I sent a tweet about this topic earlier, but it deserves more than 140 characters.

There are plenty of ongoing investigations about last week’s terrorist attack on the plane from Amsterdam to Detroit.  It seems safe to say that all the facts are not in.  Still, I think this post is on safe ground – there are some parts of the story that seem pretty solid.

One of the biggest mistakes that Bush made after 9/11 was to take the threat of future terrorist action too seriously.  He shut down domestic air travel for days.  That decision had a bigger psychological and economic impact than the actual physical damage of the attack.  Bush ended up inducing more terror in America than bin Laden ever did.

Are we going to learn from that?

The first reaction of the Homeland Security department to the latest attack appears to be incredibly restrictive.  Gawker has a compelling recording of a JetBlue flight’s enforcement of the new rules.  In order to prevent future terrorist attacks, the government is requiring no pillows, blankets, reading materials, TV, or bathroom breaks for the hour before landing.  (It sounds like some of those restrictions are being relaxed, but its not clear how much.)

Let’s review exactly what we’re protecting against.  Nate Silver at fivethirtyeight.com did an analysis.  Here’s a summary:

Over the past decade, there have been 99,320,309 commercial airline departures that either originated or landed within the United States.  There were a total of 674 passengers, not counting crew or the terrorists themselves, on the flights on which terrorist incidents occurred. There have been 7,015,630,000 passenger enplanements over the past decade. Therefore, the odds of being on given departure which is the subject of a terrorist incident have been 1 in 10,408,947 over the past decade. By contrast, the odds of being struck by lightning in a given year are about 1 in 500,000. This means that you could board 20 flights per year and still be less likely to be the subject of an attempted terrorist attack than to be struck by lightning.

When there’s a lighting storm, the average person finds it prudent to seek shelter.  What if I told you that you were 20 times more safe if you sat quietly with your hands in your lap for the duration of the storm.  Would you do it?  Or would you just read a book and not worry about it?

The early evidence is that the current terrorist protection system has holes big enough for an explosive-laden truck to drive through.  It appears that the terrorist was on a watch list and had been denied a visa by Britain.  Its going to be interesting to see what parts of the system designed to catch this guy failed – I’m sure we’ll hear more about that in the future.

Still, all of the early questions are whether or not the government is doing enough.  Millimeter ray inspection of all passengers? Purchasing more explosives detection? Increasing passenger pat downs?  I just don’t understand this reaction.  We have a fundamentally safe system – safer than our highways, even safer than our national lightning protection system.  Why are pundits bemoaning our lack of protections in a system that isn’t failing?

As we learn from this event, I just hope that we learn the right lessons.  Most of us are smart enough to get inside during a thunderstorm.  I worry that our government – and the media – doesn’t know that.

October was a month of breathless financial reporting.  There was a lot to be breathless about – the markets were crazy, day after day after day.  I know that every editor told every reporter “Explain why this is happening!” It was what the readers wanted, and hell, it might even land a Pulitzer if you got it right.

What happened was that everyone who had an axe to grind brought it out for sharpening.  Depending on who you talked to, the problem was:

• unrestrained greed of individuals and corporations
• politicians who demanded that low-income citizens be able to purchase homes they ultimately could not afford
• deregulation
• excessive regulation

Each one of those explanations left me unsatisfied.  The arguments were all made by the usual suspects, making the usual, predictable arguments.  “Sure, that might be part of the problem,” I said to myself, “but that’s too glib and leaves too much unexplained.”

So far, I think that Michael Lewis is closest to the real truth.  We’ll see if history agrees.

Sarah Palin got 909 votes when she ran for mayor of Wasilla in 1999.  I got 1506 votes when I ran for state rep in 2004.  

I’m just sayin’.

The Senate tonight voted to approve the bailout bill.  Not only did they approve $700 billion (BILLION) in spending, but they approved $150 billion in tax breaks.  Apparently our financial crisis is so severe that we need to rescind a $.39 tax on wooden arrows.  Wooden arrows?  Are you kidding me?

Are our legislators so totally intellectually and morally bankrupt that an unacceptable spending bill of unprecedented proportions can be transformed into something acceptable by throwing in a little gift for everyone?  Can they really justify squandering such a huge sum because, at long last, the makers of NASCAR tracks have a smaller tax burden?

I feel like I can dangle a piece of tinfoil in front of Congress, hand them all a lollipop, and tell them to hire me as a Red Sox Playoff Game Historical Evaluator.  At $1,000,000 a game, I’d be dirt cheap in comparison.

One final item before I take my enraged self to bed: I’d like you all to refresh yourselves on the US Constitution, Article I, Section VII, which reads: “All bills for raising Revenue shall originate in the House of Representatives . . .”  And then ask yourself: why is the Senate voting on a revenue bill that was defeated in the House?

We need to clean house.

Bush says that if we don’t do a bailout, then we’ll get a recession. It’s tough to argue that, but. . . when there are huge financial mistakes, don’t you expect a recession? I’m unconvinced that a bailout actually averts a recession. It just costs more.

Brad Feld: “I reread Nassim Nicholas Taleb’ brilliant book The Black Swan: The Impact of the Highly Improbable. I reached a very simple conclusion – everything that I was watching being discussed on CNBC was probably incorrect and, more importantly, likely irrelevant. The actual events that occurred would take me less than five minutes to read the following week when I skim BusinessWeek in the bathroom. The commentary was just noise.”

All of these talking heads saying that we need a bailout are empty parrots. Bernake and Paulson haven’t slept in days – they aren’t capable of rational thought anymore. Bush was never a problem solver. McCain and Obama are focused on November, not the long term.

I haven’t changed my mind. Let the failures fail. Let a million successes bloom.

President Bush has proposed a three-page document that he says will cost up to $700 billion of taxpayer’s money. There aren’t many people who think that the document has enough detail. There aren’t many that think it actually will stop at $700 billion. Senator Dodd puts it better than I could: “After reading this proposal, I can only conclude that it is not just our economy that is at risk, Mr. Secretary, but our Constitution, as well.”

We don’t need this bailout. Some companies made some bad decisions and loaned money to people who also made bad decisions. The people can’t pay, the homes aren’t enough collateral, and the companies are losing money on the deal. I tell you what should happen next: bankruptcy.

Paul Krugman appears to have fallen into some wisdom on the question. (Krugman is one of those nitwits who drives me crazy because he is smart enough to know better; regardless, he got this one right).

He reviews why the bailout is on the table in the first place: banks have a crappy set of assets, and that makes them nervous, and they don’t loan money when they’re nervous. They’d unload their crappy assets, but no one will take them until they know just how crappy they are. That makes the assets look even more crappy. The result is no new loans into the economy and a big logjam while everyone stares at their crappy assets.

Krugman’s key point: the banks “will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense.” Restating: The only way the banks will sell is if they get a good price on their crappy assets. The government plan is to buy the crappy assets at deliberately inflated prices.

So, we have a financial logjam. We shouldn’t try to solve this problem by overpaying to remove the logjam. That’s the brute force method, and a dumb one. We should be smarter. Let the logjam go bankrupt – they’re getting what they deserve. Instead, create an alternate channel around the logjam. Create another method for citizens and companies borrow money. Permit a new market to be created, next to the old and broken one. Lenders still have money, and borrowers still need it. They’ll find each other.

Warren Buffet’s investment in Goldman Sachs is an example. Goldman isn’t going to go under with Buffet’s leadership. Goldman can take the money from lenders and match it with borrowers. Meanwhile, the idiots who loaned the money to the idiots who pretended they could make the payments will continue to suffer their way through bankruptcy. It’s the way the system should work.