The Four Horsemen Claim the Monoline Insurers. Who’s Next?

This week on our way to Financial Armageddon it was the turn of the monoline insurers to face the scythe. For over two months AMBAC Financial and MBIA, the two biggest insurers of municipal and structured debt, have been peering into the grave, pretending that they could revive themselves with just a little more capital and a little more time. The ratings agencies ”“ Moody’s and S&P and Fitch ”“ danced along with them in this delusion, delaying any downgrade of the insurers from their current Aaa status, waiting to see if help would arrive. It never did.

The final blow occurred this week in the stock market, when the share prices of the monoline insurers collapsed, making it impossible for them to raise capital publicly. Since no private investors have stepped up yet, Fitch took the inevitable step and downgraded AMBAC. It is only a matter of time before the other ratings agencies follow, and then comes bankruptcy and some sort of restructuring for these insurers.

Municipal bond insurance had always been a sleepy business, as AMBAC, MBIA and a few smaller insurers lent their Aaa ratings to state, county, city and related local government entities that on their own could not achieve the highest rating for their bonds. The insurers got a fee for their service, and the municipal borrowers got the lowest coupon rate possible for their bonds.

But this business wasn’t enough for the insurers. They branched out into providing Aaa guarantees for so-called structured investments, like Collateralized Debt Obligations and related mortgage-backed derivatives. And why not, they reasoned? The ratings agencies placed Aaa ratings on all this paper, just like they thought the monoline insurers were Aaa risk too. The ratings agencies have since confessed that their models for analyzing potential downside risks for these investments/bonds assumed that real estate prices would always go up at a steady pace, just like they had for nearly 70 years.

In fact, everybody with money to lend or a need to borrow made the same assumption, partly because the real estate industry kept repeating this mantra: real estate prices never go down. Nobody seemed to notice that this argument was true to a point; in local circumstances real estate values have declined, and in the best of times the rate of increase only matched the rate of inflation. Until around 1996, when this link decoupled and real estate prices nationally began soaring well beyond the rate of inflation. But even when it was obvious that real estate prices were two or three standard deviations above their historical norm ”“ in other words, they were in bubble territory ”“ industry experts began extrapolating these gains into their future expectations for housing values.

The financial industry did their part in helping the bubble to inflate, by inventing all sorts of ways to securitize, package and resell real estate loans to investors, and the industry was happy to pay AMBAC, MBIA and their like a fee to obtain back-up insurance on these deals. Depending on how the insurance was structured, if something went wrong with all or a part of the bond, the guaranty provided by the monoline insurers could be activated and make investors whole again.

Unfortunately, real estate prices nationally have gone down. Defaults on mortgages in the U.S. are rising and in some sectors of the market are at record levels. No end is in sight. The monoline insurers are being called on to honor their guarantees, and they simply do not have the capital to do so for the amounts involved.

All told, the insurers have $2.4 trillion in guarantees outstanding for municipal bonds and mortgage-related structured investments. It seems inevitable now that the ratings on all this paper will deflate. If Moody’s decides that AMBAC deserves a non-investment grade rating rather than a Aaa rating, then much of the paper insured by AMBAC becomes junk debt. And junk bond debt is really what we are talking about here. While the ratings agencies might toy around with a progressive series of downgrades, the stock market has already decimated the shares of the monoline insurers, declaring them virtually bankrupt.

It is true that someone like Warren Buffett could come along and buy one of these insurers, but he has already had a bad experience with derivatives and will certainly have nothing to do with the structured investment guarantees. Don’t count on a savior to ride to the rescue of this part of the market.

If you own a bond issued by your local water reclamation project and guaranteed by one of these insurers, are you going to lose money? Not necessarily. As long as the municipality can continue to pay principal and interest on the bond, and as long as you want to hold the bond to maturity, you should be okay. But in the secondary market, once the rating is trashed, the price will sink, and if you want to sell the paper before it matures you will lose money. Tens of thousands of bond issues across the country will be affected.

Don’t forget that state and local governments are already in financial distress. Tax receipts from income and real estate taxes are drying up, while costs are increasing. Many states are operating with huge deficits. Something will have to give, and in some cases there will be defaults on municipal bonds. Because the insurance behind these bonds is practically worthless, investors will lose money. You will want to look very carefully at the financial health of the municipal issuer now that the back-up insurance is no longer there to help.

Chances are you do not own some of the complex structured investments that were also given a guarantee by the monoline insurers. But chances are the biggest banks in the country own this paper, or sold it with the insurer’s guaranty backing it up. Difficult legal questions will now arise as to whether the banks will have to step up and replace the guaranty provided by the insurers. This means, effectively, that the banks will have to guarantee the bonds themselves, since no one is around anymore to do this.

The banks simply do not have enough capital to provide such guarantees, so the legal battles will be fierce and protracted. On top of this, the banks own paper that they thought was backed by a Aaa guaranty but no longer will be. This means that the bank’s credit portfolio is no longer of the quality they assumed. The loans and other investments that a large bank tends to keep on their balance sheet average out to about a Baa rating ”“ by no means Aaa, but still investment grade and not considered junk debt. If the banks have to reclassify a huge amount of their investments as junk debt, this could well tilt the entire credit portfolio of the industry into junk debt status. Banks will no longer be able to lend as freely as they have been in the past ten to twenty years if they themselves are poor investment quality.

This doesn’t even count the actual financial losses caused by these downgrades, which are already beginning to occur. Merrill Lynch announced this week a multi-billion dollar write down of its investment portfolio in structured bonds because the paper has been significantly downgraded in the secondary market with the loss of the Aaa rating. The U.S. financial industry is already scrambling about the globe trying to replace the capital lost through previous write downs. At some point the industry will run out of rescuers just like the monoline insurers did.

Who’s next in this ongoing financial trauma? Clearly more pain is in store for Wall Street and commercial banks, but we haven’t yet come to the realization that some of these financial institutions will not survive. This will happen, and you will definitely know when that day arrives because it will be the cause of serious damage to the stock market.

But the biggest victims to come are the other mortgage insurers ”“ Fannie Mae and Freddie Mac. Like the monoline insurers, they have guaranteed trillions of dollars of mortgages. Like them, they have only a tiny sliver of capital behind their guarantees. One reason they have escaped notice so far is that these companies did not guarantee the risky structured investments that destroyed the monoline insurers. Unfortunately, the financial default risk in the U.S. economy is ratcheting up daily. American Express alerted the market this week to a surprising increase in late payments and defaults on credit cards. Sears and other card issuers are seeing the same thing. Auto loan payments are also falling behind. The U.S. consumer is tapped out of tricks to keep their spending and lifestyle at existing levels. Millions of consumers considered now to be prime quality credit risks are going to default on their mortgages, and drag Fannie Mae and Freddie Mac down with them.

This is when we will see just how valuable the U.S. government support is to these two companies. They have acted for years as if they have a guaranty from the federal government backing up everything they do, even though Congress has insisted otherwise. A lot will depend on whether the U.S. government can still issue debt without any consequences whatever. Over half of all new federal debt in recent years has been bought by foreign investors, principally the governments of Japan and China. This has kept rates low for the government, and removed any sense of discipline over the federal budget. As long as these rich uncles are willing to take on such gargantuan risks with their own foreign reserves, the U.S. may be able to bail out Fannie Mae and Freddie Mac. But we are talking of a bailout in the trillions of dollars under worst case circumstances, and worst case circumstances have become the norm in this market.

Nor is time on the side of the U.S. government. The ratings agencies are already hinting that down the road, if nothing is done about social security and other growing federal entitlements, the U.S. will lose its Aaa rating. This may happen earlier than many suspect.

Somewhere in all this mess the U.S. stock market will collapse. At the moment the stock market is already in a correction, worrying about an economic recession. What it really should be worrying about is something much worse ”“ a complete collapse of the credit markets globally, leading to a depression that will last 3 ”“ 5 years. Once that is understood, the Dow will be trading well below 8,000.

So hold on to your job, whatever that may be. Pay down your debt and watch your expenses. Monitor the credit and market risks in your investment portfolio, and if you have any real concerns, U.S. Treasuries earning 2% will be a lot better than stocks or bonds that might collapse in value. As of now, the four horsemen of the apocalypse are mowing down the big players, but the little guy will be in their sights eventually.

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Numerian is a devoted author and poster on The Agonist, specializing in business, finance, the global economy, and politics. In real life he goes by the non-nom de plume of Garrett Glass and hides out in Oak Park, IL, where he spends time writing novels on early Christianity (and an occasional tract on God and religion). You can follow his writing career on his website,

27 CommentsLeave a comment

  • remind me not to ask you for any predictions about how my favorite football team will do

    what is the best approach to triage?

    Congress will do something, just so it can say it did something, about “subprime mortgages.” The press will report that some relief was given to aggrieved borrowers.

    Whatever about that.

    In terms of stopping a general credit collapse, what would be most useful?

    What would be most useful in terms of preventing future abuses?

  • Sean-Paul was certainly entitled to his illusions.

    The debate about the financial crisis is going to shift sometime, probably into next year. The issue will be less “How do we save the banks?” to “How do we put people to work and revive the economy?”

    For the banking system bad debts, the government will adopt a Resolution Trust Corp. approach, which worked for the S&L industry. The concept is not monetizing the debt, but holding it temporarily until the market bottoms and scavengers are ready to start picking the bones. The government will lose some money in this operation, but not as much as monetizing the debt and bailing the banks out 100%.

    The government will also have its hands full salvaging the GSEs (Fannie and Freddie). This will be a bigger problem than cleaning up the banks, but not as pressing politically as getting the economy moving again.

    These efforts will mitigate the pain somewhat, but there will inevitably be substantial damage done to the economy.

    I’ve been thinking about what will be necessary to prevent future abuses and will post something in the next few weeks.

  • The bigger question is not how to bail out the banks, but what changes to make to the banking system. The 1990’s mania for deregulation and mergers meant that the take away from the S&L and insurance crisis, and there was an insurance company meltdown to go with the S&L meltdown, was to have banks buy insurance companies and to have less banking regulation. This, was not a good approach. It was also more expensive than previous bailouts, since investors as well as depositors were largely bailed out. Something to do with Friends In High Places.

    That there will be some kind of bail out is assured, since only governments are large enough to insure these kinds of losses, and governments have an incentive to do so.

    However, more importantly must be the question of what do we learn from this. If it is “let’s ban a few things that expressly got us into trouble. And then let the people who got us into trouble do even more with less scrutiny.” Then we will be talking about another bailout before we are talking about the next Detroit Lions playoff appearance.

    As for this downturn, there is, in fact, ample held dollar reserves out there to bail the US out …. this time. However, the cost is going to be a great deal of American autonomy. Don’t like what happened in Burma? Tough the Chinese bought that country fair and square. Worried about Pakistan? Get used to it, we don’t have the ability to make much of a dent after having squandered our military on attempting to make Iraq safe for Neil Bush. Want to change American from its present downward spiral? Nope, won’t happen.

    Right now American behaves like the only police officer in town, who happens to have a drinking problem. Other people in town cover it all up, until there is someone else who can wear the tin. No small part of the reason that Bush is a catastrophe for the US, is that he has degraded the quality of America’s “Security Product” to the point where many individual nations are looking to China and others, for parts of that product.

  • I’m looking forward to hearing about the steps needed to forestall what had happened.

    The biggest challenge will be political. There will always be a party of Big Business, who will work continually–like water and time–to eat away whatever good work gets done. Or create the fatal loopholes.

  • There is a chance for radical reformation. It will start with abolishing the parallel credit creation system that Wall Street has constructed, and which is now imploding. This means what few investment banks survive will be forced into commercial bank licenses under the Fed’s regulation and lender of last resort protections.

    Second, the financial industry will be forced to spend hundreds of millions of dollars constructing a derivatives clearing house to provide liquidity and price transparency. Derivatives that don’t fit into the clearing house structure will be heavily restricted or outlawed.

    Third, the Fed will have to be cleaned up. This gets to your point of moving away from laissez faire capitalism and abandoning the false premise that the markets know all and are the best allocators of economic and financial resources. The Fed will have to get back into the serious business of regulating the financial system (including mortgage brokers), and get rid of the Greenspan philosophy that asset bubbles can never be ascertained or controlled. For a real change, the Fed should get back to controlling money supply growth, and not targeting interest rates and inflation.

    Fourth, the GSEs should be abolished as part of a major reform of the mortgage industry.

    I can think of a few more things but these would be the biggies.

    p.s. Bernanke will not survive this crisis, if for the simple reason he is too tied in to the current way of doing things at the Fed.

  • where is Sen. Dodd on these issues?

    where is the House? (who is Chairman?)

    when the PR storm begins, it is important that the usual sound bites say sensible things

    the reality is that the press will be clueless, most pols too

    but there will be no shortage of demogogues pushing silliness (“more tax custs” — wait for it)

    Also, what industry types will be pushing a sensible agenda?

  • As my handle implies, I’m a musician in the NYC Subway. I often play the stations at Wall Street and Rector St (near the AMEX.) This piece fully explains what I’ve been seeing in the business district since last summer. Rush hour crowds were getting thinner due to the layoffs and the take from my guitar case began to fall. During the Holiday season there was a sense of gloom that I’d never seen before. To sum the mood up in five words, “We’ve eaten the seed corn.”

    It doesn’t take a street musician to figure it out. This article nailed it. Thank you.

  • At some point the Wall Street bankers – maybe only a few of them – will develop an honest to God sympathy for what it takes to scratch out a living day to day. Maybe they’ll start tipping a bit more. I’ve seen it happen to guys who’ve been laid off; they start seeing people that never existed before.

  • Numerian,

    Maybe there is someone who reads here who is good with graphics who could make a series of charts that illustrate the basic concepts.

    One problem for me (and probably others) is that your eyes can start to glaze over at some terminology.

    My idea is that someone could post the slide show here (somehow); a slide show without commentary basically.

    And then maybe Sean Paul (or someone) can use media contacts and try to get the networks or PBS or someone to use the slides, or something similar.

    As we saw in the Afghanistan adventure, there will be endless tv devoted to “the crisis” but no one will ever do the slightest in-depth analysis no matter how long the crisis drags on. Bizarre. But that is their routine.

    If they are handed something that they can incorporate into a 30 second story, then they might use it.

    Might be worth a try.

  • They are usually devoted to one part of the crisis – like explaining how a CDO is structured. I’ll give some thought to what you are suggesting. It’ll be stretching my powerpoint skills.

  • I am a harsh critic, and I consistently think Numerian’s stuff is great. But it needs a broader audience. Not for Numerian; to hell with him/her; he/she can fend for his/herself. For us.

    Some angles.

    One would be to put out Agonist videos on Youtube, or try to get them to go viral through Daily Kos or something. Something engaging and short and to the point.

    Is a team useful for this purpose? Maybe Mad Dog Stirling can help.

    Another angle is to try to institutionalize Numerian. Is someone associated with a university? Can’t Numerian be a visiting professor? Anyway, we need a group of students/graduate students who as part of their coursework will both follow the issues and generate materials for the traditional press and the internet.

    Finally, like blogger world generally, there is plenty of interest in “the truth” of what is happening in the world, and little interest in the dynamics of lobbying in DC. I can understand the reluctance to try to do both, on many levels. But if we want to have an impact, then we have to try to figure it out.

    Who are the players on the Hill? Who are the principal lobbies? What do they want and what are they saying?

    Are there allies? Do we need to establish our own lobby? How can it be done? What is step one? Step two?

    If, as you suggest, a nightmare comes, the country will be caught by surprise. At a minimum, the establishment pols, lobbyists and media will be caught by “surprise”/ignorance/prejudice.

    There will be a tendency to look frantically for an explanation.

    They will look to the usual suspects: establishment pols, lobbyists, and pundits. We need to invade that world.

    Some pols will be receptive to Numerian’s analysis. But they need to know what it is.

  • At the moment the stock market is already in a correction, worrying about an economic recession. What it really should be worrying about is something much worse – a complete collapse of the credit markets globally, leading to a depression that will last 3 – 5 years.

    Credit is a structural issue; I’d say the Federal Reserve can address a credit crisis, if it tries. But monetary policy doesn’t address the fundamental U.S. economic recession problem, created by excess imports (including oil) and outsourced jobs.


    I just read this in the magazine. Short synopsis: the US economy is no longer Keynesian or Milton Friedmanian or any other dead white guy-ian. It is Bubblicious, or Greenspanian. He talks about the last and current bubble and the circumstances of their birth. He thinks alternative energy will be the next bubble. After the pop, the alternative energy industry will lay about in ruins and eventually recover.

    The guy ran an early-stage VC during dot-communism and claims he liquidated early.

    Forget it, Jake – it’s AmnesiaTown

  • Think what Numerian said sounded bad? It gets worse, much worse. Right now we are witnessing the collapse of a paper economy made possible by banking and the extension of credit. What we are seeing is a correction of dislocations in the paper economy owing to excess culminating in abuse. The present problem that the US economy faces is being looked at in terms of credit contraction, which will affect the real economy based on production as not only liquidity for expansion dries up but also the velocity of transactions decreases as both consumers and businesses retrench.

    However, the looming problem not only for the US but the entire world is the contraction of energy supply in relation to demand. Right now the world is using more petro energy than it can produce, and production is flattening if not yet falling. And the situation portends to get worse, not better, from the perspective of most experts. Forget the oil shale below $200 oil and then we still don’t have the technology to actually do this efficiently. Oh, then there’s the water required for extraction, too, and water is in short supply.

    In addition, the Bush Administration, in collusion with the energy industry, has been claiming that the research about climate change is uncertain, which is blatantly false and they know it. Very soon, however, no later than the new administration taking office, the US is going to wake up to the fact that carbon-based energy use has to be reduced owing to the rapidly accelerating effects of climate change due to global warming. While this has been largely submerged by the Bush Administration, there was an exposé tonight on 60 Minutes that was both alarming and damning, and a lot of people watch 60 Minutes. The upshot is that not only is there not enough oil to meet growing demand, we couldn’t use more even if it were found, if we don’t want to smother ourselves in our own waste. The solution to pollution is no longer dilution.

    This means quite simply that without an increasing supply of affordable energy, global production cannot continue to grow. Developed economies like that of the US are premised on unlimited growth. This has to change drastically unless new technologies are brought on line quickly and deployed globally.

    The unfolding energy situation will mean that after the recession caused by the popping of the paper bubbles, the recovery will have to occur on entirely different terms than before. What these terms will be remains to be seen. Right now, the powers that be are pushing for centralized solutions, especially electricity produced from nuclear energy and “clean” coal. However, there will be an opportunity to adopt a more decentralized approach that combines conservation with alternative energy.

    At this point it is not clear how either the US or the world are going to be able to deal with this enormous challenge. We are in deep doo-doo, and at the moment most are still in the dark about it, or else in denial.

  • crisis after crisis. It’s going to be an interesting 50 years or so.

    As for energy, we need to turn it into something that is capital, not a resource.

  • This means quite simply that without an increasing supply of affordable energy, global production cannot continue to grow. Developed economies like that of the US are premised on unlimited growth. This has to change drastically unless new technologies are brought on line quickly and deployed globally.

    the winner of the most relevant aside. to which i can only add: our leaderz aren’t going to move fast enough, there will be a second/extended energy depression after the paper one, and when you toss in massive changes brought about in the global climate, all bets are off.

    radical change *is* coming, the question now is only what kind.

  • First off, very very good post. But you’ve lost me with the municipal bonds.

    State and local governments can adjust taxes, budgets, and mill rates even as the housing market deflates, so that they’re able to meet their budget and bond obligations. It seems a credible prediction that these factors will put the squeeze on the communities to come up with enough to cover the coupons. And some of the hardest-hit communities may well default on their obligations–in this case the bondholders will be without the benefit of the insurers and re-insurers. This may be especially so in places that had the fastest growth (and steepest housing depreciations) such as California, Nevada, Georgia, Florida, North & South Carolina. I can see how this would have a chilling effect on the rest of the muni market, even for communities with (for now) healthy financials.

    But . . . I don’t think it follows that because *some* communities will default on their muni bonds that *all* municipal bonds are worthless (or that the market will perceive them as so) and/or that trillions of dollars will go up in smoke. The other defaults in the market will hurt them, yes, of course; it makes their value suspect, yes; state and local governments will have a very hard time issuing bonds without federal involvement, yes; but after the dust settles people should and probably will realize that not all muni bonds are junk by association.

    Also, it seems to me that the equities markets would also watch a meltdown like this and start reacting *before* it fully unfolds, rather than watch it happen, then realize what’s happened, and only then react.

    Finally, a little soap boxing. It’s not enough that certain people lose a lot of money. The SEC should bring charges of wire fraud and corruption against about half the people at the ratings agencies, maybe everyone but the mail room guys. This isn’t the first time this has happened, and they shouldn’t have three chances to get it right. The SEC and DOJ should also prosecute the people involved in issuing uninvestigated mortgages. They should go to Leavenworth. The boards of directors should be investigated and prosecuted. To be a board member is not an honorarium, it is a corporate function with certain responsibilities. Such as, to ask the right questions and take action at the appropriate time.

  • that could solve most of these problems.

    Namely, the narrative of America and the collective meme of the population needs to change. For at least 30 years, we’ve been in the mode of “I’ve got mine, F’k you!” No one feels connected to one another on basic levels, therefore why pay for someone else’s problems? If you are rich, why the hell pay welfare for someone that is poor? If you live in the city, what do you care about the family farmers in the country? Take this crisis, how much did we hear about de-coupling, and containment, and all that BS? And that’s what it was, a load of BS. But they honestly believed that sub-prime mortgages could melt down completley and not affect the greater economy.

    Maybe the best thing that can possibly come out of a depression is a renewed sense of interdependency. If we all pull equally (or realisticly semi-equally), we can get ourselves out of the muck. Maybe if I’m rich I should pay higher taxes for welfare to look after those without jobs? Maybe I should give a damn about how farming is structured if I want my food to be safe and available?

    I don’t think this is something we can regulate so much as something we have to go through the grinder to learn. If they had stabilized the economy after 1929, would we have gotten the New Deal? Would America have been the same superpower it was after WWII? Similarly now, if we don’t take this long awaited spoon of medicine, can we change for the better?

    I’m not looking forward to it, I don’t wish any group of people harm, but the more I think about this the more it is needed for our culture. Until we see this lifestyle and mindset crash and burn in totality, I don;t think Americans can snap out of it and move on. We need to reap what we’ve sown here for the benefit of all.

    PS – This doesn’t solve the energy problem, but it sure sets up a good mindset to be able to tackle a problem of that magnitude.

  • I didn’t mean to suggest that. With back-up insurance failing, many of the bonds depending on this insurance for their Aaa rating will now be considered greater risk in the market. Their price will fall and the yield in the secondary market will rise to attract buyers given the increased risk.

    Still, these bonds are not exposed to default from this event. Indirectly, the municipalities will find it difficult to raise new money at attractive rates, and with the compression on their tax receipts, some of them will be in trouble and there will be defaults. Especially for those communities depending heavily on property tax revenues. But these defaults will not be directly tied to the loss of monoline insurance.

    You are correct that the stock markets will discount these events as they develop – we may be going through that in part this coming week with a general sell-off in the markets.

    We’ll have to wait and see what sort of social anger there is as these problems worsen. If the economy falls into a severe recession, which seems likely, then your suggestion that the SEC go after the management in these financial companies may come to pass. I wouldn’t predict it just yet.

  • America is probably the most individualistic of cultures. The cult of the strong, independent individual is so ingrained and pervasive that we don’t think about it. It extends to such basic things as how we greet each other versus the way people do in Europe, Middle East or Asia.

    Individualism informs a lot of our laissez-faire economic policy, and it is a core principle of the Republican party. Alan Greenspan sat at the feet of Ayn Rand as a teenager, and it is no surprise his years at the Fed saw the most free-market, loose regulation policies since the 1920s.

    Maybe a sharp downturn will bring America together as happened in the 1930s. Of course, we romanticize this era in a way, and I’m not sure the current culture could ever get back to the romantic image we have of the Waltons. For one thing, families are a lot smaller. What I think may happen is that an underground economy of barter and trade in services will develop to help people survive “off the grid”, because people won’t be able to get loans. In fact, the whole Fair, Isaac credit score process may fall into disrepute, partly because it will be another model proven to not work, but because people will be fed up being defined by their credit-worthiness. This will be easy when so many people won’t have any credit-worthiness to worry about anyway.

  • In one respect, I think I agree with you. Any analysis or proposed reform must be sold to the public with language that resonates with existing cultural identity.

    In the 30s, the Communist Party had many sensible policy statements (far ahead of its time on race relations, for example) but the CP got nowhere because it was perceived as alien, and because it openly denigrated the existing culture.

    However, I do not think that Ann Rand or the “spirit” of individualism explains the history of the last 30 years. The story is darker, and more complicated, I think.

    What will be the effect of a depression? Fear, humiliation, anger, violence.

    FDR’s most famous speech did not declare “we have nothing to fear but fear itself” because the country had gone all warm and fuzzy and pulling together. Extraordinary leadership helped keep the ship afloat.

    Most people will be looking around for a scapegoat. And the public is just as likely to fall for rightwing demogoguery as any other kind.

    FDR had a basketful of proposals for practical solutions. This inspired some calm and some hope.

    I don’t see any FDR around. So I look to you, Numerian, to offer the next basketful — to the people who need to hear in words that will resonate for them.

    Obi Wan Numerian.

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