Wednesday, September 23, 2009

Let's Solve The Economic Blowout!

Proof that we never lack for good ideas, we just have a shortage of will, here comes the esteemed regulator William Black, with a fine example of what we could do, if somehow, we were not unable to by the capture of the fine American corporations who make up most of the political landscape in this fine nation. Here it is, read and ponder the vast difference between this and our esteemed President's latest remarks to third world countries:

William K. Black's Proposal for “Systemically Dangerous Institutions”

William K. Black, Associate Professor of Economics and Law at the University of Missouri – Kansas City, and the former head S&L regulator, has written the following fantastic new proposal concerning the giant, insolvent banks. Posted/reprinted with Professor Black's permission.

William K. Black
Associate Professor of Economics and Law
University of Missouri – Kansas City

September 10, 2009

The Obama administration is continuing the Bush administration policy of refusing to comply with the Prompt Corrective Action (PCA) law. Both administrations twisted a deeply flawed doctrine – “too big to fail” – into a policy enshrining crony capitalism.

Historically, “too big to fail” was a misnomer – large, insolvent banks and S&Ls were placed in receivership and their “risk capital” (shareholders and subordinated debtholders) received nothing. That treatment is fair, minimizes the costs to the taxpayers, and minimizes “moral hazard.” “Too big to fail” meant only that they were not placed in liquidating receiverships (akin to a Chapter 7 “liquidating” bankruptcy). In this crisis, however, regulators have twisted the term into immunity. Massive insolvent banks are not placed in receivership, their senior managers are left in place, and the taxpayers secretly subsidize their risk capital. This policy is indefensible. It is also unlawful. It violates the Prompt Corrective Action law. If it is continued it will cause future crises and recurrent scandals.

On October 16, 2006, Chairman Bernanke delivered a speech explaining why regulators must not allow banks with inadequate capital to remain open.
Capital regulation is the cornerstone of bank regulators' efforts to maintain a safe and sound banking system, a critical element of overall financial stability. For example, supervisory policies regarding prompt corrective action are linked to a bank's leverage and risk-based capital ratios. Moreover, a strong capital base significantly reduces the moral hazard risks associated with the extension of the federal safety net.
The Treasury has fundamentally mischaracterized the nature of institutions it deems “too big to fail.” These institutions are not massive because greater size brings efficiency. They are massive because size brings market and political power. Their size makes them inefficient and dangerous.

Under the current regulatory system banks that are too big to fail pose a clear and present danger to the economy. They are not national assets. A bank that is too big to fail is too big to operate safely and too big to regulate. It poses a systemic risk. These banks are not “systemically important”, they are “systemically dangerous.” They are ticking time bombs – except that many of them have already exploded.

We need to comply with the Prompt Corrective Action law. Any institution that the administration deems “too big to fail” should be placed on a public list of “systemically dangerous institutions” (SDIs). SDIs should be subject to regulatory and tax incentives to shrink to a size where they are no longer too big to fail, manage, and regulate. No single financial entity should be permitted to become, or remain, so large that it poses a systemic risk.

SDIs should:
1. Not be permitted to acquire other firms

2. Not be permitted to grow

3. Be subject to a premium federal corporate income tax rate that increases with asset size

4. Be subject to comprehensive federal and state regulation, including:
a. Annual, full-scope examinations by their primary federal regulator

b. Annual examination by the systemic risk regulator

c. Annual tax audits by the IRS

d. An annual forensic (anti-fraud) audit by a firm chosen by their primary federal regulator

e. An annual audit by a firm chosen by their primary federal regulator

f. SEC review of every securities filing
5. A prohibition on any stock buy-backs

6. Limits on dividends

7. A requirement to follow “best practices” on executive compensation as specified by their primary federal regulator

8. A prohibition against growth and a requirement for phased shrinkage

9. A ban (which becomes effective in 18 months) on having an equity interest in any affiliate that is headquartered in or doing business in any tax haven (designated by the IRS) or engaging in any transaction with an entity located in any tax haven

10. A ban on lobbying any governmental entity

11. Consolidation of all affiliates, including SIVs, so that the SDI could not evade leverage or capital requirements

12. Leverage limits

13. Increased capital requirements

14. A ban on the purchase, sale, or guarantee of any new OTC financial derivative

15. A ban on all new speculative investments

16. A ban on so-called “dynamic hedging”

17. A requirement to file criminal referrals meeting the standards set by the FBI

18. A requirement to establish “hot lines” encouraging whistleblowing

19. The appointment of public interest directors on the BPSR’s board of directors

20. The appointment by the primary federal regulator of an ombudsman as a senior officer of the SDI with the mission to function like an Inspector General

Predatory Health Care, Once Again

A thought-provoking piece in the LA Times reminds us just how tenuous our health here in the US is: in brief, the reporter, a fired health care correspondent, decides to go it alone regarding health insurance, and finds many justifications (rationalizations) to do without, chiefly, that, should he contract a major illness/condition, the insurance company would do everything in its considerable power to deny him the coverage he paid for. A good deal of this article consists of the writer rationalizing his gambling instinct by boasting about his good health, which seems at the least, rash. This, readers, is what we've sunk to, today, in the Predatory Empire we find ourselves in. Here's the article, reprinted in its entirety:

Choosing to not have medical insurance

He covered the healthcare industry for much of his career and realizes the importance of a safety net. But after weighing the risks and benefits, he is going it alone.

It never occurred to me that I would count myself among America's 47 million uninsured when I passed my 53rd birthday earlier this year. I'm the last person I would have imagined living without a safety net between me and the medical risks of early middle age.

Insurance against the unforeseeable, after all, is what makes middle-class existence possible. Yet, as the country debates the merits of reforming the rules around insurance markets, it's worth pondering what value health insurance really adds for individuals under the current system.

I have no insurance partly by accident and partly by intent. I'm not freaking out, though. Should I be? I'll tell you what I know. Then you decide.

A little more than two years ago, I quit my job. It was, on the face of it, a good job, with a high salary, professional prestige and a luxury health-insurance policy. But I was miserable -- so unhappy, in fact, that I started to worry about myself.

I had stopped sleeping through the night. After one particularly grueling 14-hour day, a blood vessel in my nose burst and I had to lie on the floor in the lobby of an office tower while security guards debated calling an ambulance. Without being aware of it, I lost 10 pounds over five months.

What was this fearsome job? Writing about health insurance for a news organization. I interviewed top executives at the nation's mega-managed-care companies. I attended investor conferences, covered earnings reports, wrote about clinical trials, explained Medicare benefits. I learned to love the delectable insurance lingo -- medical-loss ratios, adverse selection, moral hazard, the underwriting cycle -- that make normal people feel as if they're stirring concrete with their eyelashes.

But the deadline stress was killing me, and I decided not to die before my time. I signed up for the 18-month COBRA extension and began paying $447.12 a month out of my savings for health insurance. I assumed I would find a job, with new insurance coverage, soon enough. I didn't anticipate the economic crisis or the collapse of the journalism profession.

When the COBRA coverage was about to expire and I still didn't have a job, I considered the insurance problem from two perspectives: my health status and history -- and what insurance actually buys. The answer I came up with surprised me.

Healthy lifestyle

I've always been a naturally healthy person. I eat right and get plenty of sleep. All my life I've avoided unhealthy behaviors like crack cocaine and yoga. My parents are in their 80s and in great shape. There's no cancer or heart disease in the family history. My Scottish grandparents lived to be 87 and 91.

Like a lot of guys who were not especially athletic in their youth, when I hit my 40s I decided to become a stud. I taught myself to swim and started lifting weights. I sold my car 10 years ago and started taking public transit. In warm weather, I ride my bike everyplace I need to go. I've never been overweight. I'm fit, trim, well-proportioned. My body mass index hovers around 24.7. (At 25, you are borderline "overweight," but people with strong bones and lots of muscle mass like me tend to tilt toward overweight in that metric.)

If I were going to develop a chronic disease, I'd have it by now. My blood glucose tends toward the low end, so I'm not going to become diabetic. I have some lower back pain and stiffness from a herniated disk 15 years ago, but I manage it with strengthening exercises and stretches. Knee or joint surgery? I don't like to run. Cancer? I never smoked. I had a colonoscopy at 51 and saw for myself on the video monitor that I'm clean as a whistle down there. I did, however, have early signs of a precancerous condition a few years ago.

I had some tests, and doctors believe it won't turn into anything serious. We are watching the situation. (According to insurance brokers I consulted, however, that condition could be enough to exclude me from qualifying for an individual policy.)

As to heart and vascular risk,I have always had low blood pressure and pretty good, though not ideal, cholesterol. I got my last blood work-up numbers from my doctor and plugged them into the heart attack risk calculator on the website of the National Heart Lung and Blood Institute. My risk score is 5%. Five of 100 people with this level of risk will have a heart attack in the next 10 years. That sounds acceptable.

So what does a guy like me need with health insurance? I'm the best risk in town, I thought to myself. Why shouldn't I self-insure? In other words, why couldn't I accept full responsibility for my own health expenses?

That's what big companies do. They hire a health insurer to "rent" a network of doctors and hospitals; they also pay the bills for their employees and encourage healthy habits. But the actual medical risk is held by the employers themselves. Companies save a lot of money that way. Risk management is where insurance companies make their big profits.

And so I decided: Why shouldn't I create my own network and find providers who would give me a discount for paying cash? I know how to be a savvy medical consumer. Twelve years ago, I needed a gum graft, and was told my insurance wouldn't cover it. I called oral surgeons until I found one willing to give me a firm price for the procedure. Most doctors don't like to cite a price in advance, but as the U.S. health system moves toward asking patients to pay a greater share of the bill, doctors are going to have to become more responsive to their patients' cost sensitivities.

About a year ago, when I was looking at the end of my COBRA policy in a few months, I talked to the business manager at my regular physician's office about my options. He said the office offers a standard discount to people without insurance, ranging from 20% to 40%, depending on the service or procedures performed. Diagnostic tests and X-rays are another matter, he said. He advised me to check in advance what sorts of discounts might be available. For hospitalizations, major medical centers in Chicago, where I live, are giving pre-arranged discounts, ranging from 15% to 58%, to patients who don't have insurance.

A month ago, I went to the doctor for a checkup. My "intermediate" visit, billed at $100, was discounted to $65, and some routine cholesterol tests, billed at $195, cost me $110. I wrote two checks on the spot. There was no paperwork, no correspondence, no phone calls, no arguing about deductibles or co-pays, for me or for the doctor's office. And the doctor got his money immediately.

The truth is, I still have money in the bank and can afford to pay most bills myself. A disaster costing more than $50,000 would be a problem, but short of that, I could handle it.

A few years ago I worked for a large consulting firm. The head of the healthcare practice used to argue that the U.S. will get a grip on its exploding healthcare costs only if consumers have "more skin in the game," as he put it. Regular people have to face the real costs of their medical options, instead of having them hidden behind employer-sponsored insurance or Medicare, and choose more wisely. I'm prepared to pay those costs, within reason, and consume medical care more sparingly.

Most health insurance payments to providers are for routine services that, strictly speaking, are not insurable events. The real purpose of insurance is to protect you against sudden, unexpected, unaffordable events, for instance, a heart attack or cancer diagnosis. Yet that's not how most of us use our health insurance these days. We use it to pay regular, predictable expenses such as office visits, diagnostic tests, dental cleanings and eye exams.

Giving up conventional insurance that covers all these routine expenses, however, still leaves people exposed to the risk of unanticipated catastrophe, the expense of which can sometimes force people into bankruptcy.

For me, the main medical risk is being hit by a bus or cab, or falling off my bike. But even if I bought a policy, there are no guarantees that the insurance company would pay, that it wouldn't try to weasel out of the obligation.

Avoiding payment

That brings me to the single most terrifying aspect of health insurance in America today: rescissions. This newspaper has published a drumbeat of horror stories -- notably in a 2006 article and many since -- about Californians who had purchased health insurance and paid premiums in good faith, only to find their policies revoked once they made expensive claims for major illnesses, such as cancer, or procedures, such as heart surgeries. This portrait of the health insurance industry has been horrific.

Around the same time the articles began, I learned that my music teacher had been hospitalized for two weeks in a coma that he had barely survived. Like many creative types, he was self-employed, with an individual policy. His insurer reneged on the bill, asserting that the coma was the result of a preexisting condition. The hospital is now pursuing my teacher for a six-figure medical bill. It could cost him his house. It's one thing when it happens to anonymous people a thousand miles away, another when it happens to somebody you know.

On July 21, the Chicago Tribune splashed across the front page the story of a man who got preauthorization for an expensive back operation. Yet after the $148,000 procedure was done, UnitedHealthcare, his employer's insurer, refused to pay -- even though it had already authorized the surgery. After the patient wrote to the Tribune's "What's Your Problem" columnist, and after the newspaper made inquiries with UnitedHealthcare, the decision was reversed and the insurer paid the bill.

The industry's continued use of rescissions to evade bills that companies don't wish to honor eviscerates the value of health insurance. To a person like me, who is on the margin, rescissions are the deciding factor between purchasing and not purchasing insurance.

As I indicated earlier, I believe in insurance. Honestly, it is foolhardy for a middle-class person to go without it. Yet as long as the insurers can use medical underwriting to exclude poor risks and redline preexisting conditions -- sometimes retroactively -- insurance isn't worth what we're being asked to pay.

I'm looking forward to the day when all of us will qualify for good medical insurance at reasonable prices, with a firm regulatory hand behind it. If we all have to pay into the system in order to make health reform work, so be it. I'll gladly pay if I'm assured of getting the services I contracted for.

In October, I'll hit 12 months without insurance, and I will have saved about $6,000 that otherwise would have padded the profits of the insurance companies.

Eventually, I will have some serious medical expenses, and I'll use these savings to pay them. Between now and then, I'm going to wear my bike helmet and stay off the rollerblades.

Moore is a freelance writer in Chicago and the co-founder of the Assn. of Health Care Journalists.

Wednesday, September 09, 2009

An Ominous Sign...

Here's a highly interesting video on one person's response to the typical predatory bank and credit card industry; the fact that someone has decided not to pay their credit card bill is not particularly newsworthy, nor the fact that this particular bank (Bank of America) has jacked up the interest rate to 30% or so. Instead, ponder what might happen to the system (well, some are saying that it's happening already, and who is Chaos to disagree?) if more than a small percentage of people starting feeling and acting like this. Hmmm. Well, anyway, check out this tiny snapshot of where we are:

Oh, and if you want more evidence of predatory behavior, look no further than this article on how banks take advantage of people overdrawing their account with debit cards. The bank knows at the instant of the transaction that the amount requested is more than the individual has in their account, but they don't decline the transaction, just assess the victim (uh, Chaos means the customer) a nice, fat fee.

The Spiral Downward...

"You can't cheat an honest man"---W.C. Fields

This fine feature, courtesy of the Washington Post, is an excellent example of both the path downwards that a huge chunk of the US public is about to experience, and a cultural snapshot of the values that have gotten the Empire to the exact place that it now finds itself. It's tragic and pathetic how people who have really no economic understanding of any kind are suddenly hoisted on their own petards by their innumeracy when large forces almost outside their comprehension intrude into their lives (translation: no safety net). Come to think of it, this is an approximation of the economic debacle generally, except that the worst excesses were caused by the largest, most powerful, and smartest (hah!) players. At any rate, in order to preserve the insights for posterity, here it is in its on the original link as well, because there is a revealing slideshow which simply must be watched.

For Many Americans, Nowhere to Go but Down

MIDDLEBURY, Ind. -- He sinks into the couch, foot jiggling, his gaze traveling from his wife to the television to the darkness outside, broken now and then by the distant glow of passing headlights.

His mind settles into another round of "What if?"

As in: What if we don't have cash to buy milk, eggs, bread or diapers? What if our unemployment benefits run out? What if we never find jobs?

And then Scott Nichols thinks of the words he doesn't want to say, what for him, a 39-year-old husband and father of two, is the option he has hoped to avoid since being laid off nine months earlier.

They already took free food from a church pantry, cardboard boxes filled with Corn Flakes and bologna and saltines, his wife, Kelly, walking in, head down, while he stayed in the car, ashen. They pawned his wedding ring, sold part of her Silver Eagle coin collection and had help from the Salvation Army paying their electric bill.

Now another cliff approaches: the loss of the home they rent.

"Looks like we'll have to go to your mom's," Scott Nichols says to Kelly, 33, who is in a beige recliner, staring ahead.

Moving to her mother's would mean returning to the rundown industrial town where they grew up, a place that makes him feel dirty, inside and out. They would sleep in her basement jammed with forgotten furniture, a few steps from a pair of cat litter boxes and below three narrow windows blocked by insulation.

Twenty months after it began, what has the American recession come to?

There are signs that the bottom has been reached. The stock market is on its way back up. Retail sales are improving. The overall sense of desperation, so widespread at the beginning of the year, has eased.

Every day come new reports suggesting some improvement.

But underneath all of the reports is this living room.

"Okay," Kelly says.

The people who have just agreed that they are out of options sit in silence, wondering the way out.

"It needs to be paid," she insists. The $40 installment on their Kmart layaway plan is nearly a week late.

"That doesn't leave a whole lot of money," he says. If they pay the $40, they will have $31 for themselves, their 2-year-old daughter and his 17-year-old son until their next unemployment checks arrive in five days.

"This is why we have no money," she says, irritated, fatigued.

These are the conversations that pervade Scott and Kelly Nichols's days.

How did they get here? How did their every other exchange evolve into a riddle that includes the refrain "How much?" followed by "How much do we have left?" How did their horizon become a basement in southern Michigan?

Nearly four years ago, in search of better pay, Scott Nichols took his older brother's advice and followed him to where he had moved years before: northern Indiana and the flatlands of Elkhart County, the country's largest manufacturer of recreational vehicles.

"The RV Capital of the World," as Elkhart's leaders say.

Scott got a job on a paint crew at an RV plant, and by the end of 2007 his income had climbed to $53,000, more than he had ever earned. After work he was the man at the bar with the thick roll of bills, the man he had always wanted to be, buying round after round for himself and his friends. The man with "the full pocket," as he liked to say. He took his son on a fishing trip. He took his family out to eat and told them to order whatever they wanted.

Then gas prices soared, the economy unraveled and demand for RVs plummeted. Over the course of a year, Elkhart County's unemployment rate rose from less than 5 percent to more than 18 percent. Thousands of workers lost their jobs, the casualties including Scott, and Kelly, who worked in accounts payable at another RV company. The crisis in Elkhart drew the attention of President Obama, who traveled there within weeks of taking office. Obama plans another trip to the county on Wednesday to further focus on the economy.

When he lost his job, Scott had no savings, his primary objective always having been to earn enough to cover the rent, eat an occasional steak, feed and clothe their children, ride his dirt bike, fish, golf, play poker, buy lottery tickets, and drink Bud Light.

For two decades, a robust U.S. economy had allowed Scott a paycheck-to-paycheck life, one in which he was always confident that the next payday was ahead. Lose one job, and soon enough there was another. He flipped burgers at a diner. He was an apprentice at an auto body shop. He drove a delivery truck, was a gofer for an elevator mechanic, mopped floors at a burrito plant, worked as a forge operator, and sanded and buffed and painted truck caps and RVs.

But this time, as weeks stretched into months, Scott found himself not only with no job opportunities but also with nowhere to turn for help. His parents, a retired machinist and truck-stop waitress, still live in the same cramped mobile home in which he grew up. His brother, the one who persuaded him to move to Indiana, has been behind on his own bills since his RV company cut his hours. And Kelly's mother, a retired public school teacher, can offer only her basement.

At the kitchen table, Scott opens the newspaper.

"Movie Extras Needed Now -- 45 bucks to register, earn $100 to $300 a day," he says, reading aloud.

A company needs "employees to assemble products at home, $500 weekly, no experience necessary."

Another is looking for people to "earn $3,800 a week working from home, selling information packs."

"Here's that one we got burned on," he says.

Part-Time Inside Phone Sales. Data Entry From Home. Bodyguards Wanted.

He folds the paper and tosses it across the table.

" 'Bee Movie?' " asks Hailey, the 2-year-old, climbing into Scott's lap. He loves his children. He tries to be a good father. He dotes on them.

"I don't want to watch the 'Bee Movie' right now," he says, rubbing his eyes. He pours cough medicine into a spoon and takes it to her. "I know it doesn't taste good," he says.

Five weeks before they will have to move unless they find jobs, every day is a slow-motion version of the one before, the soundtrack a mix of sighs and yawns, whatever is on TV, Hailey's laughter, Hailey's crying, Hailey's whining, discussions about which bills to pay, and infrequent, inconsequential chatter.

"That new Camaro is freakin' ugly."

"Didn't see it."

"It's right across from the library. How could you miss it?"

They always sit in the same spots, as they do today, a Wednesday, Kelly in the recliner, tattered at the edges. Scott is on his end of the couch, clutching a jug of Pepsi that he refills when it empties.

A photograph from their wedding day sits on a wooden shelf in the corner, "Kelly and Scott, July 10, 2004" in script on the frame. Her smile is wide, her dress bright white. He's in a black tux, grinning, his hair a buzz cut, his goatee neat, the mustache pencil thin.

Now, sitting on the couch, 11 months after being laid off, his hair is thick and uncombed, and his mustache full. He has gained 40 pounds since his last day on the job. He needs a refill on his antidepressant but doesn't want to spend money to see a doctor.

"C'mon, Karma," he says to the dog, a docile Labrador and Rottweiler mix. "Let's go get the garbage can. Quick trip. Like the wind."

Scott walks to the end of the driveway, 87 paces, from where he pushes the bin back to the house, a gray mobile home with a finished basement and a garage on three flat acres. He falls back onto the couch, glancing up at a framed print of three wolves, then at Kelly, then at Hailey. His toes wiggle inside his white socks. He yawns.

In the months since his layoff, he has walked into this place or that place looking for work, unannounced visits that resulted in nothing. He went to a factory that makes ambulances. Nothing. To another that sells truck caps. Nothing. Another that produces tops for aerosol cans. Nothing. He heard about an RV plant that might be hiring, but decided he needs more information before he'll get in his car anymore. He refuses to waste gas chasing rumors.

Driving anywhere alone is an expense that needs justification. Driving anywhere as a family is nearly impossible, because their two-door Cougar is too cramped and too sagging to accommodate their collective weight. Their second car, an old sport-utility vehicle, is stranded in a mechanic's back yard, needing repairs that Scott says he can't afford. So they stay home, which is another way to avoid spending money.

There is time to think: about the laundry he needs to wash. Or maybe he'll save it until tomorrow so he has something to do. He imagines the taunting he's sure he'll hear from his other brother -- the brother who has remained in Michigan -- if he moves back there and into the basement: "So you thought you were gonna go down there and make a ton of money . . . "

He thinks about his son, Cody, with his C's and D's and no direction or ambition. What will Cody do in a year when he graduates from high school? He thinks about taking classes to learn how to use a computer, aware that a new skill could help him find a job. The idea infuriates him. He has a blue folder filled with certificates: "Scott Nichols has satisfactorily completed the Advanced Auto Body Course." And: Scott Nichols "has completed 460 hours of training in auto glass installation." And: "Scott Nichols successfully completed 1,020 hours of training in auto painting."

Why should he have to start all over?

"Did you eat all the doughnuts?" Kelly asks.

"What do you think I was eating last night?" he answers.

She studies Hailey, who is on the floor, gaping at the TV.

"She's kind of sedentary," she says.


"I don't know."


"I don't know."

Scott smiles. "Why?"

She rolls her eyes. "I'm going to smack you."

For dinner, they eat breakfast -- pancakes and sausages, which is what Scott had scheduled for this night when he mapped out a month's worth of meals to save money. The handwritten menu hangs on the refrigerator. Another night was soup and sandwiches. Another night was Chicken Helper and cottage cheese. Another night was leftovers. This night, Cody washes the dishes, his shoulder-length brown hair concealing his face as he leans over the sink.

"Homework?" Scott asks.


"Imagine that. If I get another call from school."

"You won't."

"What'd you do, tell them I don't have a phone?"

Cody disappears into his room to play Xbox. The TV is still on, the "King of Queens" fading into "Family Guy," "Two and a Half Men," "The New Old Christine," "Gary Unmarried," and "Seinfeld." As the sky turns black, no one switches on the lights. Kelly and Scott are in their usual places, the living room consumed by the blue glow of the television and an unceasing laugh track.

Monday is the day Scott dresses and leaves the house with a purpose that reminds him of the way he felt when he went to work. Only now he's off to collect their unemployment benefits, electronically delivered to their bank accounts by the state of Indiana: $268 for Kelly, $390 for him.

"Payday," he says, driving to an ATM.

He withdraws $700, which he tucks into a front pocket of his jeans. He buys a Pepsi, four packs of Marlboro Lights and $20 in gas. He pays the electric bill, buys brake pads and a $66 money order for the kids' health insurance, and hoses down the Cougar at a car wash. At the bank, he deposits $500 toward rent.

"Five, 10, 12 dollars," he says, counting his remaining cash.

He has $100 more coming, his reward for winning the NASCAR betting pool at his bar, a dark, smoky joint called the Winners Circle. He walks in just before noon, hoping to find someone, anyone, who might know something about a job. The place is almost empty. The bartender, gray-haired, gravelly-voiced Valerie, delivers his winnings and a $2 draft. He rarely drinks at home or in front of his kids. He never drank at work. But sometimes he drinks here, beer after beer after beer.

"I don't want to end up in a bell tower with a high-powered rifle," he likes to say. "I need to let loose in some way. I'm not going to give up everything."

At 1:10 p.m. he orders his fourth Bud. At 1:44 he orders a fifth, then a sixth. His cellphone rings. He knows it's Kelly before he answers. There's that question again: How much does he have left?

"We're still fine," he says. "Promise! No I'm not! . . . I've only had six. . . . I'm good. . . . This is it."

He downs a seventh beer, then an eighth at 3:04. He drives home slowly. The last thing he needs is a cop pulling him over. He passes Coachmen RV on his left, a plant where he applied for a job six weeks earlier. He passes Evergreen on the right, another RV maker, the sign at the entrance to the long driveway announcing, "Not accepting any applications."

In the kitchen, Scott gives Kelly the rest of the money in his pocket, $70, which needs to last until next week's unemployment money arrives. He hands Hailey his loose change for her piggy bank before falling into a chair and losing himself in a game of solitaire.


Kelly is the one out of the house now, closing her eyes as she sits in a Subway, savoring a foot-long sandwich.

Her thoughts shift to a phone conversation she had that morning with their landlord, when she gave notice that she and Scott would be moving out in a month unless they found work. The prospect of leaving Elkhart makes her think about the place she wishes they were going, a house that exists in her imagination.

"A Victorian," she says. "Four bedrooms, two-and-a-half baths, a family room, a living room, a sunroom, what I would call a sewing room, a kitchen, a dining room and a wraparound porch. That's what drew me to it, the wraparound."

She takes another bite and wanders around the first floor.

"The family room was going to be where I kept my plants," she says. "It was going to be soft green. . . . And the sunroom, that was going to be yellow and it was going to have golden wicker to decorate it. . . . And then upstairs, the master bedroom was going to be mostly white with some blue. . . . And the master bath was going to be purple and white and I was going to have a stained-glass window."

She's ashamed that she and Scott have no money. She's embarrassed that they can't find jobs. She didn't grow up this way. In high school, she had a 3.9 grade-point average. She keeps a few old papers in a box, a teacher's "A -- Well Written" scrawled on one, "Very Good!" on another. She got a scholarship to a community college, then lost it after she started partying and stopped going to class. She held a series of forgettable jobs at forgettable places: a bank, a photo lab, a Burger King. She went back to school, finished her two-year degree and continued to work at forgettable places.

She thinks about her mother, a divorcée, raising two daughters on her own and taking them on trips to New York and Washington, D.C., and Europe. She and Scott have never taken a family vacation. They were together for eight years before getting married, mainly because Kelly wanted to save up for a catered wedding reception. Scott would have been happy flying to Vegas and mixing in some gambling. He doesn't need a tux. Or a Victorian.

"And the first bedroom was going to be Hailey's bedroom," she says. "Soft green with a big Oriental rug with a big rose in the middle. And a big canopy bed. . . . "

She takes a last bite of her sandwich.

"I know it'll never happen," she says. "But you can still dream. Wish. Imagine."

She wipes her mouth with a napkin.

"If I made $60,000 and Scott made $60,000, we could probably do it in three or four years."

Her voice trails off.


She tosses her trash in the garbage. The tour is over.

An e-mail pops up on Kelly's BlackBerry, which she got when she was working and has kept because of the cost of breaking the contract. The message is from a chiropractor needing a bookkeeper, a job she thought was filled because she had applied two months earlier and got no response. Now the doctor wants her to take what he calls a "personality survey."

She drives to the public library to use a computer, because she and Scott don't own one. The survey requires that she rate how a series of 80 statements describes her, "4" being "most like you" and "1" being "least." Next to "I am a winner in most situations," she checks 1.

A few minutes after clicking the send button, their landlord calls, asking permission to drop by the next day to see what in the house needs to be fixed. The landlord, also an RV worker, is carrying two mortgages and must rent or sell the place as soon as possible.

Kelly hangs up and listens to her voicemail. A message from the chiropractor's assistant: The doctor wants her to come in for an interview, the first callback she has received in more than two months.

"Astonishing!" she says, driving toward home. "I wish I could stop and pick some lilacs. Look at all those pretty flowers!"

Hailey is sitting on Scott's lap, and Cody in the recliner, when Kelly walks in the house. They're watching "Bee Movie." Kelly tells Scott about the landlord's call.

"They want to do a walk-through tomorrow, put an ad in the paper."

"When tomorrow?"

"Tomorrow afternoon."

She mentions the call from the chiropractor.

"You're getting a job interview?" Cody asks.


Scott coughs. He's fighting a cold. His mind drifts to cleaning up the house and packing. Kelly wonders whether they should trim the hedges.

"For God's sakes! That's just pitiful!" he shouts. "The things you worry about!"

"It just bugs me, okay?"

"Don't get snappy with me!"

They're silent for a few moments, his thoughts swinging back to the landlord.

"Didn't know she was going to market it that damn quick," he says.

The next morning, as she prepares to leave for her interview, Kelly gives Hailey a children's book to take to Scott, saying, "Ask Daddy to read it to you one more time."

The book is called "What Dads Can't Do," which Kelly discovered when she took Hailey to story time at the library. She hoped its message might lift her husband's spirits.

His voice is a monotone as he reads.

"There are so many things that dads can't do, it's a wonder they make it through life at all. But dads can't give up. No matter how tired a dad gets or how hard life gets, a dad never quits."

He closes the book and hands it to Hailey, who brings it to Kelly, who walks out the door, saying, "All right, wish me good things."

Scott is silent as the door shuts and asks no questions when she returns.

"Want me to tell you what happened?"


He doesn't look up from the wall he's touching up with white paint. The landlord is due soon.

"It's 28 hours, eight bucks an hour," she says. No benefits, she adds.

"You say, 'Thank you, but -- '?"

"Yup," she says. "I make more on unemployment."

They sweep and vacuum. As he wipes down the stove, the sink and the counters, Scott thinks about a guy from his home town he loves to tease. He's over 30, has three kids and still lives at home with his mother. What a loser.

"I can't make that joke anymore," he says.

The landlord arrives with his wife, saying how sorry he is to see them go.

"Tell you the truth, I'm broke," Scott says. While Kelly follows them through the house, he wanders the back yard with Hailey and Karma.

An hour later, over lasagna, Scott asks Cody if his girlfriend is still trying to persuade him to stay with her instead of moving to Michigan.

"I'd rather stay down here," the boy says.

"You understand that life happens?" Scott says. "We've got to do something?"

Cody nods.

Scott goes into the garage, mounts his dirt bike, gunning the engine and standing on the pedals as he speeds across the field behind the house, his face slick with grimy sweat. For the first time all day, for the first time in a long while, he seems happy.

"Look at Daddy go!" Kelly says, holding Hailey's hand.

The bike hits a bump and Scott tumbles forward, over the handlebars, falling hard on the grass. His shoulder throbs. No job, no health insurance. He can't risk hurting himself any more. He pushes his bike to the garage and heads back to the couch.

Twenty-two days to go.

A couple of hours north, inside a small yellow house in Jackson, Mich., Kelly's mother walks down 11 dark steps into the basement. She's surrounded by stacks of boxes and milk crates, old chairs shoved against tables and shelves. The ceiling is low enough to touch.

Hailey will sleep upstairs, in a toddler bed already occupied by Winnie the Pooh and Mickey Mouse.

And Cody?

"I don't know what they're going to do," says Diane Lawrence.

She shakes her head and walks up to the living room, settling into an easy chair. Her walls are decorated with antique clocks, a painting of a lighthouse and her mother's 70-year-old wedding dress, enshrined in a frame.

Lawrence leans back. She has no answers, none that she is sure of, anyway. Only questions.

How will three adults, a teenager and a child share a single bathroom?

How long will they stay?

Jackson is about 80 miles west of Detroit, its only recent distinction being that it made Forbes magazine's list of the country's 10 worst small cities for finding jobs. Elkhart was named, too. It was sixth worst. Jackson? Number one.

"There's just nothing available for anyone in this part of the country," she says.

Her friend warned her not to take them in. They're adults, let them figure it out. Lawrence scoffs at the idea. Of course they'll live with her. They're her family.

"It's not their fault the economy fell through the floor," she says. "It's just too bad it happened."

Six days until they have to leave.

"You know what he grossed this year?" a woman asks at Scott and Kelly's barbecue, referring to her husband, an RV worker, who grins as he toes the ground. "Under $10,000."

"We're three months behind on our mortgage payments," she says.

"After I pay all my monthly bills, I've got $40 in my pocket," says a boyish man, a single parent who works two jobs and fixes cars on the side.

"Haven't seen it this bad here in 21 years," says another man, in a baseball cap and bowling shirt, leaning against his pickup, gripping a can of beer. "We've all had to make adjustments."

No one more so than Scott, the host at his own farewell party, who is grilling burgers and hotdogs and hugging friends. He smiles when he sees Richard Oiler, his buddy, who recently got a job painting RVs after being laid off for 15 months.

Soon after he started, Oiler called Scott and told him to get over to the plant to fill out an application. Scott drove over once, then again, but never got a call. Maybe it's worth one last-ditch try before they go, he decides now. He moves closer to Oiler. He says he's going to stop by the plant on Monday to put in another application, and asks if he can deliver it to Oiler. Maybe Oiler could hand it to the bosses.

"See if you can?" he asks. He raises his eyebrows. "See what I'm saying?"

"Right," Oiler says.

Scott wanders away. Oiler sips his beer. He considers himself fortunate to have found a job. But he makes $15 an hour, without the regular bonuses that he and Scott could count on during fatter times. "Made more in high school," he says. Every day, he has to stop himself from talking back to his bosses.

"You keep your mouth shut!" his wife snaps.

Inside the house, Cody and his girlfriend, Brandy, lie on his bed watching cartoons. He wears a black T-shirt emblazoned with the Grim Reaper's hooded face. Thick black liner circles her hazel eyes.

"I have atrocious grades and no money," Cody says, which leaves one option, as far as he can see: the military, although boot camp is not something he'd relish.

"I'm not exactly in shape."

"You could lose weight," Brandy says.

"I'll diet then and if I can't get past that, well guess what? They'll send me home."

"No, they won't, Cody."

He doesn't want to leave their house, his school, Brandy. He envisions the three of them sleeping in that basement -- Kelly, Scott and himself, no walls between them.

"I'm sorry," Cody says, "but this is wrong."

Outside, as the sun fades and a bonfire begins to glow, Kelly keeps an eye on Hailey while Scott wanders from friend to friend, bantering as he tilts his head back and chugs another beer. If anyone says anything approaching sentimental, he obliges with a hug and a promise to return. Then he moves on, laughing as he goes.

After 12 months of trying to fix his life, there is no more fixing to be done. Scott Nichols accepts that he is a man standing in a back yard of a house that soon won't be his own. He's a man with no way out. He's the man with no option but surrender.

Monday: Four days left. He does not go to see Richard Oiler. He does not fill out an application.

Tuesday: Kelly packs up some of her things. A clarinet she hasn't played since high school. A Louis Armstrong CD. Two photographs she took at some other point in her life, one of a rose, one of lilacs. A Shakespeare anthology. She shows Scott a wooden keepsake box. "You can yard-sale that," he says, "along with all the damn candles you got."

Wednesday: They run a few errands in the sagging Cougar.

Thursday: They rent a U-Haul and begin loading, father and son, silent. First the TV, then the couches, their dressers, their beds, the kitchen table, the washer and dryer, his two hunting rifles, then box after box after box, until the house is empty and the truck is full.

They arrive in Jackson by late afternoon the next day, Kelly's mother leading them down those 11 dark steps, apologizing not once but twice for the putrid smell of cat urine.

Kelly sits on a desk and Cody slumps in a chair. Scott is on the bed, arms folded, his eyes lost in the shadows. Kelly's mother offers to ask the cable company about running another line downstairs for their television.

Not necessary, Scott assures her.

"I don't plan on being here for long," he promises. He stands and unfolds his arms. The man with no options wonders what to do next, but there is nothing left to do other than trudge upstairs, unload the truck, and come back down to the basement.