Tuesday, September 23, 2008

Channeling the Hot Air from Washington & Wall Street

While Congress battles with Wall Street lobbyists, the Federal Reserve, Treasury Secretary Henry Paulson and the future of the financial system, I thought I'd tap some of that hot air and do a co-generation conversion.

That means I'm taking the massive amount of bloviation coming from the halls of wealth and power and channeling it into something profoundly useful that will benefit everyone. No, I'm not talking about another approach to world peace. I'm talking about some great new energy ideas.

The first wave of fresh air with charged particles of positive energy comes from the American Physical Society, a group of enlightened physicists. They've just published a new report entitled "Energy = Future: Think Efficiency.

What they've recommended is accessible to everyone; you don't need a doctorate to grasp the simplicity of their energy plan. Basically, they want high efficiency vehicles, buildings, batteries, appliances and other green goals to be part and parcel of the government's permanent energy policy.

I know, so there's nothing new there. What's ambitious is that they have aggressive goals for their plan. Better yet: Everything in their program is achievable.

An interim step to the APS proposal, which is reflected in the energy legislation that is being blocked by the "drill more" crowd in Congress, is much simpler and maybe more accessible than comprehensive energy policy. Let's label buildings for their energy efficiency. Such is the idea of one of my favorite architects Michelle Kaufmann, designer of the Smart + Wired Home and other fine models.

Michele's idea to to make energy efficiency akin to nutrition ratings for foods. How much water can a house save? How much power? If people could compare one house to another, they would know and be able to make informed decisions. It's an inspired idea. Here's more on her proposal:

Green Prefab Architect Michelle Kaufmann Releases White Paper Calling for ”Nutrition Labels” for Houses

“Nutrition Labels” that clearly communicate the sustainability facts of a home would help grow the green building industry by alerting homebuyers to a home’s environmental impact and monthly financial costs while outlining potential health benefits or risks.

Oakland, Calif.—September 22, 2008---Michelle Kaufmann , award-winning green architect and sustainable living expert, today announced the release of the white paper, “Nutrition Labels for Houses.” The white paper explores the need for a universal sustainability labeling standard for houses in the same vein as the federally mandated Nutrition Facts Label for foods. It also asserts that a universal labeling system would help grow the green building industry by making it easier for homebuyers to understand the environmental, health, and financial benefits of living in a green home.

The white paper is available for download at www.michellekaufmann.com.

“Nutrition labeling allows consumers to purchase food according to the quality of its nutritional content. We want homebuyers to be empowered with the same sort of information when it comes to making a decision about what house to live in,” said Michelle Kaufmann, founder and chairwoman of Michelle Kaufmann Companies. “We have to start holding the houses we live in to the same standards as the food we eat. Our habits concerning both are vital to our own wellbeing as well as the wellbeing of the environment.”

Michelle Kaufmann, who has built more homes for clients than any other firm in the modern modular architecture world, focuses on making beautiful, thoughtful design accessible to more people by employing prefabricated modular building practices and prepackaging green solutions.

Topics covered in the white paper include:

* Growing the green building industry through universal labeling of all homes—green and traditional
* Exploration of the building industry’s environmental impact, including comparison between traditional and green building practices
* The financial benefits of buying green homes
* Why we need a holistic, “apples to apples” labeling convention
* Proposed methodology for creating a Sustainability Facts Label
* Energy Consumption Study data, comparing a green home to a comparable traditional home

“As soon as a sustainability labeling program is in place, even if it is at first instituted on a small scale before ultimately going national, we will be the first to commit to labeling our houses,” concluded Michelle.

By reducing resource consumption, waste, costs, and building time by up to 50%-75% over conventional building methods, Michelle Kaufmann’s prefabricated, modular building techniques deliver benefits to individual homebuyers as well as builders/developers, who are interested in building green multi-family and community developments .

In the meantime, urge your Congressional representatives to pass the energy package that they've been considering the past two years. It might be the most productive thing they've drafted in 8 years.

Now if they could only label mortgages, investment banks and toxic debt portfolios. But that's a blog for another day.

Wednesday, September 17, 2008

Bailout Blues

First there was the Fannie Mae and Freddie Mac takeover by the US Treasury. Then the bankruptcy of Lehman Brothers. Today, the Federal Reserve played Coast Guard to the American International Group.

Did this calm the markets? Two money-market funds "broke the buck," that is, they lost money because of these debacles. More will follow. Banks will be increasingly folding. Even the venerable firms of Goldman Sachs and Morgan Stanley are under pressure from investors. The Russians had to halt trading in their stock market to pump cash into three banks. As Yogi Berra once said, "it ain't over, 'til it's over.''

Well, the Fat Lady hasn't even come close to the stage. I can't say when this will all end. It may even trigger a monster Depression. I can predict one thing: If banks stop lending, the global economy is in deep trouble. If you don't have buyers and sellers in the debt markets, everyone will be a victim.

What are our major presidential candidates saying? Obama is going to do another speech on the subject. McCain blamed "greed and excess" for Wall Street's woes, but offered nothing beyond that. That makes sense because most of his campaign advisers are either connected to Wall Street or pushed through de-regulation to give financial companies a free ride in the free market. The free market's working all right, but it's not protecting anyone except those with the most cash on their balance sheets.

Here's what I think will happen:

-- We will be seeing a new program to purchase toxic debt. The mortgage securities that are poisoning credit markets have to be corralled and branded. Somebody will end up pooling them and auctioning them off. It will probably be the US Treasury or Fed. Taxpayers, as usual, end up being the big losers.

-- There will be attempts to send even more checks to consumers. IF middle America stops spending, a recession is guaranteed. So far, most of the damage is limited to the building/real estate industries, Wall Street and Detroit. Only? All of this may change if credit becomes unaffordable or unavailable.

-- Confidence must be restored. The Fed has got to pump more money into the system and open up all of its lending windows. The SEC, which has curbed short selling, has to shut the shorters down until this is over. The Fed needs to convene a crisis convention to provide cash to the companies next on the hit list. None of this is palatable to those outside of Wall Street, of course. But keeping credit markets liquid is essential.

-- If you can't borrow, you can't spend and people will lose lots of jobs if this happens. We can't go from being a credit-based economy to a cash-based economy overnight. This whale can't turn on a dime. There are lots of reasons for people to sit on cash and pay their debts, though. This is usually the best route.

-- Create a sense of recovery. There has to be a point where Wall Street says "I think this is over." The housing disaster will continue until foreclosures are stopped and people can get 30-year fixed-rate mortgages at reasonable rates again. That might spell the end of securitization where the local savings and loan holds onto your note, but that's not such a bad idea. Securitize that!


Wednesday, September 10, 2008

Lipstick on a Pig

Oh, the horror, the horror, of petty distractions in a presidential campaign. It gets voters away from real issues, diverts them from what an awful job the current administration and Congress have done on any number of subjects.

Rather than talking about what or whom Barack Obama was referring to when he called McCain's "change" smokescreen "lipstick on a pig," here are a few vital subjects both candidates and the media can focus on.

-- The middle-class is falling behind in a big way. That means household income is not outpacing inflation. How do the candidates propose to battle that? I don't care how much foreign policy experience Joe Biden has or how many moose Sarah Palin has shot, this is the number 1 economic issue facing Americans. How do they propose to close the gap?

-- Why no mention of Medicare? It will be insolvent within the next seven years if nothing is done. How will it be rescued? Higher payroll taxes? Lower benefits? How about throwing out that wretched "doughnut hole" drug plan and starting over by having the program accept the lowest bids possible from the pharmas instead of subsidizing this crock of a benefit?

-- The housing market is getting worse. Foreclosure destroys homeownership, communities, banks and builders. It's not the right answer, no matter whom you blame. Properties that sit unoccupied invite vandalism and blight. If the candidates want this to continue, they will contribute to the ghettoization of entire zip codes. What Congress has done in their various bailouts (including Fannie and Freddie) have been laughable. They should be telling us how they will keep people in their homes to refinance.

-- What will they do to create jobs? I know Obama wants to create "green" employment through building up the alternative energy industry. McCain wants to drill for more oil and offer modest incentives for alt-e. Neither has a plan that's audacious enough to create an Apollo-style program to reshape the economy by greening it. Japan, Germany and most of Europe are already there with their national policies. China is rushing into the game. What leadership can we offer? Can they at least read Thomas Friedman's new book (or his column today www.nytimes.com)?

-- How about a bold plan? At least T. Boone Pickens, the Texas billionaire and hedge fund manager, is willing to say that wind and natural gas are part of the energy solution and is putting some money behind his proposal. I met T. Boone on Monday (shook his hand), and believe me, he's getting more press than either candidate on energy reform. This winter natural gas and electricity prices will rise, who knows what will happen to oil and gasoline and Detroit is falling off the map.

-- A meaningful theme. "Change" as a theme doesn't mean anything to me. Washington has become a revolving door for lobbyists and corporate interests. "Reform" won't happen until someone dares to challenge this system. Real change means creating a new economy.

So let's forget about pigs and cosmetics for now. It's time to bring home the bacon on substantial ideas that will help the country out of its malaise.