RAHM EMANUEL AND ELECTRONIC TESTING: GOOD GOVERNMENT REALLY IS GOOD POLITICS, EH?

10/24/14

City of Chicago Human Resources Director Soo Choi said Thursday that she wants to convert all tests for city jobs from paper exams to electronic exams.  This is being touted by the Emanuel administration’s toadies in the media as a sharp blow for fairness, against corruption and the evils of patronage.  (See my nearly instantly seminal comments on patronage and its effect on governance, PATRONAGE, THE SHAKMAN DECREE, THE CITY THATONCE WORKED…AND DAVID COPPERFIELD, published 6/16/14 at Rant Lifestyle.) 
In its eagerness to embrace the veneer of reform, the local cheering section for Rahm Emanuel that calls itself the City Hall press corps has it wrong.  Mr. Emanuel’s plan to replace paper tests with electronic tests is not a blow for clean government but, rather, a concession to the modern reality of politics and yet another move to drop the peanuts and grab the golden nuggets.
The precinct captains and the armies of patronage workers of which they were once part are effectively dead as devices for getting out the vote and winning elections.   Federal pressure, largely in the form of Shakman enforcement, has made disciplining the troops nearly impossible.  Maybe more importantly, voters are too busy (Some gullible types say too informed, but that is another issue.) or insouciant to take the time to listen to their neighbors’ pitches for candidates.  The modern voter, even in the remaining supposedly Machine bastions, decides how to vote based on idiotic 30 second ads that interrupt his or her nightly viewing of the schlock we call prime time television.  Over the last 30 or 40 years, the television has steadily replaced the ward organization as the key to winning elections; the television is the new precinct captain and has been for years.   Some of us think this is not an entirely favorable development (See the aforementioned post.), but I digress.
The precinct captain can’t do the pols much good, so why bother fighting Shakman and other federal attacks on patronage?   Why not go the good government route and make moves, such as replacing paper exams with electronic tests, that will further wow the already completely in the tank press and, more importantly, yield an enormous dividend itself?  
What is the dividend this latest goo-goo maneuver will yield?  The electronic tests will involve millions of dollars in contracts for consultants, vendors, lawyers, facilitators and God only knows who else.  Do you suppose that those on the receiving end of this largesse will not show their gratitude by making generous contributions to the various political funds of the mayor and his minions?   If you don’t suppose so, you are hopelessly naïve; make no mistake; something is expected from those who do business with the city, and such expectations, of course, didn’t start with Rahm Emanuel.
Why bother defending patronage when it is impotent in the modern political era?  Why not actually join the fight against it when doing so can generate the money that can be used to buy the inane 30 second ads (and employ relatives, friends, and other hangers-on in the political apparati) that actually win elections in this era of the frighteningly low information voter?

See my two books, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics, for further illumination on how things work in Chicago and Illinois politics. 

MORTGAGE LENDING: “LET’S TAKE IT NICE AND EASY, IT’S GONNA BE SO EASY…”

10/22/14

Two developments on the mortgage regulatory front warrant serious consideration and spawn one insightful observation and draw two conclusions.

Federal Housing Finance Agency Director Mel Watt announced yesterday that Fannie Mae and Freddie Mac will guarantee mortgages with down payments as low as 3%.  Previously, though there were exceptions, Fannie and Freddie required 20% down payments on mortgages they guaranteed.

At the same time, the Dodd-Frank requirement that banks retain 5% of the risk in the mortgage loans they originate and sell to investors or require a 20% down payment on such loans was watered down.  Under the new rules, banks can avoid retaining risk in the mortgages they originate and sell by merely “verifying a borrower’s ability to repay” and ensuring that their debt levels remain below certain predetermined thresholds.

Both moves are part of a general thrust toward easing home lending requirements and are seen as a response to a continued sluggish housing market that is characterized by home sales’ being down 2% from last year and still below pre-recession levels of seven years ago.

One can make one observation and draw two conclusions from these regulatory developments.

First, the observation:  At the expense of sounding like a heretic in the church of new age financial innovation, when you have put down only 3% of the value of “your” home, you don’t own the home; your lenders do.  Many have pointed out that only a slight change in housing prices would wipe out one’s equity under such a structure, and that is true.  But even more fundamentally, one doesn’t have to be as atavistic as yours truly to realize that you don’t own anything when you have borrowed just about its entire purchase prices.

Now, the first conclusion.  Wall Street must have gotten to the regulators.  Mortgage backed securities issuance is down 50% year to date from last year.   This of course hurts the trading profits of banks and other Wall Street institutions.   The regulators and their political masters are following their usual “Yes, sir, you’re right sir, what else can I do to make your life easier, sir?” approach to Wall Street and to anybody else capable of writing brobdingnagian “campaign” checks and providing other sources of lucre to our selfless public servants.  That the taxpayers and others not within the vortex of Washington may wind up with the bill for such service is inconsequential to the political class.

Finally, the second conclusion.  Regulators have to have concluded that our Potemkin housing market, and maybe our Potemkin economy, cannot survive without massive debt extension and creation.  That a large chunk of such debt may be unserviceable, and thus will have to be picked up by the taxpayers is, again, inconsequential to the political class or to the special interests it services.

“LOOK AT THAT CADILLAC!”: GM TRIES A GEOGRAPHICAL CURE AT CADDY

9/24/14

General Motors announced yesterday that Cadillac will move its headquarters to New York, part of a larger move to establish Caddy as a separate business unit.   Part of the rationale for abandoning the city whose founder gave Cadillac its name is, as new Caddy boss Johan de Nysschen, put it

“There is no city in the world where the inhabitants are more immersed in a premium lifestyle than New York.”

Mr. de Nysschen thus outlines about as good a reason as any not to live in New York, but I digress.

Will this move to New York work?  Caddy has to do something.  Year to date through the end of August, its sales were down 5% in a strong car market.   Making the story even worse, Caddy’s SUVs, the SRX and especially the behemoth Escalade, are selling quite well.  Sales of Cadillac cars, however, were down 15% as of 8/31/14.  Dealer lots are teeming with CTSs and ATSs that simply won’t sell.

So is moving to New York going to change Caddy’s fortunes?   Employing a little uncommon common sense, one suspects not.  But the move to the Big Apple is at least consonant with Caddy’s pricing strategy; i.e., Caddy vehicles definitely are listed at New York prices.  Therein, one suspects, lies the problem; Cadillacs are simply too expensive.  

The ATS starts in the low $30s, which yours truly thinks is a lot of money but apparently no one else does.  But try finding an ATS at that price point; walk around a dealer lot and you will notice that most of the stickers on this cramped car sport a $40 handle, and many are priced in the high $40s.  The CTS starts in the mid $40s, which gives yours truly apoplexy, and can easily reach the high $50s and low $60s.

C’mon!   These aren’t Mercedes or BMWs; they are Cadillacs, for Pete’s sake.  Yes, the current Caddy products are, in many aspects, as good as the European fare to which they aspire.  The handling of the ATS, which is at least as good, in many knowledgeable people’s opinions, as that of the BMW 3 Series comes immediately to mind.  And it is possible to argue with a straight face that the Cadillac cars are as good as or better in totality than their German competitors.  But that misses the point.

People who spend these brobdingnagian amounts on cars are buying, as much as they will never admit it, an image, not a car.  And while Caddy may be as good as BMW, Mercedes, Audi, Lexus, Infiniti, or what have you, it doesn’t have the image of those “luxury”(whatever that means) marques.  And therefore Caddy can’t charge BMW, Mercedes, Audi, Lexus, and Infiniti prices; those who buy such cars will not stand for it.   And old time Cadillac buyers are not used to paying such prices.  But Caddy doesn’t seem to care much for the traditional Cadillac buyer; in fact, Caddy seems to treat its traditional buyers like something it would like to scrape off the bottom of its shoe.  That also is a big part of the problem.  Older, largely self-made, people have money and are willing to spend it on expensive products that deliver value.  Caddy used to know that, but now seems to be tossing such customers over the side while fixating on capturing the attention of the insecure types who fancy themselves the nouveau riche and seek to prove it, perhaps to themselves, by the accumulation of showy and glittery yet ultimately useless gimcracks and trinkets.

So Caddy can tell its hometown to screw itself.  But as long as it charges prices commensurate with those that prevail in its new HQ town, and tells its traditional buyer base to also do the aforementioned anatomically impossible, it will have problems that far transcend geography.

WHY IS THE MARKET DOWN? WHERE IS THE MARKET GOING? WISE GUY ANSWERS TO UBIQUITOUS, YET POINTLESS, QUESTIONS

9/23/14

A guest on yesterday’s edition of WBBM’S Noon Business Hour (“NBH,” a program I HIGHLY recommend…noon to 1 PM Chicago time on AM 780) was asked to opine on the reasons for the market’s mild doldrums of late.  Since I was cutting the lawn at the time, I didn’t catch the guest’s name and am unable to quote his exact response.  But, paraphrasing, he offered that the market was due for at least a mild downturn or breather after reaching record highs.

This explanation seems reasonable and is certainly as good as any other offered by the “experts” in the field of market prognostication.   Those of us who believe, with more than the usual degree of conviction, in the efficiency of markets, however, believe not only in the inability of anyone to consistently call the direction of markets.   We also believe that it is nearly impossible for anyone to explain why the market has done what it has done; who knows what future events the markets were or is discounting with their usual remarkable efficiency?  People generally stink at prospectively calling the markets; they also generally stink at even retroactively calling the markets.  Such musings as offered by the NBH’s guest, and the guests on every markets oriented show, may be interesting and fun but they are, ultimately, quite useless.  See 8/29/14’s BULLS, BEARS, AND BRAINS:   THE RELENTLESS PURSUIT OF THE FOOL’S ERRAND OF CALLING THE MARKETS for further illumination on this topic.

Given our fervent belief in the efficiency of markets, those who think like yours truly might respond to a question regarding why the market did what it did with a wise guy answer like

“The market was down because there were more sellers than buyers,”

which is about as illuminating as

“The bond market went down because interest rates went up,”

but is nevertheless at least as insightful as anything anybody else might pull out of a conveniently situated orifice.

But even the glib and wisenheimer answer

“The market was down because there were more sellers than buyers”

is wrong because there cannot be more sellers than buyers; clearly, even in this age of such financial sophistication as naked shorts (which, for those of you not as familiar with the markets as other readers, are not as interesting as they sound), for every seller, there must be a buyer.  A better, but no less smart-butted answer, would be

“The market was down because there were more sellers than buyers AT THE PRICES THAT PREVAILED BEFORE THE MARKET FELL.”

Right again, Mr. Quinn.  Thank you.

RAHM VS. THE LILLIPUTIANS

9/23/14

Fran Spielman, the City Hall reporter for the Chicago Sun-Times, write a story published today (“Long shot could force runoff,” page 11) arguing that while Alderman Bob Fioretti cannot possibly win a mayoral race against Rahm Emanuel, the presence of both Mr. Fioretti and Chicago Teachers’ Union President Karen Lewis on the primary ballot could make a runoff more likely.   (See ALDERMAN BOB FIORETTI THROWS HIS HAT IN THE RING:  OH, HEART BE STILL, 9/13/14 for more illumination on Mr. Fioretti and his minuscule chances for winning the big office on the 5^th Floor.)

A brief primer on the mayoral election process in Chicago is in order here.  Chicago mayoral elections are no longer officially partisan; instead, there is a nonpartisan primary in February.  If a candidate gets more than 50% of the vote, s/he becomes mayor.  If no candidate wins 50% of the vote, a runoff is held in April.  Since this officially nonpartisan process was initiated in 1999, there has been no runoff election.

Ms. Spielman, like any political junky reporter, loves a good story.  She even trotted out old school independent strategist Don Rose in support of her thesis, or at least in pursuit of her story.  But Ms. Spielman is, in this case, clearly delusional.  

As I have said before (e.g., TONI PRECKWINKLE RULES OUT A RUNFOR MAYOR OF CHICAGO…MY READERSYAWN, 7/15/14), no one is going to beat Rahm Emanuel in February and there will be no April election.   Mr. Emanuel has the money, the organization, the cowering pols, the obsequious “business community,” the private sector unions, and certainly the fawning press, national and local, behind him.   Politics everywhere, but especially in Chicago, is about money and the people who make money, or can potentially make money, from politics in this city on the make are either behind Mr. Emanuel or will be wooed by promises of money, or by threats, to get behind Mr. Emanuel.  Whether Mr. Emanuel runs against one, two, or a million opponents, that will be the case.

Mr. Emanuel’s inevitability would be, if anything, enhanced by the presence of both Ms. Lewis and Mr. Fioretti on the primary ballot.  Yes, there are differences between them…professional background and race come immediately to mind.  But, fully mindful that ideology is overrated in the governance of cities, it is useful to point out that these two are ideological clones.  Their philosophies are identical…vilify and tax the wealthy in order to pander to the poor.  In a mindless jihad that could only be conceived by those with complete ignorance of economics, both Ms. Lewis and Mr. Fioretti would increase the tax and regulatory burden to make the city sort of dystopia for the productive in a gormless appeal to the baser instincts of the masses.  Hello Detroit.

If we were to join the fantasizing about the possibility of unseating the Wise and Mighty Rahm, we would do well to heed Greg Goldner, Mr. Emanuel’s campaign manager in his 2002 run for Congress, as quoted in the Spielman article, who said

“They’re (Ms. Lewis and Mr. Fioretti) almost splitting the progressive community.  That’s not the right starting point to go to the white ethnic base on the Northwest and Southwest sides that might be dissatisfied with the mayor but don’t share those leftist political views.”

If we had either Mr. Fioretti or Ms. Lewis in the race, but not both, and a candidate who could appeal to the justifiably angry voters on the Southwest and Northwest sides whom Mr. Emanuel regards as an endless parade of Mikes and Mollies, then we might have something of a race…but ultimately, at best, a race to see who gets slaughtered in the April run-off.  That other candidate, however, has not surfaced and will not surface and, as Mr. Goldner points out, those teed off people from my old neighborhood and their kindred spirits from the geographical fringes of the city are not going to back Karen Lewis or, once they’ve read more than a few paragraphs on the man, Bob Fioretti.  They’d rather hold their noses and vote for Mr. Emanuel.  So Mr. Fioretti and Ms. Lewis, if they both wind up in the race, will be battling each other for that fraction of the black and/or progressive vote that hasn’t been bought off or similarly mollified into voting for Mr. Emanuel…like two dogs fighting over a picked over bone.

See my two books, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics, for further illumination on how things work in Chicago and Illinois politics. 

THE JOURNAL URGES US TO FIGHT ON BOTH SIDES IN SYRIA: BELLUM GRATIA BELLI?

9/17/14

In its lead editorial this (Wednesday, 9/17/14, page A14) morning, the Wall Street Journal urges the Obama Administration to lift the siege on Aleppo by bombing Syrian President Bashar Assad’s airfields.  This would put the United States, explicitly, on both sides of the Syrian conflict and clearly on one side of the larger Sunni/Shiite conflict in the Middle East.  Who but someone who urges us to fight a war for the sake of fighting a war would urge such an insane policy?

Even dedicated non-interventionists like yours truly can see some merit in a bombing campaign against ISIS, ISIL, the Islamic State, or whatever it is being called today, especially after this especially cold-blooded group of terrorists has beheaded two Americans and one Brit.   We don’t like our country putting its considerable proboscis where it doesn’t belong, but we also can’t see our country standing idly by while its citizens are tortured, killed, and otherwise abused.  

But I have also urged caution, reminding members of the War Party, and its most stentorian voice at the Wall Street Journal, that only a few months ago, they were urging the United States to bomb Syria in support of the Syrian rebels, the most salient group of which was, and is, ISIS.  (See, for example, THE WALL STREET JOURNAL ON THE ISLAMIC STATE:  “I WAS FOR IT UNTIL I WAS AGAINST IT”?,  8/21/14, MORE ENLIGHTENED THINKING FROM WASHINGTON: LET’S FIGHT IN BOTH IRAQ AND SYRIA!, 6/25/14)  A military campaign against ISIS, however, would put us on the side of Mr. Assad, a guy that the Journal and its fellow neocons were urging us to oppose only a few months ago.   Fighting ISIS thus would have the implicit effect of our fighting on both sides of the Syrian Civil War.  Only the geniuses at the State Department and other bastions of deep thinking foreign policy formulation in Washington would put us on both sides of a war.

Now the Journal, by urging the Obama Administration to bomb Syrian airfields and take other steps to lift the siege of Aleppo, is advocating explicitly placing us on both sides of the Syrian Civil War, fighting both the Assad regime and its most powerful and visible opponent, ISIS.

The rationale the Journal provides for getting us on both sides of the Syrian conflict is that

Sunnis will not support the campaign against Islamic State if they think our air strikes are intended to help the regime in Damascus and its Shiite allies in Beirut and Tehran.

This might indeed be the case, though we could, by the intensity and targeting of our air campaign, show the world that our objective, and only objective, is to rid the world, to the extent we can, of a group of extremists who have committed what ought to be the worst of sins on the international stage, i.e., the cold-blooded killing of American citizens.  But I digress.

More to the point, though, is that while the Sunnis may misinterpret an effort solely directed against ISIS as our taking the sides of the Shiites in Syria and in the larger Middle East, what will be the reaction of the Shiites if they see us fighting explicitly on the side of the Sunnis in Syria?  Perhaps they will take solace in that we are supporting the Shiite dominated government in Iraq, but I wouldn’t bet on it.  

The larger point is that it’s easy to see how byzantine the politics of the Middle East are and the best policy is to stay as far away from such intrigue as we can, limiting our involvement to making it clear that killing and torturing American citizens will not go unanswered.

One suspects, though, that the neocons, their manifesto writers at the Wall Street Journal, and the rest of the War Party in Washington care little for either the complexities of the Middle East or the rationalizations they provide for military action there.  Their sole, or at least their paramount, goal in urging us to bomb both the Assad regime and the Islamic State that opposes it is to get us involved in a war, any war…doing so is good for the “defense” contractors who keep War Party members comfortably ensconced in their Washington, D.C. sinecures.  And what could be more important than that?

“ILLUMINATING” THE UNIVERSITY OF ILLINOIS?

9/15/14

In a September 5 column, Chicago Sun-Times writer Neil Steinberg, under the cover of a disingenuous offer of “illumination” for my alma mater, the University of Illinois at Urbana-Champaign, delivered a back-handed slap to one of the world’s great universities and nearly an entire state. 

Rarely letting a slight of an institution I hold dear go unanswered, I sent the following letter to the Sun-Times.  As I anticipated, the paper didn’t print my missive and certainly won’t now that all this time has passed.  So I thought I’d post the letter on my blog for your enjoyment and consideration:

Neil Steinberg is a columnist and columnists are not supposed to be objective.  The columnist’s job is to be opinionated.   However, one can be opinionated without being extraneously nasty…and missing one’s facts in the process.

In his offer of “illumination” to my alma mater, the University of Illinois at Urbana-Champaign, Mr. Steinberg fails on both counts.   One understands immediately that Mr. Steinberg doesn’t like the U of I, perhaps because it is too low brow for him.  But he can’t even offer the place a compliment (“bristling with programs and libraries and quirky collegiate peculiarities”) without prefacing those compliments with the back-handed slap that he expected my alma mater to be a “seedy sinkhole of downstate grimness.”   Mr. Steinberg has to go out of his way to insult not only one of the world’s great universities but the entire state of Illinois south of I-80.   But he’s only trying to help, don’t you see?

Mr. Steinberg, in his further denigration of the U of I, offers an absolutely silly criterion for judging the quality of a university:  he challenges us to name one University of Illinois professor.     How many people can name any professor anywhere?   Mr. Steinberg compounds his folly by answering his own question by citing Bill Ayers, who was on the faculty not at the University of Illinois at Champaign, the subject of his column, but at the University of Illinois at Chicago.   Perhaps a better criterion would be Nobel Prize winners; U of I has 11 Nobel laureates among its alumni and another 11 Nobel laureates among its non-alumni faculty.   Two Nobel laureates were both alums and faculty members.  Most people in my profession, investments, can name one of those faculty laureates, Franco Modigliani, the former UIUC professor who won the Nobel in Economics in 1985 primarily for his work on valuation of the firm.  Can Mr. Steinberg name any of the U of I’s Nobel winners?

One of Mr. Steinberg’s prescriptions for improving the U of I’s image is to admit fewer students, to lower its acceptance rate so that “those it did admit might get the sense they had achieved something truly significant by being admitted and actually go.”  Mr. Steinberg goes on, after that slap, to say that he doesn’t want to “minimize” that “a lot of kids work like demons to get in” and that “U of I represent(s) the attainment of their dreams,” but one can clearly smell insincerity there.  And how do you think the taxpayers of this state would react if U of I turned down more stellar students?   Who hasn’t heard the stories of kids with 33+ ACTS and perfect GPAs getting turned down for the engineering or business schools at U of I?   Mr. Steinberg wants more such stories?

We get it; Neil Steinberg, even though he “could see (his) boys going there,” doesn’t think U of I is up to his high standards.  But in explaining this position, does Mr. Steinberg have to go out of his way to insult not only an institution that continues to contribute so much to the worlds of business, technology, and the cause of academic excellence, but also nearly an entire state?