March 17, 2007
In sailing terms, the last person to abandon ship is the captain.
In reality, the rats go first.
The events that occurred this week may lead me to believe that the analogy applies to our country.
Then the captain: whether or not Mr. Bush is prepared to face it, there are increasing signs that his moment is finally over. At the Defense department, Donald Rumsfeld has been replaced by Robert Gates, a member of the Iraq Study Group and an affiliate of the realist school associated with the previous President Bush. Paul Wolfowitz, the architect who wanted to build a new Middle East on Saddam's rubble, has been moved to the World Bank, where he observes a Robert McNamara-like silence on the failure of his war. Another former Pentagon official, Douglas Feith, is under investigation for misrepresenting intelligence data to make the case for the invasion. And finally, attorney general Alberto Gonzales—it is obvious Gonzales does not have a clue about the difference between being Mr. Bush’s personal lawyer and the people’s lawyer. If anyone, outside Bush's rapidly shrinking circle of enablers, still had doubts about that, the events of last week should have erased them.
How about Gen. Peter Pace, chairman of the Joint Chiefs of Staff? On Monday he said that he supports the Pentagon's "don't ask, don't tell" ban on gays serving in the military because homosexual acts "are immoral," akin to a member of the armed forces conducting an adulterous affair with the spouse of another service member. Immoral? Ask Tammy Duckworth what’s immoral about the armed forces and she would beg to differ. She saw young soldiers that were horribly wounded in Afghanistan and Iraq come home to fight other battles against the bureaucracy at the troubled Walter Reed Army Medical Center in Washington. Sometimes they got lost in the system—or in their own depression—and never showed up for therapy.
So, who will stay behind to save the ship?
For starters, the American public who never thought of sacrificing for a war that was uncalled for and went on a spending spree. Now buyers are falling behind or defaulting, as interest rates that started relatively low go higher and home prices in some parts of the US stop rising. So far, the problem has remained largely contained within the sub prime sector. It may stay there but concern is growing that difficulties could spread throughout the housing market and then, perhaps, the wider US economy.
The first way the sub prime decline could affect the housing market is if a flood of foreclosed homes came up for sale and pushed down prices in areas where the supply of homes is already high because demand has dropped off. The big question is, how quickly will housing prices adjust lower as delinquency rates rise?
Figures released this week by the Mortgage Bankers Association show that a final splurge of loans made recently is likely to be the poorest quality on record, with the proportion of mortgages in the initial stages of foreclosure at all-time highs and late payments and overall defaults reaching 5 per cent last quarter. Delinquency rates for sub prime adjustable-rate mortgages, the riskiest kind, hit 14.4 per cent.
And where do we go to get relief? Try China: China on Friday sought to reassure global currency markets that a new state investment agency set up to chase higher returns for its $1,000bn-plus in foreign exchanges reserves would not harm the value of the US dollar. Yeah right!