Loan Modification Provision

Aaarghh. RepresentativeMaxine Waters, on Fox News, just said that the part of the bailout that was just agreed to is a "loan modification provision." My worst fears have come true.

Waters is concerned that people with a $3000 per month mortgage, who now can only afford to pay $2000, need to be able to get a mortgage reduction through this bailout.

Where is the personal responsibility? Now we are rewarding people who are unable to pay their mortgage. What are we saying to people scrimping and saving to pay their mortgages on time? 

If this is becomes law, heads need to roll. Over the last 5 years, as homes were increasing in prices, there were many who watched their neighbors overextend themselves, purchasing the latest big screen television, hot tub, pool table, Nintendo Wii, the latest SUV, and a host of other extravagant purchases, living way beyond their means by buying and refinancing homes that they could not afford.

Rewarding this behavior punishes those living within their means. This is immoral and should not be open for compromise.

Let me remind you of how compromise works. If a person wants to take all of your money, and you don't want to give up your money, a compromise means you gives up half of your money. My point is, there are good ideas and bad ideas. One should never compromise for the sake of compromise. A bad idea is always a bad idea. 

And rewarding people who overextended themselves is a bad idea.

Derivatives and Marked to Market Regulations

At the heart of the financial crisis crippling the global financial system is an accounting regulation gone awry.

It is called 'marked to market,' which requires banks to value their assets using fair market value instead of the purchase price or future value in their financial statements. The intent of regulators was to prevent banks from inflating their balance sheets as assets were overvalued in a declining market. 

A very basic understanding of how banks operate is vital to understand this issue.  Bank liabilities are deposits, money borrowed from the Federal Reserve, and shareholder equity. The major portion of a banks assets are the loans made to their customers such as car, auto, business and credit card loans. The other portion of their asset base is their cash or cash equivalent portfolio. Since holding cash generates little interest income, banks hold much of their liquid assets in securities such as Treasury bills and bonds issued by Fannie Mae and Freddie Mac called mortgage backed securities. Many larger banks even began writing their own securities called credit default swaps.

When the real estate market started to crumble, home values dropped in value by as much as 35%. Mortgage backed securities and credit default swaps, liquid assets which were bought and sold in the open market, became hard to value.  Banks didn't know how much these securities were worth. Rating agencies didn't understand how these derivative securities should be rated. What was rated as AAA, had underlying mortgages that were in foreclosure.  Even though these securities were paying a good rate of return today, they were losing value over time.

Suddenly, banks weren't able to sell these securities because buyers no longer understood how they should be valued and the market dried up. Suddenly, these derivatives didn't have any value.

Within the last 5 months, financial institutions reported billions of dollars of paper losses as they wrote down these securities to fair market value and were required to raise more money to meet their asset/liability ratio requirements. It was difficult to raise money when banks were taking significant losses. 

Banks access money in two ways. They can go to the Federal Reserve if they meet their capital requirements. In other words, banks need to have a 1:10 capital to asset ratio.  As banks wrote down the value of their assets, they didn't have enough capital to meet their requirements.

Banks alternatively raise money by issuing bonds called commercial paper. These short term securities have been considered very safe investments and allowed banks and large corporations to meet capital needs. As banks began to show massive losses, they were unable to issue commercial paper in order to meet their financial obligations.

When banks are unable to raise money, they can't lend money.  

And the financial system teeters on the brink of collapse.

Criminal Activity in Financial Crisis

What did they know and when did they know it?

With the financial system in total meltdown, it is good that politicians don't focus on who is to blame. But in time, it is important to know who is responsible for this mess and how soon can we build a prison to house them.

Once the prison is built, we need to transfer this gentleman and some of his friends to be the first guests.  (Chris Rock has a funny skit on the same subject)

But I digress.

Fannie Mae and Freddie Mac helped create this mess through the invention of complex derivatives. The criminal investigation should focus on inflating profits by allocating revenue to income versus reserves and the executives who profited from false tax returns.  Secondly, the creation of credit default swaps and mortgage backed securities were sold as a risk free asset and we need to know if these securities were sold by promising the Federal Treasury would assume the risk. 

When something this big hits, fix the problem first and go after criminal activity hard. Whoever was responsible for these derivatives needs to spend some time in the big house.

How to combat Sarah Palin's Experience

Matt Damon, the premiere expert on the experience it takes to be President, claims Sarah Palin doesn't have the experience to face down Russian President Putin.

The obvious question is, "and Senator Barrack Obama does?" 

But the farce of the experience question is found by asking, "who in Washington predicted the financial crisis, and how did their experience help in their predictions?"

Some politicians may have thought Fannie Mae and Freddie Mac had problems.  But not one politician thought it was a problem big enough to put this issue on the front pages of the newspapers until the crisis already hit.

If you look at Barrack Obama's acceptance speech in Denver, he didn't even reference the financial crisis our economy was in, only that George Bush and John McCain caused the slowing economy.  But what if Fannie Mae and Freddie Mac are the root cause of the problem?  Who is responsible for these companies?  Shouldn't our elected officials, be held responsible?  And shouldn't Barrack Obama, Joe Biden, and all elected officials be held accountable?  After all, they have the experience.

There is enough blame to go around, but one thing is certain, there isn't one politician, Republican or Democrat that can point to their experience and say they could prevent what Alan Greenspan called the "worst financial crisis in a century."

No, Sarah Palin doesn't have experience.  She hasn't been tainted by the get nothing done Congress.  She hasn't been tainted by the money laundering and the revolving door of corruption that is a part of Washington politics.  

Sarah Palin simply has the experience of bringing common sense to government.  She simply has taken on corrupt government politicians in her own party.  She has only fought to clean up government on every level she has been involved.

Sarah Palin's experience may be different experiences than Barrack Obama, but Washington needs experience based on common sense, not on the politics of blame and corruption.

Credit Default Swaps-Read This!

You don't understand how messed up our financial system is until you read what Warren Buffett thought about these four years ago.  Read this article and prepare to have your blood boil. Buffet calls the credit default swap system a "ticking time bomb."

Heads need to roll.  People need to go to jail.  Whoever was involved in this, whoever thought this was legitimate business must be punished.

Hunch on Stock Market--Too Much Money in Market

Has anyone really thought the problem with the financial system could actually be there is too much money in the stock market?

As millions of Americans now invest their investment portfolios in mutual funds, trillions of additional dollars are invested in the stock market, pushing up the prices of individual stocks. This causes many problems.  As institutional investors such as mutual funds buy large blocks of stocks, their demand has the ability of increase the price of that stock.  When they sell, they can bring the price of the stock down.  More money creates a volatility in the market as the price of the stock is valued by demand, not the underlying strength of the company.

As more money is in the game, even larger problems are created as stockholders are increasingly concerned about short term earnings.  Shareholders in the company are meant to insure the company makes good decisions, but officers of the corporations are paid off of quarterly and yearly results.  Who is there to make sure companies make good long term decisions? 

Over the last decade or two, revenue growth became more important than debt.  Purchasing companies by large debt issues became the norm.  Revenue become more important than earnings.  And mergers and acquisitions became an easy way to grow larger and increase market share.  Many companies came to believe diversification was the key to growth and they lost their focus.

Investment banks pushed initial public offerings to their preferred investors.  Of the last 90 IPO's, only 1 has a share value that is higher today than when it was offered.  In the meantime, billions were made by taking companies public. It doesn't make sense how a private company can create 500 million shares, release 10% of the shares for public sale, and suddenly have a market capitalization worth billions of dollars.  The hype of marketing these initial public offerings are so powerful, but the reality is the company still needs to make money year in and year out.  But in the last decade, too many of these offerings were just hype.

A single analyst for a ratings company or investment company can drop the market capitalization by billions of dollars. Simply lowering a rating from hold to sell by companies such as Moody's or JP Morgan can affect the price of the stock. Further, when large institutions begin to sell, the value of the stock is crushed.  

Because of this, great pressure is placed on companies to "pad" their earnings statements. Enron became the poster child of creating separate subsidiaries to "hide" losses in order to meet earnings targets for Wall Street analysts. 

I wish I could say this is an unusual tactic, but one has to look no further than to the Federal Budget.  Social Security is held "off budget" but is included in the Congressional Budget Offices reporting of the federal budget deficitas seen here, in order to pad the books.  As of this writing, Social Security taxes are approximately $200 billion more than is needed in the program.  This money is transferred directly to the general budget, showing we have $200 billion more in revenue than we really do.  So when you see that our budget deficit is $400 billion, it really is $600 billion.  

Back to too much money in the stock market.  I will be accused of simple minded thinking, but I really believe there is some strange thinking in our accounting standards and our financial markets that just don't make sense.

Let me explain it like this.  

How much would you pay for a company that makes $100 per year? If it was guaranteed to make $1000 over 10 years, the amount you would pay would not be $1000, the sum of payments, because if you invested $1000 at 7% interest, and invested the monthly interest income, you would have $3000 after 10 years, so you wouldn't pay $1000 because you would have a better return just investing the money in 7% interest accounts.  

It is for this reason, that if I have a company to sell to another private party, I am usually paid 7 times earnings.

But if you look at the stock market, stocks are trading at 30-50 times earnings.  This just doesn't make sense.  Further look at the dot.com bubble.  We heard things like "earnings don't matter."  Stocks were trading at hundreds of dollars per share on companies that didn't have income and didn't have a plan to ever make money.

Because there was so much money in the stock market, rational discussions of the value of companies have turned to irrationality.  It was this warning that Alan Greenspan called "irrational exuberance."  When underlying common sense is overtaken by rushes to make money, problems are sure to follow.

It is my belief the problem we are experiencing is caused by too much money in the system and overpricing stocks. Combine too much money, with the corporate mentality of building their quarterly earnings statements on accounting tricks in order to show investors paper earnings over actual sales and a real mess is created.  

And this brings us to the financial crisis we are in.  Fannie Mae claims to have made $6.3 billion in 2005, $4.0 billion in 2006 and lost $2 billion in 2007.  The casual investor (or any investor, really) doesn't have any way of determining what the real value of this corporation really is.  Fannie is really an insurance company.  How much of the income they made was set aside to take care of future obligations related to insurance payments made to cover future crisis?  Should that revenue be stated as earnings or simply reserves to be paid out at a later date?  This is a complex question, but if you an executive and are paid on earnings, it is only common sense that executives would want to claim as much revenue as possible as earnings, thereby increasing the pay they received.

This is exactly what happened.  Executives claimed as much revenue as they could as earnings, thus increasing their bonuses.  When more money was needed in following years, they didn't have the appropriate amount of reserves to take care of their obligations.  Suddenly, they were losing money by the billions.  (on a side note, look at how much money Fannie paid in taxes. This isn't going to be there next year, along with many other financial businesses, and this will leave a huge void on tax reciepts--meaning more deficits)

I don't know how to fix this problem.  But when people talk about greed, they are talking about Fannie Mae.

South Dakota Media and National Politicians

In the wake of the largest economic disaster of the last 100 years, I have noticed a real void of coverage from local media.

Where is the Argus Leader explaining timely news and local investigation of this federal bailout?  Where are the tough questions of Senator Johnson, Senator Thune and Representative Herseth-Sandlin?  

Do South Dakota reporters who work for the Associated Press, the major newspapers, or television stations have any understanding of what is going on? Do they even know enough about the world of high finance to ask intelligent questions to probe the Senators and Representatives of our state about the affairs of the world?

Here is a list of questions we should be asking our elected officials to know if they were asleep at the wheel.

Please explain how we got to the point where we have to bail out entire industries?

How do you think we could have prevented it?

What can you point to, or that you have done, to try to predict this problem?

Some have said we were 50 trades away from shutting down the world's economy.  Why weren't you talking about this last month, last year, or the last 4 years?

What do you know about credit default swaps?  mortgage backed securities?  credit debt obligations?

Have you ever wondered how a mortgage would pay 6% interest, but the underlying value of the derivative could return 15% or more returns? Does that confuse you?

Who is responsible for regulating investment banks? Fannie and Freddie?

Were they negligent in their regulation?  or do you think Congress was negligent in their oversight?

There have been calls to overhaul Fannie Mae, why wasn't this done?  

How can a company be making billions of dollars a year just 1 year ago, now be bankrupt?

What other problems do you foresee in the next 2 years?

How can the Federal Government continue to spend money it doesn't have?

If you say you want to pay as you go for any legislative proposals, how can you support a Presidential candidate that calls for increasing the size and scope of government?

When has the government ever predicted accurately how much a bill would actually cost?  

When the prescription drug bill was passed in 2003, it was estimated to cost $230 billion over 10 years.  Two years later, the estimate was revised to $1.2 trillion.  How can the American people have any confidence in governments ability to estimate costs?

Are you for increasing the size and scope of health care for all Americans? Medicare? Medicaid?

Are you for increasing the size and scope of Social Security? Why can't you just come out and say Social Security is broken, and will be bankrupt in 2017?

Are you for increasing the size and scope of federal education dollars?

Are you for increasing the size and scope of veterans benefits, teachers pay, police and fire pay?

Understanding earmark spending is only 1-2% of the budget, have you ever opposed an earmark?  What have you done to take on your own party to fight earmark spending?

Have you ever told a group in South Dakota that wanted money from Washington, "no?" If so, who have you told and why?

Is now the time to run for Congress bragging about how much you brought back from Washington?

Have you ever said, "South Dakota needs to get it's fair share from Washington?"  What is our "fair share" and what do you base that on?

Do you agree that Washington doesn't have any money?  that we are truly broke?

Oil Rises on Falling Dollar

Today oil rose $25 per barrel on the falling confidence of the dollar worldwide.  

People must understand when our government spends money we don't have, we have to sell bonds to raise the money.  The more money we need to raise, the lower value our dollar becomes around the world.  All commodities, from oil to corn, will have a higher price because the dollar isn't worth as much.

We can't continue to spend money we don't have.  Our national credit cards are maxed out.

Let's not forget, that as we go through this financial crisis, our country is in the middle of the first of many crisis we face.  My earlier post from August, The Economic Challenges, explains all of the other problems on the horizon.

The value of the dollar is going to sink further as we start to address these other problems in the next two years.  I believe the increased personal debt/foreclosure and unemployment crisis is going to be rearing their head soon as we tackle how to get the economy moving again.

The worst way to address this problem is to finance an economic recovery by using debt.  If we have learned nothing else from Fannie Mae, we should have learned we can't keep pushing debt into the future and taking profits today. 

But that is exactly what we are going to be asked to do.

My Observations of Politicians During Crisis

I now believe our government is only able to respond to crisis, not prevent them.

To understand government, you must understand...

... that 537 elected officials can't agree on anything.  To get the attention of all of these elected officials requires the problem to be big enough to move their other priorities, of which there are many, aside. If you have ever been on a committee, you know how difficult it is to get enough consensus to accomplish anything of value. By the time an initiative gets to the end of the process, often you won't even recognize the original initiative. The bigger the issue, the more difficult it is to agree.

...that there are very few elected officials that are experts in any one area.  I bet if you asked elected Congressman and Senators to explain how a credit default swap or a mortgage backed security worked (the underlying causes of the current financial crisis), most elected officials would have very little knowledge and a shocking lack of understanding of these complex financial instruments.  Yet they are responsible for laws and regulations of these derivatives and how these complex financial institutions work.

... there are thousands of issues for which an elected Congressman or Senator is responsible, along with raising millions of dollars, campaigning for election, and providing earmark spending for the town pool or city park. To be an expert on any of these issues is impossible. 

... that compromise is a costly endeavor.  The support of every Senator or Congressman can be bought for a price, and it usually is.  Do you ever wonder about those Senators or Congressman that are "moderates" in the middle?  They are in the best position to get every project they ever wanted.  Both sides are willing to give them what they want.  Have you ever wondered why they called the person who counts votes, "whips?"  Their job is to whip people into shape.  When the votes get close, the people holding out will get calls like this, "I would really like to help you with the Lewis and Clark water project, but we need you to vote to increase taxes on our new budget bill."

... that reform is virtually impossible because of the sheer size of government and the entrenched interests, lobbyists and money in politics.  The chances of changing anything is very remote--unless there is a crisis.

...that legislative bills in Congress are massive bills.  Small bills, tailored to just single issues such as regulation of Fannie Mae and Freddie Mac, are always included into much larger bills in order for Congress to add all of the other pork programs and special interest group legislation in the mix.  Large bills are the problem.  Small, targeted bills should be a part of reform in Washington.

And that is why government works best to respond to crisis instead of trying to prevent them.

Oh, and of course you should know that government never, ever, never, gets smaller.  It just gets bigger and bigger.  And suddenly $1 trillion just doesn't matter that much anymore. 

And that pretty much sums up why I am cynical on politics.

$11,315,000,000,000

As of right now, the national debt is $9,670,880,065,762.  Each day, we add $1.84 billion to our nations debt.  As a result of the federal purchase of bad debt, the debt ceiling will be upped to $11.315 trillion.

You can see the current national debt here. 

As you watch Treasury Secretary Paulson on This Week with George Stephanopolis here, make sure you watch Rep. Boehner's and Sen. Dodd's reaction here.  Listen closely to them as they explain the seriousness of the situation.  When Republicans and Democrats are "willing to work together" there is something to take note.  When spending $1 trillion is better than the alternative, the alternative must have been very bad.

Let's recap the last week.

Former Federal Reserve Chairman called this "a once in a century crisis."

Now Representative Boehner says, "this could be the most serious financial crisis that the world has ever known."

In 1992, candidate ran on a simple theme, "it's the economy stupid."  He claimed that last four years had been the worst economy in the last 50 years. 

If he thought economic conditions were bad then, what must former President Clinton be thinking today?

The Housing Crisis

According to the article below, one quarter of the mortgages in America, an estimated 12.5 million, have negative equity, meaning more money is owed on the home that it is worth.  

I predict Democrats are going to propose forgiving this debt. If you give a break to a homeowner in trouble, there will be thousands of homeowners on the brink of trouble.  Big government programs to help individuals will never be fair, and will never work. Every homeowner in the country will demand to get help.  

As we bail out entire industries who were making billions of dollars in the run up to this mess, large businesses and their leaders, need to pay for the pain the little guys are going through, but the moment transfers of wealth are passed out under the umbrella of "fairness," a line in the sand must be drawn.  In the end, every person that took out a mortgage in the last five years is responsible for the purchase they made.  If you reward people who got themselves in trouble, you punish those that kept themselves out of the mortgage mess.  

At that moment, you punish the wrong person.

This will be a good time to see through the pandering of the Democrat politicians as they see a trillion dollars being spent, and an opportunity to funnel those dollars to "the middle class" who, just coincidently may vote for them.

New York Times September 18, 2008

The Pain of Selling a Home for Less Than the Loan

Many Americans are discovering an unfortunate twist to the housing crisis: even after selling a home and moving away, they might have to keep paying on it for years, even decades.

With home prices tumbling, millions of people owe more on their mortgages than the houses are worth. If a new job or other life change compels them to sell, their choices include bringing a pile of cash to the closing to make the bank whole, going into foreclosure or cutting a deal with the lender to pay off the balance of the loan over time.

How sellers will react when confronted with these unappealing options is one of the biggest questions hanging over Wall Street as it tries to move beyond the carnage overwhelming such venerable firms as Lehman Brothers, American International Group and Merrill Lynch.

A sale for less than the value of the mortgage on a property is known as a “short sale,” because the transaction leaves a homeowner short of the funds needed to settle the debt. Agents and lenders say the number of short sales is rising markedly.

Reluctantly, banks are agreeing to let some short sales go through. But instead of writing off the unpaid portion of the debt, they want homeowners to sign a note promising to pay some or all of the balance due.

This was the situation confronting Mike and Linda Kelly, who needed to sell their house in the foreclosure-plagued Central Valley of California when Mr. Kelly got a new job 75 miles away.

CitiMortgage said it would approve a sale at that price, but at the last minute told the Kellys they needed to pay $166 a month for the next 20 years, a total of $40,000.

“When you are ready to participate in the loss, feel free to call me,” a Citi loss mitigation specialist, April Easter, wrote to them in an e-mail message.

Moody’s Economy.com estimates that about 10 million homeowners have negative equity, a condition known colloquially as being upside down or underwater. By next June, the forecasting company expects the total to rise to 12.7 million — a quarter of all homeowners who have mortgages.

Owners in this predicament who must sell, like the Kellys, have few alternatives if they are not flush.

“The first wave of foreclosures involved a lot of investors who just disappeared,” said Lance Churchill of Frontline Seminars, which teaches real estate agents how to negotiate with lenders on short sales. “Now, homeowners with jobs and assets are underwater and want to sell. The banks want as much as they can get, today or in the future, and the owners want to get away clean.”

This clash is a central aspect of the financial crisis engulfing Wall Street. During the boom, millions of mortgages were bundled into bonds that were sold to investors and banking houses. But with real estate prices falling and mortgage defaults rising, it has become nearly impossible to calculate the worth of those bonds, and investors are fleeing them.

Lenders like Citi — which has already lost more than $50 billion in ill-advised real estate-related ventures — are walking a tightrope.

If they do short sales without trying to extract anything from the sellers, everyone in the country who is upside down could try to wriggle out. The banks and bondholders will take a fresh wave of hits; some might not survive. But if a lender drives too hard a bargain, the owner can default, leaving the bank worse off than if it had taken the short sale.

“It’s a game of chicken, with huge consequences for the banks, the borrowers and the economy,” Mr. Churchill said.

Lenders’ demands take many forms. Mary Gonzalez, an agent in San Jose, had to stave off a request from a mortgage company that her client take cash advances on her credit cards to settle a mortgage debt. That lender eventually agreed to settle for a few thousand dollars.

At the other extreme, JPMorgan Chase says it wants short sellers to sign a note for the full balance due, with interest, over 30 years if necessary.

While there are no authoritative national numbers on short sales, a related statistic — the number of people selling their homes for less than they paid — is rising rapidly, at least in California.

In August, 54.2 percent of Californians who sold their homes suffered a loss, a sharp rise from 16.8 percent in August 2007. Today’s number exceeds the peak of 53.2 percent reached at the end of the last downturn in January 1996, according to the research firm DataQuick. (In some of those cases, the sellers may have lost their down payment without necessarily incurring a cash shortfall at closing.)

Thank you, Mr. Gutenberg

When Johann Gutenberg invented the printing press in 1439, power was dramatically shifted from a few (those that could read) to the people (who could not), thus changing the course of history as millions of people learned to read as a direct result.

Who knew that, in 2008, the printing press would again change the world. How, you ask? The United States is printing money faster than any time in its history in order to save the financial stability of the Western World.

Today, the Federal Reserve agreed to "buy" all of the bad loans made by banks and financial organizations at a potential cost of $1 trillion dollars. The last time I checked, the United States Government doesn't have any money. But thanks to the printing press, we can just print more. It is a marvel of our time.

The financial markets are in sheer euphoria over the idea of a "stabilized" economy. But the underlying problem, a trillion dollars of bad home loans, and billions of dollars of underlying derivative securities are still bad, now they are just the property of the American taxpayer. In essence, we have just kicked the ball of bad debt down the road a couple months.

Maybe we can just give money to our friends for Christmas this year because the more we print the more worthless it becomes.  And we won't be able to buy anything with it anyway.

Understanding the Mortgage Mess

In my opinion, it all started September 11, 2001.

Desperate to stabilize the economy after the largest attack in our history, our government set it's sights on righting our economic ship. In order to keep the American economy strong, Americans were encouraged to spend ourselves into prosperity and take us through a very difficult time as we went to war in Afghanistan and Iraq as well on the broader war on terrorism.

The quickest way to infuse money in the economy was to encourage home ownership and home improvement.  How was this done?  The Federal Reserve lowered interest rates they charged to banks, who in turn, passed on lower interest rates to customers.  By lowering interest rates, the Federal Reserve pumped billions of dollars into the economy.

It became easier to qualify for loans.  As more money became available for home mortgages, prices for homes rose dramatically.  Home prices increased further by increasing the pool of buyers.  New loan products such as the adjustable rate mortgages (ARM's) created low introductory rates that dipped to 4%.  Buyers were able to afford more home which helped buyers move from their smaller home to a much larger home. Further restrictions were lifted as buyers no longer needed to prove their income (stated income loans).  Interest only loans lowered the payments further.

Once the demand increased, home prices began to skyrocket.  With the increasing prices, banks came up with a product called a reverse amortization loan, which allowed buyers to pay only a portion of the interest, and place the additional interest on the back end of the loan, the most insane idea of all.  For every month someone lived in a home, they owed more than when they moved into the home.

On a dual track, as home prices soared, homeowners were encouraged to take out 2nd mortgages to take out equity from their home up the the new "appraised value."  Trillions of dollars of equity was removed--and spent in our economy.

As home prices continued to rise, builders continued to build homes as fast as they could.  A speculative component sent home prices even higher.  Speculators--people who bought homes and just sat on them became 15% of the home buyers market.  Their goal was to hold homes for a year and sell it for the home appreciation profit.  These "flippers" had the effect of artificially increasing the price of homes.

All of this is bad, but it gets worse.  A new group of loans appeared in our daily lexicon.  Sub prime mortgages became the next growth industry further adding to the demand for homes and further increased prices.  Sub Prime is a polite way of describing higher interest loans to people with a history of bad credit or who otherwise would not qualify for mortgages.  

Finally, the worst mistake of all.  Home prices began rising at such a fast rate, banks began to believe that homes were going to appreciate forever--and 100% financing was born.  Buyers were stretching into homes that they couldn't afford and were not required to come up with any money for a down payment.  This is as far as banks could go to stretch to help people get into homes.  Or so we thought.  Banks began to refinance loans up to 110% of their value.

And then people began to default on their mortgages and things began to unravel.  

But before we look into the unraveling, we need to understand the complicated world of high finance.  

When a mortgage loan is written to a home buyer, a long tangled web of high finance begins as that mortgage is sold to a larger servicing bank or packaged and resold to investment bankers on Wall Street who repackages it with a multitude of other loans, creating a mortgage backed security bond, which is sold around the world to huge investment banks and investment groups.  These bonds, then were sold and created a value all of their own, often times appreciating in value without connection to the value of the underlying mortgage which it was based.

The best way to explain where a mortgage ends up, lets create an example.  I find a home for $100,000.  I go to the bank and take out a loan for $100,000 at 7% interest. My payment is $700/month which includes $600/month of interest and $100/month in principle.  My bank makes money originating the loan--often between 1-2%, funds the loan and then looks to sell the loan to another institution in order to free up money to make loans to other home buyers.

While not all banks sell their loans, there are several banks that are in the business of servicing these loans, meaning sending out the statements and collecting the payments.  Citibank, Wells Fargo, and Washington Mutual are the three largest.  So on my mortgage, even though I went to First Bank and Trust, I make payments to Citibank.

But my mortgage often doesn't stop there.  Citibank often sell the "rights" to the mortgage (along with a portfolio of other mortgages) to Fannie Mae, Freddie Mac (or other investment banks such as JP Morgan Chase, Lehman Brothers, or Merrill Lynch.)  Since Fannie Mae is in the news right now, lets say Citibank has my loan, where they package it together with other loans, and sells the "rights" to Fannie Mae.

Who is Fannie Mae?  A good summary exists here.  In essence, Fannie Mae is a quasi government corporation which borrows money from the Federal Reserve at a discounted rate, provides liquidity to the mortgage market by buying the rights to my mortgage, provides a guarantee that I will make my $700 payment, and then packaging my mortgage with other mortgages in the form of a bond fund (called a mortgage backed security) and sells these bonds to investment groups such as pension funds, insurance funds or other investment groups. Fannie further provides an avenue for these bonds to be bought and sold between investors, thereby creating liquidity to the mortgage market.

Once a mortgage backed security (MBS) is sold to a company like Lehman Brothers or JP Morgan, who in turn combines several types of bonds and creates three groups of bonds.  In essence, these are low risk, medium risk and high risk.  These securities are derived from the underlying mortgages such as mine (derivative securities which are called collaterized debt securities) and are bought and sold to individual investors, hedge funds or other investment groups.  

In an odd twist, banks began buying these derivative securities and added these as assets to their balance sheets.  So banks owned the underlying security--the actual mortgage, and a derivative of that security.  If you are confused, join the club.  Even banks don't know how this confusion works.

Now let's figure out how things began to unravel.

In 2007, the first shock to the banking system hit when sub prime loans began to see higher default rates.  The defaults were, in part due to large increases in the borrowers monthly payments in the adjustable rate mortgages they were sold in 2o04 and 2005.  Without the ability to refinance these homes at similar interest rates, their payments rose dramatically.  As borrowers began to turn in their keys, banks holding these loans began to get homes back through foreclosure.  As foreclosures increased, lending standards began to get tighter.  As the the matter got worse, banks specializing in sub prime loans began to be watched by regulators which began to demand stricter lending standards.  When these banks couldn't write more loans to outgrow the debt in their portfolio, they collapsed.  These banks collapsed in 2007 and became the first domino to fall.

As a result of the sub prime mortgage business collapsed, a large portion of the buying public was taken out of the market.  As the bank regulators tightened up lending standards, and adjustable rate mortgages went out of fashion, more of the buying public was taken out of the market.  In the fall of 2007, a fundamental shift occurred in the housing market.  Home prices reached their peak, and began to fall because of tighter lending rules and less buyers.

Once the prices started to fall, another large segment of the buyers fell out of the market. Speculators no longer could make money in a level or falling market.  Fifteen percent of the buyers of new homes withdrew from the market.  By the fall of 2007, new home values started to plummet adding to downward pressure on the price of homes.  Since builders were building spec homes at record levels, there was an oversupply of homes.  In order to keep their sales strong, incentives were offered.  By the spring of 2008, home values shrunk 35%.

The loss of home values placed millions of Americans in an upside down position in their mortgage.  The new home that was purchased a year ago for $600,000, builders were now selling the home for $500,000.  Home appraisals became a large focus of bank regulators. With many people upside down in their mortgages, and in houses with payments they can't afford, homes no longer became a liquid asset like the previous 15 years.  

While home values were plummeting and foreclosures increasing, the world of high finance was becoming unraveled.  Fannie Mae, you remember, creates liquidity in the mortgage market. As defaults increasing, Fannie was on the hook for guaranteeing half of the mortgages held in the United States.  This caused a run on Fannie, and they were not able to keep up with payments.

This sent a shockwave throughout the mortgage industry and the market for derivatives began to dry up.  It got to such a point that banks stopped writing jumbo loans over $400,000 for over a month.

So we have a tightening of credit, less home buyers, higher default rates and a liquidity problem in the secondary derivatives market.  Add to that rising gas prices, an endless drumbeat of bad economic news and we have a perfect storm that further reduces the confidence in the home buying public.

So there we have it.  Millions of Americans are in homes they owe more on that what it is worth. Hundreds of thousands of homes are going through foreclosure and millions more will be on the market because of foreclosure, and banks are going to be on the hook for all of those losses.

The MBS market has dried up as foreclosures increase, and Fannie Mae is on the hook for all of these derivatives.  These derivatives are owned by investment companies that run pension funds, insurance funds and billions of dollars of these bonds are owned by investment banks such as JP Morgan, Lehman Brothers and investment companies around the world.  Trillions of dollars of these bonds are owned by banks around the world.

American International Group, the company that our Federal Government now owns an 85% stake, is the 18th largest company in the world.  It is an insurance company that held many of its reserves in mortgage backed securities, which were supposed to be a liquid asset.  Since the MSB's are no longer tradable and are virtually worthless, without the backing of Fannie Mae and Freddie Mac, the Federal Government became a part owner in order to protect the underlying insurance business.  

Our Federal Government is now in the security business (US Military and TSA), mortgage business (Fannie Mae and Freddie Mac), the banking business (FDIC and Indy Bank), the insurance business (AIG), the retirement business (Social Security), the health insurance business (Medicare and Medicaid), the energy business (ethanol, wind, solar, coal and oil), the education business (Public Schools), the road building business (Highway transportation fuel taxes), the pension business (Railroad pension fund), the farming business ($300 billion in subsidies) and many others.

What began as a way to keep our economy going in the aftermath of September 11, the mortgage mess we are in highlights the problem we really have--all things go through Washington.  And we are headed for a centralized power based in a very powerful Federal Government.  

If you think we have looked to the Federal Government to take care of us before, you ain't seen nothing yet.

Local Sioux Falls Politics

Mr. Mayor, City Council Members, Taxpayers of Sioux Falls,

I stand in opposition to the growing size of government in Sioux Falls.

It is with some hesitancy I speak, as we all have so much to be thankful for in our city. Over the last 30 years, we have been blessed by strong leaders, wonderful schools, beautiful parks and expansive bike trails. Our public safety is protected with a strong police and fire departments. We see plenty of options for entertainment from the Washington Pavilion, The Sioux Empire Fair, Jazz Fest, Hot Harley Nights, Hot Summer Nights, German Fest, Rib Fest etc.

Our economy is strong, as we have diversified our economy from agriculture to financial services, health care and most recently, energy. Our government employees are dedicated and good people who have contributed to the strong and vibrant economy we enjoy.

As a homebuilder, I recognize growth is fundamental to a strong Sioux Falls. But today, in the aftermath of Federal Government bailouts of Fannie Mae, and Freddie Mac, which followed the collapse and takeover of Indy Bank, and now the bankruptcy of Lehman Brothers, the national economy is on the brink of collapse.

Now is not the time to expand government excess. Now is the time to tighten our belts and look for excesses to cut. We have record energy prices, health care costs and food costs. We have a Federal Government that is being saddled with a very serious housing crisis, a structural failure of the mortgage industry, an auto and airline industry on the bring of collapse, a health care crisis which includes but is not limited to Medicare, Medicaid and Social Security, a falling value of the dollar, and we have a growing unemployment and inflation problem, which will create additional pressure on entitlement spending such as Aid to Families with Dependant Children, Section 8 and other safety net programs designed to help individuals in a weak economy. Our federal government is in serious trouble and we can't count on them much longer for federal money.

Now is a time for this council to determine how we will cut back in the face of losing federal money that has subsidized our growth for the last 15 years. We have relied on the Federal Government to take care of roads and highways, water projects and parks projects. If we care about the financial condition of our country, we will recognize community grants to cities like Sioux Falls may not be the highest priority in the future. When one out of four homes in Detroit are in foreclosure, when national unemployment reaches 7%, money will be diverted to keep people from becoming homeless. It would be irresponsible to provide another grant to Sioux Falls just to clear a railroad in order to have another park.  If we think that railroad needs to be cleared, we should pay for it ourselves.

Now is the time to be fiscally responsible. I think it is disingenuous of this council to say we are only increasing the sales tax 8 cents per $100. The reality is, you would like to increase the sales tax 1.8 cents, but for that nasty state law that prevents sales tax from increasing. I am certain that the convention center is supported by the majority of this council. The question you must answer is this. Today, our economy in Sioux Falls is good, while the economy around us is collapsing. Is now the time to increase taxes, or is now the time to tighten our belts and reprioritize our spending habits?

Dear Sarah Palin

Gotcha politics is alive and well. The media interviewers will be trying hard to trip you up on foreign and domestic policy matters large and small.

Just know that most people don't want or expect you to be the expert in these matters. We want to know the principles and philosophies that guide your judgement.

We don't want a moral relativist who "understands all the options." Nobody can understand these issues completely because the more you know the more complicated they become. It is for this reason that Madeline Albright and Henry Kissenger disagree on policy.

Instead of worrying about getting tripped up, I would like to suggest an alternative approach.

At the very beginning of an interview, explain you don't know the names of the leaders of many countries in the world. That you have never been to many of them before. That you haven't yet declared with certainty your own position on global relations. That you don't know all of the options of what to do if the North Korean dictator is found dead next week. That you don't know the proper course in the Middle East. That you don't know how Israel should react to missle attacks or if America should be involved in joint strikes against Iran, Hamas or Hezbollah, or just arm Isreal with money and weapons to carry out the job. And tell them, NEITHER DO YOU!

That you don't know if hedge funds should be regulated. That you don't know how to structure a deal for the Treasury to bail out Fannie Mae and Freddie Mac. That you don't know how the domestic auto industry is going to make it out of bankruptcy caused by their own bad judgements and labor agreements. The list goes on and on that which you don't know. And tell them, NEITHER DO YOU!

Tell them what you do know. Tell them, in your experience, in order to reform government, you have to be willing to take on entrenched interests. It doesn't matter what party they are from or what amount of money they have given your friends. Corruption is easy to see, but difficult to fix. Talk to them about what it was like giving a speech to a group of people, half of whom hated your guts because you were targeting them in their pocketbook. Tell them what it is like to have eyes of hatred look at you when you entered a room. Tell them about your backbone and the steel resolve you have. Tell them about what is wrong with government. Tell them about the people that secretly told you to keep going, to keep fighting, to keep your eye on the reforms. Tell them about back room deals, tell them about the corruption of power.

Tell them about your guiding philosophy, that power is best kept closest to the people, that decisions should be made in Wasilla not Washington. That people can take care of themselves. Tell them about your beliefs that wherever money is spent, corruption will follow. Tell them that a Federal Government that spends $2.5 trillion per year is a government filled with corruption.

Tell them about the role you see America playing in the world. Tell them about the hope America brings to small towns just like Wasilla in little towns around the world, in the small towns and villages in Georgia, Ukraine and Iraq. Tell them that we stand for freedom. That we will always stand for freedom, and that you will talk about America as a beacon for hope, not the cause for despair. That we only need to understand the motives of tyrannical dictators, the control they exert by the use of fear and the loss of money. Tell them America's role in the world is to speak for those living under tyranny, not to speak to tyranical dictators in hoping to get along so they will like us. Tell them that America can live in a world against us, but the free world, and those yearning to be free can not live without a strong America. Tell them you will not apologize for America but rather make her stronger.

Tell them over and again. It is time to change Washington. People want to hear you fight.

The American people will take care of the rest.

Facts on Earmark Spending in Washington

Everyone can agree that earmark spending has gotten out of control in Washington. If we would like to get this spending under control, who should we hold responsible?

All earmark spending goes through the "powerful Senate Appropriations Committee."

Who sits on the committee? Our own Senator Tim Johnson.

Shouldn't he be held responsible, then, for the out of control spending in Washington?

Has he ever fought against earmarks? Has he ever dared take on the Chairman of the Committee, Sen. Robert Byrd (D, West Virginia), or even Sen. Ted Stevens (R, Alaska)?

If not, does he then disagree that earmark spending is a problem?

If so, what has he done to fight the corruption associated with earmark spending?

Washington is broken. If Sen. Tim Johnson is not responsible for out of control spending, then who is?

In a related story, Sen. Tim Johnson sits on the Banking Committee. The Federal Government has stepped in to take over Freddie Mac and Fannie Mae, the largest mortgage lenders in the country. Banks are failing. The FDIC (the government agency that insures our deposits) will be taking over hundreds of banks in the next year.

What has Sen. Johnson done the last 5 years to predict this problem?

What steps has he taken to prevent the situation we are in right now?

It is time to start changing Washington. Do we really think a person in the system can really change the system?

Facts on Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac have been bailed out by the US taxpaper. We don't know the costs, but we have found out some interesting details.

Did you know Fannie Mae and Freddie Mac has spent over $1 billion on Washington lobbyists over the past decade? An analysis of the corruption of power and financial coercion is needed to expose the despicable connection of money and power in Washington. A summary of the scandal is located here. Make sure you listen to the author's report. It is highly informative.

Before you read on, please read about the revolving door of politicians and lobbyists in this review of the top 50 lobbyists in Washington here.

Now some facts you should know about Fannie Mae and Freddie Mac.

1. Freddie and Fannie hold or guarantee half of all mortgages in the United States totaling $5 trillion.

2. Freddie and Fannie creates liquidity in the housing market by buying mortgage loans from banks. Often, they bundle these mortgages and sell them as mortgage backed securities.

3. Mortgage backed securities are bonds sold by investment brokers who in turn sell it to their clients. For example, if you have $100,000 to invest, need a monthly cash flow to live on, your financial advisor may suggest these bonds. In essence, your money is lent to a homeowner buying a home. The principle and interest payments a homeowner make go directly to you, less a servicing fee. Fannie Mae guarantees your payment even if the homeowner doesn't make the payment.

4. Fannie Mae is in trouble because many homeowners haven't paid their mortgage payments, and they don't have the cash reserves to make these loan guantanteed payments. Now, the Federal Government is making up the difference. In essence, the Federal Government is now responsible for the millions of defaulting mortages in this country and now owns nearly half of the homes in America.

5. How much will the Fannie/Freddie bailout cost taxpayers? Nobody knows. Some suggest it will be comparable to the Savings and Loan bailout of $150 billion. You should know that the banking industry as a whole is in serious trouble, and the step to take over Fannie/Freddie will move to other private banking institutions.

6. Why was it done? Currently, there isn't money available to make future home loans because of significant house price declines and mortgage defaults. Banks have lost billions of dollars, and will continue to lose money unless liquidity is restored to the houseing market.

The questions to ask:

Shouldn't politicians have foreseen this problem?

* How does lobbyist activities affect regulation?

* How much money is raised by the members of the Banking committee from Freddie and Fannie and their employees?

* Shouldn't Senator Tim Johnson have to answer these questions as the second highest ranking member of the Banking Committee?

* Where was Sen. Johnson when it came to Sen. Chris Dodd, the chairman of the Banking Committe, when he was the single largest beneficiary of Freddie and Fannie lobbyist money?

*Oh, and how much money has Senator Tim Johnson recieved from Freddie/Fannie and all other banking institutions he is supposed to regulate?

Senator McCain ended feminism in America

Feminists are lining up calling Sarah Palin a 'right wing extremist." 

Is it because Sarah Palin doesn't believe in working women?  She is.  Is it because she has never had to challenge the boys club of business and politics?  She has.  Is it because she thinks that women should stay at home barefoot and pregnant?  She hasn't.  Is it because she thinks women are not as smart as men?  She is.  Is it because she believes women should be paid less than men?  She doesn't.  Is it because she believes women are weaker than men?  She isn't.  Is it because she doesn't know what women go through every day?  She does.

Is it because Sarah Palin likes guns?  I am not sure what her views are on this subject, but is it an extreme position that believes it is a legitimate point of view that owning a gun is a right guaranteed in the Constitution in order to protect themselves?  Most people that I know who own a gun are very tough on people that commit crimes using a gun.  Is that an extremist position?

Feminism has been masqueraded to the American people as fighting for equality of all women, creating a trojan horse argument that women are being held back at the hands of men (who control society.) 

But none of the classic feminism lines apply to Sarah Palin.  This is why the feminists are so scared.  Sarah Palin has just exposed the feminist agenda as a single issue fringe group.

Sarah Palin is described as a person that believes life begins at conception.  This is the position of most church going people and is the position of the largest church in the world, the Catholic Church.  Does that mean all of these people are extremists?

The main objective of feminists is abortion (Palin supports birth control) and the sexual proclivities for which they aspire .  Feminists believe having children holds women back and this is the reason abortion rights are so important.  

Sarah Palin's selection as Vice Presidential candidate effectively ends the feminist movement. It turns out a woman can have children, still hold on to traditional values of faith, family and God, and advance their career at the same time.

Feminists are secondarily concerned about any religion because it promotes a society encouraging traditional values of monogamy, fidelity, and marriage between a man and a woman. True feminists consider open, promiscuous sexual expression more important than encouraging women to settle for a long term, healthy sexual relationship within in a loving, marital environment.

Sarah Palin represents the passing of the torch from the Sixties generation who believed in free love, rebellion against organized religion, and the role of women who were controlled by men to a more traditional woman who has accomplished everything they claimed was not possible and everything for which they have been fighting, all while raising a family within the confines of traditional values and organized religion.  

For whatever reason Senator John McCain chose Sarah Palin, the result was a radical change in the discourse in this country--to the detriment of feminism.  

Way to go.

In the life isn't fair category

I didn't know her, but a girl losing her life at 34 years of age is simply an injustice in this world.  Why does a person, in the prime of her life, get cancer and leave this world?  I simply don't know, but I will pray for her family to be able to understand and gather meaning from their loss.  My thoughts and prayers are with her family.  

Erica Lynn Olson of Sioux Falls, SD
Published: September 07, 2008

Sioux Falls - Erica Lynn Olson, 34 of Sioux Falls, SD, formerly of Brooklyn Center, MN, died Friday, September 5, 2008 at Dougherty Hospice House in Sioux Falls following a battle with brain cancer. 

Erica, the daughter of Douglas and Carol Olson, was born June 25, 1974. 

She is survived by her parents; one son, Max Olson of Canby, OR; her sisters, Rhonda J. (Randy) Kaleikilo of Canby, OR, Sheila K. Sachariason, Julie (Brian) Stricherz, and Alicia M. Olson, all of Sioux Falls, SD. 

Memorial services will be held 1:30 pm Saturday, September 13th at East Side Presbyterian Church.

Initiative 11-"For the Children"

Initiative 11 is a law to prioritize selflessness over selfishness.  

The proposed law redirects our attention from ourselves to our children by setting a state standard to prioritize a human life over a culture of egotism and narcissism. This law is vital to the survival of our way of life as it reemphasizes the dignity of human life over the a self centered lifestyle that damages children to a degree that is irreversible. 

Imagine the life of a 15 year old girl, and all of the negative influences over her future.  If you would like to know what it is like to grow up in our current popular culture, I would suggest you look past the fashion party lifestyle of Brittney Spears and simply download the lyrics of some of the music pop culture is pushing. 

The most popular rapper of this generation, 50 Cent (no joke, that is the name he goes by), a culture warrior of the worst sense,  has a song, "Candy Shop." I think you should hear it just to catch a glimpse into what your children or grandchildren are listening to. You can link to it here.

Lil Wayne and the East Side Boyz, another culture warrior, has a real catchy toon.  It's called lick my lollipop.  I don't care who hears these lyrics, but if you have a daughter that is 15 years old, you should be worried what these lyrics are telling her.

Okay, lil mama had a swag like mine
even wear her hair down her back like mine
i make her feel right when its wrong like lyin
Man, she ain never had a love like mine
n' man i aint never seen a ass like hers
and that pussy in my mouth had me at a loss fo words
told her to back it up like erp erp
and make that ass jump like shczerp shczerp
and thats when she said i lo-lo-look like a lollipop

If you still don't believe me, listen to the lyrics of every rapper and rock group out there.  The lyrics devalue the self esteem of women.  The lyrics aren't just about sex.  They are about a life without a love, not on a life centered on helping other people, definitely not on God, not on what makes a person happy for the rest of their life, but on the most basic and crude of human desires.

Some people think they can separate the popular culture from that of a life of love and fulfillment.  After all, this culture has blossomed from the flower children that grew up on a "make love not war" mantra, who rebelled against the staid, cumbersome relationships of their parents. They believed their solution was the proper alternative, a counter culture of sorts, to the traditional family values, dare I say, Christian values, of their parents. Maybe they can talk about how bad families have been in the past, how people were unhappily married, but the alternative culture has created a real problem.  

Every one of you with a daughter (or a grand daughter) would want her to grow up to be respected and loved for the rest of her life by someone who could value her.  Every one would want her to fall in love with someone who was loyal and cared about her. Your daughter, without even knowing it, would want a long term, loving relationship. Such a strong relationship, that it would last for the rest of her life so that she could look back, in her old age, and see a husband, children and grandchildren who love and adore her.

But the culture we live in devalues a long lasting love.  Falling in love is such a chance these days, because the love is based on popular culture values.  Unfortunately, many of us who grew up in this pop culture haven't really thought about the ramifications of such a "pleasure me now" culture.   That culture leads to children--unwanted children.

And that leads us to Campaign 11.  A law that values a child.  Whether they are wanted or not, the emphasis is about placing these children ahead of our own needs, wants and desires.  A satisfying selflessness. This goes against popular culture.  They will tell you this is about a womans right to choose.  

But it is more than a womans right to choose. The current laws are actually about a mans right not to choose.  Not in the way you are thinking.  The current law is about a mans right to not choose to do the right thing.  The current law is about a choice of saying we don't have a problem with today's popular culture.  The current law is about one night stands. The current law is about sex with out consequence. The current law is about women as and object, not a person.

Campaign 11 is about how you want to raise your daughter.  Do you want to teach her about the standards, the responsibilities and the possible love in her life.  Or do you want to teach her about all that is going to go wrong in her life.  

Whitney Houston once sang, "children are our future."  But as we shamelessly watched her marriage with Hip Hop artist husband Bobby Brown disintegrate and her life shattered by drug abuse, we are reminded that children may be our future, but a self centered life leads to destruction.

Hillary Clinton, boasts how she has been fighting for children for over 35 years.  I actually thinks she gets children.  But she is afraid to speak truth to her power.  How can she say she is for the children when her financial supporters are the purveyors of the smut that is called pop culture?  Hollywood, the music industry, and the womens magazines from Cosmopolitian to Playboy produce a eternal parade of degradation in the name of advancing the feminist agenda. Give me a break. Make no mistake, Hillary understands the destruction of children, but for her to turn her back to children in the name of political expediency, is a much greater evil.

A culture war exists today, and millions of Americans face it and fight it every day.  I describe the war as where popular culture and moral values collide.  Cliches are the weapons in this war. Words such as "pro life," "pro choice," "pro-abortion" and "anti-abortion" are the banners under which both sides fight.

I choose to frame this debate as an internal struggle with ourselves that is as old as time. It is a struggle within ourselves about "right and wrong," and "good and evil," separated by a conscience. 

Noted, and controversial psychologist, Sigmund Freud, describes the struggle between selfishness and selflessness as a battle between the "id" and the "super ego."  Each of us are born with natural primitive instincts (id) to hunt and gather food, protect themselves and a drive for sex and an opposite superego, a natural law of what is right.  In philisophical thought, we each possess a governing mechanism to choose between the two.  This is called the conscience or the ego.

In Christian thought, we are taught about the mind, body and soul.  The body is taught to have natural physical urges.  The soul represents the goodness of God, the human connection with the supernatural power of right.  Our mind is the intermediary in our choice between the desires of the body (Greed, Gluteny, Audultery, etc) and the soul (the connection we have to God).

So why is this important?  Popular culture tells us we can have everything we want. Unfortunately, we can't get everything we want unless we hurt people to get it.  This is the real unfortunate problem with pop culture.

Many people are hurt in our pursuit of what we want in our popular culture.  First, and foremost is the long term well being of the woman.  She is not helped by reducing relationships to primal, short term passion filled trysts.  Secondly, men are not encouraged to pursue long term relationships by a constant attention to short term relationships.  Third, another person, the unborn child, is an uncomfortable truth that is created by selfish unions of two people.

Our battle is the battle between right and wrong, good and evil, and selfishness and selflessness.  If there wasn't a battle, then there would not be emotion on either side.  Every woman that has had an abortion I have ever talked to has become very emotional.  These emotions tell me there is a conflict.  However you call it, whether in the prism of good vs. evil, right vs. wrong, or selfishness or selflessness, there is no denying it, there is conflict.

The country struggles with how abortion should be regulated by the Federal Government.  One camp shows the struggle from the perspective of women, indicating there is a Constitutional right to have an abortion.  The other camp shows the perspective of the child, indicating there is a Constitutional right to life.

A study of the Constitution would be necessary to understand the legal arguments.  One group believes that the Constitution grants rights based on the popular opinion of the times.  The other group believes God grants certain rights, and those rights are enumerated in our Constitution.  I am quite certain that neither group would claim God grants the right of a woman to abort a child.  So the legal battle that is ongoing is to determine how our government is to treat the third person involved in the decision of abortion, one group decides to acknowledge the presence of a third person, the other group can't.

Caught up in all of this debate is the role of women in our society.  Do women have a right to "not have a child" if they don't want one.  The price of a progressive sexual attitude, that one can have sex without consequences, is at stake.  If abortion would be outlawed, the results of sex (a child) would limit the ability of a woman to "plan" for a future filled with career while engaging in a sexual relationship. 

So should you be pro life or pro choice?

I think the best way to find that out whether you should vote for Initiative 11 is by finding out your true feelings about what you want out of life.  If you are looking to meet someone and spend the rest of your life with that person, raise children and eventually enjoy the grandchildren, you should support laws that encourage this behavior and should be in favor of the initiative.

Now this is a purposefully inflammatory comment.  But I would like to explain.

Popular culture pushes wrong values that run contrary to spending the rest of your life together with a husband (or wife), to raise children, and grandchildren.  Why?  Simple.  Popular culture is a culture of self centered behavior.  To have a family requires self sacrifice and selflessness.  The two can not coexist without conflict.

Read any Cosmopolitan or Us Weekly magazine and you will see the most self centered lifestyle imaginable leading to a culture of egotism and narcissism.  A culture of openness and toleration put forward by leading culture warriors such as Hugh Hefner and Larry Flint places selfish gratification as an awful alternative to the structure of family.  If you can look me in the eye and tell me you would want your 14 year old daughter to become a stripper or pose nude for Playboy, then you have already taken sides in destroying the desire of your 14 year old daughter to have a life completed by family, children and grandchildren.

Unfortunately, the popular culture has been winning as of late.  Degradation of women has risen and will continue to rise.  One needs to look no further than the lyrics of famous music titles that are played in every dance bar in America.  I am not naive enough to think that times were ever better, that popular culture was more pure.  But popular culture has never been on display 24/7 in our daily lives as it is now.  There is not escaping the negative effects of popular culture.

For every waking hour, the radio plays lurid music, television pushes banal explicit themes, and movies, magazines, entertainment and even our politicians reach further and further into the popular culture themes of sex, drugs and progressive lifestyles.

When you choose to vote for or against Initiative 11, there are several issues to decide.  Some will decide based on their religious beliefs, that God miraculously breathes life into the mouth of a child and that dependent, yet seperate life is entitled to the same protections given to all life.  Others will decide based on protecting a lifestyle of women, that each woman should not be forced to carry a child to term on the demands of government.

But there are many in the middle who would like this issue to go away without having to deal with it.  It is to you that I write this article.  This initiative is a referendum on culture.  If you think our culture is positive to women.  If you think your 15 year old daughter or granddaughter benefits by the continual stream of sexual objectification pushed on them by a popular culture that promotes self aggrandizement and narcissism.  If you think the objectification of women is beneficial to the self esteem of girls.  If you think the promotion of popular culture is beneficial to the well being of women and girls, then continuing a policy of protecting the rights of women to have an abortion is beneficial.

However, if you long to encourage your daughters to grow up believing their worth should be measured by who they are, instead of what they look like.  If you believe that popular culture is placing the wrong pressure on your children.  If you wish to protect your daughters from a culture promoting exhibitionism and sexual expression, then voting for a policy that would help counter the popular culture is beneficial.

An unwanted pregnancy is most often a result of a union between two people not in love.  We should encourage children to believe in things more important than self.  The love between a man and a woman is something that should be cherished, not derided.  Initiative 11 promotes the values of family, and we should encourage alternatives, such as adoption to loving couples yearning for children to love.

There are very few times in our life that we can selflessly make a difference in another person's life. Voting 'yes' on Initiative 11 is one of those times. More importantly, looking at this issue in a different way, may actually help you look differently at the value of your own life. 

And wouldn't that be something.