Tuesday, May 25, 2010

Do We Ever Learn Anything?

So the sovereign debt crises in Europe are creating an unexpected windfall here in the US.  Capital is fleeing Europe and being dumped into bonds here.  This is driving down bond yields and returns tied to them, notably mortgage rates.  Just why US securities look so much better than anyone else's is beyond me, but the real issue is what do we do with this windfall.  So far I'm just seeing a return to the crap that got us into this mess.

I've been saying for a couple of years now, and I've been a long way from alone on this, that as bad as the 2007-2008 option ARM resets were, the 2010-2012 resets would be worse.  Now we've been given a golden opportunity to soften that blow.  First, with rates softening, the resets will not be as severe.  Second, more people can qualify for refis and get out of the ARMs.  These two would go a long way toward restabilizing markets and values.

But it all depends, as it always does, on the third leg of the stool.  If people reduce their mortgage payments, what will they do with the new discretionary funds?  Will they pay off debt and try to get out from under?  Will they invest it here, either directly in their own businesses or indirectly through some savings vehicle?  Or will they just spend it on stuff and ship all that cash back overseas.  All signs indicate the last option, and with the active encouragement of all the powers that be.

And so it looks like we'll ultimately squander this opportunity.  We still haven't learned that a decrease in expenses is not the same as an increase in income.  We still haven't learned that our homes are not magical ATMs that can paper over our budget shortfalls.  We still haven't learned that leveraged loads of junk shouldn't be our great goal in life.  We still haven't learned that shoveling money out as fast as it comes in is not a productive pastime.  Letting flow out what flows in is a job for sewer pipes.


Thursday, May 13, 2010

Professional Civility?

An article on the ABA website this morning left me shaking my head about my remaining years in this profession.  Sarah Allen wanted to go to law school.  Let's set aside the wisdom of that in the face of this economy; she wanted to go.  As with most people, she didn't have the money to pay for it and was worried about the debt she'd end up with.  She decided to solicit donations, not just for herself but to set up a general scholarship fund.

The response was predictable: The legal message boards lit up with the usual anonymous, infantile, Gen X vitriol that seems to make up half of Internet traffic.  Nasty stuff.  And so she's shut the whole thing down and is reconsidering going into law.

But the really disturbing thing has been the responses to her withdrawal.  No comments about her soon-to-be "colleagues" calling her ugly and saying she should raise money by becoming a prostitute.  No, everyone is saying she needs to have a thicker skin to be in law.  Anyone else apprehensive about what these guardians of justice are going to be like in court or around the negotiation table when there is actually something on the line?

We've made a lot of noise for a number of years about improving civility in the profession.  It isn't sinking in, and the shark tank is getting more savage by the day.  And unfortunately, this is the behavior everyone notices.  It should be small wonder that the public views us, not as guardians of justice, but as mercenaries who operate under the motto, "Lawyers: Bringin' the Hate Since the Dawn of Time."