hell bent on getting rid of Obama. Why? Apparently Obama's policies have forced them to actually create a desirable, quality product. The loopholes are being closed, and the gravy-train of free money for the rich is no longer stopping in their towns.

Maybe Obama has actually done some progressive good in the world. As someone who makes a desirable, quality product myself, I've seen no change in my own financial burdens. But if the rich slackers are crying out in financial pain, good!

Now if only we can get pro-life people to realize that even the lackluster "Obamacare" will reduce the number of unborn babies killed by 75% (with non-abortion contraception, preventing unwanted pregnancies), maybe we can make everyone happy.

David Cay Johnston Cheerfully Explains the Credit Crisis

I happened to hit a good break point at work and had just enough time to get to the Tuesday Topics discussion in The Kate Gleason Auditorium at The Rochester Public Library (115 South Ave.) David Cay Johnston was on hand to explain The Credit Crisis: Your Wallet and Wall Street in that cheerfully confident way that only David Cay Johnston can.

He started off talking about Reaganomics and where it is some 28 years after the start. The original plan had three goals: reduce taxes, balance the budget, and deregulate industry, so he outlined a measure of past performance. Taxes have dropped for the tiny sliver of extremely rich people but not for the rest of us. The budget is profoundly not balanced. But at the core of the overall failure is that the concept of deregulation is fundamentally a myth.

His analogy to the situation is that of driving: most people on the road are generally pretty good drivers. So, to aid them in driving better, we should eliminate those expensive road signs and traffic signals. After all, most drivers are responsible, so why should we impede their progress with unnecessary regulation? Clearly the exercise leads to worse conditions. But if you take a closer look, even the act of licensing drivers is an act of regulation.

In other words, the concept of deregulation was actually one of reducing regulation, and reducing the amount of regulation opened the door for conditions for which the regulations were designed to circumvent. By operating within the confines of a system of rules, responsible action was one of following those rules.

Johnston's point was that in "deregulating", we have separated risk from responsibility. And by allowing people to make irresponsible decisions, we ended up in the mess we're in now.

Anyway, in this bail-out, the estimated value of all the sub-prime mortgages were worth about US$500B and their actual value was more like US$300B if you consider the real value of the real estate, but the government is spending 8.5 trillion dollars on the bailout — nearly 30 times more than their value … in other words, a terribly bad investment. The excess money is being used to pay for companies who owe money to Goldman Sachs — curiously enough, one of the central figures of the entire bailout.

I suspect I'm doing a very poor job explaining it. The thing I noted was that he seemed rather calm about the whole thing, whether he was talking about the bailout amount being about the same as 8 years of every American's income tax collection, or the possibility of a decade of 10% inflation. It was that kind of deep understanding that makes you know that you really don't know, and no matter what happens, you get by.