A big culprit in the housing crisis is punished

After living through the housing crisis and reading and watching news, books and movies, I read with interest that one of the biggest culprits has been punished – the rating agency Moody’s. In my view and the view of others, Moody’s failed in its job to forewarn investors of the true risks of packaged together mortgage loans. They fell into a “pay to play” modus operandi.

What is pay to play? Per an article in Reuters, “Moody’s ratings were ‘directly influenced by the demands of the powerful investment banking clients who issued the securities and paid Moody’s to rate them,’ Connecticut Attorney General George Jepsen said in a statement on Friday.” This would be akin to you paying off the inspector of the house you just built and want to sell. The buyer would not know the inspector was gaming the system against him or her.

So, individual investors, pension funds, 401(k) funds, states, and countries all fell prey to this pay to play ratings approach. Iceland had to declare bankruptcy, e.g. As a result of their actions, Moody’s was fined $864 million which will be distributed to twenty-one states and the federal government, who were part of the lawsuit.

We should not lose sight of an industry who became enamored with riskier investments and did not ask enough questions. Executives did not fully understand the risk they were taking on and it brought them down, along with the housing market, stock market and economy. An excellent movie to watch is called “The Big Short,” based on Michael Lewis’ book, which takes a complex topic and explains it with the dialogue, but also with clever sidebars which use laymen’s terms to define what things mean.

In essence, mortgage loans were given out to anyone who could fog a mirror, then these lesser risks were packaged together to spread risk and sold to investors. The problem is packaging bad risks does not make the risk less, it makes it concentrated bad risk. The law of large numbers to mitigate risk is only effective if good risks are mixed with some bad risks. Moody’s stamped these packaged loan investments with much higher ratings than they deserved. And, investors who trusted Moody’s and the seller bought them in good faith.

We rely on Moody’s and other rating agencies to take their job with seriousness of purpose and ethics. If they cannot shoot straight with us, they will let us down. And, that is precisely what they did. In my view, that fine may not be enough for the damage they helped perpetuate.

This man makes me weary

This man is not even President and I am already tired of him. His inability to be consistently truthful has worn me out. His need to share his thoughts on any topic reveals a lack of substance. And, his ego has to be stroked as he reacts very negatively to criticism.

None of this is a surprise, but I was hopeful the man might show a little more gravitas to such an important position. I want him to be successful where it helps the country. Yet, I have a very low bar of expectations. He has not even lived up to those.

So, I am weary of the man. I am also tired of his two PR people who are running out of perfume and lipstick on defending his piggish remarks or tweets. The world is already a less safer place and he has not taken the oath of office.

With the recent release of highly verifiable Russian involvement in our campaign, we have an interesting set of circumstances behind his victory. With the release of unverified information on his dossier built by the Russians, there is a need to confirm if any of this might be true. Then, there is the verified story of frequent conversation between a key cabinet nominee and the Russian ambassador’s office the day of sanctions announcement, which begs further scrutiny.

To be frank, nothing surprises me about this man. I do feel these stories are worthy of investigation. Whether there is fire under this smoke needs to be determined. And, call me crazy, but I would not be surprised if Mike Pence is President at this time next year. I don’t agree much with Pence, but I don’t think he will make me as weary.

Wise men say…

If you are any semblance of an Elvis fan, you know the next phrase of this song is “…only fools rush in.” While this song is about not listening to your head and what others say, but rushing ahead with what your heart says, it does apply well to legislation. When legislators rush into anything, they will make mistakes. You can take that to the bank.

I cite four examples, two at the federal level and two at the state level. In North Carolina, our legislators called a special session last spring to pass the HB2 Law, henceforth known as the Bathroom Bill, in ten hours. They did not ask what others thought of this legislation. The transgender discrimination part of the bill was sold on fear, and when that is done, it is hard to back off. Yet, the part that ruffled the feathers of the NCAA, NBA and ACC as well as businesses and musicians, was the part that denied protection for LGBT members under the law. This is flat out unconstitutional, but since they passed it so quickly, they did not take the time to know this.

You would think our General Assembly would learn this lesson, but last month after it was official the new governor would be a Democrat, this impatient and power-hungry assembly met to address something more than hurricane assistance, which was the purpose for the gathering. They decided to strip powers away from the new governor. Mind you, the General Assembly already had a super-majority, but they had to flex their muscles and use a coup to grab more power. Even Republican voters thought this was poor form. Yet, our leaders in the General Assembly seem to not care what people think. As an Independent, I find this to be horrific legislation, an abuse of power and poor stewardship.

Not to be out done, the first measure our Republican friends in Congress wanted to change was the nonpartisan Ethics Committee. Over the chagrin of their leaders and after meeting in secret, they decided to restrict this ethics review process. After backlash from the public and with the President-elect piling on, they repealed the bill in less than 24 hours. When the President-elect, not known for his ethics, calls you on the carpet for ethics, you really screwed up. In my view, this may have been one of the more idiotic bills ever passed. The fact that this measure was the first thing that was done is outrageous and sets a tone of poor governance.

Which brings us to the rush to repeal Obamacare. This law is imperfect and complex, but is working pretty well. It does need to be improved and there are ways to do that leaving the framework in place. The administration is already built to accommodate some needed changes, so it is only for political reasons that it must be repealed first. I have written many posts, including the previous one, which shows how we got to this place, adds some needed truths, and asks for a data-driven change. Yet, if you govern off rhetoric, you suffer the consequences. The President-elect said he’s going to make benefits more generous and cheaper at the same time – that sounds like a TV ad for a new product, so good luck with that.

Wise men say, only fools rush in. These are four examples of foolish behavior that led to or are leading to poor legislation. The sad part is there are many more. Legislation is hard enough without rushing into it. When you do, mistakes will happen. I also believe, legislators don’t want citizens to take the time to see the real story. And, if you govern by tweet without input from advisors, you are being foolish.

 

A few true statements about the ACA

In an effort to continue a push toward repeal of the Affordable Care Act, many statements have been made that are not truthful. But, this is not a surprise, as opposition to this imperfect law has used untruthful statements to show its lack of veracity. I should emphasize the following are opinions of a former benefits actuary, former benefits manager and a retired benefits consultant.

  • The ACA is not in a death spiral as stated by Speaker Paul Ryan, Senate Leader Mitch McConnell and President-elect Donald Trump. Who says so? The American Academy of Actuaries in a letter to Congress.
  • The ACA is imperfect and complex, but so is our healthcare system. In spite of this, the ACA is working pretty good, but could stand some improvements.
  • One key improvement would be to fully fund the risk corridors to help insurers with adverse selection. These were cut back by Congress to help strangle it. My former Republican friends are being very silent on this tactic, but it was done with intent to cause premiums to go up.
  • Another key improvement would be for the remaining 19 states to expand Medicaid, which would improve the states’ economies, rural hospitals and people in need. Who says so? The Commonwealth Fund, Kaiser Health Family Foundation, RAND Corporation, Economic Policy Institute and a George Washington University study. Data shows these states have reduced personal bankruptcies and hospitals have better accounts receivables.
  • A few other improvements would be to add a public option where needed to increase competition and reduce cost. We should also look at the various fees and determine which ones should stay or go. These fees help fund the subsidies.
  • A November poll from Kaiser Health noted 74% of Americans want the ACA to continue with improvements, with 48% of Republicans. It should be noted this survey shows with the exception of the employer and individual mandates, even Republicans like the specific features of the ACA by 63% (guaranteed issue and renewability) to 82% (continuing adult children to age 26) depending on the feature.
  • If the risk corridors are funded, this will help with higher premium increases and bring some insurers back to markets, yet we still have cost pressures – we are an overweight, overmedicated, and aging nation. As for prescriptions, other countries do not allow R&D to be factored into their pricing, so the US bears the brunt with their prescription cost.
  • Repealing the law will have a negative impact on the debt over the next ten years, so say nonpartisan budget reconciliation groups such as the CBO. This should be a factor in the analyses.
  • Then, there are the 20 million plus Americans who have benefitted from the system. If we are unwise with how we make any changes, people’s lives are affected.
  • A key item which is not discussed is the administration of the system. After the terrible exchange roll-out, which I fault the President as this was his baby, the system is working pretty well. Changes have to be administered. We should not lose sight of this, as many politicians do not have a good understanding of the complexities including the three folks mentioned above.

Healthcare is complex. Insurance is complex. So is the ACA. If the ACA is repealed, Republicans now own the problem. Since the ACA is largely based on a Republican idea borrowing features from Romneycare, it will be difficult for them to come up with a new idea, “something terrific,” which meets their objectives. We need a systematic, data centric analyses of what is working and what could be changed

One thing I know for certain – ramming a change through is not prudent, nor good stewardship.

Two shooting stories bookend the issues


Shooting tragedies are too commonplace in the US. Just pick up a newspaper in any city on any day and count the gun shooting stories. Last week, we had several shooting deaths, but two stand out, one that is becoming a too common accident and the other an act of terror by a lone gunman in Ft. Lauderdale.

The first accident is yet another toddler who found a loaded weapon and shot someone, in this case his mother. She fortunately survived, but the other part of the story is the father was in law enforcement and knows better.

If you Google four year old shoots six year old, many child shootings can be found of all ages. These are accidents, but are highly preventable with training and consistent practice. Also, there is a movement to place a finger printed triggering mechanism which will prevent a child or adult from firing your gun. Sadly, the NRA is against this.

The Ft. Lauderdale mass shooting shows yet again, it is very difficult to stop a motivated lone gunman. With our freedom and readily available guns, even our highly skilled police and FBI cannot prevent all of these events from happening.

We must take a series of measures that will permit better gun governance. Gun advocates will state certain measures would not prevent certain shootings, but it is apparent that doing nothing won’t either.

Background  checks on all weapon sales will help. Extended waiting periods will help with the most predominant American gun death of suicide. The finger printed trigger will help with child shootings including using a parent’s weapon for suicide. Putting people on our no-fly list on a restricted gun sales list will help. With the exception of not selling to someone who is on watch list, the other measures are reasonable safeguards which do not infringe on 2nd amendment rights.

My frustration is we do not address this issue as parents. We address as politicians. Congress is too scared of the NRA to do the right things. Until we start addressing thiese issues, we will continue to have these problems. It is that simple. And, it matters not who is in the White House.

 

Diplomatic Persistence


I have written several times about the dearth in customer service. For the most part, we must be the navigators of our own customer service. Without our diplomatic persistence, we may fail to be served. But, we do need help.

I have been involved the past few days with an entity trying to resolve an arbitrary decision on the part of an internal department which places a burden on me to recoup money owed to my family. I will spare the details, but to prevent them from doing it again on another set of transactions, we had to enlist the help of a customer service person and her manager as advocates.

The role I am being asked to play here is not new and will happen again with another entity. It may even happen with this one, but I sure hope not. Variations of both words in the title are key – diplomacy and persistence. Being a jerk will solve little and will make it harder to get advocacy. The customer service person I was speaking with was just the messenger. Yet, diplomacy also means tactfully sharing your frustration. You want them to agree with you that you have been wronged and she did.

The persistence is vital as well. I often say in follow-up after a reasonable time, “I apologize for being a pest.” Also, the first answer may be “no” as it was in this case because of internal processes, so asking for further advocacy can help, especially when you are in the right. I understood why they did what they did in general for risk management, but our circumstances were unusual and did not fit their norm. So, the internal department’s action unwound something very easy made it more time-consuming and bureaucratic.

On the positive side, after much pleading and with the manager’s advocacy, we got a yes answer with a caveat. That is all I could ask for. I will still have to remedy with another vendor their first decision, but I hopefully prevented them from repeating the process. I am so very thankful to the two people who advocated for us. They are gems.

Customer service has to be customer centric. This situation was resolving a problem this organization caused by internal processes. The group that caused it was not being customer centric, but more risk averse. My wife pointed out that what about people who do not have an understanding of financial matters and accepted decisions that were not appropriate. Or, in this case, may not know to follow-up with the other vendor. They may end up being shortchanged because of an arbitrary decision by an internal group.

Diplomatic persistence is key, but so is knowing where you may have been wronged. But, without the former two words, your hope of getting resolution is lessened. My fingers are crossed that this remedy will remain holding.

140 Characters and Global Risk

This number equates to twenty words of seven letters or symbols. Or, twenty-eight words of five letters or symbols. Irrespective of the combination, 140 characters typed in impatience is not conducive to well-thought out communication.

Yet, when in the hands of an ego-maniacal, less informed than needed and thin-skinned man who does not filter his thoughts, it is dangerous. People react to these few words that cannot possibly reflect context and subtlety and, in many cases, should not be typed without much thought and input from expert advisors. It is a bumper sticker approach to policy statements and governance.

But, when these character limits are deployed with national security messages, they are a recipe for disaster. The author has been advised on more than one occasion by another country how troubling these communiques are, most recently by China about his tweet on North Korea.

If this author is intending to govern by tweet with his temperament, this should give every person on the planet pause. But, don’t take my word for it.

On the BBC World News America earlier this week, Ian Bremmer, the founder of the Eurasia Group, an organization who measures risk, said the greatest global risk this year is an independent or retrenching America from the global scene. Bremmer said it would be akin to removing the guard rails on the global highways.

This is the stated posture of the President-elect to look more within. Imagine that concept being executed in the hands of the same less-informed, ego-maniacal and temperamental tweeting man. What could possibly go wrong?