Tailwind

Lassen Creamed Corn

2011-06-26T16:06:00.000-07:00

Nothing like a little Summer Solstice back country ski trip to remind one why California is the best place on earth.


The Summit from Bumpass Hell Parking lot. Elev. ~7,900 ft.

15 ft. Snowbank in late June. The road won't be fully open until mid-July

The trail up

We started down there...

We boot packed the whole way up.

Lunch on the summit

Mt Lassen summit. Elevation 10,457 ft. Last time it erupted was 97 short years ago!

Mt. Shasta in the distance.

Half way down our first descent--about a 45 degree angle. Glorious corn snow!

Another view looking down the same slope (Northwest aspect)

No back country trip is complete without a little downclimbing...

or a little bushwackin'.

Skinning up Eagle Peak for a lap of delightful corn snow

Mt. Lassen remains an active volcano. The steam on the right of the picture is from a vent.

Bubblin' mud

Sulphur spring.

The post ski feast--grilled ribeye with home made chimichurri sauce. Hard to believe most everybody else chose to eat backpacker meals out of a bag.

Burning Man 2010

2010-09-30T15:10:00.000-07:00

Since this was my 5th trip to Blackrock City, I've had plenty of time to ponder what I like and dislike about Burning Man. I really enjoy setting up and maintaining camp, early morning and the sunrise that comes with it, good funky beats booming from incredible sound systems, spontaneous fun, quality time with my good friends, meeting interesting people that aren't all spun-out, Space Cowboys, hopping on my bike and pedaling off by myself to experience whatever may come, and leaving on Saturday before the Burn to avoid Exodus. Things I've decided I dislike are the deep house break beats that the majority of sound camps pump out continually, guests at camp that are rude and act like it's their camp, white out dust storms, people that take themselves too seriously, and Exodus.

The Man we welded together guarding camp

The observation deck; useful for staying above the hoi polloi

Metropolis Man

Free Balloon rides!

Every city has its bums. This was probably one of the coolest art projects I saw this year.

"Bliss Dance" stole the show.

T & T's wedding

T carefully weighing the consequences of what he's about to do.

The 11:11 art car provided the transportation to the ceremony.

Welding the man was one of the highlights of the whole week.

The kitchen at T & T's wedding reception. Hard to believe they erected something so grand in the middle of the desert.

My favorite sunrise bar: Moonshine Sunrise

Moonshine Sunrise

The sun rising behind Art Car Wash.


The Front Porch. It was towed around the playa behind an old tractor. Definitely one of the coolest art cars this year.

Glittery palm trees

O makin' her grand entrance into Moonshine Sunrise

Loungin' it playa-style


Sky diving in for the Burn

I'll be doing a dualsport ride form Truckee to Gerlach next week with a group of guys. I am really looking forward to seeing what the Blackrock Desert looks like without 50,000 burners milling about.

Obama will have a Bud Lite

2009-07-29T12:26:00.000-07:00

In a bid to paper over his (Cambridge cops) "acted stupidly" comment, Obama has invited Professor Gates and Officer Crowley to the White House to make a great show of letting bygones be bygones by having all parties sit down over a beer to hash out their differences, like real men do.

Problem is, what kind of real man drinks Bud Lite?

Make His a Bud Light: Obama Picks Best-Selling Beer

July 29 (Bloomberg) -- President Barack Obama will have Bud Light tomorrow when he hosts an old friend and the police officer who arrested him.

Obama, 47, has picked the top-selling beer in the U.S. for his get-together at the White House with Harvard University professor Henry Louis Gates Jr. and Cambridge, Massachusetts, police Sergeant James Crowley, according to an administration official who asked to remain anonymous. The official wouldn’t say what the guests would be drinking.

Political strategists and marketing experts called the pick an easy, non-controversial choice for a meeting designed to defuse the tension sparked by the July 16 arrest of Gates by Crowley.

“He’s trying to send a message that he’s an average American and these are two other average Americans,” said Matt Mackiowack, a Republican strategist. “If you complicate that by making an exotic choice, or an import, or too expensive, you can be too cute by half.”

Obama invited Crowley and Gates to the White House after the president drew criticism in a July 22 news conference for saying the Cambridge police “acted stupidly” in arresting Gates at his home on a disorderly conduct charge, which was later dropped. Obama spoke hours after police union officials in Cambridge called on him to apologize.

Two days later, Obama called Crowley and Gates, an old friend, to invite them to the White House for a beer.

Mr. President, I know you are trying to seem like an authentic American--a real regular Joe--but if you think you are convincing us real regular Joes that you are just one of the guys by drinking a Bud Lite, I am sorry to inform you and your political handlers that you missed this one by a mile. Toss caution into the political wind and have a drink you actually enjoy--even if it is a white wine spritzer with an extra lemon twist. Try authentic authenticity for once. You're going to be judged no matter what you drink, you may as well enjoy it. For crissakes, at least have a regular strength Budweiser.

I think they should all drink Black and Tans. Aside from being politically correct and appropriate for such a kumbaya occasion, they're delicious!

Though if I were Officer Crowley, I would have respectfully declined the invitation in the first place. I can't think of a more pointless, contrived, uncomfortable situation--with no upside--to voluntarily place myself in.

Having beers and yucking it up is something you do with friends, not with a privileged, ivory tower race baiter and the Leader of the Free World, who says he doesn't have all the details of the situation then in the next breath says you "acted stupidly."

Seems to me Professor Gates is the only one who acted stupidly. Common sense dictates that you never talk back to a cop, even if you feel you are being mistreated. If you truly have been mistreated, file a complaint and sort it out in a lawsuit after wards. Here's another piece of common sense. When a cop comes to investigate a reported break in at your house, maybe you should consider thanking the officer for putting his life on the line to protect your property.

(Full disclosure: I have been known to drink a Bud Lite from time to time, but that is only when the choice is either brackish water or nothing at all.)

Keeping track of the TARP

2009-07-21T09:41:00.000-07:00

TARP COP: Get tough on banks

The top cop tracking the $700 billion bailout program said Monday that he's concerned federal officials are ignoring his proposals for preventing tax dollars from being wasted or pilfered.

Neil Barofsky, the special inspector general overseeing the Troubled Asset Relief Program, released a 260-page report detailing a long list of concerns about government efforts to prop up hundreds of banks, Wall Street firms and auto companies.

The report criticizes the Treasury Department the most for its unwillingness to adopt some of his recommendations.

Barofsky cites two examples: He wants Treasury to force bailout recipients to keep track of how exactly they are spending TARP funds. He also wants officials to erect a "firewall" to prevent private investment managers -- the kind hired to manage and invest taxpayer dollars -- from taking advantage of insider knowledge.

I guess it is too much to ask Treasury to:

a) ask TARP recipients to keep track of where the money is going
b) discourage insider trading

"This administration promised an 'unprecedented level' of accountability and oversight, but as this report reveals, they are falling far short of that promise," Issa said. "In fact, the Treasury Department is actively obstructing transparency. The American people deserve to know how their tax dollars are being spent -- especially considering they are the ones who are footing the bill."

The brazen, unapologetic manner in which the self-anointed aristocrats of our nation are selling the rest of us down the river is literally breathtaking. We are quickly becoming a Banana Republic, and few seem to care.

It's like deja vu all over again

2009-07-08T12:50:00.000-07:00

It's great to see that Wall St. has gotten over the Great Hiccup of 2008 and it's back to business as usual:

Morgan Stanley Plans to Turn Downgraded Loan CDO Into AAA Bonds

July 8 (Bloomberg) -- Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.

Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.

Two years after the credit markets began to seize up, costing the world’s biggest financial institutions $1.47 trillion in writedowns and losses, banks are again taking so- called structured finance securities and turning them into new debt investments with top credit ratings. While the Morgan Stanley deal is the first to involve CDOs of loans, banks have been doing the same with commercial mortgage-backed securities in recent weeks.

A lot of banks and insurers “cannot buy anything but AAA,” said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” which is due to be published in November by Oxford University Press. “You’re manufacturing AAA out of not AAA, therefore allowing those people who have AAA written on their forehead to buy.”

It seems as though dogs are not the only ones that lack a short term memory.

It also reminds me of an old saying, "no matter how good the recipe is, you'll never make chicken salad out of chicken shit."

"California: come for the sun, stay for the tire fire"

2009-07-07T13:29:00.000-07:00

If there's ever a contest for a new state slogan, that'll be the one I will submit.

Joel Kotkin: Who Killed California's Economy?

It took some amazing incompetence to toss this best-endowed of places down into the dustbin of history. Yet conventional wisdom views the crisis largely as a legacy of Proposition 13, which in effect capped only taxes.

This lets too many malefactors off the hook. I covered the Proposition 13 campaign for the Washington Post and examined its aftermath up close. It passed because California was running huge surpluses at the time, even as soaring property taxes were driving people from their homes.

Admittedly it was a crude instrument, but by limiting those property taxes Proposition 13 managed to save people’s houses. To the surprise of many prognosticators, the state government did not go out of business. It has continued to expand faster than either its income or population. . . . The media and political pundits refuse to see this gap between the state’s budget and its ability to pay as an essential issue. It is. (This is not to say structural reform is not needed. I would support, for example, reforming some of the unintended ill-effects of Proposition 13 that weakened local government and left control of the budget to Sacramento.)

But the fundamental problem remains. California’s economy–once wondrously diverse with aerospace, high-tech, agriculture and international trade–has run aground. Burdened by taxes and ever-growing regulation, the state is routinely rated by executives as having among the worst business climates in the nation. No surprise, then, that California’s jobs engine has sputtered, and it may be heading toward 15% unemployment.

What not to name a company

2009-06-26T10:29:00.000-07:00

Surely there are many examples in the business world of a company living to regret the name of a product or a joint venture. The first one that comes to mind was when Chevy rolled out the Nova in Mexico back in the 70's without considering that in Spanish, "no va" means "no go."

Today we learn that Russia's Gazprom and Nigerian Gas are teaming up in a joint venture that should provide a boost to Nigeria's state revenue.

The name of this new company will be NiGaz Energy Company, Ltd.

Manners

2009-06-18T11:42:00.000-07:00

If one were to make a broad observation about the youth of today, it would be hard to dispute the fact that in general they are sorely lacking in the etiquette and manners department. Here is a list that every teenager--and quite a few adults--could benefit from reading and striving to follow.

It is a list of 110 rules of good etiquette that George Washington copied as a teenager.

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1st Every Action done in Company, ought to be with Some Sign of Respect, to those that are Present.

2d When in Company, put not your Hands to any Part of the Body, not usualy Discovered.

3d Shew Nothing to your Freind that may affright him.

4 In the Presence of Others Sing not to yourself with a humming Noise, nor Drum with your Fingers or Feet.

5th If You Cough, Sneeze, Sigh, or Yawn, do it not Loud but Privately; and Speak not in your Yawning, but put Your handkercheif or Hand before your face and turn aside.

6th Sleep not when others Speak, Sit not when others stand, Speak not when you Should hold your Peace, walk not on when others Stop.

7th Put not off your Cloths in the presence of Others, nor go out your Chamber half Drest.

8th At Play and at Fire its Good manners to Give Place to the last Commer, and affect not to Speak Louder than Ordinary.

9th Spit not in the Fire, nor Stoop low before it neither Put your Hands into the Flames to warm them, nor Set your Feet upon the Fire especially if there be meat before it.

10th When you Sit down, Keep your Feet firm and Even, without putting one on the other or Crossing them.

11th Shift not yourself in the Sight of others nor Gnaw your nails.

12th Shake not the head, Feet, or Legs rowl not the Eys lift not one eyebrow higher than the other wry not the mouth, and bedew no mans face with your Spittle, by approaching too near him you Speak.

13th Kill no Vermin as Fleas, lice ticks &c in the Sight of Others, if you See any filth or thick Spittle put your foot Dexteriously upon it if it be upon the Cloths of your Companions, Put it off privately, and if it be upon your own Cloths return Thanks to him who puts it off.

14th Turn not your Back to others especially in Speaking, Jog not the Table or Desk on which Another reads or writes, lean not upon any one.

15th Keep your Nails clean and Short, also your Hands and Teeth Clean yet without Shewing any great Concern for them.

16th Do not Puff up the Cheeks, Loll not out the tongue rub the Hands, or beard, thrust out the lips, or bite them or keep the Lips too open or too Close.

17th Be no Flatterer, neither Play with any that delights not to be Play'd Withal.

18th Read no Letters, Books, or Papers in Company but when there is a Necessity for the doing of it you must ask leave: come not near the Books or Writings of Another so as to read them unless desired or give your opinion of them unask'd also look not nigh when another is writing a Letter.

19th let your Countenance be pleasant but in Serious Matters Somewhat grave.

20th The Gestures of the Body must be Suited to the discourse you are upon.

21st Reproach none for the Infirmaties of Nature, nor Delight to Put them that have in mind thereof.

22d Shew not yourself glad at the Misfortune of another though he were your enemy.

23d When you see a Crime punished, you may be inwardly Pleased; but always shew Pity to the Suffering Offender.

24th Do not laugh too loud or too much at any Publick Spectacle.

25th Superfluous Complements and all Affectation of Ceremonie are to be avoided, yet where due they are not to be Neglected.

26th In Pulling off your Hat to Persons of Distinction, as Noblemen, Justices, Churchmen &c make a Reverence, bowing more or less according to the Custom of the Better Bred, and Quality of the Person. Amongst your equals expect not always that they Should begin with you first, but to Pull off the Hat when there is no need is Affectation, in the Manner of Saluting and resaluting in words keep to the most usual Custom.

27th Tis ill manners to bid one more eminent than yourself be covered as well as not to do it to whom it's due Likewise he that makes too much haste to Put on his hat does not well, yet he ought to Put it on at the first, or at most the Second time of being ask'd; now what is herein Spoken, of Qualification in behaviour in Saluting, ought also to be observed in taking of Place, and Sitting down for ceremonies without Bounds is troublesome.

28th If any one come to Speak to you while you are Sitting Stand up tho he be your Inferiour, and when you Present Seats let it be to every one according to his Degree.

29th When you meet with one of Greater Quality than yourself, Stop, and retire especially if it be at a Door or any Straight place to give way for him to Pass.

30th In walking the highest Place in most Countrys Seems to be on the right hand therefore Place yourself on the left of him whom you desire to Honour: but if three walk together the mid Place is the most Honourable the wall is usually given to the most worthy if two walk together.

31st If any one far Surpassess others, either in age, Estate, or Merit yet would give Place to a meaner than himself in his own lodging or elsewhere the one ought not to except it, So he on the other part should not use much earnestness nor offer it above once or twice.

32d To one that is your equal, or not much inferior you are to give the cheif Place in your Lodging and he to who 'tis offered ought at the first to refuse it but at the Second to accept though not without acknowledging his own unworthiness.

33d They that are in Dignity or in office have in all places Preceedency but whilst they are Young they ought to respect those that are their equals in Birth or other Qualitys, though they have no Publick charge.

34th It is good Manners to prefer them to whom we Speak befo ourselves especially if they be above us with whom in no Sort we ought to begin.

35th Let your Discourse with Men of Business be Short and Comprehensive.

36th Artificers & Persons of low Degree ought not to use many ceremonies to Lords, or Others of high Degree but Respect and highly Honour them, and those of high Degree ought to treat them with affibility & Courtesie, without Arrogancy.

37th In Speaking to men of Quality do not lean nor Look them full in the Face, nor approach too near them at lest Keep a full Pace from them.

38th In visiting the Sick, do not Presently play the Physicion if you be not Knowing therein.

39th In writing or Speaking, give to every Person his due Title According to his Degree & the Custom of the Place.

40th Strive not with your Superiers in argument, but always Submit your Judgment to others with Modesty.

41st Undertake not to Teach your equal in the art himself Proffesses; it Savours of arrogancy.

42d Let thy ceremonies in Courtesie be proper to the Dignity of his place with whom thou conversest for it is absurd to act the same with a Clown and a Prince.

43d Do not express Joy before one sick or in pain for that contrary Passion will aggravate his Misery.

44th When a man does all he can though it Succeeds not well blame not him that did it.

45th Being to advise or reprehend any one, consider whether it ought to be in publick or in Private; presently, or at Some other time in what terms to do it & in reproving Shew no Signs of Cholar but do it with all Sweetness and Mildness.

46th Take all Admonitions thankfully in what Time or Place Soever given but afterwards not being culpable take a Time & Place convenient to let him know it that gave them.

47th Mock not nor Jest at any thing of Importance break no Jest that are Sharp Biting and if you Deliver any thing witty and Pleasent abtain from Laughing thereat yourself.

48th Wherein you reprove Another be unblameable yourself; for example is more prevalent than Precepts.

49 Use no Reproachfull Language against any one neither Curse nor Revile.

50th Be not hasty to beleive flying Reports to the Disparagement of any.

51st Wear not your Cloths, foul, unript or Dusty but See they be Brush'd once every day at least and take heed that you approach not to any Uncleaness.

52d In your Apparel be Modest and endeavour to accomodate Nature, rather than to procure Admiration keep to the Fashion of your equals Such as are Civil and orderly with respect to Times and Places.

53d Run not in the Streets, neither go too slowly nor with Mouth open go not Shaking yr Arms kick not the earth with yr feet, go not upon the Toes, nor in a Dancing fashion.

54th Play not the Peacock, looking every where about you, to See if you be well Deck't, if your Shoes fit well if your Stokings Sit neatly, and Cloths handsomely.

55th Eat not in the Streets, nor in the House, out of Season.

56th Associate yourself with Men of good Quality if you Esteem your own Reputation; for 'tis better to be alone than in bad Company.

57th In walking up and Down in a House, only with One in Company if he be Greater than yourself, at the first give him the Right hand and Stop not till he does and be not the first that turns, and when you do turn let it be with your face towards him, if he be a Man of Great Quality, walk not with him Cheek by Joul but Somewhat behind him; but yet in Such a Manner that he may easily Speak to you.

58th Let your Conversation be without Malice or Envy, for 'tis a Sign of a Tractable and Commendable Nature: And in all Causes of Passion admit Reason to Govern.

59th Never express anything unbecoming, nor Act agst the Rules Moral before your inferiours.

60th Be not immodest in urging your Freinds to Discover a Secret.

61st Utter not base and frivilous things amongst grave and Learn'd Men nor very Difficult Questians or Subjects, among the Ignorant or things hard to be believed, Stuff not your Discourse with Sentences amongst your Betters nor Equals.

62d Speak not of doleful Things in a Time of Mirth or at the Table; Speak not of Melancholy Things as Death and Wounds, and if others Mention them Change if you can the Discourse tell not your Dreams, but to your intimate Friend.

63d A Man ought not to value himself of his Atchievements, or rare Qualities of wit; much less of his riches Virtue or Kindred.

64th Break not a Jest where none take pleasure in mirth Laugh not aloud, nor at all without Occasion, deride no mans Misfortune, tho' there Seem to be Some cause.

65th Speak not injurious Words neither in Jest nor Earnest Scoff at none although they give Occasion.

66th Be not froward but friendly and Courteous; the first to Salute hear and answer & be not Pensive when it's a time to Converse.

67th Detract not from others neither be excessive in Commanding.

68th Go not thither, where you know not, whether you Shall be Welcome or not. Give not Advice with[out] being Ask'd & when desired do it briefly.

69 If two contend together take not the part of either unconstrained; and be not obstinate in your own Opinion, in Things indiferent be of the Major Side.

70th Reprehend not the imperfections of others for that belongs to Parents Masters and Superiours.

71st Gaze not on the marks or blemishes of Others and ask not how they came. What you may Speak in Secret to your Friend deliver not before others.

72d Speak not in an unknown Tongue in Company but in your own Language and that as those of Quality do and not as the Vulgar; Sublime matters treat Seriously.

73d Think before you Speak pronounce not imperfectly nor bring out your Words too hastily but orderly & distinctly.

74th When Another Speaks be attentive your Self and disturb not the Audience if any hesitate in his Words help him not nor Prompt him without desired, Interrupt him not, nor Answer him till his Speech be ended.

75th In the midst of Discourse ask not of what one treateth but if you Perceive any Stop because of your coming you may well intreat him gently to Proceed: If a Person of Quality comes in while your Conversing it's handsome to Repeat what was said before.

76th While you are talking, Point not with your Finger at him of Whom you Discourse nor Approach too near him to whom you talk especially to his face.

77th Treat with men at fit Times about Business & Whisper not in the Company of Others.

78th Make no Comparisons and if any of the Company be Commended for any brave act of Vertue, commend not another for the Same.

79th Be not apt to relate News if you know not the truth thereof. In Discoursing of things you Have heard Name not your Author always A Secret Discover not.

80th Be not Tedious in Discourse or in reading unless you find the Company pleased therewith.

81st Be not Curious to Know the Affairs tof Others neither approach those that Speak in Private.

82d Undertake not what you cannot Perform but be Carefull to keep your Promise.

83d When you deliver a matter do it without Passion & with Discretion, however mean the Person be you do it too.

84th When your Superiours talk to any Body hearken not neither Speak nor Laugh.

85th In Company of these of Higher Quality than yourself Speak not til you are ask'd a Question then Stand upright put of your Hat & Answer in few words.

86 In Disputes, be not So Desireous to Overcome as not to give Liberty to each one to deliver his Opinion and Submit to the Judgment of the Major Part especially if they are Judges of the Dispute.

87th Let thy carriage be such as becomes a Man Grave Settled and attentive to that which is spoken. Contradict not at every turn what others Say.

88th Be not tedious in Discourse, make not many Digressions, nor repeat often the Same manner of Discourse.

89th Speak not Evil of the absent for it is unjust.

90 Being Set at meat Scratch not neither Spit Cough or blow your Nose except there's a Necessity for it.

91st Make no Shew of taking great Delight in your Victuals, Feed not with Greediness; cut your Bread with a Knife, lean not on the Table neither find fault with what you Eat.

92 Take no Salt or cut Bread with your Knife Greasy.

93 Entertaining any one at table it is decent to present him wt. meat, Undertake not to help others undesired by the Master.

94th If you Soak bread in the Sauce let it be no more than what you put in your Mouth at a time and blow not your broth at Table but Stay till Cools of it Self.

95th Put not your meat to your Mouth with your Knife in your hand neither Spit forth the Stones of any fruit Pye upon a Dish nor Cast anything under the table.

96 It's unbecoming to Stoop much to ones Meat Keep your Fingers clean & when foul wipe them on a Corner of your Table Napkin.

97th Put not another bit into your Mouth til the former be Swallowed let not your Morsels be too big for the Gowls.

98th Drink not nor talk with your mouth full neither Gaze about you while you are a Drinking.

99th Drink not too leisurely nor yet too hastily. Before and after Drinking wipe your Lips breath not then or Ever with too Great a Noise, for its uncivil.

100 Cleanse not your teeth with the Table Cloth Napkin Fork or Knife but if Others do it let it be done wt. a Pick Tooth.

101st Rince not your Mouth in the Presence of Others.

102d It is out of use to call upon the Company often to Eat nor need you Drink to others every Time you Drink.

103d In Company of your Betters be not longer in eating than they are lay not your Arm but only your hand upon the table.

104th It belongs to the Chiefest in Company to unfold his Napkin and fall to Meat first, But he ought then to Begin in time & to Dispatch with Dexterity that the Slowest may have time allowed him.

105th Be not Angry at Table whatever happens & if you have reason to be so, Shew it not but on a Chearfull Countenance especially if there be Strangers for Good Humour makes one Dish of Meat a Feast.

106th Set not yourself at the upper of the Table but if it be your Due or that the Master of the house will have it So, Contend not, least you Should Trouble the Company.

107th If others talk at Table be attentive but talk not with Meat in your Mouth.

108th When you Speak of God or his Atributes, let it be Seriously & wt. Reverence. Honour & Obey your Natural Parents altho they be Poor.

109th Let your Recreations be Manfull not Sinfull.

110th Labour to keep alive in your Breast that Little Spark of Celestial fire Called Conscience.

Finis

Testing the waters

2009-06-09T07:16:00.000-07:00

One of my current concerns as I voiced in a previous post is that the Obama administration may try to take over the Federal Reserve by using the strong arm of a Democratic Congress. Looks like they may be testing the waters:

Bloomberg article: Fed Said to Retreat From Seeking Power to Sell Its Own Bills

At the House Budget hearing, a lawmaker brought up the idea of making Fed district-bank presidents subject to Senate confirmation. Currently the presidents are nominated by the banks’ boards of directors and approved by the U.S.-appointed Fed governors in Washington.

Representative Marcy Kaptur, an Ohio Democrat, asked Bernanke during the hearing whether he supported the idea. “No,” the chairman replied.

“The last thing the Fed wants is for its independence of monetary policy to be challenged,” said David M. Jones, president of DMJ Advisors LLC in Denver and a former Fed economist. “It’s very unlikely this debt thing would be pursued.”

The car of the future

2009-06-08T08:19:00.000-07:00

A friend of mine snapped this picture while traveling through rural Indiana last week:

It's official: Congress and the SEC are insane

2009-06-04T06:36:00.000-07:00

Insanity has been defined as the repetition of the same task with the expectation of a different result. If that's the case, then the SEC and Congress offer a text book example:

US Lawmakers Push Short-Selling Changes Following Report

A bipartisan group of U.S. senators said the SEC needs to consider new restrictions to help quell naked short selling, including a possible requirement that short sellers borrow shares before they try and sell a stock short. Naked short selling occurs when a trader sells shares that are not actually in their possession, potentially creating downward pressure on the price of shares.

"Unless the SEC can develop an appropriate alternative, a strict pre-borrow requirement may be the only way to adequately protect shareholders' rights," Sen. Charles Grassley, R-Iowa said in a joint release with Sen. Carl Leving, D- Mich., and Sen. Arlen Specter, D-Penn.

Last time I checked, it was already a requirement to get a borrow before you shorted a stock. The problem has been and remains enforcement.

One thing is certain. We'll need a vast new bureaucracy to enforce this groundbreaking new legislation.

In other news, my dog's breath smells like dog food.

Observing the weathervane

2009-05-22T07:10:00.000-07:00

This quote summarizes this week’s sentiment rather succinctly: "There will likely be a growing steady recognition that in trying to prevent a Depression, the transfer of risk has been shifted from the private sector to the public purses and this may create a longer, more drawn out problem."

Geithner admits overnight that the US credit rating is in jeopardy in light of our heavy issuance
PIMCO's Bill Gross said the U.S. will eventually lose its AAA rating
Moody's did say Thursday it is comfortable with the triple-A sovereign rating on the United States, but it is not guaranteed forever
Goldman Sachs said the hike in oil prices this week was due to real oil market fundamentals and not just hedging against a weak dollar and equity market rallies. "The oil market was shocked by disruptions in Nigeria, refinery problems in the U.S. and a strong gasoline market," Goldman said in a research note. (Not sure why they think they have any credibility. Last year when oil was at $140/bbl they were calling for $200/bbl by year end. Their prop desk was probably getting short on the call, but I digress...--Ed)
US Treasury was getting hit hard at the end of the day yesterday as the market was getting ready for big new supply coming next week - $101B of fresh Treasuries to be auctioned
WAPO reported that the Obama administration is preparing to send GM into bankruptcy as early as the end of next week under a plan that would give the auto maker tens of billions of dollars more in public financing
Mastercard will lose more than half of a $59B portfolio of debit-card users after JPMorgan Chase & Co. decided to shift more business to Visa
The FDIC seized BKUNA, the 34th bank failure of the year, with $12.8B in assets, $8.6B in deposits and 85 branches
AIG announced that Chairman and CEO Edward Liddy will step down and also proposed a 1-for-20 reverse stock split

I think that at some point in the not too distant future the Obama Administration, with the help of Congress, will attempt to take over the Fed. I bet the majority of Americans will see nothing wrong with that, at least the ones who have no idea (and don't care to have one) what the Federal Reserve system is and why it was created in the first place.

The elephant in the room

2009-05-15T09:02:00.000-07:00

Bruce Bartlett at Forbes does a good job of quantifying exactly what it would take to fully fund all of our upcoming Social Security and Medicare liabilities.

The 81% Tax Increase

Most Americans believe that the Social Security trust fund contains a pot of money that is sitting somewhere earning interest to pay their benefits when they retire. On paper this is true; somewhere in a Treasury Department ledger there are $2.4 trillion worth of assets labeled "Social Security trust fund."

The problem is that by law 100% of these "assets" are invested in Treasury securities. Therefore, the trust fund does not have any actual resources with which to pay Social Security benefits. It's as if you wrote an IOU to yourself; no matter how large the IOU is it doesn't increase your net worth.

Consequently, whether there is $2.4 trillion in the Social Security trust fund or $240 trillion has no bearing on the federal government's ability to pay benefits that have been promised. In a very technical sense, it would lose the ability to pay benefits in excess of current tax revenues once the trust fund is exhausted. But long before that date Congress would simply change the law to explicitly allow general revenues to be used to pay Social Security benefits, something it could easily do in a day.

Social Security's actuaries make such a calculation on page 64. It says that Social Security's unfunded liability in perpetuity is $17.5 trillion (treating the trust fund as meaningless). The program would need that much money today in a real trust fund outside the government earning a true return to pay for all the benefits that have been promised over and above future Social Security taxes. In effect, the capital stock of the nation would have to be $17.5 trillion larger than it is right now. Alternatively, the payroll tax rate would have to rise by 4%.
To put it another way, Social Security's unfunded liability equals 1.3% of the gross domestic product. So if we were to fund its deficit with general revenues, income taxes would have to rise by 1.3% of GDP immediately and forever. With the personal income tax raising about 10% of GDP in coming years, according to the Congressional Budget Office, this means that every taxpayer would have to pay 13% more just to make sure that all Social Security benefits currently promised will be paid.

That's just the social security portion--the baby elephant. Let's have a look at the real elephant--Medicare:

As bad as that is, however, Social Security's problems are trivial compared to Medicare's. Its trustees also issued a report this week. On page 69 we see that just part A of that program, which pays for hospital care, has an unfunded liability of $36.4 trillion in perpetuity. The payroll tax rate would have to rise by 6.5% immediately to cover that shortfall or 2.8% of GDP forever. Thus every taxpayer would face a 28% increase in their income taxes if general revenues were used to pay future Medicare part A benefits that have been promised over and above revenues from the Medicare tax.

But this is just the beginning of Medicare's problems, because it also has two other programs: part B, which covers doctor's visits, and part D, which pays for prescription drugs.

The unfunded portion of Medicare part B is already covered by general revenues under current law. The present value of that is $37 trillion or 2.8% of GDP in perpetuity according to the trustees report (p. 111). The unfunded portion of Medicare part D, which was rammed into law by George W. Bush and a Republican Congress in 2003, is also covered by general revenues under current law and has a present value of $15.5 trillion or 1.2% of GDP forever (p. 127).

To summarize, we see that taxpayers are on the hook for Social Security and Medicare by these amounts: Social Security, 1.3% of GDP; Medicare part A, 2.8% of GDP; Medicare part B, 2.8% of GDP; and Medicare part D, 1.2% of GDP. This adds up to 8.1% of GDP. Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.

I see three solutions to this problem as it exists today:

A) cut benefits
B) massive tax increase
C) hyperinflation

We're in this mess precisely because government refuses to make hard choices and instead just kicks the can further down the road, so the chances of A) happening are slim to none and slim just walked out the door. Imagine the mass of baby-boomers rolling their walkers up to Capitol Hill after beating their canes into clubs the minute some unfortunate congressional rube dared to suggest a cut in benefits.

Surely B) will be tried, but an 81% tax increase would result in some very unpleasant blow back from anybody still left in this country who produces anything of value. Since Congress has already allowed our monetary base to double from $900bil to $2 tril since last October, C) seems the likely choice. I reckon it won't be long before investors in US government debt begin to demand a risk premium. There's already anecdotal evidence that recent treasury auctions have not gone as smoothly as planned. At that point, "backed by the full faith and credit of the United States" will have about as much meaning as "the check's in the mail."

There are ways to combat hyperinflation, and I may be hyperventilating with hyperbole, but since our government has a proven track record of taking the easiest route possible, what's to stop them from doing it yet again?

Ask me no questions, I'll tell you no lies

2009-05-14T09:46:00.000-07:00

Greenmail: Money paid by a company (or allied company or individual) to acquire its own shares of stock from a shareholder who is threatening to take control of, or unwanted influence over, the company. The term is a neologism combining the terms greenback and blackmail, invented by journalists and commentators who saw the practices of corporate raiders as a form of blackmail. The target company is financially held hostage, and is legally forced to pay the greenmailer to go away.

Jonathon Weil makes some interesting observations about a recent unsolicited payment from Goldman Sachs to the Commonwealth of Massachusetts:

Goldman Sachs Pays Greenmail to make Snoops Go Away

May 14 (Bloomberg) -- Thanks to the commonwealth of Massachusetts, crusading attorneys general throughout the land now have a road map for extracting multimillion-dollar checks from Wall Street banks such as Goldman Sachs Group Inc.: Don’t accuse them of anything at all.

The big news from Goldman and Massachusetts Attorney General Martha Coakley this week was a $60 million settlement, under which the investment bank resolved her office’s investigation into its packaging of mortgage securities backed by subprime home loans. Per the usual custom in such accords, Goldman didn’t admit any wrongdoing.

The odd part is that Coakley’s office didn’t accuse Goldman of any wrongdoing, either. It filed no lawsuit. And it made no allegations that Goldman had violated any statutes or rules.

Why did Goldman pay if Coakley’s investigators couldn’t identify any infractions to allege? That’s a mystery. The only statement I could squeeze out of Goldman was a one-liner from a P.R. man, Michael DuVally. “Goldman Sachs is pleased to have resolved this matter,” he said. I’ll bet it is.

Odd behavior from an investment bank--sorry, holding company-- not exactly known for spending money frivolously.

When I first read through the settlement agreement, which contained no findings of fact, I couldn’t help but wonder if this might be one of those instances where a prospective plaintiff agrees to take a payoff in exchange for keeping silent about any damaging information it knows.

You Have to Wonder

Coakley said it was a fair question. She assured me, though, that this wasn’t the case. “There was no smoking gun here,” Coakley said. She said Goldman’s $60 million offer was everything her office could have hoped for, especially given its limited budget and jurisdiction over the bank’s activities. Even if the state had filed claims against Goldman, “we would not be able to achieve a better result,” Coakley said.

That may be true. It’s also conceivable that Goldman had no legal liability, and decided to pay the equivalent of a parking ticket just so it could get the investigation over with and stop racking up bills for outside lawyers.

Yet there’s the inescapable feeling that we have no idea what really happened here. Those 714 borrowers may be getting compensation. What much of the public is looking for, though, are answers about how some of the nation’s most powerful Wall Street banks helped drive us into our present economic mess.

We didn’t get any this time. Perhaps that’s one reason Goldman is so pleased with this investigation’s resolution.

Trickle up poverty

2009-05-14T09:36:00.000-07:00

Ed Yardeni once again nails it:

The politicians in Washington, DC have an advantage over many of us: They don’t work for a living. So they have plenty of free time to figure out ways to take money away from those of us who do. Working stiffs like us don’t have much time to stop them. We need a national Tea Party to check and balance the Kleptocrat Party running amuck on both sides of the aisle of our nation’s capitol. On April 15, there were tea parties in several cities around the nation to protest ballooning federal deficits and rising taxes. Most of the demonstrations were held during lunch time when people could get away for an hour from work!

The authors of our Constitution intended that it would protect the liberties of the individual and limit the power of the government. They intentionally designed a political system of checks and balances so that it would more often than not result in gridlock. Both the Democrats and the Republicans, and all the special interest groups that support them, have been chipping away at this system for decades. Rather than fight one another to a draw, they’ve come up with lots of compromises, and have compromised the checks and balances system. They couldn’t have done so if their spending were constrained by a balanced budget amendment. Nevertheless, until this year, there was some sense of fiscal limits, if not discipline left in Washington. This is no longer the case.

The current Administration has proposed, and Congress is likely to enact, a dramatic expansion of social welfare spending over the next 10 years. At the same time, more and more Americans are getting excused from paying any taxes if their incomes are low enough. Many may effectively benefit from a negative income tax. That leaves fewer and fewer Americans to pick up the government’s tab. These remaining taxpayers may be relatively well off, but there aren’t enough of them to pay the government’s bills. So the federal government is scrambling to find new taxes, though such taxes won’t come close to filling the gap between federal spending and revenues. Let’s review some recent developments focusing on the government’s trivial pursuit of additional nickel-and-dime revenues:

(1) The Office of Management and Budget now estimates that the deficit will be $1.84tn this fiscal year, a 5% increase over the Administration's estimate released in February.

(2) Over the next 10 years, the federal deficit is projected to total nearly $10tn. The Administration proposes to cut taxes by $736bn for middle-income families and $99bn for small businesses during the same period.

(3) Over the next 10 years, the Administration hopes to raise $210bn by closing tax loopholes for multinational corporations. This is likely to put US corporations at a competitive disadvantage since most other countries don't require their companies to pay taxes on foreign earnings.

(4) Over the next 10 years, $58bn in additional tax revenue will come from changing the way assets in estates are valued ($24.2bn), from modifying rules for some life insurance company products and contracts ($12.8bn), and from changing the way income is treated for some dealers of equity options and commodities ($2.6bn).

(5) Treasury officials also recently outlined plans to eliminate $36bn in tax breaks for oil companies for activities such as exploration and drilling and to reinstate excise taxes used to help clean up federal Superfund environmental sites. The excise taxes expired in 1996 and would generate about $16.7bn over 10 years.

(6) On April 20, President Obama convened his Cabinet for the first time, and ordered its members to identify a combined $100mn in budget cuts over the next 90 days. That’s millions, not billions.

The long-term problem is that the federal government continues to expand nondiscretionary spending on more social welfare programs. These are open-ended commitments that are politically difficult to cut. They also create an unhealthy codependence as more Americans depend on the government, and politicians expect that the beneficiaries of government spending will keep them in office. In personal income, government social benefits were equivalent to 31% of wages and salaries in March. That’s a record high. During the 1960s, it was around 10%. By the 1980s, it was around 20%. The gap between these benefits and employee and employer payroll taxes to pay for them widened from nearly zero at the start of 2001 to a record $514.5bn in March of this year.

This morning, Bloomberg reports that the Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast. Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago. The current Administration claims that their reforms of the health care industry will lower growth in health-care costs even as they push to make sure that all Americans have access to “affordable” health care. In a statement yesterday, Treasury Secretary Tim Geithner promised that after pulling off this miracle, the President will “build a bipartisan consensus to ensure the long-term solvency of Social Security.” David Axelrod, a senior White House adviser, said that Obama is “committed to a serious effort to confront that issue.” Good luck with that. Then again, it took a conservative president to recognize China. Maybe a liberal one can finally reform Social Security by imposing means testing. That should be popular with all the populists that support this Administration’s social welfare policies.

(H/T Yardeni Research)

It is settled: the JROTC stays

2009-05-13T06:45:00.000-07:00

S.F. school board to vote on JROTC

A three-year battle over whether Junior Reserve Officers' Training Corps belongs in San Francisco schools ended Tuesday night with a 4-3 vote by the school board to restore the military leadership program weeks before its scheduled expiration.

More than 200 supporters and opponents of the program crowded into the school district headquarters to make their final pleas to the board. And their arguments were as emotionally charged as they were when the fight began in 2006.

"To some of you, this is a political issue," Balboa High School sophomore Malik Douglas told the board. "But to me it's a personal issue. Represent our opinions instead of yours."

Board members Rachel Norton, Hydra Mendoza, Norman Yee and Jill Wynns voted to keep the program. Jane Kim, Kim-Shree Maufas and Sandra Fewer voted against the program.

The board's vote reverses a controversial 2006 vote to get rid of JROTC in the city high schools. The armed forces, the board then argued, should not be in public schools, and the military's discriminatory stance on gays made it unacceptable.

The 90-year-old program was scheduled to phase out in less than a month.

I started following this story back in 2006 because I though it was pretty outrageous even by San Francisco standards. I went so far as to get into an argument via email with one of the original board members who was spearheading the effort to rid the SFUSD of any reminder of the hated military. Somewhat surprisingly, Dr. Dan Kelly did not win re-election to the board. That pleased me.

The story was again in the news at the end of 2007 when, not surprisingly, the school board failed to come up with a promised alternative to the JROTC.

Last year just before the November elections I was walking with my young daughter in front of my neighborhood grocery store and was accosted by an anti-JROTC woman after I stated I didn't agree with her and handed her back the flier she gave me. In true San Francisco fashion, there was a non-binding city measure on the ballot that if it had passed would have demonstrated to the world that the citizens of SF think war is icky so the JROTC should be banned from the school system. Thankfully, even the citizens of a city who overwhelmingly voted for Obama had enough sense to realize that the JROTC is an option that should not be taken away from our city's youth by thankless activist pacifists.

Since this once great state is crumbling under the weight of progressivist tinkering I'll take this story as a ray of sunshine on a stormy day.

Or maybe I'll just call it whip cream on dog shit.

The noose tightens

2009-04-27T06:21:00.000-07:00

“You never want a serious crisis to go to waste — and what I mean by that is an opportunity to do things that you didn’t think you could do before.”--Rahm Emanuel

Today, governments around the world are taking power back from free markets, particularly financial markets, under the pretext that they have failed. In fact, the markets were hobbled by a combination of anti-market regulations and the lack of enforcement of regulations that leveled the competitive playing fields. In the US, the power grab is spreading to banking, autos, energy, and health care. Here is a brief chronology of recent developments around the world in this epic power struggle:

(1) It started with TARP, which was proposed by Hank Paulson and Ben Bernanke and enacted by Congress on October 3, 2008. This politicized the financial rescue program in the US. It gave the government the power to dictate how recipients must manage their companies. On October 13, Paulson forced nine major banks to take some of the TARP money even though most of them didn’t need it or want it.

(2) In December, Ken Lewis, the CEO of Bank of America, had buyer’s remorse after having agreed to purchase Merrill Lynch in mid-September. Mr. Lewis contends that Paulson and Bernanke also advised him not to share his second thoughts with BofA shareholders who were about to approve the deal.

(3) On February 26, the Obama administration unveiled its budget, which includes significant increases in spending on social welfare, especially health care. The resulting deficits are projected to total more than $9tn over the next 10 years.

(4) On March 30, 2009, the White House fired Rick Wagoner, the head of General Motors. The Obama administration is orchestrating the restructuring of the auto industry. President Obama declared that the US government stands behind GM's warranties.

(5) The government is pushing legislation aimed at bringing down credit card fees.

(6) The Obama administration is pushing to have student loans made by the government rather than private lenders.

(7) Democrats in Congress are moving to make the Obama administration’s health care proposals filibuster proof by pushing the proposed legislation as part of the budget reconciliation process.

(8) In Russia, the government is in effect nationalizing the industries that were once controlled by the oligarchs, who borrowed too much and must now be rescued by their comrades in the Kremlin.

(9) In China, the government is pumping large sums of money into infrastructure projects aimed at stimulating economic growth to offset the shuttering of thousands of manufacturers as a result of the plunge in exports.

(10) Governments are raising taxes, especially on high income earners. The Bush tax cuts will be allowed to expire at the end of 2010. States from New York to California are raising income tax rates and user fees. Prime Minister Gordon Brown’s government laid out plans on Wednesday for more than $1tn in deficit spending over the next five years, a scale of public debt that critics say is without precedent in Britain. In addition, his government now plans to hike the top marginal income tax rate from 40% to 50%, rather than to 45%.

(h/t Ed Yardeni Research)

The Black Hole of fiscal responsibility

2009-04-10T05:38:00.000-07:00

I'll withhold the niceties: anybody that thinks government is a good custodian of your current and future tax dollars is a moron.

Congress needs Google to find out where stimulus money went

On February 14, with the passage of the American Recovery and Reinvestment Act, Congress shoveled $787 billion of stimulus money out the door. Now they're using Google to find out where it went.
During the stimulus debate, the bill's supporters stressed that it included strong oversight safeguards. But audits and reports are months, if not years, away. Oversight will be after the fact; right now, with the money actually beginning to flow, members of Congress have little or no idea where it is going. What, for example, is the Department of Housing and Urban Development doing with the $1.5 billion Congress approved for a new program called the Homeless Prevention Fund? Lawmakers don't know.

Read the whole thing.

"No man's life, liberty or property are safe while the legislature is in session."--Judge Gideon Tucker 1866

Congress and NASCAR

2009-03-26T06:53:00.000-07:00

Here's a great idea. Every member of Congress should wear a one piece uniform emblazoned with the icons of their corporate sponsors:

Some people wear their hearts on their sleeve. Members of Congress should wear their sponsors on their chest.
This isn’t an original idea. About a month ago, a friend forwarded me a post that was making its way around the blogosphere at the speed of light:

“Members of Congress should be compelled to wear uniforms like Nascar drivers, so we could identify their corporate sponsors.”

Great idea. Just imagine what that would look like.

Senator Chris Dodd, Democrat of Connecticut and ethically challenged head honcho at the Senate Banking Committee, files into a congressional hearing room, wields his gavel and calls the committee to order. The dress code is business casual: collared shirts, no jacket required.

Dodd is sporting a pink Lacoste shirt, with his “endorsements” emblazoned across his chest in large, black letters (the corporate logos go on the back):
  Citigroup Inc.                $428,294
United Technologies           $380,550
Bear Stearns                  $347,350
American International Group  $281,038
Deloitte & Touche             $270,220
And that’s just a list of Dodd’Top 5 lifetime contributors, according to the Center for Responsive Politics.

The list goes on: Goldman Sachs, Morgan Stanley, JPMorgan Chase, Merrill Lynch and Lehman Brothers.

From a company's standpoint, investing in a politician delivers a far higher return on investment than any other investment vehicle out there:

The companies that have been awarded taxpayers' money from Congress's bailout bill spent $77 million on lobbying and $37 million on federal campaign contributions, The Center for Responsive Politics finds. The return on investment: 258,449%.

Where does a regular guy like me find a ROI like that?

The New Republic has an article today that does a good job of naming a few of the more egregious hypocrites alongside their doublespeak who are currently serving in the 111th Congress.

There's that saying...

2009-03-25T09:26:00.000-07:00

Oh you know the one, something about pictures and what they're worth in words...

Budget deficit: past, present and future (source: Wapo)

This one has words and pictures. That doubles its value!

It wouldn't be a day...

2009-03-19T09:47:00.000-07:00

...without tax evaders in the news:

California Congressman Calls Maryland Home to Gain Tax Credit

Representative Pete Stark, the second-ranking Democrat on the Ways and Means panel, in 2007 and 2008 saved a total of $3,853 in state and Anne Arundel County taxes on a Maryland waterfront home that he claims as his primary residence, according to Maryland tax disclosures.

Homeowners in Maryland qualify for the tax credit for residences they use “for the legal purposes of voting, obtaining a driver’s license, and filing income tax returns,” according to the Maryland Assessment Procedures Manual.

Stark, 77, confirmed in a telephone interview last week that he and his wife, Deborah, are registered to vote in California’s 13th congressional district using the address of her parents in San Lorenzo, about 25 miles southeast of San Francisco. Stark also said both he and his wife have California driver’s licenses.

I have an idea. Why doesn't Pete Stark go back to Maryland and stay there, and quit pretending to speak for the people of California? He can take that other carpetbagger from Maryland, Nancy Pelosi, with him.

Lawmaker: TARP Companies Owe Back Taxes

Of the 23 top recipients of government capital through the Troubled Asset Relief Program, 13 owe unpaid federal taxes, a U.S. House oversight committee reported Thursday.

House Ways and Means Subcommittee on Oversight Chairman John Lewis (D., Ga.) said the companies owe a combined more than $220 million in unpaid federal taxes. Of those companies, two owe more than $100 million each.

Rep. Lewis accused the Treasury of engaging in poor documentation practices by failing to ask companies to prove they didn't owe federal taxes, a requirement for government aid.

It seems the House Ways and Means Committee has its hands full these days. Not only can at least one member not live up to the standards they are supposed to apply to others, they can't even do the job they're paid to do. Sounds like they deserve to be a part of the AIG bonus pool.

In other news, Intrade is currently predicting a >20% chance that Tim Geithner will leave his post at the Treasury Department before June, and a 33% chance he'll be out before the year ends.

The Dodd Amendment

2009-03-18T09:04:00.000-07:00

I do believe that the Obama administration and his congressional enablers finally have a plan in place to ~~remove the last vestiges of faith in the federal government any of us may still harbor~~ exempt their campaign contributors from having to take unsavory responsibility for their bad business decisions:

While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. The provision, now called “the Dodd Amendment” by the Obama Administration provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” -- which exempts the very AIG bonuses Dodd and others are now seeking to tax.

He was for the bonuses before he was against them. John Kerry would appreciate that. Also, it's pretty rich that they want to "tax" these bonuses. As the tax laws already stand the federal government will get about 35% of the gross amount. And depending on what state the recipients live in, they'll be lucky to see 55% of the gross amount after the local governments are through.

Dodd’s original amendment did not include that exemption, and the Connecticut Senator denied inserting the provision.

"Idunnoitwasn'tme!" Classic 3rd grade denial.

“I can't point a finger at someone who was responsible for putting those dates in,” Dodd told FOX. “I can tell you this much, when my language left the senate, it did not include it. When it came back, it did.”

Of course he can't point a finger. If he did there would be three pointing back at at him. I bet even Senator Dodd can understand that 3>1.

This explains a lot (click to enlarge):

The WSJ has an editorial today that gets to the heart of the matter:

The Washington crowd wants to focus on bonuses because it aims public anger on private actors, not the political class. But our politicians and regulators should direct some of their anger back on themselves -- for kicking off AIG's demise by ousting Mr. Greenberg, for failing to supervise its bets, and then for blowing a mountain of taxpayer cash on their AIG nationalization.

The best insurance policy AIG ever invested in was political donations to the left side of the aisle.

UPDATE 3/19/09: Dodd admits Role in AIG Controversy

Why does this guy still have a job?

AIG's earmarks

2009-03-17T05:21:00.000-07:00

The latest outrage washing across the political landscape is over AIG's decision to honor a commitment to pay out $165 million in bonuses to certain employees. Obama has said that he will "pursue every single legal avenue to block" the payout.

At issue are retention bonuses for employees of AIG's financial-products division, whose credit default swaps brought AIG to the brink of collapse. The government controls AIG through an 80% equity stake and as a major lender and doesn't have legal authority to freeze payments on its own. The U.S. has committed $173.3 billion to AIG, including $70 billion from Treasury's rescue fund.

I see no difference between this and the earmark-laden bills that regularly get passed through Congress with nary a peep. Now that AIG is a de facto government owned entity, the bonus payments--just like earmarks--are a form of patronage. We already know how Obama feels about the AIG earmarks, and he has repeatedly said he is against all earmarks, though it seems that some earmarks are worse than others. Namely the ones that originate in Congress are OK, but the ones that originate in the private sector are not. Seems he's just blowing hot air of out his yapper.

Lest you think that the banks who have taken TARP money are going to sit still and let the government dictate a new, equal and just pay structure, think again. Reminds me of a beggar with a stick.

For the record, I am against all earmarks and all bailouts. Does anybody think that AIG would be paying bonuses if they'd been allowed to go bankrupt?

The wisdom of Ogden Nash

2009-03-11T08:52:00.000-07:00

In honor of our new socialist overlords, I though I would share a poem that was written during another era that has an increasing number of parallels to today; an era known as the Great Depression.

One From One Leaves Two

Higgledy piggledy, my black hen,
She lays eggs for gentlemen.
Gentlemen come every day
To count what my black hen doth lay.
If perchance she lays too many,
They fine my hen a pretty penny;
If perchance she fails to lay,
The gentlemen a bonus pay.

Mumbledy pumbledy, my red cow,
She’s cooperating now.
At first she didn’t understand
That milk production must be planned;
She didn’t understand at first
She either had to plan or burst,
But now the government reports
She’s giving pints instead of quarts.

Fiddle de dee, my next-door neighbors,
They are giggling at their labors.
First they plant the tiny seed,
Then they water, then they weed,
Then they hoe and prune and lop,
They they raise a record crop,
Then they laugh their sides asunder,
And plow the whole caboodle under.

Abracadabra, thus we learn
The more you create, the less you earn.
The less you earn, the more you’re given,
The less you lead, the more you’re driven,
The more destroyed, the more they feed,
The more you pay, the more they need,
The more you earn, the less you keep,
And now I lay me down to sleep.
I pray the Lord my soul to take
If the tax-collector hasn’t got it before I wake.

Ogden Nash

"History doesn't repeat itself, but it does rhyme."--Mark Twain

The mortgage plan is revealed

2009-03-04T11:56:00.000-08:00

U.S. Sets Rules for Mortgage Modifications, 2% Mortgages

March 4 (Bloomberg) -- The Obama administration set loan modification guidelines for its $75 billion homeowner rescue plan, agreeing to pay lenders for altering troubled mortgages while reducing borrowers’ interest rates to as low as 2 percent.

2 percent? sign me up! Sadly, I do not think I'll qualify, as I am current in my mortgage payments and have chosen to not live beyond my means. However I am troubled by all of this government intervention in the mortgage market. Though I don't think that's the kind of "troubled mortgage" candidate they're looking for.

The voluntary initiative, announced on Feb. 18, would require applicants to fully document their income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” according to documents released by the U.S. Treasury in Washington today. The second, larger part of the plan relies on government-run Fannie Mae and Freddie Mac to refinance loans.

Here's a really stupid, naive question: how does one document the ultimate financial hardship--losing one's job--by providing pay stubs and tax returns?

I hope mentioning the fact that Fannie and Freddie will be relied upon to refinance these loans is not meant to inspire confidence.

“This is not going to save every person’s home,” presidential Press Secretary Robert Gibbs said during a briefing. The plan offers help “for those who have played by the rules.”

Mr Gibbs, I played by the rules. Can you please be more specific?

President Barack Obama’s initial proposal, the biggest federal foray into real estate since the Great Depression, ignited criticism from Republican lawmakers that the government would end up subsidizing homeowners who are financially capable of surviving the economic slump on their own.

It would be encouraging to see that the GOP has lately re-discovered that one of their founding principles used to be opposition to Big Government if it weren't so unabashedly pathetic.

Lenders likely won’t be able to offer the loan modifications for a few weeks as they update their technology to process the applications, a mortgage-industry official said on a conference call today with Obama administration officials.

Not surprising since they've laid off virtually all of their employees.

Obama is seeking to curb a jump in foreclosures that, along with a drop in consumer credit, is lowering property values, dragging down the economy and keeping prospective homebuyers away. The housing market lost $3.3 trillion in value last year, and almost one in six owners with mortgages owed more than their homes were worth, according to a report last month by Zillow.com.

“This plan will help make home ownership more affordable for 9 million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans,” Treasury Secretary Timothy Geithner said in a statement.

Please somebody--anybody--show me where it is written that housing prices are only allowed to go up. I'm sure it's written right under the rule that states certain banks and insurance companies are "too big to fail".

For a loan modification, lenders would have to reduce the mortgage payments to no more than 38 percent of the borrower’s income. Then, the Treasury would share the cost for lenders to cut that debt-to-income ratio to 31 percent, the government said.

The modifications would allow a lender to drop the interest rate to as little as 2 percent to achieve the ratio, and if necessary, extend the term or amortization of the loan to as long as 40 years. If more effort is needed, lenders can forbear the principal and in some cases forgive, or reduce, portions of the principal altogether, the documents show.

Sounds like an excellent incentive to work as little as possible.

The proposal, Garrett said, may violate requirements that homeowners put up at least 20 percent of the appraised value of a home or carry mortgage insurance.

“Due to falling home values, many of the potential applicants for Treasury’s foreclosure mitigation refinancing plan will now find themselves” below that level, Garrett said. “There is no specific language under this title that provides the regulator of these two entities any discretion for when or how to apply this requirement.”

The problem with making stuff up as you go is that you often run afoul of the rule of law--not that that matters too much to our current administration. They're acting "for our own good" so there's nothing to worry about. Paging unintended consequences...

At least some vacant houses in Florida are being put to good use:

Kids Party in Foreclosed Homes, Leave Wake of Vandalism

As one astute commenter at the bottom of the article put it, ""These kids DO own these houses and will be paying for them for generations...!"

Geithner to fight himself; Obama channels Jim Cramer

2009-03-03T12:11:00.001-08:00

Everytime I see Treasury Sec Geithner's mug on TV, this is how I envision him:

Geithner: Obama to fight international tax dodgers

WASHINGTON (AP) - President Barack Obama's Treasury secretary says the administration will unveil a series of rules and measures in the coming months to limit the ability of international companies to avoid U.S. taxes.
Treasury Secretary Timothy Geithner told the House Ways and Means Committee on Tuesday that Obama will propose legislation to limit U.S. companies' ability to shelter foreign earnings from taxation in the U.S. He also said the administration will try to limit wealthy Americans' ability to use tax havens to avoid taxation.
He did not immediately provide details.

Separately, Obama had this to say about the stock market:

"What you're now seeing is profit and earnings ratios are starting to get to the point where buying stocks is a potentially good deal"

I'm no CFA, but even I know there is no such thing as a profit and earnings ratio, let alone multiple "profit and earnings ratios" . I know that the very useful price to earnings (P/E) ratio exists, but a profit to earnings ratio? No such thing. Perhaps it was just a gaffe, and he really meant P/E ratio. I would give him the benefit of the doubt if I thought that he actually knew anything about finance or wealth creation. But as a self described community organizer and a lawyer to boot, I will assume he is as well-versed in finance as the rest of his cohort. By that I mean he only knows how to take wealth from those who create it and give it to those who do not.

By the way, WTF is the President of the United States of America doing making a market timimg call in the first place?

U.S. Bailout, Stimulus Pledges Total $11.6 Trillion

2009-02-24T10:42:00.000-08:00

All information culled from Bloomberg:

The following table details how the U.S. government has pledged more than $11.6 trillion on behalf of American taxpayers over the past 19 months, according to data compiled by Bloomberg.

Changes from the previous table, published Feb. 9, include a $787 billion economic stimulus package. The Federal Reserve has new lending commitments totaling $1.8 trillion. It expanded the Term Asset-Backed Lending Facility, or TALF, by $800 billion to $1 trillion and announced a $1 trillion Public-Private Investment Fund to buy troubled assets from banks.

The U.S. Treasury also added $200 billion to its support commitment for Fannie Mae and Freddie Mac, the country’s two largest mortgage-finance companies.

--- Amounts (Billions)---

Limit Current

================================= =============== ===========

Total $11,623.63 $3,800.18

--------------------------------- --------------- -----------

Federal Reserve Total $7,565.63 $1,478.88

Primary Credit Discount $110.74 $65.14

Secondary Credit $0.19 $0.00

Primary dealer and others $147.00 $25.27

ABCP Liquidity $152.11 $12.72

AIG Credit $60.00 $37.36

Net Portfolio CP Funding $1,800.00 $248.67

Maiden Lane (Bear Stearns) $29.50 $28.82

Maiden Lane II (AIG) $22.50 $18.82

Maiden Lane III (AIG) $30.00 $24.34

Term Securities Lending $250.00 $115.28

Term Auction Facility $900.00 $447.56

Securities lending overnight $10.00 $5.59

Public-Private Investment Fund $1,000.00 $0.00

Term Asset-Backed Loan Facility $1,000.00 $0.00

Currency Swaps/Other Assets $606.00 $417.86

MMIFF $540.00 $0.00

GSE Debt Purchases $600.00 $33.58

Citigroup Bailout Fed Portion $220.40 $0.00

Bank of America Bailout $87.20 $0.00

--------------------------------- --------------- -----------

FDIC Total $1,551.50 $400.30

FDIC Liquidity Guarantees $1,400.00 $261.30

GE $139.00 $139.00

Citigroup Bailout FDIC $10.00 $0.00

Bank of America Bailout FDIC $2.50 $0.00

--------------------------------- --------------- -----------

Treasury Total $2,206.50 $1,621.00

TARP $700.00 $387.00

Tax Break for Banks $29.00 $29.00

Stimulus Package $168.00 $168.00

Stimulus II $787.00 $787.00

Treasury Exchange Stabilization $50.00 $50.00

Student Loan Purchases $60.00 $0.00

Citigroup Bailout $5.00 $0.00

Bank of America Bailout $7.50 $0.00

Support for Fannie/Freddie $400.00 $200.00

--------------------------------- --------------- -----------

HUD Total $300.00 $300.00

Hope for Homeowners FHA $300.00 $300.00

No comment is neccesary.

MBA, CFA, BFD

2009-02-17T08:54:00.000-08:00

"MBA, CFA, BFD."

I once had a boss that used that phrase anytime some greenhorn equity salesman would try to impress him with their spit-shined education credentials. I always got a kick out of that, especially since he was a CFA chartholder himself, and several of my colleagues had either an MBA, a CFA or both. He was a cynical man with a chip on his shoulder who was also fond of referring to this elite crowd as "the lucky sperm club." His roots were quite different than what he assumed were the roots of those he denigrated. He worked his way through a state school while supporting a young wife and special needs daughter as a tire salesman before launching a career in investment bank equity research which lead to his eventual early retirement as a rich, successful portfolio manager. I think it was his snide way of saying what Mark Twain once said: "I never let my schooling get in the way of my education." He had an excellent nose for bovine excrement, and was particularly suspicious of the brand that Ivy league MBA-types were fond of peddling.

There's an opinion column on Bloomberg today titled, "Harvard Narcissists With MBAs Killed Wall Street."

Twenty or 30 years ago, it was common for the best and the brightest to be doctors or engineers. By the 2000s, they wanted to be investment bankers.
When Wall Street was run by people randomly selected from the population, it was able to survive everything. After the best and brightest took over, it died the first time real-estate prices dropped 20 percent.
If you walked into any major Wall Street firm a year ago and randomly selected an employee, chances are that person would either be from an Ivy League school like Harvard University, or have an MBA, or both.

While there may be a handful of multi-talented people working on Wall St. for reasons other than the money they earn, the vast majority are attracted to Wall St. for one reason: the pay scale. The rationale being that if one is going to be a working stiff, one may as well be a working stiff at the top of the pay scale. The problem from the employer's point of view is that the pay scale becomes a self-reinforcing juggernaut rather quickly. The best and brightest are attracted to Wall St. for the money, so Wall St. firms get into a bidding war to attract the best and brightest. Elite universities then use that salary data to persuade the next crop of the best and brightest to attend their program, which further concentrates the size of the pool in which the best and brightest swim. Pretty soon all you have to choose from is the most elite pool that exists--the Ivy league and a handful of other institutions of the same caliber. The dangers of the resulting groupthink are rarely discussed, though today they are as apparent as a Skid Row hooker in a nunnery, and need no further elaboration.

What do you get from an MBA? One recent study found that MBAs acquire an enormous amount of self-confidence during their graduate education. They learn to believe that they are the best and the brightest.

This narcissism has a real career impact. Psychologists at Ohio State University studied the behavior of 153 MBA students, who were put in groups of four and asked to orchestrate a large financial transaction on behalf of an imaginary company. The psychologists observed that the students who had the strongest narcissistic traits were most likely to emerge as leaders.

According to Amy Brunell, the lead author, the results of the study had large implications for real-world settings, because “narcissistic leaders tend to have volatile and risky decision- making performance and can be ineffective and potentially destructive leaders.”

There is no shortage of narcissism on display in the upper echelons of Wall St. firms. Less overt but even more destructive is the narcissism displayed in the upper echelons of government officialdom. I say more destructive because government seldom makes any pretensions of fiscal constraint. Why should they? Afterall, it is not their own money they are borrowing and spending. Though it must be noted that TARP 1.0 has done a pretty thorough job of making private sector banking just as unaccountable as the public sector.

All of this may sound familiar to anybody who has read Herman Hesse's 1946 Nobel prize winning novel, The Glass Bead Game. In it, a member of the futuristic ivory tower elite--long having been insulated from the realities of life--decides to cast his privileged status aside for a life of rubbing elbows with the commoners. Tragedy befalls the protagonist when he drowns during what would be considered a routine swim across a lake by anybody who had not grown up insulated in the ivory tower. The moral of the story is that no matter how smart you think you are, nobody is above the laws of nature.

Another word that comes to mind when trying to describe the predicament Wall St. finds itself in is incest. When you choose the bulk of your work force from a single gene pool--no matter how gifted that gene pool may seem to be--the weakest traits inevitably surface and manifest themselves in such a way that makes the destruction of the host a real possibility. Ask the Ptolemaic Dynasty how incest worked out for them.

It is done

2009-02-14T06:07:00.000-08:00

It looks like both houses of Congress have agreed to the 1,000+ page, $787,000,000,000 "stimulus" package that is going to save our country from the abyss.

Before you accuse our elected officials of vigorously scratching the itch to spend our children's money, remember, it could have been worse:

The nonpartisan Congressional Budget Office said the stimulus package will cost $787 billion, rather than $789 billion lawmakers estimated earlier this week.

That is what passes as fiscal responsibility on Capitol Hill.

And this, from San Francisco's favorite carpetbagging daughter:

“The jobs the American people care about most -- their own -- will be dramatically safer the day that President Obama signs this plan into law,” said House Speaker Nancy Pelosi, a California Democrat.

I know I feel much safer about my job after reading that. Please, somebody find me one sound-byte that falls out of her yapper that isn't plum-crazy talk.

This is interesting:

Lawmakers dropped provisions barring funds from going to museums, arts centers and theaters. A ban on money to casinos, golf courses, zoos and swimming pools was retained.

I like museums, arts centers and theaters as much as the next guy, which is why when I use them, I pay the price of admission which I assume is structured to cover the costs of doing business. Why they should get free money from the government; while casinos, golf courses, zoos and swimming pools(??) are all forced to survive in the capitalist--sorry--socialist wilderness on their own is beyond me. Well if this results in a reduction of the $25 price of admission to the shiny new California Academy of Sciences I suppose I will be forced to reconsider my stance on the entire "stimulus" bill.

Lawmakers deleted provisions requiring businesses receiving stimulus funding to use E-Verify, a government program used to ensure workers are in the country legally.

By all means, we must not upset the largest potential block of new democratic voters, at least not until after the 2010 census. If Obama successfully wrestles control of the census count away from the Dept. of Commerce and into the White House--which is illegal if the US Constitution is your guiding principle anyhow--illegal aliens will be a permanent fixture of the democratic machine.

Most senators had left the chamber’s floor hours before the final tally was announced. The vote was held open for five hours until Senator Sherrod Brown, an Ohio Democrat, returned from his home state to cast the deciding vote for the bill. Brown had been in Ohio following the death of his mother earlier this week.

Rest In Peace Mrs. Brown; government has yet to invent a way to tax you in the afterlife. And if you thought curious, inquiring congressional minds may want to stick around and read what they just signed , you'd be wrong:

“It is over a thousand pages,” said Representative Tom Price, a Georgia Republican. “It is physically impossible for any member to have read this bill.”

I've been reading the abridged version of the History of the Decline and Fall of the Roman Empire for almost 3 years now. It comes in a little under 1,000 pages. It is taking me a long time to read because it is a lot to digest, and nobody is paying me to read it. Maybe I should just thumb through it and tell people I read it instead. At least I wouldn't let contemplating any of the details hold me back from taking a first-class trip to Europe.

On a more positive note, what we need are more economists like Michelle talking no-nonsense economics with Obama supporters, capturing it on video and broadcasting it on YouTube.

(h/t texas rainmaker via instapundit for the image at the top of the page. Probably photoshopped or a prank, but it does capture the spirit of the Obama rapture rather well.)

The United States of Insolvency

2009-02-09T07:58:00.000-08:00

This chart caught my eye over the weekend (from the Economist):

The biggest force behind the bond-market shock is the onslaught of new issuance as the government seeks to finance the gaping budget deficit, Fed liquidity programmes, mortgage purchases and bank bail-outs. Yields moved still higher this week partly on the Treasury’s announcement that it would borrow a whopping $493 billion this quarter. Wrightson ICAP, a research firm, predicts the Treasury will issue $1.8 trillion this year, which combined with $1.5 trillion last year, would exceed all the net borrowing of the prior 27 years combined.

Where are all the hyperventilating voices that expressed outrage when Dick Cheney said, "...deficits don't matter" almost 5 years ago?

The "state" of California

2009-02-09T05:47:00.000-08:00

Speaking as a third generation Californian, my family has lived through many of the ups and downs our state has experienced over the last 100 years. One of the things that has always impressed me about this great state is its uncanny ability to reinvent itself in the face of adversity. Lately though, I have become worried about the future of this state. This goes against my nature, as I am generally an optimist and not given to alarmist reactions to events.

Though, when our state's elected officials cannot do the job we pay them to do by reaching an agreement on how to close a $46bil budget gap while our general obligation (GO) debt rating gets cut to "A"--giving us the lowest credit rating of any state and making borrowing even more expensive; this worries me. Sacramento, please end your symbiotic, incestuous relationship with your public union enablers immediately.

When in the midst of this, the "prison czar" has proposed $8 billion of wildly excessive prison health care construction (with the additional cost of $2bil a year for maintenance) complete with fitness centers for "wellness promotion," music and art therapy, contemporary landscaping and maybe even a yoga room for prisoners; this worries me. Hey guys, don't forget to grab a condom on your way back from arts and music so you can engage in a little state-sanctioned sodomy while $300,000 a year guards look the other way.

When a public employee can retire at the age of 52 and collect 78% of the $112,000 salary he earned before stepping down and maintain full health care coverage for life while the rest of us working in the private sector watch our 401(k) retirement plans vanish like a puddle in the Mojave desert and fret over the astronomical cost of COBRA should we lose our jobs; this worries me.

When the recently sworn in city supervisor in my district makes his first order of business to investigate allegations of police department racial profiling of Latinos in what is a predominately Latino district; this worries me. Next he'll be investigating ice for its habit of being frozen.

I fear we're about to reach a tipping point. We simply cannot continue on this fiscally irresponsible path. I may be old fashioned, but I always thought the public sector was supposed to serve the private sector, not the other way around. What we now have is a shrinking private sector that is being choked to death by a self-entitled public sector.

The one thing I am absolutely certain of is that the golden egg-laying goose is in its death-throes. When the autopsy comes back, there will be nothing but state politician and public sector union fingerprints all over its neck.

The time warp is stuck on continuous play

2009-02-06T07:11:00.000-08:00

Trivia time! Guess the year of the following headline:

Fannie Mae to Loosen Rules for Home-Loan Refinancing

a) 1989
b) 1999
c) 2009

If you guessed "C" give yourself a prize!

From the article:

Feb. 5 (Bloomberg) -- Fannie Mae, the mortgage-finance company under government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing.

Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice yesterday to lenders posted on the Washington-based company’s Web site.
The changes apply to loans that the company owns or guarantees.

The company, which accounts for more than 40 percent of the $12 trillion in residential mortgage debt, is seeking to break a “logjam” in refinancing and allow more homeowners to take advantage of near-record low interest rates, according to Brian Faith, a Fannie Mae spokesman. The increased flexibility for consumers isn’t large enough to significantly harm mortgage- bond investors and mortgage insurers, analysts said.

Imagine if your house was burning down and when the fire department showed up, instead of turning on the water hoses they busted out the flame thrower instead.

For some strange reason, this scene from Groundhog Day keeps playing in my mind's eye.

Death and T...oh nevermind.

2009-02-05T13:25:00.000-08:00

It is pretty clear to me that the reason Democrats are such big fans of taxes is because they don't pay any taxes.

Leona Helmsley was right, when she allegedly said to one of her housekeepers, "We don't pay taxes. Only the little people pay taxes ..."

Though I wonder, what would happen if all of us little people simultaneously decided to stop paying taxes?

Trashed Prius

2009-01-26T08:14:00.000-08:00

You see the darnedest things when you come to work a couple hours late:

I took this photo just down the street from my office this morning. Apparently, somebody has it in for hybrids; or maybe it's just the Toyota Prius. The windshield and the four side windows are smashed, sideview mirrors pulverized, all four tires flat, random black spray paint all over it; at least they could have left us with some thoughtful graffiti instead.

Who's to blame? Supporters of Big Oil, livid at the impressive, profit-crimping gas mileage the Prius delivers? A marauding gang of Chinese youths celebrating New Year and simultaneously administering symbolic payback for the rape of Nanking on the nearest symbol of Japanese success? This is the edge of Chinatown after all. Maybe it was done by a gaggle of patchouli drenched eco-youths who are confused by their conflicting feelings about global warming on this much colder than normal morning? If that's the case, it will probably be chalked up as a hate crime.

No matter who is to blame, were it my car, I'd be pretty freakin' pissed off.

Government front running

2009-01-23T12:28:00.000-08:00

This is what happens when government front runs the private sector:

Bailouts Punish Investors in Bank Capital Notes
2009-01-23 12:13:34 .845 GMT

By John Glover
Jan. 23 (Bloomberg) -- Investors in bank capital securities
are being punished as the notes plunge in value on concern
government bailouts will make them effectively worthless.
Lenders use so-called Tier 1 notes to bolster regulatory
capita and cushion senior bondholders and depositors against
losses. The CHART OF THE DAY (above) shows the $93 billion market is
suffering the biggest slide on record, according to data from
Merrill Lynch & Co.’s Euro Sub-Debt Tier 1 Index.
Banks may be forced to stop paying interest on the
securities as a condition of getting billions of dollars of
taxpayer’s cash, according to Simon Adamson, an analyst at
CreditSights Inc. The price slump is hurting investors such as
U.S. insurer Aflac Inc., whose shares fell the most in more than
25 years yesterday as Morgan Stanley called the firm’s
investments in “a rapidly escalating concern.”
“Tier 1 investors are being punished,” London-based
Adamson said in an interview. “Now that governments are bailing
out banks or nationalizing them, the risk of interest deferral is
increasing.”
Tier 1 bonds, which combine elements of equity and debt,
typically have no set maturity and issuers can defer or pass
interest payments. Holders are paid after other debt investors in
the event of a bankruptcy.

If there's one thing the market absolutely hates, it is uncertainty. As a private investor, why would you consider investing in anything if there was the chance that government was going to either change the rules of the game on a whim or step in front of you in the queue to book a return on investment?

This is a perfect example of why excessive government intervention will effectively prolong our much anticipated economic recovery.

Seems we may be doomed to learn the lessons of the 1930's all over again.

The notion of too big to fail

2009-01-22T09:23:00.000-08:00

The following bubble chart compares the current market capitalization of our nation's biggest banks to what they were in the second quarter of 2007:

The chart is a little fuzzy, but the blue bubble represents Q2'07 and the green bubble represents Q1'09 YTD. The giant bubble with the tiny inset bubble that looks like the earth against the sun is Citigroup.

This link leads to a state-by-state breakdown of the allocation of TARP funds. Interestingly, those states that are politically known as "blue" are the reddest of red in this depiction.

Nouriel Roubini, a professor at NYU who has been getting a lot of press lately for correctly predicting the current banking crisis, thinks that losses may reach $3.6 trillion before we're through the woods:

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

I have been opposed to the TARP bailout since it was first proposed on the grounds that nobody is too big to fail. What we have is a perversion of capitalism, where fiscally irresponsible behavior is rewarded not with failure, but with a government handout. This is then presented as "proof" that capitalism does not work by those who fail to consider that what it really is is an example of crony capitalism. It takes two to tango, so as easy as it is to blame all of this mess on greedy bankers as many do, even the current darling of progressive economic circles, J M Keynes, realized that, "it is a mistake to believe that businessmen are more immoral than politicians" as he wrote in a letter to FDR in 1938. What we are now witnessing are the legislative fruits of millions of dollars in lobbying efforts and generous campaign donations paid for by hedge funds and banks.

If we were living in a pure capitalistic system, those banks that chose to leverage themselves 40 to 1, chose to engage in hyper-risky lending and chose to create and sell derivatives with little to no intrinsic value would have to live with the consequences of their actions, which most likely would be either reorganization in bankruptcy or going out of business altogether. For every bank that failed, there would be another--a fiscally responsible one with a strong balance sheet--to take its place. These banks would then be allowed to sink or swim based on their ability to navigate the rough seas of finance. Contrary to what those "too big to fail" banks may tell you, these banks do exist.

Like many Americans, I "get" TARP, I just can't stand it either. Unlike the practitioners of crony capitalism who run our nation, I can see that the billions already spent and the billions more promised will have little to no effect in stimulating our economy. So why spend it in the first place?

Too handsome to lampoon

2009-01-20T11:40:00.001-08:00

Two hours and thirty five minutes into Obama's presidency, and already he's off limits to least one European cartoonist:

Obama too handsome for good satire -caricaturist

Tuesday, January 20, 2009 11:35:00 AM (GMT-08:00) BRUSSELS, Jan 20 (Reuters) -

U.S. President Barack Obama is too good looking to provide inspiration for cartoons in the same way George W. Bush served as fodder for some of their most biting commentary, a caricaturist on said Tuesday.

"It's never a gift for a caricaturist to draw a handsome man," said Pierre Kroll, from Belgium, which prides itself on its comic book culture including Tintin.

"Somehow, we prefer overweight people, people with a beard, huge noses, ridiculous glasses ... If caricaturists could elect presidents, we would choose people with faces we enjoy drawing, and not a playboy like him," said Kroll whose works appears in the Belgian daily "Le Soir".

Kroll said positive public sentiment towards the incoming U.S president might also make it harder for caricaturists whose portraits have to underline a person's weaknesses and flaws.

"Caricaturists like to be a bit nasty and here, he comes with a lot of sympathy, it's harder for us to do our job and mock him while Bush had become a favourite target for cartoonists," he said.

(Reporting by Bate Felix and Marine Hass)

I feel sorry for poor Pierre Kroll. He is so blinded by Bush-hatred that he fails to see that Obama's ears are almost as big as Dumbo the Elephant's. If those suckers aren't perfect caricature-fodder I don't know what is. Then he goes on to describe what really makes a good caricature, "overweight people, people with a beard, huge noses, ridiculous glasses" without stopping to consider that Bush possessed none of those features, yet they had a field day with him. I hope he has another skill to fall back on, because caricatures of the former President Bush are going to start to look a little out dated pretty quickly. Maybe he makes a really bitchen' Belgian waffle!

Keynesian Economics and Venezuelan Amerindians

2009-01-17T14:13:00.000-08:00

Barron's takes a dig at Keynesian economics:

IN FACT, HALF A LOAF COULD BE BETTER FOR the economy, and better for Obama's ultimate treatment in the history books, not to mention his re-election odds. A $500 billion package -- say, 60% tax cuts and 40% increased spending -- could realize his stated aim of spending money wisely, while providing significant fiscal stimulus.One reason for caution is that priming the pump never quite works the way the textbooks say it should. The economy's lifeblood isn't consumer demand, but rather credit, both for the financing of business investment and the purchase of consumer durables like cars. No amount of fiscal stimulus will make much difference if credit is constricted. If credit is available, jobs and higher incomes will follow.

Even the indigenous people of Venezuela realize that receiving free money and food from the government is not the path to prosperity (from the Economist):

The Yukpas are divided. Some oppose the land invasions and even support the ranchers. “Invasions are very bad,” says Rosario Romero, a Yukpa woman. “The ranchers worked for what they have. In the sierra there’s lots of land to cultivate maize and other crops.” She adds that, contrary to what radical Yukpa leaders say, her parents never suggested these lands were theirs. Her community had never received government help until Mr Chávez came along, she says, “Now we get money and food.” However, this encourages indolence. Many Yukpa women have married non-Amerindians, as she has done, “because the Yukpa men don’t want to work.”

I hereby nominate Rosario Romero for Treasury Secretary.

Inauguration Day Carbon Footprint

2009-01-15T09:43:00.000-08:00

This sort of thing matters to some people--mostly to the anthropomorphic global warming disciples who do not understand that correlation does not imply causation. Fortunately it doesn't matter to me, but just in case anybody needs ammo when pointing out the hypocrisy among the patricians of our nation, well here ya go:

Carbon Bigfoot: 2009 Inauguration Expected to Generate More Than a Half-Billion Pounds of CO2

WASHINGTON, Jan. 15 /PRNewswire/ -- Next week scores of celebrities including Leonardo DiCaprio, Sharon Stone, Sting, and Steven Spielberg are all expected to flock to the nation's capitol, many by private jets, to the historic inauguration of Barack Obama. The swearing-in extravaganza will surely be the largest yet and is seeing ballooning costs and a major environmental footprint.
In a report released today, the Institute for Liberty (IFL) utilizes data from federal agencies, environmentalist organizations, and news accounts to extrapolate the estimated environmental impact for the 2009 Inauguration. IFL estimates that, given the millions of people expected to converge on the nation's capital. IFL concludes:

-- The 600 private jets expected to fly visitors to and from the event will
produce 25,320,000 POUNDS of CO2
-- Personal vehicles could account for 262,483,200 POUNDS of CO2
-- In the Inaugural parade, horses alone will produce more than 400 POUNDS of CO2
-- The total carbon footprint for the Inauguration will likely exceed 575
million POUNDS of CO2
-- It would take the average U.S. household 57,598 years to produce a
carbon footprint equal to that of the new president's housewarming
party

The Inauguration of President Obama is truly an historic occasion that should be celebrated," said IFL President Andrew Langer. "However, it would be very hypocritical for the scores of celebrities, VIPs and political elites to lecture on environmental policy to middle America and small businesses that are merely trying to survive in these difficult economic times, and then turn around and contribute to the half-billion pounds of emitted CO2. This is a celebration -- DC's small businesses, and thus DC's working families, are going to greatly benefit from this event. The rest of America should share in that opportunity."

Of course, the star-studded list of carbon offenders will be given a free pass by their would-be censors for at least two reasons. First, this is an historic occasion. Second, they're mostly the same people, so they'd be censoring themselves. They'll also give Obama a free pass on the estimated $146mil price tag for the whole affair; forgetting that just 4 years ago they pilloried Bush for his inauguration excesses which cost us taxpayers a fraction of what the Obama affair will cost.

It seems you just can't put a price tag--carbon or otherwise--on the celebration of tokenism, especially since the Senate voted to ban ticket scalping at the event. And anybody dumb enough to try to scalp a ticket to what is supposed to be a free event ought to be allowed to. Clearly, they have too much money. That's the kind of wealth redistribution I can get on board with.

Posted so as not to be lost for posterity

2009-01-14T09:36:00.000-08:00

Here are what I feel are the two most clearly written pieces I have read on the causes of the current economic crisis.

The first, Deciphering the Liquidity and Credit Crunch 2007-08, explains in simple terms the financial causes of our current predicament.

The second, Anatomy of a Trainwreck, explores both the political and the financial causes.

Fiddling while Rome burns

2009-01-14T08:43:00.000-08:00

In light of all the economic turmoil we are presently experiencing, if I were about to be inaugurated as the 44th President of the United States of America, I might think it wise to tone down my inaugural ceremony just a tad.

It seems that Obama is choosing the opposite course by allowing it to become the most expensive swearing in ceremony in history.

Barack Obama's inauguration is set to cost more than £100m ($146 million) making it the most expensive swearing-in ceremony in US history.
The President-elect will take less than a minute to recite the oath of office in front of an estimated two million people in the US capital next week.
But by the time the final dance has been held at one of the many inaugural balls the costs for the day will be a staggering £110m ($160.6 million).
So many people are expected in the U.S. capital that President Bush declared a state of emergency.
In doing so he paves the way for unlimited funding to be released to those local authorities responsible for staging the event. (who says democrats and republicans can't work together? -ed)
Washington Mayor Adrian Fenty revealed that is the amount that will be billed in the days after the January 20th event. US authorities had previously budgeted just £10m ($14.6 million) for the day based on previous inaugurations for George Bush and Bill Clinton.

Though questions remain as to the legality of the means utilized to raise the money, the fact is Obama raised $741.7 million during his presidential campaign. His inauguration is set to cost 10 times as much as his most recent predecessors. It might be a good idea to use part of the $30 million left in his campaign coffer to help pay for this historic moment since a token show of fiscal restraint seems like too much to ask.

Ah well, party on faithful! Enjoy the moment, because I have a suspicious feeling that Inauguration Day may be the high point of the Obama administration.

A trillion is the new billion

2009-01-08T09:48:00.000-08:00

“Never confuse motion with action.” --Ben Franklin

This simple wisdom is apparently beyond the understanding of our elected leaders as demonstrated by the following headline:

Obama Warns of Irreversible Decline Without Action

Jan. 8 (Bloomberg) -- President-elect Barack Obama warned that without immediate steps by the government to revive the economy, family incomes will drop, the unemployment rate could reach “double digits” and the U.S. risks losing a “generation of potential and promise.”

In excerpts of a speech he’s scheduled to give today at 11 a.m. New York time in the Washington suburb of Fairfax, Virginia, Obama says that while the cost of his economic recovery plan will add to a deficit already projected to exceed $1 trillion, he “won’t just throw money at our problems.”

“It is true that we cannot depend on government alone to create jobs or long-term growth,” Obama will say. “But at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe.”

Not to make light of what is now a very serious economic problem, but it often seems as though government's main function is to take something that should not have been a problem in the first place (had they been doing their job properly) and allowing it to snowball into a big crisis that only government can fix. This serves their real unspoken job rather well, which is the continual search for the justification of their own existence. At the risk of oversimplification, the main reason the Great Depression lasted as long as it did was that FDR firmly inserted government in the middle of all aspects of our economy. While his intentions were arguably well meaning, his policies were outright hostile to the private sector. So what did the private sector do? They kept their job creating, GDP expanding, entrepreneurial enabling capital on the sidelines for almost 10 years, which gave rise to the term, "idle rich." This had the effect of making government the only game in town, which further justified more government intervention.

What our economy needs is not more stimulation--overstimulation is what got us into this mess in the first place. Our economy needs to rest. Like a drunk coming down from a binge, you don't make him feel better by sticking another bottle of Jack Daniels in his hand and telling him to drink it, you let him sleep it off. Increasing unemployment (the reallocation of human capital) is a byproduct, but unemployment is in the future no matter what. Better for the private sector to put capital to work as soon as possible--creating real jobs--than letting government mis-allocate borrowed money to pay for "make work" jobs designed as a short term fix.

I feel we are in real deflationary danger. Private sector capital will continue to sit on the sidelines until our economy is well rested. But government will not let it rest, which will prolong the rough times ahead.

A better solution would be for government to temporarily cut all corporate and personal tax rates to say, 10%. It would reduce government revenues significantly of course, but borrowing money from the future to put in place a fiscal stimulus package that will surely be in excess of $1 trillion will have an even more drastic long term effect. Government can always borrow to keep critical programs and institutions running on a case by case basis.

I hold no illusions of anything like this happening, as the two things that are fundamentally anathema to big government are small businesses and the entrepreneurs that create them; for neither has any reason to pay tribute to an entity whose main purpose seems to be administering death by a thousand paper cuts. Small businesses employ far more Americans than big businesses do, but it is big business--through expensive lobbing efforts and campaign contributions--that have convinced our elected officials that they are "too big to fail" and are deserving of a taxpayer-funded bailout. Small businesses, having no such resources, are stuck scrounging for life lines of credit from banks who are simultaneously told to loan their TARP money and rebuild their capital base. If they do not secure a line of credit, they are forced to lay off workers, or close altogether, which perpetuates the economic downward spiral.

Alexis de Tocqueville had it right over 175 years ago:

The American Republic will endure until the Congress discovers they can bribe the people with their own money.

It seems the price of the bribe is somewhere north of $1,000,000,000,000

Closing the barn door after the horse has escaped

2008-12-24T07:07:00.000-08:00

There are those that feel if only there was more government regulation we'd not be in the financial mess we're currently in. The problem with regulation is that like most legislation, it is a fairly blunt instrument with which to try to fix a specific problem, and it is not uncommon to find instances where the unintended consequences outnumber the intended consequences--often significantly. The Sarbanes-Oxley Act of 2002 (Sarbox) is a perfect example. Put in place with the intention of halting further accounting scandals like the ones that brought down Enron, WorldCom, Tyco and a host of other publicly traded companies, it has also acted to limit the choices a small business has regarding its growth and has moved most of what was left of our IPO market overseas and out of its jurisdiction. Rather than go public in the Unites States and wade through the sea of red tape and absorb the added costs that Sarbox has created, many companies ready to take the next step in their natural growth cycle instead choose to either sell out to a larger company--which makes a big company even bigger and has the correlative effect of limiting the competitive landscape--or go public in London where they will not be subjected to the excessive scrutiny that Sarbox mandates. Furthermore, you'd have to be crazy to choose to go public in the United States if you were a foreign company contemplating such a move.

Unsurprisingly, the monetary cost of compliance seems to not have been considered when Sarbox went into effect. If you are a $25bil company, this additional compliance cost is more easily absorbed than if you are a $25mil company. Setting aside the regressive nature of a law that burdens small companies more heavily than large ones, consider that micro, small and mid-cap companies outnumber large-cap companies by at least an order of magnitude. Also worth considering is the fact that if you are a CFO and you sign off on your company's quarterly financials and malfeasance later surfaces that you knew nothing about, you can be held criminally liable. Imagine what that does to a company's risk-taking initiative.

Though surely there are others, the most glaring unintended consequence of Sarbox is that thousands of law-abiding, jobs-providing, tax-paying smaller companies are penalized with significant added operating costs as a result of the regulatory reaction to the illegal actions of literally a handful of much larger companies. Forcing a firm to esentially prove their innocence each quarter is a perversion of the whole "innocent until proven guilty" theory that is the foundation of our laws.

Now to the point:

Yesterday it was revealed that IndyMac Bank is guilty of altering its records in order to appear more financially sound than they actually were just weeks before they were seized by regulators last summer. The twist is that a senior government regulator helped them do it.

A senior bank regulator was removed from his job after being accused of helping mortgage lender IndyMac Bancorp alter its records so it appeared to be in better shape -- weeks before it was seized by the government.

The Office of Thrift Supervision has reassigned its top West Coast official, Darrel Dochow, who was also a controversial figure in the regulatory lapses surrounding the savings-and-loan crisis of the late 1980s.
In a letter sent Monday to Sen. Charles Grassley, the senior Republican on the Senate Finance Committee, the Treasury Department's inspector general wrote that the federal OTS allowed the bank to backdate records of capital infusions last spring. That leeway made IndyMac appear more solid than was actually the case, shortly before federal regulators seized the bank in July -- at a cost of $8.9 billion to the government's deposit-insurance fund.

The key concern raised by Treasury Inspector General Eric Thorson in his letter was that OTS supervisors allowed IndyMac to register an $18 million capital injection from its holding company made on May 9 as if it had been carried out before the end of March. That appeared to put the bank's total risk-based capital ratio for the first quarter of the year over the 10% threshold for a "well-capitalized" institution, when in fact the bank had been below that mark and qualified only to be considered "adequately capitalized."

Mr. Thorson said in the letter that his investigators had also uncovered other incidents in which OTS supervisors had allowed banks to backdate capital infusions. The letter didn't specify which banks those incidents involved.

Darrel Dochow must be a cat, for surely he has 9 lives. Here's a guy that played a significant role in the Keating 5 Scandal by holding off on cracking down (which was his job BTW) on the unsound business practices of Lincoln S&L. Then he was only demoted for his role, and managed to work his way back up the ladder to again be named Western Regional Director of the Office of Thrift Supervision in 2007, only to again help at least one bank in trouble survive a little longer to again cost the taxpayer money. To add insult to injury, don't forget we're paying him a handsome taxpayer funded salary and benefits for all his "hardwork". This is not even a one-off event, there are other banks yet to be named. It will be interesting to see what other banks are also guilty of backdating capital with Mr. Dochow's help.

Lincoln later collapsed, costing taxpayers billions of dollars and triggering a political scandal for the "Keating Five" senators who had intervened with regulators on the thrift's behalf. Mr. Dochow was demoted in the wake of the scandal, but worked his way back up the OTS hierarchy.

Is this an example of more of the type of government regulation our nation should expect?

Institutions such as banks and our government are really a reflection of the habits of the citizens that make up the society that grants them legitimacy. Lately it seems that many of the institutions that make our nation what it is have been under assault by either the arrogant, the brazenly greedy, the incompetent, the criminal or all of the above. There will come a tipping point where those of us who keep our heads down, abide by the law, pay our taxes on time and generally behave like good citizens will say, "enough is enough." What happens then is anybody's guess, but whatever happens, it won't be pleasant for somebody.

"Those who destroy the protocols of civilization may well one day wish to rely on them".--Thucydides Book III

Dominos falling

2008-12-22T11:04:00.000-08:00

Here's The Cato Institute sharing a little bit of common sense:

Daniel Mitchell, a senior fellow at the libertarian Cato Institute, said the government should have no role in helping the (auto) industry, except to provide positive economic conditions -- "a lower corporate tax rate, less red tape and things like that," he said.

Mitchell added that if the government takes control of the auto industry, it will be a recipe for disaster.

"The free markets allocate resources and reward people for doing good things and punish them for doing dumb things," he said. "Government misallocates resources and rewards people for doing dumb things and punishing them for doing good things.

"We're in this very dangerous situation where you're going to have people, Harry Reid and Nancy Pelosi, making these decisions," he said. "I wouldn't trust these people mowing my lawn, much less running a private company."

That quote is a little dated. As we now know, last Friday Congress approved a $13.4bil loan package to GM and Chrysler. Lest you think that money comes without any strings attached, here are the terms of the deal:

Fact Sheet: Financing Assistance to Facilitate the Restructuring of Automobile Manufacturers to Attain Financial Viability.

Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.

Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second of TARP funds.

Viability Requirement: The firms must use these funds to become financially viable. Taxpayers will not be asked to provide financing for firms that do not become viable. If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.

Definition of Viability: A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.

Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:
Firms must provide warrants for non-voting stock.
Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
Debt owed to the government would be senior to other debts, to the extent permitted by law.
Firms must allow the government to examine their books and records.
Firms must report and the government has the power to block any large transactions (> $100 M).
Firms must comply with applicable Federal fuel efficiency and emissions requirements.
Firms must not issue new dividends while they owe government debt.

Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:
Reduce debts by 2/3 via a debt for equity exchange.
Make one-half of VEBA payments in the form of stock.
Eliminate the jobs bank.
Work rules that are competitive with transplant auto manufacturers by 12/31/09.
Wages that are competitive with those of transplant auto manufacturers by 12/31/09.

These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations.

In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009.

Basically they have 3 months to get their acts together. Judging by how long it has taken them to not adjust their business models in order to stay competitive in the first place, it is laughable to think that they will, in fact, get their acts together in a mere 3 months time. No doubt they will ask for a time extension or use the "non-binding" clause to bend the terms more to their liking when nobody is looking. Besides, in this day and age a $13.4bil loan is almost a rounding error, so who really cares if they pay it back at all?

Do not get me wrong, I want to see our domestic auto industry succeed. From what I understand GM's Rick Wagoner is a helluva nice guy to boot, but I do not think that any good will come from the government getting involved in what should be a private industry affair. The excessive statism that we are now witnessing will only serve to undermine the economy in the long run.

This whole auto industry bailout story is old news already. Though if you listen closely, you'll hear jostling and footsteps as the commercial property developers line up for their alms from Uncle Sam.

Where does it end?

The Banana Republic of Illinois

2008-12-11T09:56:00.000-08:00

If you’re looking for a great non-fiction read that reads like fiction, look no further. The complaint filed yesterday against the current Illinois governor, democrat Rod Blagojevich, almost reads like a John Gresham novel. They ought to just slap a cover on it and sell it on Amazon.

The reader will recall that this is the same fetid swamp from which our current President-elect emerged. No doubt he has insulated himself well from this particular scandal, but there's that age old wisdom, something about the apple not falling too far from the tree, that may be appropriate here. Unfortunately, the young aspiring representative Jessie Jackson Jr. may not be so lucky. His handlers stand accused of offering the Governor $500,000 for Obama's empty Senate seat.

Since it is 78 pages long, I've highlighted some of my favorite parts below.

Careful now, there's more F-bombs dropped here than Al Pacino dropped in Scarface.

On quid pro quo:

a. Defendant ROD BLAGOJEVICH and at times defendant JOHN HARRIS, together with others, obtained and attempted to obtain financial benefits for RODBLAGOJEVICH, members of the Blagojevich family, and third parties including Friends of Blagojevich, in exchange for appointments to state boards and commissions, state employment, state contracts, and access to state funds;

On pesky media bias, the Cubs and Wrigley Field:

b. Defendants ROD BLAGOJEVICH and JOHN HARRIS, together with others, offered to, and threatened to withhold from, the Tribune Company substantial state financial assistance in connection with Wrigley Field, which assistance ROD BLAGOJEVICH believed to be worth at least $100 million to the Tribune Company, for the private purpose of inducing the controlling shareholder of the Tribune Company to fire members of the editorial board of the Chicago Tribune, a newspaper owned by the Tribune Company, who were responsible for editorials critical of ROD BLAGOJEVICH

71. Based on a review of intercepted phone calls, it appears that the Tribune
Company, in connection with its efforts to sell the Cubs, has explored the possibility of obtaining financial assistance from the Illinois Finance Authority (“IFA”) relating to the financing or sale of Wrigley Field.19 During the course of this investigation, agents have intercepted a series of communications regarding the efforts of ROD BLAGOJEVICH and JOHN HARRIS to corruptly use the power and influence of the Office of the Governor to cause the firing of Chicago Tribune editorial board members as a condition of State of Illinois financial assistance in connection with Wrigley Field. The phone calls reflect that ROD BLAGOJEVICH directed JOHN HARRIS to inform Tribune Owner and an associate of Tribune Owner, Tribune Financial Advisor (Tribune Financial Advisor is believed to be an individual identified in media accounts as a top assistant and financial advisor to Tribune Owner, who played a significant role in Tribune Owner’s purchase of the Tribune), that State
of Illinois financial assistance for the Tribune Company’s sale of Wrigley Field would not be forthcoming unless members of the Chicago Tribune’s editorial board were fired. Set out below are summaries of certain of those conversations. This affidavit does not include all calls dealing with the corrupt efforts of ROD BLAGOJEVICH and JOHN HARRIS to misuse their influence over the expenditure of state funds to cause the firing of employees of the Chicago Tribune editorial board.

On standing by your man:

During the call, ROD BLAGOJEVICH’s wife can be heard in the background telling ROD BLAGOJEVICH to tell Deputy Governor A “to hold up that fucking Cubs shit. . . fuck them.”

On Global Warming, jet flights and personal loyalty:

4. According to Levine, in approximately late October 2003, after Levine was reappointed to the Planning Board, he shared a private plane ride from New York to Chicago with ROD BLAGOJEVICH and Kelly. Levine, ROD BLAGOJEVICH, and Kelly were the only passengers on the flight. According to Levine, at the beginning of the flight, Levine thanked ROD BLAGOJEVICH for reappointing him to the Planning Board. ROD BLAGOJEVICH responded that Levine should only talk with “Tony” [Rezko] or [Kelly] about the Planning Board, “but you stick with us and you will do very well for yourself.” ROD BLAGOJEVICH said this in front of Kelly. According to Levine, Levine understood from ROD BLAGOJEVICH’s manner of speaking and words that ROD BLAGOJEVICH did not want Levine to talk to ROD BLAGOJEVICH directly about anything to do with the boards, but that Levine should talk to Rezko or Kelly. Levine also understood that ROD BLAGOJEVICH meant that Levine could make a lot of money working with ROD BLAGOJEVICH’s administration. According to Levine, ROD BLAGOJEVICH did not seem to expect a response from Levine, and Kelly then shifted the conversation to something else.

Most appropriate acronym ever:

36. Levine’s criminal activities included his abuse of his position on the Planning
Board to enrich both himself and Friends of Blagojevich. The Planning Board was a commission of the State of Illinois, established by statute, whose members were appointed by the Governor of the State of Illinois. At the relevant time period, the Planning Board consisted of nine individuals. State law required an entity seeking to build a hospital, medical office building, or other medical facility in Illinois to obtain a permit, known as a “Certificate of Need” (“CON”), from the Planning Board prior to beginning construction

On tolls and highways:

63. According to Individual A, after Individual B left the meeting on October 6, 2008, ROD BLAGOJEVICH told Individual A that he was going to make an upcoming announcement concerning a $1.8 billion project involving the Tollway Authority. ROD BLAGOJEVICH told Individual A that Lobbyist 1 was going to approach Highway Contractor 1 to ask for $500,000 for Friends of Blagojevich. ROD BLAGOJEVICH told Individual A that, “I could have made a larger announcement but wanted to see how they perform by the end of the year. If they don’t perform, fuck ‘em.” According to Individual A, he/she believed that ROD BLAGOJEVICH was telling Individual A that ROD BLAGOJEVICH expected Highway Contractor 1 to raise $500,000 in contributions to Friends of Blagojevich and that ROD BLAGOJEVICH is willing to commit additional state money to the Tollway project but is waiting to see how much money Highway Contractor 1 raises for Friends of Blagojevich.

On using a children's hospital as leverage for a political donation:

65. According to Individual A, on October 8, 2008, during a discussion of
fundraising from various individuals and entities, the discussion turned to Children’s Memorial Hospital, and ROD BLAGOJEVICH told Individual A words to the effect of “I’m going to do $8 million for them. I want to get [Hospital Executive 1] for 50.” Individual A understood this to be a reference to a desire to obtain a $50,000 campaign contribution from Hospital Executive 1, the Chief Executive Officer of Children’s Memorial Hospital. Individual A said that he/she understood ROD BLAGOJEVICH’s reference to $8 million to relate to his recent commitment to obtain for Children’s Memorial Hospital $8 million in state funds through some type of pediatric care reimbursement. As described in further detail below, intercepted phone conversations between ROD BLAGOJEVICH and others indicate that ROD BLAGOJEVICH is contemplating rescinding his commitment of state funds to benefit Children’s Memorial Hospital because Hospital Executive 1 has not made a recent campaign contribution to ROD BLAGOJEVICH.

On selling Obama’s vacated Senate Seat for personal gain:

c. Defendants ROD BLAGOJEVICH and JOHN HARRIS, together with others, attempted to use ROD BLAGOJEVICH’s authority to appoint a United States Senator for the purpose of obtaining personal benefits for ROD BLAGOJEVICH, including, among other things, appointment as Secretary of Health & Human Services in the President-elect’s administration, and alternatively, a lucrative job which they schemed to induce a union to provide to ROD BLAGOJEVICH in exchange for appointing as senator an individual whom Minimization procedures were implemented during the interception of conversations at the Friends of Blagojevich offices and over phones. At times, these minimization procedures were stricter than required under law so as to avoid intercepting certain potentially privileged conversations. ROD BLAGOJEVICH and JOHN HARRIS believed to be favored by union officials and their associates.

c. ROD BLAGOJEVICH said that the consultants (Advisor B and another consultant are believed to be on the call at that time) are telling him that he has to “suck it up” for two years and do nothing and give this “motherfucker [the President-elect] his senator. Fuck him. For nothing? Fuck him.” ROD BLAGOJEVICH states that he will put “[Senate Candidate 4]” in the Senate “before I just give fucking [Senate Candidate 1] a fucking Senate seat and I don’t get anything.” (Senate Candidate 4 is a Deputy Governor of the State of Illinois).

On planning for the future:

d. One of ROD BLAGOJEVICH’s advisors said he likes the idea, it sounds like a good idea, but advised ROD BLAGOJEVICH to be leery of promises for something two years from now. ROD BLAGOJEVICH’s wife said they would take the job now. Thereafter, ROD BLAGOJEVICH and others on the phone call discussed various ways ROD BLAGOJEVICH can “monetize” the relationships he is making as Governor to make money after ROD BLAGOJEVICH is no longer Governor.

On non-profits:

104. On November 11, 2008, ROD BLAGOJEVICH talked with JOHN HARRIS
about the Senate seat. ROD BLAGOJEVICH suggested starting a 501(c)(4) organization (anon-profit organization that may engage in political activity and lobbying) and getting “his (believed to be the President-elect’s) friend Warren Buffett or some of those guys to help us on something like that.” HARRIS asked, “what, for you?” ROD BLAGOJEVICH replied, “yeah.” Later in the conversation, ROD BLAGOJEVICH stated that if he appoints Senate Candidate 4 to the Senate seat and, thereafter, it appears that ROD BLAGOJEVICH might get impeached, he could “count on [Senate Candidate 4], if things got hot, to give [the Senate seat] up and let me parachute over there.” HARRIS said, “you can count on [Senate Candidate 4] to do that.” Later in the conversation, ROD BLAGOJEVICH said he knows that the President-elect wants Senate Candidate 1 for the Senate seat but “they’re not willing to give me anything except appreciation. Fuck them.”

Maybe the whole world was not listening, but the FBI most certainly was:

ROD BLAGOJEVICH told Fundraiser A that “you gotta be careful how you express that and assume everybody’s listening, the whole world is listening. You hear me?”

On being stuck in a dead end job and dreaming of reaching for the stars:

116. In addition, in the course of the conversations over the last month, ROD BLAGOJEVICH has spent significant time weighing the option of appointing himself to the open Senate seat, and has expressed a variety of reasons for doing so, including frustration at being “stuck” as governor, a belief that he will be able to obtain greater resources if he is indicted as a sitting Senator as opposed to a sitting governor, and a desire to remake his image in consideration of a possible run for President in 2016, avoid impeachment by the Illinois legislature, make corporate contacts that would be of value to him after leaving public office, facilitate his wife’s employment as a lobbyist, and assist in generating speaking fees should he decide to leave public office.

In my opinion, of the many outrages against all that our nation is supposed to stand for present in this complaint, the hubris displayed by Mr. Blagojevich and his associates is the most breathtaking. His behavior as outlined in this complaint reveals that he may be a borderline sociopath as well. It begs the question; do sociopaths become politicians, or do politicians become sociopaths? That's beyond the scope of this post, but I think the brass knuckle, "pay to play" world of Illinois politics would be a great place to conduct a study on the subject.

I have a feeling that when Thomas Jefferson said, “If once the people become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions” this is exactly the sort of thing he was afraid could happen.

Karmic Payback is Alive and Well

2008-12-05T12:03:00.001-08:00

O.J. Simpson gets at least 15 years in prison:

"Earlier in this case, at a bail hearing, I said to Mr. Simpson I didn't know if he was arrogant, ignorant or both,"(Judge) Glass said. "During the trial and through this proceeding I got the answer, and it was both."

I hope he enjoyed that fine meal, because I hear Nevada prison food isn't quite so tasty looking.

By they way, that's some nice ham carving skills on display there.

Coincidence?

Federal Reserve Liquidity Programs to Date

2008-12-02T07:09:00.000-08:00

Every industry has its share of acronyms, but unless one is a part of a particular industry, specific acronyms generally have no meaning. Since it is our money being used in the latest iteration of the current corporate/social bailout, I believe every taxpayer should take an interest in the list below.

TAF – Term auction facility. The Fed auctions discount window loans to banks for terms of 28 and 84 days.
PDCF – Analogous to the TAF in that the Fed is providing collateralized loans to primary dealers. The loans are for overnight terms. Primary dealers can pledge assets (including equities) from their London branches.
Foreign currency swaps – The Fed is providing dollar loans to foreign central banks who will then pass the funds onto banks in the libor market. Four of the nine participating banks will provide dollar funding in unlimited amounts.
TSLF – The Fed’s swap program exchanging its holdings of TSYs for investment grade assets. Available to primary dealers via weekly auctions. The Fed recently increased the size and expanded the eligible assets in the program.
TOP – Designed to offer primary dealers options to draw on special short-dated TSLF auctions scheduled around quarter and year-end periods. Options can be allowed to expire unexercised or used to swap mortgage collateral against general Treasury collateral.
AB-CP back up (AMLF)– The Fed is providing loans to banks and other depository institutions to purchase asset backed commercial paper from money market funds.
CP-FF – The commercial paper funding facility where the Fed will buy CP directly from issuers. For most issuers, the CP will be purchased at 3- month OIS+200bp. Banks can lower their cost by securing FDIC debt insurance.
MMIFF – A facility created by the Fed designed to purchase assets out of money market funds through newly created SPVs that themselves are financed with AB-CP.
Other credit extension – This includes the Fed loan to AIG collateralized by the companies businesses and assets. The total line of credit is $123bn.
Maiden Lane LLC – The Fed entity created to hold BSC’s portfolio of assets that collateralize the loan the Fed made to JPM ($30bn) to finance the purchase of BSC. Any losses over the first $1bn accrue to the Fed.
Fed purchases of GSE securities – The Fed plans to purchase up to $100 billion in GSE direct obligations from primary dealers and $500 billion in MBS from asset managers, in conjunction with the Treasury's bailout of the GSEs.
TALF – Term Asset-Backed Securities Loan Facility. The New York Fed plans to lend up to $200 billion (with an added $20 billion in credit protection from the Treasury’s TARP funds) to holders of AAA ABS securities tied to student, credit card, auto, and small business loans.
TARP – While not a Fed program, the TARP is designed to inject capital into financial institutions and purchase “troubled assets.” The scope and structure of the program has gotten broader and less clearly defined as there has been talk of using the money to modify home mortgages and make loans to auto manufacturers.

Surely this list will grow, so check back often.

The State of Wall St.

2008-11-19T07:44:00.000-08:00

When I first started working in the finance industry years ago, one of the first books I was advised to read was "Liar's Poker" by Michael Lewis. It remains one of the more memorable books I've ever read for a few reasons, mostly though because I like his writing style.

In the following article from Conde Nast's Portfolio.com website, Mr. Lewis offers us an entertaining glimpse of the grinding gears that are currently driving Wall St. to the brink of the abyss. He ends the article with an informal interview of his old boss and antagonist in the book that made him famous, John Gutfreund, the former CEO of Salomon Brothers.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

I think those closing paragraphs illustrate nicely the problems associated with removing moral hazard from the risk/reward equation.

Now What?

2008-11-06T14:35:00.000-08:00

Now that The One is set to ascend to the throne, what will all of his disciples do with their free time? The following video gives us a clue:

Obama Supporters Devastated By Election Win!

IowaHawk has an excellent post-election essay here.

On a more serious note, this is just plain creepy...

As an American, I congratulate Obama on his win. I will respect the office of the President as long as the person holding the office deserves respect. Hopefully, he will govern from the center and jettison the hardcore leftist crowd that helped him win. Based on his thin record, I fear that he will not, and we as a nation may have to endure the spasms associated with a severe case of buyer's remorse as portions of his coalition slowly discover they've been left at the altar. Apart from that, there are many people who do not have the United States of America's best interests at heart holding Obama chits, and it won't be long before they start expecting their dividend payments.

Every President inherits a host of issues from the former administration. How Obama positions himself--either as a victim of "Bush's failed policies" or as the Leader of the Free World--will tell us a lot about his character. It is my hope that he chooses the latter, because our nation can ill-afford the former.

Major candidate's tax plans compared

2008-10-27T12:29:00.000-07:00

Greg Mankiw, an economics professor at Harvard, walks us through the following exercise:

Let me try to put each tax plan into a single number. Let's suppose Greg Mankiw takes on an incremental job today and earns a dollar. How much, as a result, will he leave his kids in T years?

The answer depends on four tax rates. First, I pay the combined income and payroll tax on the dollar earned. Second, I pay the corporate tax rate while the money is invested in a firm. Third, I pay the dividend and capital gains rate as I receive that return. And fourth, I pay the estate tax when I leave what has accumulated to my kids.

Let t1 be the combined income and payroll tax rate, t2 be the corporate tax rate, t3 be the dividend and capital gains tax rate, and t4 be the estate tax rate. And let r be the before-tax rate of return on corporate capital. Then one dollar I earn today will yield my kids:

(1-t1){[1+r(1-t2)(1-t3)]^T}(1-t4).

For my illustrative calculations, let me take r to be 10 percent and my remaining life expectancy T to be 35 years.

If there were no taxes, so t1=t2=t3=t4=0, then $1 earned today would yield my kids $28. That is simply the miracle of compounding.

Under the McCain plan, t1=.35, t2=.25, t3=.15, and t4=.15. In this case, a dollar earned today yields my kids $4.81. That is, even under the low-tax McCain plan, my incentive to work is cut by 83 percent compared to the situation without taxes.

Under the Obama plan, t1=.43, t2=.35, t3=.2, and t4=.45. In this case, a dollar earned today yields my kids $1.85. That is, Obama's proposed tax hikes reduce my incentive to work by 62 percent compared to the McCain plan and by 93 percent compared to the no-tax scenario. In a sense, putting the various pieces of the tax system together, I would be facing a marginal tax rate of 93 percent.

It should be pretty obvious that the only people who should legitimately call themselves democrats are either billionaires or poor people; both groups are the only ones that will benefit under Obama's plan. Billionaires are what you could call "recession-proof"and can therefore afford the high cost of social engineering; and if you're poor you have nothing to lose under any tax scheme. It's interesting how businessmen such as Bill Gates and Warren Buffet(there are many other examples) belatedly find the virtue of socialism after they've spent their entire lives accumulating vast sums of wealth in a decidedly un-socialist manner. It reminds me of an aging rockstar who has spent 25 years chasing booze, drugs and women only to become a spokesperson for abstence after their liver has failed.

A filibuster-proof democratic Congress aligned with a President who's scant 2 year Senate voting record that is the most liberal in that chamber will be able to deliver the one-two punch to our wallets, for our own good of course. Surely when Obama speaks of change he really means "redistributive change." When that happens, we can all be equal and poor together.

If the Democrats succeed in keeping the wool over the eyes of the electorate long enough to win the White House and Obama becomes our President, I will respect the office, if not the man. But I would strongly recommend that Senator Reid, Madame Speaker Pelosi, and President Obama read the following essay by somebody who's been there too; and remember that it is "not yours to give."

The rise of the Welfare State

2008-10-26T07:28:00.000-07:00

The Claremont Institute put out an excellent piece that chronicles the rise of big government since 1940.

One of the Office of Management and Budget's (OMB) historical tables tracks annual federal outlays beginning in 1940, using enormous categories ("superfunctions") composed of smaller but still vast "functions." The two main superfunctions, National Defense and Human Resources, have together accounted for at least 61.7% of federal outlays in every year since 1940. The superfunctions that account for the rest of federal outlays are:

Physical Resources (e.g., Energy, the Environment)
Net Interest on the National Debt
Other Functions (e.g., Science, International Affairs, Agriculture, General Government, and the Administration of Justice)

If we group those three final superfunctions as "Everything Else," we can see the changing makeup of the federal budget over the past 67 years in Chart A.

OMB's Human Resources superfunction is made up of the following six functions:
Education, Training, Employment, and Social Services
Health (excluding Medicare)
Medicare
Income Security (excluding Social Security)
Social Security
Veterans' Benefits and Services

Let's leave the final category off the list, since veterans' programs don't figure prominently in the arguments liberals and conservatives have conducted over the size and scope of government. What's left is an imperfect but useable approximation of the welfare state. (The chief imperfections are that we're looking only at federal expenditures, which leaves out state and local welfare state spending; and that the costs imposed by regulations, like the minimum wage laws, don't show up in the federal government's outlays.)

Anybody that says war is bankrupting our nation needs to take a good look at the chart above. Human resource outlays account for approximately 65% of federal outlays, while national defense outlays account for approximately 20%.

The long political advance of liberalism has coincided with the refusal of any prominent liberal politician or writer to specify or even suggest the welfare state's ultimate and sufficient size. Instead, liberals have denounced our shockingly insufficient welfare state every year since the beginning of the Progressive era. When Max Sawicky did so in 2004, real, per capita expenditures on Human Resources were more than twice as large as they had been in 1975.

Yet it would be absurd to argue that the sort of economic insecurities the welfare state exists to alleviate were twice as severe in 2004 as in 1975, or that America had been little better than a Third World country during Gerald Ford's presidency. The percentage of Americans who owned their own homes increased between 1975 and 2004 from 64.4% to 69.1%. Average life expectancy became 5.2 years longer. In 1975 the proportion of Americans aged 25 or older whose educational attainments included the completion of at least four years of high school was 62.5%, and 13.9% had completed at least four years of college. By 2004 the percentages were 85.2% and 27.7%, respectively.

Numerous consumption items that had been luxuries or Research-and-Development daydreams in 1975 were parts of the furniture of American life in 2004, even for millions of Americans with incomes below the median: e.g., color televisions receiving dozens of channels by cable or satellite, home computers accessing the internet, air conditioning in homes and cars, cell phones and microwave ovens. None of these developments give pause to liberals who say that a welfare state that doubles its outlays in the 29 years separating a prosperous era from an even more prosperous era needs to grow dramatically faster.

Nor do liberals ask hard questions about how the persistence of shocking and shameful poverty relates to this inexorable growth of the welfare state. Americans were jarringly reintroduced to their economically vulnerable and socially isolated countrymen by Hurricane Katrina. Ask any hopeful Democrat leaving an Obama rally what we should do about such poverty, and you'll be told that the federal government ought to spend a lot more money to help these people. What you won't be told is that a welfare state that grows 4% a year for six decades and still hasn't eliminated the nation's worst poverty might have problems that more money can't solve. Specifically, you won't hear serious consideration of the possibility that the benefits already dispensed by the welfare state are not so much scandalously inadequate as scandalously misallocated.

Our elected officials never consider doing a comprehensive review of any program, they just keep asking the taxpayer for more money. I am reminded of this every time I go to the polls and there's a bond measure on the ballot for schools, parks, bridges, hospitals etc. that I could have sworn I voted on in the prior election. No matter how much money is asked for, it never seems to be enough.

Representative Dennis Kucinich of Ohio is sponsoring H.R. 808 which would establish a Department of Peace and Nonviolence. There are 70 co sponsors, all democrats.

Department of Peace and Nonviolence Act - Establishes a Department of Peace and Nonviolence, which shall be headed by a Secretary of Peace and Nonviolence appointed by the President with the advice and consent of the Senate. Sets forth the mission of the Department, including to: (1) hold peace as an organizing principle; (2) endeavor to promote justice and democratic principles to expand human rights; and (3) develop policies that promote national and international conflict prevention, nonviolent intervention, mediation, peaceful resolution of conflict, and structured mediation of conflict.
Establishes in the Department the Intergovernmental Advisory Council on Peace and Nonviolence, which shall provide assistance and make recommendations to the Secretary and the President concerning intergovernmental policies relating to peace and nonviolent conflict resolution.
Transfers to the Department the functions, assets, and personnel of various federal agencies.
Establishes a Federal Interagency Committee on Peace and Nonviolence.
Establishes Peace Day. Urges all citizens to observe and celebrate the blessings of peace and endeavor to create peace on such day.

Yay, yet another government program that I will be obliged to pay for if it ever gets passed into law. What I want to know is how one enforces the rules that will surely be established by the Department of Peace and Nonviolence? Will they force people to conform to peace and nonviolence by using peace and nonviolence? It sounds positively Orwellian to me, or rather, sounds like a good job for Obama's Youth Brigade.

The single best idea I can think of for reforming the behemoth that is our government would be to establish a house in Congress whose sole function was to review and repeal laws and programs. For every new bill that was slated to pass, one would have to be repealed; and the bottom performing 5% of all government workers and any irrelevant positions would be eliminated every year.

The One We've Been Waiting For

2008-10-21T11:10:00.000-07:00

Gotta love capitalism:

I wonder how long the seller would tolerate me if I went over to the flea market on Hayes and Octavia next Sunday and bought one, then accidentally dropped it, then bought another one, and "oops", dropped it again, etc...?

The Problem with Polls

2008-10-17T11:53:00.000-07:00

During the weeks leading up to the Presidential election 4 years ago, my wife and I were on our honeymoon, far away from any television or newspaper. It was a welcome relief from the non-stop jibber-jabber of the television talking heads, the hyper-analysis of political "experts", and the endless polling that seemed to take place after every new sentence that was uttered by either candidate. I especially did not miss the polls. What's the point of a poll anyhow? They are useful as blunt tools for measuring a general trend, but beyond that they can be inaccurate and misleading even when well intentioned, and when ill-intentioned manipulating the data to fit a preconceived result is possible. Besides, the only poll that counts is the one taken at the ballot box on election day.

It has been my suspicion that Obama supporters have been using polls to reinforce the notion that victory is a foregone conclusion for The One. Can't you see? Even the whole world wants Obama to win! Climb on board the Hope and Change Express before it leaves the station without you. You don't want to be on the wrong side of what the polls tell us is the likely outcome of this election, do you? As Getty Lee once sang, "conform or be cast out."

I found this piece over at Zombietime today that describes in great detail what I've felt to be the problem with polling.

Because it all boils down to this: Obama supporters presume that increasing Obama's perceived support will induce informational conformity in the American public. In other words, Obama supporters operate on the assumption that individual McCain supporters or undecided voters will in actuality change their minds about who to vote for if they perceive that a majority of people are supporting Obama. The imagined line of thinking is, "Gee, if so many people like this Obama guy, then my impression of him must be wrong; I trust the group's wisdom more than my own impressions."

I submit that this assumption is a catastrophic blunder. To the extent that there is any conformist behavior being exhibited by McCain supporters and undecided voters, it is much more likely to be normative conformity. In other words, people who are confronted with apparent overwhelming support for Obama may indeed announce that they too support Obama, but do so only in order to avoid ostracism or accusations of racism. Inside, however, they have not changed their minds. On November 4, they will go into that voting booth, and in total privacy and anonymity, they are free to vote for whomever they want, without fear of social condemnation for doing so. And in such a setting, normative conformity disintegrates, because there is no "norm" to conform to when your vote is anonymous.

I find it difficult to get excited about McCain; but I prefer him over Obama. At least McCain does not think I'm rich and therefore feels entitled to take an even larger share of my earnings in order to "spread the wealth around" to the people that would elect him to office, like Obama will. The only things I want from my next president are somebody who will build aircraft carriers, veto pork and play a lot of golf. By those measures, McCain scores 2 out of 3. Obama doesn't pass the sniff test, and the creep-factor is high among his supporters .

There's a Spanish saying that goes something along the lines of, "show me who your friends are and I will show you who you are." Suffice to say, I don't like the crowd that Obama rolls with. The number of hard left people and organizations that have skin in the game for him should be enough to give any rational person pause. Then again, it is obvious that the bulk of his supporers have cast all semblance of rationality aside.

With any luck, the hubris displayed by his supporters and manifested in the pre-election polling process will be enough to force the silent majority into action and spare our nation from at least four years of an Obama administration.

The Twin Frankensteins: Fannie Mae and Freddie Mac

2008-09-30T12:22:00.000-07:00

The current liquidity gridlock and extreme volatility washing across all of our debt and equity markets has caused me to do some reflecting on what I think some of the possible causes may have been. Obviously, mortgage lending took a reckless and unsustainable turn. This is what I believe has been the major catalyst for our current state of affairs. (The second catalyst--and one I will not delve into in this piece--was a combination of the repeal of Glass-Steagall Act in 1999, the bursting of the internet bubble in 2000 and the subsequent squeeze on investment bank profit margins which led to their "all-in" approach to highly leveraged, high fee, structured investment vehicles).

In order to understand how this reckless mortgage lending began, a short history lesson is in order. In a word--regulation. Regulation driven by liberals and progressives, not free-market “deregulators” as the aforementioned would have you believe.

Pushed hard by politicians and community activists, the regulators systematically and deliberately altered financially sound lending practices. The mortgage market was humming along just fine when, in the late 1980s, progressives, in their traditional style of fixing things that aren't necessarily broken, decided that it needed to be “fixed.” Their complaint: some ethnic groups got approved for mortgages at lower rates than others.

The shift began in 1989, when Congress amended the Home Mortgage Disclosure Act to force banks to collect racial data on mortgage applicants. By 1991, critics were using that data to paint lenders as racist by showing that minority applicants were approved at far lower rates. In fact, they found a racial disparity only by ignoring relevant data on applicants’ ability to make mortgage payments - such as their assets and credit history.

But the political pressure was intense - with few in politics or media eager to speak the truth. And then, in 1992, came a study from four researchers at the Boston Fed, which seemed to bear out the critics’ contentions.

That study was, in fact, based on quite flawed data - but the authors’ political, media and academic protectors stifled most serious criticism, smearing the reputation of one whistleblower and allowing the Boston authors to avoid answering serious academic challenges to their work. Other studies with different conclusions were ignored.

The very next year, the Boston Fed announced new requirements for banks - rules that have now turned out to be monumentally catastrophic: Adopt “relaxed lending standards” or risk being labeled as racists, and face serious penalties under the Federal Community Reinvestment Act.

But don't take my word for it. Below is a New York Times article--ironically published 9 years ago to the day--that talks about Fannie Mae relaxing their lending standards in order to allow more minorities to realize the American dream of debt beyond their wildest imaginations.

Here's also an 8.5 minute video spliced together from C-SPAN footage that documents how the democrats protected FNM and FRE from proper oversight.

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

The reason that progressive liberals should never be trusted with anybody's money is that they do not realize the simple fact that money is ethnic, color and race blind. If somebody is a good credit risk, they will be able to secure financing no matter the color of their skin. If by chance a bank really is racist, or there's some wild conspiracy among bankers where they collude to discriminate against qualified borrowers based on the color of their skin, you can bet another bank outside the reach of this cabal of colluding bankers would spring up and do a thriving business with all of these potential borrowers. There's really no need to legislate looser lending standards due to perceived discrimination. I do not expect that that argument will ever hold water in the minds of those who see racism or sexism lurking behind every door, especially when their livelihood and power is predicated on maintaining that illusion; regardless of the cost to society in the aggregate.

UPDATE: here is a report from the Independent Institute that details exactly what was the flawed data in the initial Boston Fed report I mentioned above.

Burning Man 2008

2008-09-06T07:53:00.000-07:00

Burning Man: Part IV

Juggernaut: n.

Something, such as a belief or institution, that elicits blind and destructive devotion or to which people are ruthlessly sacrificed.
An overwhelming, advancing force that crushes or seems to crush everything in its path: “It doesn't assume that people need necessarily remain passive when confronted by what appears to be the juggernaut of history” (Christopher Lehmann-Haupt).

It may sound counter intuitive, but not coming across as redundant after four separate Burning Man experiences is hard to do. There's a certain consistency to the chaos out there on the playa; a familiarity that only reveals itself when you are standing there immersed in it. The last thing most people want to do--me included--whilst standing in the middle of the BM experience is to pause and reflect on the moment in order to create a memory catalog for reference when it comes time to write about it later. Pictures are helpful, but they generally do not provide the proper context in which events unfold. Plus people that take too many pictures miss out on a lot. It is hard to participate (Burning Man is all about participation) with a camera glued to your eyeball, which is why all I have to show for all my picture taking efforts is this pathetic collection of grainy photos from a disposable camera. Personally, I find that kind of charming. For anybody that wants to get into a full on Burning Man pictography, google will provide countless links to professional portfolios.

The "Lido" deck was my favorite place to spend the mornings.
Our camp this year was the best ever. Thanks to all who made it possible!

The playa surface was pretty loose this year. That made biking a bit more difficult.

The Tower of Babel: quite possibly the grandest piece of artwork that has ever been erected on the playa.

The Lido Deck: Cazadores and Coors Light served daily.

Neither was able to knock any sense into the other...

From the inside of the 12 story Tower of Babel.

Back in college we would sometimes get an assignment that required "stream of consciousness" writing. This involved putting the pen to the paper and simply writing whatever came to mind, non-stop, for a specified period of time. It is an exercise I've always enjoyed. Sometimes I'll still do it because I think it helps to quiet the mind and get the ideas flowing. I did a short exercise before starting this post, and one word that really resonated this time around was juggernaut.
Burning Man is a juggernaut, but not so much in the Old Testament style of blind devotion and destrictive sacrafice as defined in the first definition. Rather, it is more like the second definition, the one that defines a juggernaut as an overwhelming, advancing force that crushes or seems to crush everything in its path.

That's Burning Man!

A different kind of hope for a change

2008-09-03T12:36:00.000-07:00

It is entertaining to watch the Obamaniacs soil their capri pants over John McCain's choice of Sarah Palin as his running mate. So far it seems the most dirt they can dig up on her is that her 17 year old daughter is 5 months pregnant and unmarried. For reasons that are unclear to me this seems to be a hypocracy of epic proportions; I guess because Mrs. Palin preaches the insane notion that abstinence is the best form of birth control. Anybody that was once young will recall that teenage rebellion is based on doing exactly what your parents tell you not to.

If she'd only hold still long enough for an abortion, that would surely pacify the left.

Bastard-ette!

Here is a list of 21 famous illegitimate children including poets, actors, authors, popes, and statesmen whose parents were not married. There's actually only 20 listed on the website, but I added one extra at the end.

21 Illegitimate Children

1. Guillaume Apollinaire. Poet.

2. Sarah Bernhardt. Actress.

3. Giovanni Boccaccio. Author.

4. Cesare Borgia. Catholic cardinal.

5. Aleksandr Borodin. Composer.

6. Pope Clement VII. Spiritual head of the Catholic Church.

7. Leonardo da Vinci. Artist.

8. Josephine de Beauharnais. Napoleon's wife.

9. Frederick Douglass. Abolitionist.

10. Alexandre Dumas, fils. Novelist and playwright.

11. Desiderius Erasmus. Scholar and author.

12. Alexander Hamilton. U.S. Secretary of the Treasury.

13. Jenny Lind. Singer.

14. Marilyn Monroe. Actress.

15. Bernardo O'Higgins. Dictator.

16. Francisco Pizarro. Conqueror of Peru.

17. James Smithson. Chemist and inceptor of Smithsonian Institution.

18. August Strindberg. Playwright.

19. Richard Wagner. Composer.

20. William the Conqueror. First Norman ruler.

21. Jrod. Blogger.

For the record, here are the contrasting views on parenthood that we will be able to vote for this November:

Obama…
“If my daughter makes a mistake, I don’t want her punished with a baby.”

Palin…
“As [our daughter] faces the responsibilities of adulthood, she knows she has our unconditional love and support.”

All of this will ultimately be irrelevant since unwed mother will marry unwed father before the baby is born. At that point, they'll have a 50/50 chance of making it work, just like the rest of us married folk.

Andrew Fastow and Milton Friedman would appreciate this

2008-08-13T11:44:00.000-07:00

Harvest of cash: Kern County agency buys public water low, sells high

Delta fish suffered a crippling decline while taxpayers paid nearly $100 million to a Kern County water wholesaler for an environmental protection program that was largely ineffective, a Contra Costa Times investigation has found.
In the process, the wholesaler sold water to the state for as much as $200 an acre-foot and last year bought water from the state for as little as $28 an acre-foot.
The Kern County Water Agency was the biggest buyer in a program that delivered discounted Delta water in a way that now appears to have been particularly harmful to the environment. It also was the biggest seller of water to an ill-fated, publicly-financed state program meant to protect the same environment, the investigation found.
The Kern agency collected $96 million in taxpayer money — nearly all of it borrowed on the bond market — for sales to an "environmental water account" that was shelved after seven years at the end of 2007, records show.
While state water officials took steps to ensure they did not directly repurchase the discount water, the exchanges amounted to "classic arbitrage," where investors exploit price differences in financial instruments, said Barry Nelson, a water policy analyst at the Natural Resources Defense Council.

Andrew Fastow would appreciate this because it is a play right out of Enron's own play book.

Milton Friedman would appreciate it because he demonstrated his knowledge of how government spends money when he said this:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

It boggles the mind.

"New " Short Sale Rule

2008-07-17T11:03:00.000-07:00

Even if you never pick up the business section of the paper, it has been hard not to notice that the stock market has been particularly volatile lately. Although there are numerous factors involved, most of the volatility has stemmed from the uncertainty surrounding the solvency of our nation's two largest mortgage lenders, Fannie Mae and Freddie Mac, as well as questions surrounding the balance sheets of some of the larger commercial and investment banks with large opaque mortgage portfolios like Wachovia, Washington Mutual, Merrill Lynch and Lehman Brothers.

Just as surely as blood in the water attracts sharks, volatility attracts short sellers. Yesterday the Securities and Exchange Commission announced an emergency order stating that they were going to crack down on naked short selling (i.e. selling shares you have not borrowed, nor have even a reasonable expectation of borrowing) in 19 of some of the most volatile and vulnerable financial stocks. Their plan will go into effect Monday.

Here are the highlights:

No person is permitted to short any of the 19 stocks on the SEC list without first securing one of the following:

1) Have a borrow in hand
2) Have a pre-arranged borrow
3) Have shares in inventory

There’s culpability at the order entry level, not just the settlement level.
Pre-borrows will have a fee attached.
Delivery requirement does not permit any Failure(s) to Deliver (FTD), no penalty for non-compliance is mentioned though.
Traditionally there has been a 13 day window before a mandatory buy in happens. All trades will have to settle in 3 days.
Exercising a put option that results in a short position is covered by the new rule, auto-exercise of a put option is also covered.
Assignment of options is not covered
If you have a pre-borrow (not just a locate) the executing broker can take the short order.
SEC will exempt market makers, specialists, etc…details not released yet.
Slated to expire in 10 days but can be extended for 30 days.
Documentation will be paramount.

It is difficult not to conclude that all of this is SEC political posturing in the face of market turmoil. Naked short selling is already illegal after all, just as it should be. The problem is that there is no enforcement. It seems that a few very heavy fines at the order entry level would go a long way towards stopping the practice since there's no incentive for prime brokers to police beyond their mandate that a short seller must have a "reasonable expectation" of being able to deliver a stock. In fact, there's a disincentive because they collect fees for facilitating a short sale--borrow or not.

The Depository Trust & Clearing Corporation (DTCC), where virtually all stocks go to settle, has in place a system called the continuous net settlement (CNS) system. To oversimplify what it does, each prime broker "nets" out their positions each night which acts to cut down on a lot of back office noise and electronic paper shuffling. If a prime broker acting on behalf of a client fails to deliver a stock because the client did not secure a borrow before selling the stock short, it throws the system out of balance. If this is not rectified over the normal settlement period of 3 days, the stock transaction may be flagged FTD (failure to deliver). After 13 days, the position will theoretically go through a "buy in" where the prime broker goes into the open market and purchases the stock in order to make good on the delivery to the counter party. Since markets are dynamic, the price paid in the open market for the buy in can vary greatly from the reported price on the original transaction, and let's not even consider that the stock you buy in could result in another FTD. To say the least the potential for an ugly and costly situation exists when a FTD is issued. One way to avoid this potentially nasty situation is if all prime brokers on the CNS system collude to not issue FTDs unless under the direst of situations. That is exactly what they do. The whole system is a house of cards supported only by the fact that nobody calls in their chips.

I have to give some credit to the SEC. They're an overworked and under-funded department charged with maintaining the integrity of our markets against the malfeasance of some of the most intelligent, clever and greediest people on the planet.

The SEC did well when they eliminated the plus tick rule. Now it is imperative that they extend these naked short rules to the market as a whole and then actually enforce them. The electronic paper trail is not difficult to follow, and if the chances of getting caught go from close to zero (as they are now) to close to 100%, you'll see the practice stop virtually overnight. Nothing hurts a trader more than getting kicked right square in the pocket book.

Short sellers provide a vital service to financial markets. They are often the first to point out that the "emperor has no clothes" and they provide another source of liquidity when markets get overheated. But the artificial conditions created when one engages in naked short selling needs to be stopped.

I wonder why he came here?

2008-07-14T10:30:00.000-07:00

Of all the nations on earth, upon escape from being tortured in an Iranian prison for 9 years, Mr. Batebi chose to come to the United States of America.

From The Economist print edition

An Iranian student protester, sentenced to death for appearing on our cover, has escaped to America

NINE years ago, Ahmad Batebi appeared on the cover of The Economist. He was a 21-year-old student, one of thousands who protested against Iran’s government that summer. He was photographed holding aloft a T-shirt bespattered with the blood of a fellow protester. Soon afterwards, he was arrested and shown our issue of July 17th 1999. “With this”, he was told, “you have signed your death warrant.”

During his interrogation he was blindfolded and beaten with cables until he passed out. His captors rubbed salt into his wounds to wake him up, so they could torture him more. They held his head in a drain full of sewage until he inhaled it. He recalls yearning for a swift death to end the pain. He was played recordings of what he was told was his mother being tortured. His captors wanted him to betray his fellow students, to implicate them in various crimes and to say on television that the blood on that T-shirt was only red paint. He says he refused.

He was sentenced to death for “creating street unrest”. But after a global outcry, the sentence was commuted to 15 years in jail. He speculates that his high profile made it hard to kill him without attracting negative publicity. For two years, he was kept in solitary confinement, in a cell that was little more than a toilet hole with a wooden board on top. He was tortured constantly. Only when he was allowed to mingle with other prisoners again did he begin to overcome his despair.

He suffered a partial stroke that left the right side of his body without feeling. He needed medical attention. The regime did not want to be blamed for him dying behind bars, he says, so he was allowed out for treatment. Three months ago, on the day of the Persian new year, he escaped into Iraq. On June 24th he arrived in America.

He spoke to The Economist on July 7th. Looking at the picture that sparked his ordeal, he says that another man in his place might be angry, but he is not. Mr Batebi is a photographer himself. He says he understands what journalism involves. Had we not published the picture, he says, another paper might have. Looking at the same picture, his lawyer, interpreter and friend Lily Mazahery says she is close to tears: in it, the young Mr Batebi’s pale arms are as yet unscarred by torture.

The protests Mr Batebi took part in nine years ago frightened Iran’s rulers. The students were angry about censorship, the persecution of intellectuals and the thugs who beat up any student overheard disparaging the regime. Mr Batebi thinks Iran could well turn solidly democratic some day. In neighbouring states, religious extremism is popular. In Iran, he says, the government is religiously extreme, but the people are not.

He is cagey about how exactly he escaped. But he says he used a cellphone camera to record virtually every step of his journey, and will soon go public with the pictures and his commentary. Meanwhile, he seems to be enjoying America. He praises the way “people have the opportunity to become who they want to be”. Shortly after he arrived, he posted a picture of himself in front of the Capitol on his Farsi-language blog, with the caption: “Your hands will never touch me again.”

“People have the opportunity to become who they want to be.” It's what the American Dream all comes down to. Sometimes it takes an outsider to comment on the obvious, something so obvious it is taken for granted by most of us.

“The obscure

we see eventually.

The completely obvious.

it seems

takes longer”.

– Edward R. Murrow

Racism in Brazil

2008-06-27T08:22:00.000-07:00

When I think of Brazil, the first three things that come to mind are passionate, scantily-clad, soccer fans, that Chiquita banana lady, and of course Charo. As far as I'm concerned that's clever brand management on Brazil's part, because upon further reflection the next three things that come to mind are institutionalized corruption, favelas and that depressing movie City of God. So on balance, Brazil appears to be just another BRIC nation taking the good with the bad while trying to navigate their way to a successful future.

But maybe all is not what meets the eye:

Brazilian Secret 93 Million Don't Want to Talk About Is Racism

Brazilians pride themselves on their multicultural society, home to the largest black population outside of Africa. Their food, music and dance -- their feijoada, the national dish of black beans stewed with pork and beef, and their rhythmic samba and bossa nova -- are a mishmash, the legacy of more than 200 indigenous peoples, Portuguese colonists and about 4.5 million Africans who were brought to the country during more than 350 years of slavery. Interracial marriages are common.

So pervasive is the perception that Brazil is a paragon of racial harmony and equality that it makes the discussion of discrimination all but impossible, says Carlos Santana, a Workers' Party legislator who represents Rio de Janeiro and heads the National Congress's Parliamentary Group to Promote Racial Equality.

``In Brazil, we can talk about anything but race,'' Santana says. ``The myth of racial democracy created a taboo.''

Some people outside of government use harsher terms.

``We have the strongest apartheid ever because people deny racism exists,'' says Humberto Adami, head of the nonprofit Institute for Racial and Environmental Laws in Rio de Janeiro. ``It's very hard to combat what is taken as nonexistent.''

Statistics paint a picture of a nation tainted by the legacy of unequal opportunities. One hundred twenty years after becoming the last country in the Americas to abolish slavery, Brazil remains divided by color. People of African descent are ``a large, impoverished and discriminated-against population,'' the Brazilian embassy in Washington said in a press release posted on its Web site in April.

Blacks -- defined by the government and nongovernmental organizations as people who describe themselves as either ``preta'' (black) or mixed-race ``parda'' (brown) -- make up almost half of the population. Of the nation's more than 187 million people, 92.7 million are black and 93.1 million are white; Asians, Indians and those who haven't declared a race make up the rest. On average, they earn little more than half as much as whites, 578.2 reais ($361) a month compared with 1,087.1 reais, according to a report based on 2006 data by IPEA Institute for Applied Economic Research, a government group in Brasilia.

(snip) The whole article is worth a read.

So often here in the United States we're told by the social justice crowd that our nation remains mired in an antebellum mindset, but I do not believe that to be true for a second. While racism surely exists in the hearts of a percentage of Americans--Americans of all colors by the way--as a nation we're light years ahead of places like Brazil where the legacy of slavery and current race relations have simply been ignored. If the social justice crowd acknowledged that they'd be out of a job; for their livelihood depends on the perpetuation of the myth. Second of all, it would seem that they should be in a lather over this. They usually get worked up over far less. Maybe they're not because Lula De Silva is a leftist himself, though admittedly he seems to be doing a better job at governing than most of his peers.

Upon further reflection, this is the Brazil of my mind's eye: Brigitte Bardot in the Girl From Ipanema

The carpenter and his tools

2008-05-21T07:32:00.000-07:00

It's a poor carpenter who blames his tools for a shoddy job.

May 21 (Bloomberg) -- Moody's Investors Service said it's conducting ``a thorough review'' after the Financial Times reported that a computer error was responsible for Aaa ratings being assigned to complex debt securities that slumped in value.

In an up market the glitch is called a "feature." In a down market the glitch is called a "bug."

Banks obtained the highest grades in 2006 and 2007 for constant proportion debt obligations, funds sold in Europe that used borrowed money to speculate on an improvement in credit quality. The subprime crisis caused banks including UBS AG and ABN Amro Holding NV to unwind their CPDOs, triggering losses of as much as 90 percent for investors.

Some senior staff at Moody's were aware in early 2007 that CPDOs rated Aaa the previous year should have been ranked as many as four levels lower, the FT reported today, citing internal Moody'sdocuments. The firm adjusted some assumptions to avoid having to assign lower grades, the paper said.

Senior staff was aware of the problem, but when the moneytrain is rollin' few are brave enough to point out that the wheels look loose and might be in danger of falling off.

`If it is true, does that mean other products haven't been rated correctly?'' said Puneet Sharma, Barclays Capital's head of investment-grade credit strategy in London. ``Will they be downgraded? It could lead to turmoil.''

Rest easy Puneet, surely this is an isolated incident.

Moody's and Standard & Poor's stripped CPDOs of their Aaa grades this year as rising defaults in the U.S. housing market increased the cost of credit-default swaps referenced by the funds by as much as 670 percent in the past year.

Guess there's no penalty for piling on at this point.

``The integrity of our ratings and rating methodologies is extremely important to us, and we take seriously the questions raised about European CPDOs,'' New York-based Moody's said in an e-mailed statement. ``We are therefore conducting a thorough review of this matter.''

I love it when hookers talk about integrity, especially when they still have lastnight's mascara and lipstick smeared all over their face.

Moody's has ``adjusted its analytical models on the infrequent occasions that errors have been detected,'' the statement said. ``It would be inconsistent with Moody's analytical standards and company policies to change methodologies in an effort to mask errors.''

Computer glitches aside, it never ceases to amaze me how these supposedly brilliant builders of analytical models account for the possibility of a black swan event occurring by just tossing out the possibility. And since Wall St. is ruthlessly efficient when it comes to sucking up all the best talent that money can buy, it occurs to me that the programmers working for ratings agencies are not necessarily the best and brightest.

Where the rubber meets the pavement

2008-05-20T06:30:00.000-07:00

Ever since environmentalism became a shibboleth of the left, and therefore the Democrats, I have wondered how they would react when the time came to reconcile their actions with their purported beliefs. It appears I will not have to wonder much beyond the DNC in Denver this summer:

Caterers find eco-standards tough to chew

Fried shrimp on a bed of jasmine rice and a side of mango salad, all served on a styrofoam plate. Bottled water to wash it all down.
These trendy catering treats are unlikely to appear on the menu at parties sponsored by the Denver 2008 Host Committee during the Democratic National Convention this summer.
Fried foods are forbidden at the committee's 22 or so events, as is liquid served in individual plastic containers. Plates must be reusable, like china, recyclable or compostable. The food should be local, organic or both.

How are we ever going to make the shift from fossil fuel to vegetable oil power if fried food is forbidden? That's a serious question I keep meaning to ask somebody with a "powered by vegetable oil" sticker proudly displayed on their bumper.

And caterers must provide foods in "at least three of the following five colors: red, green, yellow, blue/purple, and white," garnishes not included, according to a Request for Proposals, or RFP, distributed last week.

...All the pretty colors of the rainbow.
Reading this far I was reminded of the first Burning Man theme camp planning meeting I attended a few years ago. We had settled on a genie-type theme and purchased a used golf cart we intended to turn into an art car. One of my camp mates proposed turning the golf cart into an elaborate motorized genie bottle and she had done some nice sketches to show us what she had in mind. We all agreed that it looked great, then somebody asked her for a list of materials and a rough outline of the building plan so we could get started. Her confusion over the question turned to slight irritation when she realized that not only did she not have any specs, we weren't going to do it all for her. The vision quickly turned to dust.
I imagine the person who was tasked with creating the DNC catering RFP is similar to my idealistic camp mate that year.

The shrimp-and-mango ensemble? All it's got is white, brown and orange, so it may not have the nutritional balance that generally comes from a multihued menu.
"Blue could be a challenge," joked Ed Janos, owner of Cook's Fresh Market in Denver. "All I can think of are blueberries."

Ed nails it. Blueberries being the only exception that immediately springs to mind, every first year culinary student knows that putting blue on a plate is a cardinal sin.

Caterers praise the committee and the city for their green ambitions, but some say they're baffled by parts of the RFP.
"I think it's a great idea for our community and our environment. The question is, how practical is it?" asks Nick Agro, the owner of Whirled Peas Catering in Commerce City. "We all want to source locally, but we're in Colorado. The growing season is short. It's dry here. And I question the feasibility of that."
Agro's biggest worry is price. Using organic and local products hikes the costs.
"There is going to be sticker shock when those bids start coming in," he says. "I'll cook anything, but I've had clients who have approached me about all-organic menus, and then they see the organic stuff pretty much doubles your price."

Mr. Agro,

Please resist the urge to use words like "practical" and "feasibility", for they have no meaning in the eco-lexicon. Just make it happen, and if you're not prepared to put the good of our planet above your personal profits, we will find somebody that does.

Signed, DNC

P.S. we've noted your propensity to question authority, and we're not happy, but we'll address your insouciance after the convention.

The document, which applies only to the host committee's parties, came after months of work that involved discussions with caterers and event planners along the Front Range, says Parry Burnap, Denver's "greening" director.

Months of work filled by many, many hours spent in committee and sub-committee meetings to come up with the RFP. There's nothing bureaucracy loves more than more bureaucracy.

Thousands of other parties hosted by corporations, lobbying groups, individuals, nonprofits and more will happen in Denver during the convention, Burnap says. None of them is subject to the committee's green agenda.
The committee's effort to host eco-friendly events, she says, hinges on its determination not just to put on a smart convention but to transform Denver into a top-shelf green city.

What's a law without a gaping loophole afterall? I hope somebody keeps score of all the non-conforming parties that take place and who hosted them.

"We are hoping that everything we are doing for greening (the convention) has some legacy value," she says.
The RFP, for example, will likely live on after the convention in a brochure the city will distribute widely to help guide local businesses interested in improving their green practices.

It will have legacy value alright. My guess is that the DNC will host a small handful of perfectly "eco-friendly" parties and showcase them as the rule rather than the exception.

Burnap says taking the organic and local route may be more costly, but the committee thinks caterers will find ways to comply and still make a profit.
"It takes some creativity because some of these things are more expensive," she says. "But we're at the front end of a market shift."

One of two things will happen. The caterers will sacrifice a large percentage of their profit margin and "make it happen" for the "greater good" or they will cheat and charge organic prices for non-organic products. Most people are not able to tell when a filet mignon has been replaced with an "eye of round" which is a much cheaper cut of meat, for example. Who will be able to tell if the avocados used in the guacamole are organic or not? Catering is hard work fraught with unforeseen hassles and much pressure in order to put out a quality product that the clients are unlikely to even fully appreciate. I would be shocked if any caterer that was not independently wealthy would sacrifice any part of their already slim profit margin. Cheating would be far easier, especially when the theme is all a pose in the first place.

Joanne Katz, owner of Three Tomatoes Catering in Denver, cheers the committee's environmental aspirations and is eager to get involved with the convention, but she wonders if some of the choices the committee is making are really green.
Compostable products, such as forks and knives made from corn starch, are often imported from Asia, delivered to the U.S. in fuel-consuming ships. But some U.S. products are made from recyclable pressed paper. Which decision is more environmentally sound?
"Customers are beginning to demand these things, and we don't have all of the information," she says. "And we are doing the best we can, one project at a time."

Ms. Katz,

Your wondering is troubling. We will deal with you after the convention, too.

Signed, DNC

Burnap acknowledged that figuring out what is most green can be difficult.
"Maybe in 20 years, there will be better analysis for us to make better choices," she says. "One we are talking about now is, is it better to compost or to recycle? If you are using a cup for a beverage, is it better to be (plastic) and back in the materials stream, or compostable, biodegradable waste and go into the waste stream or compost? There are no definitive answers."
Composting for the convention hasn't been entirely figured out yet, she says.

What a wonderful nation we live in; where the greatest problem of the moment seems to be whether it is better to compost or to recycle? I wonder what a typhoon survivor in Burma, or an earthquake survivor in China, or a Darfur refugee, or, or, or--thinks is the biggest problem of the day?

The committee is working with other groups to develop a carbon-footprint "calculator" that will measure the environmental impact of each event and suggest an "offset" — a fee — that will go toward a fund helping to match carbon losses with carbon gains.
"That's a fun one," Burnap says. "If these event planners will calculate and offset, it will start to get the money flowing into the Colorado Carbon Fund, a fund that will reinvest in renewable energy here in Colorado."

Whoooopppieeeee! Boy I know nothing gets my motor revved quite like carbon-footprint calculations. Next up, a self-administered root canal sans novicane!

I hope they don't plan on encouraging people to walk around Denver during the convention, since it has been proven in the U.K. that walking kills the planet.

The only advice I can give to the caterers of Denver is to get all of your money up front, in cash.

The two faces of Citigroup

2008-05-10T06:49:00.000-07:00

Banks, like all businesses outside of the non-profit realm, are in the business of making money. The difference between banks and most other businesses is that banks do not create anything tangible. Of course they make tangible products possible by providing financing for companies that do actually create things, but the value in a bank resides in the intellectual capital of its workforce.
Any industry that promotes the promise of a big payday tends to attract the most clever among us, and there is no shortage of clever people on Wall Street. It is safe to say that if it is possible to squeeze a dollar out of a rock, lever it to return $100 and charge 20% for the service, Wall Street has come up with 25 ways to do it.
Auction rate securities (ARS) are one of the many inventions of Wall Street. Pitched to municipalities, port authorities, school districts and other entities that don't always grasp the full meaning of caveat emptor, they were assumed to be as "safe as cash" while providing a little extra yield. Like many things that work great until they don't, it turns out ARS aren't exactly as safe as cash.

Citigroup Leads Wall Street Drive to Hurt Taxpayers
May 9 (Bloomberg) -- Taxpayers from Massachusetts to California are paying Wall Street banks to end derivative contracts gone bad as they exit the collapsing auction-rate bond market, with penalties in some cases topping $10 million and compounding the pain of rising borrowing costs.

Sacramento County, California, paid Morgan Stanley $5 million to cancel an interest-rate swap agreement when it refinanced $79.5 million in auction-rate securities last month. The fee added to the cost of the bonds after the rate on the securities more than doubled to 9.8 percent in March as dealers stopped supporting the market.

As you may have heard, there's a home price melt down going on out there. Sacramento County is one of the hardest hit areas in the nation. This is good news for those who have been patiently saving towards a down payment on a starter home. It is not so good news for a county government with a declining tax base. Can Sacramento County really afford an extra $5million just to cancel a deal gone bad?

States, cities, hospitals and colleges face penalties exceeding $10 million to terminate swaps that failed to protect them against higher rates, according to interviews with borrowers and advisers. That's on top of the $1 billion in fees they're paying to dealers to help sell bonds that would replace auction-rate securities they sold, based on industry averages.

Citigroup, based in New York, was the top underwriter of auction-rate securities in the municipal market, arranging $55 billion in sales between 2000 and the end of last year, according to data compiled by Thomson Reuters. Zurich-based UBS AG, which said on May 6 it will close or sell its municipal bond department, underwrote $42 billion, followed by Morgan Stanley of New York at $22 billion and 19 others.

The banks are earning fees on both sides of the trade and us taxpayers are footing the bill. That's a nice hedge if you're the bank.

All this is just a drop in the bucket though:

Citigroup Plans to Shed About $400 Billion of Assets

May 9 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit plans to get rid of about $400 billion of assets over the next three years as he starts to whittle away at the company built by Sanford``Sandy'' Weill.

When he's done, Citigroup may cease to be the biggest U.S. bank, a title the firm has held for a decade. ``There will be more'' divestitures, Pandit told shareholders at a meeting today at the bank's New York headquarters.

The company, which lost $5.1 billion in the first quarter, has booked more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year. The shares dropped in New York trading today, as analysts said they were unimpressed by Pandit's proposals for returning to profitability.

What is it that causes some of the most clever people in the world to rack up such huge losses?
Besides being the most lucid resident of Berkeley, Michael Lewis, author of the famous Wall St. book Liar's Poker, remains one of my favorite columnists. He has this to say:

To both their investors and their bosses, Wall Street firms have become shockingly opaque. But the problem isn't new. It dates back at least to the early 1980s when one firm, Salomon Brothers, suddenly began to make more money than all the other firms combined. (Go look at the numbers: They're incredible.)

The profits came from financial innovation -- mainly in mortgage securities and interest-rate arbitrage. But its CEO, John Gutfreund, had only a vague idea what the bright young things dreaming up clever new securities were doing. Some of it was very smart, some of it was not so smart, but all of it was beyond his capacity to understand.

Ever since then, when extremely smart people have found extremely complicated ways to make huge sums of money, the typical Wall Street boss has seldom bothered to fully understand the matter, to challenge and question and argue.

New New Thing

This isn't because Wall Street CEOs are lazy, or stupid. It's because they are trapped. The Wall Street CEO can't interfere with the new new thing on Wall Street because the new new thing is the profit center, and the people who create it are mobile.

Anything he does to slow them down increases the risk that his most lucrative employees will quit and join another big firm, or start their own hedge fund. He isn't a boss in the conventional sense. He's a hostage of his cleverest employees.

There's an aphorism that states, "you can't cheat an honest man." It means that in order for a scheme to work, the one being solicited for the deal needs to feel like they're getting something for nothing. In the case of ARS, the purchasers thought they were getting a debt instrument as safe as cash but with a higher yield. Just as many of the most clever among us end up on Wall St, many of the not-so-clever among us end up in government, especially local government.

The late, great Milton Friedman had this to say:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

So there you have it. Clever people fleecing not-so-clever people spending money that doesn't belong to them. I have a feeling that the other industry that attracts clever people in search of riches, the law industry, will make out OK in all this too.

And some believe we should have higher taxes...

Level 3 Asset Watch

2008-05-07T12:04:00.000-07:00

DJ Merrill Level 3 Assets $82.4B At 1Q End, 8% Of Total Assets
Tuesday, May 06, 2008 4:37:57 AM (GMT-07:00)

Merrill Lynch & Co. (MER) said Tuesday that its Level 3 assets at the end of the first quarter increased nearly 70%, to $82.4 billion, from $48.6 billion at the end of the fourth quarter.
The Wall Street firm said the Level 3 assets, which include assets measured at fair value on a recurring and non-recurring basis, increased because of the recording of trading assets, for which the exposure was previously recognized as derivative liabilities at the end of the fourth quarter.
The company said it also transfered $5.6 billion of European commercial real estate mortgage loans into level 3 that had previously been classified in Level 2.
"During the first quarter of 2008, there was a decrease in the liquidity for these products, resulting in the increased use of unobservable inputs to derive their fair value," Merrill said.
In its quarterly report filed with the Securities and Exchange Commission, Merrill said Level 3 assets as a percentage of total assets amounted to 8% at the end of the first quarter, compared with 5% at the end of the fourth quarter.

In an earlier post I talked about level 3 assets as the bucket that banks dump the stinkiest of their dirty laundry into. Management literally guesses what the asset is worth and assigns it that value. Here's an interesting screenshot that captures the current top 18 companies sorted by their level 3 assets:

Merrill is number 3 at the moment. Citigroup and Goldman Sachs own the number 1 and 2 spots respectively. The question that continues to nag me is if by definition level 3 assets are assigned a best guess value in the first place, how can we take seriously what a company says they have in their level 3 bucket? Where's the tipping point?

If it were not for financial institution convertible security secondary offerings floated to shore up their sick balance sheets, investment bankers would have little to no business to speak of so far this year. That would make their balance sheets look even worse.

I see more writedowns to come.

Global Warming Mulligan #1

2008-05-01T12:08:00.000-07:00

In this crazy, mixed up, topsy-turvy world--where anything can cause everything, or even nothing at all--it makes perfect sense that a cooling trend can be interpreted as further evidence that man is causing global warming.

Ocean Cooling to Briefly Halt Global Warming, Researchers Say
April 30 (Bloomberg) -- Parts of North America and Europe may cool naturally over the next decade, as shifting ocean currents temporarily blunt the global-warming effect caused by mankind, Germany's Leibniz Institute of Marine Sciences said.

Average temperatures in areas such as California and France may drop over the next 10 years, influenced by colder flows in the North Atlantic, said a report today by the institution based in Kiel, Germany. Temperatures worldwide may stabilize in the period. `
`Those natural climate variations could be stronger than the global-warming trend over the next 10-year period,'' Wood said in an interview. ``Without knowing that, you might erroneously think there's no global warming going on.''

Germany's universities have been going downhill since they quit charging tuition; arguably longer. I assume that the Leibniz Institute of Marine Sciences is staffed by many graduates of German universities. But honestly, is "don't believe your lyin' eyes" the best they can offer the world?

``Natural variations over the next 10 years might be heading in the cold direction,'' Wood said. ``If you run the model long enough, eventually global warming will win.''

Yes, Dr. Wood, and if you ran your model even longer, I bet global cooling would win. Variations in global temperature is the nature of, er, global temperature variation afterall. By the way, what does global warming win?

Here's my favorite part:

``We thought a lot about the way to present this because we don't want it to be turned around in the wrong way,'' Keenlyside said. ``I hope it doesn't become a message of Exxon Mobil and other skeptics.''

Cause, like, only shills for BIG OIL don't believe in global warming.

This is a picture of Palm Jumeirah, which is a man-made luxury island just off the coast of Dubai. It has more than doubled the waterfront area of Dubai and created luxury homes for thousands of people. I was reading an industry report today from a well-known investment bank and it stated that there is estimated to be $1.5 trillion invested in Dubai and the greater surrounding area over the next 5 years. Dubai, is at sea-level. I wonder how serious those who are going to invest $1.5 trillion at sea-level consider the imminent threat of rising tides due to anthropogenic global warming?

I hope Al Gore is translating "An Inconvenient Truth" into Arabic. Who else can save them from themselves?

Now taking nominations for the Worst Magazine Cover of the year

2008-04-22T09:43:00.000-07:00

I humbly submit the following:

I saw this magazine cover sitting on the coffee table at a friend's house two days ago and I had to look twice to believe what I was seeing. After digesting my double-take i concluded my eyes had not deceived me; for there it was for all the world to see: Time Magazine equates the importance of "The War on Global Warming" with the Battle for Iwo Jima. I'll give Time an "A" for shock value alright, but if their intention was to shock folks like me into thumbing through the issue--let alone purchase it--well let's just say they failed miserably.

Dennis Prager sums up my thoughts on the matter rather succinctly, so I'll just add, "yeah, what he said."

The Time cover is cheap heroism. It is a liberal attempt to depict as equally heroic those who fight carbon emissions and those who fought Japanese fascists and Nazis.

Second, for much of the left, the cover reflects the primacy of environmental concerns over moral concerns. For example, the left seemed never to care about the millions of Africans who continued to die from malaria largely because of the environmentalists' worldwide ban on the use of DDT as pesticide. The same holds true for another leftwing environmentalist fantasy. Changing corn into biofuels is causing a surge in food prices throughout the world. The European Union continues this policy despite warnings even from some environmentalists that food shortages, starvation and food riots are imminent. But human suffering is not as significant as environmental degradation.

Third, the left is far more internationalist -- global, if you will -- in its orientation than national. As the Time article states, "Going green: What could be redder, whiter and bluer than that?" Whereas, for most Americans patriotism remains red, white and blue, for much of the left it is green.

Fourth, the further left you go, the more inclined you are to hysteria. From the threat of DDT to the threat of heterosexual AIDS in America to that mass killer secondhand smoke, the left believes and spreads threats that, unlike the threat of Islamic terror, really are "scare tactics."

I'm sure there are plenty of people out there who see nothing wrong with Time's cover this week--even going so far as to celebrate it as speaking "truth to power" or something--and will take the opportunity to dismiss any objection as typical right-wing hysteria. Too bad they'll also not realize that the men on the cover and their brothers-in-arms fought for their right to hold and express their mis-guided feelings and opinions.

Oh yeah, HAPPY EARTH DAY, whatever that means.

The Cost of Healthcare

2008-04-14T08:14:00.000-07:00

One thing that I've never been able to understand with regards to our nation's perpetual health care debate is why anybody thinks that insurance is the best way to pay for health care in the first place. If one looks at the insurance industry model in general, the whole system is geared toward pricing the probability of one-off events occurring among a certain portion of those who are insured. For example, automobile insurance exists to protect against theft and accidents; home insurance to protect against catastrophic loss from fire and natural disasters; and life insurance to protect one's family against the untimely death of the breadwinner. Insurance companies can stay in business because the risk of all policy holders making a claim at the same time is unlikely, and most policies never pay out anything substantial if they pay anything at all.

Now consider health care. The probability that somebody with a health care policy is going to make a claim, actually several claims over the life of the policy, is all but assured. What would happen to the price of auto insurance if every time you got a tune up for your car, or filled the tank with gas, you then submitted a claim? Where would home insurance premiums be if it was standard practice to ask for reimbursement after having your house painted or the hot water heater fixed? Would it be within the realm of possibilities that insurance companies would try any number of tricks to make the process of filing a claim more cumbersome so as to cut down on the number of claims they were bound to honor?

The way the system is now, going in for a health check up or a minor procedure and submitting the bill to your insurance company for payment is akin to submitting an automobile tune up receipt or a general home maintenance receipt to your insurance company. A health check up, car tune up and the upkeep of one's home are all similar inasmuch as they can be categorized as general maintenance. Items that fall under general maintenance should not be subjected to the insurance reimbursement maze. As Dr. Kellerman puts it in an opinion article in today's WSJ:

The health insurance model is closest to the parasitic relationship imposed by the Mafia and the like. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection." But even the Mafia doesn't stick its nose into the process; once the monthly skim is set, Don Whoever stays out of the picture, but for occasional "cost of doing business" increases. When insurance companies insinuate themselves into the system, their first step is figuring out how to increase the skim by harming the people they are allegedly protecting through reduced service.

Insurance companies act as middlemen, and middlemen add layers to the cost of business, not take them away.

Insurance is all about betting against negative consequences and the insurance business model is unique in that profits depend upon goods and services not being provided. Using actuarial tables, insurers place their bets. Sometimes even the canniest MIT grads can't help: Property and casualty insurers have collapsed in the wake of natural disasters.

Health insurers have taken steps to avoid that level of surprise: Once they affix themselves to the host – in this case dual hosts, both doctor and patient – they systematically suck the lifeblood out of the supply chain with obstructive strategies. For that reason, the consequences of any insurance-based health-care model, be it privately run, or a government entitlement, are painfully easy to predict. There will be progressively draconian rationing using denial of authorization and steadily rising co-payments on the patient end; massive paperwork and other bureaucratic hurdles, and steadily diminishing fee-recovery on the doctor end.

Anybody that's ever been to an auto body shop knows that a 2-tier system of billing exists. Tell them you are going to submit the bill to insurance for payment and you will get a much different estimate than if you reveal you'll be paying out of pocket. The same 2-tier system exists in our current health care system:

Some of us are old enough to remember visiting the doctor and paying him/her directly by check or cash. You had a pretty good idea going in what the service was going to cost. And because the doctor had to look you in the eye – and didn't need to share a rising chunk of his profits with an insurer – the cost was likely to be reasonable. The same went for hospitals: no $20 aspirins due to insurance-company delay tactics and other shenanigans. Few physicians became millionaires, but they lived comfortably, took responsibility for their own business model, and enjoyed their work more.

Several years ago, I suffered a sports injury that necessitated an MRI. The "fee" for a 20-minute procedure was over $3,000. My insurance company refused to pay, so I informed the radiologist that I'd be footing the bill myself. Immediately, the "fee" was cut by two thirds. And the doctor was tickled to get it.

Like so many things in life, personal responsibility needs to be introduced into the health care equation. Being forced to pay for one's own health maintenance should in theory promote a more healthy lifestyle. Young, healthy individuals need little more than catastrophic health insurance to protect against the big unforseen bumps in life. As one gets older, perhaps the level of coverage could go up on a sliding scale. In any case, whatever system of payment for health services is eventually instituted needs to be market-based and portable so it is not dependent on a particular job or social circumstance. Once the tremendous amount of inertia caused by the millions of minute claims processed each day by insurance companies is reduced, maybe then they can focus on the efficiency of the system; or get out of the business altogether.

Quantifying a WAG

2008-04-09T07:01:00.000-07:00

Today several investment banks announced their share of Level 3 assets. In case you are wondering what level 3 assets are--and level 1 and 2 assets for that matter--the Wall St. Journal has this definition:

Level 1 is assets that have observable market prices. Think a stock traded on the NYSE.
Level 2 assets don’t have an observable price, but they have inputs that are based on them. Think an interest-rate swap where its components are observable data points like the price of a 10-year Treasury bond.

Level 3 is for assets where one or more of those inputs don’t have observable prices. This is the bucket that has been described as a guesstimate, because it is reliant on management estimates. As things stand now, companies who haven’t early adopted FAS 157 don’t give this more detailed breakdown to investors. So, one result of FAS 157 is more information.

Warren Buffet famously said that he never invests in things that he does not understand. I wonder how many investment banks truly understand what they have filed under Level 3 assets? (Bloomberg article)

Goldman's share of Level 3 assets surged 39 percent to $96.4 billion at the end of February from $69.2 billion in November, according to a filing with the U.S. Securities and Exchange Commission today. The ratio of Level 3 to total assets rose to 8.1 percent from 6.2 percent.

While many subprime-related stakes that lost almost 100 percent of their value since July were categorized in Level 3, other holdings such as private-equity stakes, real estate and rarely traded corporate debt are also included because market prices for them aren't available. More assets have become difficult to value in the last three months as investors shunned a wider array of credit, reducing trading.

Goldman Sachs has $96.4 billion of Level 3 exposure that is valued on what amounts to a wild ass guess (WAG). The obvious question is how can the figure $96.4bil be taken seriously if it is, by definition, a WAG?

Goldman Chief Financial Officer David Viniar said last month the Level 3-to-assets ratio had risen to about 8 percent mostly because some assets classified as Level 2, including commercial real estate loans, dropped to Level 3. The biggest increase in the hard-to-value category was a 59 percent jump in derivative contracts, according to today's filing. Mortgage and other asset-backed loans and securities increased 56 percent in the quarter.

Mr. Viniar does not seem too concerned that assets that were formerly able to be valued (Level 2) are dropping into the Level 3 bucket. This is the same Mr. Viniar that last August was shocked when their volatility models did not anticipate the severity of the sub-prime melt-down.

“We are seeing things that were 25-standard deviation events, several days in a row,” he said then.

My biggest problem with derivatives in general is that once you move beyond the realm of equity index options and futures, they seem to become easily decoupled from the underlying asset from which they are supposed to derive their worth. Many derivative markets, until recently, were several times more liquid than the market for the underlying asset, which is why a derivative was created in the first place. The problem then becomes once the music stops, the person left without a chair is stuck holding a bag that is impossible to value accurately. Once that person tries to value his "bag" it forces everybody else to do the same. And so the downward spiral of valuation begins; unless you can stuff it in the Level 3 sack. Eventually though, the can that keeps getting kicked down the road is going to get kicked back. I won't be surprised if it's loaded with gun powder and the fuse is lit.

To be sure, Goldman Sachs is not the only investment bank with this problem, just the biggest.

Morgan Stanley's Level 3 assets rose 6.1 percent to $78.2 billion last quarter, the firm said today in an SEC filing. Lehman, which also filed a report with the agency today, said its Level 3 holdings rose 1.3 percent to $42.5 billion. All three firms are based in New York. The harder-to-value securities made up 7.2 percent of Morgan Stanley's total assets at the end of February, up from 7 percent three months earlier. Lehman's ratio declined to 5.4 percent from 6.1 percent as total assets grew faster.Lehman CFO Erin Callan said last month the ratio would be around 5 percent.

Before we congratulate Lehman Brothers for a job well done, recall that they just raised $3bil a couple weeks ago to shore up their liquidity issues.

``The uncertainty of Level 3 asset valuation is already priced in the stocks of brokerage firms,'' said Steve Roukis, managing director at Matrix Asset Advisors Inc. which oversees $1.8 billion of assets in New York. ``We expect more writedowns in coming quarters, but they're not going to be huge numbers like the past quarters.''

I wish I was as optimistic as Mr. Rourkis, who believes that assets valued by WAGs are already priced into the market. However, I do not see this liquidity problem ending any time soon, which may be a contrary indicator...or not.

John Meriwether's 9...8...7...lives

2008-03-19T11:01:00.000-07:00

Fool me once, shame on you.

Fool me twice, shame on me:

John Meriwether's Bond Fund Loses 24% on Credit-Market Plunge
2008-03-19 13:42 (New York)

By Katherine Burton and Saijel Kishan
March 19 (Bloomberg) -- JWM Partners LLC, the investment
firm run by ex-Long-Term Capital Management LP chief John
Meriwether, lost 24 percent in its $1 billion fixed-income hedge
fund this year through March 14, according to two people with
knowledge of the matter.

Meriwether's Relative Value Opportunity fund was hurt as
bond managers such as Peloton Partners LLP and Carlyle Capital
Corp. were forced to sell securities to meet margin calls, said
the investors, who asked not to be identified because JWM
doesn't publicly disclose returns. The Greenwich, Connecticut-
based firm, which is selling holdings to reduce borrowings and
lower risk, didn't have any loans called, they said.

``There's been a lot of forced de-leveraging,'' said
Benjamin Sarly, head of marketing at Sanno Point Capital
Management in New York, a relative-value credit fund.
Meriwether declined to comment.

JWM Partners opened a year after Russia's 1998 default
resulted in almost $4 billion of losses for Greenwich,
Connecticut-based Long-Term Capital. The Federal Reserve
orchestrated a bailout by its 14 lenders.

Relative-value funds try to profit from price changes
between related bonds. They rarely make outright bets that a
specific bond will rise or fall. Investors in these funds expect
to make about 1 percent a month.

The Pope of Hope

2008-02-22T10:00:00.000-08:00

Barack Obama's meteoric rise to stardom is an interesting phenomena. It is not often that a politician can capture the imagination of so many people across such a broad spectrum. For this to happen, the ground must be fertile, and fertile it is. After 8 years of Bush, and before that, 8 years of Clinton, and before that, 4 years of Bush, I suspect that there is a large portion of the population suffering from both Bush and Clinton fatigue. People are hungry for a new message, even if that message is no deeper than "hope for the future." Handsome in an exotic way, articulate almost to a fault, full of youth and vigor, Obama provides the perfect vessel into which people can project their vision of the future.

Kathleen Parker writing in the Washington Post elaborates:

So what is the source of this infatuation with Obama? How to explain the hysteria? The religious fervor? The devotion? The weeping and fainting and utter euphoria surrounding a candidate who had the audacity to run for leader of the free world on a platform of mere hope?

If anthropologists made predictions the way meteorologists do, they might have anticipated Obama's astronomical rise to supernova status in 2008 of the Common Era. Consider the cultural coordinates, and Obama's intersection with history becomes almost inevitable.

To play weatherman for a moment, he is a perfect storm of the culture of narcissism, the cult of celebrity, and a secular society in which fathers (both the holy and the secular) have been increasingly marginalized from the lives of a generation of young Americans.

All of these trends have been gaining momentum the past few decades. Social critic Christopher Lasch named the culture of narcissism a generation ago and cited addiction to celebrity as one of the disease's symptoms -- all tied to the decline of the family.

That culture has merely become more exaggerated as spiritual alienation and fatherlessness have collided with technology (YouTube, Facebook, MySpace, etc.) that enables the self-absorption of the narcissistic personality.

I agree that the cult of celebrity and the marginalization of fathers as role models are symptoms of the larger problem that is narcissism. It is not surprising that narcissism is so prevalent in our society. One should outgrow their narcissistic tendencies at some point during adolescence. Sadly, and to the detriment of society, this is not happening. Personal responsibility and accountability are the greatest antidotes to narcissism; and these two traits are anathema to government's reason for existence as they greatly diminish the need for what government offers. If one has a nation of citizens who are responsible and accountable, there is no need for government to act as a nanny. It is one thing to treat children like children, it is another thing to treat adults like children. Treating adults like children arrests one's development, and though there are numerous side effects to this, the most dangerous is narcissism. Perhaps this is why Senator Obama has such wide appeal among our nation's youth, and those who's personal growth was arrested during their adolescent years. I am not saying that every person that likes Obama is a childish narcissist, but what he offers seems to hold more sway with those possessing a narcissistic bias than those who do not.

Then there's this:

But underpinning that popularity is something that transcends mere policy or politics. It is hunger, and that hunger is clearly spiritual. Human beings seem to have a yearning for the transcendent -- hence thousands of years of religion -- but we have lately shied away from traditional approaches and old gods.

Thus, in post-Judeo-Christian America, the sports club is the new church. Global warming is the new religion. Vegetarianism is the new sacrament. Hooking up, the new prayer. Talk therapy, the new witnessing. Tattooing and piercing, the new sacred symbols and rituals.

Obama as an empty vessel offers his supporters anything they choose to fill him with. He reminds me of a big stick of fluffy cotton candy. Looks great, tastes good, but ultimately un-fulfilling; and if you eat too much, you'll wake up with a belly ache.

I am of the opinion that many of those who are currently swooning under the spell of the Pope of Hope will wake up with a belly ache soon enough.

When a Man stops believing in God he doesn't then believe in nothing, he believes anything.--G. K. Chesterton

JROTC Decision Revisited

2007-12-31T12:15:00.000-08:00

This story missed my attention recently:

SAN FRANCISCO
Board approves year extension for high schools' JROTC program
Classes allowed to count for physical education credit

(12-11) 20:09 PST San Francisco -- The Junior Reserve Officers' Training Corps gets to stay in San Francisco high schools for one more year, the district's school board decided Tuesday night.

More than 100 students packed the meeting as the board voted 5 to 2 to extend the program through the 2008-2009 school year.

Board President Mark Sanchez and board member Eric Mar voted against the measure.

The board also decided to allow JROTC courses to continue to count toward up to two years of physical education courses, which is required for graduation.

Last November I posted a heartfelt rant about the SFUSD's decision to get rid of the JROTC. I even wrote a letter to Dan Kelly and the rest of the school board members who voted in favor of the ban. He was kind enough to reply to me, and we exchanged ideas for a while, until he quit replying anyhow. That's easier than admitting that you hate the military and are using your postion of power to end a popular military-related program evidently. It does not matter anyhow since Dr. Kelly did not get re-elected to the Board of Education last year. I'll sure miss him.

The board voted a year ago to eliminate the 90-year-old program at the end of this school year, with a majority of members then saying its connection with a discriminatory and homophobic military means it has no place in public education.

At the time of the vote, the board also required a task force to identify an alternative program to replace the popular leadership program that now serves 1,200 students in seven of the district's high schools.

That task force, however, didn't meet until April. This fall, the group - consisting of district staff as well as JROTC supporters and critics - requested an extension of JROTC at all the high schools, saying there wasn't enough time to develop an alternative by this fall.

I knew at the time that they would run into trouble when they actually had to come up with an alternative. How does one re-create a program that teaches responsibility, commitment, respect for authority and physical fitness; especially when those traits are anathema to the Board of Education's personal beliefs? Besides, a football program already exists. A year later, it is no surprise that the "task force" came up dry. This is just further proof that bitching and moaning is far easier than actually coming up with viable alternatives.

So the JROTC is safe for another year from the bloviations of our local anti-military/suicidal-pacifist nannies. I can't wait to see what really bitchin' alternative they offer next year. At least they won't be able to say they did not have enough time to come up with something.

A Brief History of Christmas

2007-12-24T07:31:00.000-08:00

No other holiday seems to polarize people quite like Christmas. Depending on your relationship with your family, your god and/or your neighbors, Christmas can be either a time of great joy, an inconvenience to be endured, a time of profound depression, or any combination thereof. My wife often feels steamrolled by Christmas since her birthday is just 10 days prior. Growing up, woe to the relative that decided to combine her birthday and Christmas present into one "big" gift. That still holds true today by the way.

Every year the same scrooges trot out the same grievances in an effort to give the rest of us the same case of the "bah-humbugs" from which they suffer. Atheists demand the removal of Nativity scenes lest they gaze upon one and singe their eyes. Anti-consumer groups point out the amount of money wasted on junky gifts for people we don't even like. Health officials highlight the dangers of overconsumption. The fact that Christmas has been commercialized to the point of self parody hardly needs to be mentioned; and the last minute rush to the stores is never enough to save the retail establishment from yet another mediocre shopping season.

John Steele Gordon opining in the Wall Street Journal last Friday points out that Christmas is actually a celebration of two distinct and separate occurrences:

Christmas famously "comes but once a year." In fact, however, it comes twice. The Christmas of the Nativity, the manger and Christ child, the wise men and the star of Bethlehem, "Silent Night" and "Hark the Herald Angels Sing" is one holiday. The Christmas of parties, Santa Claus, evergreens, presents, "Rudolph the Red-Nosed Reindeer" and "Jingle Bells" is quite another.

But because both celebrations fall on Dec. 25, the two are constantly confused. Religious Christians condemn taking "the Christ out of Christmas," while First Amendment absolutists see a threat to the separation of church and state in every poinsettia on public property and school dramatization of "A Christmas Carol."

The Christmas of parties and presents is far older than the Nativity. Most ancient cultures celebrated the winter solstice, when the sun reaches its lowest point and begins to climb once more in the sky. In ancient Rome, this festival was called the Saturnalia and ran from Dec. 17 to Dec. 24. During that week, no work was done, and the time was spent in parties, games, gift giving and decorating the houses with evergreens. (Sound familiar?) It was, needless to say, a very popular holiday.

Proof that it was not all about skull crushing and raping and pillaging your neighbors during the Middle Ages:

By the high Middle Ages, Christmas was a rowdy, bawdy time, often inside the church as well as outside it. In France, many parishes celebrated the Feast of the Ass, supposedly honoring the donkey that had brought Mary to Bethlehem. Donkeys were brought into the church and the mass ended with priests and parishioners alike making donkey noises. In the so-called Feast of Fools, the lower clergy would elect a "bishop of fools" to temporarily run the diocese and make fun of church ceremonial and discipline. With this sort of thing going on inside the church to celebrate the Nativity, one can easily imagine the drunken and sexual revelries going on outside it to celebrate what was in all but name the Saturnalia.

Those looking to place blame on somebody for making Christmas a national holiday need look no further:

In 1870, President Ulysses S. Grant signed into law a bill making the secular Christmas a civil holiday because its celebration had become universal in this country. It is now celebrated in countries all over the world, including many where Christians are few, such as Japan.

My feelings regarding Christmas are pretty simple: if you don't like it, don't celebrate it. If you are really, truly offended by all things Christmas, consider a vacation to Saudi Arabia this time of year. I bet you won't hear Jingle Bells even once. Most of all, don't use Christmas as an excuse to feign some grievance in an attempt to advance your own agenda; whatever it may be. It's also probably not wise to do what these Kiwis recently did as you may end up in jail.

If there's one thing that we can all agree upon it's that jail is no place to spend Christmas.

Iraq in the Context of American Military History

2007-12-20T08:20:00.000-08:00

Victor Davis Hanson chronicles our past military blunders and determines that most of the wars the U.S has been involved in since our nation's inception started under dubious circumstances, involved bad intelligence and were fought by ill-equipped troops in the beginning.

...what is missing from the national debate over the "worst" (Iraq) war in our history is any appreciation of past American military errors—political, strategic, technological, intelligence, tactical—that nearly cost us victory in far more important conflicts. Nor do we accept the savage irony of war that only through errors, tragic though they may be, do successful armies adjust in time to discover winning strategies, tactics, and generals.

Read the whole article. There's much to digest.

Global Warming: OUT Climate Change: IN

2007-12-20T07:05:00.000-08:00

Here's a fun exercise: Try to note the shift in language being employed by those who are desperately trying to jam their grand social engineering experiment disguised as reverent regard for the sacred environment down our throats. Increasingly, it seems that "climate change" is being substituted for "global warming." You see, with climate change any outcome is possible; even cooling in the Antarctic, snow in Buenos Aires and a decrease in hurricane activity.

Antarctica is getting colder. Neither the intensity nor the frequency of hurricanes has increased. The 2007 season was the third-quietest since 1966. In 2006 not a single hurricane made landfall in the U.S.

South America this year experienced one of its coldest winters in decades. In Buenos Aires, snow fell for the first time since the year 1918. Dozens of homeless people died from exposure. In Peru, 200 people died from the cold and thousands more became infected with respiratory diseases. Crops failed, livestock perished, and the Peruvian government declared a state of emergency.

Since any outcome is possible, it means one can never be wrong, which means never having to apologize for anything. It's a good thing too, because that means we do not have to be concerned with this report from the U.N. Bali Climate conference:

The air-conditioning system installed to keep more than 10,000 delegates cool used highly damaging refrigerant gases - as lethal to the atmosphere as 48,000 tonnes of carbon dioxide, and nearly the equivalent of the emissions of all aircraft used to fly delegates to Indonesia.

Staff from Australia's Natural Refrigerants Transition Board and the London- and Washington-based Environmental Investigation Agency noticed the stockpiled cylinders of hydrochlorofluorocarbons - a refrigerant likely to be phased out over the next few years because it devours ozone in the upper atmosphere.
In addition, the refrigerant is a potent greenhouse gas, with each kilogram at least as damaging as 1.7 tonnes of carbon dioxide.

Investigators at the Balinese resort complex at Nusa Dua counted 700 cylinders of the gas, each of them weighing 13.5 kilograms, and the system was visibly leaking.

It also means, thankfully, we can keep our democracy; for now at least:

Hillman, senior fellow emeritus at the Policy Studies Institute, says carbon rationing is the only way to ensure that the world avoids the worst effects of climate change. And he says that the problems caused by burning fossil fuels are so serious that governments might have to implement rationing against the will of the people.

"When the chips are down I think democracy is a less important goal than is the protection of the planet from the death of life, the end of life on it. This has got to be imposed on people whether they like it or not."

I'd like to see the army made up of listless, Birkenstock-clad, overly idealistic, cocksure soldiers marching arm-in-arm with the limo-lib/Hollywood elite "special forces" Dr. Hillman would raise to impose his carbon rationing policy on us infidels. At least he's honest in revealing that fighting global warming, sorry, I mean fighting climate change, is really just warmed-over nihilistic Marxism.

My Favorite Liberal Feminist Lesbian

2007-12-13T10:50:00.000-08:00

I was first introduced to Camille Paglia by a girl I used to work with during the summers back in my college days. While waiting for our turn in the rotation for the privilege of serving the unwashed masses of the greater Narragansett Bay area all-you-can-eat clam cakes and chowder, we would do a lot of reading. Sometimes we would read each other's books; and that is how I happened to pick up Paglia's Sexual Personae. I'll never forget that it was the first book I ever read for pleasure that required me to keep a dictionary on hand.

One of my biggest beefs with the left these days is that there are woefully few outspoken members who are not stricken with Bush Derangement Syndrome (BDS). For example, they would prefer to see us leave Iraq defeated and humiliated--regardless of the consequences-- because any other outcome might possibly make Bush look good. They do not see the difference between being an outspoken member of the loyal opposition (which they're not) and indirectly or directly supporting those who wish to destroy our civilization (more often the case). While I do not agree with everything she says, I do not think that Camille Paglia is one of these shrill BDS suffers; and it is why I respect her. It is also why those who lay claim to the leftist-progressive megaphone shun her like a drug-addled aunt at Thanksgiving.

In this Salon piece, she touches on a point I made in a previous post about how cultural secularism is destroying our society.

Religion is becoming an endless political distraction -- but cultural secularism is not the answer.

...I agree with him (Mitt Romney) that the founders of the U.S. social experiment were Christians (even if many were intellectual deists) and that our separation of church and state entails the rejection of an official, government-sanctioned creed rather than the obligatory erasure of references to God in civic life.

This is something that those who wish to wipe "In God We Trust" off of our currency, for example, and stamp out all references to God in civic life either fail to grasp or willfully ignore. Regardless of the number of times history is revised by those who do not like its outcome, the United States of America will always be a nation founded by men of faith; and their indelible stamp will remain.

But what does Romney mean by the ongoing threat of a new "religion of secularism"? The latter term needs amplification and qualification. In my lecture on religion and the arts in America earlier this year at Colorado College, I argued that secular humanism has failed, that the avant-garde is dead, and that liberals must start acknowledging the impoverished culture that my 1960s generation has left to the young. Atheism alone is a rotting corpse. I substitute art and nature for God -- the grandeur of man and the vast mystery of the universe.

Here she acknowledges humanity's need to believe in something beyond the, "if it feels good do it" frame of mind that defines secular humanism.

But primary and secondary education, which should provide an entree to great art and thought, has declined into trivialities and narcissistic exercises in self-esteem. Popular culture, once emotionally vibrant and collective in impact (from Hollywood movies to rock music), has waned into flashy, transient niche entertainment. The young, who are masters of ever-evolving personal technology, are besieged by the siren call of materialism. In this climate, it is selfish and shortsighted for liberals to automatically define religion as a social problem that needs suppression or eradication. Without spirituality in some form, people will anesthetize themselves with drink or drugs -- including the tranquilizers that seem near universal among the status-addled professional class of the Northeastern elite.

Europe, which has settled into a comfortable secularism, is no model for the future. The great era of European achievement in arts and letters seems to be over. There are local luminaries but no towering figures any longer of the stature of James Joyce, Pablo Picasso, Marcel Proust, Thomas Mann or Ingmar Bergman. Europe is becoming a museum and tourist trap, as people from all over the world flock to see the remnants of Europe's royal and religious past -- the conservative prelude, in other words, to today's slack liberalism.

Europe as a "tourist trap"--just like our own Fisherman's Wharf. Though with the Euro trading where it is lately, I'll stick to visiting Fisherman's Wharf.

Regarding education:

There was an excellent Op-Ed in the Philadelphia Inquirer last week about the urgent national need for technical education -- which has been a recurrent theme in my Salon columns for a decade. Walt Gardner, who taught public school for 28 years in Los Angeles, calls for a "shift in our attitude to grant career and technical education the same recognition, respect and value that we reflexively accord academic education."

Gardner predicts severe dislocations for the college-educated middle class over the next two decades: "Auto mechanics, plumbers, and electricians will be earning a comfortable living and deriving deep satisfaction from their work, while many graduates from marquee-name colleges will find themselves unemployed when their jobs are off-shored."

Exactly! And as a career college teacher, I want to insist yet again that the general education offered by American public high schools and even elite colleges and universities has become blatantly mediocre and not worth the price. Soaring tuition costs are a national scandal that the presidential candidates have failed to systematically address. Families and students themselves have incurred monstrous debts in their deluded search for brand-name cachet, which only marginally relates to a quality education. The college admissions race in the United States is a gigantic marketing scam that most mainstream journalists, desperate to get their kids into the overrated Ivy League, have shamefully neglected.

Whenever somebody asks me if I've started a college fund for my 10 month old daughter (yes I have), I often reply, "well now I'm not so sure she's college material." I am joking, but only half-joking. Prof. Paglia makes another point I touch on from time to time: college in its current dumbed-down form isn't necessarily worth the price; and a good technical education is underrated.

Al Gore got the Nobel Prize this week for his role as chief propagandist in spreading global warming hysteria into every nook and cranny of credulous minds. I expect that this baseless panic, like all fads, will evaporate when apocalypse doesn't arrive on schedule. Meanwhile let's focus on legitimate practical issues -- such as the grotesque volume of pollution belched by big-rig trucks, which in the absence of an efficient interstate rail system in the U.S. are absurdly carrying freight for thousands of miles from coast to coast. Exhaust from family SUVs is nothing compared to the environmental damage wrought by trucks, whose massive weight and deadline-driven high speeds also constitute an unacceptable risk to passenger vehicles on the highway... Nature is not our victim but an awesome, uncontrollable force.

I'd like to see the study that helped formed her opinion regarding the relative costs and benefits of rail versus truck transportation, but she puts an arrow right through the hubristic heart of the Eco-vangelists with that last line.

Proof that Climate Change is a Religion

2007-12-12T10:22:00.000-08:00

When the Pope condemns global warming alarmists as "prophets of doom", you know that it has reached deep into the religious realm.

If there is one thing organized religion hates, it is competition for dues-paying believers; especially from young upstarts.

--- Amounts (Billions)---
	Limit	Current
=================================	===============	===========
Total	$11,623.63	$3,800.18
---------------------------------	---------------	-----------
Federal Reserve Total	$7,565.63	$1,478.88
Primary Credit Discount	$110.74	$65.14
Secondary Credit	$0.19	$0.00
Primary dealer and others	$147.00	$25.27
ABCP Liquidity	$152.11	$12.72
AIG Credit	$60.00	$37.36
Net Portfolio CP Funding	$1,800.00	$248.67
Maiden Lane (Bear Stearns)	$29.50	$28.82
Maiden Lane II (AIG)	$22.50	$18.82
Maiden Lane III (AIG)	$30.00	$24.34
Term Securities Lending	$250.00	$115.28
Term Auction Facility	$900.00	$447.56
Securities lending overnight	$10.00	$5.59
Public-Private Investment Fund	$1,000.00	$0.00
Term Asset-Backed Loan Facility	$1,000.00	$0.00
Currency Swaps/Other Assets	$606.00	$417.86
MMIFF	$540.00	$0.00
GSE Debt Purchases	$600.00	$33.58
Citigroup Bailout Fed Portion	$220.40	$0.00
Bank of America Bailout	$87.20	$0.00
---------------------------------	---------------	-----------
FDIC Total	$1,551.50	$400.30
FDIC Liquidity Guarantees	$1,400.00	$261.30
GE	$139.00	$139.00
Citigroup Bailout FDIC	$10.00	$0.00
Bank of America Bailout FDIC	$2.50	$0.00
---------------------------------	---------------	-----------
Treasury Total	$2,206.50	$1,621.00
TARP	$700.00	$387.00
Tax Break for Banks	$29.00	$29.00
Stimulus Package	$168.00	$168.00
Stimulus II	$787.00	$787.00
Treasury Exchange Stabilization	$50.00	$50.00
Student Loan Purchases	$60.00	$0.00
Citigroup Bailout	$5.00	$0.00
Bank of America Bailout	$7.50	$0.00
Support for Fannie/Freddie	$400.00	$200.00
---------------------------------	---------------	-----------
HUD Total	$300.00	$300.00
Hope for Homeowners FHA	$300.00	$300.00