President Obama and cigarettes: If he quits, he can help reverse the global tobacco epidemic and save millions of lives

January 17, 2009

barack-obamaWith the country is facing an economic disaster and crises throughout the world, it may not seem very important whether President Obama smokes cigarettes. The public response to his struggle to quit seems to be: Give the guy a break.

But, tobacco smoke kills 440,000 a year in the United States and 5.4 million each year worldwide. That number will reach 8 million by 2030, with 80 percent of those deaths in developing countries. Tobacco will kill 1 billion people this century. It’s the most preventable cause of death, in rich and poor countries alike. President Obama can save millions of these lives by joining the fight against this global epidemic. But unless he can quit smoking and stay quit, he might actually hurt the cause.

The international tobacco industry spends tens of billions each year pushing its message that smoking is normal and desirable. A charismatic world leader who is an inspiration to young and old — and who smokes –would be a godsend for the industry. But if the same world leader publicly quits, and supports changes that help others to quit and children never to start, he could turn the tide on this epidemic.

Smoking in the United States has declined in recent decades; leveling off at about 20 percent of the adult population. Meanwhile, the global reality is much worse. Countries with low or moderate per capita incomes are particularly at risk because of low tobacco prices, lack of awareness and aggressive tobacco marketing.

Indonesia is a tragic example. Over 60 percent of adult males smoke. So do a quarter of teenage boys under 16. The rate among young girls is rising fast. Tobacco advertising is rampant and, like most developing countries, Indonesia has few of the controls that can reverse the tobacco epidemic. Treatment for tobacco dependence and anti-smoking messages are rare. Tobacco advertising is everywhere. And, tobacco taxes, and hence prices, is low.little-kid-smoking-cigarette-copy21

It’s also a country where President Obama is very popular, having spent some of his childhood there. By speaking out as an honored world leader who has quit smoking, he could help countries like Indonesia overcome tobacco industry muscle and enact desperately needed anti-tobacco measures. Africa is another region with a growing tobacco epidemic where President Obama can help.

While tobacco prevalence in Africa is still relatively low, it’s a vast new marketplace for the tobacco industry because of lax controls and young populace. President Obama could spur tobacco controls there, too, and help save millions of lives.

Reversing the global tobacco epidemic is not complex. It doesn’t require breakthrough cures or heroic medical treatment, just policy changes that already have been tested, plus enforcement. A recent World Health Organization report laid out the path countries must take by using the acronym MPOWER: Monitor tobacco use and prevention policies; protect people from tobacco smoke; offer help to quit smoking; warn about the dangers of tobacco; enforce bans on advertising, promotion and sponsorship; and raise taxes on tobacco. These are well-researched and proven methods. If adopted by all countries, these policies would save hundreds of millions of lives.

mpower_report_2008_cover1The tobacco industry vigorously opposes the MPOWER measures. And many countries have yet to develop the political prowess to resist the industry’s powerful influence and sophisticated tactics. President Obama can help by supporting global adoption of these policy changes. He could begin by getting the United States to ratify the World Health Organization’s Framework Convention on Tobacco Control. This treaty is blueprint for reducing the worldwide supply of and demand for tobacco. While 161 nations are parties to the treaty, the United States isn’t one of them.

President Obama will battle unemployment, the real estate collapse, worldwide recession, climate change, a broken health care system, the Israeli-Palestinian conflict and crises still beyond the horizon. But he should not ignore the planet’s greatest preventable health threat. Because he’s admired throughout the world and because he himself struggles with addiction to cigarettes, President Obama could be instrumental in reversing the global tobacco epidemic.


‘Cram-down’: A word you need to know in 2009. It may be the only way out of the mortgage disaster

January 2, 2009

underwater-real-estateCram-down: A court-ordered reduction of the secured balance due on a home mortgage loan, granted to a homeowner who has filed for personal bankruptcy…

We will have a tough time getting out of the recession and mortgage crises as long as the following dire statistic remains true: More than one in six U.S. homeowners are underwater. They owe more than their home is worth. And, since their primary home is usually their biggest investment, that means their liabilities are greater than their assets. In essence, they’re bankrupt.

And, it’s greater than one in six in many parts of the country, particularly those places that experienced the real estate bubble-on-steroids earlier this decade. Probably, most people who bought homes in Southern California from 2003-2007 are underwater. That includes a certain blogger.

Loan modifications for homeowners in trouble aren’t enough, because too many people bought their homes at wildly inflated prices. Continuing the “underwater” motif, loan modifications for these people are like rearranging the deck chairs on the Titanic. If your liabilities are far greater than your assets, it doesn’t matter a whole lot how you finance your liabilities. Proof is that more than 50 percent of loans modified this year were delinquent again within six months.

More and more people are saying that reducing debt principal is necessary to keep people in their homes. One of those people is Barack Obama. The President-elect’s senatorial colleague from Illinois, Dick Durbin, has introduced legislation that that would allow judges to modify the terms of distressed mortgages, including the principal. Obama is said to approve of this approach; Durbin wouldn’t otherwise have repeatedly introduced it as federal legislation.

…In a cram-down, the bankruptcy court splits the outstanding mortgage balance into two parts. The amount of debt equal to the current appraised value of the home is treated as a secured claim, which the borrower must continue to pay. The amount of debt in excess of the current property’s value becomes an unsecured claim, which is usually not repaid in full…

Mortgage bankers hate the idea, of course. Investors do, too. If a judge simply reduces the current value of a home by reducing the mortgage balance, somebody’s gotta take it on the chin.That somebody will be your friendly neighborhood mortgage originator.

…In areas where home prices have depreciated, cramdowns can result in significant mortgage reductions. In some cases, the judge may order the remaining secured debt amortized over the remaining life of the loan term, thus lowering monthly payments. In other cases, monthly payments remain the same as before the cram-down, and the secured mortgage is simply paid off faster…

But all of this brings up the question of fairness. If my neighbor declares bankruptcy and a judge lowers the principal of his mortgage and therefore the value of his home, where does that leave me? So, one of the ideas is doing cram-downs as public policy, with big groups of mortgages, rather than just individually in bankruptcy court.

The problem with cram-downs is that mortgages have been sold to Wall Street, which in turn sold them around the world; it’s the poisonous mortgage-backed securities we’ve all been hearing about. So if you cram down the value of mortgages, you’re harming investors from CALPIRS to China and other large and small government investment funds from Indiana to Italy. Judges’ decisions could put a hard bottom on mortgage-backed securities. Their low value would be revealed and that could put added strain on the markets by showing how much trouble companies that hold them are really in.

One solution is for the US government to foot the bill for a portion of the cram-down. But what that would cost and how much more debt the US government would have to issue is anybody’s guess.

Somehow, though, government has to get the leverage out of the economy. It’s killing us. That’s what the Bush Treasury Department has been trying to do, unsuccessfully, with its bank bailout money. As long as so many Americans owe more on their homes than their homes are worth, the foreclosures and economic squeeze will continue.

Remember the word: Cram-down. Coming soon to a neighborhood near you.