No Immunity for Bridgewater or Somerset County

The financial tsunami engulfing Wall Street threatens to drown markets and to tank the economy. The effect is being felt locally. Three factors brought this about:

1. Sub-Prime Loans Fed by Complex Financial Instruments. It was like a financial merry-go-round. A person went to a local bank, obtained a loan for a home purchase at an absurdly low introductory rate and left happy as a pig in mud.

The bank, though, did not hang onto that mortgage note. It worked with financial ‘wizards’ on Wall Street, who repackaged those mortgages into bond-like securities. Those securities were then traded in the financial markets. At that point, the borrower no longer knew who actually held the debt. Neither did the bank. In fact, neither did the ‘wizards’ of Wall Street.

These derivative securities allowed banks to off-load entire mortgage portfolios. By getting those loans off their balance sheets, banks and their Wall Street partners were able to slice and dice loan portfolios and to push them out into the bond markets. This enabled a continual remarketing of loans, thereby providing even more cash to fund housing construction .

2. Over-Extended Consumer Housing Demand. Hundreds of thousands of consumers, if not millions, were lured into buying homes at temporarily low teaser rates. The mortgage agreements specified that these initial rates would rise to normal market levels. However, many of those contracts were well below the repayment ability of borrowers who should have exercised far more prudence and restraint than they did. These were not good deals. When the hammer came down, too many of those borrowers found themselves unable to meet the higher monthly mortgage obligation.

3. The Federal Reserve. When, in the early 2000’s, Alan Greenspan, then Chairman of the Federal Reserve depressed interest rates to their lowest levels in 50 years, he set up the conditions which led to the current mess in the housing market. His purpose at the time was to stabilize the stock market and to stem any further damage to the economy. It was a good strategy because it pulled the country out of a pit. But Greenspan kept rates too low, too long -- he admitted as much in his post-retirement book.

Those artificially low interest rates had a corollary effect. They fueled a boom in the real estate market. Lured by the availability of easy money, Wall Street firms kicked into high gear to market an alphabet soup of derivative instruments (CDO’s, SIV’s, MBS’s, etc.) to keep the party going. But it could not be sustained.

Ben Bernanke, the current Fed Chairman who inherited today’s housing market bust may be repeating Greenspan‘s mistake: Lower interest rates quickly and hope that it doesn’t create more problems than it cures.

What Greenspan and Bernanke seemed to have glossed over is that existing legislation authorizes the Federal Reserve to prevent the errant behavior of financial institutions. Prudent regulatory oversight would have pre-empted the excesses of banking and financial houses. Both chairmen were asleep at the switch.

Opinion. The conservative behavior and fiduciary responsibility which America should be able to expect from its large financial institutions is a myth. If it were not, the deplorable condition of some of the biggest U.S. fiduciary establishments would not require a Federal Reserve bail-out and infusions of cash from Middle-East kingdoms

London-based Breakingviews.com is harsh on some of those bearing responsibility. Quoted in Saturday’s edition of the The Wall Street Journal, it refers to, "…the periodic recurrence of banker stupidity." Enough said.

Only Eight Left

If you find yourself shopping at the Bridgewater Commons Mall this weekend and you want a cup of Joe or a sandwich to maintain your energy, brace yourself for a surprise: The food court is being renovated, and there remain only a handful of eateries where you can refresh yourself.

A floor to ceiling partition now walls off about 85% of the former food court floor space. Only a few food emporiums are left on the upper level. Sbarro’s Pizza and Buffet Italiano is still in its original spot. Next is Sarku Japan in the corner position, followed by the cookie queen, Mrs. Field’s.

Facing the upper level escalators, leading up to what used to be the food court is the pretzel concession of Auntie Anne’s, which also maintains a second location on the middle level.

If all you want is coffee, bagels, or pastries. Gloria Jean’s is for you. It’s located next to Macy’s inner mall entrance on the upper level, just across from the escalators. You can find similar offerings at Starbuck’s, on the middle level near center court.

Should you have the time and are up to a real meal, McCormick & Schmick’s seafood restaurant on the middle level is your destination.

My wife and I will miss Michael’s Deli. It was a very active and varied eatery which drew plenty of early morning and lunch patrons with its wide assortment. That’s progress, but count ’em: There are now only eight food concessions available for your gustatory delight.

Civil Disobedience, Student Style

Today’s local newspapers were replete with stories and opinions about a group of Hunterdon County students at the Readington Middle School. These are the kids who were pinched by the administration, because they paid for their lunches with pennies.

The Star-Ledger ran a story about it in today’s county section. A same-day Courier News editorial discussed it, and the editorial page featured comments from Joan Greiner’s blog. The one thought that really grabbed my attention, though, was encapsulated in the last sentence from Jay Jefferson Cooke’s article in the Courier News. He wrote, “I don’t know where I’d be eating today if a few people hadn’t protested at a few lunch counters some years back.”

In 1849, Henry David Thoreau wrote an essay entitled, Civil Disobedience. It became the gold standard for carrying out non-violent protest. When Mohandas Gandhi, the renowned leader of non-violent resistance in India once was asked the source of his inspiration, he referred his American questioner to the works of Thoreau. Martin Luther King was Gandhi’s American counterpart. Both paid dearly for their techniques of protest.

Obviously, the stakes for a group of young school kids challenging the time allotted for lunch doesn’t carry the same import as that of people protesting peacefully for civil rights. But the thinking is similar. So is the risk. Perhaps it’s not such a bad idea to carry through with the kids’ detention. It can underscore to these young minds that sticking your neck out in public for a good cause can achieve gains, but not without cost.

I wonder if Schools Superintendent Jorden Schiff and Principal Catherine Hollinger would consider an assignment for these kids built around the essay, Civil Disobedience. The administration and teachers should read it first. It makes an excellent basis for children to understand that they are not the first to have thought of poking peacefully – if not without irritation, at authority.


Note: For Joan Greiner's blog post, see http://cnflemington.blogspot.com/. For the Courier News editorial see http://www.cn.com/apps/pbcs.dll/article?AID=/20080304/OPINION01/803040316/1009. Jay Jefferson Cooke’s article is at http://www.c-n.com/apps/pbcs.dll/article?AID=/20080304/NEWS01/803040402/1006/NEWS01. The Star-Ledger story is at http://www.nj.com/news/ledger/somerset/index.ssf?/base/news-3/1204608986194610.xml&coll=1

Franklin A. Yates, Bridgewater Citizen

Frank was a long-time resident of Bridgewater – longer, in fact, than the lifetimes of most people in this township.

Although born in Ancón, Panama Canal Zone, just two years before the canal’s completion by a U.S. led construction team, Frank would not see the U.S. mainland until his late teens, when he left to study at MIT in Boston.

His dad, who was a U.S. citizen, had gone to Panama to teach English, where he subsequently married a native Panamanian, Eudoxia Arias. At the time, U.S. law recognized the child of such a union as a citizen of the United States.

The survival skills and disciplines which Frank acquired in his childhood and teen years in Panama would serve him well throughout his life. He was an intelligent and diligent tri-lingual student. In high school, the French Consul presented him with an award for best student. Frank would go on to graduate from Balboa High School as valedictorian.

Frank was especially proud of his proficiency in Spanish. During his years in Bridgewater, he always sought out Spanish speakers, and never passed up a chance to strike up a conversation when he saw Latinos or Hispanics working in his neighborhood.

Although Frank belongs to an era which is slowly but irrevocably slipping into the past, he left a set of values and characteristics which are timeless. He was a highly-focused, self-effacing, selfless person, rigorously dedicated to his family, job and community. Had he been a participant in the workforce of the 60’s and 70’s, the growth years of the electronic and computer industries in the Bay State, he could have comfortably written his own ticket.

Instead, when Frank graduated from MIT sporting an electrical engineering degree, he slammed headlong into the job market of the Great Depression. Even that was not enough to daunt his indomitable spirit. He eventually landed a job in the Boston area, where he met his wife-to-be, Marjorie, a Jersey girl and Radcliff student.

The couple moved to Bridgewater, where Frank and Margie settled down and raised a family. Frank landed a war-related job where he was the key person to develop sub-horsepower electrical motors. This engineering achievement would provide critically-needed accuracy for anti-aircraft guns.

I could go on, but you get the idea: We all stand on the shoulders of people who preceded us and to which we owe gratitude and the obligation to follow in their footsteps. That’s really part of the essence of America, isn’t it?

Frank left us on Wednesday, February 20th, at the age of 95. But the example of his life still shines in Bridgewater.

Note: Did you know that Presidential candidate John McCain was also born in the Panama Canal Zone?

Bridgewater-Raritan Passes ‘Tentative’ 2008-2009 School Budget

Debate or Budget Meeting? I had a choice tonight: Stay at home to watch the Clinton-Obama debate, or drive to the Wade Building in Martinsville to see how the Bridgewater-Raritan School Board and Administration would deal with the preliminary 2008-2009 school budget. Once such a budget is adopted, I’ve never known one to change before being presented to the voters in the April election.

Given the obfuscations of both national candidates in the TV debate, which I painfully watched for a few minutes upon returning home, I think I made the right move in deciding to go to the Wade building.

Here’s the recap: A general fund budget of $128.8 million was adopted for the next school year. That represents a $4.9 million increase (4%) over last year’s number.

The impact is that, if finally adopted as presented, the new budget will result in a real estate school tax increase of $141.81 for Bridgewater Township homeowners on a house with a $450,000 assessment. Raritan Borough homeowners would see an increase of $141.83 on a house assessed at $350,000. (These assessed values are said to represent averages in each community.)

This year, the Bridgewater-Raritan School District received a total of $12.1 million in State Aid, up by 24.9% from last year’s $9.7 million. You need to know that $2.4 million of this year’s total state aid was part of Governor Corzine’s 11th hour distribution of extra money to school districts throughout New Jersey. Without such assistance, Bridgewater-Raritan’s proposed budget of $128.8 million would produce a significantly higher local real estate tax.

The best fiscal surprise of the night, though, is what the Board of Education decided to do with that $2.4 million in extra state aid which drifted down like manna from the Corzine Administration. Those funds were awarded to the school district without spending limitations: In my opinion, a dangerous move.

However, bowing to much better judgment and to the spirit of the times, the Board and Administration decided to return $1.5 million to Bridgewater-Raritan taxpayers for direct tax relief. A very, very good move!

The remaining $.9 million of extra state aid will be used for facilities improvements at the middle school (largely for paving the parking lot), curriculum improvements, and to cover an increase in the District’s obligation to the Public Employees Retirement System.