Monday, October 20, 2008

The Good, The Bad, & The Ugly

As the old saying goes if you’re not a socialist in your youth you have no heart when you’re old. A recent New Yorker Magazine issue carried a series of letters by the late literary lion Norman Mailer dating back to his time in the U.S. Army during World War II. In the early letters Mailer admits to being an avowed Marxist and socialist, but one with a deep dislike for the Russians. As time passed he became less an atheist and a Marxist, but never lost his fervor for the fight for justice and equality.

One of Mailer’s 1960’s era letters saw him concerned by racism in the USA which he felt could well blow apart the fragile experiment in democracy. Today, with Barak Obama a Presidential candidate, and by all indications, the next U.S. president, Mailer’s causes for concerns are over.

Of course, someone may shoot him. It has happened before. Four presidents have been killed in office: Abraham Lincoln, James A. Garfield, William McKinley and John F. Kennedy, even presidential candidate Bobby Kennedy. But the benchmark will have been reached. Racism will have been dealt a severe blow.

Will Obama make a good president? Who knows? The current leadership, headed by George W. Bush, backed by Dick Cheney, and advised by Rumsfeld, has been accused of being rudderless. Others say that they had a firm direction in mind, but it was just the wrong direction. Still others claim that they tried to institute missionary-like democracy but the local tribes weren’t prepared for it.

Whatever the truth, pundits believe the experiment didn’t work. But these Conservatives deserve credit for trying. But now, even Republican poster-boy Collin Powell has endorsed Mr. Obama. So have prestigious Republican newspapers like the Chicago Tribune. Obama, analysts say, must be doing something right, or is simply the lesser of two bad choices.

So another experiment appears on the horizon.. Mr. Obama may try to talk America’s enemies out of their antagonism, and may just succeed. And may not, but as the peace camp in Israel is fond of saying, it’s worth a chance.

Israel worries about Mr. Obama. His early supporters were liberal Jews from Chicago’s wealthy Gold Coast, however many of these people were ex-60’s activists, vocal anti-Israeli Jews. One Jerusalemite wondered if those anti-Israeli radicals would have a persuasive voice. The issue is still open. Obama is, his critics admit, very smart. And very smart will help handling a world adrift.

Bill Clinton was very smart. Under his leadership HUD Secretary Henry Cisneros instituted the legislation that allowed low-income families to buy homes using cheap mortgages. Both Clinton and Cisneros meant well. Both wanted poor people to have a piece of the American dream. Today, in an article in the International Herald Tribune, ( )Mr. Cisneros admitted he was wrong. Many of those who took out mortgages should have stuck to trying to pay tent. Eviction for lack of payment of rent is easier on the economy than foreclosure on a piece of property that must be sold to another buyer. Another buyer who needs a now hard-to-get mortgage. Both Mr. Cs deserve a C for that plan.

Cisneros, according to the article, left Washington under a cloud of sexual scandal, and using his contacts went into the construction business. He built one San Antonio, Texas subdivision of nearly 500 low-income homes, using brokers who secured ‘sub-prime’ loans for the lower-income minorities. A noble experiment. It too failed.

According to Christopher Cox, Chairman of the U.S. Securities and Exchange Commission, ( ) the lenders benefited by unregulated ‘derivative’ markets, a new financial tool that came on the scene in 2000. These were bonds wholesaled by lenders to financial institutions with no regard for the ability of the original mortgagee to pay back the loan. The assumption was that the financial institutions would be careful what investments they made.

”In 1999 a report by the President's Working Group on Financial Markets envisioned no systemic risk from such derivatives since "private counterparty discipline" - investors' natural desire to keep their own risks to a minimum - would work to protect the broader financial system,” wrote Cox. .They weren’t, as the world now knows. The blame is put on the original lender, the local banks. According to the SEC article, lenders didn’t even need to meet the person taking out the mortgage. And the assessor of the borrower’s ability to pay back the loan worked for the mortgage company, not the government.

Cisneros, who also joined the board of Countrywide, the company that went belly-up over sub-prime mortgages, maintains he meant well. But not only was he involved with Countrywide, KB Home. his housing development company in partnership with American City Vista Partnerships, was involved with James Johnson, former CEO of Fannie Mae, who was also on the board of Countrywide. Fannie Mae was one of the leading culprits of the sub-prime fiasco.

Cisneros says he wanted to help the minority community. And he did, up until they couldn’t pay the monthly mortgage. Now many of the homes he built and sold are in foreclosure. He is still in the building business, with a new company valued at hundreds of millions of dollars. Some cynics ask if he was noble or greedy?. His buyers say they were told to ‘buy, buy,buy.” One asks, in the article, “How in the hell did I ever think I would be able to pay?”

Years ago, when this writer was employed by the EOE, the U.S. Government’s Office of Economic Opportunity, better known as the Poverty Program, putting out a newsletter for the Cook County branch, the man in charge of housing initiatives and alternatives, had a sign on his wall. “You can rent a man a palace and he’ll turn it into a slum, you can sell a man a slum and he’ll turn it into a palace.”

The experiment by Cisneros was tried. It was a good try. Hopefully, one day, it will work. Will Mr. Obama institute similar welfare experiments? Or will he turn his attention to world affairs? Make his mark on the pages of history as an innovator who changed the rules of the game? And will Israel be affected?

Things are changing today in the middle east.. A new Israeli prime minister is on the horizon. Tzipi Livni has won her Kadima party’s primary, and is scheduled to replace Ehud Olmert. But first she must form a coalition. Israel’s system of government requires at least 61 seats in the 120 members Knesset to allow the President to approve a government.

Coalition ‘talks’ are now ongoing. The give and take revolves around money. Which party will be able to get a bigger slice of the budget in exchange for joining the coalition? The ultra-Orthodox Sephardic Shas party’s spiritual leader, Ovadia Yosef is featured on the front page of the Jerusalem Post holding a round silver-plated Torah scroll. The story below the picture is how Rabbi Yosef has told the Shas leaders not to join the government if Shas doesn’t receive guarantees of a certain level of child allowances.

Another noble idea.

Each party will have its own demands. Some of the demands will be about money and power. Not only a budget allocation for a specific ministry, but also a fat sum to provide jobs to the party faithful and prestige to the party leaders. Labor party leader Ehud Barak, may want a top job as incentive to join the government, like the Finance Ministry or the Foreign Ministry. Whatever deals are made the government will be lucky that the Israeli economy is healthy enough to pay the bills. For now.

Yet that is a position Israel has always been in. Beset by unimaginable odds somehow Israel has managed to pull through. When driving around Jerusalem with visitors a host was asked, “What do the Israelis think of those guys,” they said, pointing to a group of Ultra-Orthodox Hassidim.

“Most Israelis resent them, because they don’t serve in the Army. The average kid goes to war, these guys stay in their Yeshivot, studying Torah. They live off the State. Since they’re impoverished, they also don’t have to pay property tax. So the average Israeli is envious.’ “Do they work?” asked the visitor. “They consider that the study of the Torah is their work. That by studying the Torah, the keep the world spinning, they keep Israel safe.”

Now, as the Jewish communities prepare to celebrate the festival of Simchat Torah, when the nation of Israel received the Torah on Mt. Sinai, perhaps there’s a chance that these Hassidim are right? Perhaps it is their study of the Torah that keeps the world spinning? Keeps Israel going? Since they’ll never stop studying we’ll never get a chance to prove the hypothesis the Hassidim believe in. And maybe that’s the best thing possible.

Even Mailer, in his later years, moved away from being an atheist. Maybe, after all, the noble experiments can exist side by side with the true believers. Meanwhile it’s up to the observers to figure out who are the good, the bad, and the ugly.