How the Crisis Happened

One good summary of how the current financial crisis came about can be found at Jerry Pournelle's Chaos Manor Reviews. Following are some highlights, but read it all here.

In the past month, investment banks managed to lose more money than all the banks in history cumulatively have made as profit on risky investments. Lehman Brothers, which survived the Civil War, the turbulence of the late 19th Century, World War I, the Crash of '29 and the Great Depression, has vanished. Major stockbroker houses, which used to know that the first rule was never to gamble with house money, collapsed. Note that the crisis was easily predicted by anyone except the smartest guys in the room who controlled America's financial centers. They, apparently, couldn't see it coming. ...

As often (but not always) happens when government interferes with economics, the origin of the collapse was due to good intentions. Aristotle tells us that democracy is rule by the middle class, and the middle class are those who possess the goods of fortune in moderation. Most political scientists, economists, and intellectuals in general are agreed that ownership of one's home is a key element in defining the middle class in America. It's neither necessary nor sufficient, but it's still important, and the more people who own homes, the more people with a stake in America and the existing social order. People who own houses work hard to keep them. Home ownership is good for the owners, and it's good for America.

It was decided that the usual market forces weren't sufficient to spread the joys and benefits of home ownership, and government help would be needed. There are several ways that might be done including taxing the rich, buying houses, and giving them to those who couldn't afford them, and that was actually proposed at one time; but sanity prevailed. After all, if you could get a free house by being poor, why work hard to save a down payment and take out a mortgage? Better to spend yourself poor...

Eventually a solution was found. Private corporations called Fannie Mae and Freddie Mac were established with government backing, and by implication, government guarantees. These firms, managed by executives paid on the modern scale (millions to hundreds of millions in 'incentives' and bonuses), were sent forth to make it easier to own a house by making it easier to get a mortgage loan on that house.

This meant that people who couldn't convince bank loan officers that loaning them money would be profitable were able to borrow money because the government guaranteed the repayment. Fannie Mae and Freddie Mac could obtain money at low interest from the Federal Reserve System. Of course the Feds don't have any money — the budget runs a deficit — but it's easy to print some and borrow more by selling Treasury bonds, so Fannie Mae and Freddie Mac were well financed at low interest. Given those loan guarantees to lenders, people who otherwise would not be able to buy a house were enabled to do so. And of course as more people were able to enter the housing market, more bids were made on houses, and housing prices rose. ...

A note here from Pastor Zip, who from 1985-1987 worked for a Savings and Loan in California. We made only Fannie Mae conforming (what Pournelle calls "guaranteed" and, indeed, that was the effect) loans, which became in those years a difficult thing as the prices of homes throughout California (especially LA) were rising well over Fannie Mae limits. In that way we were one of the more conservative S&Ls. But also couldn't be profitable, so Sears abandoned the business at the end of 1987, selling their accounts to other institutions on a largely piecemeal basis. Legal "reforms" of the industry (largely after we'd closed) dramatically raised out-of-date limits, making home loans easier and the industry profitable again. Pournelle describes what happened, but one key he leaves out is that by the mid-1990s "community organizers" were getting really involved. And the market adapted, as it will, to the new rules. Back to Pournelle.

Note that this was not deregulation.

Pastor Zip again, for that sentence simply cannot be repeated enough. Yes, we are hearing stories of greed, the failure of due diligence, etc. Pournelle highlights that in a moment. They have happened. But one of the Big Lies of the last 2-3 decades is that there has been deregulation of industries in the US. Every significant government act of "deregulation" in one area has been accompanied by higher, and more complicated, regulation on that area's flip side. Think of public utilities where, in exchange for deregulating user prices, the supply was even more highly regulated. "Deregulation" has, in every instance, been deliberately designed by legislatures and industry for immediate profits in exchange for long-term failure. In others words, "deregulation" has been anything but. But I digress. Returning to Pournelle...

Note that this was not deregulation. The Community Reinvestment Act of 1977 was amended in 1995 to increase regulatory supervision to guarantee that CRA loans were not confined to high and middle income borrowers, and that more sub-prime loans would be made. For the history of the Act and its modifications see this Wikipedia link or use Google to find your own sources. And the bubble grew and grew.

So far we have a foreseeable crisis in housing and construction, serious enough, but still, nothing that could bring down the whole financial system; but at that point the smartest people in the room got really creative. They realized they had a lot of assets in real estate. As the bubble expanded these assets were valued higher than the mortgages held on them. They were, in a word, really first class securities. Perhaps some of them were a bit shaky — after all, when you loan $500,000 to a $40,000 a year gardener so that he can buy a house with a thousand dollars down and interest only payments, there's a chance he's going to default when it comes time to pay the principal — but many of them were solid as a rock.

What Pournelle describes here didn't happen everywhere, but that was a significant part of the housing market for at least the last 5 years, perhaps a decade or more. The only way most home loans in California (and other large markets) were going to be paid off was by the the home owner selling at an inflated price. How else does one pay off an interest-only payments, or a negatively amortized, home loan? Pournelle continues.

The obvious remedy was to bundle the gardener's loan with a nearly paid off loan by a college professor whose house had appreciated like mad over the years, and sell that package as a "mortgage guaranteed" loan to an investment bank. Now the loan company has even more money to loan out on even more questionable sub-prime deals.

At some point the investment banks began to realize that they'd bought a pig in a poke, and got creative by selling bundled packages of "mortgage guaranteed loans" to retirement funds, other investment banks, and anyone else they could find. After all, a mortgage guaranteed loan was as safe as a Treasury bond, and paid higher interest. Great investment, with no risk.

They sold a lot of those bundled mortgage guaranteed loans; and that is how the entire financial system was endangered. To learn how many bankers were caught by surprise because they didn't look very hard or didn't want to look, see "How Wall Street Lied to Its Computers" by Saul Hansell. Note that some of the lies were deliberately ordered by management who wanted the bubble to continue (and who departed their ruined companies with enormous bonuses). Given incorrect models to work with, the computers continued to forecast profits right up to the crash. For a cartoon summary of the above, see this Sheldon Comics strip.

So: that's where we are. As to what can be done, it may not matter. That is, it's important what we do, but the chance that it will be done sanely and rationally is very small. What will be done must be decided by the most unpopular Administration in nearly a century in connection with the most unpopular Congress in history; and everyone involved in finding a remedy was in one way or another a part of creating the mess. By everyone, I mean everyone: the Administration, the Treasury, the Congress under Carter and Clinton, Congress under Reagan and Bush, Congress controlled by both Democrats and Republicans, the regulatory agencies, and the "experts" now out of jobs who will be hired to manage the new institutions that will be set up to buy bad debts: every one of them. What will be done will be settled by politics, not by economics.

I say this because those who did foresee this disaster tried repeatedly to rein in Freddie Mac and Fannie Mae, but the Fred and Fan lobbyists were easily able to defeat those efforts. Moreover the leaders of Fred and Fan were fired, but left with multi-million dollar bonuses, as did the leaders of various firms ruined in the disaster. The remedies being proposed aren't going to do much more than create a bureaucracy. Once that happens, Pournelle's Iron Law of Bureaucracy will take over, and whatever is required to keep that bureaucracy healthy will be done. One thing is certain: the people who must pay for this debacle will largely be those who took out sensible loans and have kept up their mortgage payments; those who did nothing wrong, but will be handed the bill. Depend on it.

Again, read it all here.

Can the Rescue Plan Work?

Pastor Zip's undergraduate degree is in Business Administration—Accounting and I have read economics for over 30 years. The folks at the Ludwig von Mises Institute have made sense to me for years, as did Mises himself. Frank Shostak, an adjunct scholar of the Mises Institute and chief economist for MF Global Australia Limited (specialists in futures and derivatives), concludes,

the rescue package cannot help the economy; it will only severely weaken wealth generators. (The larger the package, the more misery it will inflict.) Hence, once the massive rescue plan is implemented, it will not prevent an economic slump but, rather, runs the risk of plunging the economy into the mother of all recessions.

Now read how he comes to that conclusion.

Can the Rescue Plan Fix the US Economy?

Daily Article by Frank Shostak | Posted on 9/22/2008

Given last week's dramatic events — the bankruptcy of Lehman Brothers, the end of Merrill Lynch's independence, and an $85 billion US-government bailout of insurer AIG — most financial institutions are likely to become more sensitive to the state of their net worth.

For instance, all it takes for a financial institution that has a net worth of $30 billion and assets of $600 billion to go under is for the value of assets to fall by 5%. In the current financial climate, it can easily happen; hence, most financial institutions are not immune from the potential threat of going belly up.

One of the major reasons why the Fed rescued AIG was to prevent a fall in the value of bank assets, a fall that would in turn expose their true net worth and cause (it is generally believed) a run on banks that would decimate the entire banking system. As long as the AIG can keep paying the banks' losses for their suspect (but insured) investments, those banks don't need to reappraise their true values.

But there is always the lingering fear that at some stage banks will be forced to disclose market-related valuations and that this could set in motion a financial tsunami.

Mortgage-linked assets are regarded as being at the root of the present credit crisis — the worst since the Great Depression. To eliminate a potential threat from devalued mortgage-linked assets, US Treasury Secretary Paulson and Fed Chairman Bernanke are planning to move these assets from the balance sheets of financial companies into a new institution. The Bush administration is asking Congress to let the government buy $700 billion in bad mortgages as part of the largest financial bailout since the Great Depression.

The plan would give the government broad power to buy the bad debt of any US financial institutions for the next two years. It would also raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion.

But how is the transfer of bad paper assets to some new institution and their replacement with a better quality of assets — with Treasuries, let us say — going to fix the economy? How can it reverse the present slump in the housing market?

The Treasury and the Fed believe that allowing financial institutions to get rid of bad assets will remove the threat of banks' having to assign correct values to their suspect assets. It is held this will bring things back to normal, that the banks will start expanding mortgage loans and revive the housing market and in turn the economy.

But allowing banks to get rid of bad assets doesn't imply that they will be keen to expand mortgage lending, thereby accumulating new potentially bad assets.

At present, for most US banks, the major concern is improving their net worth, i.e., strengthening their solvency. This means that banks are likely to slow the pace of expansion of their assets, and the volume of lending is likely to come under pressure. In the week ending September 10, commercial banks' total assets fell by $33.9 billion. The yearly rate of growth of total assets fell to 4.9% from 6.7% in August and 12.7% in March.

According to the Federal Deposit Insurance Corporation (FDIC), commercial banks and savings institutions' net worth fell by $10 billion from Q1 to Q2. This was the first decline since the data was made available in Q2 2000.

At the root of the problem are not mortgage-backed assets as such but the Fed's boom-bust policies. It is the extremely loose monetary policy between January 2001 and June 2004 that set in motion the massive housing bubble (the federal-funds-rate target was lowered from 6% to 1%). It is the tighter stance between June 2004 and September 2007 that burst the housing bubble (the federal-funds-rate target was lifted from 1% to 5.25%).

The tighter monetary stance put a brake on the diversion of real savings toward bubble activities. Now the effect of a change in monetary policy operates with a time lag. We suggest that the tighter interest stance of the Fed between June 2004 and September 2007 has so far only hit the real-estate market and financial institutions.

Various bubble activities that sprang up on the back of loose monetary policy between January 2001 and June 2004 are not only in the real-estate and financial sectors; they are also in the other parts of the economy.

Consequently, there is a growing likelihood that these activities will come under pressure. Since they are the product of loose monetary policy, obviously the banks that supported them are going to incur more bad assets, which will put more pressure on banks' net worth.

The US Congress May Help Bernanke to Increase Monetary Expansion

The rescue package is a combined act by the US Treasury and the Fed and is seen by experts as a comprehensive approach since it also addresses the issue of liquidity. The chairman of the Fed, who is fearful that the American economy could plunge into depression, holds that the only way to prevent this is through massive monetary pumping.

We suspect that Bernanke is of the view that he hasn't been allowed to operate "properly" to prevent the current upheavals in financial markets because he wasn't free to pump money at liberty.

In the present setup of interest targeting, the Fed cannot simply pump money unhindered into the economy and boost monetary liquidity. Monetary pumping, while the federal-funds rate is at its target, will push the rate below the target. To bring the federal-funds rate back to the target the Fed is obliged to sell assets such as Treasuries to absorb money from the federal-funds market.

All this means that if there is no upward pressure on the federal-funds rate, the Fed cannot pump money without pushing the rate below the target. For instance, if the Fed increases lending to a financial institution, the new money that will enter the financial market will put downward pressure on the federal-funds rate.

To eliminate this downward pressure, the Fed will be obliged to sell Treasury securities. By selling these securities, the Fed takes money from the market. In this way the US central bank offsets the downward pressure on the federal-funds rate brought about by the increase in lending to financial institutions. Note that the holdings of Treasuries by the Fed play an important role in the process that we have described.

As a result of all the actions to boost liquidity taken by the Fed since August 10, 2007, the US central bank holdings of US Treasury securities has dwindled. Just a year ago, the Fed held $780 billion in Treasuries; by September 17, 2008, this has fallen to $480 billion. Year-on-year Treasury securities holdings by the Fed fell by 38.8% in August after falling by 39.4% the month before. This was the tenth consecutive month of yearly decline.

So far in September, the yearly rate of growth has stood at negative 38.5%. If we allow for the $200 billion that the Fed pledged to the Term Securities Lending Facility and the $85 billion loan to AIG then the amount falls to $195 billion.

If more institutions are on the brink of bankruptcy, and the Fed decides to provide support to them, it would have difficulty in doing so without a sufficient inventory of Treasuries. Again, if the Fed were to run out of Treasuries, then any lending by the Fed would lead the federal-funds rate to fall below the target.

To help out the Fed, last Wednesday, the US Treasury announced that it would auction $100 billion in debt in order to offset the monetary pumping by the Fed.

Observe again that the Fed has officially been engaged in actions to boost liquidity since August 10, 2007. All this means that the Fed might appear to be loose, but in reality, the overall pumping by the Fed, as depicted by its balance sheet so far, has been moderate.

The yearly rate of growth of the Fed's assets stood at 4% in August against 3.8% in July. Note that since November 2004, the growth momentum of the Fed's assets has been in a downtrend (the yearly rate of growth in November 2004 stood at 7.1%).

How Can the Fed Boost the Money Supply?

So how can the Fed boost the money supply without pushing the federal-funds rate to below the target? One way of achieving this is by asking the Treasury to issue more debt. Once the Treasury sells more debt to the public, this absorbs money from the federal-funds market. As a result the federal-funds rate will be pushed above the target. Once this happens, the Fed will step in by buying the Treasuries from the public.

Remember that, by buying Treasuries the Fed injects money into the federal-funds market. The new money in turn pushes the federal-funds rate back towards the target. The final outcome of all this is that the money supply has increased and the Fed now has more Treasuries, i.e., its balance sheet has increased.

Now this way of boosting money supply and monetary liquidity is somewhat cumbersome. It also raises the level of the Treasury debt and pushes long-term yields and hence mortgage interest rates higher than they would have been.

The better way, according to Bernanke and US central bank officials, is to pump money any time they think it is necessary. Not only will this boost monetary liquidity but it will also boost the Treasuries holdings by the Fed. (Remember: to pump money, the Fed buys Treasuries.)

But how can this be done, given the fact that to keep the federal-funds rate at the target prevents the Fed from pumping money at liberty?

A solution is on its way — to pay interest on bank deposits held at the Fed. By paying banks an interest rate, which corresponds to the target rate, the Fed removes from banks the incentive to lend surplus cash to each other. As a result, the federal-funds rate will not fall below the target in response to the Fed's monetary pumping.

(Remember: when more money is pumped, banks' surplus cash increases. To get rid of the greater surplus, they will agree to lend at a lower interest rate than before.)

When every bank is guaranteed interest on its deposit with the Fed, banks will not lend to each other — why bother to lend and incur risk if a bank will be paid interest by just keeping the money at the Fed? Consequently, the interest rate will not decline in response to the increase in the Fed's pumping. With this setup, the Fed could pump money at liberty without pushing the federal-funds rate to below the target.

We suspect that against the background of last week's events and the emerging view that something drastic must be done to prevent a calamity, there is a high likelihood that the Congress is going to approve the Fed's (i.e., Bernanke's) request for paying interest to banks very soon. Once the Congress gives the green light, Bernanke will start pushing a massive amount of money to soften the crisis in the credit markets.

The idea is that this should boost bank lending, which in turn will kick-start the economy. Some experts are arguing that the Fed needs to pump over $1 trillion to make things work.

Can More Money Fix the Current Economic Crisis?

But why should pumping more money do the trick? It seems that, for most experts, money is an agent for economic growth. Money however is just a medium of exchange and cannot create real wealth as such. On the contrary, monetary expansion results in the squandering of real wealth and economic impoverishment (look at Zimbabwe). If the pool of real savings is declining, then real economic growth will follow suit regardless of how much money the Fed is going to pump.

Declining household net worth raises the likelihood that the pool of real savings could be in trouble. According to the Federal Reserve flow-of-funds data, the net wealth of households fell 0.8% in Q2 as both home values and financial-asset values fell.

This was the third consecutive quarterly decline. In its press release, the Fed said it has never before recorded three consecutive quarters of declining household wealth since it began tracking quarterly changes in 1951. Year-on-year net wealth fell by 3.5% in Q2 after falling by 0.7% in Q1.

Conclusions

The Bush administration is asking Congress to let the government buy $700 billion in bad mortgages as part of the largest financial bailout since the Great Depression. The plan would give the government broad power to buy the bad debt of any US financial institutions for the next two years. It would also raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion.

At the root of the problem are not mortgage-backed assets as such but the Fed's boom-bust policies. It is the extremely loose monetary policy between January 2001 and June 2004 that set in motion the massive housing bubble (the federal-funds-rate target was lowered from 6% to 1%). It is the tighter stance between June 2004 and September 2007 that burst the housing bubble (the federal-funds-rate target was lifted from 1% to 5.25%).

On account of the time lag, we suggest that the tighter interest stance of the Fed between June 2004 and September 2007 has so far only hit the real-estate market and financial institutions.

Various bubble activities that sprang up on the back of loose monetary policy between January 2001 and June 2004 are not only in the real-estate and financial sectors; they are also in the other parts of the economy.

Consequently, there is a growing likelihood that these activities will come under pressure in the month ahead regardless of the rescue package. Since these activities are the product of loose monetary policy, obviously the banks that supported them are going to incur more bad assets, which will put more pressure on banks' net worth.

Contrary to popular belief, the rescue package cannot help the economy; it will only severely weaken wealth generators. (The larger the package, the more misery it will inflict.) Hence, once the massive rescue plan is implemented, it will not prevent an economic slump but, rather, runs the risk of plunging the economy into the mother of all recessions.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. He is chief economist of M.F. Global. Comment on the blog.

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49 Years Ago Today

Let the Government solve your problems

That's the subject line in an advertising e-mail from a "Grant Resource Center" Mac Mail stuck in my Junk file.

This at the end of a week in which we're watching a panic-stricken federal government trying to bail out as its past "solutions" to financial matters are simultaneously collapsing.

It was some 30 years ago that Howard Ruff described

the Twentieth Century's three greatest lies in ascending order of immensity: (1) My wife doesn't understand me, (2) my check is in the mail, and (3) I'm from the government and I'm here to help you.

For the results of some of that help, see the results of government "help" in the housing markets to the banking industry in this New York Times graphic.

Protect the children!

Now this is the warning young children should be getting in pre-school or kindergarten.

Good Peoria Radio Bites the Dust--Again

Well, nuts! I come back from a few days out of town, turn on the radio, and my radio station has changed formats. No more "World Class Rock and Roll" at 99.9 (where the music was so good that I didn't mind the silly "The Stage" moniker). It's now "The Buzz" and the music (the newer, harder edge of the old format), ads (the local strip club is sponsoring the entire first week), and DJ (at least he's a live one) seems to be aimed at potty-mouthed college frat boys. Like a couple of other stations in town.

I suppose I ought not be surprised. Peoria radio stations that I really enjoy listening to never last very long. Even the two I still list on the right column, the classical/public affairs WCBU NPR affiliate and the Adult Standards WOAM, aren't as good as they once were.

As for WWCT 99.9, it went to the "world class rock and roll" format early this year, with an eclectic adult rock format, sort of a cross of LA's KNX-FM and K-WEST circa 1980 (just before they gave up being individual stations and went Top 40) updated for 2008. While I was in hospital for my prostate surgery (and thus not listening to the radio) they announced an upcoming format change (the ratings weren't anything special), but by the time I was home the only change was the new name along with lots of promo announcements about how "the listeners have spoken" so station management listened back and wasn't screwing up the station.

Until this week.

Well, I guess I go back to radio channel surfing in the car, and XM at home if I'm not listening to the news. Thanks AAA Radio.

Panic? No, the Glories of Change

The financial markets -- private, government, and that queer amalgamation of both, the Federal Reserve System -- are in a panic and old bills finally come due. An economist at the Ludwig von Mises Institute thinks what's happening is a good thing.

The Glories of Change

Daily Article by Jeffrey A. Tucker | Posted on 9/15/2008

The events on Wall Street, the collapse of Lehman and the selling off of Merrill, are magnificent and inspiring events. What we see here are examples of sweeping and fundamental change taking place, a huge upheaval that affects the whole of society, and toward the better, since what we have going on here is a massive reallocation of resources away from failing uses toward more productive uses.

Hundreds and hundreds of billions of dollars are on the move, sweeping all before them. And yet take note: it is not war accomplishing this. It is not violence. It is not the result of a planning committee. No election is necessary. No terrorist act took place. There was no government edict.

The agent of change here is that composite of all the world's exchanges that relentlessly shove resources this way and that way, so that they will find their most economically valued uses in society.

No one person is in charge. Layers upon layers of decisions by millions and billions of people are the essential mechanism that makes the process move forward. All these decisions and choices and guesses come to be aggregated in a single number called the price, and that price can then be used in that simple calculation that indicates success or failure. Every instant of time all around the world that calculation is made, and it results in shifts and movement and progress.

But as wonderful as the daily shifts and movements are, what really inspires are the massive acts of creative destruction such as when old-line firms like Lehman and Merrill melt before our eyes, their good assets transferred to more competent hands and their bad liabilities banished from the face of the earth.

This is the kind of shock and awe we should all celebrate. It is contrary to the wish of all the principal players and it accords with the will of society as a whole and the dictate of the market that waste not last and last. No matter how large, how entrenched, how exalted the institution, it is always vulnerable to being blown away by market forces — no more or less so than the lemonade stand down the street.

The need for dramatic shifts is essential for progress. But adapting to changing conditions and becoming an agent of that change, staying with the curve and jumping out in front of it — this is the real challenge. Enacting change — any kind of change but especially big and fundamental change — sometimes seems impossible in this world. We all desire it and know it is necessary. Seeking the reality of rebirth has an appeal. But finding the mechanism to make it happen is hugely difficult.

Try to change an institution from the inside and you will meet resistance around every corner. Bureaucracies are nearly impossible to change. Even firms in private enterprise are reluctant to adapt, and have to be pushed and nudged by the accounting ledger or no movement happens. Churches and other charitable organizations can whither and die without periodic and fundamental change and upheaval. Many institutions grow up around the principle of stability first. The organizational structure tends in the direction of the protective mode, with everyone burrowing in and resisting doing something different today and tomorrow from what he or she did yesterday and the day before. Inertia is the default.

How to break away from this problem is a great challenge. The theory of democracy was that we would have a voting mechanism to enact and force change, but the problem is that votes and personnel shifts bring a change in the look and feel of government but do not get below the surface. Wars and revolutions yield change but at too great a cost. The change wrought by markets goes to the very core of the issue. It makes and breaks whole institutions, sometimes overnight. And it does so in a beneficial way for the whole, without blood and without the risk of unanticipated calamity.

All the plans of big shots, all the desires of our governing masters, all the wishes and dreams of people who imagine themselves to be larger and more important than the rest of us, melt like snow on a sunny day.

In this sense, the market is the great leveler, the force in the universe that humbles all people and reminds them that they are no more important than anyone else and that their wishes must ultimately be shelved when faced with the overwhelming desire on the part of market traders that some other reality emerge.

For this reason, everyone has reason to celebrate the end of Lehman and Merrill. Overnight, while we slept, the seemingly mighty were humbled, the first made last and the last made first. The greatest became the least, all without a shot being fired.

LA Train Wreck

Yes, I am familiar with the area of this afternoon's crash of a commuter and freight train in Chatsworth. When I still lived in Canoga Park, I would sometime stop near the 180° curve where Old Santa Susana Pass went over the railroad track to watch a Southern Pacific train go by as I was coming home from work in Northridge. (Hey, boys like to watch trains! In those days there was no passenger traffic on that road.) It looks like the collision was about 1000-1500 feet east of that point, as a northbound train would be curving to the east. It looks horrific. Prayers for those on the trains and for the rescue workers.

The West Is Won!!!

Guess who just won the American League West for the fourth time in the last five years?










The other Los Angeles baseball team isn't doing too badly, either.

He Was a What?

Okay. Pastor Zip can understand how some people didn't appreciate Gov. Sarah Palin's take on community organizers during her speech at the Republican National Convention last week. I have friends -- good, solid Lutheran pastors -- who have been heavily involved in such efforts and speak well of what they accomplished.

So for the moment I'll set aside my own experiences when the Gamaliel Foundation's guy in the Quad Cities tried to stir up interest in organizing here in Peoria -- where I went to a big Quad Cities Interfaith convocation and saw just how much of "the community" bothered to show up to set QCI's agenda for the coming year. That would make it easy enough to belittle Sen. Obama's experience -- though if they intend to be victorious in November Sen. McCain's people had better not forget that our junior senator came out of nowhere to defeat the mighty Clinton machine. But this is Pastor Zip's Blog, not my 21st Century Whig blog, so we'll step around the "political" side of this.

I find the following quip gaining popularity with my more, uh, progressive connections within the Church:

"Jesus was a community organizer, Pontius Pilate was a governor."

And while I like a good quip, I've also read the Gospels. So...

Just how was Jesus a "community organizer?"





(Well, there was his disciple Simon the Zealot...)

Big tents are for circuses.

Early this morning (while also watching news reports of the Republican National Convention) I was reading an ALPB Forum Online discussion that had started with responses to the Speaker of the House's mangling of Catholic thought on abortion but had turned into another debate over ELCA vs. LCMS communion practices. I read from an ELCA pastor,

"We are the 'big tent' denomination."

Now, "big tent" --whether it be from political or churchly pundits -- got old for me a long time ago. It just seems a nonsensical thing for anyone who cares about political principles (which the United States of America were founded upon) or a confession of faith (which is what Lutheranism was founded upon). But only early this morning, upon reading once again that sort of nonsense, did words immediately jump into my head. And so I posted them:

"Big tents are for circuses."

The Spirit of Traditional Morality

This by Nathaniel Peters over at First Things on the reaction to the news that the presumptive Republican Vice-Presidential nominee's teen-aged daughter is with child:

Joseph Bottum wrote: “though surely it’s an odd moment when an out-of-wedlock pregnancy becomes a symbol of conservative cultural values, but chalk it all up as yet another way in which abortion has skewed the natural divisions of American politics.”

I beg to differ. The issue is not only that we applaud Bristol Palin for upholding the sanctity of life. The issue is how social conservatives deal with people when they don’t live up to our moral values. Do we stand up and roundly condemn them, or do we care for them while continuing to propose a more excellent way?

What we’ve seen is that, contrary to expectation, social conservatives have chosen not to condemn. The country has seen that “family values” not only means teaching your children not to have sex outside of marriage, but also supporting them responsibly should they fail to follow the teaching. In other words, it means teaching them what sin is and loving them if they sin.

That kind of standing in the truth with love should be a hallmark of those who believe in traditional morality. And it should be incomprehensible to those who do not understand the spirit behind that morality. In that light, it’s only natural that the way Sarah Palin has handled her daughter’s pregnancy should be seen as a symbol of conservative cultural values, and that those who do not share those values should be threatened by the truth lived in love.

For what it's worth, this pastor thinks Peters and Bottom are both correct. It is an odd moment skewed by the abortion debate. And it's, well, Christian people acting like Christians, something we (being sinners) don't always do well. And something those hostile to Christians don't get because it doesn't fit with their preconceptions about us.

Faith vs. Science?

The headline to the story in the August 24 edition of the New York Times is "A Teacher on the Front Line as Faith and Science Clash." Looks to me, though, as if we have an even bigger problem with critical thinking than the Grey Lady ever imagined. See if you can find it:

By AMY HARMON
Published: August 23, 2008

ORANGE PARK, Fla. — David Campbell switched on the overhead projector and wrote “Evolution” in the rectangle of light on the screen.

He scanned the faces of the sophomores in his Biology I class. Many of them, he knew from years of teaching high school in this Jacksonville suburb, had been raised to take the biblical creation story as fact. His gaze rested for a moment on Bryce Haas, a football player who attended the 6 a.m. prayer meetings of the Fellowship of Christian Athletes in the school gymnasium.

“If I do this wrong,” Mr. Campbell remembers thinking on that humid spring morning, “I’ll lose him.”

In February, the Florida Department of Education modified its standards to explicitly require, for the first time, the state’s public schools to teach evolution, calling it “the organizing principle of life science.” Spurred in part by legal rulings against school districts seeking to favor religious versions of natural history, over a dozen other states have also given more emphasis in recent years to what has long been the scientific consensus: that all of the diverse life forms on Earth descended from a common ancestor, through a process of mutation and natural selection, over billions of years.

But in a nation where evangelical Protestantism and other religious traditions stress a literal reading of the biblical description of God’s individually creating each species, students often arrive at school fearing that evolution, and perhaps science itself, is hostile to their faith.

Some come armed with “Ten questions to ask your biology teacher about evolution,” a document circulated on the Internet that highlights supposed weaknesses in evolutionary theory. Others scrawl their opposition on homework assignments. Many just tune out.

With a mandate to teach evolution but little guidance as to how, science teachers are contriving their own ways to turn a culture war into a lesson plan. How they fare may bear on whether a new generation of Americans embraces scientific evidence alongside religious belief.

“If you see something you don’t understand, you have to ask ‘why?’ or ‘how?’ ” Mr. Campbell often admonished his students at Ridgeview High School.

Yet their abiding mistrust in evolution, he feared, jeopardized their belief in the basic power of science to explain the natural world — and their ability to make sense of it themselves.

Passionate on the subject, Mr. Campbell had helped to devise the state’s new evolution standards, which will be phased in starting this fall. A former Navy flight instructor not used to pulling his punches, he fought hard for their passage. But with his students this spring, he found himself treading carefully, as he tried to bridge an ideological divide that stretches well beyond his classroom.

A Cartoon and a Challenge

He started with Mickey Mouse.

On the projector, Mr. Campbell placed slides of the cartoon icon: one at his skinny genesis in 1928; one from his 1940 turn as the impish Sorcerer’s Apprentice; and another of the rounded, ingratiating charmer of Mouse Club fame.

“How,” he asked his students, “has Mickey changed?”

Natives of Disney World’s home state, they waved their hands and called out answers.

“His tail gets shorter,” Bryce volunteered.

“Bigger eyes!” someone else shouted.

“He looks happier,” one girl observed. “And cuter.”

Mr. Campbell smiled. “Mickey evolved,” he said. “And Mickey gets cuter because Walt Disney makes more money that way. That is ‘selection.’ ”

Later, he would get to the touchier part, about how the minute changes in organisms that drive biological change arise spontaneously, without direction. And how a struggle for existence among naturally varying individuals has helped to generate every species, living and extinct, on the planet.

For now, it was enough that they were listening.

He strode back to the projector, past his menagerie of snakes and baby turtles, and pointed to the word he had written in the beginning of class.

“Evolution has been the focus of a lot of debate in our state this year,” he said. “If you read the newspapers, everyone is arguing, ‘is it a theory, is it not a theory?’ The answer is, we can observe it. We can see it happen, just like you can see it in Mickey.”

Some students were nodding. As the bell rang, Mr. Campbell stood by the door, satisfied. But Bryce, heavyset with blond curls, left with a stage whisper as he slung his knapsack over his shoulder.

“I can see something else, too,” he said. “I can see that there’s no way I came from an ape.”

Read it all here, for there is a lot more to this article. But contrary to what Mr. Campbell and Ms. Harmon want us to think, Bryce the young football player is not the one thinking badly here. If you haven't figured it out yet, think of the "challenge" Mr. Campbell is issuing in his classroom. Meanwhile, here's some more about the teacher:

When Florida’s last set of science standards came out in 1996, soon after Mr. Campbell took the teaching job at Ridgeview, he studied them in disbelief. Though they included the concept that biological “changes over time” occur, the word evolution was not mentioned.

He called his district science supervisor. “Is this really what they want us to teach for the next 10 years?” he demanded.

In 2000, when the independent Thomas B. Fordham Foundation evaluated the evolution education standards of all 50 states, Florida was among 12 to receive a grade of F. (Kansas, which drew international attention in 1999 for deleting all mention of evolution and later embracing supernatural theories, received an F-minus.)

Mr. Campbell, 52, who majored in biology while putting himself through Cornell University on a Reserve Officers Training Corps scholarship, taught evolution anyway. But like nearly a third of biology teachers across the country, and more in his politically conservative district, he regularly heard from parents voicing complaints.

With no school policy to back him up, he spent less time on the subject than he would have liked. And he bit back his irritation at Teresa Yancey, a biology teacher down the hall who taught a unit she called “Evolution or NOT.”

Animals do adapt to their environments, Ms. Yancey tells her students, but evolution alone can hardly account for the appearance of wholly different life forms. She leaves it up to them to draw their own conclusions. But when pressed, she tells them, “I think God did it.”

Mr. Campbell was well aware of her opinion. “I don’t think we have this great massive change over time where we go from fish to amphibians, from monkeys to man,” she once told him. “We see lizards with different-shaped tails, we don’t see blizzards — the lizard bird.”

With some approximation of courtesy, Mr. Campbell reminded her that only a tiny fraction of organisms that ever lived had been preserved in fossils. Even so, he informed his own students, scientists have discovered thousands of fossils that provide evidence of one species transitioning into another — including feathered dinosaurs.

But at the inaugural meeting of the Florida Citizens for Science, which he co-founded in 2005, he vented his frustration. “The kids are getting hurt,” Mr. Campbell told teachers and parents. “We need to do something.”

The Dover decision in December of that year dealt a blow to “intelligent design,” which posits that life is too complex to be explained by evolution alone, and has been widely promoted by religious advocates since the Supreme Court’s 1987 ban on creationism in public schools. The federal judge in the case called the doctrine “creationism re-labeled,” and found the Dover school board had violated the constitutional separation of church and state by requiring teachers to mention it. The school district paid $1 million in legal costs.

Inspired, the Florida citizens group soon contacted similar groups in other states advocating better teaching of evolution. And in June 2007, when his supervisor invited Mr. Campbell to help draft Florida’s new standards, he quickly accepted.

During the next six months, he made the drive to three-day meetings in Orlando and Tallahassee six times. By January 2008 the Board of Education budget had run out. But the 30 teachers on the standards committee paid for their own gasoline to attend their last meeting.

Mr. Campbell quietly rejoiced in their final draft. Under the proposed new standards, high school students could be tested on how fossils and DNA provide evidence for evolution. Florida students would even be expected to learn how their own species fits into the tree of life.

Whether the state’s board of education would adopt them, however, was unclear. There were heated objections from some religious organizations and local school boards. In a stormy public comment session, Mr. Campbell defended his fellow writers against complaints that they had not included alternative explanations for life’s diversity, like intelligent design.

His attempt at humor came with an edge:

“We also failed to include astrology, alchemy and the concept of the moon being made of green cheese,” he said. “Because those aren’t science, either.”

The evening of the vote, Mr. Campbell learned by e-mail message from an education official that the words “scientific theory of” had been inserted in front of “evolution” to appease opponents on the board. Even so, the standards passed by only a 4-to-3 vote.

Mr. Campbell cringed at the wording, which seemed to suggest evolution was a kind of hunch instead of the only accepted scientific explanation for the great variety of life on Earth. But he turned off his computer without scrolling through all of the frustrated replies from other writers. The standards, he thought, were finally in place.

Now he just had to teach.

Again, read it all here. And ask, just what is Mr. Campbell really teaching? Let's look at his Mickey Mouse Challenge again.

On the projector, Mr. Campbell placed slides of the cartoon icon: one at his skinny genesis in 1928; one from his 1940 turn as the impish Sorcerer’s Apprentice; and another of the rounded, ingratiating charmer of Mouse Club fame.

“How,” he asked his students, “has Mickey changed?”

Natives of Disney World’s home state, they waved their hands and called out answers.

“His tail gets shorter,” Bryce volunteered.

“Bigger eyes!” someone else shouted.

“He looks happier,” one girl observed. “And cuter.”

Mr. Campbell smiled. “Mickey evolved,” he said. “And Mickey gets cuter because Walt Disney makes more money that way. That is ‘selection.’ ”

Er, no, Mr. Campbell. That is actually...

...

......

[someone's gonna really hate this]

.........

............

..............intelligent design.

On the part of Walt Disney, who kept redesigning his creation.

Mr. Campbell may have "helped to devise the state’s new evolution standards." But looks like we need to be more concerned about thinking standards among Florida's leading teachers and America's leading media.

Hat tip to Gary North's Specific Answers.

My Web Sites

I posted my first web page in March 1996 after CompuServe, which was then one of the premier online services, created Our World for its members. The old URL for my first web page still works, though before I left CI$ I put forwarding information on all the pages that I had. I hope that's proven useful, as there are still plenty of web sites that point to that old site.

One of the things I thought I'd do then was have a detailed page of Christian and Lutheran resources, turned into a much bigger project than I ever imagined, but since the World Wide Web and my site developed over a few years, I didn't really notice how big a project it had become. Created near the end of 1996, Pastor Zip's Christian Web Links grew in length and spawned Pastor Zip's Lutheran Web Links in mid-1998. By then I'd came up with the idea of having a link there, with a brief description, for every Lutheran church body that had any English pages. Pastor Zip's International Lutheran Web Links was branched onto a page of its own at the end of the year 2000 (and I've been thinking I need to break it into regional pages as it is a pretty long page). As I discovered more a more small Lutheran synods and associations—and as more of them discovered my site—Pastor Zip's US Lutheran Web Links was branched in mid 2002.

Actually, I had first branched an Our World Site for Zion (with its unwieldy http://ourworld.compuserve.com/homepages/przip/zionpeo.htm URL) within weeks of putting up that first simple page. And while I had intended a broader based series of personal pages, except for my pages directed towards space exploration (the currently rather out-of-date I Want to Go!) they've just never happened as I've focussed on the Lutheran links and Zion's site.

The World Wide Web has somewhat settled down. Wonderful sites might move or disappear (and sometimes re-appear) every few months as internet services firms went broke and/or consolidated, so keeping on top of a site full of links could take some time. And as more and more came online, some of my initially simple ideas proved that they would be far too time-consuming for someone doing all this on the side as a "hobby."

And yet, through all this, Pastor Zip's Lutheran Web Links—especially the subsidiary church body pages—has filled a still-unique niche. And it is just plain fun when someone half-way around the world writes me, or I meet someone new for whom Pastor Zip's Links are a favorite and oft-used bookmark.

Anyway, I've just updated my original Steven P. Tibbetts Home Page for the first time since December '06! Same with Pastor Zip's Anglican Web Links, which I'd not done anything with in almost 2 1/2 years! Zion's pages, most of those basic Lutheran links, and the US Lutheran Links were updated earlier in August. You're certainly welcome to look around—and tell me what you think!