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09/21/2008

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Brian Davis

I'm just a common lawyer - born, indoctrinated, and set in my ways too long ago to be much of a code lawyer (Justice Scalia has books to explain the difference). But thinking about this mess and some of the valuable insights we've seen here, it occurs to me that, basically, usury has finally jumped up and bit itself in the butt. To-wit, there's little or no current value in instruments of perpetual indebtedness/servitude. Think about it - ARMs, option ARMs, 100+% LTV floating-rate credit. The risk that droves of debtors, en masse, will walk away from these indentures, no matter how enticingly-wrapped by financial engineers, oughtta be enough to tell anybody with common sense not to get involved. The Bard's Polonius (circa 1600) knew best. Gambling contracts weren't enforceable at American common law. Neither was insurance wagering. As much as I do believe that a deal is a deal and a debt is a debt, with the effect that, ultimately, the law will have to enforce the toxic paper, still it forecasts a demoralizing chapter in American society's progress.

Jack

Brian: In the "perfect storm" of the S&L meltdown, changing tax law, and the crash of oil prices in the mid-80's Alaska was hit far harder than most of the "oil patch" regions and here's what happened vis a vis living up to obligations:

Many who would be considered 'bullet proof millionaires' found their last purchase underwater and unrentable, so they sold to salvage something, but! no buyers, so down went the whole house of cards.

Regular folks who found themselves much underwater, at all, walked. Sometimes out of state, some across town, and were able to buy in a year or two later at the bottom.

RTC? (the gov fixit agency) forced owners out, rehabed the buildings at typically high government costs, and put them on the market at fairly low prices. Naturally that made privately owned, un-rehabed buildings relatively worthless.

Condo projects had limits on the percentage that could be rented so many sat empty so no one to pay taxes and condo dues. Worse? the guy who held on was paying high interest on a high balance loan, while the empty unit next door was being offered at half the price with better terms.

It took most of a decade for things to "normalize" with perhaps the influx of income after the Exxon spill saving many from bankruptcy in 1989 though fishermen and many biz in fishing areas were hurt badly by the same spill.

My guess is that regardless of "bail outs" that there is a similar repricing of housing going on in many areas and in the "hot" markets it's likely not going to be over for quite a while.

James T. Struck

1. Government could benefit from taking over all current holders of government debt. Take over all debt, and then write off the $5-7 trillion in debt. Merrill Lynch, Lehman AIG etc are not holders of all America' debt, so government is not going to be able to eliminate its debt which has existed pretty much since the country's origin through taking over banks and investment agencies. The size of government debt does make government part of the problem. Government debt has a theoretical inflationary effect on prices as government is constantly going after its debt through more debt creation and money creation.

2. Derivatives (and related financial instruments from the private sector) are not entirely a problem as Becker aludes to as they create growth. I could sell imaginary "Mrs. and Mr. Wonderful" toys that made people happy and did absolutely nothing. Derivatives are similar; they win a Nobel Prize and create economic growth and value. Financial instruments which are completely worthless as far as real impact (they do not help you fly, eat, get healthy) still create value as far as providing employment. Imaginary products are valuable (just imagine how much Natalie Messeschmidt or someone loves you and if that helps you rest, then good)

3. The Washington Mutual bailout/takeover was too quick to say the least. A mere $2 billion draw on funds is miniscule compared to a bank with $300 billion in assets. If the regulators had taken a nap (NAP TIME EVERYONE let's go catch a movie; they've got a new one over at the Davis or Main Street theater), then WaMU would still be held by its former owners. So what if there are 2 billion in withdrawals. That is not even remotely a reason to take over a bank. That is government panic and a government created problem. (NAP TIME everyone is a suggestion for next time a bank has 2 billion in withdrawals- or let's go watch reruns of the Dick Van Dyke show or go to the local library)
4. A 6.7% unemployment rate is a spike, but still not the 13% rates we had in the 1980's even 1992. This is by no means the worst economic crisis since the great depression. Government bailouts should not be the indicator of recession; Unemployment rates are a more important indicator.

5. Judge Posner made some severe mistakes in legal reasoning during his career. He is of course a good candidate to replace Justice John Paul Stevens, but there are hundreds if not thousands of qualified candidates for that job. If not millions. I think his legal reasoning about Rooker Feldman is extremely problematic. Take guardianship cases in state courts for example. Someone could take over anyone's life, because someone has a 1.mental illness, 2. physical incapacity 3. disability in Illinois. I do not need to loose my rights to decide because I had some acne, am in a wheelchair, am upset or ankle pain. Rights violations should be challengeable in federal court.

Imagine the scenario--

Judge Posner the parties have motioned that you loose your rights to decide under guardianship, because you once had anemia and you can't show you are able to protect yourself from an invasion similarly to the invasion of Europe around the Battle of Tannenberg in the 1300's. They say you have to be able to "fully care your person and estate." You can't stop such as invasion...you have no record of beating people up as needed to stop such an invasion. You are..you are no Lawrence Taylor.

Judge Posner- I can take care of myself. I am noted jurist and author.

State Judge- But can you protect yourself from something like the invasion of Genghis Kahn in the 1300's and you do have anemia.

Judge Posner- I am seeing my doctor over that

State Judge- You have been declared a ward of the state of Illinois.

Judge Posner- We do not want guardianship to be like slavery enslaving people who just have diagnosis or who can't stop Genghis Kahn. Who can stop Genghis Kahn?

State Judge- One more comment like that and you are going to be held in contempt. You are prohibited from filing documents in my court.

Judge Posner- Now I kind of see why there were some people who wanted to challenge these decisions in federal court. the state judge will not let me leave the nursing home and get some fresh air or go to religious services or see family or phone family or go to the zoo

State Judge- that is contempt of court

Sheriff- You are going to be jailed if you say things like that . Sheriff pushes Judge Posner from building into nursing home

People should be able to challenge these abuses in federal court. I filed over 70 motions in state courts about these types of guardianship rights violations. Such issues as not knowing where family is, not being able to visit family, phone family, know what chemicals are being used on family, get fresh air away from smokers, come home, go to reunions, or the zoo, or go to services, or get caregiving reimbursed, or get mail, or not shake severely on medication should be challengeable in the federal jurisdiction. If Posner were held by a state court, his son should be able to know where he is and visit him and be able to bring him from smokers.

Justice Stevens knows that Rooker Feldman is a problem, and I am concerned about Judge Posner's use of the doctrine. To be honest, I am eerily reminded of doctrines or applications of rules such as Jews need to be separate from Germans or courts could not challenge the confinement of the disabled in 1930's National Socialist Germany. I think doctrines are of secondary importance to legal realities such as a person not knowing where his mother is or being able to visit his mother.

Jerry Baldy

I have created a solution to many if not all of the componet parts of the current financial crisis. To see the solution in it's detail see copyright#TXu000496588. Upon review if interested in Applications,Licensing and Consulting considerations please contact me at gbaldy@cox.net.

Best Regards,

Jerry Baldy

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