Answer: A few months ago.
How do I know?
Let's look at the evidence.
1. Mere recessions are generally triggered by pricing shocks; depressions by the collapse of a credit bubble.
2. Mere recessions do not require the effective nationalization of the pillars of global finance.
3. The national housing industry has been in a full-fledged depression for more than two years now without any evidence it has reached bottom.
4. The usual market mechanisms for liquidating insolvencies are not operational.
Much is made of comparisons to various post-Great Depression downturns as guidance to the likely path of this current crisis. Most recent recessions have resulted from transitional shocks; anti-inflation monetary policy shifts in the 1950's, the oil price shocks of the 1970's, the interest rate squeeze on inflation leading to the "Carter/Volcker/Reagan Recession" of the early 1980's, the dot-com bubble bursting at the beginning of this decade. By definition, each of these recessions included a period of "negative growth" in the GDP and some degree of increased unemployment.
Statistically, we are well into another period of negative growth in our GDP and rising unemployment. Beyond this statistical similarity, the nomenclature of "recession" obscures a more profound difference. Like the Great Depression -- and unlike all of the interim recessions -- our current crisis is the result of a credit bubble bursting, characterized by a profound and pervasive insolvency throughout the international credit markets.
The scope of this systemic insolvency is breathtaking.
The United States alone has extended credit, loan guarantees, and cash infusions exceeding $1 trillion in an effort to head off the serial collapse of the world's largest financial institutions. While serial collapse has been forestalled for now, the scope of insolvency actually appears to be growing.
The pillars of US finance are generally not lending to one another except where compelled by the feds to do so.
Common sense suggests we are somewhere towards the beginning of a multi-year period of "negative growth" with no identifiable basis for recovery now in sight.
Consider the amount of time necessary to actually deleverage illiquid, loss mounting assets when there is no market for them. Unless these assets can be sold off to government, many will be held to maturity and swaps to cover risk of default will last as long. How can anyone determine the solvency of a financial institution under these circumstances? Under these circumstances, how can anyone imagine the private sector and traditional market forces can resolve this crisis?
Thursday, November 27, 2008
Tuesday, November 25, 2008
The News Gets Worse
I'm lying in bed with a temperature of 102' reading the business press on Citi II, the second unprecedented bailout of Citigroup in less than six weeks.
The federal government has now committed nearly $350 billion to Citigroup alone in direct capital infusions and guarantees on Citi's "toxic" and potentially toxic mortgage-backed securities portfolio. This is bad news - - despite the rosy reaction of stock markets around the world.
First, it is now obvious the Bush Adminsitration's ever-evolving "TARP" program was never up to the task. The federal government found it necessary to guarantee over $300 billion in Citigroup debt-backed assets to make Citigroup sufficiently credit-worthy to borrow from other banks -- its only hope of remaining a going concern as an international bank. As the other major banks line up to strike similar deals - - and they must - - the TARP's original claim that there were $700 billion in toxic assets out there will be revealed for the arbitrary and naive number it was.
Nor is Citigroup yet out of the woods. These capital infusions and guarantees are only meant to create some kind of floor under it's mortgage-backed securities exposure and provide the liquidity to make Citigroup a less risky borrower on the world's capital markets. Citigroup's other questionable loan portfolios - - particularly its credit card, commercial real estate, and other securitized debt - - will continue to sour as economic activity slackens.
The federal government is struggling on a daily basis to restore lender confidence and liquidity within the international capital markets. It has tried guaranteeing commercial paper, money market fund deposits, expanded FDIC deposits, interbank loans, and now finds it must place a floor under the mortgage-backed securities exposure of major banks. The evidence suggests the core purpose of federal government intervention is to do whatever is necessary to avoid another Lehman-sized bank failure. That's a reasonable goal, but we need to recognize it for what it is -- an ad hoc reaction to impending disasters as they arise.
However reasonable a goal in the near-term, the decision to forestall free market restructuring of these financial institutions has serious potential long-term implications. In other words, twice in the past six weeks Citigroup has reached insolvency - - its liabilities exceed its assets. The entire financial sector recognizes this and, understandably, won't lend to an insolvent bank or buy its short-term debt. Twice in the past six weeks the federal givernment has stepped in to pad the asset column with capital infusions exceeding $50 billion.
This time, the federal government has also guaranteed 90% of potential losses on over $300 billion of these assets at Citigroup, but they remain on Citigroup's books. It will take decades for many of these assets to be retired and Citigroup will have to retain reserves against these possible losses during that period -- money that might otherwise provide liquidity to the economy through business and personal loans. Repeat that same story among the other major banks and you can see how much dead weight in potentially bad loans will hang over the financial sector for years to come. There are no private buyers for these assets at this time at any price. Even the federal government backed off buying these assets from the banks after TARP was passed -- choosing less costly guarantees instead.
Normally - - and for smaller banks and businesses facing insolvency - - the liability side of the ledger is reduced through restructuring (selling off assets to pay down liabilities and focusing on a core business to generate sufficient cash to pay down the rest over time) or bankruptcy. The federal government has taken bankruptcy off the table for the likes of Citigroup. Without the fear of bankruptcy, the impetus to restructure is less urgent. In fact, the political will to tackle the extreme dislocations which may occur when the behemoths of the financial world all face insolvency simultaneously, and so must restructure simultaneously, can disappear. Faced with a choice between certain pain now and perhaps less pain extended into the distant future, most politicians will choose the latter. This is what happened in Japan, resulting in their infamous "lost decade," humbling an economic powerhouse thought to be more saavy and politically disciplined than the United States during its meteoric rise in the 1980's.
This is the real danger of these successive bailouts. We are watching the transfer of decision-making authority from the collective rough and tumble of the free markets to the White House. We know free markets can be brutal things and Citigroup filing for bankruptcy would likely shake financial markets to their core. We also know no White House will be able to resist the political pressure of major contributors for long - - allowing businesses which should have failed in a free market to drag on.
In sum, a pattern is emerging which strongly suggests the federal government will continue to prop up the biggest firms, encourage restructuring through mergers where solvent buyers can be found, and pour money into the capital markets in the hope greater liquidity and inflation eventually create a market for the toxic assets weighing down the big firms' balance sheets. The pattern strongly suggests we are reducing pain in the near-term, but extending it over time. Where "economists" a year ago questioned whether we would even see a recession, they now speak confidently about a recession lasting several quarters to a year. A year from now, they will be talking about an extended period of low- to no-growth stretching into the next decade. Five years from now, they'll be criticizing the powers that be today for showing too little resolve, propping up firms they should have allowed to fail.
The federal government has now committed nearly $350 billion to Citigroup alone in direct capital infusions and guarantees on Citi's "toxic" and potentially toxic mortgage-backed securities portfolio. This is bad news - - despite the rosy reaction of stock markets around the world.
First, it is now obvious the Bush Adminsitration's ever-evolving "TARP" program was never up to the task. The federal government found it necessary to guarantee over $300 billion in Citigroup debt-backed assets to make Citigroup sufficiently credit-worthy to borrow from other banks -- its only hope of remaining a going concern as an international bank. As the other major banks line up to strike similar deals - - and they must - - the TARP's original claim that there were $700 billion in toxic assets out there will be revealed for the arbitrary and naive number it was.
Nor is Citigroup yet out of the woods. These capital infusions and guarantees are only meant to create some kind of floor under it's mortgage-backed securities exposure and provide the liquidity to make Citigroup a less risky borrower on the world's capital markets. Citigroup's other questionable loan portfolios - - particularly its credit card, commercial real estate, and other securitized debt - - will continue to sour as economic activity slackens.
The federal government is struggling on a daily basis to restore lender confidence and liquidity within the international capital markets. It has tried guaranteeing commercial paper, money market fund deposits, expanded FDIC deposits, interbank loans, and now finds it must place a floor under the mortgage-backed securities exposure of major banks. The evidence suggests the core purpose of federal government intervention is to do whatever is necessary to avoid another Lehman-sized bank failure. That's a reasonable goal, but we need to recognize it for what it is -- an ad hoc reaction to impending disasters as they arise.
However reasonable a goal in the near-term, the decision to forestall free market restructuring of these financial institutions has serious potential long-term implications. In other words, twice in the past six weeks Citigroup has reached insolvency - - its liabilities exceed its assets. The entire financial sector recognizes this and, understandably, won't lend to an insolvent bank or buy its short-term debt. Twice in the past six weeks the federal givernment has stepped in to pad the asset column with capital infusions exceeding $50 billion.
This time, the federal government has also guaranteed 90% of potential losses on over $300 billion of these assets at Citigroup, but they remain on Citigroup's books. It will take decades for many of these assets to be retired and Citigroup will have to retain reserves against these possible losses during that period -- money that might otherwise provide liquidity to the economy through business and personal loans. Repeat that same story among the other major banks and you can see how much dead weight in potentially bad loans will hang over the financial sector for years to come. There are no private buyers for these assets at this time at any price. Even the federal government backed off buying these assets from the banks after TARP was passed -- choosing less costly guarantees instead.
Normally - - and for smaller banks and businesses facing insolvency - - the liability side of the ledger is reduced through restructuring (selling off assets to pay down liabilities and focusing on a core business to generate sufficient cash to pay down the rest over time) or bankruptcy. The federal government has taken bankruptcy off the table for the likes of Citigroup. Without the fear of bankruptcy, the impetus to restructure is less urgent. In fact, the political will to tackle the extreme dislocations which may occur when the behemoths of the financial world all face insolvency simultaneously, and so must restructure simultaneously, can disappear. Faced with a choice between certain pain now and perhaps less pain extended into the distant future, most politicians will choose the latter. This is what happened in Japan, resulting in their infamous "lost decade," humbling an economic powerhouse thought to be more saavy and politically disciplined than the United States during its meteoric rise in the 1980's.
This is the real danger of these successive bailouts. We are watching the transfer of decision-making authority from the collective rough and tumble of the free markets to the White House. We know free markets can be brutal things and Citigroup filing for bankruptcy would likely shake financial markets to their core. We also know no White House will be able to resist the political pressure of major contributors for long - - allowing businesses which should have failed in a free market to drag on.
In sum, a pattern is emerging which strongly suggests the federal government will continue to prop up the biggest firms, encourage restructuring through mergers where solvent buyers can be found, and pour money into the capital markets in the hope greater liquidity and inflation eventually create a market for the toxic assets weighing down the big firms' balance sheets. The pattern strongly suggests we are reducing pain in the near-term, but extending it over time. Where "economists" a year ago questioned whether we would even see a recession, they now speak confidently about a recession lasting several quarters to a year. A year from now, they will be talking about an extended period of low- to no-growth stretching into the next decade. Five years from now, they'll be criticizing the powers that be today for showing too little resolve, propping up firms they should have allowed to fail.
Monday, October 27, 2008
More Stormy Weather
Do I think we're headed into another Great Depression? No, that is impossible because the Great Depression was a time and place which is now past and can never return. Like every crisis we face, we measure our current prospects by the past. Iraq was not going to be another Vietnam for a thousand reasons. Amazingly, Iraq has turned out to be Vietnam for a thousand reasons no one could have guessed at the outset. This growing global economic crisis will not be a repeat of the Great Depression for a thousand different reasons. However, it looks to be a searing experience for many which will alter the rules to a degree and extent we simply cannot imagine right now.
I remember a conversation I had as a very young man with my grandfather, an old school capitalist who survived the Great Depression and considered "FDR" a curse. When asked about the 1929 crash, he said the Crash was not a huge event in itself. He said the news came slowly and the market rebounded so quickly that it seemed like a blip at the time. He said there was no single memorable precipitating event, rather it was the relentless stream of discouraging news and results -- month after month, quarter after quarter, year after year, that characterized the Depression. He said it just ground down optimism over a long period of time, squeezing confidence out of the markets and the entire system.
I recall this as I look at the markets and wonder what the next 2-3 quarters of earnings will present, how world recession plays out and a world of opaque balance sheets deleverage from among the banking and non-bank sectors. The Fed/Treasury have succeeded in putting a stop to runs on banks and the first panic, but there's plenty to suggest we're in for a remarkable, extended stream of bad news which won't be as susceptible to federal credit extensions.
It seems to me the Lehman shock, as those repercussions spread through the global financial markets, pushed the federal government into a situation akin to what the Japanese government has struggled with since their collapse in the late 1980's. If there are entities which are too big to fail, they can become the "credit zombies" -- effectively insolvent but too costly to unwind -- that still haunt Japan. At the time, it seemed obvious that the Japanese government didn't have the political will to let these giants fail. Robust capitalists in the West smugly discounted the Japanese lack of courage. Events of the past few months make pretty clear that -- when contemplating the consequences face-to-face -- we are similarly lacking.
I find it hard to believe we're facing anything less than a multi-year squeeze. All the talk of attractive share prices based on historical P/E's is just a snapshot out the window of a fast moving car. The earnings denominator is beginning a rapid, sustained decline and, until there's greater stability in overall economic activity, the price numerator is a lagging indicator I view as pure gambling to chase.
Where does it end? Conventional wisdom says the Second World War ended the Great Depression. It might as easily be said the Great Depression ripened the world for that awful war. I'm not saying we face a global depression or that a global war will follow. I'm simply saying we delude ourselves to somehow imagine we know better now. We delude ourselves to think the federal government -- and national governments throughout the world -- didn't do their utmost, with the best intentions and grasp of circumstances they had, to combat the economic collapse of the 1930's. We delude ourselves when we assume we're somehow smarter, more evolved, or wiser than that earlier generation. The proof is everywhere around us. Together, we all drank the kool-aid and accepted unprecedented good times as normal. Together, just as every generation before us, we'll find the challenges we face these next few years are, to some extent, beyond our comprehension because they, too, are unprecedented.
I remember a conversation I had as a very young man with my grandfather, an old school capitalist who survived the Great Depression and considered "FDR" a curse. When asked about the 1929 crash, he said the Crash was not a huge event in itself. He said the news came slowly and the market rebounded so quickly that it seemed like a blip at the time. He said there was no single memorable precipitating event, rather it was the relentless stream of discouraging news and results -- month after month, quarter after quarter, year after year, that characterized the Depression. He said it just ground down optimism over a long period of time, squeezing confidence out of the markets and the entire system.
I recall this as I look at the markets and wonder what the next 2-3 quarters of earnings will present, how world recession plays out and a world of opaque balance sheets deleverage from among the banking and non-bank sectors. The Fed/Treasury have succeeded in putting a stop to runs on banks and the first panic, but there's plenty to suggest we're in for a remarkable, extended stream of bad news which won't be as susceptible to federal credit extensions.
It seems to me the Lehman shock, as those repercussions spread through the global financial markets, pushed the federal government into a situation akin to what the Japanese government has struggled with since their collapse in the late 1980's. If there are entities which are too big to fail, they can become the "credit zombies" -- effectively insolvent but too costly to unwind -- that still haunt Japan. At the time, it seemed obvious that the Japanese government didn't have the political will to let these giants fail. Robust capitalists in the West smugly discounted the Japanese lack of courage. Events of the past few months make pretty clear that -- when contemplating the consequences face-to-face -- we are similarly lacking.
I find it hard to believe we're facing anything less than a multi-year squeeze. All the talk of attractive share prices based on historical P/E's is just a snapshot out the window of a fast moving car. The earnings denominator is beginning a rapid, sustained decline and, until there's greater stability in overall economic activity, the price numerator is a lagging indicator I view as pure gambling to chase.
Where does it end? Conventional wisdom says the Second World War ended the Great Depression. It might as easily be said the Great Depression ripened the world for that awful war. I'm not saying we face a global depression or that a global war will follow. I'm simply saying we delude ourselves to somehow imagine we know better now. We delude ourselves to think the federal government -- and national governments throughout the world -- didn't do their utmost, with the best intentions and grasp of circumstances they had, to combat the economic collapse of the 1930's. We delude ourselves when we assume we're somehow smarter, more evolved, or wiser than that earlier generation. The proof is everywhere around us. Together, we all drank the kool-aid and accepted unprecedented good times as normal. Together, just as every generation before us, we'll find the challenges we face these next few years are, to some extent, beyond our comprehension because they, too, are unprecedented.
Sunday, October 26, 2008
Stormy Weather
Quite a storm last night. There's a metaphor here, but I may not find it before the end of this post.
I've heard from a number of neighbors since my last post, mostly kind and encouraging words about the blog itself, but also a number of one-on-one questions seeking advice about the economy. When I point out that I'm not a professional investment advisor, the response tends to be "that's why I'm asking." I've noticed an overall shift in the business media as well -- moving past the vilification of Wall Street and towards a more wary sense of skepticism towards all the punditry - - CEO's and Treasury officials included. I think that's progress, but am still troubled by h0w little thoughtful news coverage and debate addresses the fundamental engine to the current swoon.
I know that I don't know how bad things may get or how those bad things will present themselves. I'm pretty sure no one else knows either. I do think there are a few hints to suggest we're in for tougher times internationally, nationally, and locally, than we can hope to identify at this juncture.
We are experiencing the natural rejoinder to an extraordinary, once in a lifetime, economic boom. The sustained strength of economic activity and the unprecedented wealth creation throughout an increasingly globalized economy -- despite serious shocks in the late 1990's and 2001 -- slowly edged us all further and further along the risk aversion continuum to levels of borrowing and speculation which would have seemed utterly reckless just a few years ago. The boom changed the rules simply because it continued for so long.
I think it's important to recognize the communal delusion beneath it all because that delusion hasn't lifted, it's simply shifted. There were plenty of people saying things were out of whack as early as the late 1990's. I know because I was convinced the stock market had become idiotic back in 1998 and I read every Cassandra I could find to reaffirm my fear. But between 1998 and the stock swoon in the months prior to 9/11, I lost faith in my own doubts as day after day, quarter after quarter, the markets boomed. The relentless good news made caution seem foolish and, while I felt temporarily vindicated by the internet bubble bursting, the markets recovered in a matter of months and roared forward for another seven years.
I think it's very likely we face the same dynamic with the bust.
The Treasury Department can only go to the well so many times to dollop liquidity on the credit markets. The stream of CEO's and pundits speaking reassuringly about the long-term prospects for the economy will dwindle. As with the relentless nature of the boom, the sustained negative trends will progressively sap the residual optimism among business people and households. What replaces that optimism should concern us all.
We have just passed through the first panic of this downturn. The Treasury Department and Federal Reserve -- aided by Congress -- acted admirably and forcefully to head off a complete collapse of international banking. Their interventions to prop up individual institutions, and increasingly all the major national banks, have not saved these institutions, they've simply headed off panicked runs as they've arisen.
The ad hoc, reactive nature of the federal government's efforts are best seen in the amazing morphing "bail-out" package approved by Congress. First presented as an effort to take a bullet for the banks by assuming their "toxic liabilities," the bailout soon became a direct infusion of capital into the largest federal banks, and most recently, a combined carrot and stick the federal government is using to compel consolidation, feeding weaker banks to their stronger brethren.
The federal government is doing everything it can to prevent a complete collapse of the financial markets. The feds have gone far beyond what anyone imagined it could manage, legally or politically, just twelve months ago. Consistent with the boom, this bust is also changing the rules, with each successive stagger downwards justifying greater desperation and fundamentally altering our assumptions of what is possible.
The bottom line should be clear: The Fed is buying time, keeping credit markets on life support until the critical stage of the disease passes. I'm sorry to say I find it difficult to believe they can succeed. Oh, the patient will survive, but the cost will be astounding. The price we may all pay can only be counted nominally in dollars. The real price, as in the Great Depression, will likely be the toll on our sense of well-being wrought by a relentless constriction of possibilities and opportunities over these next few years.
Pretty dire stuff.
Right now, the federal government -- and national governments throughout the world -- are working daily to keep capital markets from closing up. Those capital markets only bring the economic horse to water, they can't make it drink.
The fate of our economy will be decided by the aggregate of millions of individual circumstances. A very large number of households and businesses borrowed more than their underlying assets and/or economic prospects warranted. Some indeterminate number of households and businesses are just this side of bankruptcy or foreclosure, counting on a positive turn in the economy to stave off personal disaster. But the vicious cycle is picking up steam. Every layoff announcement pushes a few more households over the brink, reduces overall consumer spending and business income, pushing more businesses to the edge. With every bankruptcy/foreclosure, lenders are forced to recognize the true scale of their losses on that loan. As optimism wanes, the potential cost balloons, the true extent of those losses can only be verified by actual bankruptcies and foreclosures. No one knows the ultimate cost because the cycle self-perpetuates for some period. The credit risk of borrowers changes as the individual circumstances of those borrowers changes. No one knows where the cycle will end.
In other words, the focus of federal efforts and most analysis of our prospects remains on credit availability. We are facing a credit crisis and, to my limited grasp, it appears to me they're doing their best. But the credit crisis is a symptom and consequence of the underlying equity crisis -- too much debt in too may hands with worsening prospects for repayment. That equity crisis can only be resolved by reducing the amount of outstanding debt to a level where it's sensible to lend and borrow once more. Traditionally, that occurs through foreclosures (net loss to home owner and lender); bankruptcies (net loss to lender and borrower); and refinancing (net loss to lender). The potential scale of losses makes the lender's job very tough.
If we were only worried about a credit crisis, it seems plausible governmental intervention could tide us over until lenders regained confidence. Facing an equity crisis we face a conundrum. Every step towards resolving that crisis - - clearing bad debt - - perversely puts more debt in question -- exacerbating the credit squeeze. We face a similar conundrum as a society and economy: The crisis deepens as optimism wanes. Optimism wanes as the crisis deepens.
I do not understand how this equity crisis can be resolved in months or even over the next year or two. The longer it lasts, the worse it will get; the more optimism ebbs away. Oddly, our collective delusion -- our tendency to maintain optimism despite the evidence, works in our favor here. However, at some point the litany of bad news can exhaust that optimism and the delusion swings too far to the other side. At that point, a vicious cycle undermines economic and political stability and gives way to demagoguery and literal bloodletting.
Perhaps our more highly developed and efficient capital markets will allow us to clear bad debt more quickly than during the boom/bust cycles of some prior generations. Or perhaps our more highly developed and efficient capital markets allowed us to gorge on debt to an extent only a ferocious emetic can clear.
It's sunny outside.
I've heard from a number of neighbors since my last post, mostly kind and encouraging words about the blog itself, but also a number of one-on-one questions seeking advice about the economy. When I point out that I'm not a professional investment advisor, the response tends to be "that's why I'm asking." I've noticed an overall shift in the business media as well -- moving past the vilification of Wall Street and towards a more wary sense of skepticism towards all the punditry - - CEO's and Treasury officials included. I think that's progress, but am still troubled by h0w little thoughtful news coverage and debate addresses the fundamental engine to the current swoon.
I know that I don't know how bad things may get or how those bad things will present themselves. I'm pretty sure no one else knows either. I do think there are a few hints to suggest we're in for tougher times internationally, nationally, and locally, than we can hope to identify at this juncture.
We are experiencing the natural rejoinder to an extraordinary, once in a lifetime, economic boom. The sustained strength of economic activity and the unprecedented wealth creation throughout an increasingly globalized economy -- despite serious shocks in the late 1990's and 2001 -- slowly edged us all further and further along the risk aversion continuum to levels of borrowing and speculation which would have seemed utterly reckless just a few years ago. The boom changed the rules simply because it continued for so long.
I think it's important to recognize the communal delusion beneath it all because that delusion hasn't lifted, it's simply shifted. There were plenty of people saying things were out of whack as early as the late 1990's. I know because I was convinced the stock market had become idiotic back in 1998 and I read every Cassandra I could find to reaffirm my fear. But between 1998 and the stock swoon in the months prior to 9/11, I lost faith in my own doubts as day after day, quarter after quarter, the markets boomed. The relentless good news made caution seem foolish and, while I felt temporarily vindicated by the internet bubble bursting, the markets recovered in a matter of months and roared forward for another seven years.
I think it's very likely we face the same dynamic with the bust.
The Treasury Department can only go to the well so many times to dollop liquidity on the credit markets. The stream of CEO's and pundits speaking reassuringly about the long-term prospects for the economy will dwindle. As with the relentless nature of the boom, the sustained negative trends will progressively sap the residual optimism among business people and households. What replaces that optimism should concern us all.
We have just passed through the first panic of this downturn. The Treasury Department and Federal Reserve -- aided by Congress -- acted admirably and forcefully to head off a complete collapse of international banking. Their interventions to prop up individual institutions, and increasingly all the major national banks, have not saved these institutions, they've simply headed off panicked runs as they've arisen.
The ad hoc, reactive nature of the federal government's efforts are best seen in the amazing morphing "bail-out" package approved by Congress. First presented as an effort to take a bullet for the banks by assuming their "toxic liabilities," the bailout soon became a direct infusion of capital into the largest federal banks, and most recently, a combined carrot and stick the federal government is using to compel consolidation, feeding weaker banks to their stronger brethren.
The federal government is doing everything it can to prevent a complete collapse of the financial markets. The feds have gone far beyond what anyone imagined it could manage, legally or politically, just twelve months ago. Consistent with the boom, this bust is also changing the rules, with each successive stagger downwards justifying greater desperation and fundamentally altering our assumptions of what is possible.
The bottom line should be clear: The Fed is buying time, keeping credit markets on life support until the critical stage of the disease passes. I'm sorry to say I find it difficult to believe they can succeed. Oh, the patient will survive, but the cost will be astounding. The price we may all pay can only be counted nominally in dollars. The real price, as in the Great Depression, will likely be the toll on our sense of well-being wrought by a relentless constriction of possibilities and opportunities over these next few years.
Pretty dire stuff.
Right now, the federal government -- and national governments throughout the world -- are working daily to keep capital markets from closing up. Those capital markets only bring the economic horse to water, they can't make it drink.
The fate of our economy will be decided by the aggregate of millions of individual circumstances. A very large number of households and businesses borrowed more than their underlying assets and/or economic prospects warranted. Some indeterminate number of households and businesses are just this side of bankruptcy or foreclosure, counting on a positive turn in the economy to stave off personal disaster. But the vicious cycle is picking up steam. Every layoff announcement pushes a few more households over the brink, reduces overall consumer spending and business income, pushing more businesses to the edge. With every bankruptcy/foreclosure, lenders are forced to recognize the true scale of their losses on that loan. As optimism wanes, the potential cost balloons, the true extent of those losses can only be verified by actual bankruptcies and foreclosures. No one knows the ultimate cost because the cycle self-perpetuates for some period. The credit risk of borrowers changes as the individual circumstances of those borrowers changes. No one knows where the cycle will end.
In other words, the focus of federal efforts and most analysis of our prospects remains on credit availability. We are facing a credit crisis and, to my limited grasp, it appears to me they're doing their best. But the credit crisis is a symptom and consequence of the underlying equity crisis -- too much debt in too may hands with worsening prospects for repayment. That equity crisis can only be resolved by reducing the amount of outstanding debt to a level where it's sensible to lend and borrow once more. Traditionally, that occurs through foreclosures (net loss to home owner and lender); bankruptcies (net loss to lender and borrower); and refinancing (net loss to lender). The potential scale of losses makes the lender's job very tough.
If we were only worried about a credit crisis, it seems plausible governmental intervention could tide us over until lenders regained confidence. Facing an equity crisis we face a conundrum. Every step towards resolving that crisis - - clearing bad debt - - perversely puts more debt in question -- exacerbating the credit squeeze. We face a similar conundrum as a society and economy: The crisis deepens as optimism wanes. Optimism wanes as the crisis deepens.
I do not understand how this equity crisis can be resolved in months or even over the next year or two. The longer it lasts, the worse it will get; the more optimism ebbs away. Oddly, our collective delusion -- our tendency to maintain optimism despite the evidence, works in our favor here. However, at some point the litany of bad news can exhaust that optimism and the delusion swings too far to the other side. At that point, a vicious cycle undermines economic and political stability and gives way to demagoguery and literal bloodletting.
Perhaps our more highly developed and efficient capital markets will allow us to clear bad debt more quickly than during the boom/bust cycles of some prior generations. Or perhaps our more highly developed and efficient capital markets allowed us to gorge on debt to an extent only a ferocious emetic can clear.
It's sunny outside.
Saturday, September 27, 2008
Where there's smoke . . .
This past week of spectacular autumn days somehow reminds me of September 11, 2001 and the jarring juxtaposition of that gorgeous Vermont autumn day against the terrible events occurring over the horizon and on our televisions.
A similar feeling of suspended animation has set in these past few months as we all watch the outlines of a growing international credit crisis. The feeling has intensified this past week with the sudden drama of the Bush Administration's proposed $700 billion credit market intervention.
The disjunction between beautiful benign Vermont weather and the threatening chaos of the larger world is unsettling in itself. As with 9/11, the dizzying flurry of public drama this past week flooding the media channels easily overwhelms our judgment. However, the disjunction offers some perspective as well. For myself, I require the low hum of a pre-dawn Vermont morning to arrange my thoughts and take stock.
What I see in the burgeoning credit crisis is both much worse and much less mysterious than the news frenzy would suggest.
First, the economic fundamentals involved are, I'm afraid, more dire than most the popular media seem able to grasp.
The bank failures and related government interventions are symptoms of a deeper, more profound credit crisis. The news cycle celebrates the symptoms without really addressing the underlying disease. Each intervention by the federal government is treated as a positive sign and the stock markets -- barometers of speculative investment rather than fundamental economic health -- leap as though the disease has been vanquished.
We are, instead, facing a crisis in confidence which, if allowed to become a panic, may well prove as traumatic and disruptive as the Great Depression.
Our economy and the world economy operate on relatively efficient credit flows. Individually, our decisions to spend are influenced by the availability of capital. Credit (mortgages, credit cards, car loans, etc.) expands the availability of capital beyond what our current assets would otherwise generate. Businesses and the business of banking are no different, though their ability to tap credit markets -- to leverage their assets -- is more sophisticated.
Extending credit is a matter of confidence: "Will the borrower be able to repay the loan?" There are certain well-established metrics to determine the lender's risk; credit history, job security, collateral. As debt instruments have become more complex and credit derivatives of all kinds have flourished, the question for lenders has increasingly become, "Can I sell the loan?," attenuating the risk of repayment by spreading the loan obligation among a number of different debt-derived securities which investors will buy.
The refinement of this secondary market for debt derivatives has fed an extraordinary period of credit expansion which has, in turn, fueled huge asset bubbles in the stock and housing markets. As long as prices continued upwards, confidence in further lending continued and the appetite to invest in debt-derived securities grew. To feed demand, lenders worked harder to drum up loans they could sell, loosening underwriting standards and terms based on what they could bundle and sell as debt-derived securities, rather than what the borrower could bear.
The fundamentals underlying the credit markets began to turn decisively in late-2005. Housing production began to fall well before lenders began to rein-in mortgage lending. Consumer spending has only recently begun to tail off despite unprecedented levels of consumer debt wholly disproportionate to prospects for offsetting increased wealth. A succession of subsidiary credit markets have shriveled, beginning with "sub-prime" mortgage-backed securities; the complete collapse of a $330 billion auction rate securities market last winter; and more recently, the bedrocks of the secondary mortgage market Fannie Mae/Freddie Mac and (via credit default swaps) AIG. Banks are hoarding what cash they can find to offset their growing lending losses rather than offer new loans. As these credit markets have constricted, they have rendered higher quality debt-derived securities more risky, giving impetus to a vicious cycle of credit contraction. Finally, with the public drama of Secretary Paulson's proposed intervention to purchase up to $700 billion in debt-derived securities, public confidence in the overall economy appears to have taken a turn.
It is that shift in public confidence which will determine whether we face a sharp recession or a prolonged economic depression.
Unfortunately, for all of us, neither our political nor our business leadership can afford to speak frankly on the matter until it's too late. To openly address the severity of the credit crisis would be to openly state that, inevitably, the vast majority of people will be less well-off over these next few years than they have been these past few. As people ask how much less, some will panic and panic is contagious. FDR's famous 1933 Inaugural Address quotation, "the only thing we have to fear is fear itself," is as true today as it was in the depths of the Great Depression. By the time FDR uttered these words, vast wealth had already disappeared in bank runs, stock market declines, and foreclosures; the political risk of admitting the emperor had no clothes had past.
Today, our business and political leadership are scrambling to put band-aids on the credit markets and keep up a brave face. The federal intervention in the collapse and liquidation of Bear Stearns last March was considered an unprecedented intrusion into the markets by the Federal Reserve. Since then, the federal government has initiated an escalating series of unprecedented interventions, each more expensive and far-reaching than the last; each premised on the hope that it would be the last. In this context, Secretary Paulson's proposed $700 billion intervention in the mortgage debt derivative market should be recognized as simply another hopeful stopgap.
If you take a look at Secretary Paulson's original plan:
http://www.nytimes.com/2008/09/21/business/21draftcnd.html?ref=business
you'll notice he's seeking authority to purchase up to $700 billion in mortgaged-backed securities at any given time over the next two years. The hope appears to be that adding $700 billion to the mortgage debt market will allow banks and investors to sell off their distressed mortgage debt and use the cash from those sales to lend and reinvest. The concept is sound, but there's simply no guarantee $700 billion will be enough to encourage gun-shy lenders to open the credit taps once more; or to save the more distressed entities from worried investors. Moreover, the time period envisioned -- initially two years of continuing authority -- highlights the Treasury Department's expectation it will take an extended period of federal intervention to restore lender confidence.
Can any intervention at this point alter the fundamental shift in public confidence? While the stock markets may well leap at a signed intervention plan, the bread-and-butter of our economy will continue to languish with limited lending available while lenders sort out their balance sheets and borrowers bear the weight of existing debt in a recessionary economy. While Secretary Paulson and his successor are busy sorting out the mortgage-backed securities market, the credit-card-backed securities market, basic business loans, and mortgage payments on non-defaulting mortgages will all continue to deteriorate for all the same reasons the mortgage markets collapsed: a great deal of lending and borrowing occurred based on the appetite of investors to buy the debt, rather than traditional metrics for assessing the credit worthiness of the borrower.
Over-leveraged borrowers must reduce spending to cover debt expense. Consequently, business activity declines and lay-offs increase. Over-leveraged borrowers who lose their jobs will default on mortgage and credit card loans and the vicious cycle continues. Depositors begin to question the adequacy of bank reserves to cover swelling bad debt and begin to pull their money as we've seen recently with certain money market funds. If enough people run for the exits, panic ensues and all bets are off.
How do the federal interventions stay ahead of what is, ultimately, an untenable debt load throughout our economy? They don't. A lot of this debt must wash through the economy, depleting savings and sinking businesses in the process. The Paulson plan simply hopes to keep the major inter-bank lenders afloat while the economy "deleverages." If they can stave off a run on the banks, they can keep the credit taps open for those able to borrow. Eventually, confidence builds among consumers and they begin to borrow and spend once more.
The only thing I know for sure is that literally no one knows how this will all play out precisely because no one can know whether/when panic might set in. It is that fear, the fear that fuels economic panic, that we must now fear.
It's leadership we lack. The frank, courageous leadership to address the current crisis for what it is, confront the risk of panic up front, and outline a progressive multi-year plan to deleverage the economy which will mean pain for many but should avoid the irrational economic destruction of a panic for all.
Sadly, it may be the nature of the beast which makes such leadership rare. Those who claw to the top of the business and political worlds do so against ridiculous odds, fueled by an irrational optimism in both their own prospects and, I'm afraid, their own abilities. The few who reach the pinnacle are habituated to overcoming obstacles through that same optimism and sheer determination. You don't get to the top telling those below you to accept less.
(FDR's 1933 inaugural address, which employs much of the language and focus we sorely need today, was likely only possible after the horses were already out of the barn and the economic collapse an accepted fact: http://historymatters.gmu.edu/d/5057/ )
A similar feeling of suspended animation has set in these past few months as we all watch the outlines of a growing international credit crisis. The feeling has intensified this past week with the sudden drama of the Bush Administration's proposed $700 billion credit market intervention.
The disjunction between beautiful benign Vermont weather and the threatening chaos of the larger world is unsettling in itself. As with 9/11, the dizzying flurry of public drama this past week flooding the media channels easily overwhelms our judgment. However, the disjunction offers some perspective as well. For myself, I require the low hum of a pre-dawn Vermont morning to arrange my thoughts and take stock.
What I see in the burgeoning credit crisis is both much worse and much less mysterious than the news frenzy would suggest.
First, the economic fundamentals involved are, I'm afraid, more dire than most the popular media seem able to grasp.
The bank failures and related government interventions are symptoms of a deeper, more profound credit crisis. The news cycle celebrates the symptoms without really addressing the underlying disease. Each intervention by the federal government is treated as a positive sign and the stock markets -- barometers of speculative investment rather than fundamental economic health -- leap as though the disease has been vanquished.
We are, instead, facing a crisis in confidence which, if allowed to become a panic, may well prove as traumatic and disruptive as the Great Depression.
Our economy and the world economy operate on relatively efficient credit flows. Individually, our decisions to spend are influenced by the availability of capital. Credit (mortgages, credit cards, car loans, etc.) expands the availability of capital beyond what our current assets would otherwise generate. Businesses and the business of banking are no different, though their ability to tap credit markets -- to leverage their assets -- is more sophisticated.
Extending credit is a matter of confidence: "Will the borrower be able to repay the loan?" There are certain well-established metrics to determine the lender's risk; credit history, job security, collateral. As debt instruments have become more complex and credit derivatives of all kinds have flourished, the question for lenders has increasingly become, "Can I sell the loan?," attenuating the risk of repayment by spreading the loan obligation among a number of different debt-derived securities which investors will buy.
The refinement of this secondary market for debt derivatives has fed an extraordinary period of credit expansion which has, in turn, fueled huge asset bubbles in the stock and housing markets. As long as prices continued upwards, confidence in further lending continued and the appetite to invest in debt-derived securities grew. To feed demand, lenders worked harder to drum up loans they could sell, loosening underwriting standards and terms based on what they could bundle and sell as debt-derived securities, rather than what the borrower could bear.
The fundamentals underlying the credit markets began to turn decisively in late-2005. Housing production began to fall well before lenders began to rein-in mortgage lending. Consumer spending has only recently begun to tail off despite unprecedented levels of consumer debt wholly disproportionate to prospects for offsetting increased wealth. A succession of subsidiary credit markets have shriveled, beginning with "sub-prime" mortgage-backed securities; the complete collapse of a $330 billion auction rate securities market last winter; and more recently, the bedrocks of the secondary mortgage market Fannie Mae/Freddie Mac and (via credit default swaps) AIG. Banks are hoarding what cash they can find to offset their growing lending losses rather than offer new loans. As these credit markets have constricted, they have rendered higher quality debt-derived securities more risky, giving impetus to a vicious cycle of credit contraction. Finally, with the public drama of Secretary Paulson's proposed intervention to purchase up to $700 billion in debt-derived securities, public confidence in the overall economy appears to have taken a turn.
It is that shift in public confidence which will determine whether we face a sharp recession or a prolonged economic depression.
Unfortunately, for all of us, neither our political nor our business leadership can afford to speak frankly on the matter until it's too late. To openly address the severity of the credit crisis would be to openly state that, inevitably, the vast majority of people will be less well-off over these next few years than they have been these past few. As people ask how much less, some will panic and panic is contagious. FDR's famous 1933 Inaugural Address quotation, "the only thing we have to fear is fear itself," is as true today as it was in the depths of the Great Depression. By the time FDR uttered these words, vast wealth had already disappeared in bank runs, stock market declines, and foreclosures; the political risk of admitting the emperor had no clothes had past.
Today, our business and political leadership are scrambling to put band-aids on the credit markets and keep up a brave face. The federal intervention in the collapse and liquidation of Bear Stearns last March was considered an unprecedented intrusion into the markets by the Federal Reserve. Since then, the federal government has initiated an escalating series of unprecedented interventions, each more expensive and far-reaching than the last; each premised on the hope that it would be the last. In this context, Secretary Paulson's proposed $700 billion intervention in the mortgage debt derivative market should be recognized as simply another hopeful stopgap.
If you take a look at Secretary Paulson's original plan:
http://www.nytimes.com/2008/09/21/business/21draftcnd.html?ref=business
you'll notice he's seeking authority to purchase up to $700 billion in mortgaged-backed securities at any given time over the next two years. The hope appears to be that adding $700 billion to the mortgage debt market will allow banks and investors to sell off their distressed mortgage debt and use the cash from those sales to lend and reinvest. The concept is sound, but there's simply no guarantee $700 billion will be enough to encourage gun-shy lenders to open the credit taps once more; or to save the more distressed entities from worried investors. Moreover, the time period envisioned -- initially two years of continuing authority -- highlights the Treasury Department's expectation it will take an extended period of federal intervention to restore lender confidence.
Can any intervention at this point alter the fundamental shift in public confidence? While the stock markets may well leap at a signed intervention plan, the bread-and-butter of our economy will continue to languish with limited lending available while lenders sort out their balance sheets and borrowers bear the weight of existing debt in a recessionary economy. While Secretary Paulson and his successor are busy sorting out the mortgage-backed securities market, the credit-card-backed securities market, basic business loans, and mortgage payments on non-defaulting mortgages will all continue to deteriorate for all the same reasons the mortgage markets collapsed: a great deal of lending and borrowing occurred based on the appetite of investors to buy the debt, rather than traditional metrics for assessing the credit worthiness of the borrower.
Over-leveraged borrowers must reduce spending to cover debt expense. Consequently, business activity declines and lay-offs increase. Over-leveraged borrowers who lose their jobs will default on mortgage and credit card loans and the vicious cycle continues. Depositors begin to question the adequacy of bank reserves to cover swelling bad debt and begin to pull their money as we've seen recently with certain money market funds. If enough people run for the exits, panic ensues and all bets are off.
How do the federal interventions stay ahead of what is, ultimately, an untenable debt load throughout our economy? They don't. A lot of this debt must wash through the economy, depleting savings and sinking businesses in the process. The Paulson plan simply hopes to keep the major inter-bank lenders afloat while the economy "deleverages." If they can stave off a run on the banks, they can keep the credit taps open for those able to borrow. Eventually, confidence builds among consumers and they begin to borrow and spend once more.
The only thing I know for sure is that literally no one knows how this will all play out precisely because no one can know whether/when panic might set in. It is that fear, the fear that fuels economic panic, that we must now fear.
It's leadership we lack. The frank, courageous leadership to address the current crisis for what it is, confront the risk of panic up front, and outline a progressive multi-year plan to deleverage the economy which will mean pain for many but should avoid the irrational economic destruction of a panic for all.
Sadly, it may be the nature of the beast which makes such leadership rare. Those who claw to the top of the business and political worlds do so against ridiculous odds, fueled by an irrational optimism in both their own prospects and, I'm afraid, their own abilities. The few who reach the pinnacle are habituated to overcoming obstacles through that same optimism and sheer determination. You don't get to the top telling those below you to accept less.
(FDR's 1933 inaugural address, which employs much of the language and focus we sorely need today, was likely only possible after the horses were already out of the barn and the economic collapse an accepted fact: http://historymatters.gmu.edu/d/5057/ )
Sunday, June 22, 2008
Who Needs A Town Manager?
Here we are again.
On Tuesday, the 24th, we'll be asked once more to vote on employing a town manager.
I've had a chance to speak to any number of residents about the vote, both proponents and opponents. Foreshadowed back in the 2001 Town Administrative Needs Committee report which first recommended a town manager, I've concluded that the outcome on Tuesday doesn't really matter.
That 2001 report includes a "Note of Caution" beginning at the bottom of page 13, which reads as follows:
The towns we surveyed that ran best—and in which satisfaction with the structure seemed to be highest—all had the same characteristic: Selectboard members were content to leave day-to-day administrative decision-making to the administrator or manager. This is not an easy state of affairs to maintain, and it may be especially difficult in Norwich, given the board’s tradition of hands-on authority. A town managed by a chief administrative officer who lacks Selectboard support, is constantly second-guessed by individual Selectboard members, or whose authority is
undermined by Selectboard interference may well be worse off than one with no professional administrator at all.
As we talked with other towns about how they do things, we were struck by the fact that some are quite happy with their structure, while others have switched from one form to another—and, in a few cases, back again—as they search for the perfect governing blueprint. This suggests to us that there is no perfect blueprint; any structure might work, given the right alignment of personalities, politics and needs.
We are quite aware, then, that what has worked in other towns will not necessarily work for Norwich. One thing we can say for certain, though, is that no change will work unless it clarifies lines of authority within town government. Even then, it will take more than a statutorily defined job description to do so. Switching to a town manager will require the Selectboard to change its style of operation dramatically, and the townspeople of Norwich to respect the new structure.
As a committee, we have become convinced that town government can improve under a better administrative structure. But we are equally convinced that end-runs around the manager by townspeople and political power plays by elected officials can sabotage even the best-designed structure. Whatever option we adopt, we hope the people of Norwich will give those charged with making it work all the support and encouragement they need to be successful.
We now have seven years of experience with the town manager model. The results are decidely mixed for all the reasons outlined back in 2001. If we want to understand what hasn't worked this past decade -- and what will likely bedevil us in the decade to come however many town managers and/or town administrators we employ -- we need simply look in the mirror.
Since the openly divisive selectboard elections of 2000, we seen almost constant turnover in selectboard membership with most incumbents defeated seeking reelection or choosing not to stand for another term. Each new selectboard majority has viewed itself as an agent of change intent upon reversing the errors of their predecessors and protecting the town from future errors by the recent majority they've unseated. The aggrieved majority in 2000 was unseated by a different aggrieved majority two years later and yet another over the next three years.
The one constant throughout has been faction. Anyone active in town government this past decade has found themselves challenged to declare themselves an "us" or a "them" at any given time, in any given drama, and there have been plenty: Police protection, the Bradley Hill Trail, the original town manager debate, creating a development review board, the Planning Commission purges, outsourcing police protection, building affordable housing, Norcap, the "Gateway," the bandstand, and now another town manager debate.
Faction -- the tendency to delineate an "us" and a "them;" villify the "them" and take comfort in the angry fellowship of "us" -- and our appetite for faction in Norwich, is rendering this community effectively ungovernable. In my opinion, it's rendered the decision whether to employ a town manager or a town administrator largely irrelevant. Either and both are doomed to be frustrated by factional discord unless and until the political culture of this town changes.
It is said that the opposite of love is not hate, but indifference. Similarly, the opposite of faction may not be unanimity, but rather tolerance. There is no reason to think we should all agree on the issues of the day. There are any number of practical reasons we should do our best to disagree in a constructive manner; understand the thinking of those with whom we disagree and tolerate their right to voice disagreement.
The single best reason for tolerance is the simple fact we live together. Those who think Tuesday's vote will decide anything more than the next incremental episode in our shared struggle to govern ourselves are sadly deluded. Tuesday's victors and vanquished will all still remain town residents; still be subject to the same taxes, land use regulations, school services, police and fire protection; still vote next March. Those who subject themselves to these votes would do well to spend more time reaching out to those who may disagree, understand their points of disagreement, and resist the short-sighted advantage won by finger-pointing and fueling outrage to garner votes. Democracy is not preordained to succeed. It only ensures that we all have a voice in its success or failure. Whether we choose to work together or instead attempt to divide and conquer each election cycle and special town meeting is really a matter of individual wisdom, humility, and tolerance. As a town, we seem a little short on these virtues lately. No town manager or town administrator on earth can deliver them for us.
* * *
Monday Note: The links I placed on the Norwich listserv were truncated. The complete links are here:
1) A detailed review of the town manager versus town administrator question;
http://norwichnavel.blogspot.com/2007/03/i-confess-bewilderment-with-debate.html
and 2) The questions that question begs:
http://norwichnavel.blogspot.com/2007/03/part-two-town-managers-police-whats.html
On Tuesday, the 24th, we'll be asked once more to vote on employing a town manager.
I've had a chance to speak to any number of residents about the vote, both proponents and opponents. Foreshadowed back in the 2001 Town Administrative Needs Committee report which first recommended a town manager, I've concluded that the outcome on Tuesday doesn't really matter.
That 2001 report includes a "Note of Caution" beginning at the bottom of page 13, which reads as follows:
The towns we surveyed that ran best—and in which satisfaction with the structure seemed to be highest—all had the same characteristic: Selectboard members were content to leave day-to-day administrative decision-making to the administrator or manager. This is not an easy state of affairs to maintain, and it may be especially difficult in Norwich, given the board’s tradition of hands-on authority. A town managed by a chief administrative officer who lacks Selectboard support, is constantly second-guessed by individual Selectboard members, or whose authority is
undermined by Selectboard interference may well be worse off than one with no professional administrator at all.
As we talked with other towns about how they do things, we were struck by the fact that some are quite happy with their structure, while others have switched from one form to another—and, in a few cases, back again—as they search for the perfect governing blueprint. This suggests to us that there is no perfect blueprint; any structure might work, given the right alignment of personalities, politics and needs.
We are quite aware, then, that what has worked in other towns will not necessarily work for Norwich. One thing we can say for certain, though, is that no change will work unless it clarifies lines of authority within town government. Even then, it will take more than a statutorily defined job description to do so. Switching to a town manager will require the Selectboard to change its style of operation dramatically, and the townspeople of Norwich to respect the new structure.
As a committee, we have become convinced that town government can improve under a better administrative structure. But we are equally convinced that end-runs around the manager by townspeople and political power plays by elected officials can sabotage even the best-designed structure. Whatever option we adopt, we hope the people of Norwich will give those charged with making it work all the support and encouragement they need to be successful.
We now have seven years of experience with the town manager model. The results are decidely mixed for all the reasons outlined back in 2001. If we want to understand what hasn't worked this past decade -- and what will likely bedevil us in the decade to come however many town managers and/or town administrators we employ -- we need simply look in the mirror.
Since the openly divisive selectboard elections of 2000, we seen almost constant turnover in selectboard membership with most incumbents defeated seeking reelection or choosing not to stand for another term. Each new selectboard majority has viewed itself as an agent of change intent upon reversing the errors of their predecessors and protecting the town from future errors by the recent majority they've unseated. The aggrieved majority in 2000 was unseated by a different aggrieved majority two years later and yet another over the next three years.
The one constant throughout has been faction. Anyone active in town government this past decade has found themselves challenged to declare themselves an "us" or a "them" at any given time, in any given drama, and there have been plenty: Police protection, the Bradley Hill Trail, the original town manager debate, creating a development review board, the Planning Commission purges, outsourcing police protection, building affordable housing, Norcap, the "Gateway," the bandstand, and now another town manager debate.
Faction -- the tendency to delineate an "us" and a "them;" villify the "them" and take comfort in the angry fellowship of "us" -- and our appetite for faction in Norwich, is rendering this community effectively ungovernable. In my opinion, it's rendered the decision whether to employ a town manager or a town administrator largely irrelevant. Either and both are doomed to be frustrated by factional discord unless and until the political culture of this town changes.
It is said that the opposite of love is not hate, but indifference. Similarly, the opposite of faction may not be unanimity, but rather tolerance. There is no reason to think we should all agree on the issues of the day. There are any number of practical reasons we should do our best to disagree in a constructive manner; understand the thinking of those with whom we disagree and tolerate their right to voice disagreement.
The single best reason for tolerance is the simple fact we live together. Those who think Tuesday's vote will decide anything more than the next incremental episode in our shared struggle to govern ourselves are sadly deluded. Tuesday's victors and vanquished will all still remain town residents; still be subject to the same taxes, land use regulations, school services, police and fire protection; still vote next March. Those who subject themselves to these votes would do well to spend more time reaching out to those who may disagree, understand their points of disagreement, and resist the short-sighted advantage won by finger-pointing and fueling outrage to garner votes. Democracy is not preordained to succeed. It only ensures that we all have a voice in its success or failure. Whether we choose to work together or instead attempt to divide and conquer each election cycle and special town meeting is really a matter of individual wisdom, humility, and tolerance. As a town, we seem a little short on these virtues lately. No town manager or town administrator on earth can deliver them for us.
* * *
Monday Note: The links I placed on the Norwich listserv were truncated. The complete links are here:
1) A detailed review of the town manager versus town administrator question;
http://norwichnavel.blogspot.com/2007/03/i-confess-bewilderment-with-debate.html
and 2) The questions that question begs:
http://norwichnavel.blogspot.com/2007/03/part-two-town-managers-police-whats.html
Monday, February 25, 2008
Town Eating Day - Valley News (2/17/08)
As political controversy season nears here in Norwich, I'd like to issue a friendly challenge to the Valley News and your readers.
When the feathers start flying; as our worst-behaved neighbors and town officials begin to dominate the headlines, we'll have a choice. On the one hand, we can entertain the outrage-peddlers as they angle for headlines. We can continue to stoke the factional flames by lending them an audience, hoping they'll somehow learn to listen with humility and wisdom once they've chased their adversaries from the stage. Or we can refuse to play, demanding more of ourselves and our community to move beyond the scorched-earth tactics of recent years.
Last winter, a group of Norwich residents -- fed up with the state of politics in town -- began building an alternative approach. We held a day of events meant to complement Town Meeting -- tentatively called ""Get Off Our Duffs Day." We invited townspeople (and journalists) to a day meant as a celebration of the human scale of town government and small-town community.
The morning was spent in a series of break-out sessions focusing on individual volunteer town committees, boards, and commissions. The sessions are designed to break down the distance between these boards and the public by dedicating time for open dialogue without the agendas, deadlines and formality which so often stifle a free exchange of ideas. They also seek to promote transparency, giving townspeople an opportunity to learn about the duties and time commitment involved in serving on these volunteer boards, while providing board members a chance to solicit public opinion on issues which fall within their authority.
Following the morning sessions, a free hot lunch was provided in the school gym, allowing townspeople time to get to know neighbors they've seen around town but never met or follow up with town volunteers on conversations from the morning. After lunch, we held two general sessions, first with our school board, followed by a plenary session on our fire and police protection -- all lightning rods here in Norwich. These sessions explicitly addressed how our community should make decisions regarding these difficult issues, eschewing the headline-dominating debate focused entirely on "who" might be to blame and "why." While these sessions lacked volume and vitriol, they proved this community can address difficult issues in a deliberate and sensible manner.
Sadly, the event received no press coverage whatsoever. We understand the Valley News is in the business of selling papers. Faction and scandal sell papers and are even arguably newsworthy. But it's time for the Valley News to dig a bit deeper, using its pages to help our communities find constructive solutions to the real problems we face.
Your readers live in a region with a rich and storied tradition of self-reliance, where democracy still means not simply the right to vote, but also the corresponding duty to serve. Our communities are of a scale -- a human scale -- where bureaucracy remains the exception and citizenship means more than merely consuming government services. Our volunteer-based model of civil service -- and the subtle virtues that service fosters -- will only survive if we work to preserve it. That struggle, found to some degree in every town where the Valley News is delivered, is itself surely newsworthy.
So we're going to do it again this year. Renamed "Town Eating Day," we'll gather Saturday, March 1st, in Marion Cross Gym. We'll follow a similar format with some refinements we hope will help establish this day as an annual tradition here in Norwich. As "Town Eating" takes root, we hope it becomes a perennial antidote to the politics of outrage which have done so much to diminish Norwich town government this past decade. The day is open to all Norwich residents (and Valley News reporters). We hope to see you there.
When the feathers start flying; as our worst-behaved neighbors and town officials begin to dominate the headlines, we'll have a choice. On the one hand, we can entertain the outrage-peddlers as they angle for headlines. We can continue to stoke the factional flames by lending them an audience, hoping they'll somehow learn to listen with humility and wisdom once they've chased their adversaries from the stage. Or we can refuse to play, demanding more of ourselves and our community to move beyond the scorched-earth tactics of recent years.
Last winter, a group of Norwich residents -- fed up with the state of politics in town -- began building an alternative approach. We held a day of events meant to complement Town Meeting -- tentatively called ""Get Off Our Duffs Day." We invited townspeople (and journalists) to a day meant as a celebration of the human scale of town government and small-town community.
The morning was spent in a series of break-out sessions focusing on individual volunteer town committees, boards, and commissions. The sessions are designed to break down the distance between these boards and the public by dedicating time for open dialogue without the agendas, deadlines and formality which so often stifle a free exchange of ideas. They also seek to promote transparency, giving townspeople an opportunity to learn about the duties and time commitment involved in serving on these volunteer boards, while providing board members a chance to solicit public opinion on issues which fall within their authority.
Following the morning sessions, a free hot lunch was provided in the school gym, allowing townspeople time to get to know neighbors they've seen around town but never met or follow up with town volunteers on conversations from the morning. After lunch, we held two general sessions, first with our school board, followed by a plenary session on our fire and police protection -- all lightning rods here in Norwich. These sessions explicitly addressed how our community should make decisions regarding these difficult issues, eschewing the headline-dominating debate focused entirely on "who" might be to blame and "why." While these sessions lacked volume and vitriol, they proved this community can address difficult issues in a deliberate and sensible manner.
Sadly, the event received no press coverage whatsoever. We understand the Valley News is in the business of selling papers. Faction and scandal sell papers and are even arguably newsworthy. But it's time for the Valley News to dig a bit deeper, using its pages to help our communities find constructive solutions to the real problems we face.
Your readers live in a region with a rich and storied tradition of self-reliance, where democracy still means not simply the right to vote, but also the corresponding duty to serve. Our communities are of a scale -- a human scale -- where bureaucracy remains the exception and citizenship means more than merely consuming government services. Our volunteer-based model of civil service -- and the subtle virtues that service fosters -- will only survive if we work to preserve it. That struggle, found to some degree in every town where the Valley News is delivered, is itself surely newsworthy.
So we're going to do it again this year. Renamed "Town Eating Day," we'll gather Saturday, March 1st, in Marion Cross Gym. We'll follow a similar format with some refinements we hope will help establish this day as an annual tradition here in Norwich. As "Town Eating" takes root, we hope it becomes a perennial antidote to the politics of outrage which have done so much to diminish Norwich town government this past decade. The day is open to all Norwich residents (and Valley News reporters). We hope to see you there.
Sunday, February 3, 2008
little big brother
Here's an interesting read:
http://projects.washingtonpost.com/2008-presidential-candidates/finance/search/?zipcode=05055
Find out who your neighbors support for president.
http://projects.washingtonpost.com/2008-presidential-candidates/finance/search/?zipcode=05055
Find out who your neighbors support for president.
Tuesday, January 8, 2008
Big Picture Planning and Permitting
I've been given twenty minutes to address the joint SB/PC meeting this evening so spent my time waiting for my car to be fixed this morning jotting down notes.
Twenty minutes is not enough time to discuss specific provisions of the proposed zoning regulations in any detail. Instead, I hope to take a step back and discuss the draft zoning regulations as a symptom of a much more serious problem with Norwich town government as a whole -- our planning and permitting process in particular.
These draft zoning regulations are the fruit of a land use governance regime which is fundamentally broken. It represents the cost in dozens upon dozens of volunteer hours devoured by a demonstrably failed approach we nevertheless perpetuate for lack of the imagination, the criticial perspective, and the political will to remedy.
Our current methods have yielded a Town Plan now eleven years without any meaningful updates or review. They've seen us run through nearly two dozen Planning Commission members in the past six years. They've delivered draft zoning regulations -- several times larger than their predecessor regulations in terms of verbiage -- produced by nine (now seven?) volunteers and professional staff working largely on their own. These zoning regulations now face the distinct possibility of rejection by the Selectboard for a number of reasons discussed here and elsewhere.
Who's to blame? Who cares? Our real problem is asset utilization. For years now we've squandered untold hours of volunteer time struggling to run everything planned and permitted through a nine-member Planning Commission. We've allowed our Planning Commission -- in it's many iterations over the past decade -- to become woefully overextended in terms of time and agendas. There's simply no way for a single nine-member commission to do everything we ask of them, let alone do those tasks well. This would be of little moment if it didn't directly impact -- negatively impact -- land owners here in town. The price of poorly conceived regulations; the expense in terms of time, money spent navigating the permitting process, and good will diminished -- plain to see to anyone who sits in on a few DRB hearings -- is unconscionable. All the more so as a viable alternative is explicitly contemplated in recent changes to Vermont's land use laws.
I'd like to talk about that alternative, how it might work here, and how we might go about putting it in place. If we're willing to take a new approach to planning and permitting here in Norwich, I'd recommend rejecting these draft regulations and remanding them for thorough revision consistent with this new approach. If we aren't willing to tackle the deeper issues here, then rejecting and remanding these regulations to the Planning Commission seems to me a cruel, pointless gesture. We might as well accept that these regulations are the best we're going to produce and pity the applicants, their neighbors, and the DRB members who must find there way through them until we get around to revising them another 15 years from now.
Twenty minutes is not enough time to discuss specific provisions of the proposed zoning regulations in any detail. Instead, I hope to take a step back and discuss the draft zoning regulations as a symptom of a much more serious problem with Norwich town government as a whole -- our planning and permitting process in particular.
These draft zoning regulations are the fruit of a land use governance regime which is fundamentally broken. It represents the cost in dozens upon dozens of volunteer hours devoured by a demonstrably failed approach we nevertheless perpetuate for lack of the imagination, the criticial perspective, and the political will to remedy.
Our current methods have yielded a Town Plan now eleven years without any meaningful updates or review. They've seen us run through nearly two dozen Planning Commission members in the past six years. They've delivered draft zoning regulations -- several times larger than their predecessor regulations in terms of verbiage -- produced by nine (now seven?) volunteers and professional staff working largely on their own. These zoning regulations now face the distinct possibility of rejection by the Selectboard for a number of reasons discussed here and elsewhere.
Who's to blame? Who cares? Our real problem is asset utilization. For years now we've squandered untold hours of volunteer time struggling to run everything planned and permitted through a nine-member Planning Commission. We've allowed our Planning Commission -- in it's many iterations over the past decade -- to become woefully overextended in terms of time and agendas. There's simply no way for a single nine-member commission to do everything we ask of them, let alone do those tasks well. This would be of little moment if it didn't directly impact -- negatively impact -- land owners here in town. The price of poorly conceived regulations; the expense in terms of time, money spent navigating the permitting process, and good will diminished -- plain to see to anyone who sits in on a few DRB hearings -- is unconscionable. All the more so as a viable alternative is explicitly contemplated in recent changes to Vermont's land use laws.
I'd like to talk about that alternative, how it might work here, and how we might go about putting it in place. If we're willing to take a new approach to planning and permitting here in Norwich, I'd recommend rejecting these draft regulations and remanding them for thorough revision consistent with this new approach. If we aren't willing to tackle the deeper issues here, then rejecting and remanding these regulations to the Planning Commission seems to me a cruel, pointless gesture. We might as well accept that these regulations are the best we're going to produce and pity the applicants, their neighbors, and the DRB members who must find there way through them until we get around to revising them another 15 years from now.
Sunday, January 6, 2008
The Marijuana Paradox and the Right to Sin
Windsor County State's Attorney Bobby Sand's Forum letter in today's Valley News is worth a ponder. Sand frames the decriminalization debate in terms few have acknowledged and effectively exposes the political motivations behind the hyperbole. It might also be read as a gracious gesture towards Governor Douglas who has been on his back heels over marijuana since the day he tried to make populist hay of Sand's prosecutorial discretion in the Martha Davis matter.
Sand's thesis is straightforward: Our national drug policy is a tremendous drain on law enforcement resources with very little to show for the effort. With marijuana use widespread, a significant minority of voters against criminalization, and thousands of lives disrupted by arrest and prosecution for marijuana possession, we need to reconsider our drug policy -- and marijuana laws in particular -- in a rational and dispassionate manner. Political ambition, expressed in the sanctimonious manner Jim Douglas exhibited this past autumn, does not help.
I would go a step further.
I've seen people I care about destroyed by illicit drugs -- even marijuana, which I would otherwise consider a less addictive substance. I've seen people I care about destroyed by alcohol abuse. I've seen the lives of people I care about shortened and weakened by addiction to tobacco. Having witnessed the price of addiction firsthand, I cannot say decriminalizing illicit intoxicants -- or greater access to licit ones -- is a good idea. But that's not the issue.
There are plenty of things Americans are allowed to do that aren't good ideas -- some which utterly repulse me. I don't think flag and cross burning are a good idea, but I accept that those too close-minded to recognize the deep insult of their actions have the constitutional right to make fools of themselves. The pornography industry is huge in this country, deemed an exercise in free speech protected by our First Amendment. The idea of watching other people have sex doesn't do it for me, but I accept that millions of Americans will pay good money for the vicarious thrill. I don't think pornography is a good thing for the actors or the audience, but that's not the issue.
The issue is one of individual liberty and the extent to which our laws may limit individual liberty for the benefit of society as a whole. The issue is our right to sin.
Take tobacco for instance. Unlike alcohol -- an illicit drug in this nation for a decade -- tobacco has never faced a complete legal prohibition. While there are likely some beneficial characteristics to tobacco consumption, there's really no question smoking and chewing tobacco regularly has a serious, progressive, negative impact on the health of the user. By law, we've prohibited the sale and use of tobacco by minors on the principle that minors do not have the mature capacity to choose what's best for themselves. By law, we've recently prohibited smoking in indoor public spaces on the principle that workers employed in those spaces aren't truly free to avoid the secondhand smoke. Compared to the outright prohibition on alcohol in the 1920's and on marijuana today, these are relatively nuanced measures to balance public health concerns with individual liberty -- not unlike the balance we've struggled to maintain with regard to free speech.
Can we find a similarly nuanced approach to marijuana and other illicit intoxicants? Can we recognize the individual's right to be intoxicated balanced against society's right to be protected from secondhand injury due to that individual's indulgence? I cannot imagine why not. But that question -- the proper balance between an individual's right to sin and society's right to be protected from injury -- isn't even on the table for discussion.
Why do we recognize and protect the rights of the pornographer, the drinker, and the tobacco smoker, but deny adults the right to mistreat their bodies using other intoxicants? Certainly, the pornography, tobacco, and alcohol industries are now so well entrenched financially that they can mount an effective defense against legislation seeking outright prohibition. But that can't be the whole answer, as social mores regarding alcohol, tobacco and pornography have shifted substantially over the decades; alcohol and tobacco treated more stringently since the 1960's and pornography actually finding wider acceptance within the mainstream.
Ultimately, it may simply be a matter of majority rule. A lot of people like the intoxication of alcohol and nicotine. A lot of people like watching other people have sex. Not enough people like the intoxication of marijuana, methamphetamine, or opiates to tip the political scales against prohibition?
Unfortunately, the cost to this minority -- their families and neighbors -- is horrific. By driving the market for these intoxicants underground, we've abandoned millions of people to a criminal underworld which mocks the law-and-order sanctimony of our politicians. Selectively denied their right to sin -- their addictions arbitrarily criminalized -- we feed a cycle of property crime, prostitution, and exploitation which our prisons and police are finding increasingly difficult to contain. It is politically expedient to sweep the mess under the rug, but the cost in terms of individual lives and innocent bystanders is immense.
Political expediency and majority rule can and do perpetuate terrible injustice at times. Our founders understood this and sought to enshrine the supremacy of individual rights in our Constitution. This did not prevent the perpetuation of slavery, racial segregation, the disenfranchisement of women, or Prohibition, but it was instrumental in the eventual remedy of each over time.
As a society, we need to insist upon our right to sin. Since our founding, we have recognized an adult's right to sin by decriminalizing divorce, contraception, engaging in homosexual acts, and gambling -- to the chagrin of many. This right to sin is not a monolithic trump to reason. The right to sin with tobacco, alcohol, and XXX videos is not without counterbalancing restrictions for the protection of broader society. Drunk driving, secondhand smoke and child exploitation for sexual gratification are legitimate dangers to others and thus legitimate bases for regulation. Despite the distaste many may feel, it is time to confront the implications of recognizing an adult's right to sin with a broad range of illicit intoxicants, not least marijuana.
Our forty year experience with this "War on Drugs" raises legitimate and difficult questions regarding the war itself. As we've learned, sometimes we lose wars because we were mistaken about the enemy. We talk about this "war" in terms of foreign narco-terrorists and drug cartels, but we've actually been fighting a war against the desire of millions of Americans to intoxicate themselves. Who are we, as a nation, to deny individual citizens this right so long as they exercise it without harming others? Who are we, as a people, to consign fellow citizens to a criminal underworld entirely of our own legislation? The impulse to control society for our perception of the "greater good" has within it the seeds of tyranny. Our insistence upon the rights of individuals -- enshrined within our Constitution -- forces us to question our own provinciality regarding what we believe to be the greater good. We err badly pursuing wars founded, not upon our defense of individual liberties, but rather upon our own sense of righteousness. We're going to lose this war, even if we win.
Sand's thesis is straightforward: Our national drug policy is a tremendous drain on law enforcement resources with very little to show for the effort. With marijuana use widespread, a significant minority of voters against criminalization, and thousands of lives disrupted by arrest and prosecution for marijuana possession, we need to reconsider our drug policy -- and marijuana laws in particular -- in a rational and dispassionate manner. Political ambition, expressed in the sanctimonious manner Jim Douglas exhibited this past autumn, does not help.
I would go a step further.
I've seen people I care about destroyed by illicit drugs -- even marijuana, which I would otherwise consider a less addictive substance. I've seen people I care about destroyed by alcohol abuse. I've seen the lives of people I care about shortened and weakened by addiction to tobacco. Having witnessed the price of addiction firsthand, I cannot say decriminalizing illicit intoxicants -- or greater access to licit ones -- is a good idea. But that's not the issue.
There are plenty of things Americans are allowed to do that aren't good ideas -- some which utterly repulse me. I don't think flag and cross burning are a good idea, but I accept that those too close-minded to recognize the deep insult of their actions have the constitutional right to make fools of themselves. The pornography industry is huge in this country, deemed an exercise in free speech protected by our First Amendment. The idea of watching other people have sex doesn't do it for me, but I accept that millions of Americans will pay good money for the vicarious thrill. I don't think pornography is a good thing for the actors or the audience, but that's not the issue.
The issue is one of individual liberty and the extent to which our laws may limit individual liberty for the benefit of society as a whole. The issue is our right to sin.
Take tobacco for instance. Unlike alcohol -- an illicit drug in this nation for a decade -- tobacco has never faced a complete legal prohibition. While there are likely some beneficial characteristics to tobacco consumption, there's really no question smoking and chewing tobacco regularly has a serious, progressive, negative impact on the health of the user. By law, we've prohibited the sale and use of tobacco by minors on the principle that minors do not have the mature capacity to choose what's best for themselves. By law, we've recently prohibited smoking in indoor public spaces on the principle that workers employed in those spaces aren't truly free to avoid the secondhand smoke. Compared to the outright prohibition on alcohol in the 1920's and on marijuana today, these are relatively nuanced measures to balance public health concerns with individual liberty -- not unlike the balance we've struggled to maintain with regard to free speech.
Can we find a similarly nuanced approach to marijuana and other illicit intoxicants? Can we recognize the individual's right to be intoxicated balanced against society's right to be protected from secondhand injury due to that individual's indulgence? I cannot imagine why not. But that question -- the proper balance between an individual's right to sin and society's right to be protected from injury -- isn't even on the table for discussion.
Why do we recognize and protect the rights of the pornographer, the drinker, and the tobacco smoker, but deny adults the right to mistreat their bodies using other intoxicants? Certainly, the pornography, tobacco, and alcohol industries are now so well entrenched financially that they can mount an effective defense against legislation seeking outright prohibition. But that can't be the whole answer, as social mores regarding alcohol, tobacco and pornography have shifted substantially over the decades; alcohol and tobacco treated more stringently since the 1960's and pornography actually finding wider acceptance within the mainstream.
Ultimately, it may simply be a matter of majority rule. A lot of people like the intoxication of alcohol and nicotine. A lot of people like watching other people have sex. Not enough people like the intoxication of marijuana, methamphetamine, or opiates to tip the political scales against prohibition?
Unfortunately, the cost to this minority -- their families and neighbors -- is horrific. By driving the market for these intoxicants underground, we've abandoned millions of people to a criminal underworld which mocks the law-and-order sanctimony of our politicians. Selectively denied their right to sin -- their addictions arbitrarily criminalized -- we feed a cycle of property crime, prostitution, and exploitation which our prisons and police are finding increasingly difficult to contain. It is politically expedient to sweep the mess under the rug, but the cost in terms of individual lives and innocent bystanders is immense.
Political expediency and majority rule can and do perpetuate terrible injustice at times. Our founders understood this and sought to enshrine the supremacy of individual rights in our Constitution. This did not prevent the perpetuation of slavery, racial segregation, the disenfranchisement of women, or Prohibition, but it was instrumental in the eventual remedy of each over time.
As a society, we need to insist upon our right to sin. Since our founding, we have recognized an adult's right to sin by decriminalizing divorce, contraception, engaging in homosexual acts, and gambling -- to the chagrin of many. This right to sin is not a monolithic trump to reason. The right to sin with tobacco, alcohol, and XXX videos is not without counterbalancing restrictions for the protection of broader society. Drunk driving, secondhand smoke and child exploitation for sexual gratification are legitimate dangers to others and thus legitimate bases for regulation. Despite the distaste many may feel, it is time to confront the implications of recognizing an adult's right to sin with a broad range of illicit intoxicants, not least marijuana.
Our forty year experience with this "War on Drugs" raises legitimate and difficult questions regarding the war itself. As we've learned, sometimes we lose wars because we were mistaken about the enemy. We talk about this "war" in terms of foreign narco-terrorists and drug cartels, but we've actually been fighting a war against the desire of millions of Americans to intoxicate themselves. Who are we, as a nation, to deny individual citizens this right so long as they exercise it without harming others? Who are we, as a people, to consign fellow citizens to a criminal underworld entirely of our own legislation? The impulse to control society for our perception of the "greater good" has within it the seeds of tyranny. Our insistence upon the rights of individuals -- enshrined within our Constitution -- forces us to question our own provinciality regarding what we believe to be the greater good. We err badly pursuing wars founded, not upon our defense of individual liberties, but rather upon our own sense of righteousness. We're going to lose this war, even if we win.
Saturday, January 5, 2008
(LONG) Open Letter to SB/PC re: Tuesday, January 8th @ 6:30pm
To the Norwich Selectboard:
I am writing to express my strong opposition to the proposed Norwich Zoning Regulations currently before you and to ask the Selectboard to reject these proposed regulations at this time for further comprehensive revisions.
I take no pleasure in criticizing the work of a number of well-intentioned and hard-working volunteers in developing these draft regulations, but feel there's really no alternative to outright rejection at this point. While this letter may seem late in the game for the Selectboard, it is consistent with detailed comments I have provided the Planning Commission at their meetings, at public forums conducted to receive comment on these drafts, and by direct correspondence dating back even to the late 1990's. I have attached a PDF copy of one such letter written in response to the Planning Commission's February 2007 draft which I feel remains relevant to the draft now before you. (PDF available by request)
Where to begin? Three basic points:
1) The size and scope of these proposed regulations far outstrip our ability to meaningfully review proposed developments and to meaningfully enforce these regulations throughout the development process.
A simple example: Deer Wintering Areas. (NZR Draft 3.13 (B)(3))
According to 3.13, the impact of proposed development on the enumerated features shall be determined by the Development Review Board and development shall conform to the criteria of those regulations.
Specifically, Section 3.13(3) states that, "Development shall be located and configured to minimize adverse impacts on critical wildlife habitat, including travel corridors, deer wintering areas and natural areas identified in the Norwich Town Plan, by the Vermont Department of Fish & Wildlife, the Vermont Agency of Natural Resources, or through site investigation."
The section further states that development may be excluded from such habitat and a buffer area of adequate size shall be established to protect such habitat.
In theory, this all sounds fine. In practice, it's largely meaningless.
Huge swathes of Norwich are identified by the Vermont Department of Fish & Wildlife as deer wintering habitat and travel corridors between such habitat. Those maps are of some vintage and make no effort to identify variable levels of criticality. At DRB hearings where this criterion has been reviewed, testimony tends towards whether a neighbor has seen deer in the vicinity, hunters visit the area, and if anyone saw dropping during the site visit. There are currently no resources utilized by the town to assess relative criticality of habitat and land owners are left to the whims of the hearing whether their chosen house site or subdivision line will be found to impose more than minimized adverse impacts. Recognizing the capricious nature of the regulation in practice, the DRB is rightfully hesitant to give it any teeth.
To effectively regulate adverse impact upon deer wintering areas and related critical habitat, the town needs more detailed and transparent identification of the areas affected. This would allow land owners to plan ahead regarding house location and subdivision design. It would allow the Zoning Administrator to more meaningfully assist the land owner in the application development process by being able to point to regulations which are objectively comprehensible and enforced. It would allow neighbors and concerned conservation entities to meaningfully engage in the DRB review. Finally, it would allow the DRB to apply the existing regulations with more confidence in the fairness of the review process and the defensibility of the decision itself upon judicial review.
We don't have those maps today. To my knowledge, we don't have any specific plan to develop those resources at this time. So my question remains: Why regulate something we can't regulate well? Why burden land owners, their neighbors, DRB volunteers, our Zoning Administrator, and the town's legal resources on broad stroke regulations of this type? Don't regulate what you can't regulate effectively. While I've used deer wintering areas as an example here, there are many others throughout these regulations. The scope and size of these proposed regulations reflect our authority to regulate development under state law rather than our ability to meaningfully regulate a subset of factors specifically important to our community.
2) These proposed regulations burden land owners with voluminous restrictions and advice which are, in most cases, unenforceable due to vagueness, poor conception, or inconsistent application.
Example: Scenic Resources and the Norwich Gateway.
No one, at any level of the litigation concerning the Simpson project, disputed whether the January 2000 Inventory of Scenic Resources specifically identified the subject property as a scenic resource. To my knowledge, no one (other than our Zoning Administrator) questioned whether the Inventory of Scenic Resources was a legitimate legal basis to regulate development on that parcel. Nevertheless, in practice, the Inventory and applicable provisions in the subdivision regulations were deemed too vague to enforce. Upon appeal, the determination of what constituted an adverse impact to a scenic resource came down to a subjective judgment whether the lot in question was sufficiently scenic to warrant restricting development and whether the regulations were sufficiently specific to support a permit denial. The court concluded they were not and the DRB would be well-advised to finesse future fragile feature determinations so they are not the primary basis for a permit denial. Despite this, the proposed zoning regulations adopt the same mandatory language which has already proven effectively unenforceable under our subdivisions regulations.
Again, don't regulate what you can't regulate effectively. Why extend the fragile features criteria to our zoning regulations when they are so problematic in our experience under our subdivision regulations? Why put land owners through a series of hoops which are likely unenforceable, at least against those applicants with the means to mount an appeal?
If the town wants to preserve scenic resources, don't saddle land owners and DRB volunteers with these criteria. Entrust the Inventory of Scenic Resources to our Conservation Commission to prioritize these resources in a series of public hearings. Use that priority list to pursue conservation easements on those resources of highest priority. Don't impose a broad-stroke list of regulatory criteria on individual land owners -- potentially impacting the value of what to many is their largest single investment -- without taking the time to meaningfully differentiate between what the community would like to see conserved and what the community is actually willing to step forward and conserve.
3) These proposed regulations reflect a promulgation process which poorly utilizes town resources, burning out volunteers, and repeating a pattern of planning projects which collapse at the finish line rather than sustain a thoughtful and effective planning regime.
Examples: Town Plan, Zoning and Subdivision Regulation revisions, Inventory of Scenic Resources, etc.
Vermont state law is blessed with an enlightened attitude towards land use regulation which values local democratic participation in developing regulations above any centralized planning bureaucracy. In practice, I feel we, as a town, have made very poor use of our authority.
Why is it up to the Planning Commission alone to draft, research, and review proposed regulations and planning initiatives? Certainly, state law entrusts our Planning Commission with the authority to do so, but that doesn't mean the Planning Commission has to do it alone. We need the political and administrative leadership to reorganize our planning efforts to delegate far more research and drafting to existing and ad hoc committees which can utilize and develop specific expertise on discreet projects. Final policy determinations and regulatory language would remain the responsibility of the Planning Commission, but the development of policy and regulations would benefit from broader input.
Recent revisions to Chapter 117 clearly envision a more collaborative, less confrontational structure for both planning and permitting through the use of advisory commissions. The Bradley Hill Road controversy of a few years back illustrates this point well. A land owner sought to develop a parcel and access that parcel by improving what was effectively a hiking trail for automobile use. Neighbors objected. The Planning Commission and Selectboard were dragged into the fray. The controversy became a matter of litigation and a political rallying cry for libertarian land-owner rights folks on one side and communitarian trail/hiking/recreational rights folks on the other. In an attempt to avoid further such controversies a town committee was created to review all Class 4 roads in town and recommend candidates for trail designation. The committee was responsive to both libertarian and communitarian views and, in their work together, a more balanced and collaborative outlook on the issue emerged as everyone came to recognize a one-size-fits-all regulatory approach did not reflect the values of the community.
We are a community entrusted with the legal authority to limit what individual land owners can do with our land. We should exercise that authority sparingly and in a manner which draws broadly from the community to come up with solutions which suit us as a community. These 135 pages reflect the bureaucratic default which occurs when a single committee of volunteers are overextended, harried politically, suffer 100% attrition over a matter of a couple years, and plow on so they can get to the next item on their inexorably growing agenda. No number of public hearings asking townspeople to absorb 135 pages of regulatory language can make this document reflective of the community.
I am confident the Planning Commission has done the best they can under trying circumstances. I am simply saying it's time to address the circumstances. Let's take a step back and recognize the practical effect these regulations will have on land owners, their neighbors, DRB members, and, ultimately, the community. Let's develop a planning structure which addresses individual policy and regulatory goals in a deliberate and effective manner rather than seek to reinvent the wheel through omnibus decennial rewrites of our Town Plan and regulations. No volunteer-based Planning Commission can do that alone. It's time to exercise the political will and leadership to admit we're off track and put our minds to developing a solution which serves the community and its land owners.
I am writing to express my strong opposition to the proposed Norwich Zoning Regulations currently before you and to ask the Selectboard to reject these proposed regulations at this time for further comprehensive revisions.
I take no pleasure in criticizing the work of a number of well-intentioned and hard-working volunteers in developing these draft regulations, but feel there's really no alternative to outright rejection at this point. While this letter may seem late in the game for the Selectboard, it is consistent with detailed comments I have provided the Planning Commission at their meetings, at public forums conducted to receive comment on these drafts, and by direct correspondence dating back even to the late 1990's. I have attached a PDF copy of one such letter written in response to the Planning Commission's February 2007 draft which I feel remains relevant to the draft now before you. (PDF available by request)
Where to begin? Three basic points:
1) The size and scope of these proposed regulations far outstrip our ability to meaningfully review proposed developments and to meaningfully enforce these regulations throughout the development process.
A simple example: Deer Wintering Areas. (NZR Draft 3.13 (B)(3))
According to 3.13, the impact of proposed development on the enumerated features shall be determined by the Development Review Board and development shall conform to the criteria of those regulations.
Specifically, Section 3.13(3) states that, "Development shall be located and configured to minimize adverse impacts on critical wildlife habitat, including travel corridors, deer wintering areas and natural areas identified in the Norwich Town Plan, by the Vermont Department of Fish & Wildlife, the Vermont Agency of Natural Resources, or through site investigation."
The section further states that development may be excluded from such habitat and a buffer area of adequate size shall be established to protect such habitat.
In theory, this all sounds fine. In practice, it's largely meaningless.
Huge swathes of Norwich are identified by the Vermont Department of Fish & Wildlife as deer wintering habitat and travel corridors between such habitat. Those maps are of some vintage and make no effort to identify variable levels of criticality. At DRB hearings where this criterion has been reviewed, testimony tends towards whether a neighbor has seen deer in the vicinity, hunters visit the area, and if anyone saw dropping during the site visit. There are currently no resources utilized by the town to assess relative criticality of habitat and land owners are left to the whims of the hearing whether their chosen house site or subdivision line will be found to impose more than minimized adverse impacts. Recognizing the capricious nature of the regulation in practice, the DRB is rightfully hesitant to give it any teeth.
To effectively regulate adverse impact upon deer wintering areas and related critical habitat, the town needs more detailed and transparent identification of the areas affected. This would allow land owners to plan ahead regarding house location and subdivision design. It would allow the Zoning Administrator to more meaningfully assist the land owner in the application development process by being able to point to regulations which are objectively comprehensible and enforced. It would allow neighbors and concerned conservation entities to meaningfully engage in the DRB review. Finally, it would allow the DRB to apply the existing regulations with more confidence in the fairness of the review process and the defensibility of the decision itself upon judicial review.
We don't have those maps today. To my knowledge, we don't have any specific plan to develop those resources at this time. So my question remains: Why regulate something we can't regulate well? Why burden land owners, their neighbors, DRB volunteers, our Zoning Administrator, and the town's legal resources on broad stroke regulations of this type? Don't regulate what you can't regulate effectively. While I've used deer wintering areas as an example here, there are many others throughout these regulations. The scope and size of these proposed regulations reflect our authority to regulate development under state law rather than our ability to meaningfully regulate a subset of factors specifically important to our community.
2) These proposed regulations burden land owners with voluminous restrictions and advice which are, in most cases, unenforceable due to vagueness, poor conception, or inconsistent application.
Example: Scenic Resources and the Norwich Gateway.
No one, at any level of the litigation concerning the Simpson project, disputed whether the January 2000 Inventory of Scenic Resources specifically identified the subject property as a scenic resource. To my knowledge, no one (other than our Zoning Administrator) questioned whether the Inventory of Scenic Resources was a legitimate legal basis to regulate development on that parcel. Nevertheless, in practice, the Inventory and applicable provisions in the subdivision regulations were deemed too vague to enforce. Upon appeal, the determination of what constituted an adverse impact to a scenic resource came down to a subjective judgment whether the lot in question was sufficiently scenic to warrant restricting development and whether the regulations were sufficiently specific to support a permit denial. The court concluded they were not and the DRB would be well-advised to finesse future fragile feature determinations so they are not the primary basis for a permit denial. Despite this, the proposed zoning regulations adopt the same mandatory language which has already proven effectively unenforceable under our subdivisions regulations.
Again, don't regulate what you can't regulate effectively. Why extend the fragile features criteria to our zoning regulations when they are so problematic in our experience under our subdivision regulations? Why put land owners through a series of hoops which are likely unenforceable, at least against those applicants with the means to mount an appeal?
If the town wants to preserve scenic resources, don't saddle land owners and DRB volunteers with these criteria. Entrust the Inventory of Scenic Resources to our Conservation Commission to prioritize these resources in a series of public hearings. Use that priority list to pursue conservation easements on those resources of highest priority. Don't impose a broad-stroke list of regulatory criteria on individual land owners -- potentially impacting the value of what to many is their largest single investment -- without taking the time to meaningfully differentiate between what the community would like to see conserved and what the community is actually willing to step forward and conserve.
3) These proposed regulations reflect a promulgation process which poorly utilizes town resources, burning out volunteers, and repeating a pattern of planning projects which collapse at the finish line rather than sustain a thoughtful and effective planning regime.
Examples: Town Plan, Zoning and Subdivision Regulation revisions, Inventory of Scenic Resources, etc.
Vermont state law is blessed with an enlightened attitude towards land use regulation which values local democratic participation in developing regulations above any centralized planning bureaucracy. In practice, I feel we, as a town, have made very poor use of our authority.
Why is it up to the Planning Commission alone to draft, research, and review proposed regulations and planning initiatives? Certainly, state law entrusts our Planning Commission with the authority to do so, but that doesn't mean the Planning Commission has to do it alone. We need the political and administrative leadership to reorganize our planning efforts to delegate far more research and drafting to existing and ad hoc committees which can utilize and develop specific expertise on discreet projects. Final policy determinations and regulatory language would remain the responsibility of the Planning Commission, but the development of policy and regulations would benefit from broader input.
Recent revisions to Chapter 117 clearly envision a more collaborative, less confrontational structure for both planning and permitting through the use of advisory commissions. The Bradley Hill Road controversy of a few years back illustrates this point well. A land owner sought to develop a parcel and access that parcel by improving what was effectively a hiking trail for automobile use. Neighbors objected. The Planning Commission and Selectboard were dragged into the fray. The controversy became a matter of litigation and a political rallying cry for libertarian land-owner rights folks on one side and communitarian trail/hiking/recreational rights folks on the other. In an attempt to avoid further such controversies a town committee was created to review all Class 4 roads in town and recommend candidates for trail designation. The committee was responsive to both libertarian and communitarian views and, in their work together, a more balanced and collaborative outlook on the issue emerged as everyone came to recognize a one-size-fits-all regulatory approach did not reflect the values of the community.
We are a community entrusted with the legal authority to limit what individual land owners can do with our land. We should exercise that authority sparingly and in a manner which draws broadly from the community to come up with solutions which suit us as a community. These 135 pages reflect the bureaucratic default which occurs when a single committee of volunteers are overextended, harried politically, suffer 100% attrition over a matter of a couple years, and plow on so they can get to the next item on their inexorably growing agenda. No number of public hearings asking townspeople to absorb 135 pages of regulatory language can make this document reflective of the community.
I am confident the Planning Commission has done the best they can under trying circumstances. I am simply saying it's time to address the circumstances. Let's take a step back and recognize the practical effect these regulations will have on land owners, their neighbors, DRB members, and, ultimately, the community. Let's develop a planning structure which addresses individual policy and regulatory goals in a deliberate and effective manner rather than seek to reinvent the wheel through omnibus decennial rewrites of our Town Plan and regulations. No volunteer-based Planning Commission can do that alone. It's time to exercise the political will and leadership to admit we're off track and put our minds to developing a solution which serves the community and its land owners.
Subscribe to:
Posts (Atom)