(1) The first step on the path of maturing as a human being is the acquiring of a sense of self — learning the distinction between Self and the Others around you.

(2) The necessary precept of the tribe also necessitates our ability to identify ourselves as a member of a larger group, creating a sense of Us versus the Other.

(3) This sense of community has resulted in many good things — its the basis of cooperation and civilization. However, it also a darker side: The origin of all prejudice lies in the instinctual elevation of the individual’s immediate community (Us) above other communities (Other).

(Some of this is an outgrowth of our natural competition as a species. But part of it is an unhealthy tendency to elevate oneself not through personal achievements but by denigrating others: The poor pale-skinned southern farmer can feel good about himself because he “knows” himself to be superior to those with dark skin. The abusive husband mitigates his own failures in life by destroying his wife. And so forth.)

(4) Cultural or systemic prejudice sets in when the other becomes subjugated — either physically or ideologically — into accepting the elevation or “superiority” of the other group.

(5) The natural first step in attempting to liberate the oppressed and create a proper equality between two separate communities, therefore, has been to increase the pride of the oppressed group. Blacks must first be willing to have pride in themselves before they can fight for their rights. Women must have pride in themselves before they can leave the feminine mystique of “housewife”.

(6) However, there is a trap. First, and most obviously, the search for pride can often tap into that same instinctual elevation of the individual’s immediate community. Thus, it’s not enough for women to claim their rightful place as human beings… all men must become rapists. It’s not enough for the slaves to be set free… the slavers must be made the slaves.

(7) The more insidious trap, however, is that be emphasizing the need for pride, the civil rights movements deepen the sense of identity in the community. But it is the very distinction between communities which allows the racists or the sexists to flourish.

When there is a legitimate basis for the community, the possibility of prejudice against that community is unavoidable and must simply be guarded against with constant vigilance. For example, a Jew or a Catholic or a Republican all have a legitimate community.

But what about those communities which only exist because of prejudice? Why, for example, are all those with dark skin grouped together into a single community whereas all those with blue eyes or red hair are not similarly grouped together?

These illegitimate communities are, fundamentally, part of the problem. Ironically, however, they have also been made part of the solution: By creating a sense of pride in a community which, by all rights, shouldn’t exist, the illegitimate community is perpetuated and the fundamental foundation on which all prejudice is built remains intact.

At some point, therefore, it follows that the illegitimate community must be discarded entirely and the foundation ripped away. But here the trap snaps shut: In order to fight back against prejudice, the civil rights movement has fostered a sense of pride in the illegitimate community. In doing so they have turned that community into a force capable of effecting societal change… but it has also led them into a cul-de-sac. Such a movement can effect great change, but — like a man trying to pick up the board on which he is standing — it will find itself fundamentally stymied in attempting to rip away the foundation in which the prejudice it fights takes root.

The question then becomes: How do you escape from this pride cul-de-sac? How can a community voluntarily — and positively — disassemble itself?

If you’re a citizen of the United States, then today is the most important day of the year: Election Day.

Millions of people have suffered, bled, and died to give you your right to vote. But voting is more than just a right: It’s a responsibility. Voting is the fundamental bedrock of a democratic civilization. When a citizen fails to vote they are, in a very real and definite sense, inflicting harm on society as a whole.

So if you’ve been thinking you might just skip this election, then you should take a moment to think about all the sacrifices which have been made to give you your vote. And then find the resolve within yourself to wait in line and perform what is both your duty and your privilege.

The stakes have never been higher.

Vote!

Your honor, I think you will find — if you just peruse this report — that I was not speeding when the state trooper pulled me over.

Hmm… Who prepared this report? Well, I did of course.

Now, if you’ll just turn to page 2 you’ll find the general conclusion of the report: I am not guilty of speeding. On page 4 you’ll find the detailed diagrams demonstrating that if I was driving no more than 30 mph, I could not have been driving 40 mph when the officer pulled me over. And if you flip to page 7–

What’s that? My protestations of innocence don’t automatically me innocent?

I don’t understand.

It worked for Sarah Palin.

So we’ve slapped an ill-conceived and pork-laden bailout bandage onto the current economic crisis.

But that’s all it is: A bandage. This bailout bandage contains no solutions for the fundamental problems that led to the current crisis. It’s the functional equivalent of pulling over a drunk driver, taking away the bottle of rum he’s clutching in his right hand, and then giving him back the car keys.

So the next step must be to address the fundamental failures that led to this crisis. It’s the only way to prevent another.

(1) The lack of regulation that allowed unfettered greed to flourish on Wall Street must be addressed. This means re-instituting the regulations that have been obliterated by the last thirty years of bankrupt Republican strategy — a strategy based entirely upon the facilitation of greed.

(2) The bad mortgages lying at the heart of the current crisis must be alleviated. Main Street has been guilty of making some bad decisions in its own right, but the middle class has also been victimized by predatory lending practices.

This means that bad mortgages held by homeowners (not speculators) need to be re-structured to ensure reasonable and consistent monthly payments. Barack Obama has proposed giving bankruptcy judges the power to restructure these bad mortages, but in my opinion that’s not good enough: If we see these people hurtling towards the cliff of financial ruination, we shouldn’t wait for them to go over it before trying to pull them back up.

And this also can’t be an effort limited to just bailing out those currently in trouble. It also means regulating the mortgage industry so that these types of bad mortgages can no longer be created. For example, adjustable rate mortgages were legalized in the same legislation that led to the Savings & Loan crisis.

(3) We can no longer slave our economy to the fate of a small handful of companies. Senator Bernie Sanders says that “if they’re too big to fail, then they’re too big to exist”.

Unfortunately, in the wake of the current crisis, we have actually exacerbated this problem instead of alleviating it. Mergers of the largest banks have resulted in even larger banks. This solves a short-term problem, but we’ve simply replaced it with a bigger problem down the road.

The current crisis clearly demonstrates the truism that, the larger they are, the harder they fall. These large institutions, on which our economy is apparently completely dependent, must be broken up into smaller entities. We shouldn’t be keeping all of our eggs in one basket.

(4) A happy balance must be found in regards to mark-to-market accounting rules. These rules (requiring that the value of assets be set to their current market value) were put in place as a direct result of Enron’s abuse and downfall. The problem is that they tend to exacerbate downward spirals, particularly when applied to long-term assets, by creating and then reinforcing destructive pricing volatility.

The SEC has now been given the power to suspend the mark-to-market accounting rules. But if they exercise that power to simply remove yet another layer of protective regulation from the system, we’re simply switching one form of economic catastrophe for another.

Newt Gingrich has proposed what appears to be a logical compromise between these two extremes: “Perhaps a three year rolling average to determine mark-to-market prices would be a workable permanent system.”

And now I’ll say something I rarely expect to say: I think Newt Gingrich is right. A three year rolling average for long-term assets evens short-term volatility in the pricing of those assets, without completely disconnecting corporate accounting from any kind of objective reality. (The rest of his proposals, on the other hand, are just the standard Republican refrain of “cut taxes and deregulate”… which shows a rather stubborn inability to learn from past mistakes.)

Now What?

That’s the real question. I’ll admit that I’m not an economic specialist. I don’t know the best way to accomplish these things. (Although you probably couldn’t go too far wrong if you started by rolling back most or all of the Garn-St. Germain Depository Institutions Act and the Gramm-Leach-Bliley Act.) But it’s clear that these are things that must be done.

Because simply slapping a bandage on an infected wound won’t solve the problem.

And, really, this is just the beginning — a first step. Because the current and most immediate crisis we’re facing is merely the tip of the iceberg. Years of mismanagement under Republican economic theories have left our economy fundamentally dysfunctional. We’ve got a lot of work ahead of us. But I think this is a decent outline for the first step in the right direction.

Here’s the two-bit tour of the current financial crisis: In an attempt to cure the woes that led to the Great Depression, the banking industry was regulated. These regulations were designed to rein in unchecked greed from running us, lemming-like, off a financial precipice. Over the past thirty years, the Republican philosophy of de-regulation — championed by conservative leaders like Reagan, Bush, and McCain — systematically dismantled these protections. The warning flags were raised with the S&L crisis in the late ’80s (which included significant scandals including George W. Bush’s brother and John McCain himself). But, after the S&L bailout was paid, these warning signs were largely ignored and the Republicans continued on their de-regulating crusade.

Which brings us to today. With a significantly deregulated mortgage market, lenders issued riskier and riskier mortgages in the pursuit of more and more money. And because the banking industry had been deregulated, they were able to package these risky mortgages into unregulated securities… which could be sold to give them more money to make even riskier mortgages. In many ways it resembled a pyramid scheme and eventually, like all pyramid schemes, it collapsed as the risky mortgages started failing.

Today the value of these securities has completely flat-lined. They’re worthless paper because nobody has any confidence in the value of the risky mortgages on which they’re based. But our entire deregulated financial system is so heavily invested in these worthless mortgages as a result of the unregulated securities they were packaged into that the entire system is in danger of eminent collapse.

(Warning: The previous paragraphs contains gross over-simplification of a complex issue.)

So, enter the bailout: The government will buy up these bad mortgages (although no one is sure exactly what they’re worth), which will hopefully save the financial institutions which foolishly invested in them. If you think of the bad mortgages as a thug with his foot on the windpipe of the financial institutions, we’re grabbing the thug and giving the financial institutions a chance to get back on their feet.

But there’s a problem with this analogy: There is no thug and no innocent victim here. The financial institutions we’re trying to help get back on their feet were the ones putting their feet on their own windpipes.

What’s needed here is not a rescue. It’s an intervention.

Here’s a better analogy: Our financial institutions are cutters. They like to hurt themselves. It’s not really their fault. It’s just that, collectively, they’re incapable of controlling their own greed. We need to get them help. And an important part of that help will be putting them in a straitjacket so that they can’t keep hurting themselves.

The name of that straitjacket? Regulation.

And this is my primary objection to the Bush bailout plan: It throws money at a symptom without actually curing the disease. The fact that the symptom itself (the dead weight of these sub-prime mortgage securities) is bad enough that it needs to be addressed doesn’t mean we should be ignoring the disease. And that means that part of this bailout needs to be a re-institution of the post-Depression regulations that were put in place to stop exactly this kind of disaster from happening again.

But there’s also another problem to be addressed here: The bad mortgages.

The bailout is designed to buy up those bad mortgages, wave a magic wand over them, and make them disappear. (This looks like another analogy, but it isn’t. The Treasury Department really has no idea what they’re going to do with these mortgages once they buy them.)

But, again, that’s just a crude attempt at treating the symptom. The problem is that these are bad mortgages. Just transferring ownership to the public isn’t going to change that fact.

So why are these bad mortgages? Because (a) the people who borrowed money under these mortgages are likely to default on their payments and (b) the value of the property itself has been devalued so that foreclosure won’t recoup the lender’s investment.

And why are these people likely to default on their payments? It’s not as if anyone wakes up one day and says, “You know what would be fun? Getting foreclosed and ruining my credit!”

Well, there are two primary reasons:

(1) They have lost the income that allowed them to make the payments on the mortgage. (They may have lost their job or the other costs of living may have risen to a point where they can no longer afford the payments.)

(2) The size of the payment has increased to the point where they can no longer afford the payment. (The result of an adjustable rate mortgage, a balloon payment mortgage, or similar “teaser rate” schemes.)

There’s little that can be done about the former (short of strengthening our economy in general), but the latter is — once again — the direct result of deregulating the mortgage industry. The types of mortgages are predatory in nature, irresponsible for both lender and borrower, and (as we have seen) extremely dangerous for our economy.

It should be obvious to anyone looking at this crisis objectively that these types of loans need to be regulated out of existence. Like usury interest rates, there is no reason for them to exist.

But I would go one step further. We shouldn’t just be getting rid of these loans going forward, we should be figuring out a way of retrofitting the existing loans so that the people currently holding these loans can continue making their monthly payments.

I’m not a mortgage expert, so I don’t know the best way of accomplishing that. But we know that the homeowners with these mortgages were (and probably are) capable of making a reasonable monthly payment. The goal is to find a way to restructure these mortgages to lock in this reasonable monthly payment. And that may be offering a lower interest rate; extending the term of the loan; or any number of other things.

For the loans that we end up purchasing as part of this bailout, this type of retrofitting should be relatively easy to carry out under the auspices of a properly formulated agency. For other loans of this nature out on the market, we can probably offer incentives to encourage/bailout the financial institutions needing to restructure these “assets” on less favorable terms.

REHABILITATION PLAN

So instead of talking about a “bailout”, let’s instead talk about a Rehabilitation Plan based on three pillars:

(1) We will treat the immediate symptom of this crisis by buying up these bad loans, giving our financial institutions some breathing room.

(2) We will re-institute proper regulation of our financial system to insure our economic security in the future.

(3) We will retrofit existing ARMs and similar mortgages to reduce the foreclosure rate. This will benefit homeowners, help to stabilize these rocky segments of our financial markets, and reduce foreclosures (which will also help the real estate market recover and further stabilize the market).