Archive for October, 2008

Where did Obama come from ?

Wednesday, October 15th, 2008

As it becomes increasingly possible that Barack Obama may be our next president, some of his past associations have begun to crop up in a few media outlets. The major newspapers have shown an amazing lack of interest in his associations and a few “progressives” have attacked such inquiries as “racist.” There has been more talk about “The Chicago Way” and I suspect we will hear more about that in the future. Here is a primer on Obama and The Chicago Way.

One data point is the 1987 Chicago Teachers’ strike that led to attempts at reform.

A 1987 teachers’ strike brought those two sides together to push for a reform act passed by the Illinois legislature in 1988 that created “Local School Councils” (LSC) to be elected by residents in a particular school area. According to Shipps, the strike “enrag[ed] parents and provid[ed] the catalyst for a coalition between community groups and Chicago United [the business lobby] that was forged in the ensuing year.” (The full story of this complicated process is provided by Shipps in her book.)

This battle between parents and the teachers’ union led to legislation and a “local school council” movement that was captured by the political far left.

The LSC’s were to be made up by a majority of parents and have the power to hire and fire principals thus creating a new power center in the school system against what both reform groups viewed as the bureaucratic and expensive school board, on the one hand, and, on the other, the teachers union. In my view these types of councils are reminiscent of the manipulative “community” bodies set up in regimes like those of Hugo Chavez and the Sandinistas – used to control genuine democratic movements such as trade unions. Dorothy Shipps argues, as I will suggest below, that there is an alternative approach that is genuinely democratic and possibly more effective in improving outcomes for students.

Here is where Obama enters the picture.

Active in the local control from below, on the “community” side of this effort, was Bill Ayers who had returned to Chicago in 1987 as an assistant professor of education at the University of Illinois’ Chicago Circle campus, after surfacing from the underground and earning his Ph.D. at Columbia. Another ally in this battle at the same time was Barack Obama’s Developing Communities Project (DCP), as Obama notes briefly in his Dreams From My Father. (See also, “Meeting on School Reform Halted,” Chicago Tribune, Feb. 19, 1988 at 3; and “Black Parents” A letter to the Chi. Trib. on Aug. 23, 1988 from a DCP member defending the 1988 local control reform bill) The DCP had its origins in the “radical” movement started by Saul Alinsky.

Obama, of course, was an Alinsky disciple. The Chicago Annenberg Challenge comes in here.

Bill raised money to start the Small Schools Workshop in the early 90s and eventually hired another former maoist from the 60s (and actually someone who was a bitter opponent of Ayers as SDS disintegrated) named Mike Klonsky first as research director and then to head it up. Klonsky was a PhD student at UIC studying under Ayers. Obama would approved grants of hundreds of thousands of dollars to the Workshop from the Chicago Annenberg Challenge. [Bill’s brother John later got in on the small schools approach also, raising money in part from the Annenberg Challenge program started by Bill and chaired by Obama

Klonsky was the Obama web site blogger who was suddenly fired when his Weather Underground connections were revealed. He was driving a taxi when Ayres steered a large grant to him to start the Small Schools Workshop. The Annenberg money seems to have been distributed among this network of old-time radicals.

In the fall of 1988, however, Obama left the city to go off to law school. My best guess, though, is that it was in that 86-88 time frame that Obama likely met up with the Ayers family. I will explain why I believe that in a minute. Interestingly, after his first year in law school Obama returned in the summer of 1989 to work as a summer associate at the prestigious Chicago law firm of Sidley & Austin. This in and of itself is a bit unusual. Very few top tier law students work for big law firms during their first summer. The big law firms discourage it because if you work for them in the first summer you are likely to work for a second firm the following year and then the firms have to compete to get you.

So, why or how did Obama – at that point not yet the prominent first black president of the Harvard Law Review (that would happen the following year) – end up at Sidley?

There is also quite a bit of interest in how Obama was admitted to Harvard Law School in the first place. He did not graduate with honors from Columbia. Rashid Khalidi may have played a role here. Obama also seems to have been close to Edward Said, former chief of the Middle East Studies department at Columbia that Khalidi now heads. There is even speculation that the Palestinians are more important in the Obama career than has been apparent thus far. Of course, the association is innocent. He says so.

His kids went to the Lab school where my kids go as well. He is a respected scholar, although he vehemently disagrees with a lot of Israel’s policy.”

Obama’s kids have some peculiar associations in school, I guess.

He has some other peculiar friends, too.

Anyway, we learn more about this, hopefully before the election. If not, eventually. Sigh.

An election decided by issues

Tuesday, October 14th, 2008

There have been allegations that many Obama supporters are voting for him just because he is black. To study this question, Howard Stern sent out staff members to do man-in-the-street interviews. Listen to this and they should settle the question.

They agree that Obama supports the war in Iraq, opposes stem cell research and chose Sarah Palin for his VP.

No problem. On the issues, they are with him.

Good news

Sunday, October 12th, 2008

We interrupt the steady diet of bad news to announce the long delayed award of the Nobel Prize to the discoverers of the AIDS virus. This is terrific news and I may even improve (slightly) my opinion of the Nobel Committee that awarded a prize to Al Gore, a phony political figure. In my history of medicine, I told the story of the discovery of the virus and its identification as a retrovirus.

Half of the award will be shared by two French virologists, Françoise Barré-Sinoussi, 61, and Luc A. Montagnier, 76, for discovering H.I.V., the virus that causes AIDS. Conspicuously omitted was Dr. Robert C. Gallo, an American virologist who vied with the French team in a long, often acrimonious dispute over credit for the discovery of H.I.V.

In my chapter on this discovery, I despaired of any recognition of these two great scientists because of the lying and cheating of Robert Gallo. At last, they get the recognition they deserve. A good source, and one I used for my chapter on the story, is Science Fictions, an excellent book by Chicago Tribune science reporter John Crewdson. The book came out of a newspaper series in the 1980s that clearly described Gallo’s attempt to steal credit. For years after publication of the book, there was a famous negative review of it on Amazon, signed by “a reader from Baltimore.” The joke was that everyone familiar with the story knew it was Gallo who had written the review.

I am so happy to see these two French scientists, who at the time comprised the entire retrovirus section of the Pasteur Institute, receive credit at last.

It looks as though Gallo is still trying to defend himself with attacks on the book. The Nobel Prize is all the more welcome to refute his allegations.

Obama, ACORN and financial collapse

Saturday, October 11th, 2008

Barack Obama is ACORN and vice versa.

If we elect Obama, we will have financial crisis until the fascists take over.

Of course, Chicago Mayor Daley is pushing them and protecting them so they must be OK.

UPDATE: Here is more evidence (pdf file) that the underwriting corruption that began in the 1990s is the underlying cause of the financial meltdown. I see denials that the CRA and the forces of ACORN could have had that big an effect in the world economy. The answer is that the weakening of underwriting fed into a culture of debt manipulation already weakening the world economy for the past 50 years. We will be lucky to get out of this with the currency intact. The rise in gold price over the past three years was the warning that was ignored. Had McCain been elected in 2000 instead of Bush, we would have, hopefully, avoided some of the excesses of the Republican Congress the past few years as they lost their principles in an orgy of spending and influence peddling. One irony is that the man who replaced Mark Foley, poster boy for Republicans run amok, has his own sex scandal now.

Mark Twain had it about right. “There is no hereditary criminal class in the United States with the possible exception of Congress.”

An Obama win and its consequences

Saturday, October 11th, 2008

I think this editorial says it best:

The freeze-up of the financial system — and government’s seeming inability to thaw it out — are a main concern, no doubt. But more people are also starting to look across the valley, as they say, at what’s in store once this crisis passes.
And right now it looks like the U.S., which built the mightiest, most prosperous economy the world has ever known, is about to turn its back on the free-enterprise system that made it all possible.
It isn’t only that the most anti-capitalist politician ever nominated by a major party is favored to take the White House. It’s that he’ll also have a filibuster-proof Congress led by politicians who are almost as liberal.
Throw in a media establishment dedicated to the implementation of a liberal agenda, and the smothering of dissent wherever it arises, and it’s no wonder panic has set in.

The federal bailout bill has flooded the markets with money but it doesn’t seem to be working. Why ?

It starts with a tax system right out of Marx: A massive redistribution of income — from each according to his ability, to each according to his need — all in the name of “neighborliness,” “patriotism,” “fairness” and “justice.”
It continues with a call for a new world order that turns its back on free trade, has no problem with government controlling the means of production, imposes global taxes to support continents where our interests are negligible, signs on to climate treaties that will sap billions more in U.S. productivity and wealth, and institutes an authoritarian health care system that will strip Americans’ freedoms and run up costs.
All the while, it ensures that nothing — absolutely nothing — will be done to secure a sufficient, terror-proof supply of our economic lifeblood — oil — a resource we’ll need much more of in the years ahead.
The businesses that create jobs and generate wealth are already discounting the future based on what they know about Obama’s plans to raise income, capital gains, dividend and payroll taxes, and his various other economy-crippling policies. Which helps explain why world stock markets have been so topsy-turvy.

And that doesn’t even mention the assault on freedom of speech that is planned by the people who ensure that You Tube videos critical of Obama and his friends disappear in an hour.

We do have the advantage of a preview of Democrat government in charge in California.

The Golden State’s finances are a mess. California’s general obligation debt has tripled in the past six years and is now almost equal to the state’s $145 billion annual budget. Even without any new loans, in three years the state will spend a record 6.1% of its budget just to service the debt it already has. What’s more, with the economic slowdown, the state is now expecting a deficit larger than $1.1 billion for the first three months of this fiscal year. The state’s rainy-day fund is running dry, which has hurt its credit rating.

Would that cause a retrenchment in spending ? Not with Democrats (and a RINO governor).

California Gov. Arnold Schwarzenegger sent an extraordinary letter to Treasury Secretary Henry Paulson asking for $7 billion. Although the governor has since withdrawn that request, it testifies to the dire state of his budget. Yet days before penning his note, the governor told an audience at the Commonwealth Club of California not to worry about the state’s budget crunch and to approve $9.95 billion in new debt on the November ballot to build a bullet train to connect Los Angeles to San Francisco: “Just because we have a problem with the budget does not mean people should vote ‘no’ on high-speed rail.”

The bullet train is a fantasy that will never pay for itself, let alone add thousands of new net jobs. The Democratic Party used to be just as conservative on spending as the Republicans. The difference was in emphasis on working men and women vs businessmen. Now, rich businessmen donate most money to Democrats and fiscal prudence is not a feature of Democrat rule. It isn’t just limited to the state, either as cities and counties are also insolvent.

God help us all.

Another memory hole

Friday, October 10th, 2008

This video was posted on You Tube and then linked at Hugh Hewitt’s blog. Within an hour, the video was listed as “no longer available” at You Tube. You Tube cannot be trusted to deal fairly with political material, unless, of course, it supports Obama.

I looked at the video at Politico, which still has it up, and thought it nothing special. Just more about Obama’s slimy friends. I guess this is what we have to look forward to in an Obama presidency.

The Ministry of Truth. Twenty five years late.

Obama and education

Thursday, October 9th, 2008

The Ayres story is less about Obama’s personal friends and their backgrounds than about his education plans for his presidency. Obama’s web site seems to list his education priorities. It includes child care to the infant level:

Zero to Five Plan: The Obama-Biden comprehensive “Zero to Five” plan will provide critical support to young children and their parents. Unlike other early childhood education plans, the Obama-Biden plan places key emphasis at early care and education for infants, which is essential for children to be ready to enter kindergarten. Obama and Biden will create Early Learning Challenge Grants to promote state “zero to five” efforts and help states move toward voluntary, universal pre-school.

There is research showing damage to small children from very early day care. One thinks of Romanian nurseries filled with near-autistic children deprived of maternal nurturing. It seems that Obama is committed to the use of early day care, even for infants.

They would go back to bilingual education, even though it has been shown to worsen school outcomes.

Support English Language Learners: Obama and Biden support transitional bilingual education and will help Limited English Proficient students get ahead by holding schools accountable for making sure these students complete school.

The rest is mostly the usual ed school blather. What about his real agenda ?

Well, we could listen to his friend Ayres, a “progressive school reformer.”

November 2006 at the World Education Forum in Caracas hosted by dictator Hugo Chavez.
With Chavez at his side, Ayers voiced his support for “the political educational reforms under way here in Venezuela under the leadership of President Chavez. We share the belief that education is the motor-force of revolution. . . . I look forward to seeing how . . . all of you continue to overcome the failures of capitalist education as you seek to create something truly new and deeply humane.”
Ayers told the great humanitarian Chavez: “Teaching invites transformations, it urges revolutions large and small. La educacion es revolucion.” It is that form of socialist revolution that Ayers, and Obama, have worked to bring to America.

Ayres is a major figure in the Daley empire of Chicago.

Chicago’s current mayor, Richard M. Daley, has employed Ayers as a teacher trainer for Chicago’s public schools and consulted him on the city’s education-reform plans.
Just last month, Ayers was elected vice-president for curriculum for the 25,000-member American Educational Research Association. AERA is the nation’s largest organization of education-school professors and researchers.
In a recent interview on Fox News’ “The O’Reilly Factor,” Obama upgraded Ayers’ status from “a guy who lives in my neighborhood” to “somebody who worked on education issues in Chicago that I know.”
Actually, Obama knew him quite well, having worked together on a school “reform” project called the Chicago Annenberg Challenge.
In the 1990s, Ayers was instrumental in starting the Annenberg Challenge, securing a $50 million grant to reform the Chicago Public Schools, part of a national initiative funded by the late Ambassador Walter Annenberg.
Obama was given the Annenberg board chairmanship only months before his first run for office. He ran the fiscal arm that distributed grants to schools and raised matching funds.
Ayers participated in a second entity known as the Chicago School Reform Collaborative, the operational arm that worked with grant recipients.
During Obama’s tenure as Annenberg board chairman, Ayers’ own education projects received substantial funding.
One of Ayers’ descriptions for a course called “Improving Learning Environments” says a prospective K-12 teacher needs to “be aware of the social and moral universe we inhabit and . . . be a teacher capable of hope and struggle, outrage and action, teaching for social justice and liberation.”

Sol Stern has some thoughts.

Obama is a dangerous man and his education background shows his Marxist economics are not necessarily the worst threat.

More on how we got here

Wednesday, October 8th, 2008

Now that we have explained the bailout, how did we get here ? Milton Friedman might have said this.

This is an elegant piece on the moral hazard problem and where it came from. Richard Epstein points out how social engineering led us here.

Disasters like this latest financial meltdown don’t just happen. Mistakes this huge require an impoverished political philosophy to grease the skids. Fannie and Freddie didn’t design their horrific lending policies by chance. No, behind this lending fiasco lay the strong collective preference for the “patterned principles” of justice that Robert Nozick attacked so powerfully in his 1974 masterpiece, Anarchy, State, and Utopia.

I have ordered the Nozick book as it looks like that rare philosophy work that I can get through.

Anyway,

The key function of the legal system is to minimize the transactional barriers and increase the velocity of voluntary exchanges, all of which generate mutual gains for the parties. So long as one is sure that the given distribution of resources is obtained by legal moves from the original position, don’t worry about the relative positions of one person vis-à-vis the others. Don’t, in other words, use state coercion to create a distinctive pattern of rights deemed ever so desirable in the eye of some political beholder.

This is what we call the “market” and that market is the enemy of Barack Obama and his allies. They are concerned with ends, as well as means, and will tilt the scale to attain those ends. Was the market at fault? Russell Roberts says partly but not totally.

Many believe that wild greed and market failure led us into this sorry mess. According to that narrative, investors in search of higher yields bought novel securities that bundled loans made to high-risk borrowers. Banks issued these loans because they could sell them to hungry investors. It was a giant Ponzi scheme that only worked as long as housing prices were on the rise. But housing prices were the result of a speculative mania. Once the bubble burst, too many borrowers had negative equity, and the system collapsed.

Part of this story is true

But that is not the whole story.

Beginning in 1992, Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low and moderate income borrowers. For 1996, the Department of Housing and Urban Development (HUD) gave Fannie and Freddie an explicit target — 42% of their mortgage financing had to go to borrowers with income below the median in their area. The target increased to 50% in 2000 and 52% in 2005.

For 1996, HUD required that 12% of all mortgage purchases by Fannie and Freddie be “special affordable” loans, typically to borrowers with income less than 60% of their area’s median income. That number was increased to 20% in 2000 and 22% in 2005. The 2008 goal was to be 28%. Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable-rate loans, and made to borrowers who bought houses with less than 10% down.

This was a Ponzi scheme alright but who was Ponzi ?

The Community Reinvestment Act (CRA) did the same thing with traditional banks. It encouraged banks to serve two masters — their bottom line and the so-called common good. First passed in 1977, the CRA was “strengthened” in 1995, causing an increase of 80% in the number of bank loans going to low- and moderate-income families.

Fannie and Freddie were part of the CRA story, too. In 1997, Bear Stearns did the first securitization of CRA loans, a $384 million offering guaranteed by Freddie Mac. Over the next 10 months, Bear Stearns issued $1.9 billion of CRA mortgages backed by Fannie or Freddie. Between 2000 and 2002 Fannie Mae securitized $394 billion in CRA loans with $20 billion going to securitized mortgages.

This money is all lost and will have to be repaid by taxpayers. Here is more about the CRA effect with examples.

Did the Bush Administration play a role in the fiasco ?

The Fed did its part, too. In 2003, the federal-funds rate hit 40-year lows of 1.25%. That pushed the rates on adjustable loans to historic lows as well, helping to fuel the housing boom.

The Taxpayer Relief Act of 1997 [which raised the capital gains exemption on houses-Ed]and low interest rates — along with the regulatory push for more low-income homeowners — dramatically increased the demand for housing. Between 1997 and 2005, the average price of a house in the U.S. more than doubled. It wasn’t simply a speculative bubble. Much of the rise in housing prices was the result of public policies that increased the demand for housing. Without the surge in housing prices, the subprime market would have never taken off.

I have a theory that the 9/11 attacks contributed to this bubble. There is also a theory that the Panic of 1907 was caused by the 1906 San Francisco Earthquake because of the enormous insurance losses. Most of the worst property damage in San Francisco was caused by fire producing a gigantic insurance loss since fire was covered when earthquake was usually not. The 9/11 attacks caused an enormous capital loss, both due to the property damage in New York and by the effect on airlines and oil prices that followed. The Bush Administration fought deflation with low interest rates and by telling people to “shop” as a contribution to national security. This has been widely quoted and attacked but it is misunderstood, like most of Bush’s policies. He has been almost criminally inept in explaining them.

The low interest rates were continued too long and contributed to the bubble. Had Bush and the Fed raised rates two or three years ago, the bubble would have popped with much less damage as the speculation might have stopped before the worst of the excesses had occurred. Here is someone who was warning about this years ago. He got nowhere.

Anyway,

Once Congress set in place a destructive lending policy, we could count on private parties to issue bad loans from which they profited, knowing that dear old Fannie and Freddie would happily pay face value for paper that everyone knew was worth a whole lot less.

But Congress lived in a dream world. It forgot that the quality of the paper would deteriorate as its ambitious social objectives let its underwriting go south. So, too late in the game, we learn from yet another case where Congress should have done good by doing nothing at all. Let people rent or buy in unsubsidized markets and then watch with supreme indifference what residential patterns emerge.

This does not explain how to recover but it does point out how unlikely it is that Congress will be helpful in the next phase of this crisis. Obama, in particular, has all the helpful instincts of Herbert Hoover. He is opposed to free trade. He is an interventionist. And he is stubborn and unwilling to acknowledge that raising taxes is the worst thing a government can do in this situation.

God help us all.

The banned SNL skit about the mortgage crisis

Tuesday, October 7th, 2008

NBC quickly moved to ban a Saturday Night Live skit that actually explained the mortgage crisis very well. That was the problem. It named the real crooks.

Enjoy.

Obama’s coming war on science

Tuesday, October 7th, 2008

The left rails against fundamentalist Christians as enemies of science. Creationism is, indeed, anti-scientific but there are other motives for the adoption of this narrow philosophy by those who are still deeply religious. They are trying to defend themselves and their children from the hedonism of modern life. Science and atheism, in spite of exceptions, are intertwined. Atheism is not a good basis for conservative moral and ethical beliefs. After all, if there is no punishment for evildoers in the next life, why is virtue desirable ? We can say it is its own reward but that is a bit circular.

The Marxists, like our all-too-probable next president have their own rules about virtue and truth. They are useful only insofar as they promote the desired end. Science depends on truth and the willingness to tell the truth and accept it. Why do so many scientists see enemies on the right but not on the left ?

I have previously written about The Second Era of Bacteriology, which I believe will solve the energy problem for a while until nuclear energy takes over. The second area in which science is moving quickly is genetics and human behavior. Bacteriology may be safe from the Marxists but behavior is a major area of their concern. Larry Summers found out how intolerant they are and that was before we had a leftist president.

John Derbyshire has a piece today on Obama and science. I have previously written about Charles Murray’s The Bell Curve and the peculiar reaction to it when it came out in 1994. I was at Dartmouth and bought a copy when it first appeared. When others learned I had a copy, several asked to borrow it as they did not want to be seen buying it at the Dartmouth Bookstore. What did Barrack Obama think of it ?

science blogger Jason Malloy posts the transcript of an NPR discussion about The Bell Curve from October 1994, featuring “civil rights lawyer and writer” Barack Obama, who “lives in Chicago.” What did our young civil-rights lawyer and writer (?) think of Herrnstein and Murray’s pop-psychometrics masterpiece? He no like.

“Mr. Murray isn’t interested in prevention. He’s interested in pushing a very particular policy agenda, specifically, the elimination of affirmative action and welfare programs aimed at the poor. With one finger out to the political wind, Mr. Murray has apparently decided that white America is ready for a return to good old-fashioned racism so long as it’s artfully packaged …”

Does anyone think President Obama is going to fund genetics research on human behavior ?

Marxism is sociobiology without biology. The strongest opposition to the scientific study of human nature has come from a small number of Marxist biologists and anthropologists who are committed to the view that human behavior arises from a very few unstructured drives. They believe that nothing exists in the untrained human mind that cannot be readily channeled to the purposes of the revolutionary socialist state. When faced with the evidence of greater structure, their response has been to declare human nature off limits to further scientific investigation. A few otherwise very able scholars have gone so far as to suggest that merely to talk about the subject is dangerous.

This is the basis of Stephen Jay Gould’s theories of the Blank Slate and nobody is going to challenge them as long as Obama is president. At least Bush funded stem cell research, a credit denied him by the political left. I don’t expect to see similar open mindedness when his opponents take office.