March 4, 1789 Founding Documents

On September 25, the first Congress adopted 12 amendments, sending them to the states for ratification. The states got rid of the first two, and so the Congress’ original 3rd amendment became 1st, of what we now call the “Bill of Rights”.

Early discussions of the American experiment in self-government began 20 years before the Revolution, with the Albany Congress of 1754, and Benjamin Franklin’s proposed Albany Plan of Union. The 2nd Continental Congress appointed a drafting committee to write our first constitution in 1776, the work beginning on July 12. The finished document was sent to the states for ratification on November 15 of the following year.

articles-of-confederation_grandeTwelve of the original thirteen states ratified these “Articles of Confederation” by February, 1779. Maryland would hold out for another two years, over land claims west of the Ohio River. In 1781, seven months before Cornwallis’ surrender at Yorktown, the 2nd Continental Congress formally ratified the Articles of Confederation. The young nation’s first governing document.

The Articles of Confederation provided for a loose confederation of sovereign states. At the center stood a congress, a unicameral legislature, and that’s about it. There was no Executive, there was no Judiciary.

In theory, Congress had the authority to govern foreign affairs, conduct war, and to regulate currency. In practice, these powers were limited because Congress had no authority to enforce the requests it made on the states, either for money or for troops.

The Union would probably have broken up if the Articles of Confederation were not amended or replaced. Twelve delegates from five states met at Mann’s Tavern in Annapolis Maryland in September 1786, to discuss the issue. The decision of the Annapolis Convention was unanimous. Representatives from all the states were invited to send delegates to a new constitutional convention in Philadelphia, the following May.

The United States had won its independence from England four years earlier, when 55 state delegates convened in Philadelphia to compose a new constitution.

Delegates from 12 of the 13 colonies, (only Rhode Island abstained) met on May 25, 1787 atconstitutional_convention_1787 Philadelphia’s Pennsylvania State House. The building is now known as Independence Hall, the same place where the Declaration of Independence and the Articles of Confederation were drafted.

The assembly immediately discarded the idea of amending the Articles, instead crafting a brilliant Federal system of checks and balances over three months of debate. The Federal Republic crafted by the framers delegates specific, limited powers to the Federal Government, with authority outside those specific powers devolving to the states.

Even at the convention, there was concern about the larger, more populous states governing at the expense of the smaller states. The “Connecticut Compromise” solved the problem, creating a bicameral legislature with proportional representation in the lower house (House of Representatives) and equal representation of the states in the upper house (Senate).

signingThe Constitution was signed by 38 of the 41 delegates on September 17, 1787. As dictated by Article VII, the document would not become binding until it was ratified by nine of the 13 states.

Five states: Delaware, Pennsylvania, New Jersey, Georgia, and Connecticut ratified the document in quick succession. Some states objected to the new document, especially Massachusetts, which wanted more protection for basic political rights such as freedom of speech, religion, and the press. They wanted it specified that powers undelegated to the Federal government, were reserved to the states. A compromise was reached in February, 1788 whereby Massachusetts and other states would ratify the document, with the assurance that such amendments would be immediately proposed.

The Constitution was ratified in Massachusetts by a two vote margin, followed by Maryland and South Carolina. New Hampshire became the ninth state to ratify on June 21. The new Constitutional Government would take effect on March 4, 1789.

On September 25, the first Congress adopted 12 amendments, sending them to the states for ratification. The states got rid of the first two, and so the Congress’ original 3rd amendment became 1st, of what we now call the “Bill of Rights”. Today, the United States Constitution is the oldest written national constitution in operation in the world.

It’s interesting to note the priorities of that first Congress, as expressed in their original 1st and 2nd amendments. The ones that were thrown out. The first had to do with proportional representation, and would have led us to a 6,000 member House of Representatives, instead of the 435 we currently have. The second most important thing in the world, judging by the priorities of that first Congress, was that any future Congress could not change their own salaries. Any such change could affect only future Congresses.27th-amendment

That original 2nd amendment, reading that “No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened”, took effect in 1992 as the 27th amendment, following a ratification period stretching out to 202 years, 7 months, and 12 days. We must not be too hasty about these things.

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February 25, 1921 Red Scare

In the 1930s, many believed that International Communism was “winning”. That the Soviet Union was deliberately starving millions of its own citizens to death during this period, seemed to trouble relatively few.

In the wake of WWI and the Bolshevik revolution in Russia, American authorities became increasingly alarmed at the rise of foreign and leftist radicalism.  Most especially the militant followers of anarchist Luigi Galleani.

This was not meaningless political posturing.  Anarchists mailed no fewer than 36 dynamite bombs to prominent political and business leaders in April 1919, alone. In June, another nine far more powerful bombs destroyed churches, police stations and businesses. Attorney General A. Mitchell Palmer had one hand delivered to his home by anarchist Carlo Valdinoci, who did something wrong and somehow managed to blow himself to bits on the AG’s doorstep.

Palmer attempted to suppress these radical organizations in 1919-20, but his searches and seizures were frequently illegal, his arrests and detentions without warrant, his deportations questionable.
Lookinganarchism over the international tableau of the time, there appeared great cause for concern.  The largest nation on the planet had just fallen to communism, in 1917.
The Red Army offensive of 1920 drove into Poland, almost as far as Warsaw. The “Peace of Riga”, signed in 1921, split off parts of Belarus and Ukraine, making them both parts of Soviet Russia. On this day in 1921, Bolshevist Russian forces occupied Tbilisi, capital of the Democratic Republic of Georgia.
In the 1930s, many believed that International Communism was “winning”. The capitalist west was plunged into a Great Depression that it couldn’t seem to control, while the carefully staged propaganda of Stalin’s Soviet Union did everything it could to portray itself as a “workers’ paradise”.
That the Soviet Union was deliberately  starving millions of its own citizens to death during this period, seemed to trouble relatively few.
Whittaker Chambers was one who saw communism as winning, and joined the Communist Party of the United States (CPUSA) in 1925. For a time he worked as a writer at the Party’s newspaper “Daily Worker”, before becoming editor of “New Masses”, the Party’s literary magazine.
Through the early to mid-thirties, Chambers delivered messages and received documents from Soviet spies in the government, photographing them himself or delivering them to Soviet intelligence agents to be photographed.
By the late 30s, Chambers’ idealism was replaced by the growing realization that he was supporting a murderous regime. By 1939, he joined the staff of Time Magazine, where he pushed a strong anti-communist line.
A series of legislative committees were formed between 1918 and the outbreak of WWII to investigate this series of threats.  It was in this context that HUAC, the House Committee on Un-American Activities was formed in 1938, becoming a “standing” (permanent) committee in 1945.img_0416
Chambers warned about communist sympathizers in the Roosevelt administration, as early as 1939.  Government priorities changed during the course of WWII.  Chambers was summoned to testify on August 3, 1945.
In his testimony, Chambers named Alger Hiss and others, as communists.  A graduate of Johns Hopkins and Harvard Law School who had clerked for Supreme Court Justice Oliver Wendell Holmes, Alger Hiss seemed an unlikely communist. He went on to practice law in Boston and New York before returning to Washington to work on President Roosevelt’s “New Deal”, winding up at the State Department as an aide to Assistant Secretary of State Francis B. Sayre, former President Woodrow Wilson’s son-in-law.
alger-hiss-public-servant-i-am-amazed-until-the-day-i-die-i-shallHiss flatly denied Chambers’ charges, filing suit that December for defamation of character.  Chambers doubled down in his 1948 deposition, claiming that Hiss was not only a communist sympathizer, he was also a spy.
Before his defection, Chambers had secreted documents and microfilms, some of which he hid inside a pumpkin at his Maryland farm. The entire collection became known as the “Pumpkin Papers”, consisting of incriminating documents, written in what appeared to Hiss’ own hand, or typed on his Woodstock no. 230099 typewriter.
Hiss claimed to have given the typewriter to his maid, Claudia Catlettimg_0415. When the idiosyncrasies of his machine were demonstrated to be consistent with the documents, he then claimed that Chambers’ team, including freshman member of Congress Richard M Nixon, must have modified the typeface on a second typewriter to mimic his own.
Hiss’ theory never explained why Chambers side needed another typewriter, if they’d had the original long enough to mimic it with the second.
Alger Hiss’ first trial for lying to a Grand Jury ended with a hung jury, 8-4.  A second trial began on November 17. He was found guilty on January 21, 1950, still proclaiming his innocence. He appealed his conviction but lost, and served 44 months in Lewisburg Federal Penitentiary before being released in 1954.
Hiss would go to his grave protesting his innocence, though Soviet era cables, decrypted through the now-declassified “Venona Project”, seem to convict him beyond a reasonable doubt of being a soviet agent. Venona transcript #1822, sent in March 1945, from the Soviets’ Washington station chief to Moscow, describes subject codenamed ALES as having attended the February 4–11, 1945 Yalta conference, before traveling to Moscow. Hiss did attend Yalta on those dates, before going to Moscow with Secretary of State Edward Stettinius.
41facggulzl-_sx306_bo1204203200_Historians John Earl Haynes and Harvey Klehr report that the Venona transcripts tied 349 Americans to Soviet intelligence, though fewer than half have ever been identified.  The Office of Strategic Services alone, precursor to the CIA, housed between fifteen and twenty Soviet spies.
In 1992, former KGB archivist Vasili Mitrokhin defected to Great Britain, taking with him 30 years of handwritten notes. The Mitrokhin Archive revealed that Soviet moles went as high as President  Roosevelt’s most trusted aid, Harry Hopkins. Equivalent to finding that, at any point during the last three administrations, Karl Rove, Valerie Jarrett or Steve Bannon was an agent for the other side.

February 22, 2005 Little Pink House

For newly divorced paramedic Susette Kelo, the house overlooking the Fort Trumbull waterfront was the home of her dreams

In 1775, Connecticut Governor Jonathan Trumbull proposed a fortification at the port of New London, situated on the Thames River and overlooking Long Island Sound. The fort was completed two years later and named for Governor Trumbull. During the Revolution, Fort Trumbull was attacked and occupied by British forces, for a time commanded by the turncoat American General, Benedict Arnold.

By the early 20th century, the Fort Trumbull neighborhood consisted of 90 or so single and multi-family working class homes, situated on a peninsula along the fringes of a mostly industrialized city center.

In 1996, chemists working at Pfizer Corporation’s research facility in England were studying compound UK-92, 480 or “Sildenafil Citrate”, synthesized for the treatment of hypertension and heart disease resulting from a restriction in blood supply to heart tissues. Study subjects were expected to return unused medication at the end of the trial. Women showed no objection in doing so but a significant number of male subjects refused to give it back. It didn’t take long to figure out what was happening.  The chemical compound which would one day bear the name “Viagra”, was going to be put to a very different use.

little-pink-houseFor newly divorced paramedic Susette Kelo, the house overlooking the Fort Trumbull waterfront was the home of her dreams. Long abandoned and overgrown with vines, the little Victorian cottage needed a lot of work, but where else would she ever find a waterfront view at this asking price?  It was 1997, about the same time that Connecticut and New London politicians resurrected the long-dormant New London Development Corporation (NLDC), charging it with developing a plan to revitalize the New London waterfront.

Susette Kelo sanded her floors on hands and knees, as Pfizer Corporation was looking at a cataract of business based on their newest chemical compound. The company was recruited to become the principal tenant in a “World Class” multi-use waterfront campus, including high-income housing, hotels, shopping and restaurants, all centered around a 750,000 sq. ft. corporate research facility.  Connecticut College professor and NLDC President Dr. Claire Gaudiani liked to talk about her “hip” new development project.  Fort Trumbull residents were convinced that stood for “High Income People”. With an average income of $22,500, that didn’t include themselves.

Most property owners agreed to sell, though not exactly “voluntarily”.  There was considerable cap_nfs_keloharassment of the reluctant ones, including late-night phone calls, waste dumped on property, and tenants locked out of apartments during cold winter weather.

Seven homeowners holding fifteen properties refused to sell, at any price. Wilhelmina Dery was in her eighties. She was born in her house and she wanted to die there. The Cristofaro family had lost another New London home in the ’70s, taken by eminent domain during yet another “urban renewal” program. They didn’t want to lose this one, too.

Susette Kelo came home from work the day before Thanksgiving 2000, to find an eviction notice taped to her door.

Letters were written to editors and rallies held, as NLDC and state officials literally began to bulldoze homes. Holdout property owners were left trying to prevent property damage from flying demolition debris.

KELO BULLOCK

Facing a prolonged legal battle which none of the homeowners could afford, the group got a boost when the Libertarian law firm Institute for Justice took their case pro bono. There was cause for hope. Retired homeowner Vera Coking had faced a similar fight against Now-President Donald Trump in 1993, when the developer and Atlantic City New Jersey authorities attempted to get her house condemned to build a limo lot.

Eminent domain exists for a purpose, but the most extreme care should be taken in its use. Plaintiffs argued that this was not a “public use”, but rather a private corporation using the power of government to take their homes for economic development, a violation of both the takings clause of the 5th amendment and the due process clause of the 14th.

Vera Coking won her case against Trump, the casino later failing and closing its doors. New Londonkelo-decision District Court, with Susette Kelo lead plaintiff, “split the baby”, ruling that 11 out of 15 takings were illegal and unconstitutional. At that point it wasn’t good enough for the seven homeowners. They had been through too much.  All of them would stay, or they would all go.

Connecticut’s highest court reversed the decision, throwing out the baby AND the bathwater in a 3-4 decision. The United States Supreme Court agreed to hear the case, argued before the seven justices then in attendance on February 22, 2005.

SCOTUS ruled in favor of New London in a 5-4 decision, Justices Stevens, Kennedy, Souter, Ginsburg and Breyer concurring. Seeing the decision as a reverse Robin Hood scheme that would steal from the poor to give to the rich, Sandra Day O’Connor wrote “Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms”.  Clarence Thomas took an originalist view, stating that the majority opinion had confused “Public Use” with “Public Purpose”. “Something has gone seriously awry with this Court’s interpretation of the Constitution”, Thomas wrote. “Though citizens are safe from the government in their homes, the homes themselves are not”.  Antonin Scalia concurred, seeing any tax advantage to the municipality as secondary to the taking itself.

kelo-2014In the end, most of the homes were destroyed or relocated. State and city governments spent $78 million and bulldozed 70 acres.  The 3,169 new jobs and the $1.2 million in new tax revenue anticipated from the waterfront project, never materialized.  Pfizer backed out of the project and moved away, taking 1,500 existing jobs with them.  Just about the time when existing tax breaks were set to expire, raising the company’s tax bill by 400%.

The now-closed redevelopment area became a dumping ground for debris left by Hurricane Irene in 2011.  Its only residents were feral cats.

In reaction to the Kelo v. City of New London decision, a group of New Hampshire residents proposed a hotel to be built on the site of Justice David Souter’s home in Weare, New Hampshire.  Calling it the “Lost Liberty Motel”, an on-line petition was created to quantify the public benefit of the taking, generating at least 1,418 signatories committing to stay there at least a week. Supporters claimed to be serious, but the measure was defeated three to one in a ballot referendum. The two candidates for Selectman backing the measure, were both defeated.

To this day, New Hampshire license plates bear the slogan “Live Free or Die”.  Those in Connecticut say “Constitution State”.  In neither case is it at all clear, why.

February 19, 1807 Founding Scoundrels

What would it be like to turn on CNN or Fox News, to learn that Former Secretary of the Treasury Jacob Lew had been party to a duel, and that he was near death after being shot by Vice President Mike Pence.

What would it be like to turn on CNN or Fox News, to learn that Former Secretary of the Treasury Jacob Lew had been party to a duel, and that he was near death after being shot by Vice President Mike Pence.

The year was 1804, and President Jefferson’s Vice President, Aaron Burr, had a long standing personal conflict with one of the Founding Fathers. Alexander Hamilton, the only signer of the Constitution from the state of New York, had been the first Secretary of the Treasury serving under President George Washington.

aaron-burr-alexander-hamilton
Aaron Burr(R), Alexander Hamilton (L)

The animosity between Hamilton and Burr probably began in 1791, when Burr defeated Hamilton’s father-in-law Philip Schuyler in a US Senate election. The conflict escalated during the 1800 Presidential election, one of the ugliest election seasons in our nation’s history.  Called the “Revolution of 1800”, the contest pitted Thomas Jefferson and his Democratic-Republicans, against former Vice President John Adams and his Federalist party.

Both sides were convinced as an article of faith, that the other side would destroy the young nation.  Federalists attacked Jefferson as an un-Christian deist, whose sympathies with the French Revolution would bring about a similar cataclysm in the young American Republic.  Democratic-Republicans criticized the alien and sedition acts, and the deficit spending the Adams administration used to support Federal policy.

“The father of modern political campaigning”, Burr enlisted the help of New York’s Tammany Hall in his pursuit of election, transforming what was then a social club into a political machine.

The election was a decisive victory for the Democratic-Republicans, not so much for the selection of President and Vice President.  At the time, electors cast two votes, the first and second vote-getters becoming President and Vice President.   The electoral vote tied at 73 between Thomas Jefferson and Aaron Burr, moving the selection to the House of Representatives.

Hamilton exerted his influence on behalf of Thomas Jefferson, who was elected on the 36th ballot, making Burr his VP.

Today we’re accustomed to the idea of “Judicial Review”, the idea that Supreme Court decisions are final and inviolate, but that wasn’t always the case.  The Landmark Supreme Court case Marbury v Madison established the principle in 1803, a usurpation of power so egregious to Democratic-Republicans that it led to the impeachment of Associate Justice Samuel Chase, a signer of the Declaration of Independence.  As VP, Aaron Burr presided over Chase’ impeachment.

Relations became toxic between Jefferson and his VP.  Burr knew that he wouldn’t be kept on for the 1804 re-election campaign, and so he ran for Governor of New York, losing the election by a decisive margin to a virtual unknown, Morgan Lewis.  It was a humiliating defeat, the largest in New York electoral politics up to that time.

weehawken-duelBurr blamed Hamilton for his defeat, challenging him to a duel over comments made during the election.  Dueling was illegal at this time but enforcement was comparatively lax in New Jersey.  The pair rowed across the Hudson River with their “seconds”, meeting at the waterfront town of Weehawken, New Jersey.  It was July 11, 1804.  Hamilton “threw away” his shot, firing into the air.  Aaron Burr shot to kill.

Murder charges were filed in both New York and New Jersey, but neither ever went to trial.

Aaron Burr went on to preside over Justice Chase’ impeachment trial, later that year.  It had to have been the high point of the Vice President’s political career, a career that otherwise ended the day he met Alexander Hamilton in Weehawken.

Burr headed for New Orleans, where he got mixed up with one General James Wilkinson, possibly the sleaziest character of the founding generation.  At that time, Wilkinson was a paid agent for Spanish King Charles IV. 100 years later Theodore Roosevelt would say of Wilkinson, “In all our history, there is no more despicable character.”

Wilkinson would take his payments in silver dollars, hidden in rum, sugar and coffee casks.  All those clinking coins almost undid him, when a messenger was caught and killed with 3,000 of them.  The messenger’s five murderers were themselves Spaniards, who testified at trial that the money belonged to the spy Wilkinson.  Payment for services rendered to their King.  Wilkinson’s luck held out, as the killers spoke no English.  Thomas Power, interpreter for the Magistrate, was another Spanish spy.  He translated:  ‘They just say they’re wicked murderers motivated by greed.’

wilkinson
General James Wilkinson

The nature of Burr’s discussions with Wilkinson is unknown, but in 1806, Burr led a group of armed colonists toward New Orleans, with the apparent intention of snatching the territory and turning it into an independent Republic.  It’s probably safe to assume that Aaron Burr saw himself at the head of such a Republic.

Seeing no future in it and wanting to save his own hide, General Wilkinson turned on his former ally, sending dispatches to Washington accusing the former Vice President of treason. Burr was tracked down in Alabama on February 19, 1807, arrested for treason and sent to Richmond, Virginia, for trial.

Burr was acquitted on September 1 of that year, on grounds that he had not committed an “overt act” as specified in the Constitution.  He was not guilty in the eyes of the law, but the court of public opinion would forever regard him as traitor.  Aaron Burr spent the next several years in Europe before returning to New York, and resuming his law practice.

The Vice President who killed the man on our $10 bill, died in obscurity on September 14, 1836, at the age of 80.

 

February 11, 1812 Gerrymander

Before redistricting, Barney Frank’s old 4th congressional district resembled nothing so much as a grasping hand. I’m not sure if the new congressional map is an improvement, but hey. It seems to work for the ruling class

The dictionary defines “Gerrymander” as a verb: “To divide (a geographic area) into voting districts in a way that gives one party an unfair advantage in elections”.  In the Old Country the practice goes way back, the earliest instance in the American colonies dates back to early 1700s, Pennsylvania.

gerry-manderIn 1788, Virginia voted to ratify the Constitution and join the Union. Former Governor Patrick Henry persuaded the state legislature to reconfigure the 5th Congressional District, thereby forcing his political enemy James Madison to run against a powerful opponent named James Monroe. Henry’s redistricting tactic failed and Madison won, anyway.  One day he would become the nation’s fourth president. All was not over for James Monroe, though.  He would become #5.

Elbridge Gerry was born in 1744, in Massachusetts’ North Shore town of Marblehead.  He’d spend most of his adult life in public office, excepting ten years in the family codfish packing business.  First elected to the state legislature in 1772, Gerry died in office in 1814, while serving as James Madison’s Vice President.

Politics are ugly these days, but that’s nothing new.  Back in 1812, parties were split between Federalists supporting strong central government and favoring business & industry, pitted against Jeffersonian Democratic-Republicans, suspicious of centralized power and favoring non-slaveholding, small landowning, family farmers to secure the well-being of the nation.  Both parties believed the other would destroy the young nation, and campaigns were as nasty as they get.elkanah_tisdale_the_gerry-mander_map_1813_cornell_cul_pjm_1034_01

Elbridge Gerry was elected Massachusetts Governor in 1810.  Soon, his Democratic-Republican supporters were doing everything they could to get the man re-elected.  The redistricting plan that emerged on February 11, 1812 confined Federalist precincts to a handful of congressional districts, while Democratic-Republican precincts were spread across many.  In the end, 50,164 Democratic-Republican votes resulted in 29 seats in Congress, and only 11 Federalist Party seats, despite a vote tally of 51,766.

Benjamin Russell was a newspaper editor, and ardent Federalist.  The painter Gilbert Stuart commented on the new district map hanging over Russell’s desk, saying “That will do for a salamander.”  “Better say a Gerry-mander!” was Russell’s reply.  A cartoonist added head, wings, and claws.  The cartoon map and the name appeared in the Boston Gazette within the month.

Ever since, “gerrymandering” has been a bi-partisan favorite for keeping “public

maryland_us_congressional_district_3_since_2013-tif
Maryland 3rd Congressional District

servants’” bellied-up to the public trough.

In 1842, Federal law required that voting districts be compact, and contiguous.  That worked out for about a hot minute.  In the 1870s, Mississippi gerrymandered a “shoestring” district 300 miles long and only 32 miles wide.  Other states have “packed” voters into districts shaped like frying pans, dumbbells, and turkey feet.

In the 1960s, gerrymandering was used to “crack” the voting strength of black and urban voters.  A 1962 Supreme Court decision ruled that electoral districts must reflect the principle of “one man, one vote”.  A 1985 decision ruled it unconstitutional to alter election districts to favor of any political party.

These days, voting districts are intentionally drawn up to favor or disfavor parties, racial,modern-gerrymanders and other “interest” groups, ensuring that we look on one another as “us and them”, rather than just, plain, fellow Americans.  Talk about “the conduct of public affairs for private advantage”.  (Hat tip to my favorite curmudgeon, Ambrose Bierce, for that one).

In 2000, California’s two major parties worked together to redraw state and Federal legislative districts, in such a way as to preserve the status quo, in perpetuity.  It worked.  53 congressional, 20 state senate, and 80 state assembly seats were at risk in the 2004 election.  Not one of them changed parties.  28th state senate district Senator Jenny Oropeza (D) won re-election in 2010, despite having died in office, a month earlier.

Here in Massachusetts, Barney Frank’s old 4th congressional district resembles nothing so much as a grasping hand.  I’m not sure if the new congressional map is an improvement, but hey.  It seems to work for the ruling class.

February 5, 1637 The Day the Bubble Burst

Economic forces had combined with irrationality to bid up prices to the point of collapse. This was neither the first nor the last time

gillette-stadiumOn March 24, 2000, the New England Patriots broke ground on their new stadium home in Foxborough, Massachusetts. The internet company CMGI won naming rights, agreeing to pay $114 million over 15 years for the privilege. The 2002 season opened on September 9 in the Patriots’ new home, tickets bearing the name, CMGI Stadium.

Except by that time, the “Dot-Com” bubble had burst. CMGI had ceased to exist.  The stadium itself would open, bearing the name of a razor and shaving cream manufacturer.

Economic forces had combined with irrationality to bid up prices to the point of collapse, but this was neither the first nor the first time.  We saw it in the housing bubble of the 2000s, and the “Bull Market” of the Roaring 20s.viceroy-tulip

The oddest of these speculative bubbles may be the “Tulpenwoede” (tulip madness) gripping Holland in the 17th century.

The first tulip bulbs came from the Ottoman Empire to Vienna in 1554, introduced to Europe by Ogier de Busbecq, ambassador of the Holy Roman Emperor Ferdinand I to the Sultan of Turkey. The tulip was different from anything in Europe, the intense, saturated colors soon turning the flower into a status symbol.

By the 17th century Holland had embarked on a Golden Age. The East Indies trade Keukenhof Gardens Desktop Backgroundproduced single voyage profits of 400% and more, as merchants built grand estates surrounded by flower gardens. The hyacinth enjoyed early popularity, but the plant at the center of it all was the spectacular, magnificent, tulip.

For much of this period, tulip bulbs were primarily of interest to the wealthy. The craze began to catch on with the middle and poorer classes by the mid-1630s.  Soon, increased demand began to drive prices to irrational levels.

The market soared in late 1636, as prices bid up for bulbs planted to bloom the following spring. People mortgaged their homes and businesses, hoping to buy bulbs for resale at higher prices. At one point, “one single root of the rare species called the Viceroy”, sold for “two lasts of wheat, four lasts of rye, four fat oxen, eight fat swine, twelve fat sheep, two hogsheads of wine, four tuns (barrels) of beer, two tuns of butter, One thousands lbs. of cheese, one complete bed, a suit of clothes, and a silver drinking-cup”. In early 1637, single “Viceroy” bulbs bid between 3,000 and 4,200 guilders, at a time when skilled craftsman earned about 300 guilders a year. At one point, 5 hectares (12 acres) of land were offered for a single Semper Augustus bulb.

“Couleren” bulbs were most commonly traded, single hued flowers of yellow, red or white, followed by the multi-colored “Rosen” and “Violettin”. Rarest and most sought after weretulip_price_index the vivid streaks of yellow or white on the red, brown or purple backgrounds of the “Bizarden” (Bizarres).  Ironically, these were the most sickly specimens, victims of a “Tulip breaking virus” which “broke” petals into two or more hues.

Confidence evaporated in 1637 and the market collapsed. The last recorded market data were reported on February 5, as 98 sales were recorded at wildly varying prices. Those who had taken possession of bulbs found their worth to be a fraction of the prices paid. Others were locked into futures contracts, obliged to pay ruinous sums for comparatively worthless flower bulbs.

Afterward

Today, the Federal National Mortgage Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC), are Congressionally authorized hybrids or “GSEs” (government-sponsored enterprises), charged with “providing liquidity and stability to the U.S. housing and mortgage markets”. Better known as “Fannie Mae” and “Freddie Mac”, both entities are privately owned by shareholders and backed by taxpayers.

The US Department of Housing and Urban Development (HUD) was charged with regulating Fannie and Freddie in 1992. Before that, these organizations were required to buy only “prime” mortgages, notes which institutional investors would buy on the open market. Such standards made it too difficult for lower income, higher risk buyers to become homeowners, or so it was believed. Regulators imposed “affordable housing” liar_loansguidelines that year, imposing a 30% quota and raising it to 50% by the end of the Clinton era. By 2007 under President Bush, 55% of all mortgages purchased by the mortgage giants were “sub-prime”.

Banks and brokers were happy to sing along, issuing “NINJA” loans (No Income No Job no Assets) to anyone who asked. “Low-doc” and “no-doc” mortgages called “liar loans” sprouted up everywhere, but gone were the days when your home town bank held your mortgage.  No mortgage originator would ever be left holding the bag, should these loans turn bad.  They sold them to Fannie and Freddie.

Fannie, Freddie and others “bundled” high risk mortgages into increasingly exotic financial instruments called “mortgage backed securities”, selling them off to investors and backing transactions with “credit default swaps” (CDS), a two-party agreement impossible to distinguish between an insurance contract and a bet.

The danger signs were there for those who would see, but Barney Frank said it best inhome-made-of-dollar-on-grass 2003: “I want to roll the dice a little bit more in this situation toward subsidized housing.”

Property values doubled and doubled again. You were always going to make money in real estate. Family members sold to one another over and over at ever increasing prices, with none ever moving out of the house.  Aggregate CDS values reached $62 Trillion in 2008, equivalent to a stack of dollar bills, reaching from Earth to the moon. 18 times.

Then, the bubble burst.  Imagine waking one morning to find your entire pension or mutual fund account, was invested in that stuff.

housing-bubbleThat was the year when gas first hit $4/gallon.  Those living closest to the financial cliff began to fall off, and foreclosures went through the roof.  Highest risk mortgage holders were the first to default, people with $20,000 incomes and multiple investment properties. We all remember 2009.  I myself lost a job of 15 years when my employer went under, briefly making my family part of the “zero percent”.  Some will tell you that we haven’t emerged from the “Great Recession”, to this day.

The old subprime “MyCommunityMortgage” program is dead and buried, but not the geniuses who gave it life. Sub-prime has become a dirty word, so, until recently, regulators pushed “alt” mortgage guidelines. Once, your “income” had to be your own, whether or not you could document it. Now, you could claim other people’s income: your aunt, parents, even a roommate. They won’t be on the note, they have no responsibility to repay.  They don’t even have to live there. As long as you can augment your income enough to qualify.  What could go wrong with that?

Speaking of the Patriots, I hear there’s a game today.  I’ll have to check it out. At this point, I’d rather think about football.

Go Patriots.

January 20, 1829 An Ass for a Lion

“The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world”

The Declaration of Independence, the birth certificate of the nation, begins with this preamble: “When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another…”.

The next paragraph leads with the phrase most commonly cited: “We hold these truths todeclaration-of-independence be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”.

The paragraph ends with a personal indictment of one man, followed by a 27 item bill of particulars against him. “The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world”.

The overall tenor of the document is a personal indictment of one man, George III, King of England. The word “He” appears in the document 19 times, “tyrant” is used twice and “ruler” only once, as in: “A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people”.

Thomas Paine wrote of George III in “Common Sense”, the pamphlet which inspired a people to rise up in the summer of 1776: “One of the strongest natural proofs of the folly of hereditary right in kings, is, that nature disapproves it, otherwise she would not so frequently turn it into ridicule by giving mankind an ass for a lion”.

To be sure, the King had little or nothing to do with the policies which brought the two countries to war. The Stamp Act of 1765, the Townshend duties on tea, paper and other products in 1767; these came from Parliament, as did the “Coercive Acts” of 1774, referred to by the Patriots of Massachusetts and others as “The Intolerable Acts”.

These policies were a result of the financial burdens of garrisoning and administering the huge territories of the American colonies, the never ending wars with France and Spain, and the loans given to the East India Company, which was then responsible for administering India.

The third King of the House of Hanover was himself a creature of Parliament, his lineage having been invited to rule over Great Britain in 1714, after the fall of the House of Stuart. What Parliament gives, Parliament may take away. Yet today, George III is remembered for two things; losing the American colonies, and for losing his mind.

He is the longest reigning of any English King, ruling from 1760 until his death on January 29, 1820. Medical historians have long said that George III suffered from a genetic blood disorder called Porphyria, a term from the Greek meaning “purple pigment”. This refers to a blue discoloration in the urine of those suffering from the condition, along with symptoms primarily involving the central nervous system, and accompanied by severe abdominal pain, vomiting and mental disturbances.

The illness seems to have afflicted George III alone however, casting doubt on an hereditary condition. George III’s medical records cast further doubt on the porphyria diagnosis, showing that he was prescribed medicine based on gentian, a plant with deep blue flowers which may turn the urine blue. He seems to have been afflicted with some kind of mental illness, suffering bouts which occurred with increasing severity and longevity. At times the King of England would talk until he foamed at the mouth or go into convulsions where pages had to sit on him to keep him from injuring himself.

An ongoing research project at St George’s, University of London, has looked at thousands of King George III’s handwritten letters, and concluded that the King suffered from mental illness. His writing was erratic at times coinciding with his “spells”, with run-on sentences of 400 words or more and as many as 8 verbs with no punctuation. These are features of the writing and speech of patients as they experience the manic phase of bipolar disorder. This manic phase stands at one end of a spectrum of mood disorders, with an overwhelming sadness or depression at the other. Research is ongoing, but these types of mood swings are consistent with contemporary witnesses to George’s behavior, as well as the written record.

The last ten years of George’s reign were spent in complete seclusion, mentally unfit to rule.  His eldest son, the Prince of Wales and future King George IV, acted as Prince Regent from 1811 on.

There is an historic lesson in this story. If the country ruled by a King (or Queen) wins the lottery and gets a good and fair monarch, then that country can experience a period of peace and prosperity. If that country draws the cosmic short straw and gets a bad one, the results can be catastrophic. In the end, it’s the most powerful argument I can think of for a governmental system of diffuse power with checks and balances.