Today as in, today it taught me, not, it taught me about today's world. In other words, in the sense of the current state of the world AND what I learned about it, but only today... got it? Clear? Good.

Through Fark.com I found a link to a NY Times blog about the movie Wall-E and the valiant fight of two National Review Online writers against its subversive left-wing ideologies. An appropriate Wikipedia entry comes to mind.

Speaking of Wikipedia, thanks to the XKCD webcomic for pointing out that Wikipedia has a "List of problems solved by MacGyver". How can you not love an "encyclopedia" that devotes more page space to MacGyver's antics with chewing gum and twine than it does to the first President of the modern free world?

Speaking of presidents, the House is eyeing up a new S-CHIP bill. You may remember that bill as the popular bipartisan legislation to increase children's health funding to keep up with rising costs. Or maybe not since George W. Bush vetoed it. Sorry, kids, smokers need love too (oh, and it helps if you strain the point about middle-class families falling under S-CHIP coverage without bothering to cross-reference that data with the increase in healthcare costs and the decrease in covered dependents well into the "moderate" income range... besides, $82,600 in New York is the same as $82,600 in Alabama, right?).

All that, and it's only 6:30 in the morning. Time to go to work.

Christopher Dodd, for those who aren't aware, is the Democratic senior Senator of Connecticut. He has been in the Senate since 1981, and he served in the House before that beginning in 1975.

He is currently the Chairman of the Senate Banking Committee.

Dodd has come under fire recently regarding some sketchy loan terms he obtained in 2003 from Countrywide on two houses he owns. The CEO of Countrywide, Angelo R. Mozilo, maintains a blurry set of special terms for people deemed to be a "Friend of Angelo", and Dodd is, apparently,
within the blurred lines of the unofficial program.

Some people, myself included, might conclude that a man who heads the Senate Banking Committee maybe shouldn't be quite so cozy with people he's in the position to help immensely.

Dodd has received $21,000 in campaign contributions from Countrywide since 1997, and about $70,000 from Bank of America during the runup to the breaking of the scandal.

On the surface, this is probably not particularly surprising. The rich and powerful get special treatment - especially the powerful - and politicians are, usually, rich and powerful. What makes this particularly egregious, however, is a set of claims made by the Heritage Foundation regarding a bill Dodd introduced in June 2008.

First, a little background for those who don't follow financial news very closely.

Countrywide mortgage was the biggest mortgage lender in the country during the real estate boom that led up to the subprime crisis of 2007-2008. The lender was also one of the hardest hit by the collapse of shady loan dealings and is currently sitting on hundreds of billions of dollars of potentially bad loans.

In January 2008, Bank of America agreed to obtain the beleaguered lender for a paltry $7 per share. Countrywide has numerous assets and positions that would make such an acquisition an amazing deal, if not for the bad loans that come along with it.

In June 2008, Dodd introduced the Dodd-Shelby Refinancing Proposal to the Senate Banking Committee. Ostensibly, the plan allows people with bad loans to refinance through the FHA under more favorable - and affordable - terms (initially there were few stipulation, but additional amendments were eventually added to, among other things, limit the ability of people who lied on applications to partake in the bailout). The idea is that the FHA would assume the risky mortgages and provide a more affordable plan to limit the foreclosure crisis to some extent.

Unfortunately, there's a much dimmer view one can take of it, especially in light of the claims by the Heritage foundation and some anonymous Senate staffers that Dodd's bill was essentially written by Bank of America.

If Bank of America acquires Countrywide, they will assume hundreds of billions of dollars of dangerously sketchy loans that are liable to result in huge losses when the lendees either just walk away from unaffordable houses, or declare bankruptcy. However, under Dodd's plan, many of these people could be refinanced through the FHA. What this means is that most anybody who received an unfavorable subprime loan through Countrywide - those loans now being owned by Bank of America - could apply for a more favorable loan through the taxpayer-funded FHA (there is a provision to raise about half a
billion dollars a year to fund the program, but if the bad loans remain bad on the FHA's balance sheet, as they were on Countrywide's, it becomes a moot point). If approved, the FHA would refinance the homeowner and assume the risk of the loan.

In other words, Dodd's plan effectively offers the chance to take Countrywide's bad loans off of Bank of America's hands (actually, it does this for any bank's bad mortgages) and puts them in the hands of the taxpayers, using the FHA as a pawn.

To really pound the point home, if you haven't quite seen the whole picture yet: Bank of America would acquire the valuable resources, positions, and assets of Countrywide for $7 per share, and taxpayers would eat hundreds of billions of dollars of bad loans so Bank of America doesn't have to.

The only tiny glimmer of light in this whole mess is that the overall bill is so amazingly flawed that it's becoming increasingly obvious that few people would actually be helped anyway. At last estimate, only about $85 billion of bad debt would be refinanced. If 75% of that debt failed, taxpayers would only" eat about $64 billion in losses for Bank of America and other lenders who failed in their fiduciary duty.

I don't know whether to take solace in the fact that Congress's incompetence is apparently limiting the damage of its corruption or not...

[1] The Dodd-Shelby Housing Bill: A Bad FHA Refinance Plan Hijacks Good GSE Reforms (The Heritage Foundation)
[2] Countrywide Corruption (National Review Online)
[3] Did Bank of America write the Dodd bailout bill? (LA Times Blog)
[4]The VIP Treatment: Countrywide CEO Offers Better Rates for Prominent Few (ABC News)

And then, kick 'em when they're down
If all of that wasn't enough to set your pacemaker off, consider this: Bank of America's purchase of Countrywide's equity might be entirely footed by you, the taxpayer. In fact, CEO Kenneth Lewis is counting on it.

According to an article on Bloomberg, Bank of America may be buying Countrywide primarily because the tax writeoffs that come with the purchase will offset the cost of actually paying the $7 per share bid they entered for the company. If the FHA absorbs enough of the bad loans due to the Dodd bill, and the losses Bank of America incurs on the remainder of the bad loans is high enough, Bank of America may pay effectively nothing for the equity in Countrywide. In effect, they'll gain all the equity of Countrywide, and only take a tax-deductible writeoff that has to be funded later by taxpayers (or budget cuts) for the pleasure.

How's that for a real kick in the pants?

It seems that there's a lot of angst floating around in relation to high oil prices. Regular folks are hurting at the pumps and grocery stores, oil explorers are pointing the finger at speculators, and speculators are pointing the finger at consumers.

I've noticed that those speculators are becoming increasingly shrill lately.

One thing that rich people don't seem to understand is the derision that is heaped on them by the other classes. This becomes especially harsh in economic downturns where the other classes are hit hard by fundamental shifts in economic realities while the wealthy are merely inconvenienced.

To some extent, certainly, the ill will toward the wealthy is influenced by jealousy and a desire to identify a material cause for the harsh economic climate. However, that only explains part of the psychology, and to simply pass all the derision off as the sniping of the underclasses is both dishonest and willfully ignorant.

The wealthy have much more influence on American politics, economics, and social mores and taboos than the other classes. Designers influence fashion, pro-corporate lobbyists influence law, and media moguls influence opinion on those and all other facets of society. To simply shove aside those realities and act as though the wealthy don't shoulder more of the burden of economic downturns - and the credit for upswings - is simply foolish or, more likely, intentionally deceptive.

The problem becomes that you have certain wealthy individuals who value only greed. While there are obviously many wealthy individuals who are engaged in countless charitable activities and who pass billions of their own hard-earned dollars to those same charitable causes, there are also many unscrupulous individuals and businesses who prey on the underclasses or manipulate economic rules and markets for their own gain, usually by profiting from the loss of others. We're still unraveling, for example, the twisted web of corruption surrounding the subprime lending scandal that kicked off our current economic woes with nothing less than a bang.

The wealthy and their apologists must understand that, while the underclasses do often berate them for their success out of jealousy or resentment over problems their targets didn't really cause, the resentment is often born out of material grievances.

Oil speculators are the current crop of "wealthy scum" who are drawing the ire of the other classes. It should not be unexpected, either. Speculation in the markets serves a valid purpose - ask any farmer how much nicer it is to lock in prices for crops that are still growing in the field, or any buyer who enjoys the added liquidity that speculation brings to a futures market - but, like most anything, it must be done in moderation. When speculation gets out of hand, as it has in oil, prices become a positive feedback loop. People buy contracts with no intent to take delivery because they believe prices will go higher, and prices go higher because people buy contracts that they roll over - because they never intend to take delivery. The wealthy who can afford the contacts - and especially the wealthy who can afford media exposure to start the process with a few well-timed press releases - become wealthier, but everyone else has to suffer hyper-inflated commodity prices on a product that is not nearly as scarce as it's cost suggests.

Joe Millionaire becomes Joe Billionaire without doing any real work, and Joe Sixpack loses his house without doing anything wrong.

Is it really unfair of Joe Sixpack to be just a little bit peeved?

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This journal is a set of random musings from a guy who probably doesn't really know what he's talking about. He's a software engineer by trade, not a political analyst, market analyst, foreign policy expert, legal expect or anything else. He's just a guy who likes cold beer, loud music, and shooting his mouth off on the internet. Don't get too worked up over what he has to say, and you'll probably live that much longer for it.