The Lehman Brothers bankruptcy

The Lehman Brothers bankruptcy filing indicate that as of their May 31, 2008 financial statement that the firm has $639 billion of assets and $613 billion of debt. At that time the firm had about $110 billion in ordinary bonds, and about $17.6 billion in subordinated bonds. The composition of the other debts is hard to determine, in part, because of a bad cross reference in that part of the filing.

As of the last financial statement, accounts payable were about $71 billion, short term debt was $163 billion, other current liabilities were about $29 billion, and long term debt was about $350 billion.

As of the filing date, the listing of the top 30 outsider creditors of the firm mentioned $138 billion of ordinary bonds (managed by two bond trustees), $17 billion of subordinated bonds (managed by one of the two ordinary bond trustees), and about 3 billion in bank loans and letters of credit ranging in size from $463 million to $10 million from 23 different institutions (a few of whom appear to be related entities of each other). This leaves about $485 million of debts owed to creditors in amounts less than $10 million and insider debtors.

This would suggest that $71 billion+ is made up of trade credit in small amounts per creditor, while $414 billion is made up of financial creditors in amounts less than $10 million and insider debt, with insider debt probably making up the bulk of the debts, as investment banks don't generally take deposits from millions of households the way that commercial banks do.

There don't appear to be any significant (i.e. more than $10 million) secured creditors or trade creditors, although this might not include financial rights of setoff.

There are more details (and explanations for why better data isn't provided) in an Affidavit of the CFO, which is honestly rather dubious and unsatisfying. I find it very hard to believe that Lehman Brothers is incapable of providing much, much more information than it has to date with only modest effort. While it might not be able to provide ever single creditor in a matter of weeks (although with the joy of computers it is hard to see why it shouldn't, it has to do so every quarter anyway), it ought to be able to publicly account for more than a third of its outstanding debt. These folks are in the financial analysis business and live and die on their own ability to be highly leveraged without becoming insolvent.

Equity

The most recent financial statement listed the aggregate value of preferred stock at $7 billion (and did not include it as a debtor in the petition).

The aggregate redemption value of the preferred stock based upon the rights of each class of preferred stock, the number of preferred shares identified in the petition (presumably the number of authorized preferred shares in each class), and assuming that preferred stock dividends aren't grossly in arrears, is about $237 billion. This is calculated as follows:

C 5 million shares, $500 each, $2.5 billion
D 4 million shares, $5000 each, $2.0 billion
F 12 million shares, $2500 each, $30 billion
G 5.2 million shares, $2500 each, $12.5 billion
J 66 million shares, $2500 each, $165 billlion
K 12 million shares, $25 each, $0.3 billion
L 12 million shares, $25 each, $0.3 billion
M 16 million shares, $25 each, $0.4 billion
N 8 million shares, $25 each, $0.2 billion
P 4 million shares, $1000 each, $4 billion
Q 2 million shares, $1000 each, $2 billion

But, this appears to grossly overstate the amount of preferred stock shares outstanding.

There are 694,401,926 common shares outstanding according to the petition.

Assets

The source balance statement listed the company's assets as $314 billion in cash, $42 billion in net receivables, $4.3 billion in fixed assets, and $279 billion in non-current assets.

Presumably, this number is lower now, due to market losses, particularly in mortgage based securities.

Some breakdown on the nature of those assets is available:

Sanford Bernstein analyst Brad Hintz estimates that 55% of Lehman's balance sheet can be quickly liquidated, particularly such assets as receivables and short-term loans known as repurchase agreements. There are about $269 billion in securities that are "another story," Hintz wrote in a report released Monday. He estimates 27% of the $269 billion is in mortgages, 17% in derivatives, and 8% in real estate.

Analysis

The two primary bond trustees seem likely to be the dominant voice on behalf of creditors in this bankruptcy on the creditor's committee.

This could be a 100% payout liquidity failure bankruptcy, and failing that, could be one in which common stock shareholders, preferred stock shareholders, and perhaps subordinated debtors bear the brunt of the impact, while general creditors are held harmless or nearly so.

Indeed, if the company adopts a plan that holds harmless all preferred and general unsecured creditors, and all secured creditors, then only the holders of subordinated debt would have any right to object. Since all of the subordinated debt appears to be represented by a single bond trustee, this might mean that the plan could be confirmed in a one on one negotiation with the representative of that bank.

Equity and subordinated debt together are capable of absorbing a $43 billion loss between May 31, 2008 and the bankruptcy filing, and pre-bankruptcy loss estimates had been in the vicinity of $7 billion.

Barclays Bank is discussing buying the brokerage and investment banking operations including the headquarters out of bankruptcy for about $8 billion (presumably the usually highly profitable brick and mortar part of the operation which probably also counts for most accounts payable and accounts receivable), and assuming that this is a market value for that operation by some reasonable measure, the market losses that other creditors would have to bear would remain unchanges, but greater liquidity could speed up the payout.

As one source explains:

The bankruptcy filing covers only Lehman’s holding company. Its brokerage and money-management units are not in Chapter 11 – employees still have their jobs, customers still execute transactions on accounts, and portfolio managers still manage mutual funds.

The relative independence of these subsidiaries from the bankruptcy process is what enables Barclays, the U.K.-bank that walked away from a Lehman rescue over the weekend, to consider purchasing part of Lehman.

Another interesting possibility would be a plan that allocated good, short term assets to outsider creditors as payment in full, while allocating securities of uncertain value, like the mortgage backed securities, to the insiders. Outsiders can't object if they get quick cash in exchange of the debts owed to them, so this plan could be imposed on them, leaving insiders with any windfalls resulting from market undervaluation of Lehman Brothers' complex financial assets.

The biggest overall risk is that the derivatives market, and in particular, the credit default market, will be screwed up by the freezing of the positions of a major market player, although recent bankruptcy law reforms are designed to minimize this impact.

Bottom line: Despite the drama, the class of people really taking a hit from this bankruptcy may be quite small.

Depression More Than Genetic

[H]aving a depressed mother substantially ups a teenager’s likelihood of becoming depressed, even if he or she was adopted and shares no genes with the mother. . . .

Having a depressed father does not increase depression susceptibility in either adopted or non-adopted teens . . . successful treatment of depressed mothers — either with medication or psychotherapy — spurs emotional gains in their depressed children.

While living with a depressed mother boosted the mood disorder’s prevalence in adopted teens, non-adopted teens were even more likely to become depressed themselves. For non-adopted teens, genetic influences may amplify as the detrimental effects of environmental factors, the researchers suggest.

Having a depressed mother also increased the rate of delinquency and other behavior problems in both adopted and non-adopted teens.

Neither adopted nor non-adopted teens’ emotional problems triggered depression in their parents[.]

The fact that adoptees with non-depressed mothers did not suffer unusual rates of depression suggests that birth parent depression was not a factor that would impact this result, even though birth parent data was not available.

From here (discussing three recent medical journal articles on the subject).

In previous studies the "heritability of depression—the degree to which it is genetically determined—has been estimated at around 40% for women and 30% for men." But, few studies have done as powerful a job as the one cited above at identifying a statistically significant specific cause for childhood depression in a family setting, apart from genetic influences.

By way of comparison studies have shown "the heritability of risk for schizophrenia to be approximately 80%."

Treatment works

These studies are also notable because they indicate that treatment for depression does work, is not a futile response to a purely genetic condition, and that the benefits can extend beyond the person directly receiving treatment.

The study on the impact of a mother's recovery from depression on her children found that "70 of 123 depressed women recovered from the mood disorder within one year." So, while treatment (a mix of drugs and cognitive-behavioral psychotherapy) isn't a sure cure, most of the time, it works. Cognitive-behavioral psychotherapy also has a good track record of helping children deal with trauma.

Many kinds of treatment help mitigate depression, but while there are differences in observed sucess rates, identifying treatment methods with statistically significant improvement relative to placebos is elusive.

While drug treatment is effective, at least the newest class of anti-depressentants, called SSRIs, like Prozac, Effexor, Serzone and Paxil, "provide an edge over placebos in only the minority of patients with the most severe symptoms." So, "there is little reason to prescribe new-generation antidepressant medications to any but the most severely depressed patients unless alternative treatments have been ineffective."

Depression is among the most common mental health issues, with almost one in twelve Americans experiencing it each year. About one in six people suffer from clinical depression at least once in their life (one in five women, one in seven men). The only mental health conditions similarly common are phobias.

(An interesting manga take on the fallout from one woman's inability to care for her young daughter due to mental health problems is Aishiteruze Baby which was also made into a Japanese television series.)

Arrest and Crime Statistics

FBI tracks violent and property crimes were down slightly in 2007 from 2006. Also, the arrest numbers are interesting to those not familiar with them:

"In 2007, the FBI estimated that 14,209,365 arrests occurred nationwide for all offenses (except traffic violations), of which 597,447 were for violent crimes, and 1,610,088 were for property crimes. That means just 15.54% of arrests were for violent crimes or property offenses . . . . Law enforcement made more arrests for drug abuse violations (an estimated 1.8 million arrests, or 13.0 percent of the total number of arrests) than for any other offense." What's more, 42.1% of drug arrests were for pot possession.

From here.

The most common offenses of arrest other than FBI countable violent crimes and property crimes are:

Driving under the influence 1,427,494
Other assaults 1,305,693
Disorderly conduct 709,105
Liquor laws 633,654
Drunkenness 589,402
Vandalism 291,575
Fraud 252,873
Weapons; carrying, possessing, etc. 188,891
Curfew and loitering law violations 143,002
Offenses against the family and children 122,812
Stolen property; buying, receiving, possessing 122,061
Runaways 108,879
Forgery and counterfeiting 103,448
Sex offenses (except forcible rape and prostitution) 83,979
Prostitution and commercialized vice 77,607
Vagrancy 33,666
Embezzlement 22,381
Gambling 12,161
Suspicion 2,176

There then is the imfamous: All other offenses 3,931,965

Dow Tanks On Financial Industry Worries

The Dow when Bush took office (January 20, 2001) was 10,732.

The Dow closed today at 10,917.51, a gain of just 185.51 points (less than 2%) over the past seven and a half years. If the market sees another bad day tomorrow, the Dow could drop below the level it was at when Bush took office.

Challenge To Colorado School Finance Considered

The Colorado Supreme Court has granted certiorari to consider the state constitutional adequacy of Colorado's system of K-12 education finance. Specifically:

Whether the court of appeals erred in holding that claims regarding educational quality and adequacy of school funding brought pursuant to article IX, section 2 of the Colorado Constitution (the Education Clause) present nonjusticiable political questions.

Whether the court of appeals erred in holding that the school districts do not have standing to bring suit under article IX, section 15, of the Colorado Constitution (the Local Control Clause) challenging the constitutionality of the Colorado system of public school finance.

The Plaintiffs include fourteen school districts, mostly rural ones with small property tax bases, and a large number of individuals on behalf of their children, presumably mostly from the districts involved in the suit.

The Colorado Supreme Court could have simply buried the question by refusing to grant certiorari when relief was denied by the Colorado Court of Appeals. But, it didn't. State supreme courts across the country have ruled for Plaintiffs in similar suits, Ohio among them, but have had difficulty making the remedies they have ordered stick.

A win at this stage of the litigation would simply allow a trial court to consider the issues on the merits, and would not actually resolve the issues presented. Given the judicial philosophies of the judge's on Colorado's Supreme Court and the framing of the issues it was willing to rule upon, it is likely that the Plaintiffs will prevail at this stage and be permitted to continue this litigation, at least to the point of having a court determine on the merits if they have stated a claim upon which relief can be granted apart from jurisdictional issues.

Rural districts in Colorado actually have the highest per capita state funding, but also have high costs and a low capacity to raise funds locally.

Financial Institutions Dropping Like Flies

Lehman Brothers, burdened by $60 billion in soured real-estate holdings, said it is filing for Chapter 11 bankruptcy after attempts to rescue the 158-year-old firm failed.

Bank of America Corp. said it is snapping up Merrill Lynch & Co. Inc. in a $50 billion all-stock transaction.

The demise of the independent Wall Street institutions came as shock waves from the 14-month-old credit crisis roiled the U.S. financial system six months after the collapse of Bear Stearns. . . .

Insurer AIG, hit hard by deterioration in the credit markets, said Sunday it is reviewing its operations and discussing possible options with outside parties to improve its business after a week when its stock dropped 45 percent amid concerns about the company's financial underpinnings.

The Wall Street Journal and The New York Times both reported early Monday on their Web sites that the American International Group is seeking an additional $40 billion in emergency funds - possibly from the Federal Reserve - to help it avoid a credit rating downgrade, which would make it more expensive for AIG to raise money.

From here.

I discussed some underlying causes of these developments last week.

Lehman dealt a blow to the largest of Janus Funds mutual funds, based in Denver, Colorado's Cherry Creek North business district (walking distance from Wash Park). While this doesn't directly hurt Janus, because mutual funds are fundamentally investments made with someone else's money, it hurts their carefully cultivated reputation for careful research and prescience. This could discourage others from investing with Janus in the future, and in particular hurts the reputations and job security of the fund managers at the fund that made the bad bet.

Denver itself, however, has one of the best credit ratings in the nation due, according to the S&P which made the rating, to:

the fundamental strength of Denver’s deep and diverse economy and high per capita market values, combined with the city’s proactive budget-cutting efforts in periods of revenue softness to maintain, in our opinion, very strong fund balance.

.

Commercial bank Washington Mutual is also in dire straights and has ousted its CEO.

Blame The Bloggers

Troy Eid, the U.S. Attorney for the District of Colorado, husband of one of Colorado's most conservative state supreme court justices, and a high level GOP political operative ranted in Sunday's Denver Post on the evils of blogging. An examination of his arguments show them to be more hysterical than historically accurate.

His arguments:

1. Blogs create public pressure on public officials based upon misinformation.

Blog-driven "news" is tragically becoming the rule, not the exception. Much of it is misinformation, where some person or interest group "spins" some angle for an unknown purpose. You can tell this when calls and e-mails start flooding the office, reading from the identical script, accusing you of the moral equivalent of crimes against humanity.

On many days, my office spends more time dealing with anonymous and often outlandish Internet rumors than talking with professional flesh-and-blood journalists. Why? Because so many print, TV and radio journalists are getting their story leads directly from the blogs, or — thanks to the changing economics of the news business — are blogging themselves.

There are several problems with this analysis.

First, professional journalists often get things wrong more often than the subject matter professionals who blog, particularly in technical areas like coverage of legal matters. This isn't because they are bad people. I was a radio news reporter myself in college and have friends who work for daily newpspaers in Los Angeles and Denver, among other places. But, journalists are generalists, while many bloggers devote themselves to subject matter reporting in areas where they have expertise.

Second, "we didn't start the fire." Mass telephone calling predates the Internet. When I was a Congressional intern in the pre-Internet days, similar call storms surfaced every time my representative was on C-SPAN, and we routinely received letter and call campaigns that have changed only slightly since the advent of the Internet. The technology has changed, but the behavior hasn't.

Both inaccurate coverage and mass outrage orchestrated by it, has its roots in Colorado at least as far back as the Republican Publishing Company, as recounted by Frank Gibbard in his article, "Libel, Contempt, and the Republican Publishing Company," at page 85 of the September 2008 issue of the Colorado Lawyer. This paper, which among others, was eventually gobbled up by the Rocky Mountain News (which also acquired a less controversial Democratic paper), drove essentially the same behavior a century ago, and was behind a majority of Colorado's early defamation cases.

Indeed, blogs have been pivotal in exposing factual errors by the press, such as a mistake about the citizenship of the Democratic nominee for President recently made by the Rocky Mountain News for which the publisher eventually ate a great deal of crow, and mistakes by such journalistic icons as the Wall Street Journal. There are some blogs that devote themselves almost entirely to policing the accuracy of traditional media outlets, like Media Matters, and others like Daily Kos which routinely make a habit of identifying traditional media and punditry's disconnect from the facts.

Certainly, most well known bloggers at least attempt to accurately report stories in good faith, something not true of the vast majority of political advertising and many press releases from interested parties (including a large share of press releases from police departments). Moreover, most blogs, particularly those on the left of the political spectrum, allow for comment on posts, which provides a means for anyone to correct in close proximity to a post, any misstatements in the post.

Eid also greatly exaggerates the extent to which blog stories are picked up by the mainstream media, something I systemically monitored when I worked for CoCo, as blog story pickups by the traditional media were something we tracked closely in our editorial meetings. It happens, but only rarely. It is far more common for accurate and important stories covered in the blogosphere to escape traditional media attention, in part due to the more press release driven nature of traditional media reporting.

2. Blogs make newspapers expose witnesses by creating a fear of being scooped.

Eid also mysteriously blames bloggers for that fact that:

The Post has understandably written and editorialized about the need to protect the identity of witnesses in criminal investigations. Yet the full name of one such witness recently appeared on The Post's own website, and then in print.

The case itself involved violent gangs that have previously terrorized other witnesses. The danger to innocent people and the justice system is obvious. Not to be left behind, the Rocky Mountain News did the same thing within hours.

He complains about the good old days when journalists would keep information from the public because prosecutors wanted them to do so. Of course, prosecutors and law enforcements don't have to expose witness identities in the first place, and often go to great lengths to keep secret witness identities when they wish to do that. But, reporting on who testifies about what in criminal matters is a practice that goes back to the earliest reporting on court proceedings (and is the subject of two generations old legal privileges for this kind of reporting) because the public needs to be able to evaluate the credibility of witnesses in a legal system where criminal trials are made public as a matter of our constitutional order.

Eid claims that witnesses are identified because of "the fear of being scooped," which he argues in turn is a consequence of the rise of blogging. The fear is, of course, as old as mass market journalism itself, which first responded to this fear with the virtually extinct concept of the "extra" edition. He also fails to explain why rape victims are far less often exposed in this way, than other criminal witnesses.

In fact, the fear of being scooped got so bad in New York City, long before there were online editions, that there was a gentleman's agreement between the major papers their to exchange early editions voluntarily to prevent anyone from being embarrassed too badly.

3. Bloggers are faceless and amoral.

Too many journalists I know and respect, pressured by their employers, seem to be running scared. They try to play catch-up with faceless bloggers, who observe no known code of ethics.

In fact, many newspaper stories are written by anonymous "staff" sometimes from an unidentified outpost at the Associated Press. Meanwhile, bloggers, like myself include pictures that can identify them more often than print journalists do, and even those who do not almost always use a consistent blogging handle that identifies them to the public for purpose of allowing the public to judge the source based upon its prior track record.

Even short lived secrets, like the identification of Jason Bane with Colorado Pols, are often open secrets, widely known by regular blog readers, long before they are officially acknowledged.

Markos at Daily Kos has likewise, repeatedly illustrated cases where it is the traditional media, and not the bloggers, who act amorally. In reality, blogs have some rather well established ethical standards in practice, including the ethical standrads of (1) disclosing sources through hyperlinks, (2) not suppressing meritorious comments that disagree with the author, (3) rallying around efforts of interested parties to suppress blog reporting, and (4) not accepting uncritically false or misleading statements of fact made by interested parties as mere opinions.

Indeed, some blogs, particularly those associated on the right with the "vast left wing conspiracy" like the Colorado Independent (formerly known as Colorado Confidential), expressly adhere to a written code of journalistic ethics and some are recognized members of journalistic associations. I know. I lived those ethical standards when I worked for CoCo.

Certainly, blogging adheres to different stylistic conventions than print journalism. Print journalist favors "eye of God" third person writing with only implicit opinion, while blogging is more often written as personal narrative with expressly stated biases. Print journalists place a much higher premium on copy editing, in part because they can't correct typographical errors later. Print journalism insists upon quoting third party authority, even when ads little to the story and denies the obvious knowledge of the person writing the story, and abhores paraphrasing, but rarely provides source materials. Bloggers, in contrast, routinely link to original source materials, but often paraphrase or summarize materials that they link. Print journalists wnat to tell all facts in the story (the five Ws and an H), while bloggers tend to note the interesting facts and refer to others for the whole story, in the interest of brevity.

The fact that Eid doesn't know the ethical standards that apply in the blogosphere, as a man who came of age in the pre-blog era, does not mean that they don't exist.

Bottom Line

There is nothing new under the sun. Blogs have had an impact, but certainly not a pernicious one with the biases suggested. Instead, Eid's latest rant is simply the effort of a senior Republican operative to carry out one of his party's core politic tactics -- to discredit the messenger delivering information conservatives don't like, in an effort to encourage voters to act in dishonest advertising, instead of more reliable information sources.

Hippies may have invented culture jamming, but the Republican perfected it as a way to undermine an honest rational discourse for cynical self-interested ends.

An Amazing Football Game

I very rarely watch television, and even less rarely watch sports. But, with a son playing football, homework includes watching a game or two. And, while I have never played a proper football game in my life, even in gym, I do know how to watch it on TV, so I have no excuses.

So, we watched the Broncos play the Chargers, despite the fact that I still haven't gotten around to replacing the family's broken and little used TV, resulting in purple people and blue Bronco's logos where the orange should be.

Sunday's game against the Chargers in Denver was worth watching. The combined 77 points scored and one point margin of victory only hints at the drama of amazing plays, repeated reversals of fortunes, and epic mistakes on both sides. I'll save the play by play to people who do that kind of thing. But, I couldn't have picked a better day to watch.

Off With Their Heads

The chief justice of the Saudi Arabian Supreme Court has declared, in all seriousness, that killing the makers of immoral television shows is justified homicide, with a particular focus on a Turkish soap opera based upon the life of Islam's founding prophet. And, we wonder where Saudis like Osama bin Laden and the many Saudi 9-11 hijackers and the Saudis that helped set up the Taliban, and the Saudis who have committed a plurality of the suicide bombings in Iraq picked up their bad habits.

Why we sell advanced military weapontry to the Saudis and consider them our allies is beyond my comprehension, or at any rate, beyond common sense.

Subprime Loans No Longer Exist

In 2006, roughly one in three new mortgages was a subprime or Alt-A loan, with about three subprime mortgages for every two Alt-A loans. Two years later, those loans make up about one in fifty new mortgages, and the more creditworthy Alt-A loans outnumber the less creditworthy subprime loans by a 3-1 ratio.

In the 2nd quarter of 2008, there were just $4 billion of subprime loan originations. This is down more than 97% from the subprime lending rate in 2006, and is down about 92% from the subprime lending rate in 2007. Subprime lending increased more or less steadily since 1994, yet current subprime lending rates are less than half of what they were in fourteen years ago.

Other Non-Conventional Lending Has Also Collapsed

Like subprime mortgage lending, Alt-A lending is unraveling, after a boom that paralleled the growth in the subprime market.

In 2001 Alt-A loans represented 2.7 percent of a $2.2 trillion market. In other words, Alt-A loans issued that year were worth $59.4 billion. Skip ahead to 2006 and Alt-A loans were 13.4 percent of a $3 trillion market, meaning that Alt-A originations in 2006 totaled $402 billion — almost seven times the dollar volume originated in 2001.

In the second quarter of 2008 "the subprime share fell to 0.5 percent and the Alt A share slipped to 1.6 percent." Thus, the Alt-A share in the second quarter was about $13 billion (down about 87% from the peak in 2006, and down about 12% from 2001 levels).

This continues a trend that I noted in March of this year (and here). The share of jumbo loans issued as also declined.

Various loan products designed to reduce monthly payment size relative to the amount of the loan have also dramatically declined.

What are Alt-A and Subprime Loans?

An Alt-A loan is one with a borrow who does not meet conventional loan standards, but is more creditworthy than a subprime loan borrower, which includes everyone who does not qualify for an Alt-A loan (link below):

"Alt-A" loans, also called "nontraditional" mortgages, are typically offered to borrowers with credit scores between 620 and 700 and include interest-only loans, option ARMs, "no-doc" loans, those requiring little if any income documentation, and others.

An average Alt-A loan is for about $172,000. The average subprime loan that was a first mortgage was originally about $202,000 in 2006, with the average subprime second mortgage originally involving about $35,000.

Why Has Mortgage Lending To Those With Poor Credit Collapsed?

The trend is driven by a lack of third party investors to buy the loans in the secondary market, and a soaring default rate on existing subprime and Alt-A loans (which have in turn reduced the interest of investors in the loans). Default rates, in turn have been driven in part by a collapse in a housing price bubble combined with declining underwriting standards when investors were eager to put money in mortgage backed securities.

For Alt-A loans: "Fourteen months after origination, 4.21 percent of 2006's Alt-A loans face 90-plus-day delinquencies. The rate is 1.59 percent for 2005 Alt-A loans and 0.91 for 2004 originations, in both cases also after 14 months of existence." The fourteen month measure, moreover, does not reflect most defaults that arise from variable rate mortgage resets, which often take place after two years.

Troubled Banks

The disappearing mortgage market has devistated the financial industry, which had been the leading source of growth in the assets of the uber-rich in the United States until the last couple of years.

About 283 major mortgage lenders in the U.S. have left this line of business since 2006. At least fourteen more are in trouble. The vast majority of subprime lenders have left that market. In 2005, there were 210 mortgage lenders that specialized in subprime lending nationally, while a small number of additional lenders dabbled in that business. Fannie Mae, Freddie Mac, two of the biggest investment banks (Bear Sterns and Lehman Brothers), and a major commercial bank (Washington Mutual) have all either been taken over or face make or break financing challenges within a week.

Commercial banks, thifts and credit unions with diversified lending portfolios are essentially the only major mortgage lending institutions that are not in crisis right now. Foreclosure rates for conventional, fix rate mortgages to prime credit borrowers remain extremely low. These institutions have now largely limited their lending to these conventional loans and to government guaranteed mortgages, in addition to a small percentage of jumbo loans (currently about six percent) to people with good credit and significant down payments.

Tens of thousands, if not hundreds of thousands of people in the financial industry, many of them well paid investment bankers, have been laid off.

Terminology

A commercial bank takes deposits from the general public (and can borrow funds from other banks such as the federal reserve), their deposits are generally either federally insured or ultra-safe, and they make loans from their own funds to individuals and businesses, usually for specific transactions or purposes. Only a small number of commercial banks that invested their deposits heavily in the subprime and Alt-A markets, with a small market share and weak retail banking operations serving the general public, have been shut down to date.

Thrifts, formerly known as savings and loans, and credit unions, are very similar to commercial banks. The former makes loans primarily to consumers as opposed to businesses and consumers. Thrifts and commercial banks are generally owned by ordinary shareholders, while credit unions are generally mutual companies owned by their depositors. Commercial banks, thrifts and credit unions are subject to parallel but seperate regulatory regimes. There are also multiple regulation regimes (state and federal) for commercial banks.

In contrast, an investment bank facilitates public offerings of stocks and bonds by corporations and devises other ownership level transactions, such as mergers and acquisitions, split ups, and spin offs, for these companies. Investment banks are not government insured, and secure most of the funds for their deals from third parties in exchange for third party investments in particular deals, although they also sometimes finance transactions with their own funds. Investment banks are closer to what an ordinary person thinks of as a stock brokerage, than to what an ordinary person thinks of as a bank. Investment banks have taken a harder hit in the current financial crunch than commercial banks. Private equity funds, venture capital funds, and hedge funds, are similar to investment banks, but less diversified than a stereotypical investment bank.

Mortgage brokers and finance companies underwrite loans, i.e. determine who should get loans, and originate loans, i.e. locate borrowers and conduct closings for them, but do this with other people's money, either as an independent contractor for the true lender, or by immediately reselling the loans made to a larger financial institution or fund in what is known as the "secondary market" for mortgages. Typically, mortgage brokers and finance companies have only modest capital of their own, so their duty to compensate the third parties who finance their loans if there are excessive defaults is to a significant extent illusory. Effectively, they are even more highly leveraged than investment banks in most cases. Most of the distressed lenders are mortgage brokers or finance companies.

The Impact of Leverage

For a bank, loans are assets, and deposits or loans from third parties like the Federal Reserve or other banks are debt. A bank deposit is simply a loan from a customer to the bank that is payable on demand, no more and no less. Contrary to many ordinary people's belief, a bank deposit is not comparable to putting currency in a safe deposit box. Safe deposit boxes are a not very profitable side business that many banks offer.

All banks are highly leveraged (i.e. have a high debt to asset ratio) compared to most businesses in the "real economy" where 1:1 debt to equity ratios are the average level of leverage in publicly held companies. This leverage is possible because bank deposits, interest due on deposits, amounts owed on loans to banks, interest due on those loans can be known with great certainty, and because banks usually make only loans with a very high likelihood of repayment in full after whatever allowance for defaults in made in the interest rate for that class of loans (like conventional mortgages and car loans where there is collateral to make good on a bad loan). The certainty that makes leverage possible also arises because banks make so many small loans relative to a bank's total loan portfolio that default rates are statistically very predictable even if determining which particular loan will go bad is impossible to determine.

Commercial banks have historically avoided lending to high risk borrowers because these loans make it hard to determine the exact real value of the bank's loan portfolio which in turn makes it risky to be highly leveraged. As a result, most commercial banks do relatively little subprime and Alt-A lending with their own money, and usually do so, when they do, through subsidiaries organized as mortgage brokers and finance companies.

Also, there are strict limits on the amount of leverage that a commercial bank can undertake (the required reserve ratio in the United States for commercial banks was 10% on transaction deposits like checking and savings accounts and zero on time deposits like certificates of deposit, and all other deposits) which were adopted after the wave of bank failures during the Great Depression and have been adjusted from time to time since then, while investment bank leverage is largely unregulated and is generally greater than in commercial banks. Thus, a commercial bank typically has a little more than nine times as much debt as equity, while an investment bank typically has a higher debt to equity ratio. This leverage increases a bank's return on equity, i.e. on shareholder investments, when it is profitable, but means that small defaults percentage-wise in the bank's loan portfolio can wipe out large percentages of its equity.

If a bank is highly leveraged and investments are made from company assets rather than merely being brokered by a bank directly between two third parties, a moral hazard is present. If a deal goes well, bank management is in a position to take big bonuses, but if a deal goes badly, bank management loses little if anything except future employment for a while. So, there is an incentive to take risks that aren't in the economic interests of shareholders or depositors. In commercial banks, FDIC regulation prevents bank management from taking these kinds of risks. In credit unions, the allegiance of management to depositors discourages this kind of risk taking. But, in investment banks, mortgage brokerages and finance companies, this moral hazard is very real.

Leverage and diversification of investments are the two biggest factors that have determined which financial institutions have failed and which have weathered the credit crunch. Highly leveraged institutions that are heavily invested in mortgages have taken the brunt of the subprime mortgage crisis of the last two years.

Consequences

The decline of these markets has greatly increased the importance of FannieMae and FreddieMac, which were the subject of a federal takeover last week: "Fannie Mae and Freddie Mac financed or guaranteed 82% of home loans initiated in January, 2008, up 46% in the second quarter of 2007." This April, 2008 report stated that "Fannie Mae’s portfolio includes 2.8 trillion in mortgage debt, about 23% of all residential home loans in the US. This includes 314 billion in Alt-A loans."

The subprime meltdown has also made it virtually impossible for families with poor credit, and borrowers who want unconventional loan terms, to get mortgages.

Many of the people who currently have subprime and Alt-A loans don't qualify to get any kind of new mortgage now, although there are programs in place to refinance existing "slavagable" loans in some cases. If you have a subprime or Alt-A loan that isn't in default, and want to continue to be a homeowner, you can't sell your home and buy a new one to replace it.

The decline of the subprime and Alt-A credit market also means that families with poor credit but significant real estate equity who have a financial crisis must sell their homes, often at a loss given the current state of the real estate market, and start renting, to access that equity. Previously, home equity loans would have been a common solution for these families.

Going forward, the demise of the subprime market is not necessarily a bad thing, and may not even hurt home ownership rates very much. Many subprime loans involve debt consolidation by people who are already homeowners, rather than new home purchases.

Also, many subprime loan borrowers would be better off economically selling their homes to an investor, putting the proceeds, if any, in an FDIC insured certificate of deposit, and renting the property back at the going market rate rental (at least in the absence of a pre-payment penalty). One of the biggest virtues of renting is that the mortgage interest rates available to landlords generally are more important in determining rental rates than the mortgage interest rates available to tenants, which typically have lower credit ratings than landlords.

This is less obviously true in the case of Alt-A loans (which, until recently weren't very common), but according to at least one source I skimmed recently (I don't have the citation and wouldn't have considered it authoritative in any case), many Alt-A loans are for second homes and investment properties.

Still, for a family who already has one of these loans, particularly if the loan has a pre-payment penalty (and new laws banning pre-payment penalties typically aren't and constitutionally can't be retroactive), the demise of the subprime and Alt-A market will force some difficult choices as homeownership must be weighed against a potential new job far from an existing home, for example.

Stupid Zones Revisited

I have a new entry in my Daily Kos diary entitled Stupid Zones Revisited, that examines what policy responses we should make to deal with future threats like Hurricanes Ike, Gustav and Katrina. At a broader level, it argues that we need to try to live in better harmony with nature, rather than assuming that we can conquer it, both in how we build and how we live. It uses Denver's history of dealing with flooding in the South Platte River and Cherry Creek as a model.

Offshore Drilling Irrelevant

Via Steam Powered Opinions.

Is the environment really worth that little yellow boost in oil production starting in 2020?

The Compromise of 1850

NewMexiKen has a nice post on how California and several other Western states ended up joining the union and getting the boundaries that they did.

Seven years

We've had seven years of bad luck. Will it continue any longer?

Particle Physics Musings

The Large Hadron Collider (LHC), the world's largest atom smasher, opens for business today. Basically, it crashes subatomic particles into each other at very high speeds, in an efford to pack enough energy into a very small space to allow subatomic phenomena that are only possible with large amounts of energy to unfold.

All known large subatomic particles are inherently unstable and hence not detected with any frequency in nature. It takes massive amounts of energy to bring them into being, and then we observe them indirectly, by gathering information about the debris left over which is observed when they decay into smaller particles. The rules of quantum mechanics, further, place fundamental limitations on how much information can be gathered from any one atom smashing, so we have to repeat them many times to get a good composite picture of what is going on.

Also, many stable subatomic particles don't normally appear in isolation. They naturally bind themselves to other subatomic particles. So, the only way we can observe them is through their effect on particles in decay chains from big atom smash ups that disturb these stable particles that are generally found only bound to other particles.

It will be months before any interesting results are expected. Analysis of the results requires statistical probing of months of collisions to sort the chaff of already well understood collision events from the wheat of new physics. Quantum mechanics makes the outcome of atom smashing a random event, and it is the events that only happen infrequently in the highest energy collisions that are the most interesting.

For many years, the potential of almost all previous such experimental tools has been exhausted, leaving theorists to ponder what will happen in larger collisions largely unbounded by experimental evidence in the meantime.

Almost no professional physicists think that the particles described in the "standard model of particle physics" include all particles that could or do exist. Many physicists think that at least two particles remain to be discovered: the Higgs Boson and the graviton, and theory suggests that if the Higgs Boson exists, that the LHC should be capable of detecting its existance.

In the standard model, the Higgs boson basically is responsible for inertia, while the graviton would be a "spin 2" particle that mediates the gravitational force between particles in much the same way that the photon mediates the electromagnetic force between particles.

A large number of physicists think that there are, at least, a few more, which are necessary to explain the absence of a particle that is a good fit for "cold dark matter." Some physicists think that there are a whole host of undescribed particles, particularly proponents of a theory known as supersymmetry. There are also many physicists who expect to see evidence of dimensions beyond the usual three in space and one in time. Given speculative nature of the theory that predicts these kinds of new particles (or a number of other possible particles under other theories, such as "fourth generation" particles similar to the existing three generations of neutrinos, electrons and quarks, but with higher masses), no one knows for sure whether the LHC will detect them.

The LHC will almost certainly rule out reams of theoretical physics proposals, but disproven theories have a tendency to mutate to accomodate the limitations of new data, rather than disappearing entirely.

* * * *

I personally expect that LHC will produce fewer new particles than many people expect. I would not be at all surprised to see the LHC rule out the existence of a Higgs boson. I also would not be surprised to learn that the LHC has revealed no new fundamental particles beyond the standard model, a result which would disfavor supersymmetry, and no indications of additional dimensions, a result which would disfavor string theory.

Bad Day For Axis Of Evil

Iran had a moderate sized earthquake that destroyed 200 villages. North Korea's sitting dictator, who has no clear successor, appears to have had a serious stroke. And, hell, what day in Iraq isn't a bad one?

The term "Axis of Evil" for three countries with little in common was, and is, foolish. The coincidence of events is just that, a coincidence. But, both the events in Iran and the events in North Korea could change the nature of both of these countries internationally. So, they are both worth noting.

Big Verdicts

Some recent big verdicts in the courts bear note.

1. A judgment against Pricewaterhousecoopers, LLC in favor of the receiver of a defunct insurance company for audit malpractice prior to its unanticpated collapse in the amount of $182.9 million, was affirmed on appeal.

2. Class action plaintiffs suing Enron in connection with its collapse which caused $40 billion in losses, secured $7.2 billion in recovery, with the lawyers netting 9.5% of the recovery.

3. The United States lost a $1.1 billion case brought by oil companies based upon breach of contract in the Federal Court of Claims in connection with leases to conduct offshore drilling of the California coast. The won a recission award when the leases were terminated by a federal law enacted after the leases were inked.

Apparently, the government entered into 35 such leases between 1979 and 1984. The oil companies then discovered oil fields that the government estimates contained over one billion barrels of oil. However, 1990 amendments to the 1972 Coastal Zone Management Act statutorily barred the oil companies from drilling in the region. The $1.1 billion, which BLT reports is one of the largest awarded in the 150-year history of the Federal Circuit, represents the amount paid under the leases.

While it is possible to bring a big money personal injury case, and there are rare big money class action personal injury or property damage tort cases, the real big dollar cases involve investments and contracts gone bad.

Saying No To Scouting

The Cub Scouts made a pitch for their organization at my son's elementary school. The prospect naturally excites him. He likes craft projects, camping, and a lot of other things that Cub Scouts do. I was a Cub Scout and eventually became an Eagle Scout myself, and I got a lot out of the experience. I understand why he would want to do it.

But, it is very hard for me to say "yes" in good conscience.

The Cub Scouts are a subdivision of the Boy Scouts of America. Just as I was finishing scouting, and around the time I was starting to have very serious doubts about my religious upbringing (but before I was ready to publicly identify myself as an atheist), scouting took a turn for the worse. (I'm not alone in thinking so. Cub Scout membership is down 20% since 1997 despite growth in the population of approriate aged boys, and Boy Scout membership is down 8%, despite the fact that those who do participate are staying in longer.)

Today, I am ineligible to be a scout leader, because I am atheist. Two member's of Denver's delegation in Colorado's General Assembly are ineligible for those leadership positions because they are homosexual. The same applies to some of my fellow school parents, to many of my clients, to many of my political colleagues in the Democratic party.

I also don't want to teach my son to be dishonest to fit in, either personally or by my own example.

The turn for the worse in the Boy Scouting organization hurts. It is like learning that your childhood mentor is a child molestor. The organization, which once supported families, now tears them apart. The organization, which once support tolerance and positive values, now has become an instrument of a national hate machine.

The Boy Scouts places a premium on upholding high ethical standards. But, its conduct is deplorable. Its policies exclude more people than the entire membership of the Southern Baptist Convention, and its reasons for doing so make no sense. Why should an organization that claims that Buddhists, Muslims, Christians and Jews can co-exist and meet its values, exclude secular humanists? Why should an organization exclude people who are born with the sexual orientation that they have?

Honestly, I don't appreciate the fact that my local school contributed to putting me in this bind. We don't let churches evangelize in our schools, and this state has non-discrimination policies. It isn't appropriate. I won't sue. Maybe someone else will. What's done is done. I've tried to explain things in terms as kid friendly as I can, so he understands that I'm not simply being mean.

If the Boy Scouts of America were to abandon its path of discrimination, intolerance and hate, I'd happily return to the fold. But, for now, BSA is not morally straight and in good conscience, I have to say no to scouting.

Election Timeline

As I understand it, the deadline to register to vote in Colorado for the November 4, 2008 general election is October 6, 2008.

You must be a U.S. citizen to register to vote.

You may register to vote, even if you are not yet age eighteen, if you will be eighteen years old on election day.

You may register to vote, even if you have a felony record, or are serving a probation sentence, but may not register to vote if you are incarcerated for a felony or are serving a parole sentence for a felony.

Voting itself begins in twenty-six days.

Sad Day For Bad Judge

A controversial Nevada trial judge who was suspended (rightly IMHO) from the bench by the Nevada Supreme Court has been badly beat up by her husband. Nobody deserves that. Some people just can't seem to catch a break. Few of those people, however, make it into the limelight of the upper middle class world before their terribly fall.

8th Circuit Invalidates Bankruptcy Gag Rule

A provision of the Bankruptcy Reform Act banning people from advising bankruptcy petitioners about certain legal options to maximize bankruptcy case outcome has been struck down the 8th Circuit Court of Appeals as unconstitutional.

The section of the opinion regarding the constitutionality of the gag rule (after an analysis that determined that the rule did by its terms apply to the attorneys bringing the suit) stated (at Slip Op. 10-13):

B. Constitutionality of § 526(a)(4)

Having concluded that attorneys providing bankruptcy assistance to assisted persons are debt relief agencies under the Code, we now must determine whether the challenged provisions placing restrictions and requirements on debt relief agencies are unconstitutionally overbroad as applied to these types of attorneys.7 One of the sections challenged by the plaintiffs in this case is § 526(a)(4), which states:

(a) A debt relief agency shall not–
. . .
(4) advise an assisted person or prospective assisted person to
incur more debt in contemplation of such person filing a case
under this title or to pay an attorney or bankruptcy petition
preparer fee or charge for services performed as part of preparing
for or representing a debtor in a case under this title.

11 U.S.C. § 526(a)(4).

Plaintiffs assert that the prohibition against advising an assisted person or prospective assisted person to incur more debt in contemplation of bankruptcy violates the First Amendment. The parties disagree as to the level of scrutiny we apply to the constitutional analysis of this limitation on speech. Plaintiffs claim that we should review the constitutionality of § 526(a)(4) under the strict scrutiny standard as the restriction on attorney advice is content-based. See Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 642 (1994) ("Our precedents thus apply the most exacting scrutiny to regulations that suppress, disadvantage, or impose differential burdens upon speech because of its content"). Under strict scrutiny review, the government has the burden to prove that the constraints on speech are supported by a compelling governmental interest and are narrowly tailored, such that the statutory effect does not prohibit any more speech than is necessary to serve the governmental interest. Republican Party of Minnesota v. White, 536 U.S. 765, 774–75 (2002).

In contrast, the government argues that § 526(a)(4)'s restrictions are a type of ethical regulation, invoking the more lenient standard outlined in Gentile v. State Bar of Nev., 501 U.S. 1030 (1991). Under the Gentile standard, we would balance the First Amendment rights of the attorneys against the government's legitimate interest in regulating the activity in question—the prohibition of advising assisted persons to incur more debt in contemplation of bankruptcy—and then determine whether the regulations impose "only narrow and necessary limitations on lawyers' speech." Id. at 1075.

According to the government, § 526(a)(4) should be interpreted as merely preventing an attorney from advising an assisted person (or prospective assisted person) to take on more debt in contemplation of bankruptcy when the incurrence of such debt is done with the intent to manipulate the bankruptcy system, engage in abusive conduct, or take unfair advantage of the bankruptcy discharge. However, the plain language of the statute does not permit this narrow interpretation. Rather, §526(a)(4) broadly prohibits a debt relief agency from advising an assisted person (or prospective assisted person) to incur any additional debt when the assisted person is contemplating bankruptcy. The statute's blanket prohibition applies even if the additional debt would not be discharged during the bankruptcy proceedings. 11 U.S.C. § 526(a)(4).

Thus, regardless of whether the government's interest in prohibiting the speech was legitimate (Gentile standard) or compelling (strict scrutiny standard), § 526(a)(4) is unconstitutionally overbroad as applied to attorneys falling within the definition of debt relief agencies because it is not narrowly tailored, nor narrowly and necessarily limited, to restrict only that speech that the government has an interest in restricting. Instead, § 526(a)(4) prohibits attorneys classified as debt relief agencies from advising any assisted person to incur any additional debt in contemplation of bankruptcy; this prohibition would include advice constituting prudent prebankruptcy planning that is not an attempt to circumvent, abuse, or undermine the bankruptcy laws. Section 526(a)(4), as written, prevents attorneys from fulfilling their duty to clients to give them appropriate and beneficial advice not otherwise prohibited by the Bankruptcy Code or other applicable law.8

There are certain situations where it would likely be in the assisted person's, and even the creditors', best interest for the assisted person to incur additional debt in contemplation of bankruptcy. However, under § 526(a)(4)'s plain language an attorney is prohibited from providing this beneficial advice—even if the advice could help the assisted person avoid filing for bankruptcy altogether. For instance, it may be in the assisted person's best interest to refinance a home mortgage in contemplation of bankruptcy to lower the mortgage payments. This could free up additional funds to pay off other debts and avoid the need for filing bankruptcy all together. Hersh, 347 B.R. at 24. Moreover, it may be in the client's best interest to incur additional debt to purchase a reliable automobile before filing for bankruptcy, so that the debtor will have dependable transportation to travel to and from work, which will likely be necessary to maintain the debtor's payments in bankruptcy. Id. Incurring these types of additional secured debt, which would often survive or could be reaffirmed by the debtor, may be in the debtor's best interest without harming the creditors.9

Factual scenarios other than these few hypothetical situations no doubt exist and may further illustrate why incurring additional debt in contemplation of bankruptcy may not be abusive or harmful to creditors. Nonetheless, § 526(a)(4), as written, does not allow attorneys falling within the definition of debt relief agencies to advise assisted persons (or prospective assisted persons)—i.e. clients (or prospective clients) meeting the definition of assisted person—to incur such debt. Thus, § 526(a)(4) is not narrowly tailored nor narrowly and necessarily limited to prevent only that speech which the government has an interest in restricting. Therefore, we hold that §526(a)(4) is substantially overbroad,10 and unconstitutional as applied to attorneys who provide bankruptcy assistance to assisted persons, as those terms are defined in the Code.

7 Even though a more narrowly drawn version of § 526(a)(4) would likely be valid as applied to the plaintiffs in this case, our analysis applies to all attorneys falling within the definition of debt relief agencies, not merely the plaintiff attorneys. See Members of City Council of City of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 798–99 (1984) (explaining that the overbreadth doctrine allows a party to challenge a broadly written statute "even though a more narrowly drawn statute would be valid as applied to the party in the case," as "the statute's very existence may cause others not before the court to refrain from constitutionally protected speech or expression") (internal quotations and citation omitted).

8 Several bankruptcy courts are in agreement with our decision. See Zelotes, 363 B.R. at 667 ("Because § 526(a)(4) is not sufficiently 'narrowly tailored to achieve the desired objective,' it is unconstitutional as applied to bankruptcy attorneys."); Hersh, 347 B.R. at 25 (concluding that § 526(a)(4) is unconstitutional because: "(1) it prevents lawyers from advising clients to take lawful actions; and (2) it extends beyond abuse to prevent advice to take prudent actions," and therefore imposes "limitations on speech beyond what is 'narrow and necessary'"); Olsen, 350 B.R. at 916 ("[S]ection 526(a)(4) is overly restrictive in violation of the First Amendment" even if reviewed under Gentile standard).

9 See Erwin Chemerinsky, Constitutional Issues Posed in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 79 Am. Bankr. L.J. 571, 579 (Summer 2005).

"[Section 526(a)(4)'s] prohibition is particularly troubling when it might be completely legal and even desirable for the client to incur such debt. For example, there may be instances where it is advisable for a client to obtain a mortgage, to refinance an existing mortgage to obtain a lower interest rate, or to buy a new car on time. There would be no fraud in doing so if the client intended to pay such debt notwithstanding the filing of a contemplated bankruptcy case. For example, the client may intend to keep all payments fully current and to reaffirm such debt once the case is filed bankruptcy to lower the mortgage payments. This could free up additional funds to pay off other debts and avoid the need for filing bankruptcy all together. Hersh, 347 B.R. at 24. Moreover, it may be in the client's best interest to incur additional debt to purchase a reliable automobile before filing for bankruptcy, so that the debtor will have dependable transportation to travel to and from work, which will likely be necessary to maintain the debtor's payments in bankruptcy. Id. Incurring these types of additional secured debt, which would often survive or could be reaffirmed by the debtor, may be in the debtor's best interest without harming the creditors."

10 See Veneklase v. City of Fargo, 248 F.3d 738, 747 (8th Cir. 2001) ("For us to find a statute unconstitutionally overbroad, its 'overbreadth . . . must not only be real, but substantial as well, judged in relation to the statute's plainly legitimate sweep.'") (quoting Broadrick v. Oklahoma, 413 U.S. 601, 615 (1973)).

The unconstitutionality of this law was, of course, entirely predictable. For example, similar laws in the area of Medicaid counseling have similarly been invalidated. But, sloppy drafting in this area has resulted in expenditures of a major scholarly, practical, lobbying and litigation effort to have this relatively unimportant element of the bankruptcy reform law declared unconstitutional.

The 8th Circuit ruling was by a 2-1 margin, but even the dissent argued that the provision should have instead been interpreted to apply only when the advice given produces civil damages from a violation of the bankruptcy code, thus construing the law to have a meaning other than its plain language.

Perhaps the result was right in the end, but this kind of irresponsible legislation doesn't come cheap to the general public or the government officials who have to defend it.

Colorado Ballot Measures

The final list of Colorado Ballot initiatives is out. Extended analysis will have to wait for another post. Some of the easier calls follow the list.

November 4, 2008 General Election Amendments and Referenda

Amendment 46 - Prohibition on Discrimination and Preferential Treatment by Colorado Governments
Amendment 47 - Prohibition on Certain Conditions of Employment
Amendment 48 - Definition of Person
Amendment 49 - Limitation on Public Payroll Deductions
Amendment 50 - Limited Gaming
Amendment 51 - State Sales Tax for Services for Individuals with Developmental Disabilities
Amendment 52 - Severance Tax - Transportation
Amendment 53 - Liability of Business Entities and Their Executive Officials - Criminal Liability
Amendment 54 - Restrictions on Campaign Contributions from Government Sole-Source Contractors
Amendment 55 - Just Cause for Employee Discharge or Suspension
Amendment 56 - Employer Responsibility for Health Insurance
Amendment 57 - Safe Workplace
Amendment 58 - Severance Tax
Amendment 59 - Education Funding
Referendum L - Age Qualification for Serving in General Assembly
Referendum M - Elimination of Obsolete Constitutional Provisions Regarding Land Value Increase
Referendum N - Elimination of Obsolete Constitutional Provisions Regarding Intoxicating Liquors
Referendum O - Initiative Petition Requirements

46 -- Bad. Affirmative action is still needed to get us on track. It will probably pass, however, and the main effect is likely to be dramatic declines in minority enrollment at the most selective public colleges.

47 -- Bad. Pointlessly anti-union.

48 -- Bad. Unconstitutional for the most part, and havoc wrecking in unexpected ways to the extent given effect.

49 -- Bad. Gives corporations an unfair advantage over unions in political fundraising.

50 -- Indifferent. The changes in the gambling rules aren't necessarily so bad, but the justifications given for it and the disposition of additional revenues to locals are questionable.

L -- Good. Let the voters choose who they want to serve in the legislature.

M -- Good. The less junk in the state constitution the better.

N -- Good. Prohibition is long gone. Good riddance.

O -- Good. Even well meaning initiatives are often poorly crafted. There should be a distinction between iniatives and referrendums. And, the legislature can forge bipartisan constitutional amendments. It does entrench some existing bad language in the state constition, but given the single subject rule for initiatives, those problems are hard to solve via initiative anyway.

I am still studying the final versions of 51-59, which have much more recently been assigned their final numbers. Most initatives have multiple versions, so it pays to check which one got on the ballot.

Feel free to make your ballot initiative and referrendum pitches, pro and con, in the comments.

Best Line Of The Day

Look, I accept that you're going to talk me into it. Just give me some time to fight you on it with dignity before I have to give in.

From here.

Dow Still Down

Two months from the last time I looked at the subject the Dow Jones Industrial Index remains in bear territory, falling a bit since then to 11,188.23 yesterday, a slightly down from where it was two months ago. The high in October was 14,189.09. Needless to say, a collapse since October 2007 can't be attributed to the Clinton administration's economic policies.

Meanwhile, according to the Denver Post, citing the ADP National Employment report, private sector emplyment decreased in August by 33,000 jobs, an eight straight decline in monthly payrolls, accompanied by a rise in unemployment.

In addition to a stagnant stock market during the Bush Administration:

* wages have been stagnant for all but the highest income people during the Bush Administration (as I noted in a post earlier this week),
* energy prices have risen,
* oil company profits have soared,
* real health insurance premiums have risen significantly,
* real estate values have fallen,
* the mortgage industry has melted down in hte face of record foreclosure rates,
* a major investment bank vanished in a weekend,
* bank failures are at record highs,
* the American automobile industry is in crisis,
* the federal budget deficit has soared, inflation is creeping up, and
* despite a weakening dollar, one in five American manufacturing jobs have disappeared during the Bush Administration and we are still running trade deficits.

Wal-Mart, which may as well be Chinese Imports, Inc., is the only company in the economy other than energy companies that are thriving at the moment (although more ethical discount retailer Costco is also doing well enough). And, why shouldn't it? Wal-Mart's prices a significantly lower than many of its competitors for many products. Times are tough, and prices matter.

The Other Rex Morgan

Rex Morgan, M.D. was a renowned everyman hero of the funny pages of an earlier era (the creator died in 1991, but the strip has continued, although it is less popular than it was in its heyday). Denver, however, had its own community hero of the same name:

The Rex Morgan Citizen Volunteer Award has been a Scientific and Cultural Facilities District (SCFD) tradition since 1998 and honors a resident whose leadership has made a significant impact on the arts, science and cultural community in the seven-county SCFD district. The award is named after one of the founders of SCFD, the late Rex Morgan, a tireless civic activist and trustee of the Denver Art Museum. The deadline for nominations is September 15th. To nominate a qualified candidate and to learn more about the award please visit: www.scfd.org.

From Denver City Councilmember At Large Doug Linkhart's Newsletter.

More Bad News For Motown

U.S. automakers are doing catastrophically worse than their competitors in the currently down across the board U.S. auto sales market for another month. Chrysler sales are down a third from a year ago for August, Ford down a quarter, GM down a fifth, foreign companies each down by less than a tenth or up.

The race to be the first of the Big Three to go out of business seems to be moving foward at a break neck pace. GM moreover, is only achieving its sales improvements relative to the other two American automakers by cutting prices with its employee discount program that at the same time cuts dramatically into GM's profit per car.

Are bookies taking odds on which will fail first? Or is that bookie simply called the stock market?

Meanwhile, Detroit Mayor Kwame Kilpatrick has pleaded guilty to obstruction of justice charges, and will have to resign from his office within two weeks, serve 120 days in jail, and pay $1,000,000 in restitution. The six year Mayor admitted to lying about an affair with a staff member during a deposition and at trial in a whistleblower suit brought against the City. He used city lawyers to cover up this fact. While this may be good news in the long term for Detroit, which is a city in a never ending crisis, it also means a lack of leadership as the president of the city council serves as interim mayor until a replacement can be elected.

To Do

This year, for the first time, Colorado has released an analysis of CSAP scores on a value added basis, rather than simply on the basis of absolute achievement, in which socio-economic factors dwarf school quality. I've skimmed them and found some interesting tidbits, but have not yet had time to take a really thorough look at the entire data set. When I get time, I hope to do so. These numbers have the potential to be game changing in terms of which schools we see as successful and which are less successful, something only possible on a crude basis at the extremes of very high performing schools with poor kids, and very low performing schools with affluent kids, before now.

In my initial skim, I was surprised to see just how well both Steele and Merrill in Denver did on a value added basis (these are my neighborhood elementary and middle schools. Steele, which was also recently praise vis-a-vis nearby Asbury Elementary School in 5280 magazine this month for high parental involvement in the PTA, is known for its relatively unstructured, multiage classroom British Primary program and beautiful campus. I was similarly surprised that Knight Fundamental Academy, a back to basics charter school that is among the most popular choices in DPS for African-American students not attending their home school, despite being located in Belcaro, a predominantly white Southeast Denver neighborhood, does so poorly on measure of minority and low income student progress compared to other DPS schools.

Also on the to do list is a rundown on this year's November ballot. We have, in Colorado, four statewide referrenda, fourteen statewide citizen initiatives, a Denver Public schools bond issue, probably about two City of Denver ballot issues, many judicial retention elections, state legislative and district attorney races, RTD elections, elections for federal office, and probably a variety of local ballot issues and local races around the state of interest. It is going to be a long ballot. I've also been updating the Wikipedia entry on state ballot issues in Colorado, but that could use more work.

I also plan to look at the election process itself. Early indications are that it could take many days, maybe even a week or two, for Denver to finish counting its ballots this year, even with a fairly high percentage of turnout coming from early voting and mail in ballots. The first votes will be cast in six or seven weeks, and the list of state ballot issues has just been finalized.

I'd also take a look at how the citizen's initiative on car impoundment in Denver passed this summer is being implemented or challenged. I'm particularly peeved by the fact that ballot initiatives are even allowed on the ballot during partisan primaries, that city initiatives are explained via blue book as state initiatives are when they are TABOR issues, and that there is no mechanism in place to require city ballot initiatives to have non-deceptive titles or adhere meaningfully to a single subject.

The Bad Husband Gene

Scientists have identified a gene that influences brain activity that, when present in men, is significantly associated with not marrying, divorcing, and having an unhappy wife.

[The study] not only links the gene variant — which is present in two of every five men — with the risk of marital discord and divorce, but also appears to predict whether women involved with these men are likely to say their partners are emotionally close and available, or distant and disagreeable. The presence of the gene variant, or allele, also seems predictive of whether men get married or live with women without getting married.

"Men with two copies of the allele had twice the risk of experiencing marital dysfunction, with a threat of divorce during the last year, compared to men carrying one or no copies," said Hasse Walum, a behavioral geneticist at the Karolinska Institute in Stockholm who led the study. "Women married to men with one or two copies of the allele scored lower on average on how satisfied they were with the relationship compared to women married to men with no copies."

The scientists studied men because the hormone being examined is known to play a larger role in their brains than in women's brains.

Linking a single gene to such a wide range of behaviors at a subclinical level is remarkable. The vast majority of mental traits with a strong hereditary component either have a genetic (or epigenetic) cause that has not been identified, or are the product of multiple different genes that operate only in combination. The X v. Y chromosome that determined a person's genetic gender, and the "fruitless" gene in fruit flies which determines sexual orientation in fruit flies, are the only other simply inherited genes of which I am aware that have such pervasive influences on complex behaviors.

I look forward to tracking down the original study to look at the methods used and the significance of the relationships found. Typically only about half of the variation in even the most strongly genetically determined traits is hereditary, and one would expect a weaker relationship in expression of trait in a context also strongly influenced by cultural and economic factors like marital health.

It is also interesting that a trait which would seem to hurt one's reproductive chances would be so common. The title to the cited article called it an "infidelity gene" despite the text of the article not clearly suggesting that result. But, perhaps infidelity is the factor that provides those who have it with a reproductive advantage, or perhaps paying less attention to a spouse pays off through economic success achieved by paying more attention to work, or perhaps the gene was once important in helping widowed men move on to new relationships, when many women died in childbirth leaving behind young children who might perish if raised only by a father.

Of course, being a good husband has not been very important to one's ability to stay married until about a century ago, when divorce started to become more common, and the ability of women to choose a spouse freely is also relatively new by evolutionary standards.

The fact that the gene may not express meaningfully, or at least in the same way, in women may also be a relevant factor in allowing it to persist. It could be a gene that is reproductively beneficial in women, and reproductively detrimental in men, for example.

UPDATE:

More details:

The gene in question, AVPR1a, governs a receptor that regulates the brain's production of vasopressin, a hormone that contributes to attachment behavior with mates and offspring. A few years ago, scientists found that when they added extra copies of the AVPR1a gene to the brains of promiscuous meadow voles, the animals began acting more like monogamous prairie voles, spending more time with partners and grooming offspring. A similar role for the AVPR1a gene has been observed in chimps and bonobos. . . .

A team led by Hasse Walum of the Karolinska Institute in Stockholm, Sweden, sequenced the AVPR1a gene in about 500 pairs of adult same-sex Swedish twins, all of them married or cohabiting for at least 5 years, and their partners. One variation of the gene was particularly common; about 40% of males had either one or two copies of a version--or allele--of the gene known as "334." . . .

The tests included a Partner Bonding Scale containing items that reflect affection and cooperation, such as "How often do you kiss your mate?" and "How often are you and your partner involved in common interests outside the family?"

Scores on the test were significantly lower for the men carrying either one or two copies of allele 334 than for those without it, the researchers report online this week in the Proceedings of the National Academy of Sciences. The highest score possible is 66; those without the allele scored an average of 48, whereas carriers of one copy of allele 334 scored an average of 46.3. Carriers of two 334 alleles had the lowest scores of all, averaging 45.5. Although the score differences seem small, Walum says they are statistically significant. (No connection was observed in females.)

More striking were the answers to questions as to whether the men had experienced a marital crisis or threat of divorce during the prior year. More than one-third of carriers of two 334 alleles said yes, compared with only 15% of those with no 334 allele. What's more, 32% of those with two alleles were unmarried, compared with 17% of those who didn't carry the allele. Evaluations of the relationship by the men's partners tended to correspond with assessments reported by the men themselves.

The behavior appears to be somewhat heritable. Because the researchers were dealing with a population of twins, they were able to separate genetic and environmental influences. They found that about 28% of the behavior could be chalked up to inheritance, which is similar to what other studies have estimated for the heritability of marital satisfaction and of divorce.

The last sentence is particularly notable. It suggests that a single gene accounts for essentially all of the heritability of marital satisfaction and divorce.

The abstract is here.

SECOND UPDATE:

Another interesting study by one of the authors of this study in 1997, using an overlapping data set notes that:

Controllable, desirable, and undesirable life events were revealed [to show] significant genetic variance for women. There was no significant genetic variance for either sex for uncontrollable events. Multivariate analyses of personality (as indexed by Neuroticism, Extraversion, and Openness to Experience) and life events suggest that all of the genetic variance on controllable, desirable, and undesirable life events for women is common to personality. Thus, in this sample of older adult women, genetic influences on life events appear to be entirely mediated by personality.

A 1996 study of heritability of personality by other authors note that:

The genetic and environmental etiology of the five-factor model of personality as measured by the revised NEO Personality Inventory (NEO-PI-R) was assessed using 123 pairs of identical twins and 127 pairs of fraternal twins. Broad genetic influence on the five dimensions of Neuroticism, Extraversion, Openness, Agreeableness, and Conscientiousness was estimated at 41%, 53%, 61%, 41%, and 44%, respectively. The facet scales also showed substantial heritability, although for several facets the genetic influence was largely nonadditive. The influence of the environment was consistent across all dimensions and facets. Shared environmental influences accounted for a negligible proportion of the variance in most scales, whereas nonshared environmental influences accounted for the majority of the environmental variance in all scales.

The larger project that was the basis of the "bad husband gene" conclusion also make some conclusions about intelligence heritability in a 1994 study:

General cognitive ability yielded a heritability estimate of about .80 in two assessments 3 years apart as part of the Swedish Adoption/Twin Study of Aging. This is one of the highest heritabilities reported for a behavioral trait. Across the two ages, average heritabilities are about .60 for verbal tests, .50 for spatial and speed-of-processing tests, and .40 for memory tests. For general cognitive ability, the phenotypic stability across the 3 years is .92 and stable genetic factors account for nearly 90% this stability. These findings suggest that general cognitive ability is a reasonable target for research that aims to identify specific genes for complex traits.

About The Sample

The use of a Swedish sample in these studies have pluses and minuses. Sweden is a quite homogeneous society with a strong social safety net. The positive aspect of this is that "noise" from environmental factors like cultural differences between subgroups in the data are unlikely to cloud any genetic effect that exists.

Also, the relatively low rates of marriage and relatively high rates of divorce in Swedish society, compared to many other cultures, lead to non-marriage rates and divorce rates that are numerically high enough to produce clear differences between the subgroups in the study.

Further the relative ease with which marriages are ended, or in which relationships can be established without social condemnation in the absence of marriage, again moves the focus away from environmental and economic factors as a cause of relationship instability and towards more personal inherent personality factors.

The negative aspect of this reality, is that the importance of genetic effects are probably overstated. Sweden's more egalitarian society, for example, does not have the gross disparities in marriage rate and divorce rate based upon socio-economic status to nearly the extent that the United States does. One suspects that "mixed marriages" by any conveniently comparable measure are far more rare among Swedes in Sweden than among Americans.

In short, I would expect lower heritability estimates for the outcomes measured in more diverse studies outside Sweden than I would in this study.

Replication and Thorny Questions

This is a study that is easy to replicate. There are multiple twin studies already in place. Most of the outcome data could be obtained quickly and easily with a fairly simple survey of a modest sized population that has already agreed to participate in studies trying to resolve this kind of issue. The genetic tests involved could likewise be quick and non-invasive.

Assuming that replications of this study show that there are statistically significant effects from the gene in question cross-culturally, regardless of the precisely magnitude of the heritability estimate in different studies, at least a couple of thorny questions present themselves.

One is whether genetic testing for the trait is appropriate for the general population of people contemplating marriage, potentially improving prospects for about 60% of the population, while perhaps materially harming the marital prospects of about 40% of the pouplation, at least until benefits of this gene to those who have it are established.

Another is that the 23% share of this allele in the general gene pool, implied by the fact that 40% of men have at least one of these genes (and assuming, perhaps naively, independence of the frequency of this allele in mothers and fathers), almost certainly varies in different populations. Moreover, unlike intelligence, which is measured almost entirely by observed manifestation of a trait, rather than direct genetic testing, the prevalance of this trait in different populations could be established with precision not reasonably subject to question. In short, it would be a rehash of the controversy over The Bell Curve which considerably more bite due to the far lesser degree of methodological controversy involved. This, in turn, could fuel stereotypes about the fidelity of members of particular populations inappropriate to make about individuals.

A Rosetta Stone?

The allele studies is one of the strongest genetic links to what appears to be basically a personality trait. Like a Sudoku puzzle, a piece of information supplied with certainty in any one part of the puzzle sheds light on the entire picture.

Psychology now is where biology was when Linneas was first starting to develop taxonomies based upon observed characteristics before the theory of evolution was developed. Definitions of personality traits and mental health conditions are based upon observation and guesswork, without any definitive framework to guide researchers.

For example, pre-evolutionary biologists had to decide whether bats which shared fur and nursing with rats were more closely related to bat than birds which shared winged flight with bats. Sometimes the classifications have appeared wise in retrospect. At other times, the taxonomy has been substantially reworked.

For example, we have little way of determining whether symptoms that manifest as what we call schitzophrenia are multiple disorders, or a single basic disorder.

The ground is even muddier in the area of personality. The leading five factor theory of personality in psychology was developed basically with thesauruses, questionaires, and statistical analysis. But, words are slippery things, and words we use to describe ourselves are even more perilous.

If mastery of the scope and definition and mechanism of the single gene genetrically determined personality trait measured in this study were better understood, it might be possible to pin down more single gene or small number of gene genetically determined personality traits. This, in turn, might sharpen our understanding at a biochemical level of what a personality trait actually is, within our bodies, and how the areas of personality for which we cannot find genetic markers are best defined.

For example, one obvious study that suggests itself, given this research, particularly if it is validated, is to gather a large random sample of men, test them for these gene, and examine the differences between the groups with two, one or no alleles of it, in all aspects of their lives. This could be done with a far less difficult to assemble population than a twin study. Any several hundred men would do. Indeed, a more intensely interviewed smaller study might actually be more helpful at a preliminary stage. Once you can identify who does and doesn't have a gene with certainty, and you know that it is important, it is possible to do much more definitive research about its effects.

We know that all sorts of things are corrolated with not marrying and/or getting divorced. It would be fairly quick work to determine which of these things flow from the personality of the unmarried or divorced person and which of these things flow from the non-marriage or divorce itself, rather than the underlying personalities of those invovled in it.

One psychological trait associted with non-marraige or divorce in the United States is IQ. Given that this particular trait is not obviously synonomous with general intelligence (indeed, it comes closer to the popular pyschology notion of EQ), and that in Sweden this trait describes almost all heritable variation in relationship stability, it is likely that further study would show that in the U.S. almost all IQ impacts on relationship stability are mediated by the economic factors that are so strongly influenced by IQ in the United States. This in turn, might motivate programs by providing solid evidentiary support for the already strongly suggested notion that family economic stability can help remedy the low marriage rates and high divorce rates of low income Americans.

U.S. Middle Class Incomes Stagnant

Tax returns show that in 2006, for the third year in a row, Americans reported rising average and total income. Census Bureau estimates for 2007 show that the median income -- half make more, half make less -- was $50,233, up 1.3% in real terms over 2006. ...

While median income rose year-over-year in 2007, it was still smaller than way back in 1999 by $408 or nearly 1%. Eight years and no gain is not good news. ...

Among people making less than $75,000 -- roughly 8 of every 10 taxpayers -- 2006 average incomes remained below those of 2000 levels. And of the gains of the top fifth, an astonishing 42% went to the 1 in 400 taxpayers who reported seven figures or more of AGI on their Form 1040. . . . For the 99.75 percent of Americans making less than $1 million, wages were up, but by so little that it would be hard to notice. Average wages in 2006 were just $170 more than in 2000. ...

The portion of Americans earning wages is slipping, and the share of total income from wages is dropping. The tax data show that in 2006, 84% of Americans reported earning wages, down from 85% in 2000, or more than a million taxpayers. The share of AGI due to wages was 82% in 1980. By 2000 it was down to 70%, and in 2006 it slipped to 68% of all income.

So where is the income growth coming from? A small part is from pensions and retirement savings plans, which are simply deferred wages, and which will continue to grow as the boomers move into their final decades. But the big growth in incomes is in business profits and investment gains. . . . The dominant and often only form of income for most Americans is slowly eroding, while the capital incomes earned by those at the top are soaring.

From here.

This is particularly notable in light of the Presidential candidates tax plans.

McCain proposes tax cuts for all, with the steppest cuts percentagewise, for the highest income groups. Those making more than $2.87 million a year would receive a 4.4% tax cut.

Obama proposes tax cuts for those making under about $226,981, with the steppest cuts pecentagewise for those in the lowest income groups, and proposes tax increases for those making $603,403 or more a year (up to 11.5% for taxpayers with annual incomes in excess of $2.87 million a year). Those in between see no material change in their tax liability. Obama's tax plan cuts taxes more steeply than McCain's for taxpayers with incomes of less than $111,645 a year.

The report cited in the link above notes that "the Obama plan would cut taxes by $2.9 trillion from 2009-2018. McCain would reduce taxes by nearly $4.2 trillion. These projections assume the 2001 and 2003 tax cuts expire in 2010 and that the Alternative Minimum Tax is fully effective."

The Wars Are Over

A U.S. District Court opinion arising out of fraud prosecutions in connection with Boston's "Big Dig" interprets a little known provision of U.S. law that extends the statute of limitations for prosecuting federal criminal frauds against the United States when the nation is "at war."

The court finds that indeed we were "at war" under the meaning of the statute in both Afghanistan and Iraq, but that both of those wars have since ended for the purposes of applying criminal statute of limitations provisions. It finds that the Afgan war ended when a treaty was entered into with a successor government, and that the Iraq War ended when the President made his "mission accomplished" pronouncement.

The analysis is quite eurdite, although the conclusion has a too clever by half character to it, and is probably likely to be appealed.

Republican Ticket Fertile

The McCain-Palin ticket for the GOP is certainly fertile. Between them, they have twelve children.

Sarah Palin herself just had her fifth child, a son, Trig, who has Down's Syndrome (a high risk, relatively speaking, given the age of the parents) in April of this year.

Her seventeen year old daughter, Bristol Palin, is due in December, and plans to marry Levi Johnston, the eighteen year old father to be. He is a hockey player and the couple are long time high school sweet hearts and are both from Wasilla, Alaska.

McCain has seven children (the eldest age 49, the youngest age 17), three from his first marriage, and four from his second marriage. He started dating his second wife while married to his first wife, one of multiple affairs he had during his first marriage, and remarried over the objections of his children from his first marriage who did not attend the wedding). He is 72. His current wife is 54.

The Clintons, in contrast, had only one child who is currently childless and single at twenty-eight, and has an established career on Wall Street after having graduated from Stanford University in addition to a Master's Degree from Oxford University.

Obama has two young daughters. Biden had two sons and an infant daughter in his first marriage, which ended in a car crash that killed his wife and daughter, and seriously injured his two sons who are now adults. Biden has a daugther from his second marriage who is also an adult.

* * * * *

Who is Sarah Palin?

Notably, Palin has rather week ties to the Republican Party. Prior to 1996 (including years spent on city council), she was registered as a member of the Alaska Independence Party, which seeks to discontinue Alaska's status as a U.S. State. Neither her husband, Todd, nor her eldest son Track (who is a nineteen year old infantryman in the U.S. Army), are registered to vote as Republicans. She first ran for partisan office as a Republican in 2002 when she was a candidate for lieutenant governor.

Her tenure in Wasilla city government was controversial, her first bid to be lieutenant governor failed, and in 2004 she resigned after a brief term on the Alaska Oil and Gas Commission and filed a formal ethics complaints against the state Republican Party's chairman, Randy Ruedrich. She is a year and a half into her first term as Governor of Alaska, she is facing an ethics investigation herself.

Palin is pro-life (opposing abortion even in cases of rape and incest), favors abstinence only sex education, thinks creationism should be taught in schools, opposes gay rights, favors oil and natural gas drilling in the Arctic National Wildlife Refuge, does not favor putting the polar bear on the endangered species list, favors hunting wolves from helicopters, does not believe that global warming is human-made, is a long-time member of the National Rifle Association, opposes the legalization of marijuana, and has no foreign policy experience although generally supports President Bush's opinions on foreign policy and the Iraq War.

She is very public about her Pentecostal religious faith. She eloped at age twenty-four.