Fannie and Freddie Bailout

The big news yesterday was the U.S. government's takeover of Fannie Mae and Freddie Mac. My response? Ho-hum. The international community holds about 5 trillion (yes, that's a "t") dollars of Fannie Mae debt, according to today's WSJ. Of course we had to bail them out, if we ever wanted to see a single yen or yuan buying American paper.

(For more on this, read http://www.blacklistednews.com/news-1459-0-13-13--.html)

In short, we didn't have a choice. What's really scary is politicians are talking about bailing out GM and Ford. I predicted a Ford and GM bankruptcy months ago, but there is no reason for the government to bail out Ford or GM--they are private companies who decided to focus on manufacturing SUVs right before oil spiked. While taxpayers may have an interest in ensuring their neighbors don't lose their homes--vacant lots of homes are terrible for cities and states--ensuring your neighbor gets service for his Hummer is a different matter entirely.

If the U.S. seriously talks about bailing out GM and Ford, the American dollar will have officially become the world's doormat. (I earlier compared the dollar to the world's prostitute, who kept servicing STD-ridden johns instead of closing the doors to them, but apparently, that analogy was too blunt.) Perhaps we've got a case of financial immaculate conception, where U.S. taxpayers who paid their mortgage bills and taxes on time, still end up with a baby on their hands to support; however, instead of a savior, U.S. taxpayers will apparently be forced to pay for Rosemary's Baby's expenses. Where are three wise men when you need them?

(One of them, Patrick Killelea, is here: http://patrick.net/housing/crash.html)

Fun: German Chocolate, Kinder Happy Hippo

I've just tasted a bit of heaven. I loved the famous Kinder eggs, the chocolate eggs with the toy parts inside of them. But now Kinder has come up with something so good, I was just stunned: Kinder Happy Hippo cacao. It's hazelnut chocolate inside a hippo-shaped wafer.

I can't read German, so I can't tell you what the ingredients are, but I felt like I had tasted ambrosia--the food of the gods. If you like hazelnut, you must check it out.

I have no connection with the following website, nor have I ordered from them, but they appear to be based out of Illinois and they do have Kinder chocolate:

http://www.minosimports.com/

Happy eating, folks. Unleash your inner hippo.

The Green Bag, Summer 2008

I just got my first edition of The Green Bag, Summer 2008, Vol 11, Number 4. The Green Bag calls itself an entertaining journal of law, and it is indeed a fun read. This volume talked about the change from the plural to the singular in "The United States are" to "The United States is" post-Civil War; and Henry R. Selden's must-read June 17, 1873 speech in defense of Susan B. Anthony's right to vote.

Some of my favorite items are here:

page 474: Louis Brandeis: "Equity does not demand that its suitors shall have led blameless lives." Loughran v. Loughran, 292 U.S. 216, 229 (1934)

page 519: Nelson Lund, quoting Gene Healy's book, The Cult of the Presidency:

True political heroism rarely pounds its chest or pounds the pulpit, preaching rainbows and uplift, and promising to redeem the world through military force. A truly heroic president is one who appreciates the virtues of restraint--who is bold enough to act when action is necessary, yet wise enough, humble enough to refuse powers he ought not have. That is the sort of presidency we need, now more than ever. And we won't get that kind of presidency until we demand it.

Restraint? Check. Humility? Check. Act not rashly, but when necessary and prudent? Check. It's this kind of talk that makes my libertarian heart go aflutter.

Hospitals and the Real Costs of Protection

The August 28, 2008 WSJ (front page, "Nonprofit Hospitals Flex Pricing Power") had a well-researched article on hospitals. Most people don't realize hospitals and even insurance companies are usually nonprofit corporations. What's worse is that many hospitals and insurance companies are nonprofit subsidiaries of larger partnerships or for-profit corporations, making it hard to ascertain the true owners. When lawyers sue hospitals, it usually takes forever to figure out the proper entity to sue. Many times, you have to trace the corporation or non-profit back to a Limited Partnership (L.P.), even though the direct employer is a nonprofit hospital corporation. Corporations, nonprofits, and hospitals have created byzantine empires to shield themselves from liability, which makes it very difficult to point fingers when things go wrong.

For example, you think Stanford University is called "Stanford University"? Nope. That would be too easy. Stanford is broken up into three separate entities: one, the LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT STANFORD; two, STANFORD HOSPITAL AND CLINICS; and three, The Board of Trustees of The Leland Stanford Junior University. Yes, it's a scary world when you realize how hard it is to point blame in an ever-expanding universe where lawyers spend all day trying to shield their clients from liability.

I'm not saying Stanford is doing anything unwise--they should be trying to ensure that a medical malpractice judgment against a hospital doesn't cost their University students anything, but at some point, Enron and its fake, fraud-masking subsidiaries come to mind (remember, Enron claimed major profits partly because it kept offloading its debt through a complicated set of fake subsidiaries that took on Enron debt for stock). We forget there's a moral cost to this kind of paper legal protection. The more fragmented a place or entity, the harder it is for people to take responsibility or to find out where the buck stops. Corporate fragmentation disincentivizes entities and their agents to act responsibly, because the money and assets can be shifted or protected through more and more complex special purpose paper vehicles.

Pretty soon, it won't be enough to sue, get to trial, win the trial, and then deal with the appeal after multiple years have passed--when you do win and finally get a judgment, maybe the entity you sued doesn't have assets to claim, or you can't pierce the corporate veil. Corporate America, One. Consumer/Employee, Zero.

Is College Still Worth It?

Meg, a blogger, has a great post on market inefficiencies and colleges:

http://wealthisgood.blogspot.com/2008/08/government-subsidies-enable-colleges-to.html

Her post is related to this CNNMoney article:

http://money.cnn.com/2008/08/20/pf/college/college_price.moneymag/index.htm

I like her dad already.

WSJ's Neal Templin Supports Young Adults

All college-educated young adults who live at home with their parents should read Neal Templin's "Learning Life's Lessons On a Shoestring Budget," WSJ, August 28, 2008; Page D2. For now, the article is posted at the link below, but no permalink exists. If the link below does not go to the article, try googling "Learning Life's Lessons On a Shoestring Budget."

http://online.wsj.com/article/cheapskate.html

It wasn't always a given that kids would move out when they reached adulthood. Children used to live at home until they married, and it's still that way in many other countries.

This arrangement also allows parents to have more sway over who their daughter or son marries, thereby providing more leverage for their expectation of grandchildren. For more on this subject, 60 Minutes did an entertaining report on Italy's men this year, called "Mammoni."

http://60minutes.yahoo.com/segment/170/mammoni

Movie Reviews from Erik Lundegaard

I'm a big fan of The Wire and Tyler Perry. I just found two interesting articles on both subjects from Erik Lundegaard and had to share:

The Wire:
http://www.huffingtonpost.com/erik-lundegaard/the-wire-vs-the-sopranos_b_92120.html

Tyler Perry:
http://www.msnbc.msn.com/id/23635092/

Erik Lundegaard's blog, with movie reviews, can be found here:

http://www.eriklundegaard.com/moviereviews.php

A friend of mine, Jim Quillinan, also has a movie review website worth checking out: http://qsreviews.wordpress.com/