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$2 billion social experiment in central planning fails; it’s after-school for you
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Since 1985 Kansas City Mo has spent over $2B on court ordered school “improvements, and now, 26 years later, find themselves rigt back in the same position: losing their accreditation on Sunday. All the students are going to be shipped to other districts. KCMO school system has committed to paying these other districts to do their own job at a level of about $3800 per student, whereas the costs per pupil are closer to 10K. Nice jjob of you can get it. KCMO administratprs will surely find it much easier ot run their schools wihtout all those pesky kids in the way.
Everyone in town is wringing their hands about how they can’t understand why the city is in such a mess and there isnt a single voice offering a constructive plan yet. Disgraceful.
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Who should bear the risk? who should be the judge of value?
Image by bsterling via Flickr
If we have decied that our banks are too large to fail, then how about the following idea?
1. When an individual and a bank agree on a loan, its based on a shared estimate of the value of the home.
2. When a bank decides to underwrote a speculation then both the individual and the bank are betting that the price will go up and allow them to take on more downside risk
3. The individual takes the risk because they think they wont get stuck (greater fool theory plus tactical liquidity)
4. The bank takes the risk because they know there are greater fools to buy the house, tactically, or because the government (the greatest fool) will bail them out (strategic greater fool theory)
5. when there is tactical failure the individual loses all, the bank gets the cushion of the down payment or the property top resell
6. when there is strategic failure, all the risky individuals are crushed, and banks get bailed out with the money taken from prudent banks and individuals who didnt speculate. This is the moral hazard problem.
7. Even in strategic failure, the banks dont lose, and cant lose, unless the entire world’s financial edifice is removed, but then we have total anarchy and bankers arent worse off than anyone else, plus they can live off the real assets they squirreled away along the wya. No real risk at all.
What we need is a way to put the risk on the banks up front, so that we shift the cost of failure from the prudent banks and individuals.
So, I am thinking that the bank needs to be the appraiser, and quote a price at which they guarantee they will repurchase the house from the borrower at any point in the lifecycle of the loan, at the individual’s demand. They can require a 20% down payment, so that they have a pool of capital to loan to others. They will be conservative in their estimates of value, and will therefore be a brake on speculation.
This prevents individuals from eating all the cost of their own speculation alone. banks wont let them speculate without skin in the game. Speculation will be inhibited. Banks will do a better job of appraising, since they will have to own their decision for the life of the loan. If there is a meltdown in housing prices, individuals, who are least capable of making those kinds of forecasts and judgments, dont get smoked on their loans because they can always demand the bank buy them out at the negotiated price. Now prudent individuals arent stuck with the cost of the bad speculative loans. Then if banks fail for having poorly estimated housing value, prudent banks get to buy their books at a discount.
This would serve to stabilize a conservatively priced housing market and prevent the socialization of costs incurred by the worst risk takers at the expense of the prudent individuals and banks. Virtue will be rewarded
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- Bank break-up law by 2015 – BBC News (bbc.co.uk)
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- An Investment in Your Future: Funding Your Undergraduate Education Through Loans, Grants and … (education.com)
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The source of moral authority?
It’s horrible when your “spiritual advisor” is more concerned about preventing scandal than doing the right thing
Insert commentary on “Hate the sin, not the sinner” here, and how that doesnt invalidate “the message”
Channelling TR? Should have gone for Andrew Jackson
Image by Douglas Coulter via Flickr
I wish the President would go back a little further and channel Old Rough and Ready, and then get rid of the Fed. It’s hard to fault him though, as he is grasping at straws.
The sad thing is, grasping at straws and just flicking that jab out keeps the Republicans at bay while they desperately search for their fighter. Gingrich is coming out to toe the line, but if the Democrats ever wanted to design the perfect cartoon to represent the Republicans in the minds of their base its Gingrich. He embodies every stereotype that the Democrats wish were true of all Republicans: undisciplined, tool of the rich, flip flopper, uncaring, believes in differential outcomes while mouthing the words of equality of opportunity; accepts bribes, I mean he was a million dollar historian as a consultant.
That’s much different than Clintoon working with Corzine.
And now Gingrich says he will appoint John Bolton as Sec State: that will gain approximately zero independent voters, consolidate the left wing talking points and not convince any Republicans who aren’t already in his camp.
I’d buy ringside seats for a live unscripted debate though 
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A cunning plan on immigration reform
Image by Getty Images via @daylife
destroy the economy and make the nation a less popular destination
A plan that clever calls for a 17 day vacation. the good news is that he wont get involved in any legislation. The downside would be if he takes that opportunity to invent new policies as successful as his first 3 years. i dont know if we could stand much more success in realizing his vision.
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