FDH Fantasy Newsletter: Volume I, Issue VI

By Rick Morris

For the most part, we keep our fantasy content on our fantasy website and fantasy blog and keep this site for content on all subjects. It allows our readers to find specific content more easily that way. However, it has come to our attention that because our new fantasy sports newsletter is published on the older Blogger platform that our readers may be limited in their ability to subscribe to it. There does not appear to be a way to have content on the FantasyDrafthelp.com blog forwarded to an aggregate news reader -- however, we know that we have that ability here. So we will link to that newsletter each week right here when it is published. Here is this week's newsletter.

2008 ALCS/NLCS preview

By Rick Morris

First-round predictions were 1 for 2 in each league. I hit on Tampa, although in all modesty they were the biggest gimme in the first round since they were playing the offensively all-or-nothing White Sox the Angels, until belatedly shaking their Boston fear at Fenway in the latter half of the series, did not in any way resemble the best team in baseball (which they were during the regular season) or my preseason pick to win the World Series. So now the Red Sox, who carried along their own nonsensical "Curse" for lo those many years, now have some type of edge many consider supernatural over the Angels. And so the world turns ...

Speaking of curses, the Cubbies now enter their second century of championship futility wondering what it will take to make it up to the spirit of that old billy goat. Their collapse was even more shameful than that of the Angels and now two consecutive postseasons of complete futility will be weighing down on the Cubbie Nation this winter. Meanwhile, Philly got by Milwaukee in a series that nobody will be confusing with an all-time classic anytime soon.

Onward to the second round ...

RAYS-RED SOX: You don't have to be a "sports entertainment" fan to appreciate the wisdom of the one and only Ric Flair in regards to this series: To Be The Man, You've Got to Beat The Man (WHOOOOOOOOOOO!). Personally, I loathe the Sox and their "Poor Man's Yankees" dynasty and their jerky bandwagon fans and ... ahem. Okay, back to the subject at hand. By decisively vanquishing what was baseball's best team over the course of 162 games in 2008, Boston proved that, completely healthy or not, they are still the team to beat until proven otherwise. If Josh Beckett comes to resemble the Josh Beckett of Octobers past, they are a prohibitive favorite. Tampa has got to make the most of their home field advantage, including utilizing their speed offensively and defensively on the turf. The problem is, the Sox have been adding some fleet young legs to their lineup over the last two years as well. The Rays have to win the first two games at home to have a chance, for that insurgent vibe to take over and give a sense that the big-market bullies are getting punched in the mouth -- similar to what Florida managed vs. the Yankees in the '03 World Series. My assessment is, though, that it's unlikely, especially with Jon Lester's excellent pitching in the ALDS. If Tampa loses, they've got an entire winter to bemoan not going out and getting a strong right field bat at the trading deadline. Red Sox in 6.

PHILLIES-DODGERS: This brings back a lot of memories for me, watching these two epic late '70s monsters battling it out as a wee tyke back in 1977 and 1978 on this stage. I'm going to be waiting for Greg Luzinski and Ron Cey and Shake'n'Bake McBride and Steve Garvey and Larry Bowa and Bill Russell and Steve Carlton to come on my screen! Deciding a series based on feel can be extremely deceptive. Having said that, here's the feel of these two teams right now: after their shockingly one-sided first-round win, the Dodgers look like a repeat of their squad from '88, a team of destiny -- while the Phillies merely look like a good team that dispatched another good, slightly less experienced team in Milwaukee. When I said that the Dodgers would rely heavily on their pitching, I was underestimating their postseason hitting -- not trusting the health of Rafael Furcal, not trusting Casey Blake to continue to hold off his long-overdue resumption of journeyman status, not trusting Blake DeWitt to be able to hold his own at this point in his career, not trusting James Loney to show enough pop. I was wrong, and the Dodgers aren't going to lose any remaining series because of a lack of offense. Philly got big-time production out of Cole Hamels and Brett Myers in the first round and those two will have to be huge again for the Phils to get by. Derek Lowe and Hiroki Kuroda are enigmatic to say the least, but they've been on lately and on the whole, LA's pitching looks more dependable. Just think, in addition to the Dodgers getting past Philadelphia 30 and 31 years ago to get to the Series, the economy was also in brutal shape back then as well! The more things change, the more they stay the same. Get ready for Manny and Nomahhhh's return to Beantown. Dodgers in 6.

And if Charlie Manuel wins the World Series as a manager, I will eat (some) dog food on the air on SportsTalkNetwork.com.

FDH Insider/no Goon Squad October 8

By Rick Morris

This week’s edition of the FDH Wednesday night on SportsTalkNetwork.com is being completely given over to THE FANTASYDRAFTHELP.COM INSIDER as we hold one of our biggest programs of the year: our basketball mock draft. From 7-10 PM EDT we will be holding our fifth annual mock draft as we help you, our listeners, to get a real sense of the value of this year’s crop of roto players. Join us to get an edge over the rest of your hoops league as we point you towards the best players in the league in the course of our event, only on STC.

As this is one of our most important shows of the year, we will be repeating it in the same time slot next Wednesday, October 15, in the same time slot. We will return with brand-new editions of the INSIDER and THE GOON SQUAD -- with a comprehensive look at the beginning of the hockey season -- at their usual times on Wednesday, October 22.

Old Fad: Bush-Bashing; New Hotness: Palin-Pouncing

By Tony Mazur

The 2008 Presidential Election, which seemed light years away, is less than one month away. And in the past two years, there has been so much mudslinging that it's disgusting. In fact, they're not even throwing mud anymore. Everything plus the kitchen sink has been tossed.

However, there are lines when it comes to trashing another candidate. Most importantly, they cannot be a minority. It's true. Have you heard anyone once rip Barack Obama for his appearance? In fact, I haven't heard much criticism towards Obama besides his lack of experience. Remember Reverend Jeremiah Wright? If John McCain attended a church where the pastor doubled as a Ku Klux Klan leader, he would have to drop out of the race. If Cindy McCain said that the only time she was proud of her country was when he husband was running for president, this could be a different election.

When Hillary Clinton was still in the race, it seemed like she was an untouchable. Hear me out before you comment. The only time she was criticized, her husband's name was spoken in the same breath.

However, Sarah Palin falls into that minority category, and all I've heard it non-stop Palin-pouncing. It's to the point where it's vicious.

Aside from her short political experience (which, by the way, is much longer than Obama's. And also remember that she is running for VICE President, not President), which is fair game, the attacks are all personal. The pundits, commentators, bloggers, and radio show hosts make fun of her dialect and origin, which is really getting old. Okay, we get it. Tina Fey looks like her.

She been called an unfit mother for having a pregnant teenage daughter and giving birth to a baby with Down Syndrome. I thought it was understood that there would be no trashing of the candidate's families. Oh, wait, she's on the Republican ticket. That means we can tear her to shreds.

The media wants to ruin her. Their goal is to make her drop down and bawl her eyes out. And they will not stop until it is done.

Recently, Larry Flynt (of Hustler fame), announced that he has made a porn flick with a Sarah Palin look-alike. The film apparently features women who look like Hillary Clinton and Condoleezza Rice.

I want to know why there is no outrage over this. Women typically protest over the most ridiculous events or occurrences. Why aren't they picketing in front of Hustler's Headquarters?

Please tell me why it's fair game to lambaste Sarah Palin, but walk on eggshells when bringing up an Obama blunder. That's the American Way.

Wall Street crisis and bailout: An FAQ

By Rick Morris

This Wall Street crisis that we as a country find ourselves embroiled in cries out for an easily relatable breakdown. So naturally, who better than The FDH Lounge to provide it to you, especially since we delivered a detailed – and prescient, if we may brag a bit – Iraq War FAQ a year ago and we also warned of a huge economic crisis to come back in July. So yeah, we think we can handle this! We have dozens of links to outside sources so that you can further examine the definitions of the words we will use here and the full context of the sources we consulted.

Without further ado, here is the Wall Street Crisis FAQ:

Why does Wall Street need a bailout? What about Main Street? Why can’t I get the government to pay my mortgage or help me or assume my bad debts …

Well, this is a great place to start, as pundits have been talking constantly about how unpopular the bailout is and how the American people are dead-set against it. They may well be, but if that is the case, we’re fortunate yet again that this is a constitutional republic and not a democracy – because action is needed here to save the financial system.

By and large, the American people are not to blame for the false framing of the situation that so many of them have – the media and the politicians really have fallen down on the job of explaining everything. The very phrase “Wall Street bailout” is a phrase loaded with connotations that frankly are un-American. But this isn’t really a Wall Street bailout – it’s a rescue of the American economy, because Wall Street is the engine of our economy. Go to an NHRA event and ask any drag racing fan how far a car gets when the engine gets decimated.

This is a country that depends hugely, regrettably, on credit. Over the decades we have become a nation that is completely reliant on paying for today’s goods tomorrow, and that extends to business as well. Businesses cannot function if credit dries up completely, and we may well be on the road to that point without government action. At that point, everything crashes and life as we know it pretty much ceases to exist.

So in other words, anybody asking why Main Street is being neglected at the expense of Wall Street in this bill is either an interest group lobbyist being paid to peddle disingenuous slop, a politician looking to score political points in our worst national financial crisis since the Great Depression, or a citizen who just hasn’t been made to see the big picture. The fact that the bill had to be larded up with pork to pass the House of Representatives on the second go-round is the most eloquent statement possible about the complete and utter lack of statesmanship in government today.

I see a lot of finger-pointing among the politicians. Who’s to blame?

Most of them.

Can you be more specific?

All right. This crisis was pretty much caused by politicians in the federal executive and legislative branches operating from the two extremes of insufficient regulation and too much regulation. We keep hearing about the toxic debt that the government would be buying up with the $700 billion package and in that vein, it’s pretty easy to picture this mess as a toxic stew caused by hair-brained policies from both ideological extremes.

Let’s start with too much regulation. Where did the government go wrong there?

This end of the problem goes back to the Carter Administration, when in the full flush of post-Sixties optimism about the capacity of the federal government to solve the problems of poor people, the Community Reinvestment Act came into being. It was intended to solve the problems of redlining as they applied to the concept of mortgage approvals; long story short, banks were now being pressured by the federal government to be more forthcoming in terms of approving mortgage applications in minority neighborhoods that had previously experienced discrimination. The Clinton Administration subsequently expanded its powers dramatically by tilting the burden of proof for bank compliance significantly.

But isn’t expanded home ownership a good thing for America?

Absolutely, in a moral sense and almost certainly in a public policy sense as well because it makes more people stakeholders in a growing and prosperous economy. But moral and economically sound ideas can’t be midwifed by nonsensical public policies. Rather than mau-mau this nation’s financial institutions into downgrading their lending standards, the intellectually honest route would have been to embrace Jack Kemp’s crusade back in the 1980s about privatizing public housing by selling units at cut-rate prices to the poor people who were tenants.

Granted, that would have required an outlay, perhaps a substantial one, by the federal government as seed money for the program, but at least the accounting would have been clear and the private financial institutions that help keep this country going would not have been threatened.

Isn’t that just substituting one form of government action for another?

Yes, it would have been substituting clear and effective government action for intellectually dishonest mandates with disastrous consequences for the entire economy. If you learn nothing else by the end of this column, you’ll learn that regardless of what the politicians will tell you, actions by the federal government are not uniformly good or bad. This is not to suggest that massive government regulation is ever helpful, but it is worthwhile to keep in mind that Thomas Paine and Ronald Reagan used to say “That government is best that governs least” – not “That government is best that EXISTS least.”

Are there any more examples of how over-regulation helped get us into this mess?

Unfortunately, there are. “Mark to market” accounting procedures, which were mandated last November as part of the Financial Accounting Standards Board Statement #157 “Fair Value Measurements,” force companies to determine a value for a holding based on the current rate of what it could fetch on the market. This was an effort to force more honesty into the market after copious accounting scandals in which companies were committing blatant fraud in terms of claiming a value for their holdings. As with the goal of eliminating redlining, a worthy goal was pursued with haphazard means. Like many of the aspects of this crisis that were brought about by too little regulation, this misapplication of regulation failed to take into account what would happen outside of normal circumstances. In a market like we’ve seen in the ruinous year of 2008, some aspects of financial life simply don’t apply in a rational way. How do you fairly price an asset to sell when the entire market for it is crashing? A rolling snowball of paper losses then becomes an avalanche due to the chain reaction of a market being forced into a vicious downward spiral. Assets cannot be pegged to a market that is out of whack either positively – because that can create “paper winnings” that are completely illusory – or negative – because that can fuel an artificial dive of the market and eventually, the entire financial system. Previously, holdings were valued based on what could be deemed as their historical level of value.

Are there any other major factors relating from over-regulation?

Not as such, but we will start breaking down the aspects of under-regulation by looking at an example that bridges the two. We’ll deal subsequently with subprime mortgage loans and some of the other instruments that were part of the whole “expanding home ownership” climate that produced the aforementioned Community Reinvestment Act. Most Americans would probably be shocked to know that there were mass efforts a few years ago to provide mortgage opportunities for illegal immigrants! Columnist Michelle Malkin has written about this extensively, and while most of government’s faults here came from a hands-off stance in regards to the situation (from the federal apathy about border security on down), one quasi-governmental agency actually made matters worse by sticking their fingers in the pie. The Wisconsin Housing and Economic Development Authority (WHEDA) got involved by aiding and abetting the process of providing mortgages to those who were in this country illegally. Now, leave aside the merits of the immigration debate for a moment, because there are those who like the fact that Uncle Sam hasn’t been particularly interested in securing our country’s borders over the years. Different strokes for different folks. But whatever your political point of view on the subject, it is indisputable that mortgages for illegal immigrants are as risky as they come, inasmuch as the home buyers are subject to being deported when their cover is blown! Having an agency associated with state government attempt to regulate a process by which this can be accomplished is the most irresponsible betrayal of taxpayers possible.

OK, but that seems to have more to do with under-regulation of potential homeowners. Give me some more examples.

Gladly. To provide a logical segue, we’ll continue with the previous example and how counter-intuitive the politics were on these matters. Traditionally, Democrats and liberals are associated with pleas for regulation and conversely, Republicans and conservatives are considered advocates for deregulation. But the old saw about “whose ox is being gored” applies to this situation, as it seemingly does with everything in politics. Many Democrats and liberal interest groups were among those objecting to the notion of trying to screen illegal immigrants out of the pool of potential mortgage recipients – and Republicans and conservative advocacy groups were only too happy to get Uncle Sam involved when it came to what they considered an issue of border security and national sovereignty. But a much stronger example of this came with the Fannie Mae and Freddie Mac breakdowns.

Both of these companies were government sponsored enterprises (GSEs) that were really “neither fish nor fowl” in terms of whether they were public or private (and indeed, Fannie Mae was an actual appendage of the US government for three decades). They were ostensibly independent institutions, but they were charted by the Congress and carried with them at least the implicit financial backing of the federal government. As companies designed to increase the pool of liquidity to the mortgage industry and thereby make more money available to aspiring homeowners, Fannie and Freddie were hugely popular with liberals who saw these enterprises as assisting the disenfranchised. As an example, these agencies have had a long and cozy relationship with the Congressional Black Caucus, whose members considered them corporate citizens on the front lines of the battle to expand economic opportunity. Thus, political allies of these companies didn’t hesitate in 1995 to grant them the power to receive affordable housing credit for subprime loans. Now, the subprime mortgage situation merits its own discussion, but we’ll define the term for these purposes now: subprime mortages were high-risk loans that were granted to people who had trouble for whatever reason securing a loan under traditional circumstances.

So with their institutions now more directly facilitating the acquisition of home loans by the economically disadvantaged, Fannie and Freddie found themselves the objects of even greater affection by liberal politicians. Powerful House Financial Services Committee Chairman Barney Frank opposed the Bush Administration’s attempt at GSE reform in 2005, as did Senate Banking Committee Chairman Christopher Dodd. For what it is worth, Fannie and Freddie have been longtime contributors to primarily Democratic candidates for office and many of the recipients of this campaign cash just happened to share Fannie and Freddie’s objections to the (unsuccessful) proposed reforms. We’ll allow you to connect the dots regarding their lobbying operation, campaign contributions to key Congressional players and the fact that they successfully eluded the kind of regulation that the Bush Administration, John McCain and others had in mind for them.

As such, you had the interesting picture that had liberals opposing further regulation of certain enterprises lest they have a chilling effect on the cause of promoting home ownership to a high-risk segment of the populace – and on the other hand, you had conservatives clamoring for more regulation! That certainly seems a bit counter-intuitive, but it fits the D.C. template of promoting or opposing efforts based on how your (financial) allies line up on a given issue. Republicans traditionally didn’t get many campaign contributions from Fannie and Freddie anyway – and for a political party that has tried to shake accusations of financial anarchy ever since Ronald Reagan reversed America’s course away from higher regulation, well, what better way to prove that you do support some regulation? However, they never invested much political capital in the issue, using it mostly as a way to blunt the anti-regulation extremist image and the agencies continued uninterrupted down their respective paths of doom.

Additionally, there was actual scandal for the Republicans to try to expose as they were seeking to burnish at least some regulatory credentials. Falsification of some key accounting measures led to some bad headlines for Fannie Mae and some legal problems for key executives, but no structural reform in terms of how the company conducted their business. Actually, matters ended up getting worse: Fannie and Freddie executives cynically calculated that they needed increased cover from their liberal patrons and the best way to accomplish this was to double down on their exposure to subprime and other risky loans that held the purported purpose of leading more poor people down the path to home ownership. Sadly, the maneuver worked and once the Fannie/Freddie-friendly Democratic leadership took over both houses of Congress in the Republican wipeout of ’06, the chances of averting this crisis disappeared altogether.

You mentioned those subprime loans and I’ve heard about them and Freddie and Fannie in the news. What’s the connection?

Well, as we started to mention, Fannie and Freddie started to become a part of the subprime picture back during the Clinton Administration. Their moves into that market fit the politically correct template of helping poor people to achieve home ownership and so their shift in focus was not greeted with the scrutiny it deserved. After all, as organizations straddling that sometimes-nebulous line between public and private, they were viewed in a unique light by many – too big to fail. The thought was that if these companies ended up making any catastrophic mistakes that Uncle Sam would bail them out – which happened recently. So when the subprimes hit the fan, We The People ended up shouldering some of the responsibility in an attempt to keep stable the $6 trillion in mortgages in this country that they either own or guarantee.

So Fannie and Freddie got involved in subprime loans and bad consequences resulted. You mentioned that subprimes are inherently high-risk, but risky loans have been around since the beginning of time. How did these instruments end up imperiling our entire financial system?

You have heard this situation referred to as a “housing bubble,” right?

Yes.

Well, the overall housing market was highly susceptible to dangerous influence from subprime loans and other similar methods of financing mortgages, such as adjustable rate mortgages, which left many people of the people who chose not to lock in their lending rate completely unprepared when it rose on them. Perhaps the most radical form of permissiveness came in the form of the “Ninja loan” – No Income, No Job, No Assets. As with the part about facilitating mortgages for illegal immigrants, we feel compelled to note that we are not making this up. Some financial institutions decided to grant the significant loans inherent in mortgage packages to folks with no income, no job and no assets!

How was that even remotely possible?

It goes back to what we said about a “housing bubble” and the very nature of what constitutes a bubble in the business sense. It’s the notion that assets in a given market can only rise.

Think back to the dot-com boom. So many Internet-based companies were valued way out of whack with what any of the fundamental statistics would have recommended, simply because the notion of “what goes up must come down” was not at all in play. In fairness to those who got caught up in that way of thinking, the Internet provided such immense advancements in so many areas of economic life that it was easy to imagine that basic rules of financial gravity might not apply in exactly the same way with such an explosive medium. But, seemingly justified or not, a classic “bubble mentality” was at work.

The same concept applied exactly to the American housing market, which was already on the rise coming into the new millennium in part due to Fannie and Freddie’s aforementioned actions which were taken with the goal of increasing home ownership in mind. Shortly after the twenty-first century began, the economy shouldered two body-blows in two years: the bursting of the dot-com bubble and 9/11. A recession was inevitable; the only question was how long it would linger and how severe it would be.

Fed Chairman Alan Greenspan’s decades at the epicenter of global monetary policy had taught him that consumer purchasing power (and a high tolerance for debt) was the element that drove the American economy. In tough times, he knew that his countrymen would spend if they perceived that their home equity rendered them economically secure. So, with no fear of the housing bubble that would ensue, the Fed slashed the Federal funds rate all the way down to 1.75%. This fueled a refinancing boom that allowed homeowners to take profit from their rising home values and it helped keep the economy going strong as Greenspan hoped.

Low fixed rates and low initial rates on adjustable mortgages also caused homes to be treated as commodities. A great many people took out extravagant loans just to finance the purchase of homes they would never occupy. Why? For the purpose of “flipping” the homes, or reselling them quickly for profit. In a climate where home values were thought to be immune to the laws of gravity, many people treated their home equity as an irreversible asset and spent accordingly.

Many homeowners gave into greed when they saw the dollar signs, a greed that was mirrored by so many predatory lenders. The high-risk loans we have spoken of can be dangerous enough to the economy – when offered by folks like those who have gone to jail for committing fraud in these matters the past few years, the effect can be devastating.

So as with the dot-com mania, an irrational mindset had clearly set in, just as it has with countless bubbles before and doubtless will happen on and off for the rest of human history. As long as the bubble has not occurred previously in the same industry, all but a few lonely voices in the wind are generally unable to spot the danger signs until it is too late. In a housing bubble, with the notion that prime properties can only appreciate in perpetuity, it’s not irrational to lend money to citizens who could legally be deported at a moment’s notice. In a housing bubble, it’s not irrational to give out Ninja loans because of the belief that equity in the house alone can enrich someone with no income, job or assets. And in a housing bubble, subprime and other high-risk loans can do disproportionate damage to the economy because they were extended – and sought – so freely.

So a lot of people defaulted on high-risk loans. I don’t know a tremendous amount about the economy, but it seems hard to believe the high foreclosure rates alone brought us to this point of ruin.

They didn’t. These defaults were just part of a very lethal cocktail.

Over the past three decades, a process called securitization has grown like kudzu on Wall Street. It involves repackaging loans into securities that are sold to investors.

Subprime and other high-risk loans were bundled into these securities and pushed off onto other parts of the economy. Theoretically, risk was being spread and collectively negated in this process. In reality, it was the equivalent of taking a vial full of lethal disease in a lab and spreading it widely in small doses. Here was where the popping of the housing bubble caused havoc, because as homeowners defaulted on their high-risk loans and the downward spiral in real estate prices resulted, the subprime disease coursed through the bloodstream of the economy with demented abandon.

I understand how many homeowners and lenders gave in to greed during a housing bubble. That makes sense. But how could the contagion spread to other parts of the economy? Did the lenders really think somebody else could be left “holding the bag” with these risky mortgages?

Yes, they did. One unfortunate element that shows up in any bubble is the tendency for bad actors to make greedy decisions and push off the consequences on to somebody else and this instance was no exception.

The concept of “moral hazard” explains this: when a party believes they are insulated from risk, they behave in artificial ways that end up harming the market. In this instance, lenders were happy to push off the risky mortgages they sold into securities that would only end up hurting other suckers.

But where did the lenders find suckers? Nobody would willingly purchase securities that had a good chance of becoming worthless.

Of course there were special circumstances that allowed tainted securities to cause damage in the markets, as it is obvious that nobody would willingly take the gross risks these securities offered. Wall Street’s rating agencies pegged many of these securities as a much safer bet than circumstances later indicated was warranted. Why? Standard & Poor’s referred to what it called “unprecedented levels of misrepresentation and fraud, combined with potentially shoddy initial loan data. So the ratings agencies, which are responsible for collectively setting the standards for how to evaluate the reliability of securities, were fed fraudulent information in some instances and as a result, many of the securities containing high-risk loans were misperceived as safer than they really were.

Does this explain why so many large institutions have been caught up in this? Even AIG – an insurance company – required an $85 billion assist from the government to remain in business recently.

Yes, it does. To further explain, we need to work just a few more definitions into the mix.

Derivatives are instruments that are supposed to facilitate the process of conducting transactions involving debt – such as the aforementioned securities – but they are obviously unable to function as they are supposed to if the information about the risk involved with the securities is inaccurate. This is especially true for the subset of derivatives known as credit default swaps, which are supposed to measure the creditworthiness of companies. One can readily understand why credit default swaps would be dependent on accurate information about the risks involved in subprime loans that were bundled into some of these securities!

Derivatives in general increase the extent to which major institutions are interconnected – which brings us back full-circle to why the government has had to rescue some of these companies this year. They have spread like wildfire, from $100 trillion in 2002 to $516 trillion just five years later (for what it’s worth, the entire US money supply is a “mere” $15 trillion). During this span, Warren Buffett, universally regarded as one of the world’s wisest investors, put great time and expense into the effort of ridding his Berkshire Hathaway company of derivatives because they terrified him: he just couldn’t figure out how they were supposed to operate as promised without presenting horrific risk. He called them a “time bomb” and “financial weapons of mass destruction,” and he has been proven right as the domino effect of one company being toppled after another has pointed out the frightening fragility of the entire market. In all, there is a tremendous amount of leverage between institutions that is completely outside the purview of federal regulators. This is rather remarkable in light of the influence that those wielding this leverage have been shown to have over our entire financial system.

So in this crisis, we had overregulation, with the government reacting to redlining in an inappropriate way by facilitating bad loans just to help more poor people own homes. We had more overregulation with mark to market accounting requirements that forced companies to price their assets to a plunging market that just fueled an overall death spiral for values. We had underregulation in terms of lax oversight of the mortgage operations at Fannie Mae and Freddie Mac, as well as with lax lending standards and all of the misrepresentation with high-risk loans in general. From there, bad loans getting packaged into securities poisoned the market, as did the fact that derivatives connected so many major players of the market and all but insured that the collapse of one major institution could threaten several others. Is there anything else?

Sadly, there is. Many politicians have been using “short sellers” as a political punching bag. Investors who practice short selling are essentially placing bets that a stock’s value will decrease by borrowing the stock, then actually purchasing it later on – with the hopes that a profit will ensue from the previously agreed-upon price and what the investor believes will be a lower price at the time the transaction actually occurs. In and of itself, there is nothing wrong with this practice and indeed, it helps contribute to the equilibrium of the market and keeps institutions honest. But there is a sinister variation of the practice that just fueled the “perfect storm” that brought this country’s finances to the precipice.

“Naked short selling” involved going through the short process, sans the actual borrowing of stock. So essentially, they don’t have to risk anything in order to chase their profit. A great many naked short sellers can best be likened to pirates, who ruthlessly reduce companies to ruins, then feast on the remains. Not all abusive short sellers are of the naked variety, however – we at FDH knew a rather reprehensible individual who bragged after 9/11 about how much money he was making by shorting stocks that were plummeting at that time. And whether naked or clothed, short sellers looking to make a quick and crooked buck can use all types of nefarious means to drive down the price of stocks in order to enrich themselves. The SEC is presently investigating whether bogus rumor campaigns illegally drove down the price of Bear Stearns and Lehman Brothers stock before both of these institutions collapsed. To make matters worse, in 2007 the SEC eliminated the “uptick rule,” which ended up facilitating short selling at record levels. While the SEC has officially been working to stop naked short selling all along, their level of attention to the problem has come under question. In what seems to be a tacit admission that they did not fully appreciate some of the problems that short selling excesses can impose on the market, in September the SEC temporarily banned shorting the stocks of 799 financial companies.

Let’s bring this full circle. You alluded in one of your first answers about how Wall Street is the engine of the economy and how the crisis there is going to topple Main Street. No offense, but I’d rather not take your word for that. Sketch out how exactly this connects to the lives of ordinary Americans.

No offense taken. People can’t be blamed for taking the notion of major financial institutions needing taxpayer help on faith, especially given their incessant lobbying for favors in D.C. The aforementioned fact that a bill designed to hold off a grave national emergency couldn’t pass without some odious pork pretty much proves that it’s impossible to be too cynical about money and Congress. Additionally, the answers you have read thus far about this crisis indicate that greed, especially relating to the housing bubble, fueled this nightmare and it’s human nature to want to see bad guys punished and not rewarded.

But in this case, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are correct that the crisis is so grave that it threatens a total collapse of the world financial system – a sort of “Mad Max Beyond Thunderdome” scenario where life as we know it is ended. Think of the worst Y2K fears as a realistic baseline for expectations.

Whether on the left or the right, opposition to this bailout seemed to forget the notion that no man is an island, especially in a global economy that we have already stated is completely interconnected. Left-wing congressmen fulminated against their favorite villains, evil businessmen who drove Mercedes. Those on the right who happily rubber-stamped every Big Government initiative during the Bush Administration chose this particular moment to demonstrate their free market bona fides and bemoan the march of “socialism.”

Some observers have long theorized that the political spectrum is not actually a straight line, but rather a circle in which people at the extremes actually overlap in some of their beliefs. We have seen this recently in foreign policy with some on the left and the right opposing the Iraq War for different reasons and it’s not unusual for “strange bedfellows” to align on different issues, but this level of agreement on an economic matter is most unusual. Those on the left are notorious for believing that rich people live in a universe of their own, completely unconnected to anything relating to the rest of us and that they can be taxed punitively and otherwise treated harshly with no harmful affect to the rest of us. So at least those who voted against this bill on the basis of class warfare were being true to their own beliefs, as disconnected from economic reality as they are. Conversely, those on the right who opposed the bill are, by and large, aware of the interconnected reality of the modern world and should have been aware of the damage that a domino effect can inflict on Main Street.

So what the ultimate consequences of failing to arrest this situation? Two realities at the moment are particularly horrifying:

^ LIBOR is the rate at which banks all over the world lend to one another. Essentially, it’s the basis for lending worldwide and it hit a new high this past week in the midst of the global crisis.

^ Commercial paper is a money-market security that businesses routinely use to finance short-term debt. Because of the effects of the Lehman Brothers crash in mid-September, the market for commercial paper has all but been destroyed at this time. Fearing that this once-stable form of investment is now unsafe because of the number of large companies that may be following Lehman Brothers into Chapter 11, buyers of commercial paper – at least at reasonable prices – are quite scarce.

With LIBOR and the commercial paper markets completely haywire, this picture is at long last connected back to Main Street. As we mentioned repeatedly, this entire economy runs on credit, both on a consumer and a business level. Something needed to transpire to get the banks and other financial institutions out of the fetal position and willing to lend money again, because the whole system shuts down otherwise – and we are frighteningly close to that already.

This bailout will allow the federal government to buy up as much as $700 billion in “toxic debt” from the nation’s banks. The government will try to rebuild the value of the assets for resale at a later date, while theoretically the banks will be able to get their books in much healthier order and be able to start priming the economy with the capacity to loan money once again. That’s the hope, anyway, because the consequences of failure are unthinkable.

Just one more question: what’s the most important thing to implement to avoid a repeat of this situation, assuming we don’t all get pitched off the abyss first?

A solution along the lines of the Base Realignment and Closure (BRAC) would seem to be called for here. Knowing full well that individual members of Congress would never cast a vote to shut down a military base just in their home state or district, BRAC was set up in the late 1980s as a blue-ribbon commission with the authority to compile a master list and schedule for military bases to be shuttered. Then, the recommendations were submitted to Congress for an up-or-down vote to be sent to the president to be signed into law. This proved to be the only possible way to get Congress to put aside the parochial concerns of individual states and districts and vote to put the national interest first in terms of allocating defense resources in the best way.

The next Congress needs to set up a federal commission to study the nation’s regulatory processes for the market top-to-bottom, taking into account some of the aforementioned financial inventions and trends of recent decades. In addition to rewriting the laws from the ground up, means of obtaining cooperation with other regulatory agencies around the globe dealing with similar issues should be obtained as well. The guiding principles should be the ones laid out here in terms of enough regulation to avoid chaos and not enough to lead to bureaucratic inefficiency at the other end of the spectrum. The BRAC process is a good model for what needs to be done here, because if the lessons of this crisis have reinforced once and for all what a lost art statesmanship is in Washington, D.C.

FDH Fantasy Newsletter: Volume I, Issue V

By Rick Morris

For the most part, we keep our fantasy content on our fantasy website and fantasy blog and keep this site for content on all subjects. It allows our readers to find specific content more easily that way. However, it has come to our attention that because our new fantasy sports newsletter is published on the older Blogger platform that our readers may be limited in their ability to subscribe to it. There does not appear to be a way to have content on the FantasyDrafthelp.com blog forwarded to an aggregate news reader -- however, we know that we have that ability here. So we will link to that newsletter each week right here when it is published. Here is this week's newsletter.

FDH Lounge Show #37: postponed

By Rick Morris

We are sorry to announce that the 37th edition of THE FDH LOUNGE on SportsTalkNetwork.com will be postponed to Sunday, November 2. There are some football-related conflicts with the station until then inasmuch as we broadcast on Sunday evenings. We will be resuming what looks to be a normal broadcast schedule of every-other-week at that time. Again, we apologize to any disappointed viewers/listeners in our great audience and we assure you that the next show will be well worth the wait.

Tony's MLB Division Series Preview

By Tony Mazur

Ah, October. The sights, the smells, the, uh, temperature. When October rolls around, that means the best of the best will play each other in the Major League Baseball postseason, starting with the fourteenth year of the Division Series.

With the exception of the Boston Red Sox, the teams make for a great story. Most of them have seen minimal or no playoff action in the past decade.

The Cubs have always been everyone's lovable loser, but not this year. Milwaukee hasn't been to the playoffs since their 1982 run to the World Series. Aside from last year's sweep by the Rockies, Philadelphia hadn't been to the playoffs since Toronto's Joe Carter sent the Phillies packing in 1993. And I shall not forget about the Tampa Bay Rays, with not only their first playoff trip in team history, but the first winning season.

Let us break down the matchups, shall we?

Milwaukee vs. Philadelphia

This is a pretty evenly-matched series, in my opinion. Milwaukee has their share of sluggers (Prince Fielder and Ryan Braun), and so do Philadelphia (Ryan Howard and Chase Utley). These two teams have their strengths and weaknesses when it comes to pitching. CC Sabathia may be anchoring the Brew Crew, but the rest of the staff have been plagued with injuries their entire careers. The Phillies do not have anyone that will jump out at you, but their pitching staff is pretty steady.

My Prediction: The firing of Ned Yost pays off in four.

Los Angeles (NL) vs. Chicago (NL)

Dodgers manager Joe Torre has been here many times before, so why should this scenario be any different? I'll tell you why. With the exception of the acquiring of Manny Ramirez, the Dodgers do not have a scary lineup. In fact, their pitching does not put the fear of God in my heart. The Chicago Cubs seem to be the better team. Their entire lineup is strong 1-9, and the pitching staff is as tough as nails.

My Prediction: Leave Bartman at home when the NLCS comes to Wrigley Field.


Boston vs. Los Angeles (AL)

In a rematch of the 1986 ALCS (sans "Hendu" and Donnie Moore), this should be one for the ages. Small market teams should take notes, because both organizations know how to field a good team. The Red Sox are looking to further their season, since they missed out on winning the AL East. But watch out for the Angels, the team with the best record in the majors and their best in team history. Both teams have Cy Young-caliber pitching. Both teams could average a .300 batting average or better. This is defintely the series to watch.

My Prediction: The Halos may come out bruised, but they'll return to the ALCS for the first time since 2005 in five games.

Chicago (AL) vs. Tampa Bay

Thanks to a 461-foot home run by Jim Thome and a diving grab by Brian Anderson, the White Sox won the weak AL Central Division. Now the AL East is certainly not weak, and the Rays came out of it on top. The Sox seem to have a lot of flaws. Their big hitters (Thome and Paul Konerko) have been inconsistent all season. If they come out and hit, the series may be different. The Rays have to set the tone from the getgo. If they can do that, the Cinderella story might continue.

My Prediction: Tampa/Clearwater/St. Petersburg will be jumping.

FDH Insider/Goon Squad October 1

By Rick Morris

This week’s FDH Wednesday night on SportsTalkNetwork.com promises to have more of its usual variety for the entire three hours.

On THE FANTASYDRAFTHELP.COM INSIDER (7-9 PM EDT), we will review our Week 5 NFL waiver wire recommendations before we get into our Week 5 game-by-game breakdowns from a fantasy perspective. That will carry us just into the final half hour of the program, at which point we will take our final look ahead before next week’s fantasy hoops draft by examining some advice from our “old pal” Matt Berry. As you would expect, we differ with some of what he advocates!

On THE GOON SQUAD (9-10 PM EDT), we continue our look ahead to the NHL regular season by delivering our predictions for winners of this year’s major awards. In the second half of the program, we review our NHL Improvement Manifesto from two years ago. We at FDH had laid out a number of areas where we thought the league could improve its presentation. A few have been implemented, more have not and we’ll take a fresh look at it to see how much of that material remains relevant as we head into the 2008-2009 regular season.

As always, it promises to be another great FDH Wednesday night on STN.

2008 ALDS/NLDS preview

By Rick Morris

October baseball has returned and not a moment too soon! It’s always fun to see players who have established themselves as the game’s biggest stars on this stage for the first time. We had a bumper crop last year (including, but not limited to, Matt Holliday, Jimmy Rollins, Ryan Howard and Chase Utley) and this year many more of the new rulers of the game play in the autumn for the first time. Ryan Braun, Evan Longoria, Mark Teixeira, Prince Fielder, Ben Sheets, Matt Kemp, Andre Ethier, Alexei Ramirez, Chad Billingsley, Geovany Soto, Jason Bay, John Danks and Scott Kazmir will all be carving their first October memories (as will Carlos Quentin and Carl Crawford if they heal in enough time). Additionally, some faces who haven’t been on the postseason stage in years will be returning: Jim Thome, Ken Griffey, Jr. and Ray Durham.

Some hugely intriguing World Series matchups could be formed by these eight teams. Here’s a look at the top ten possibilities:

1. Red Sox-Cubs: Needs no elaboration.

2. White Sox-Cubs: The Battle of Chicago would put the intensity of any other sporting event this decade to shame.

3. Red Sox-Dodgers: Two historic franchises, Joe Torre vs. the Red Sox in the World Series, Manny vs. Beantown.

4. Angels-Dodgers: The Battle of SoCal would be pretty intense as the upstart Dodgers try to work their way out of the Angels’ shadow – and try to restore the status quo ante from the Angels’ first four decades of existence.

5. Angels-Cubs: The best team in each league on paper matching up, two teams that used to play at a Wrigley Field, Mike Scioscia vs. Lou Pinella playing chess with their very deep squads – this is the best pure baseball matchup of the bunch.

6. Rays-Cubs: There is no purer new school/old school potential clash between franchises. How bitter would Cubs fans be to blow a World Series title on the 100^th anniversary of their last title against a team with the most apathetic fanbase in the game? And how bitter would Pinella be to have his old team get over on him?

7. White Sox-Brewers: It’s not exactly a Subway Series, but the close proximity of these teams – and their past American League battles – would add plenty of spice.

8. Red Sox-Phillies: Two historic franchises, two hard-core sports cities that despise each other.

9. White Sox-Dodgers: Just a year shy of the golden anniversary of their 1959 World Series tilt involving two large-market cities.

10. Rays-Phillies: Similar to Rays-Cubs, Phillies fans would be very bitter to see their long-suffering franchise lose to a newcomer.

One additional note: as we noted last year at this time, the Red Sox took a gigantic leap towards Team of the Decade status with their second world title in this span. But this October features two other teams who could match that feat, the Angels and the White Sox.

On with the series previews:

RAYS-WHITE SOX: Tampa has to be a bit disappointed not to draw the Twins, who would have been an extremely favorable matchup with their lack of pop. It will be a long winter in the Twin Cities as fans wonder what might have been had their ace Francisco Liriano been activated by the team even a week earlier. Ron Gardenhire should get Manager of the Decade for getting that crew within even sniffing distance of the postseason. Nevertheless, they fell short in an outstanding play-in game and now the South Siders make it back in for the first time since their world title in ’05. Minus Quentin, their lineup is excessively streaky, but still potentially imposing. Their frontline starters compare favorably with the Rays in terms of experience if not present production. Tampa comes in as a team mistakenly labeled a “Cinderella Story” by many – it’s a wonderfully talented young team that has been gelling (although underachieving) for the last few years. Think 1991 Atlanta Braves, a team that had also finished in last place the previous season but was on the verge of a wondrous run. The team may well have missed an opportunity at the trading deadline, however, when they passed up the chance to add the additional bat that they really need. Sans Crawford, they are vulnerable, but the White Sox are counting too much on the emotional lift of the victories of the past few days heading into this series. The well-rested Rays, augmented by the veteran presence this year of Cliff Floyd and Troy Percival, should advance. Rays in 4.

ANGELS-RED SOX: This is the marquee series in terms of two perennial postseason contenders going head-to-head. The Angels got the better of Boston in the regular season, but the Sox rolled the SoCals in the ’04 and ’07 playoffs. The Angels were the preseason World Series pick here and frankly, they did nothing to dispel the notion that they were the best team in baseball as they rolled, machine-like, to the best record in the game. They’re deep, they’re experienced and they’re well-managed. John Lackey heads up a darn good 1-2-3 punch in the rotation and he’s probably the least-appreciated ace in the game. His counterpart, Josh Beckett, is this generation’s best big-game pitcher, but he’s battled through one injury after another all year long and isn’t 100% right now. Dice-K and Jon Lester took big steps forward, so Curt Schilling isn’t missed as much as he otherwise would have been. The lineup looks more human with a banged-up David Ortiz and without Manny (although the trade was a necessity due to the need to get the rampant unprofessionalism out of the clubhouse and Bay is as good of a replacement as they were going to get). The left side of the infield is about as good as it gets and the bullpen is almost as good as LA’s – but not quite. In the end, the hungrier team with more key players presently at 100% is likely to get by, albeit in what shapes up as an absolutely great series. Angels in 5.

PHILLIES-BREWERS: Here’s hoping that this series is more competitive than the NL’s two battles between young squads last October (Phillies-Rockies and Diamondbacks-Rockies). There’s a lot of mirroring here with each team having an outstanding lefty ace, an elite first baseman and an exciting talent at shortstop. The Brewers definitely don’t have a counter for Brad Lidge, though, as he has turned back the hands of time to just before his infamous gopher ball to Albert Pujols a few years back. Combine that with the fact that Sheets isn’t 100% and the Brewers look very vulnerable. Ace-in-the-making Yovani Gallardo could be an equalizer, though, and he’ll probably have to be if Dale Sveum’s improbable managerial ride is to continue through another series. This year, we should see the NLCS matchup I had predicted for a year ago. Phillies in 4.

CUBS-DODGERS: Even with LA’s late-season hitting acquisitions, the previous failed signings of General Manager Ned Colletti still render this as a team that will need its pitching to really step up in order to have a chance. But as they face the Cubs’ most-playoff tested team in the franchise’s last several decades, Dodger arms probably won’t be enough. The Cubs have rolled all year long, displaying a bravado not often seen on the North Side. They will match up favorably with anyone they meet the rest of the way with the exception of the Angels and perhaps the Red Sox, but the uncharacteristic ease that has accompanied them does raise the question about whether the collars will get a bit tight when adversity inevitably hits them at some point. Aside from the hole in right field caused by the lack of production from rookie Kosuke Fukudome (a player undeservedly voted in as an All-Star Game starter by ballot-stuffing Japanese nationalists – and a player whose name could be unfortunately and crudely mispronounced by the Bleacher Bums with a poor October) and some possible middle-relief issues, the Cubs look impregnable against the National League field. Normally, that would be the cue to run the other way on a prediction with this team, but not this year. We will get one step closer to finding out what the ivy looks like with the changing of the seasons during fall games at Wrigley. Cubs in 4.

MLB final power rankings for 2008 regular season

By Rick Morris

NOTE: Each team’s final record is listed, along with the record I predicted for them at the beginning of the year in parentheses.

TOP TIER

1. Los Angeles Angels 100-62 (93-69)

2. Chicago Cubs 97-64 (87-75)

3. Boston 95-67 (92-72)

4. Tampa Bay 97-65 (82-80 -- Well, I was closer than most.)

5. Philadelphia 92-70 (97-75)

6. Milwaukee 90-72 (88-74)

7. Los Angeles Dodgers 84-78 (88-74)

8. Chicago White Sox 89-74 (78-84)

SECOND TIER

9. Minnesota 88-75 (80-82)

10. New York Yankees 89-73 (89-73 – BINGO!)

11. New York Mets 97-75 (89-75)

12. Toronto 86-76 (82-80)

13. St. Louis 86-76 (78-84)

14. Houston 86-76 (70-92 – WHOOPS!!!)

15. Florida 84-77 (60-102 – DOUBLE WHOOPS!!!)

16. Arizona 82-80 (91-71)

THIRD TIER

17. Cleveland 88-74 (81-81 – Imagine that, I overestimated the Indians – but not nearly as much as their apologists in the media!)

18. Texas 79-83 (72-90)

19. Kansas City 75-87 (77-85 – They didn’t surprise me – I actually thought they’d be a tad more respectable.)

20. Cincinnati 74-88 (78-84)

21. Colorado 74-88 (89-73 – You mean that 21-1 streak last year was a fluke?)

22. Oakland 75-87 (74-88)

23. Detroit 74-88 (91-71 – Well, I wasn’t alone in being fooled!)

24. Atlanta 72-90 (88-74 – My prediction could have been worse; there were actually some in the media pegging this team as a sleeper for a World Series run – paging Ken Rosenthal!)

25. San Francisco 72-90 (65-97)

FOURTH TIER

26. Baltimore 68-93 (60-102)

27. Pittsburgh 67-95 (74-88)

28. San Diego 63-99 (87-75 – They never recovered from Matt Holliday’s phantom tag of home plate!)

29. Seattle 61-101 (88-74 – TRIPLE WHOOPS!!!)

30. Washington 59-102 (68-94)

Here’s how the divisions shaped up in terms of how many wins the teams collectively had vs. the .500 mark – the number in parentheses represents the number of games I had projected each division to collectively finish above or below .500.

1. AL East +30 (+3 – OOPS!)

2. NL Central +15 (-27 – WHOA!)

3. AL Central +2 (-1)

4T. AL West -9 (+9)

4T. NL East -9 (Even)

6. NL West +17 (-30 – DOUBLE WHOA!)

NFL Power Rankings for Week 5

By Rick Morris

TOP TIER

1. New York Giants

2. Dallas

3. Tennessee

SECOND TIER

4. Washington

5. Philadelphia

6. Buffalo

7. Tampa Bay

8. Jacksonville

9. Pittsburgh

10. San Diego

11. New England

12. Indianapolis

13. Denver

14. Carolina

15. New Orleans

16. Green Bay

17. Chicago

18. Arizona

19. New York Jets

20. Baltimore

21. San Francisco

FOURTH TIER

22. Seattle

23. Minnesota

24. Atlanta

FIFTH TIER

25. Miami

26. Houston

27. Cleveland

28. Cincinnati

29. Oakland

30. Kansas City

31. Detroit

32. St. Louis