Greed, Fraud and Duplicity: How the Housing/Lending Bubble Inflated


Author Richard Bitner was kind enough to send me a copy of his new book Greed, Fraud & Ignorance: A Subprime Insider's Look at the Mortgage Collapse which I can recommend to you as a concise account of the entire subprime lending bubble and implosion.

Bitner has a unique view of all the players, as he was a major subprime mortgage broker for many years prior to the implosion. He was unashamed to describe himself as a subprime mortgage broker before the excesses consumed the business, as he felt that even though the system was less than perfect, the subprime market served a valuable purpose to those with impaired credit. With proper vetting and risk management, the higher-risk borrowers were rejected and those whose credit history supported their ability and willingness to pay could buy a house by paying higher interest rates.

I can't summarize a 191-page book in a few paragraphs, but this is my primary take-away from this very clearly written account:

When everybody from the borrowers to Wall Street began gaming the system, all credibility was lost. It is still lost, and will remain lost until the entire model of payment for all players is radically restructured.

Bitner reports that up to 80% of all subprime loan applications were rejected by honest subprime mortgage brokers. This stunning statistic suggests the frenzy which overtook the nation as people who were clearly below-average credit risks stormed the housing market, trying to get in and get rich just like everybody else.

While there is nothing remarkable about this human behavior--we all want to get in on the Get Rich Quick Scheme of the Day--what is remarkable is that Wall Street and the credit ratings agencies went for the Get Rich Quick scheme in the same frenzied fashion. (OK, so there's nothing remarkable about that, either.)

But unlike a subprime borrower, Wall Street and the rating agencies (Moodys et. al.) could approve their own terms and grant themselves a high rating. In Bitner's memorable description, "Not only was the fox guarding the henhouse, he hired a contractor and built a separate wing so he could feast at his convenience."

Bitner describes how Wall Street's securitization of mortgages fragmented what was once an integrated process. The granting of a mortgage used to be--and still is, in smaller local banks--an integrated process within the bank. The loan officer verifies employment and income of the borrower, hires a trusted local appraiser, confirms the loan meets all underwriting requirements, confirms the down payment wasn't borrowed, etc.

As Bitner writes:

"In addition to creating a renewable source of capital, mortgage securitization helped fragment the industry. An entire process originally performed by one entity was divided into separate components. This fragmentation gave each player a claim of plausible deniability."

A great strength of this book is its clearsighted exploration of the greed, fraud and duplicity which was engineered by every player. Interestingly, the automation of the mortgage process via computer risk modeling--a credit score of 580 enabled this mortgage product to be approved, while a score of 620 gained approval for this product, and so on--allowed brokers to fudge and finesse applications to squeak in and get approved.

With the help of a less-than scrupulous mortgage broker, the borrower could "forget" items which might lower his credit score. The broker, knowing the underwriting rules, might write the loan only in the wife's name, as her credit score was 20 points higher. There were innumerable ways to game the system and get a loan approved.

The entire system flourished because the incentives were all wrong. The borrower got the money by lying,"forgetting" or fudging. The broker only made money by getting a lender to fund the loan, while the lender only made a fat profit if the mortgage was sold to Wall Street for securitization, and Wall Street only made money if they sold the mortgage-backed security to an investor with a high rating from Moodys or Fitch, who only made money if they rated the MBS as AAA regardless of its true risk.

It wasn't always this way. As Bitner explains, the ratings agencies in the 1970s received income on an entirely different subscription model. The SEC (securities and Exchange Commission changed the model: "Instead of buying a subscription, the companies would pay the agencies for rating their debt. In hindsight, this may have been the single greatest mistake in the history of the SEC."

Back in the early 90s, private investors were the only buyers of subprime debt. Obviously, if you sold a poor-risk loan to an investor who was subsequently burned, that was your last sale to that investor. Word would get around and your business would dry up and blow away. But once Wall Street got into the act, according to Bitner the demand for mortgages to securitize was insatiable.

And to feed this ravenous, supremely profitable maw, the mortgage industry conjured up a raft of new products to sell--products which were scored for risk like traditional mortgages. Only the new "exotic" loans were highly risky--a fact which every player from the broker up to the rating agencies cloaked for their own benefit.

The rating agencies played a huge part. Bitner quotes two sources as snapshots of the agencies' power to manipulate the system:

"Only slightly more than a handful of American non-financial coprorations get the highest AAA rating, but almost 90% of collaterialized debt obligations (CDOs) that receive a rating are bestowed such a title. Are we willing to believe that these securities are as safe as those of our most honored corporations?" (Josh Rosner)

"There are two superpowers in the world today in my opinion. There's the United States and there's Moody's Bond Rating Service. The United States can destroy you by dropping bombs, and Moody's can destroy you by downgrading your bonds. And believe me, it's not clear sometimes who's more powerful." (Thomas Friedman)

Bitner does an excellent job of describing the inherent conflicts of interest in the entire mortgage lending and selling of MBS process:

"In some ways, the investment firm-rating agency relationship mirrors the dysfunctional nature of the broker-lender relationship. If the broker is having trouble getting a deal approved, his account executive will tell him how to structure the loan. When the investment bank has a security filled with garbage loans, the agencies advise then how to structure the deals in order to maximize profit.

The agencies defend themselves by issuing 100-page disclaimers to go with the ratings. It's equivalent to building a car and sticking a label on the inside that reads, "We want you to know we can't stand behind anyone who had anything to do with the assembly of this vehicle. If the steering wheel falls off, motor falls out or any bodily injury comes to you as a result of driving this car, just remember, we told you so."

You have probably read about each piece of the subprime lending puzzle somewhere, but this book puts the puzzle together in admirably clear fashion. You can download the first chapter for free on the website The Mortgage Insider where you can of course buy a copy as well.

As with all books I discuss here: I receive no compensation, fee, commission, etc. from the author or publisher. I decide whether to discuss the book on its merits to readers. If you purchase a copy of Greed, Fraud & Ignorance: A Subprime Insider's Look at the Mortgage Collapse via this amazon.com link, I receive a 3-4% slice which costs you nothing (amazon pays me, your price is the same whether you buy it from this site or not.) If you prefer to buy a copy from the author's site or another bookseller, I receive nothing, which is fine with me.

This book provides the most succinct account of the subprime complex I have found. Others have done great jobs with one slice or another, but this book covers it all, from appraisers who have to play ball if they want to survive to duplicious brokers all the way up to the Federal Reserve's role.

Bitner concludes with some suggestions on fixing the mess. While I generally agree with his ideas, I don't think trust can rebuilt without the entire edifice being rebuilt from the ground up. The entire inherently conflicting models of payment for the rating agencies, appraisers, brokers, lenders, and Wall Street all have to be radically changed.

The model will simply blow up again unless appraisers are paid for the accuracy of their appraisals, not by those with a vested interest in the highest appraisal. Ditto for the ratings agencies and everyone down the line. As long as everyone only gets paid by foisting off high-risk debt onto the next chump, the system is destined to fail, and can never regain the trust of global investors.

Is such a rebuild from the ground up possible? Not at this time. The entire edifice will have to fail catastrophically before the players will accept a new regulatory world.

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Advice and Predictions


Every once in a while you see a photo which deserves to be in either National Geographic or a museum photography exhibit. Correspondent John U. was kind enough to send this photo he took at the Burning Man event in Nevada:



I asked John for a caption suggestion, and he came up with the perfect one: Somewhere under the Rainbow.

As John put it, "it's a right-click world," meaning anyone can grab this for their own use. As my colleague Jeff Blair noted, the Web is a giant copy machine.

Isn't this a great photo? Thank you, John, for enabling others to enjoy it. It inspires me to offer up some advice, but unfortunately I don't have any. I do have some predictions, though, which are easier.

1. U.S. Unemployment will hit 15% within the next four years. The general consensus at the moment is unemployment might inch up from 5% to 6% before everything returns to "growth" wonderfulness.

The whole "unemployment" number is suspect, of course, for it only measures people who have laid off/quit and who are "actively seeking employment" at their local unemployment office. "Discouraged workers" or those out of work longer than six months aren't even counted.

Most people on the unemployment rolls are "between jobs," and so a stable unemployment rate suggests the unemployed are finding other jobs.

Other twists include: self-employed people whose income drops to near-zero are not counted, and a laid-off full-time worker who accepts a part-time job at much lower pay is counted as employed. The non-legal workers in the U.S. aren't counted either, of course. though it is estimated there are 6 to 10 million or even more undocumented workers.

The number of employed in the U.S. is about 138 million. Add in about 7 million officially unemployed and at least 5 million cash/illegal workers, and you get a total workforce of about 150 million. A 6% unemployment rate suggests about 8 million "officially counted" workers would be out of work in the "short, shallow recession" the punditry is predicting.

It's easy to see how the true unemployment rate can be fudged/massaged in a deep recession. All those out of work longer than six months--not counted. Self-employed (Realtors, mortgage brokers, etc.) no longer working or making an income, not counted. "Discouraged workers" (i.e. anyone who stops reporting to the unemployment office) aren't counted, either.

So in predicting 15% unemployment, I am saying 22 million people who would like to be working won't be able to find a real job. But the "official" rate of unemployment at this dire moment may well be 9% or so, as millions of unemployed won't even be counted.

This may sound like a return to the Great Depression. For me, it's simply a return to 1982. Are you 26 years old? Well, the year you were born, 1982, was a nadir for the U.S. economy and its workers. Unofficial unemployment was estimated to be 15%, while the "official rate" hit 10.8%.

While there are significant differences between the early 80s and the present, several conditions are quite similar:

1. Few could borrow money, choking off business expansion and auto and real estate sales.
2. A real estate bubble (modest by current standards) was popping.
3. Energy costs had risen enough to inflict damage on the economy.
4. Global competition was forcing laggard U.S. firms into bankruptcy.
5. Purchasing power was dropping like the proverbial stone.
6. Financial institutions were failing.
7. Cities were edging toward bankruptcy.

So why am I predicting such a high unemployment rate? Basically, the bigger the bubble, the longer and deeper the unraveling/unwinding. Take the biggest real estate bubble in global history and the biggest lending/financial bubble in history, toss in declining purchasing power, a public sector veering toward a cliff of insolvency, a banking sector heading for the same cliff, and a bunch of other negatives covered here and elsewhere in the blogosphere, and it's easy to predict this will not be a "short, shallow recession."

I live in a college town of 120,000 residents (about 35,000 are students). Here are some fine retailers who seem like naturals for this college environment: Ross Dress for Less, Barnes and Noble bookstore, an independent bookstore or two, Eddie Bauer (for the upscale students), and Gap.

Yes, they were all here, but they've all closed. Yes, every one of these "natural" retailers folded shop and left town. So did the local Burger King. If the recession hasn't even started, and a college town has already been gutted by businesses leaving, what do you reckon will happen when the recession deepens? How many other chain stores will be closed as "insufficiently profitable" by corporate HQ desperate to maintain a profit?

And how about when those 10% across-the-board cuts our Governor has proposed to ease the state's "fiscal crisis" (which is basically permanent except during bubbles) hit the University and other agencies? Unfortunately, these government entities' primary expense is employees. There won't be any way to trim the budget without lay-offs. Those 10% cuts will be very painful to those losing their jobs/contracts.

Sadly, it's all too easy to predict a tripling of unemployment. Fewer paychecks leads to reduced spending which leads to reduced taxes which leads to reduced headcount which leads to fewer paychecks, and so on.

Now we get a double-whammy: a consumer recession and a business-investment recession. We all know about the consumer's back against the wall; it's the BusinessWeek cover story Over the Limit. But what about business investment?

Internet: built out.
Software: built out.
Office space: overbuilt.
Retail space: overbuilt.

The same issue has a story entitled, Capital spending hangs in, but for how much longer? Even more interesting is the story: $1.6 Trillion. Now We're Talking Stimulus: That's how much is just sitting on U.S. company books. And for what? Corporations with fat cash reserves aren't doing much for investors—or the economy.

Allow me to explain to the mystified writer of the piece: corporations are holding onto their cash because they don't see any investment opportunities worthy of risking the capital. These folks aren't morons; who would be dumb enough to sink money into anything just as recession is about to grab the throats of consumers, businesses and government? Even Big Oil is worried high oil prices won't last--and they have a point.

2. Housing will continue down the path I laid out in 2006. I still think these little charts are a good roadmap to the future:



I think we may finally be exiting "The Plateau of Denial" though this is unconfirmed. Continued sharp price declines would be confirmation.



And if that isn't negative enough, then here's one last one to ponder as "impossible":



Back in the good old days of deflating real estate bubbles (say, 1981), many owners had enough equity in their homes that they could "seller finance," i.e. offer the buyer a private mortgage, usually for five years or so, with the idea being the buyer would get a bank mortgage and pay off the private loan once lending to return to normal.

While about 20% of all homeowners own their houses free and clear, and these folks could offer seller financing, the general trend for the remaining 80% is declining equity. If you have to sell, but few can borrow, then what happens to price? If you expect, like many of us do, that the entire global financial markets will remain frozen/in shock/implode, then you don't really know how low prices will go because you won't know when the mortgage market will return to "normal."

If you believe all the financial issues (liquidity crisis, freeze-up of CDO market, etc.) are about to get resolved, then you will find my predictions as absurd today as they were in 2006.

All I can say is: real estate and housing are totally dependent on a freely accessible flow of capital for lending/borrowing. If for any reason people can't borrow $500,000, or decline to borrow $500,000, then houses listed for $500,000 will not sell. Their price will decline to what people will willingly borrow.

The question then becomes: what if few can borrow, or are willing to borrow huge sums? Then the price will have to drop to the point the house makes sense as a business proposition, i.e. market rents enable a better return on capital (investment) to a cash buyer of the house than any other potential investment.

I submit that investment matrix supports my prediction that housing has a long way yet to fall in most global markets. Remove appreciation, add in periods of vacancies, operating expenses, taxes, maintenance and all the other expenses of a rental property and you get a much different investment valuation for housing than you would with a "market appraisal."

Wait a minute, I do have something which might pass for advice, taken from Lao Tzu: The way of the Tao is reversal.

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Saturday Quiz and More on the Mis-Use of Pyschotropic Drugs


Who is this man?

--Born in Minnesota in 1861 (3 years after MN statehood)
--Died in California in 1947 at the age of 88
--Little formal education, began his career at age 14 as a scout in the Southwest.
--Worked as a mounted messenger for the Western Union Telegraph Company in California and Arizona.
--Traveled in northern Mexico and the American Southwest, including Texas and Oklahoma, earning a living as a buffalo hunter, cowboy, and prospector.
--Served as Deputy Sheriff of Pinal County, Arizona, barely escaping with his life from the Tonto Basin Feud.
--Married in 1884 and settled down to tend to an orange grove in Pasadena, California.
--Moved to South Africa in 1893 and joined the British South Africa Company as a scout. He became well known in Africa for his ability to track, even at night, and the Africans dubbed him He-who-sees-in-the-dark
--While in Africa he fought in four wars, including the Second Boer War as a British soldier. He was awarded the Distinguished Service Order by Britain.
--Traveled to Alaska to prospect in the Klondike Gold Rush.
--Was befriended by Teddy Roosevelt and was an early ardent conservationist.
--Engaged in counterespionage for the Allies in World War I.
--Struck oil 1923 at Dominguez Hill, California, becoming wealthy.
--Much of his later life was spent supporting conservation organizations he had helped found such as American Committee for International Wildlife Protection (now a committee of the World Conservation Union).
--Provided inspiration to the Scouting movement.

Here's the Answer.

Special thanks to long-time contributor John U. for bringing this amazing life to my attention.


Correspondent L.S. sent in this personal account of the wanton distribution of powerful psychotropic drugs, their side effects, and also suggested a book on the topic.

I had wanted to respond to your essay on prescription drugs the other day. My 86 year old mother recently spent 2 days in the hospital due to a bad reaction to Fosamax. That little adventure cost Medicare (i.e., the taxpayers) $16K. After querying the doctor about the effectiveness of this drug, I suspect exercise with light weights would be more beneficial.
And the doctor’s "give it a try" attitude with anti-depressants for may dad was so disastrous I had to demand the doctor take him off the stuff. My mom would call me at work in tears, saying dad had become a monster and could I please come over right now and help.

A good friend with two ruptured disks in his back was prescribed anti-depressants because "some of the pain might just be in his head". After a miserable 6 months he took my advice and threw the stuff in the trash. Another friend was in counseling trying to deal with her mother’s affliction with Alzheimer’s, and the family problems this brought about. By the second session, the counselor wanted to prescribe anti-depressants to my friend. I said to her, "let me get this straight, you are going to alter your brain chemistry in order to deal with a transitory problem?". I’m sure you know of some similar cases too.

There’s a book I’ve been meaning to read on the subject which sounds pretty good:
Artificial Happiness: The Dark Side of the New Happy Class

Thank you, John U. and L.S. for these contributions to our understanding.

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Readers Commentaries has been updated, with plenty of dissent and interesting perspectives on Hillary, pharmaceuticals, Big Media Meltdown, and more.

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One Reader's Account of Psychiatry and Drugs


Reader S.W. sent in this personal account of one family's experiences with American psychiatry and its "default setting" prescriptions of powerful, potentially dangerous psychotropic drugs.
Some readers of my Wednesday entry, The Drugs Which Drive You Crazy felt I had veered over the edge to hyperbole. Please read this account, which is hardly unique in today's U.S.A., and then tell me the American system of mental health via pharmaceuticals is healthy.

The reason I'm writing is that today's entry causes me to recall a personal nightmare with my teenage son and big pharma a few years ago. I don't like to think about it, it was a very harmful and painful experience. Happily I can say it is all behind us now. I want to thank you for warning people about the psych drug racket. From my personal experience I can only conclude that psychiatrists are nothing more than sales reps for pharmaceutical companies. (Emphasis added--CHS)

My son was having big trouble by the time he hit High School. Instead of doing schoolwork he sat in class memorizing japanese alphabets and pi. He just didn't care about the curriculum or anything else and because of his bizarre behavior he was referred for counseling. Then he was referred to a psychiatrist, and they immediately diagnosed him with paranoid schizophrenia and started him on a long series of drugs that had heartbreaking side effects and made no real improvement in his 'affect'. I had to pull him out of school. I am ashamed to say we had him warehoused in the back room, and it seemed there was no hope.

I would never have questioned the experts, and this could have gone on forever if it were not for the fact that a very similar child in the family was identified as being on the autistic spectrum. I made a great effort to have him diagnosed properly, and for over a year I never talked to my son about what I suspected as I didn't want to influence the process. I took my son to no less than three neurologists, and after a lot of testing he was diagnosed with a neurological disorder called asperger's syndrome.

When I went back and explained this to the shrinks, they refused to consider the new diagnosis and were very resistant to discontinuation of meds. There seems to be a disconnect between neurology and psychiatry when it comes to autism. Although my experts trumped their experts, they were insistent that the new diagnosis was a 'fad' and that I was just grasping at straws.

I was surprised at their opposition, as I had done everything right to get a second diagnosis. My son had just turned 18 and when I went with him to his appointments to discuss this, they treated me as if I was meddling in the affairs of an adult patient, and recommended that he needed 'case management'. I found out from reading the shrink's reports that my son's original diagnosis was based on 'negative' symptoms (i.e., flat affect, depression) and their opinion that he was concealing paranoid and delusional ideation, which he had never admitted to having.

They did not want to help with discontinuation, and when they finally relented and agreed to a 'trial' discontinuation, the prescription for the tapering was very rapid. I learned from reading a book on the subject that this is a common trick they use to cause discontinuation to fail, because you must taper from anti-psychotics very slowly or you can actually cause psychosis. I used a different formula for discontinuation, based on a self-help book. I was unsure throughout this period that I was doing the right thing, as I had no support. I had nothing to follow but pure intuition.

After discontinuing, my son shed all the horrible side effects. Over time his personality reappeared, after years of being a zombie. He is now healthy, happy, and pursuing his special interests, such as teaching himself Japanese and enjoying fine tea. I hope one day he can go back to school, but that's up to him.

I know there are some people who may need medication for real mental illnesses, and I am not anti-treatment. I am not a scientologist. All I am saying is that when faced with such a critical issue, parents must educate themselves, trust their intuition, and get another opinion before blindly accepting diagnoses and drugs from shrinks. Prescribing drugs is how psychiatrists make their $$$.

In my view, this reader's experience reflects the terrible dilemmas in the American mental health complex which have been accepted as "normal"--until you or your family are caught up and badgered to comply. Then your perspective rapidly undergoes a revolution.

The responsible parties include not just a medical profession all too enamoured of prescriptions and a pharmaceutical industry all too eager to push the prescriptions and not eager at all to test drugs in combination with other drugs, e.g. OxyCotin and Valium, which recently killed actor Heath Ledger--but the American public, too.

For the public all too often demands a "pill-fix" for their medical problems, and demands the impossible of medical professionals pressured to "do something" when all too often the "first, do no harm" step would be to eliminate all adverse environmental influences such as high-sugar and junk food diets, TV and video games, sedentary lifestyles, etc., all of which are in the direct control of the patients and their families. Doctors can prescribe such "treatment" but the patient all too often ignores this "prescription" in favor of a simple (but often horrendously costly and ineffective) "pill solution."

Clearly, S.W. did the right thing: she pursued a correct diagnosis of a difficult-to-diagnose condition in the face of opposition, and then sought to educate herself on treatments, side-effects, etc. In other words, there really is no alternative to taking responsibility for your own health and the health of your family.

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Why I Hope Hillary Is Not The Democratic Candidate for President


At the grave risk of alienating readers who are keen supporters of Hillary Clinton's campaign for the Presidency, I would like to explain my opposition to her bid.

As harsh as this may sound to her supporters, I believe her campaign--and thus her governing style--combine the very worst of her husband Bill's Presidency with the worst of George W. Bush's Presidency.

To wit: Hillary combines Bill Clinton's poll-driven emptiness with Bush's attack politics.

I am not a fan of either Bill Clinton's or George Bush's presidencies. Clinton accomplished very little, given the Democrats' initial control of Congress, and his most enduring accomplishment-- ending welfare as we know it--was a Republican platform plank which he glommed onto once his polls indicated the public supported it.

He did oversee a reduction in the relative size of the Federal Government and the Federal deficit--accomplishments the Republicans only paid lip-service to but never actually pursued--and he did stand up at several key foreign policy junctures: the stabilization of Haiti and the NATO bombing of Serbia (four years too late for all those slaughtered while he dithered, but nonetheless he finally agreed to use force).

His efforts at a comprehensive peace between Israel and Palestine were clearly sincere and well-intentioned. He was unlucky to draw Arafat as a negotiating partner, but lucky in drawing a booming economy which carried him through eight years of prosperity.

His inability to keep his trousers zipped up was the least of his failures as a leader. For he pioneered the "poll-driven presidency," in which a desire for approval is the leader's single propelling goal. Clinton succeeded in being a popular president, but he was the classic "empty suit": what exactly did he believe in that can be traced directly to policy? It is fair to say he believed deeply in trying to broker peace in the Mideast; but this was an easy thing to support because virtually every American favors peace in the Mideast.

What did he push which was deeply unpopular but vitally important? Medicare reform? Yes, his administration trimmed a bit of fat here and there, putting off the day of reckoning a few years; but what deeply divisive issue did Clinton oversee but welfare reform, which was essentially pushed on him by the Republican Revolution of 1994, when the Democrats' pandering and squabbling was rejected by voters?

As for George Bush, he has excelled at empowering hatchet men like Cheney and Karl Rove to do his "attack-politics" dirty work. His administration's contempt for the media (free press) is legendary, as is their obsessive control of "message."

I don't read material hatched in the "vast right-wing conspiracy," preferring mainstream political journals like The New Republic. It seems Hillary Clinton's campaign has learned all too well from the Bushies: like the Bush Administration, Hillary's campaign is run by a small circle of fanatical loyalists, and lower-rung staffers are terrified of being caught "off-message." Both the Bushies and Hillaryites treat the press to robotic "on message" events which are tightly managed and controlled.

How is this different from any political campaign? Of course the "message" is controlled in every campaign, but you need some sense of history to see just how far we have come from a healthy relationship between the press and the candidates.

There were few tougher, more paranoid politicos than Richard Nixon, but even Nixon could sit down with Hunter S. Thompson (gonzo journalist) and discuss college and pro football at length. This simply doesn't happen in either the Bush or Hillary camps, where sycophants and control freaks essentially rule the roost.

I keep trying to ascertain what core beliefs are powering Hillary's quest for the Presidency, but her positions are constantly "nuanced" into favorless pablum by her "poll-driven politics" machine, depending on her audience of the moment.

Good Ole Bill has been recruited as attack-dog, something which raised a few eyebrows even among Democratic stalwarts. Bill took time out of his busy schedule making millions as a huckster oops, I mean speaker, to remind Hispanic voters that their interests might not align with an African-American candidate's. Thanks, Bill, we as a nation desperately needed you to spout some Karl-Rove-like innuendo.

Bill wasn't the first president who eagerly sought popularity to salve his deep insecurities; Lyndon Johnson famously wanted to be popular, too. But he pushed through civil rights legislation which was extremely unpopular with southern politicians and their constituents, and he did so ruthlessly and at great political risk.

Bush and Hillary aren't the first politicians to surround themselves with a Praetorian Guard of fanatic loyalists; like Hillary, who feels abused by a "vast right-wing conspiracy," Richard Nixon felt abused by a "vast left-wing conspiracy" which he sought to identify with "Enemies Lists" and the like.

It seems crossing Hillary in Bill's White House was a good way to lose your kneecaps, or access to the President. By some insider accounts, V.P. Al Gore somehow fell out of favor with Hillary towards the end and as a result he was quickly marginalized.

Is Hillary as brilliant a strategic thinker as Nixon? You can be closed and controlling, of course, and yet bring nothing in the way of grand strategy to the table. The Watergate Crisis has overshadowed Nixon's other accomplishments, which become even more impressive when you consider he was opposed by an overwhelmingly Democratic Congress and faced with spiraling inflation and an unpopular war.

Here is Hillary's long piece in Foreign Affairs on her global views:

Security and Opportunity for the Twenty-first Century. The other candidates' pieces are roughly equivalent: more or less "restore America's standing in the world" plus other easily-supported positions. After all, who doesn't want to see America's standing in the world improve?

Nixon made horrendous mistakes, of course--not accepting a negotiated end to the Vietnam War in 1969, and imposing wage and price controls--but he also managed some innovative domestic policies such as block grants, and set the wheels in motion ("triangulating" the Soviet Union and China) to limit nuclear weapons for the first time (SALT I Treaty) and engage the Soviet Union and China in ways which led to the collapse of the USSR and the emergence of China.

To his credit, Bush doesn't seem to care much if he is popular or not. He is apparently drawing lower poll numbers than Richard Nixon just before he resigned.

What has Bush accomplished with his hatchet men and attack-politics? He has overseen the rot of the American economy, the ballooning of unsustainable deficits (he never used his veto to cut spending), the severe erosion of civil liberties via the excesses of The Patriot Act, etc., and the miring of the U.S. Military in the quagmire of Iraq.

Does George Bush have a Grand Strategy in Iraq a la Nixon's triangulation? It is difficult to tell, but judging by the incompetence of the occupation and the ineffective diplomacy his administration has pursued in the area, an objective observer finds precious little persuasve evidence of a brilliant Grand Strategy. The story has changed again and again as the need for support waxes and wanes; first, it was trumped-up "evidence" of WMD (weapons of mass destruction), then it was democracy, and now it is oil--oops, I mean, regional stability.

In fairness, I should note that Bush's diplomacy in Asia has been far more successful: Winning Asia: Washington's Untold Success Story by Victor D. Cha.

I fear Hillary has learned all the wrong lessons from her husband and from George Bush. From her husband she has clearly learned the value of "nuancing" every position to death, and using polls to massage her beliefs and policy stances to generate the desired results, i.e. "popularity."

From George Bush she has learned the value of suppressing media access, surrounding herself with fanatically protective sycophants and deploying hatchet-men to do her political dirty-work.

Like Nixon, she views any skepticism or probing of her campaign or positions as orchestrated attacks by a vast conspiracy, rather than evidence that some people don't like her, just as millions didn't like Nixon and thought him a dangerous phony. To counter this "right-wing conspiracy," she maintains rigid control over her entire staff, and woe to the staffer who speaks out of turn or "off-message."

Unlike Nixon, she does not have the redeeming quality of being a grand strategist; her platform is long on muddled, easy populism (universal healthcare) and short on vision--what President Bush I dismissed as "the vision thing." Like George W. Bush, she is an expert in partisan domestic politics, and in raking opponents over the coals via proxies.

From everything I have read--and precious little leaks out of her campaign that isn't pure "on-message" pablum--I conclude she has learned all the wrong lessons, and is the ideal candidate for "more of the same"-- more poll-driven "nuance" and more attack-politics, the very tools of governing most of us find most appalling and tiresome after sixteen long years of the Clinton-Bush administrations.

Could I be wrong, and Hillary is poised to become a great president? Of course I could be wrong; but little in her Senate career (which can be summarized as "keep your head down, go along to get along"), writings or very public history suggests that is likely.

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