Audacity of the Rich

I listen to This American Life every weekend and if I miss it I download the podcast. It's always a great show. I laugh, I cry, it's better than Cats. I was listening this weekend to their show about True Urban Legends and was riveted when I heard the host, Ira Glass, interviewing a Republican hopeful in the California gubernatorial race, Steve Poizner. Poizner is a multimillionaire. He made his fortune in Silicon Valley. He recently wrote a book about his experience as a teacher in a San Jose High School titled Mount Pleasant. In the book Poizner characterizes the school, neighborhood, students as "inner city." Here is a transcript from the beginning of the story, on This American Life:

Steve Poizner: [reading] I passed nearby my neighborhood French bakery and the local Ferrari
dealership.

Ira Glass: This is Steve Poizner, reading from the book he wrote about this.

Steve Poizner: [reading] Several miles and a couple of highways later I took the Capital
Expressway exit and drove into what felt like another planet. Signs advertising janitorial supply
stores and taquerías. Exhaust hung over 10 lanes of inner city traffic; yellowing, weedy gardens
fronted many of the homes, as did driveways marred by large oil spots or broken down cars.

Ira Glass: When he sees the sound walls that separate California homes from the highway he asks, "were
they keeping out the city's grit and noise, or hiding profoundly sad lives?"

He's allowed to teach one U.S. government class for one semester, under another teacher's supervision.
What he finds in the school are leaky roofs, hardened, unresponsive students, gangs and violence, a dropout
rate twice the national average. He worries that one student is going to punch him and later that this student
and his thug friends are going to push him up against a wall. He wonders if the kids are "too busy ducking
bullets to consider their careers?" At the end of his first visit to school, he's relieved to find his Lexus still
in the parking lot where he left it.

sounds pretty grim but the people who live in the neighborhood, the teachers, and Ira Glass (who reported on the Education Beat for NPR) all think Mount Pleasant is a typical middle class school in a typical middle class neighborhood... And they are pissed at how Poizner characterized them. After hearing the story I remember two incidences from my childhood. They are not really related to the TAL story about True Urban Legends but they are about class distinction, growing up on the other side of the tracks, and how the rich see the poor.


I grew up in a town of about 5000 people, surround by cornfields, in the middle of Indiana. We had one junior high, a middle school, on the other side of town. It was about a two mile walk so I rode the bus. I lived in a typical middle class neighborhood and the bus that served my side of town picked up kids from two other neighborhoods in the area. About halfway through my 6th grade year the bus driver, Mr. Smiley, told us that we were going to start picking up kids from Brendan Wood too. Brendan Wood was an upper middle class neighborhood were doctors and lawyers lived. It was nice but not as nice as the Ulen Country Club on the other side of the golf course. My hometown was very segregated according to class and the fact that the country club, which was surround by the town, was an independent town unto itself made matters worse.

Mr. Smiley told us that because he would be picking up the Brendan Wood kids after us we had to reserve the first three rows of seats for them. We all had to crowd in the back of the bus while he made his way to the upper middle class neighborhood on the other side of town. On the way home from school we stopped in Brendan Wood first and every student was dropped off right in front of their door. There were only 9-12 kids from Brendan Wood and they sat comfortably in the first three rows and we could not move up until the last Brendan Wood kid left. After dropping off the snobs we circled through Northfield, a working class neighborhood, making several stops. I got off at the elementary school and walked the six blocks home.

Surprisingly, I didn't tell my parents about having to sit in the back of the bus that is until the school board consolidated all of the stops in three working class neighborhoods into one stop. All of the kids from Northfield, Hoosier Acres, and West Maplewood had to gather in front of the elementary school while Brendan Wood kids practically had door to door service. I told my parents and they talked to other parents but nothing happened. I was sure that the kids from Brendan Wood told their parents stories about how awful the other kids were and how frightened they were about riding the bus with us. Riding in the back of the bus continued until I moved on to High School. The High School was walking distance to my house so problem solved...

The second story deals with picking up my brother from a birthday party. I'm 10 years older than my youngest brother. When I got my license my parents pressured me into picking up my brother from time to time... I had a 1972 Dodge Dart and even in the 80's it was a pretty lame car. My brother had befriended one of the kids in the Country Club and when I arrived to pick him up the kid's dad was outside at the drive waving riff raff away. He told me that I had to drive around to the service entrance to pick up my brother. He wouldn't even let me stop my car in front of his house. I had to exit the country club and drive the county road around the back side to the service drive to pick up my own brother...

I know many people had it much worse. In the context of the racial segregation and hate crimes perpetrated in the country my experiences are laughable. I just wanted to point out that rich folk don't always have both feet in reality. I think Steve Poizner is a good example. What could he possible learn from teaching one semester at a public high school and how could he mis-characterize the situation so badly? When McCain, during the 2008 Presidential Election, couldn't remember the number of houses he had that, to me, was typical of people who are out of touch with reality. President Bush, in the late 80's, marveled at the bar code scan reader in a grocery store. He had never experienced the joys of shopping for his own food. To even imagine that people like Bush Sr., John McCain, or Steve Poizner have even the slightest inkling of what everyday Americans face is strangely unimaginable. Maybe that is the source of populist anger... Maybe we have been electing people who have no idea how we live.

Government Borrows 57¢ of Every Dollar Spent in 2009

Bill Maher was on a roll the other night in his New Rules. He donned a tri-corner hat and became a tea bagger for the evening. In Maher's monologue he claims we borrow 61¢ for every dollar spent (it's actually only 57¢ but what's a few pennies). Last year about 35¢ of every dollar was spent on the military and about 20¢ of every dollar was spent on health care. Of the remaining 45¢, 10¢ was for government and 8¢ was for interest on the national debt. The remaining 27¢ goes to food, income and labor security, Housing, environment and energy science, education, and transportation. Everyone complains about entitlements but that's a small portion of the debt.

Remember, 57¢ of every dollar spent was borrowed and 34¢ came from income tax. The remaining 9¢ came from corporate tax, excise tax, and estate tax. Wow corporations get off cheap!

The top marginal tax rate for an individual making over $372,000.00 is about 35%. In Eisenhower's day the top marginal tax rate for the wealthiest Americans was 91%. Throughout the 70's it was 70% and Reagan dropped it to 50%. By the last year of the Reagan presidency it dropped to 28%. Clinton took it back to 39% and of course Bush dropped it to 38% and then 35%.

The big story is not really where the money comes from but that 35% of our money pays for the military. Supporting our empire, the war on terror, weapons of war that are out of date, nuclear stockpiles, 500,000 troops around the world. As Bill Maher put it the military spending is really a public works project that puts what FDR did to shame.

Goldman? Fraud? Really?

When the I heard the story about the Magnatar trade in which a hedge fund selected risking investments to create a CDO, collateralized debt obligation, backed by subprime mortgages and then hedged against the CDO basically saying that if the CDO fails we will win both ways; I couldn't believe it. Propublica and This American Life broke a story that is at the heart of the Financial Crisis. In the Magnatar story we hear how a hedge fund pushed for the creation of such risky investments and bet against those same risky investments. In the This American Life story they claim that by pushing for these type of investment Magnatar basically helped the market overheat. Unfortunately the banks didn't disclose to the investors that the company that picked thw risky mortgages to bundle into the CDO also was betting against the CDO. Actually the Wall Street Journal broke the story in 2007 but this type of activity on Wall Street apparently does not raise eyebrows. Wall Street types just want to know how they can get in on the action...

This is basically what the SEC to accusing Goldman Sachs of doing. Goldman is accused of failing disclose to investors that a hedge fund helped stock a Goldman CDO and then bet against it.

Washington, D.C., April 16, 2010 — The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

The SEC alleges that Goldman Sachs structured and marketed a synthetic (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

Goldman pointed out that what they did is quite similar to what other major investment banks seem to have done [1] with the hedge fund Magnetar. (Goldman denies [2] that its investments were built to fail. Magnetar also denies [3] it was betting against CDOs it helped create.

When I heard the Goldman story I thought it was about Magnatar but SEC filing is about another fraud case entirely but build on the same premise. Wow! Gambling is not just for Vegas anymore and when you have guys like this who needs the mafia?

Really?

Apparently Barack Hussein Obama is planning a jihad against the US. That's why the logo for his summit on securing lose nuclear material looks EXACTLY like Islamic flags, and logos. The Teabaggers were right. He is a terrorist.

ASICS 2010 Global Advertising Campaign (HD)

I don't watch commercials that much because of the great and glorious TiVo but this one caught my eye. Interesting use of type...

Inside Job

An excellent story about the financial crisis, it's genesis, and the players. Listen and pass it on to everyone you know.

Inside Job

Why is Net Neutrality Important

In her 4/11/10 Op-Ed piece in the New York Times, Susan Crawford outlines the reasoning behind net neutrality and the strategy for the FCC to achieve it. First of all why do we need it:

Until August 2005, the commission required that companies providing high-speed access to the Internet over telephone lines not discriminate among Web sites. This allowed innumerable online businesses — eBay, Google, Amazon, your local knitter — to start up without asking permission from phone and cable companies. There was nothing unusual about this legal requirement; for more than 100 years, federal regulators had treated telegraph and telephone service providers as "common carriers," obligated to serve everyone equally.

Under the Bush administration the F.C.C. deregulated high-speed Internet providers. The F.C.C. declared that high-speed Internet access would no longer be considered a “telecommunications service” but rather an “information service.” This removed all high-speed Internet access services — phone as well as cable — from regulation under the common-carrier section of the Communications Act.

When the Bush F.C.C. deregulated ISPs it hoped that it would prompt greater competition in Internet access services. The unintended consequences were that a wave of mergers kept prices high and speeds slow. And eventually the carriers started saying that they wanted to be gatekeepers — creating fast lanes for some Web sites and applications and slow lanes for others.

How to solve this? Crawford's solution:

In its decision last week, the appeals court said that the “information services” label given to high-speed Internet access providers means the F.C.C. cannot prohibit companies like Comcast from engaging in discriminatory activities... The F.C.C. has the legal authority to change the label, as long as it can provide a good reason. And that reason is obvious: Americans buy an Internet access service based on its speed and price — and not on whether an e-mail address is included as part of a bundle. The commission should state its case, relabel high-speed Internet access as a “telecommunications service,” and take back the power to protect American consumers.

Now the Glen Becks out there will tell you that net neutrality inhibits free speech and is a plot to spy on your internet activity. He couldn't be further from the truth and as usual is deliberately misleading hi audience.

The full NYT Op-Ed is here