Archive for ‘Political commentary’

October 9, 2008

Am I “Wall Street” or “Main Street”?

by Steve Dana

Let me see if I understand what is happening.  The banking industry demonstrated questionable judgment by making poor loans that put their businesses in jeopardy of bankruptcy.  In some cases the mortgage companies and/or banks did actually go bankrupt.  Isn’t that what happens when we get careless?  It happens to consumers every day.  How is this situation different?

 

So I have some questions.  Did all this happen because the housing market failed to continue its unreasonable meteoric growth rate?  What drove that meteoric growth?  When the market was exploding upward was anyone concerned that the real value of the underlying assets was much lower?  Was everyone seduced by the unreal returns?  Since we all know the cyclical nature of the real estate market didn’t some smart guys see the end coming in time to raise a warning?  Who is supposed to be listening for a warning?  Is there supposed to be someone looking for warnings?

 

Then when the housing market crashed, weren’t there safeguards built into the regulatory system to soften the landing?  Aren’t there safeguards in the system?  What should reasonable safeguards be?  Where should they be imposed?  Is this a State or Federal issue?

 

Is this whole thing a failure of government or the private sector?  Should government be the “Black Knight” and let the failed institutions fail and let the market take care of it or should the government be the “White Knight” and come to the rescue?

 

The crisis became a catastrophe when we learned that most of the major financial institutions were infected with the disease.  Could that be characterized as massive corporate greed?  When it was just a crisis, we let the individual institutions be swallowed up by scavenger investor institutions.  Isn’t that just the way of the world?  Then when it became a catastrophe, the stakes were too high to let the banks go under.  There must have been too many failing banks for the “big boys” like JPMorgan Chase, Wells Fargo and the Bank of Americas to step in and rescue (steal) with infusions of capital.  When Warren Buffet put up $5 Billion to prop up one of those fat cats, he didn’t do it without demanding a pound of flesh with an equity stake.

 

Since Fannie Mae and Freddie Mac were privately held public corporations how should they be treated in all this mess?  If they hold trillions of dollars worth of mortgages that are performing and a couple hundred billion that are not performing, what are they worth?

 

In the end, if you had your retirement funds invested with one of these major financial institutions you pretty much lost it all.  In the case of Washington Mutual, the company was taken over by JPMorgan Chase for a fraction of the capitalized value of the shares.  Everything that made that company worth investing in was gone along with the value.

 

If the government is stepping in to prop up “Wall Street” so we can save “Main Street”, what are share holders whose IRA’s and 401K’s are invested in those companies, “Wall Street” or “Main Street”?  If the home owners are the “Main Street” part, how exactly are they to be helped?  If your retirement account has been destroyed because you invested in financial stocks how are you saved?  If you borrowed more money than you can repay, why is the government stepping in to save you and not the folks who saved enough to invest and now face the loss of their retirement investments?

 

There is no doubt that the executives and boards of directors of many publicly traded companies are responsible for this debacle.  By not providing the proper amount concern about the downside risk, they put the shareholders in jeopardy.  There is nothing wrong with taking advantage of good times, but we now know if you don’t prepare for the down turn, you might be left holding the bag.  Let this be a warning to little investors; if the directors of the companies in which you own shares are not looking out for your interests, can you afford to invest in that company?

 

In light of all this corporate failure there has been a lot of conversation about executive compensation.  Some opinions suggest that there should be limits to executive pay.  I can’t support that any more than I would a limit on profit.  Share holders hire executives to increase share value.  Confidence in a corporation comes from smart executives who develop management policies and efficiencies that produce goods and services for a profit.  When it is working, things look pretty good.  If investors are willing to pay a hundred times earnings, should anyone be concerned?  You cannot limit executive pay any more than you can a movie star or a ball player.  Super stars command high salaries.

 

Free market advocates have now seen that there is too much greed and corruption for that system to work the way it is supposed to, but at the same time, most of us are not interested in a Socialist State either.  We are looking for a “modified free market system”.  For many years the system seemed to work, what changed?  Can we shove this thing back into the box?

 

I sure hope we are making a list of lessons we have learned and formulating some plans for rebuilding the regulatory system to safe guard consumers from predatory lenders and share-holders from irresponsible corporate managers.  As for every formidable task, we will have to eat this elephant a tiny bite at a time.  If we put a lot of hot sauce on this rotten meat, we can get it down.

 

I suspect that it will be easier to protect consumers than share holders, but in this difficult time we need to be working on it.

 

I still haven’t figured out whether I am “Wall Street” or “Main Street”.  I could use a bail out.

October 7, 2008

Thoughts for Snohomish County Leaders

by Steve Dana

Voters are on the hook again this fall to decide about another transportation initiative.  Any bets on how that vote turns out?  This is another case where there is clearly a need to invest in the infrastructure, but there is no confidence in government doing the right thing.

 

With regard to Sound Transit and the whole transportation system, the perception is that dollars will be sucked out of our county and funneled south to fund improvements in King County.  If an when the day comes when the light rail comes to our borders and WE need funding for projects to Lynnwood or Everett, those King County interests will already be focused on a light rail extension across Lake Washington to the Eastside.  The burden of funding light rail in our county will fall on us alone if that day ever comes.  I don’t expect voters to support initiatives that send money to King County.  We need to look at congestion management issues we can address without billions of dollars.

 

We need to look for ways to improve transit services.  People in the county need to understand the cost to subsidize a route with low ridership so they will know why there is sparse service in rural areas. 

 

Community Transit needs to look at a transit route that serves the SR-9 corridor from Arlington to Woodinville in addition to the routes to Everett. The market is not just east-west, it is becoming north-south as well, particularly into King County.

 

In the area of County relations with the State, our Council should meet with legislators representing Snohomish County prior to legislative sessions to discuss agendas and after sessions to discuss results.  This would give both sides a chance to better understand the problems the other side faces.  The issues do go both ways.  Having a regular dialog creates opportunities for bi-partisan support of issues.

 

I would ramp up support for Economic Development Zones within the county specifically targeting locations that would take advantage of infrastructure capacity already in place.  I would be looking at traffic patterns that could stand a reverse commute.  There is no reason for a corridor to have only one direction at a time.  Economic Development Zones would come with some financial incentives; for landlords to build facilities and for tenants that might need assistance.

 

I would encourage more intense use of the fairgrounds in Monroe.  I would look at developing an arena with similar capacity as the Everett Events Center.  The investment in the fairgrounds needs to produce more revenue on a year round basis rather than beating up the ten day fair run for so much revenue.  The Evergreen Fair Grounds needs to be an Enterprise Zone.

 

The Evergreen Fair needs to be more people friendly and less greedy.  This strategy will only come to fruit if more revenue can be grown during the other months.  If the arena were enlarged to seat five to six thousand with nicer facilities, we could attract conventions and events.  This proposal might require some work.  The Evergreen Fair Advisory Board could work with a management company and neighboring cities to develop a marketing plan.

October 7, 2008

What, Me Worry?

by Steve Dana

Everywhere we turn today, the headlines point to negative impacts of a shrinking economy.  The Feds are printing billions of dollars to meet their commitments for the rescue.  The State of California is pleading for a bail out.  The State of Washington will balance its’ budget, but not without some serious cutting.

 

It is no surprise that Snohomish County government faces a crisis.  The County Executive submitted a budget with a lot of grief.  Shortfalls in revenue mean reductions in services and staff.  If you are one of those casualties of a reduction of staff, you have a lot of grief.

 

In addition to a shrinking of the economy, County government suffers from a shrinking tax base every time an annexation is approved by the Boundary Review Board and a City council.  Counties have mandates from the state to move urban growth into cities.  It makes sense for the cities to be the urban service providers.  The mandates don’t include corresponding methods to fund county-wide services after sales tax revenues have migrated to the cities.

 

I am most familiar with Snohomish County, but the problem is probably the same in most counties.

 

I have been critical of Snohomish County for aggressively promoting urban development in unincorporated areas.  I believe that the Growth Management Act told counties to get out of the urban development business.  I still believe that the reason we have a Growth Management Act is because of “out of control” county governments, but I have already beaten that horse in previous blog entries.

 

The budget crisis we face in our county comes in part from the fact that as the urban areas annex into cities, the sales tax revenue goes with it.  Whether I like it or not, County government counts on that sales tax revenue to fund government services.  If that revenue goes away, there are problems.

 

As residents and taxpayers in the county, we all need county-wide services like the Criminal Justice system which includes the Sheriff, the Jail, the Prosecutor and the Courts along with the Assessor, the Auditor, the Treasurer and the Clerk.  We still need Public works and transportation departments in rural areas.  And even though it is a separate entity, the Health District provides a vital county-wide service.  I would include the Planning Department, but I could make an argument against the need for those turkeys.

 

Regardless of your political persuasion, County-wide services need to be funded.  The issue about how the pool of money is divided amongst the departments is the small stuff.  That is the politics of government at every level.  How large that pool of money should be is the big question.  Since the Assessor’s office jacked up our property values in an expanding real estate market to fund huge revenue growth during the past couple years, I hate to see what he will do when market forces tell him our property is not worth those big numbers anymore and at the same time revenue demands remain high.

 

A downturn in the economy is a good time to develop a budget strategy.  If it is developed correctly, it will serve government in prosperous times as well. 

 

All the years I was Mayor in Snohomish, Kelly Robinson was my City Manager.  He told me he could prepare a budget regardless of the revenue, but that less revenue meant fewer services.  He was keyed into the size of government.  Since government services are predominantly personnel costs, he tied the growth in personnel to conservative revenue estimates to prevent big swings in hiring and subsequent layoffs.  He was constantly aware of long term revenue commitments from expanding staffing.  For many years, he was able to provide revenue for discretionary budget commitments because he was not totally committed to an inflated employee base.  As economic cycles change, extra revenue in good times goes to fund projects and not staff.

 

The foundation of my own philosophy of government management is built on the lessons I learned working with Kelly Robinson.  I think our county could put some of those lessons to use today.  Where is Kelly when we need him?

 

In order to balance the budget in our county, we need to look for ways to reduce spending in places where everyone won’t suffer.

 

I have a couple ideas that would change how our government is run.

 

The first change.  To the degree allowable by the County Charter, I would move control or oversight of the Long Range Planning Department to the Legislative Branch.  Anything that has to do with developing the Comprehensive Plan and Land Use regulation would fall into a Council managed area.  The Planning Department Director, an appointee of the Executive has too much control.  The “policy development” elected officials need to have more control over what the Planning Department does.  This would keep the council members engaged with what is happening in their districts.

 

The permitting and execution of the plan and regulations would stay with the executive department.

 

The second change.  I would suggest that urban growth areas outside city boundaries should be served by city police departments rather than the county sheriff.  I would support annexations that move that process along.  All the deputies that are currently based within an urban growth area would be reassigned to areas outside urban growth areas.  The size of the sheriff’s office could be reduced considerably.  If we maintain the ratio of officers to thousands of population but applied in areas away from cities, the number of officers needed would be smaller.  Providing police services in a rural environment only could clarify the mission for deputies and the public.

 

How many of us expect urban police services from the Sheriff today?  Everyone should have an understanding about different expected levels of service from a sheriff’s deputy compared to a city police officer.  The mission of the Sheriff’s deputy is not the same as an urban police officer.

 

The other services provided by the Sheriff’s office that are not patrol related would be evaluated and future service levels would be determined based upon new assessments of need.  Special services provided by the Sheriff’s office might be paid with “fee for service” charges to the jurisdiction that requires the service.

 

Cities would have to step up to their responsibilities in providing police services in Urban Growth Areas just as the county has had to assume higher costs for jail, prosecution and court services for the whole county.

 

It could be that the whole issue of Criminal Justice funding should be viewed as a county wide cost and a method of funding the system be based upon population so that as the population percentage in the unincorporated moves into the incorporated, funding shifts from the county to the cities.  At the same time, the cities need a seat at the table when developing Criminal Justice policies and budget development. 

 

Snohomish County Tomorrow could become a relevant organization again if it is required that the county and the cities work together to address growth and criminal justice issues rather than giving the county all the power by itself. 

 

It is clear that our county leaders don’t have a corner on smarts.

 

Can the extra services provided by the Sheriff’s office be tied to a levy?  Can the voters decide to tax themselves for higher levels of service not provided by existing tax revenues?  Can there be dedicated revenue sources for Criminal Justice?  For other government services?

 

Can we restrict the size of government to some economic factor?  Prohibit growth in government spending by law?

 

Even though I don’t particularly care for Aaron Reardon’s style and approach to government, I cannot fault him for filling in the void of leadership left by the County Council.  I think that if council members had their own agendas and campaigned for them like Reardon does during the whole term, the taxpayers in our county would be better served.

 

Solving our county’s budget problems is not a task for the faint of heart.  Our elected officials need to have courage to battle for things rather than against.  We need council members that can stand toe to toe with Reardon and give as good as they get.

October 7, 2008

Get to work or get out of the way!

by Steve Dana

The President and the leadership in the Congress delivered a bill to the House of Representatives from the Senate with the plea for urgent action to supposedly stabilize the credit market.  Absolutely none of the House members liked the bill, but a majority voted for it and some voted against it from both political parties.  Public sentiment was to vote it down, yet some voted in favor in spite of the public input.  It remains to be seen whether the President’s plan will work, time will tell.

 

The reasons for passing this “rescue” plan are still not clear.  I have listened to a few supposedly knowledgeable media people with different suggestions and there are some patterns and themes that point to possible fixes to prevent another catastrophe like this one.  I am not hearing those suggestions coming from Harry Reid or Nancy Pelosi.  I would hope that the Congressional leadership would be focusing on specific changes they think will prevent subsequent damage.

 

My real question here is for all those elected officials out there who know there are mine fields in their respective jurisdictions that have the potential for raising havoc and yet they sit on their hands and do nothing.  When are you going to get off your butt and do your job?  Members of Congress knew about the problems developing for several years and still failed to act.  Even though this disaster is far from over, we need to appeal to our elected officials at all levels of government to step forward with concerns or ideas to address other sleeping catastrophes.

 

How many times have you heard an elected official say “I had no idea that the problem was so bad!” after a problem surfaced?  Or, how many times did they say “I warned them about this problem X months ago and they failed to act!”?  Junior members of the Congress don’t have much power, but they can stand up to raise the alarm.  It could be their challenge is to convince the media to run with the issue to give it the hearing it deserves. 

 

Doesn’t it make you wonder about what elected officials actually do in their jobs?

 

We elect them to office to be executives or legislators with the idea that they will be knowledgeable enough about the law to protect us from this kind of fall-out.  The failure of so many elected officials to recognize the potential for not just this current disaster but others in the past suggests that elected officials are not doing their jobs.  I expect more from my leaders.

 

Even if a Congressman is in the minority, he/she can be persistent in raising the alarm even if leadership chooses to do nothing.  A failure to act is what this is all about.

 

If you are a rookie on the football team, it might be appropriate to defer to the veterans.  They have demonstrated mastery of their sport through their performance on the field. 

 

If you are an elected official, you need to make a case for your membership on the “team” by demonstrating your mastery of the “sport” so your constituents can be confident you represent them.  Too many are elected and you never hear a word from them except at election time.  The observation I make is that they are more often than not beholding to a political party and not to the voters.  The party is their master, and us voters are just dupes in the process.

 

In light of the fact that our federal government came together in a bi-partisan manner to address the current problem after the fact, I would challenge elected officials at all levels of government to get past the partisanship that paralyzes government so often today to be proactive in identifying other problems that will be similarly damaging in other arenas.

 

The fixes for Social Security and Health care will require ideas and cooperation from both parties.  Does the problem have to turn into a disaster before our “leaders” get to work?  I want to see some leadership before the fact.

 

The spotlight is focused on the federal government right now, but there are persistent problems in our state, counties and cities that require action from elected officials.  Isn’t it about time that we remind all of them that our future support is contingent upon their past performance and that for candidates that have never served our support is based upon specific ideas they have to make government better.

 

I am tired of political parties feeding me “political ‘yes’ men” who are either incompetent or blatantly deceptive.  If we all sit back and accept this low level of service from our government, we might just deserve what we get.

Tags: