I grew up in a southern upper middle-class part of town, and was hauled to church by my parents to a large church filled with other white, upper middle-class people. My parents, at least to the best of my knowledge, have no friends who belong to an ethnic minority. Think of this church as a country club for religious fanatics.

If you think I'm exaggerating, I'm not. It's large enough that its main building can seat over 2,500 people. And yet my parents, when asked how they were doing, remarked, "Oh, we had the black people from church over for lunch today." Now, the very fact that they can make a statement like that and uniquely identify a family is rather disturbing. And after I picked my jaw up off of the floor, I had to inquire, "Do these people have names?"

Now if you asked them directly if they were racists, they would explicitly deny it. But ask questions like, "What do you think about interracial dating?" You'll get answers like, "We don't think that it's a very good idea in most cases, but we think that white-asian marriages are better than white-black marriages." I'm not making this up. They'll deny any racial bias of any kind, but I think that from their statements it's pretty clear that some racial bias exists. You can make arguments for or against my interpretation of this in the comments!

So what do they think of Barack Obama? Well, fortunately, religious extremists aren't prone to the use of four letter words. But if there ever was a time when their use might be considered appropriate, it would be now, and with respect to this candidate, who is, "The most liberal person in the Senate." (How you win such a prize is still a mystery to me, since I don't think one actually exists; but I think that we actually should have a prize, complete with a large plaque, and Josh Marshall's signature of approval.) Their number one reason for voting against him, by their own words, is that he's pro-choice. They value human life, or something like that.

Now when you ask about human lives lost in Iraq -- in the hundreds of thousands by anyone's estimate -- because of a pointless invasion, they admit, yeah, that didn't work out so well. We regret that those people died. But those were actual living people about which there's no ambiguity. You don't need to decide if life begins at conception or at birth or half way between, or when morning sickness finally goes away, because we're talking about killing people who are already out and walking around and attempting to live normal lives.

McCain and Palin seem even more hawkish than Bush these days, as even Bush has reailzed that a lot of his foreign policy ideas have us in a position where, according to one of our top generals, we will never be able to apply the word, "victory." So I look at these two candidates as more than likely causing even more loss of life than the Bush administration. Palin basically said she thought war with Russia would, "possibly," be a good idea; and no one stopped her and said, "You know this would be nuclear, right?" Well, maybe they couldn't, because as a rule now, Republican candidates are prohibited from pronouncing the word "nuclear" correctly. She probably wouldn't have understood.

Yesterday on the phone, I made a rare foray into politics with my mother. She said, and I quote, "The most dangerous place to be in the world is the human womb." Technically, I think your unconditional probability of being aborted, if you're a fetus right now, is around 0.22, which isn't that high. I mean, there are plenty of countries in Africa with HIV/AIDS infection rates higher than that, where you also stand a pretty good chance of getting killed by someone's grab for natural resources. So I think it's inaccurate to say that the womb is the most dangerous place in the world to be, even if you think of a developing fetus as a full human life.

And then there's the issue of torture. The Abu Ghraib pictures came out and Sy Hersh brought out his A+ game to tell us that this was an official interrogation program sanctioned by the Pentagon. So because this is so outrageous and disturbing, I think that, regardless of your political views, you must find the pictures and stories of torture at Abu Ghraib disturbing. I telephone my father and ask what he thinks. His response? "Well, I think it depends on what you mean by torture." Okay, fine, but if people are being put through so much pain and suffering that they end up dead (oops), could we call that torture? Could we agree about that being torture? My family won't. "It depends," is the escape clause always used. 

So the conservative right values life. That's why you should vote for McCain-Palin. Palin values life so much she won't even abort a severely mentally and physically handicapped child who won't have much of a life. (But who knows? Maybe he'll grow up to be President of the United States: The Decider, the most powerful man on our little blue planet. Special needs is by no means an impediment to being President anymore.) But then while claiming to value life, they also think that there's basically no place on this earth that we shouldn't invade and blow up. Well, except Israel. But everywhere else is fair game. And when we invade countries, people die. Lots of them die. This isn't a game. Do you call that value for human life?

So if your primary objective is to support someone who values human life, it seems to me that you should vote for Barack Obama, a man who views violence as a last resort and who genuinely believes in multilateral diplomacy, a guy who actually values people who are out there walking around and trying to do stuff right now.

Two candidates: one group values fetuses, the other values people's right to value fetuses (or not). One group thinks that military action is the solution to everything. (It's like Football has gotten too boring. We need to do something really manly like go out there and kill a bunch of people for no reason at all.) The other views military action as a last resort. In addition to viewing military action as a last resort, Barack Obama also values human life in the sense that he values its quality. Being alive is nice, but being in poverty sucks, especially when you remember that the guy sitting next to you in traffic got a huge tax writeoff for buying his Hummer. And the other candidate thinks that you wouldn't pick lettuce for $50 an hour (a six figure salary).

So from my perspective, Barack Obama values human life a lot more than John McCain. But is that what conservatives are really voting for? Probably not.

Barack Obama is black.

You've probably heard by now that the FDIC increased the level of insurance on standard deposits from $100,000 to $250,000, at least temporarily. A reasonable question to ask is: Why? Here are a couple of options as I see it. I'd love to see comments suggesting additional possibilities.

(1) The limit has been fixed at $100,000 since 1980, we're probably due for an increase anyway. But the increase expires at the end of 2009, so it's not clear this is the best explanation.

(2) Part of the bailout package included insurance for money market funds. An economist we'll call FG suggested to me that this might be implemented to keep consumers from moving funds from deposit accounts to money market funds. I'm not completely convinced of this, mainly because I have some rather affluent friends, and none of them keep more than $100,000 in their checking account on a regular basis.

(3) The bailout was largely a political move, and is not apt to have a major effect, or at least as major an effect as one might like. If you look at the markets since the bailout package was passed, it sort of seems like the markets agree. One scenario: Paulson/Bernanke are going to let a number of banks fail and leave the FDIC to absorb the losses. Wachovia was a candidate for this a few days ago, before Citigroup and Wells Fargo got into a bidding war over the institution.

The problem with (3), my favorite option? The FDIC has limited assets. If a single bank failed, they could probably handle it. If bank failures are correlated, they're not in a very good position to handle it. But it's possible Paulson/Bernanke have just decided to let them bear as much of the burden as they're able. They could certainly have handled the failure of Wachovia.

Any other ideas?

The recapitalization of Bank of America today, along with their announcement to temporarily halve dividends, resulted in a fairly substantial stock price decline. Simple-minded analysts will look at this and see their expected returns over the next few years drop, both as a result of the dividend cut and the dilution of their shares.

However, this is arguably the wrong way to think about things. Over the last year, banks have talked about their commitment to existing shareholders; but when this supposed commitment to non-dilution of existing shares results in total loss of equity value and bankruptcy, it's hard to play this out as being in the interest of shareholders. Would you rather hold diluted shares, or worthless shares because the company went under?

Many of the failed and troubled banks have attempted to raise capital over the past year (with Bear Sterns being a notable exception). But banks like Lehman Brothers raised only modest amounts of capital (less than 20% of I recall correctly). And the reluctance of banks, in general, to recapitalize following losses left them with only one other option: liquidating assets. And the assets they were liquidating were frequently some of the few profitable units. No one had any interest in buying the rest.

And it's not that no one tried to sell them. It's just that everyone recognized that they were one of the more risky portfolio components, and attempted to liquidate them in an attempt to lower weighted portfolio risk. If the banks could actually hold these securities through their maturity, they might survive. (This is one of the reasons the government won't do as badly as the headlines would have you believe with the purchase of so-called toxic assets -- this is a special case in which market value is below fundamentals.) But when you finance long-term assets with short term debt, you have a temporal risk mismatch, and you can sometimes get screwed.

The liquidation of prime assets meant that while companies might have acquired modest amounts of capital, the weights on the riskiest parts of their portfolio went way up. And there's substantial reason to believe that these weights were not properly updated, and that the volatility of the most risky portfolio components was drastically underestimated.

My opinion: If you're a bank regulator and you want to trust Value-at-Risk, go ahead. Investors beware. The entire idea of this kind of risk assessment is to ensure that banks possess enough capital to survive rare, disastrous events. But Value-at-Risk varies with the business cycle, and this primarily because the historical data used to predict portfolio risk is, in general, pretty short. So if you're using two years of data to try to estimate the likelihood of an event that's going to happen once every thirty years, this seems pretty stupid, right? And this is where derivatives are useful: we don't have decades of data. If you wanted to be careful, you could get a better idea by looking at historical fundamentals and the ways in which fundamentals would have affected derivatives at the time, had they existed. But you don't want to be careful: you want your end-of-year bonus.

Postscript: Apologies for the diversions. It's a known personality flaw.

Disclaimer: Advice is roughly worth what you pay for it. And don't mail me a check. I really wouldn't have an answer for you if you paid me!