No More Free Ride on Sixth Classes

Mayor de Blasio giveth, and Mayor de Blasio taketh away. In my school, there are a whole lot of teachers with six classes. That's because people get sick, take leaves, go on vision quests, quit, and do all sorts of things that humans do. When that happens, kids ask, "Hey, where the hell is my teacher?"

Now I can't say precisely why they ask that question. For one thing, I know an awful lot of kids with intense aversions to homework. When the gym teacher is covering your physics class, you tend to get much less of it. But they're young, and sometimes they just don't think things through. Administrators, though, take a different view. They might wonder how they get 90% of the kids to pass physics. They can scream at the gym teacher, or me, or whoever happens to be covering, but probably none of us could pass physics either.

That's when they start to look around. "Hey, Mr. Teacher, how would you like to teach a sixth class and pocket an extra 12K a year?" That usually goes over pretty well. A lot of people, in my experience, want twelve thousand dollars. Think of all the doggie biscuits you could buy for that. Or donuts. You could eat donuts every day, your doggie could eat biscuits, and the whole house could celebrate almost perpetually.

And the cool thing about it is Bill de Blasio picks up the tab! So principals haven't got a whole lot of incentive to stop giving six classes to everyone. After all, it's a win-win! The teachers get a crapload of cash and not one cent leaves the school budget. After all, with "fair student funding" it isn't like the good old days when central paid all the salaries.

But I just got a hot tip that those days are over starting next year. So if principals want to give out sixth classes, they'd best be prepared to lay out 12K per class from the school budget. If you were thinking about padding your retirement with those extra classes, better do it before June. This could be a big hit for schools that depend on this stuff.

Waving 12K in front of people can do some pretty bad stuff. Full disclosure--I've been offered an extra class for years and have declined it each and every time. My job is crazy enough already and it's all I can do to keep up. I just don't think I could handle it.

Of course, that doesn't stop everyone. Sometimes it's that people want the money, and they'll do whatever they have to. Other times it's a supervisor leaning on someone, saying we really need you to help out. But I've seen brand new teachers with six classes, and it doesn't always work out well. Teaching is a complex and always demanding job, and new teachers really need time to learn. How on earth are they going to be mentored when they've given up their woefully insufficient forty minutes of daily prep?

So there's a good-bad thing happening here.  It's good that this sixth class thing will likely be discouraged. In my personal, non-chapter leader opinion, having these things out there is divisive and destructive.  As a chapter leader, though, I can't much fight it because a whole lot of people really like the chance to make extra money.

The bad thing is there are a whole lot of schools that depend on this little break from the city to staff their schools and provide essential services. It's incredibly creepy that Bill and Carmen have decided to say, "Screw you, you're on your own now," to principals who've come to depend on this little perk. Make no mistake, there will be fewer teachers for kids and larger classes for all as a result of this.

So thanks a lot, Mr. Mayor.

Who Should Run the United Federation of Teachers?

If you're happy with how things have been going, you can vote for Michael Mulgrew and his gang of 800 loyalty oath signers. You can let them know you love being under a microscope. You can tell them you love being judged by a rubric, and it makes no difference to you whether or not supervisors even understand it. You can tell them it's swell that you can't address supervisory fabrication in observations until and unless you receive an ineffective rating.

You can tell them you're pleased they failed not once, but twice to oppose autocratic billionaire Michael Bloomberg as he bought Gracie mansion. You can pat them on the back for supporting his mayoral control not only at its inception, but also after it was proven to be an abject disaster. You can thank them for not only supporting charter schools, but also for creating and even co-locating them.

You can let UFT Unity and Michael Mulgrew know that you have no problem with their sitting on their hands as Joel Klein established a Leadership Academy and trained a small army of administrators to paint targets on the backs of working teachers. You can tell them you approve of being judged by test scores of students you may or may not even teach. You can let them know that you think it's a great idea to be judged on what Diane Ravitch and the American Statistical Assiciation regard as junk science.

You can pat UFT Unity on the back for having handed you a contract that ushered in second tier due process for ATR teachers, the most vulnerable among us. You can tell them you're pleased to wait until 2020 for the raise that NYPD, FDNY and most city workers got in 2009. You can say, "Thank you sir, may I have another?" as they make teachers on leave wait at least two years to get the small portion of retro pay we received a few months ago.

In fact, you can thank them for their failure to actively support or promote opt-out. You can listen to Mulgrew take credit for the cosmetic changes Cuomo proposed, the ones that were actually inspired by opt-out activists like those in this video, Jia Lee, Lauren Cohen, and Kristin Taylor. You can pretend that Cuomo is afraid of Mulgrew instead of the vibrant grassroots opt-out movement that has tabloids all over the state in a frenzy.

On the other hand, you may wish to support the future, and you may wish to repudiate the reforminess that has infected and degraded not only our profession, but also the education of our children. That's what I'm going to do, and I'm going to do so by voting for not only Jia Lee for UFT President, but also the entire coalition of MORE/ New Action. I'm tired of being told that black is white, that hot is cold, that day is night.

If you are too, you will join me in demanding fundamental change in our union. MORE/ New Action has a slate of hundreds of activists who will stand up for what we know to be right. That's why I'm proud to be running with them. Vote for them, vote for me, and vote for a long-needed new direction in our union, the United Federation of Teachers. 

UFT Then and Now

I'm on a mailing list from a UFT rep who goes around to schools organizing for the union. He sends an email every week or so. Sometimes there are interesting bits. The one I just received certainly caught my attention. Here's a little piece of it.

Thank You, Senior Members!

         I hope you all enjoyed your midwinter break.  Now that you are back in your school, be sure to thank your senior colleagues, those who were working in Spring 1991, twenty-five years ago, for paying for it.

         That’s right.

         Back then under Mayor David Dinkins the city, in financial crisis, asked each and every UFT member for a loan of $500*.  In exchange we got

         -a liberalized sabbatical and leave policy

         -a buyout for Tier I members

         And

         -the midwinter break.

         It wasn’t free.  It didn’t come from Kris Kringle, Befana the Witch, or the Tooth Fairy.  Your colleagues and your union paid for it.

         Be sure to thank them. *Happy ending.  Everybody got paid back in three years at 6% interest.

Now consider that. I was working when Dinkins was mayor, and I certainly lent the city that money, so it's nice to be appreciated. But I don't expect young teachers to thank me anytime soon. For one thing, I don't see any buyout for them, and there hasn't been one for many years. For another,  they likely as not have never even met a Tier One teacher, and there's no buyout for them, let alone anyone else right now. A whole lot of them are on the far inferior Tier Six. In fact, for them, even the 25/55 we got via the grab bag of goodies we gave the city in 2005 is now gone. I like the midwinter break, but I'm pretty sure it entailed a shuffling of days.

The most egregious omission here, though, has nothing to do with any of the above. It's the failure to note that the most recent contract, the one new and not-so-new teachers are actually working under, entails a significantly larger, longer-term loan to the city. I can't say exactly how much newer teachers are deferring, but I know I myself have deferred in excess of forty thousand dollars, not for three years, but rather eleven. I'm not gonna see the money I earned in 2009 until 2020. I'm not getting 6% interest on that, but rather the 0% cannily negotiated by UFT President Michael Mulgrew and his crack team.

If I were a new teacher, knowing this, and knowing I lent a whole lot more than $500 to the city, I'd find this comparison fairly upsetting. And if I were, say, on leave for some reason (maternity is a big one), I'd be pretty pissed off that I got zero retro and had to wait two more years for the big magical chest to open again. And as for rewards for this contract, aside from the lowest pattern bargain in my living memory, the only one that pops into my mind is the second-tier due process rights we got for ATR teachers. Hardly something worth boasting about, if you ask me.

I suspect this was reaching out to try and get new members to appreciate union, given the Friedrichs case. I'm pretty surprised it failed to take into account the death of Antonin Scalia, which pretty much stops Friedrichs in her tracks (for now at least). Friedrichs' principled Koch brothers-financed quest toward more work for less pay has certainly been slowed.

Of course, on Scalia's death and its consequences, we've heard only crickets from UFT leadership. Doubtless it will be painted as a victory, just as every time UFT leadership blows its nose is a victory. But exactly what sort of victory it is needs to be considered by those who run 52 Broadway. They are very smart, as Michael Mulgrew reminds us on a monthly basis, and need to consider how to paint this for membership. After all, we aren't that smart, sophisticated, or knowledgeable. Many of us have yet to realize, for example, that the only reliable source of information, since Mulgrew axed Edwize,  is NY Teacher. A whole lot of us still rely on dubious sources like Diane Ravitch or opt-out activists, despite what the very smart people in leadership have decreed.

Anyone who compares then and now is not going to take a favorable view of the comparison. Personally, I'm not sure it was a good idea to reach out with this.  This is a pretty elementary comparison to make, and leaves me thoroughly unimpressed with the progress of UFT leadership.

The Ratings Game

You'd think we were a TV station seeking Nielsons, but actually we're the largest school system in the country. An emergency headline from vacationing Gotham Schools blares that we're going to lose a ton of money, but doesn't bother to inform readers of the limited purposes for which the money can be used.

This, of course, leaves readers with the impression the evil UFT is obfuscating so that the lazy worthless teachers won't be accountable. To balance this coverage, Gotham features a DOE employee in their community section telling what a great job the DOE is doing (along with the usual pontification from failed teacher Ruben Brosbe).

The NY Times story is a little more comprehensive:

The money, known as school improvement grants, is supposed to help the schools lift their results through a series of changes, like replacing principals and at least half the staff members; giving teachers extra time for training and preparation; and extending the school day. In New York City, it offers, in essence, an alternative to the most common approach to dealing with failing schools, which has been to close them. 

We all know how effective closing schools has proven, and we all know that the high-needs students simply get shuffled off to nearby schools, which also end up closing. We also know that when new schools don't get grades that please the Emperor, he simply closes them too, taking no responsibility whatsoever. But will replacing principals and half the staff change anything? Will subjecting teachers to even more useless staff development from the people who close schools and have no idea how to improve them help students?

In fact, there are 33 so-called transformation schools getting almost two million each a year in these funds, and reports have been less than glowing. Firsthand reports tell me teachers are miserable, the schools are not better places for anyone, and the Danielson framework is a truncheon to beat staff into submission, or more likely to beat staff for no reason whatsoever. Shall we pursue further funds to expand this practice citywide?

UFT hangs tough, saying we won't accept a bad system. This represents common sense, the least common of all the senses, and I hope we stick with it. In fact, the only incentive to agree to any system whatsoever would be a fair contract, like the ones granted to the NYPD and FDNY. But despite the nonsense from the tabloids and the billionaire-sponsored anti-union groups, there is no bad teacher crisis that needs fixing, no teacher should be fired without just cause, and no system that allows that to happen is acceptable.

It's a disgrace that the state pushes baseless unproven nonsense, and a further disgrace that sleepy journalists can't be bothered to look beneath the surface and inform readers about it.

Democrats Demand More Crappy Jobs for Our Kids

That's State Senator John Sampson standing up for just that. You can just feel the excitement all the people around him have. You can't really see it--The man on the left looks bored out of his gourd, while the woman on the right seems absolutely fixated on Mr. Sampson's choice of jacket. Nonetheless, he wore it for the occasion of his announcement that he wanted to raise the charter school cap.

I've read elsewhere that Mr. Sampson wants to make charters more accountable, but these reservations don't seem to have stopped him in asking the cap be raised. First things first. Right now, he wants more charters whether or not they're regulated, and he was quite clear about why he wanted to raise the cap.

"My philosophy is you have to be in it to win it," Sampson told reporters yesterday. "So I think we need to put ourselves in a position to take advantage of ... moneys that can come from the federal government."

There's nothing all that confusing about Sampson's statement. We're doing it for money, pure and simple. It's refreshing, actually, to see a pol who will let it all hang out like that. None of this nonsense about doing what's best for kids. That's neither here nor there. Who cares if there are fewer union jobs and more "at-will" jobs where you can be fired for a bad haircut? Not John Sampson, evidently.

If you work at a charter school, you can be fired for telling your colleagues how much UFT teachers make. You can also be fired for insisting IEPs be followed. In fact, I've met ex-charter teachers who were fired for just those things.

It certainly appears those are the kind of jobs Mr. Sampson is willing to accept for our kids. With friends like him, who needs Republicans?

Poor Rich Folks

It appears that the economic boom is causing some of our well-heeled residents to consider (gasp!) public school for their children. Now I send my kid to public school, but on the other hand I'm just a lowly teacher. So the question of whether or not I'd be spending 33 thousand bucks a year on my kid's education just never came up somehow.

So you can imagine how badly I must feel for all these people. Apparently, although they're zoned for good public schools, there may not be enough space for their kids. Gee, it's kinda too bad that Mayor Bloomberg closed all those other neighborhood schools rather than fix them. But those are the breaks for people who couldn't afford the good neighborhoods, and now they're the breaks for these poor rich folks too.

Now if you didn't move into a favorable school district, you can sublet your apartment and rent elsewhere. But it turns out that districts with better schools command higher rents. Who would've imagined a good neighborhood school made the neighborhood more desirable? Not Mayor Bloomberg. Not Joel Klein. Not any of the "reformers." They always figured important folks, like themselves, could just send their kids to elite private schools and everyone else could just go to hell. But now that rich people are going with them, they may need to take another look. They probably won't, but if they did it could be a silver lining in this economic downturn.

There is absolutely nothing that enriches a neighborhood more than a good school or three. Hopefully the voters, whose will clearly means nothing to the mayor, will select someone in November who thinks enriching neighborhoods is even more important than enriching the likes of Eva Moskowitz.

Thanks to Schoolgal

Who Should Teach Teachers?

Yesterday Joanne Jacobs ran a piece about how good teacher pay looks in a recession. And people have told me that during the depression, teachers did better than a whole lot of people. It's beyond pathetic that's what it takes to make this job appealing to some, but when you see how regularly we're vilified in the press, it's certainly understandable.

My attention was drawn by one of the comments, from one Obi-Wandreas, who writes:

There’s not a gorram thing you’re going to learn in an education class that will actually be of any use to you in the classroom. You still have to take a metric keesterload of them, however, to get a teaching license. This takes a significant amount of time. I was fast-tracked and it took a year before I was able to teach.

I can't really argue with that. I too had to take several courses that were total crap to become a teacher, but I also learned a lot about my subject area. Many in the "reform" crowd, including Rod Paige, ex-US Education Secretary, falsifier of the "Texas Miracle," and part-time UFT President Randi Weingarten's biggest fan, say this must be corrected, and the sooner the better. We need to make it easier for people to become teachers, and we need to ease the restrictions, because it's too hard to get certified.

Actually, folks like Rod don't give a damn who teaches kids, and want to let anybody in so as to enlarge the employee pool and keep salaries down. But many buy that line, and NY Times columnist Nicholas Christof thinks it's keeping Meryl Streep and Colin Powell from becoming teachers. That's an idiotic notion, of course. Just as implausible, but somewhat less idiotic, was a remark I read somewhere suggesting, "Just put a CPA in that classroom. Give him the book. He'll know what to do."

Actually, leaving aside the woeful cut in pay, a CPA may know math, but that doesn't remotely guarantee he can control a room full of 34 teenagers. We had a Teaching Fellow in our school who knew as much or more math than anyone, but couldn't handle the kids at all. And poor retention rates suggest (to me at least) that not everyone can do this job.

So perhaps we shouldn't have ivory tower professors who've never seen public school classrooms telling us how to run them. Perhaps we should find people who have actual experience doing the instruction. Actually, I have friends who are lawyers and nurses who tell me their education included lots of impractical nonsense. Still, you don't hear people say we should let absolutely anyone become a nurse, or a lawyer, or a doctor.

That's because, make no mistake about it, an awful lot of people have no respect whatsoever for what we do. We could certainly improve teacher education. But I think eliminating it is one of the worst ideas I've ever heard.

What do you think?

Where Are All The Hedge Fund Managers Going?

There's seems to be some alien life force or nasty mutated virus that's taking all the hedge fund managers off the face of the planet and replacing them with missing assets and a bunch of bilked clients:

In a case with parallels to the Bernie Madoff scandal, a prominent Florida hedge-fund manager has vanished - and so has up to $350 million of his clients' money.

Sarasota police said they are looking into claims that Arthur Nadel, 76, defrauded investors before leaving a distraught note for his family and disappearing.

Nadel's wife, Peg, filed a missing person report with police on Wednesday. She told the Daily News on Saturday that she's cooperating.

"We are being very proactive," she said.

"There is nothing to show that anything was taken. They're investigating his disappearance for his own safety and his own well-being."

Some reports estimated that the hedge fund was out some $350 million, but Spitler said it's too soon to say exactly how much it was worth.

...

His disappearance comes a month after authorities charged Madoff, 70, with securities fraud for allegedly duping investors with a giant $50 billion Ponzi scheme.

Earlier this week, Marcus Schrenker, an Indiana investment adviser suspected of bilking investors, was taken into custody by police in Florida, after allegedly attempting to fake his death in a plane crash.

Frankly, I think the world would be a better place if all the hedge fund managers were taken to an island somewhere in the Pacific and left to fend for themselves, but you'll note how these parasites keep disappearing with all the money.

As do the former Masters of the Universe, the bankers - only they're disappearing with taxpayer money too. We've already ponied up $700 billion in TARP money for the financial industry even as Hank Paulson and Uncle Ben Bernanke have had the Federal Reserve buying a bunch of worthless crap off the balance sheets of banks like Citigroup and Bank of America and yet the financials still need more cash:

It’s too soon to say how much taxpayer money will be spent trying to rebuild banks hollowed out by bad lending practices. Paul J. Miller, an analyst at Friedman, Billings, Ramsey, thinks that the nation’s financial system needs an additional $1 trillion in common equity to restore confidence and to get lending — the lifeblood of a thriving and entrepreneurial free-market economy — moving again.

That $1 trillion would come on top of funds disbursed through the Troubled Asset Relief Program, which has tapped $700 billion, and the president-elect’s stimulus plan, clocking in at $825 billion.

And don't expect these policies to change with Barack Obama at the helm. Obama is expected to back an economic plan to send more cash to failing banks and financial companies while buying up hundreds of billions of dollars of "toxic assets" from these very same insolvent institutions.

In addition, his economic team, particularly his picks for Treasury and the SEC, are as implicated in creating the current financial mess as Paulson, Bernanke, and Ayn Rand's favorite economist, Alan Greenspan:

WASHINGTON (Reuters) - President-elect Barack Obama's choice to lead the U.S. Securities and Exchange Commission is likely to be roughed up at her confirmation hearing in connection with the Bernard Madoff scandal, but ultimately she is expected to be confirmed.

Mary Schapiro currently oversees the Financial Industry Regulatory Authority, the watchdog that supervises nearly 5,000 U.S. brokerages, and is in turn overseen by the SEC.

FINRA's role in the Madoff case has been drawn into the debate over why the SEC failed to uncover what could be the largest U.S. fraud in decades.

...

Politicians have slammed the SEC for not pursuing tips about Madoff from one of his competitors. They also fault the agency for missing red flags such as Madoff's uncanny ability to generate steady returns in all types of markets, and his firm's use of a small, little-known auditor.

...

"The primary regulator was FINRA because for throughout the entire scandal, Madoff had a registered broker-dealer entity," said Mercer Bullard, a securities law professor at the University of Mississippi and an advocate for mutual fund shareholders.

"Broker-dealer regulations are intended to address the problem of disappearing assets," continued Bullard, who once worked in the SEC investment management division. "It has surprised me that the SEC has borne the brunt of so much of the criticism. If fingers are to be pointed, they should be pointed first at FINRA."

As for Obama's pick at Treasury, not only is he a tax cheat with a nanny problem, he's an architect of the TARP program who agrees completely with Bernanke's and Paulson's candy store giveaway to the financial industry.

So if you liked the last few months when taxpayers and the Federal Reserve printing press handed out nearly a trillion and a half of cash to banks and companies that FAILED, you're going love the next couple of years.

Frankly, Cunning Realist got it right when he posted this today:

Two people have come out of nowhere recently and, by way of New York City, become national figures: Bernie Madoff and Chesley "Sully" Sullenberger, the pilot who landed the jet in the Hudson River. No long post needed on the obvious contrasts.

But those contrasts are a good context for some larger issues. Sullenberger is everything this country -- and those who champion Wall Street as a pillar of patriotism -- likes to think it is about. Small-town Texas, top student, Air Force Academy, fighter pilot, distinguished career, family man, and ultimately a saver of lives. His counterpart in the news is, allegedly and apparently, a destroyer of lives. Without going into the separate issues of whether the Wall Street bailout is working, or what would have happened without it, there's a basic truth: it takes money from people like Sullenberger and gives it to people who sit in front of banks of computer screens all day making a living off flickering green dots.

Sullenberger's not the only one who's had a TARP pulled over his wallet. The emergency workers who got those passengers out of the Hudson River will send some of the money they earned that day to Washington, which will send it to traders and investment bankers. So will teachers, doctors, farmers, truckers, scientists, and small business owners. (And as a final insult, their savings will be inflated away.) The people who make this country run are spending part of every day working for people like this -- those who have done fantastically well in recent years, many of whom made dubious or ill-gotten profits. This is the "soft slavery" I've written about before, and it's getting less soft with every new bailout.

The Sully-Madoff contrast also brings into stark relief a more existential national choice, one that's been building for years. Should we value things like the ability to get into the cockpit of an airplane and fly hundreds of people across the country, or teach kids, or actually make things? Or, the past year or so aside, are we going to continue as a society to encourage our best and brightest to become slightly more legit versions of Bernie Madoff? This is partly why I and others have criticized the Federal Reserve, which made that choice for the country in the mid-90's and since then has seen itself as Keeper of the Flame of National Purpose.

I wonder if people have become so inured to these bailouts that they've lost sight of the underlying dynamic. The architects and beneficiaries of it would welcome that.

Indeed they would.

And if we can all forget about this stuff as the hedge fund managers continue to disappear with all the cash and the investment advisers fake their own deaths by jumping out of planes, the boys and girls who were supposedly watching the candy store the whole time - i.e., the Greenspans, the Bernankes, the Paulsons, the Coxes, the Geithners and the Schapiros - would be very, very happy people.

Fooled Again

President-Elect Barack Obama's pick for Secretary of Education, Arne Duncan, received Harriet Mieresque praise from both Republicans and Democrats when he faced senators at his confirmation hearing today.

The Chicago Tribune described it as a "kumbaya moment" as Duncan took tough questions like this one from Lamar Alexander (R-Tenn):

"President-elect Obama has made several distinguished Cabinet appointments. I think you're the best."

Or this one from Lisa Murkowski (R-Alaska):

“My first impressions are very strong and very favorable,” Senator Murkowski told Mr. Duncan. “I’m glad to see that your boy is there reading books instead of playing with an electronic gadget.

Duncan didn't actually say anything of import at his hearing other than the usual reform pablum about how NCLB needs to be funded, teachers need to be held accountable for student achievement, charter schools are wonderful things and the high school drop-out rate needs to be decreased at the same time that access to college is expanded.

Duncan, Obama's basketball buddy and the current chief of the Chicago school system, didn't say how he would do any of these things.

But judging by his record in Chicago, you can bet the emphasis on testing won't go away anytime soon.

Heck, how else can teachers be held accountable for their students' achievement?

Ironically, at the same time Uncle Arne was holding hands with Lamar Alexander and Lisa Murkowski and singing "It's A Small World After All", Federal Reserve Chairman Helicopter Ben Bernanke was explaining during a speech at the London School of Economics that the boys running Citigroup, BoA, AIG, J.P. Morgan Chase, Goldman Sachs and other financial institutions, having already received more than $350 billion dollars in taxpayer funds as part of the TARP program, will need hundreds of billions more to keep them afloat. Of course he didn't say that in English, but here's his quote anyway:

“More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets."

Though the Fed chairman acknowledged that people in many countries were “understandably concerned” about pumping government money into the financial industry while often turning a cold shoulder to other sectors, he defended the effort as unpleasant but necessary.

“This disparate treatment, unappealing as it is, appears unavoidable,” he said. “Our economic system is critically dependent on the free flow of credit, and the consequences for the broader economy of financial instability are thus powerful and quickly felt.”

Got that now?

Teachers must be held accountable for student achievement, financial CEOs and Wall Street Masters of the Universe must be bailed out because, you know, the world might implode if the boys at AIG didn't get to take taxpayer funded junkets to Arizona spas and the boys at Citigroup didn't get to retire with golden parachutes, even though they were the ones who helped make all the financial mistakes in the first place.

Sigh - meet the new bosses, same as the old bosses.

Our Tax Dollars at Work

Workers at Republic Windows and Doors were given three days notice that their factory was closing. By law, they're supposed to get 60. And that wasn't all. They were told, sorry, but you don't get your severance or vacation pay either. Too bad, but we just don't have the money we've promised you.

The workers have now occupied the factory, and they don't plan to leave until they get what they're contractually entitled to. Why is the company in such dire straits that they need to give employees such awful news? Well, apparently, Bank of America, its creditor, will not allow them to pay their debts. It doesn't care for the monthly sales reports.

The kicker here, though, is that Bank of America just got 25 billion from we, the people, in order to bolster its ability to extend credit. And this is what we, the people, are getting in return.

The State of Illinois has suspended all business with Bank of America until they make things right. If you want to know what you can do, PREA Prez Fred Klonsky can fill you in.

Bailout Nation

Secretary of Treasury Henry Paulson wants $700 billion dollars of taxpayer money so that the federal government can buy garbage mortgage-backed securities from banks and financial institutions and bail them out of their own self-created financial catastrophe.

The White House says there can be no changes to the Paulson plan ($700 billion with "unlimited discretion" how to use the money and immunity from any review) and the plan must be passed by Friday or there will be "severe consequences."

Apparently the financial system meltdown that will result from not passing the Paulson Plan with no strings attached on Bush's timetable will come in the form of a mushroom cloud.

Gene Robinson of the Washington Post argues giving Treasury $700 billion of bailout money without getting some measure of equity and accountability is crazy:

Let's be clear about why we're facing a crisis that could pull down the global financial system. The irresponsibility of individuals who bought houses they couldn't quite afford pales in comparison with the irresponsibility of the financial wizards who built on those shaky mortgages a towering edifice of irrational faith. Someone in the government should have looked at all those trillions of dollars' worth of mortgage-backed securities and collateralized debt obligations and credit default swaps and demanded that Wall Street prove that all, or even most, of this purported money was real. But we're in the eighth year of the Bush administration; adult supervision left the building long ago.

Now that the whole highly leveraged structure is threatening to fall, some kind of government bailout is necessary and inevitable. But Congress shouldn't approve Treasury Secretary Henry Paulson's $700 billion rescue plan without insisting on some measure of equity and accountability.

See, neglecting such details as equity -- in both senses of the word -- and accountability is what got us here in the first place.

Last Thursday and Friday when Wall Street thought they were getting the bailout without the strings, the markets went up, up, up. Yesterday, when it became apparent that clearer heads may prevail and some measures of accountability will be added to the bailout dough, the markets plummeted.

Looks like the masters of the universe and the hedge fund managers on the Street don't want any accountability.

I guess accountability is only for teachers and other poor schlubs like that.

Worst Since World War II

The government bailed out A.I.G. for $85 billion this morning but that still didn't stop the U.S. markets from plummeting again.

The Dow fell almost 450, losing 300 points in the last hour. The Nasdaq lost almost 109 while the S&P fell 57. Markets around the world also fell sharply.

The Financial Times described the day like this:

The panic in world credit markets reached historic intensity on Wednesday, prompting a flight to safety of the kind not seen since the second world war.

Barometers of financial stress hit record peaks across the world. Yields on short-term US Treasuries hit their lowest level since the London Blitz. Lending between banks in effect halted and investors scrambled to pull their funding from any institution or sector whose future had been called into doubt.

The Fed has spent more than $600 billion to bail out Bear Sterns, Fannie Mae, Freddie Mac and now A.I.G., but the problems in the financial system are just getting worse.

Washington Mutual is about to go belly-up and the government is trying to arrange for a buyer. So far nobody is biting because "No one knows what's in their books..."

Gee, that seems like a good reason to not buy WaMu.

In addition, the two remaining investment banks, Morgan Stanley and Goldman Sachs, have not been able to convince investors about their stability to weather the crisis. Goldman dropped 19% today and Morgan Stanley dropped 31%. Rumors swirl Morgan and Goldman will both be bought up soon.

And if you think your money is safe in a bank because it is backed by the FDIC, think again:

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

...

Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

The financial system is facing the worst crisis since World War II, but at least Preznut McCain will put together a 9/11-type commission to study the problem.

That should fix things.

Magical Thinking In The Magical Kingdom

Another day, more bad news on the financial front - unless you're an economic adviser to the John McCain campaign, that is.

But more on that in a minute.

The government reported today that wholesale prices jumped the most on a year-over-year basis in 27 years.

The Producer Price Index rose 1.2% after gaining 1.8% in June. But the core index - prices stripped of food and energy - rose 0.7% after 0.2% in June.

Even with oil prices falling to about $112 a barrel these days, energy prices still rose 3.1% in July, about half the 6% increase energy prices saw in June.

Both the PPI Index and core price increases were much higher than expected by analysts.

In more bad financial news, major retailers like Home Depot, Target, Staples, and Saks reported lower sales, late credit payments and continued expectations for poor sales.

In real estate, housing starts dropped to a 17 year low, sending stock futures down just a day after the American financial markets fell sharply on fears that Fannie Mae and Freddie Mac will have to be nationalized.

In the scariest news of the day, former chief economist at the IMF Kenneth Rogoff said yesterday that the worst is yet to come for the U.S. economy and a major U.S. bank or two is probably going to go under before the financial mess is all over:

"Credit market turmoil has driven the U.S. into a recession and may topple some of the nation's biggest banks, said Kenneth Rogoff, former chief economist at the International Monetary Fund.

"The worst is yet to come in the U.S.,'' Rogoff said in an interview in Singapore today. "The financial sector needs to shrink; I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.''

The U.S. housing slump has triggered more than $500 billion of credit market losses for banks globally and led to the collapse and sale of Bear Stearns Cos., the fifth-largest U.S. securities firm. Rogoff said the government should nationalize Fannie Mae and Freddie Mac, the nation's biggest mortgage-finance companies, which have lost more than 80 percent of market value this year.

So here we have inflation running red hot despite falling commodity prices, housing starts plummeting again even as home values continue to fall, retailers like Home Dept and Target reporting poor sales and late credit payments, and the former economist of the IMF saying a major financial institution or two is going to go under here in the U.S. - it sure sounds like things are bad, right?

Uh, uh - not if you're Don Luskin, financial adviser to the John McCain campaign.

You see, Mr. Luskin, a frequent guest on Kudlow and Company, just visited Disneyland and had to wait on a long line to ride Space Mountain.

Long lines at Disneyland, Mr. Luskin writes, prove that the country is not in recession and everything is just fine economically:

There's simply no way this country is in a recession with people spending money like mad amusing themselves at Disneyland. I've been coming here frequently for years, during good times and bad, having grown up in Southern California. I've never seen crowds like this. Not here, not anywhere — not even on the Tokyo subways.

There were times when the streets of the Magic Kingdom were so thickly thronged with human bodies that one simply couldn't move. Rides were breaking down. Restaurants and snack vendors were running out of food. There wasn't enough staff to get people properly loaded onto the rides that were working. It was bedlam.

It actually would have been a miserable experience, if we hadn't lucked out and been given a rare and highly coveted "Dream Fastpass," a plastic badge you wear around your neck that lets you bypass the hours-long lines at the most popular rides.

Mr. Luskin goes on to write that:

The risks that threatened the economy with potential recession are receding. The credit crisis is now a year old, and at this point is very well understood and contained thanks to smart moves by the Federal Reserve and the Treasury. There are still problems in the banking system, and there may be problems for years. But the risk of outright meltdown is now off the table, so these problems will get solved.

The housing crisis is probably near an end. As I wrote then, it hasn't been reported, but by some important measures the national housing market bottomed in February and has been on the upswing ever since.

Gee, Luskin's comments on the economy sound strangely akin to what Phil Gramm, another McCain economic adviser, said about the economy just about 6 weeks ago:

Phil Gramm, a former senator and top economic policy adviser to presumptive GOP nominee John McCain, has suggested in an interview with the Washington Times that the U.S. is in a "mental recession" as opposed to a real one.

"You've heard of mental depression; this is a mental recession," he told the newspaper. "We may have a recession; we haven't had one yet."

"We have sort of become a nation of whiners," he added. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline" despite a boom in exports.

"Misery sells newspapers," said Gramm, who argues the U.S. has never been more dominant. "Thank God the economy is not as bad as you read in the newspaper every day."

While McCain let Gramm go after the above comments became an embarrassment to the campaign, you can be sure the sentiment within the McCain campaign remains that all is well with the American economy and these people who are "whining" about rising prices and falling wages need to just to stop crying and listen to economic experts like Don Luskin tell them just how good things are.

In other words don't believe your eyes or your wallets, believe the magical thinking of Don Luskin (see here for Luskin's dismal track record) and Phil Gramm.

Truly magical thinking in the magical kingdom known as the McCain Campaign.

If you've liked the magical thinking of the last 8 years on the economy, the Iraq war, disaster relief, etc., you'll love the next four or eight years in a McCain administration where guys like Phil Gramm and Don Luskin will be making the economic decisions that impact our lives.

I'll Have Another Cucumber Martini, Please...

Governor David Patterson announced drastic cuts to health and education programs in New York State yesterday while vacationing in the Hamptons.

Patterson announced a $51 million cut for the CUNY system, a $506 million dollar cut in health care spending, a $250 million cut in local government assistance, and a $132 million cut in spending on new programs.

The governor wants the cuts to address the state's $6.4 million projected deficit for next year.

After announcing the cuts, the governor then finished playing golf and ordered another round of cucumber martinis for he and his Hamptons golfing buddies/hedge fund managers courtesy of New York taxpayers.

Actually I made that last part up, but seriously, couldn't Patterson have made the announcements from Albany?

I understand times are tough and everybody's got to tighten their belts and make some sacrifices.

But why can't "working vacations" in the Hamptons for politicians also be put on the chopping block?

Bailout Monday

Secretary of the Treasury Hank Paulson issued a statement last Friday saying the federal government would NOT be bailing out mortgage lenders Fannie Mae and Freddie Mac.

That was Friday.

By Sunday, word came down the Bush administration was prepared to provide whatever funding necessary to ensure Fannie Mae and Freddie Mac would not go belly up.

As Cunning Realist noted Friday, this looked like it was going to be an exact repeat of the Bear Sterns debacle.

The Friday before Bear Sterns was essentially liquidated, the Bushies said there would be no government action to aid the firm but they would be monitoring the situation over the weekend.

Of course by Sunday night it became clear that the Bush administration considered Bear Sterns one of those "Too Big To Fail" institutions and was already in the process of providing $30 billion taxpayer dollars to back up Chase's acquisition of Bear Sterns.

Same thing happened this weekend.

As many have started to note, while the Bush administration has sold us for years on the Ownership Society in which people are supposed to take the risks and responsibilities for their own lives, livelihoods and retirements, what they've really been doing behind the scenes is creating the the socialization of capitalism - if you're big and rich and powerful, there's safety net for you in Washington DC ready print up lots of dollars and send 'em your way.

At least for the investment class, that is.

For the rest of us, bailouts only come when they are forced to do them (i.e., when the press cameras are on them.)

Thus New Orleans got "help" or what what Hank Paulson would call a "government bailout" when the media were paying attention.

He does not call the Bear Sterns/Freddie Mac/Fannie Mae taxpayer bailouts by that name however.

Rather they are instead a means of "providing liquidity to ensure an orderly operation of markets during a period of financial stress."

See the difference?

Anyway, when the press got bored with the Katrina story and went on to following the next ball of yarn, there wasn't much of a government bailout for the Katrina victims anymore anyway, especially once the Bushie cronies had gotten their hands on as much of the reconstruction funds as they could.

The same will happen for the homeowners going belly-up on their mortgages. It's an election year, so both parties are ready to "help" but you can bet the help will be pretty ineffectual for most and fade away after the election.

You see, Joe and Susie Upside Down Mortgage aren't "Too Big To Fail" once the election season is over and their votes are counted.

Ahh, yes, we are all equal in Bush's Ownership Society, but some of us are more equal than others.

As a side note to this mess, can you imagine if Bushie and the Republicans had gotten their way and had privatized Social Security and put the dough in blue chip stock like GM, Lehman, Bear Sterns, or Freddie Mac/Fannie Mae?

Yeah, that would have been fantastic for the long-term health of the Social Security program.

Okay, not really.

But it absolutely WOULD have been fantastic for the long-term wealth of the Wall Street shills and Bush cronies handling the money and taking their fees.

You know, the very same guys who created messes like Bear Sterns, Indymac, and Fannie Mae/Freddie Mac.

The ones we as tax payers are bailing out this morning.

The guys who are "Too Big Too Fail."

I Believe In Magic

Woke up and put on CNBC this morning like I do every weekday morning.

On Tuesday one of the "perma-bears" on the channel told me the market had bottomed and Tuesday was a wonderful day to buy, buy, buy. Oil was heading downward (it eventually fell from the mid-$140's to the mid-$130's this week), the battered financial sector was ripe for bottom-picking, the market was on the way up and all was well with America.

Yesterday the McCain campaign, echoing the CNBC perma-bears, dismissed the economic problems the country is facing as a "mental recession" and called Americans a "nation of whiners" for not seeing the silver lining in outsourcing, record high oil prices, record high food prices, record high health care costs, soaring inflation, a credit crisis, a tanking stock market, record foreclosures, and a housing market in depression.

You see, the problem is with your mindset, not the Bush financial policies of tax-cut and spend and business deregulation that brought so many of these problems to fruition in the first place.

And yet this morning when I turned on CNBC, all I heard was panic.

Here's why:

Shares of Fannie Mae and Freddie Mac, two pillars of the nation's housing market, continued to plummet yesterday as investors and federal officials contemplated the possibility that the giants of the mortgage business could require a federal bailout.

...

The failure of Fannie Mae or Freddie Mac could be devastating, making it harder for people to buy and sell homes and sending ripple effects through the broader economy.

If Fannie and Freddie go under, you're looking at a trillion dollar taxpayer bail-out that will make the Bear Sterns bailout look small.

If Fannie and Freddie go under and they aren't bailed out, the housing market is REALLY going to get hammered.

The credit crisis has already choked off mortgage money for many borrowers; Fannie and Freddie have picked up the slack - but if they can't lend, then very few people will be able to get home loans.

With home values already down 15% in many areas around the country, the bottom would fall out of the market and you'd have an awful lot of homeowners with upside down mortgages (owe more than the home is worth.)

That really would complicate the foreclosure problem, wouldn't it?

Which would really complicate this "mental recession" so many of us are suffering from.

Couple the Fannie/Freddie panic with spiking oil prices (oil futures are back up to an all-time high - $146.90) and the Dow threatening to fall below the 11,000 support level this morning, and I get why the CNBCers sound so panicked.

But here's what I don't get. Throughout the economic problems of the last year and a half, from the failing hedge funds to the Bear Sterns bailout to the locking up of the credit markets to the dismal job numbers to the soaring commodity prices, so often I hear from the boys and girls who supposedly know about these things is "The worst is over, the markets have bottomed, this economy is the greatest story never told..."

And yet, isn't it becoming increasingly clear that the worst is NOT over for either the main street economy, the housing market or Wall Street?

Now today's CNBC panic may turn out to be nothing - lately every time there is a really bad crisis in the stock market or the economy, money has a funny way of finding it's way where it's needed (think Federal Reserve credit market infusions, think Bear Sterns) so I'm sure Hank Paulson is cranking up the currency printing press and Ben Bernanke is warming up the helicopter to start throwing money at the problem right now.

But what do you think all this newly-minted money is going to do to already record oil and food prices?

You got it - they're going to continue to go up, up, up.

So maybe the CNBC perma-bears have got it right - maybe the worst is over and the market is on an upswing.

All you've got to do is ignore the plummeting home prices, the bear market at the Dow and the S&P, the soaring commodity prices, and the constant news about new write-downs at the banks related to the mortgage crisis which continue to complicate the foreclosure problem.

All you've got to do is believe in magic.

Stayin' Alive

Remember the 70's?

I do.

I was born in 1967, so the 70's were my formative years.

Some of my first memories in life are of oil embargoes, gas lines, blackouts, riots, high unemployment, mass layoffs, Mom complaining bitterly about double digit inflation and double digit interest rates (which kept her from selling our old house and buying a newer one in a nicer neighborhood) and Dad pontificating about President Nixon taking us off the gold standard and Federal Reserve Chairman Arthur Burns creating a spiral of hyper-inflation with his monetary policies

I know, I know - a truly twisted childhood, which is why I'm in therapy now and working through those awful memories. But I'll save that story for another post and focus on this:

Watching the TV news or reading the papers these days, I'm starting to have deja vu all over again to my childhood.

I mean, have you seen these headlines?

Inflation fears spark global market rout

Reports show U.S. growth weak if not in recession

Geopolitical worries send oil above $143

Eurozone inflation soars to new high

Prices for commodities and oil likely to stay high

Broad Says Economy in Worst Slump Since World War II

I must not be the only person sensing something is wrong these days. Take a look at the consumer confidence chart for the last nine years:




Consumer expectations for the future are just as dismal - people expect their standards of living to continue to diminish as incomes fail to keep pace with price increases for food, energy, health care, and education costs for the overwhelming majority of Americans.

Notice that I haven't mentioned the one place in the economy where prices aren't going up - housing. That's because the Greenspan/Bush housing bubble created over the last few years that saw housing prices increase astronomically in many markets around the country is the root cause of so many of the economic problems we are facing today.

The theory goes like this: in the early part of this decade, Federal Reserve Chairman Uncle Alan Greenspan needed to create another bubble to replace the tech bubble. Though the economy was already tanking by the fall of 2001, the financial fall-out from the 9/11 attacks gave Uncle Alan all the cover he needed to decrease interest rates to historically low levels (1%) and keep them there for a long, long time. Cheap money solves lots of economic ills and there is little doubt that Greenspan's monetary policies, fully backed by the Bush administration, took the country out of the tech bubble and the 9/11 attacks and into a minor economic recovery.

The problem, of course, was that Greenspan had created another bubble to replace the last one - in this case, a credit/housing bubble. Couple the cheap money with lax lending standards and little accountability or oversight of the financial institutions and banking system lending that money and you get what we have today - banks and financial institutions dealing with lots of bad debt lent to people who shouldn't have been allowed to borrow money to buy houses they couldn't afford to buy. On top of that, Wall Street created all kinds of new "innovative" ways to chop up these debts and sell them to investors - including hedge funds, pension funds and ultimately even mom and pop investors - so everyone is getting to share in the fall-out from the bursting of the credit/housing bubble.

The Dow is down 19.9% in the last year and with futures showing a triple digit down opening, it looks like we will officially hit a "bear market" in the Dow today. Banks have been writing off billions of bad mortgages and while we have heard more than once that "the worst of the credit crunch has passed," it is becoming increasingly obvious that this is not so. Rumors swirled yesterday that investment bank Lehman Brothers could follow in brother Bear Sterns' footsteps and be put to a fire sale. Lehman's stock is down 70% in the last year. The Dow Jones Wilshire U.S. Banks Index was down 26% for the second quarter. Writedown rumors continue to swirl around Citigroup and a few other banks. There seems to be a lot of bad debt still in the pipeline that needs to be worked out before the credit crisis can truly be declared over and the financial system can heal itself.

To compound matters, the Federal Reserve's solution to the problem of falling housing prices, increases in homeowners defaulting on their mortgages and a slowing economy was to lower interest rates again and keep them there. The result has been a tanking dollar and sky-rocketing commodity prices.

Bill Fleckenstein sums up the current crisis quite well on MSN Money:

The aftermath of this housing/credit bubble is far different from that of the stock bubble. Now the lending institutions are swimming in bad debts. Homeowners have mortgages they can't pay, just as the assets (houses) behind those debts are dropping in price.

As if that weren't enough, consumers' paychecks are eroding, thanks to galloping inflation created by the money printing that fomented the housing bubble (and by the credit that Greenspan's replacement, Ben Bernanke, has subsequently thrown in to ameliorate the aftermath).

Thus $143 a barrel oil, $4.79 a gallon gasoline and record grain, corn, and soybean prices. With the Bush administration playing pre-election games with oil-supplier Iran (somebody has been leaking news of an imminent Israeli attack on Iran), you can bet oil and gas are going much higher in the near term.

Which brings me back to my memories of the 70's. Here we are with a president more unpopular than Jimmy Carter (23% approval in the latest LA Times/Bloomberg poll) in office, increasing tensions with Iran, American forces fighting overseas (remember those other two wars Bushie started in Iraq and Afghanistan that he never finished?) rising inflation, rising unemployment, rising oil, gas and food prices, falling incomes, falling home prices, a falling dollar, tanking consumer confidence and expectations for the future and an overall "malaise" around the country that has 80% of the country saying we are on the wrong track for the future.

Of course all this bad news means even worse news for the Republican Party which will be saddled with the blame for the economy (75% of people in the Times/Bloomberg poll blame Bush for the worsening economy.) Since this is an election year, you can bet that doesn't make the boys and girls in the White House and the RNC happy. And that's why you can bet that the Bushies will trigger some international event to try and take people's minds off the economic problems and overall malaise the country is suffering from. Cunning Realist thinks it's an attack on Iran that's coming. So does Sy Hersh. What better way t distract people from their problems than by ginning up another war against a Middle Eastern "Hitler".

Except that this attack, if it comes, will take oil well above $150 a barrel, maybe even to $200 a barrel. The LA Times looked at what $200 a barrel oil would do to the American economy and the consumer:

with oil closing above $140 a barrel Friday, more experts are taking those predictions seriously -- and shuddering at the inflation-fueled chaos that $200-a-barrel crude could bring. They foresee fundamental shifts in the way we work, where we live and how we spend our free time.

"You'd have massive changes going on throughout the economy," said Robert Wescott, president of Keybridge Research, a Washington economic analysis firm. "Some activities are just plain going to be shut down."

Besides the obvious effect $7-a-gallon gasoline would have on commuters, automakers, airlines, truckers and shipping firms, $200 oil would drive up the price of a broad spectrum of products: Insecticides and hand lotions, cosmetics and food preservatives, shaving cream and rubber cement, plastic bottles and crayons -- all have ingredients derived from oil.

...

With every penny hike in the price of gas costing American consumers about $1 billion a year, sharply higher pump prices would lead to "significant bankruptcies and store closings," said Scott Hoyt, director of consumer economics at Moody's Economy.com.

Consumer spending has held up surprisingly well in the face of skyrocketing pump prices -- bolstered in part, perhaps, by federal tax rebates. But the same day the government reported a 0.8% rise in May consumer spending, a research firm said consumer confidence had plunged to its lowest level since 1980 -- hinting at the catastrophic effect another big gas price surge could have on retailers and customers.

"The purchasing power of the American people would be kicked in the teeth so darned hard by $200-a-barrel oil that they won't have the ability to buy much of anything," said S. David Freeman, president of the L.A. Board of Harbor Commissioners and author of the 2007 book "Winning Our Energy Independence."

70% of the American economy is driven by consumer consumption. If the LA Times article is right and consumers wouldn't have the ability to buy much of anything with oil at $200 a barrel, economic conditions would get really ugly, really fast. And what could Helicopter Ben Bernanke do then? Take interest rates down to 0%? Surely that wouldn't help either the inflation problem, the tanking dollar or increasing commodity prices.

So will Bushie, DeadEye Dick, Condi and gang do it before they leave office?

If I had to place a bet on it, I'd say yes.

I mean, they forged the Niger documents and created all kinds of crapola about Saddam, didn't they? And they ignored the real threat to the U.S. ("Bin Laden Determined To Attack U.S.") while planning for the Iraq war. Then they used 9/11 as a perfect excuse for the Iraq misadventure.

So why wouldn't they create one more misadventure before they leave Washington?

Yes, if I had to bet I'd say something big surrounding Iraq is coming before the election.

But let's make the bet in euros.

The dollar isn't worth what it used to be, you know?

"Bear Sterns Is Fine!"

Here's some great video of CNBC's Jim Cramer, host of Mad Money, explaining last week why a viewer shouldn't sell Bear Sterns stock: "Bears Sterns is not in trouble...Bear Sterns is fine!"

Gee, once again Jim Cramer couldn't have been more wrong about a stock (if you want to see his track record on stocks, see this article from Barron's.)

And yet, there was Mr. Cramer on a CNBC special tonight about the Bear Sterns collapse to provide his "expertise" without noting how he had been absolutely, totally and completely wrong about Bear Sterns the week before.

Once again, we see how accountability is only for public school teachers.

H/T to TPM.

Collapse

I've been blogging for a while at NYCEducator about problems in the financial and economic sectors.

With the collapse of Bear Sterns this morning, those problems have grown immensely.

The ironic thing is that as of last Thursday, S&P said all was well in the financial sector and that most bank writeoffs related to the mortgage mess were over.

The Dow Jones, which had been down all day, responded with a triple point turn-around and finished the day up.

But behind the scenes on Thursday, there was a run on Bear Sterns, the fifth largest brokerage in the country with tons of investments in garbage mortgage securities.

By Thursday night, Bear Sterns told the Federal Reserve they might have to file bankruptcy.

As a result of Bear's impending collapse, a bunch of laissez faire capitalists who hate government regulation and intervention got together to try and save Bear.

By Sunday night, J.P. Morgan had agreed to purchase Bear Sterns for $236 million in a deal brokered by the Fed. On Friday afternoon, Bear Sterns had been worth $3.5 billion and as of January 2007 Bear Sterns was worth $20 billion. Now it was being sold for about $2 a share, truly a firesale.

To get J.P. Morgan to purchase Bear Sterns and keep this financial crisis related to the mortgage mess from spreading to other vulnerable banks like Lehman and Citigroup, the Federal Reserve is providing as much as $30 billion in financing for Bear Stearns's less-liquid assets, such as mortgage securities that the firm has been unable to sell.

In other words, the Federal Reserve is buying a bunch of crap mortgage securities that are worthless for $30 billion.

Barry Ritholtz at The Big Picture wonders just who is buying Bear Sterns, J.P. Morgan or the Federal Reserve.

It kinda sounds like this is a government bailout to help out a bunch of laissez faire capitalists who made some awful (and greedy decisions) over the past few years.

It's funny how all these laissez faire capitalists hate government bailouts unless they are on the other end of it.

At any rate, rumors are swirling that Lehman Brothers will be next to collapse and that Citigroup could go to.

It is not in the country's interest to have these major financial institutions collapse even if the reasons why they are vulnerable to collapse are due to their own misguided and/or greedy decisions so I can understand why the Fed needed to step in to avoid a possible financial system meltdown.

Nonetheless, the next time some billionaire businessman or greedy hedge fund manager tells us in print that the problem in education is that there is no accountability and what we need to do is bring more business and corporate principles to education to make sure the system, the administrators and the teachers are held accountable for their performances, let's ask the billionaire businessman and greedy hedge fund manager where the accountability in this mortgage crisis is.

Accountability Is For The Other Guy Redux

The NY Daily News reports that Chancellor Klein plans to meet with nearly 200 principals over the next couple of weeks about the mayor's current and proposed future budget cuts for the New York City school system.

You see, these New York City principals were given extra money earlier this year for the school budgets "in exchange for higher consequences if they fail to raise test scores" as part of the mayor's and chancellor's vaunted Children First education reform movement.

The extra money could be used for a variety of programs including after-school and Saturday tutoring to help students on the battery of standardized tests the mayor and the chancellor have instituted per year.

Unfortunately for all involved, the U.S. economy has begun to tank (see here) and the mayor has ordered a bunch of city-wide budget cuts including ones in the public school system. Principals were ordered to cut 1.75% from their school budgets this year while much of the central administrative NYCDOE budget was saved. In addition, the mayor has ordered additional cuts to city agency budgets between 5% and 8% for the next fiscal year, although it is unclear just how much schools will have to cut.

Nonetheless you can bet individual schools will be forced to shoulder the fiscal burden while the central administrative budget (and all those yummy, yummy central administrative consultants and even yummier no-bid contracts handed out to Klein and Bloomberg cronies) will see few if any cuts.

And that makes sense. I mean, why cut the $80 million dollar ARIS computer system that doesn't work the way it's supposed to or the no-bid standardized testing contract Bloomberg handed to McGraw-Hill, the company that STILL hasn't delivered on the standardized ELA tests kids are supposed to be taking nearly nine months after the company first got the contract, when you can cut after-school Regents tutoring, arts and enrichment programs, and field trips and force principals to try and raise their test scores and graduation rates with much less money than they were promised.

Oh, and you can bet the mayor's and chancellor's vaunted school report cards and quality review program won't be cut, even if the programs that might help schools improve in some of the categories measured will be.

Remember, it's Children First and children always, as long as Bloomberg's and Klein's corporate cronies are not hurt in the pocketbook or the balance sheet.

No wonder principals are mad as hell over the budget cuts. Unlike the CEO's from Citigroup, Merrill Lynch and Countrywide Financial who got dragged in front of Congress yesterday after receiving millions in executive "performance" compensation even as they made terrible business mistakes that cost their companies and shareholders hundreds of millions of dollars, you can bet Klein and Bloomberg will hold principals, assistant principals and teachers accountable for "improvement" even as he cuts the school budget by as much as 10% (and perhaps even more if the economy continues to worsen.)

You see, accountability is for everybody except the big-time businessmen, the corporate CEO's, the short-selling hedge fund managers, or billionaire media moguls.