Words of Wisdom from an Economic Genius

Carla Howell is Chair of the Committee for Small Government, a group that is supporting a referendum question on the Massachusetts ballot in November. This particular question proposes to eliminate the state income tax beginning in 2010. Among the benefits that will be derived from eliminating 40% of the state revenue will be the creation of "hundreds of thousand of new Massachusetts jobs". There will be no downside as neither property taxes nor any other tax will be raised nor will any "essential government services" be cut.

A number of people have actually bought this argument as it takes quite a few signatures to place a referendum question of the state ballot. I wish I had the names of these people as I'm trying to sell a bridge.

A New Definition for Asshole

Supposedly, several Republicans did not vote for the bailout because of Pelosi's speech. I'm not a fan of Madame Speaker but how this speech could cause someone to vote against the bailout is beyond my comprehension.

The Sun Is Shining

Okay, the market was down almost 800 points. It's been raining hard all weekend. Obama did not do well in the debate. The Patriots may have won or lost. Masterpiece Theater has lost its way. I walk even more slowly.

But, I did finish the Sunday Times puzzle. I think all of my family is in decent health. My car started today. Gas is under $4 on the Vineyard. With very few changes, HUD and USDA have approved all of the budgets we submitted. I'm engaged in reading Bacevich's book. I slept well last night. I feel as though I'm contributing to bettering the life on the Island and elsewhere. And, most importantly, I had my windows open as I drove home today for the sun was shining and it was warm. The world has not ended.

However, I am glad I am old. I have been fortunate to have lived when America was truly a great nation.

As John McCain Said

I didn't realize how much Tina Fey used quotes from these interviews.

Here's another one if you can stand it.

Haven't you heard smarter comments from a drunk at a bar?

And she would be a heartbeat away!

Will This Be The Deal?

The Speaker issued the following statement very early this morning. Overall it looks pretty good considering where the economy is today. As always, the devil is in the details.

(Reuters) - The following is a statement issued by U.S. House of Representatives Speaker Nancy Pelosi's office on changes to the Bush administration's $700 billion financial rescue plan request. Congressional leaders conducted a marathon negotiating session on Saturday before announcing they had a broad outline of a deal. Here is the statement issued early on Sunday:

Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers.

3 Phases of a Financial Rescue with Strong Taxpayer Protections

- Reinvest in the troubled financial markets... to stabilize our economy and insulate Main Street from Wall Street

- Reimburse the taxpayer... through ownership of shares and appreciation in the value of purchased assets

- Reform business-as-usual on Wall Street... strong Congressional oversight and no golden parachutes

CRITICAL IMPROVEMENTS TO THE RESCUE PLAN

Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable -- protecting American taxpayers and Main Street -- and these elements will be included in the legislation

Protection for taxpayers, ensuring THEY share IN ANY profits

- Cuts the payment of $700 billion in half and conditions future payments on Congressional review

- Gives taxpayers an ownership stake and profit-making opportunities with participating companies

- Puts taxpayers first in line to recover assets if participating company fails

- Guarantees taxpayers are repaid in full - if other protections have not actually produced a profit

- Allows the government to purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families

Limits on excessive compensation for CEOs and executives

New restrictions on CEO and executive compensation for participating companies:

- No multi-million dollar golden parachutes

- Limits CEO compensation that encourages unnecessary risk-taking

- Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate

Strong independent oversight and transparency

- Four separate independent oversight entities or processes to protect the taxpayer

- A strong oversight board appointed by bipartisan leaders of Congress

- A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse

- An independent Inspector General to monitor the Treasury Secretary's decisions

- Transparency - requiring posting of transactions online - to help jumpstart private sector demand

- Meaningful judicial review of the Treasury Secretary's actions

Help to prevent home foreclosures crippling the American economy

- The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year

- Extends provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures

- Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis - allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks.

Office of Speaker Nancy Pelosi -- September 28, 2008

Palin and Couric

Investing in Growth Is Not Always Good for You

The current financial disasters prompted me to look at something I wrote a few years ago. Would we be in better shape now had more people followed the advice?

“Grow or Die”. That was the mantra I heard as a young entrepreneur and, I suspect, you hear it, too. I was young then and, like most young people, unaware of my own mortality. Now retired, I am well aware that my time here is limited. So, I’d like to share a lesson I learned only when I was in my 60s.

Most things on this earth grow, it is a certainty that all things die. Why should a business, a living organism, be different? It doesn’t matter the industry or whether the company is a manufacturer, distributor or service business; growth stops, death arrives. True, death comes later to stronger companies and may be postponed by mergers and acquisitions. But come it will. The smart businessperson understands this reality and adjusts accordingly.

As death is a reality, so it is that many of us will not build billion dollar businesses, no matter how hard we work, how much capital we raise, how smart we are, how brilliant our idea. It’s a fact of life that not all of us will be superstars. But there is nothing wrong with building a “nice, little business”, one that supports several families in relative comfort, provides a useful product or service to the community, enables its employees to use all of their talents, is fun to work at. For most of us in our rational moments such a business would represent something close to nirvana. However, ambition often blinds us. We must build another factory, establish a London office, raise millions from venture capitalists.

I’m not saying that one accepts the status quo and does not strive for the stars. Without ambition, drive and hard work you won’t start, let alone build, a business. However, there comes a time in life (yours and your business’) when you have to accept and live with reality. It’s easier to do so if your business caters to a local market. But, many companies are after a national and, even, a global market where the stakes and rewards can be much higher. That makes the task of accepting reality harder, but also more important to yourself (and to the economy in general, as it is likely that better use can be made of assets deployed in a futile attempt to be a superstar).

Yes, it’s not easy abandoning one’s dream, to recognize or admit that your creature, born amidst such great hopes and dreams, has not turned out to be the barn burner you expected. Nor is it easy to see that additional investments of time, money and talent will not be rewarded by the marketplace. But, if one does have the presence of mind and courage to see the world for what it is, the rewards – not necessarily financial rewards – can be considerable. When you stop beating your head against the wall trying to overcome the judgment of the marketplace, you sleep better, are less stressed, can devote more time to your community, can explore your whole self. You’ll find that reality is not so bad after all.

Vineyard Haven Harbor, Sept. 18, 2008

The Surge

Patrick Cockburn has a different take than McCain and company on the effects of the surge. Everybody acknowledges that violence has been down, but in Mosul there were 30 attacks per week in July, now there are 60 - 70. In Baghdad there were six car bombings in the past seven days. We still have 138,000 troops in Iraq. One in six Iraqis is a refugee and still without his home. Sectarian conflict is way down because the Shia control Baghdad. The influence of Iran is even stronger than it was before the surge.

But perhaps the biggest reason why so many Americans speak of the surge as a success is the cutback in reporting about the war. Americans are not getting killed, so things must be better. The show has gone on for over five years, longer than the two world wars. Isn't it over yet? Who's still interested in that old story, the media is not.

Brian Katulis etal point out that the basic goal of the surge - political reconciliation - has not been achieved. In fact, the surge may have made political reconciliation more difficult to achieve. The supplemental 2007 budget laid out 18 benchmarks for the Iraqi government to meet. They have met four.

We need leaders who can accept reality. Until we do, we cannot change it.

You Have to Do It Yourself

That's what local tribes and their leaders in northwest Pakistan have apparently decided. They are organizing to combat the Taliban. They are getting fed up with the extremism of the Taliban and were moved into action by the Taliban's attempt to kidnap 300 school children.

Is this the Wazirstan Awakening?

God Save This Country

Our 'leaders' won't.

For the first time this season I watched a full 'presidential debate', or so it was called. But I'm just a naive 20th century person. I don't understand that 'presidential debates' are not about imparting knowledge as to what a candidate feels should be done about significant issues. They are a rehash of the candidates' stump speeches. Any subtlety about issues and their complexity was out the window. Real discussion between the candidates? Forget about it. Attempt at analyzing issues? Not in this 'debate'. Focus on the inconsequential? You bet.

Based on this 'debate' neither Obama nor McCain is fit to be president of this country. How did we create such a juvenile way of selecting our leaders? Is this what happened to Rome, Assyria, the Ottomans, England?

I wish the dollar were stronger as it looks like I should start investigating alternative abodes.

Is Wachovia Next?

They're talking with a couple of banks although, paraphrasing Wachovia's CEO, everything is fine. That's what Fuld said before Lehman went belly up.

America, September 26, 2008

His Horse Must Have Been Hungry

McCain has left Washington in order to debate Obama. Maybe he realizes what an ass he's made of himself. But he will return to D.C. as his statement says,

"The McCain campaign is resuming all activities and the senator will travel to the debate this afternoon. Following the debate, he will return to Washington to ensure that all voices and interests are represented in the final agreement, especially those of taxpayers and homeowners."

Will This Help or Hurt Obama?

Sixty-one Nobel Laureates issued a letter in support of Obama. The letter makes sense. But forty-one Laureates issued a similar letter in support of Kerry and Gore. Is this a kiss of death? Here is the letter:

An Open Letter to the American People
September 25, 2008

This year's presidential election is among the most significant in our nation's history. The country urgently needs a visionary leader who can ensure the future of our traditional strengths in science and technology and who can harness those strengths to address many of our greatest problems: energy, disease, climate change,
security, and economic competitiveness. We are convinced that Senator Barack Obama is such a leader, and we urge you to join us in supporting him.

During the administration of George W. Bush, vital parts of our country's scientific enterprise have been damaged by stagnant or declining federal support. The government's scientific advisory process has been distorted by political considerations. As a result, our once dominant position in the scientific world has been shaken and our prosperity has been placed at risk. We have lost time critical for the development of new ways to provide energy, treat disease, reverse climate change, strengthen our security, and improve our economy.

We have watched Senator Obama's approach to these issues with admiration. We especially applaud his emphasis during the campaign on the power of science and technology to enhance our nation's competitiveness. In particular, we support the measures he plans to take – through new initiatives in education and training, expanded research funding, an unbiased process for obtaining scientific advice, and
an appropriate balance of basic and applied research – to meet the nation's and the world's most urgent needs.

Senator Obama understands that Presidential leadership and federal investments in science and technology are crucial elements in successful governance of the world's leading country. We hope you will join us as we work together to ensure his election in November.

Circumcision in the News

Kenya is serious about fighting AIDS. Leading politicians, including the Prime Minister, have been circumcised despite the opposition of the Luo Council of Elders who frown on the practice as not being part of their cultural heritage.

Then there's this fellow in Kentucky who found that his circumcision turned into an amputation.

Colbert Should Have Been Nominated

WaMu Bites The Dust

The Feds shut it down tonight and sold most of it to JP Morgan Chase. It will likely be the biggest bank failure in our history.

Deal But No Deal

Our Congressional leaders had agreed on a deal this afternoon to the point of issuing a one page summary. However, at the meeting with Bush etal conservative Republicans decided that the deal was too much a government thing and would cost the taxpayers too much.

John McCain, economist, true to form took no part in the first batch of negotiations today, which, since he is not a member of the Senate Finance Committee, one can understand. But you would think that the man on the white horse would make his ideas known to the negotiators or to Bush and company. He did not. Is it because he has no ideas? Is this all a campaign ploy on his part?

How can any rational person vote for this guy?

Get Out of the Cities

That's the advice Thomas Johnson and M. Chris Mason feel we should follow in Afghanistan. They feel that the military is repeating the mistakes of the Vietnam War by trying to fight the war while being based in urban centers. Russia tried it and failed. Afghanistan has really had only one effective national government and that was due to the ferocity of the "Iron Emir", a madman who built towers using the skulls of those opposed him.

The power is in the districts, which are usually controlled by a single tribe. That's where the Taliban operate. Johnson and Mason argue that the districts may not want Western control, but they also do not want to be controlled by the Taliban, which espouses a fanatical Islam and does not respect the elders.

The authors propose that district teams be established and actually reside in the districts. The team would be a mix of NATO troops, Afghan troops and a reconstruction team. If we don't do something like this, it will be Vietnam all over again - we'd win the big battles but lose the war.

Should We Follow Buffett?

Should we buy assets whose value cannot be determined or should we buy preferred stock in troubled financial companies and let the companies and the market deal with the mess of assigning value? Both options are very difficult to implement. But if we were selective as to what companies we bought stock in, it would seem to me that we'd have a better chance at getting some of our money back a few years hence as some of these companies actually have good businesses beyond the arcana of the credit markets.

The complexity of our situation is becoming clearer every day. Yet, at some point soon we have to act. Sweden acted fast, Japan didn't when they were faced with financial system catastrophe. Sweden came out of their crisis much sooner than Japan largely because they were more demanding of the banks. It seems wiser to me to move quickly but not with all of our assets.

There are systemic changes that must be made. We need to regulate just about all financial markets of any size. We have to return to a day when people accepted reality and saved today's money rather than spend tomorrow's money today, a day when we invested in education, in science and technology, in infrastructure, a day when we were much less of a 'service' economy'.

Somehow we have to figure out a way to help those of our neighbors who, through no fault of their own, have found themselves in a rapidly deteriorating financial situation. Figuring out who these people are may require a Solomon. At the same time, we pray that our leaders can resist the blandishments of the lobbyists. And, most importantly, we have to put a fair value on the very complex securities that are at the heart of the problem.

Stewart Comments on the Crisis

Acting Rashly

So, the guy on the white horse rides into Washington and restores the American economy to its preeminence. I guess this is the picture in McCain's mind when he decides to stop his campaign and straighten things out in DC. But, like most of his campaign, this is another example of his shooting from the hip and shooting wildly, at that. He is not on the Senate committee that is negotiating with Paulson and company. He and Obama have been absent from the Senate for about a year, a year in which this crisis has been coming to a head.

As far as getting his name in the press, he has succeeded. But my sense is that he will soon be seen as the panderer he is.

Moving at Lightning Speed

Berkshire Hathaway is investing $5 billion in Goldman Sachs. They're buying preferred stock that will pay a 10% dividend and are also getting warrants to buy common stock at $115 any time over the next five years. Note that Goldman stock was at $125 today. This should have a calming effect on things.

Valuing the Securities

Notice that I don't call as assets the securities we will buy in the bailout. No one really knows what the value of this stuff is. But a mechanism for pricing this stuff has to be established soon. Mark Thoma has a lengthy article about this issue. He references Bernanke's comments today about valuing the securities as if held to maturity and the alternatives to this as proposed by Krugman and others. It really should be read by our leaders and others who don't want to get screwed.

Sound Familiar?

Barry Ritholtz has posted this e-mail which is making the rounds of Wall Street:

SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

A Blank Check?

The first cut at the bailout plan by the Treasury seems to give Paulson and company a blank check. They decide which securities to buy at what price from whom. They hire whomever they want to advise them at whatever price they want. They report to Congress in three months and twice a year thereafter.

There is talk of a reverse auction which may do something to give us a better price for the bad stuff we'll be buying, but more oversight is needed.

We don't have time to sacrifice the good for the perfect but there is a risk of that happening in Congress. Of course, what the Congress considers perfect a rational person would consider pandering to get re-elected.

The End of an Era

Goldman Sachs and Morgan Stanley will be transforming themselves into bank holding companies and,as such, will be subject to more regulations. In return they'll be better protected by us.

The Days Dwindle Down

On the first day of Autumn, it's time for Sinatra.

It Will Not Die

That's the idea of federalism in Iraq that I wrote about in 2005. Biden and Gelb have been pushing it for a while and now it seems to be rearing its head as a de facto federalism is gaining ground.

Who Benefits from TARP?

Gretchen Morgenson raises that question, TARP standing for "Troubled Asset Relief Program" and it's an important question as knowing who benefits by getting our money is something we, the taxpayers, should be told. But even more important is to ensure that the troubled assets we buy are reasonably valued; there is no way we can afford to buy these assets at their 'book value', which bears no relationship to their true value.

And, of course, we must have some policing of the derivatives market. The first part of that policing would be to be able to explain these instruments in such a way that at least most MBAs could understand.

Hang the Messenger

McCain has the solution to our fiscal crises - fire Christopher Cox, the head of the SEC. He thinks Cox is the sole culprit, I guess. I wonder if McCain would be interested in a bridge I have for sale.

A 21st Century Pipeline

Vodka is very cheap in Russia, but more expensive in neighboring Estonia. So, some Russians saw an opportunity and built a pipeline to transmit Russian vodka to Estonia. The pipeline was over a mile long. They were able to trasnport 6200 litres before being caught. They may serve five years in prison.

A Surprise

We visited the Portland (ME) Museum of Art today. I was amazed to find a treasure trove of Impressionist paintings as well as a batch of Winslow Homer and N.C. Wyeth. The museum is small enough to visit in a few hours. You'll be surprised often at the quality of the collections.

Pulling Out All The Stops?

The world's leading central banks have opened the spigot. Here's the Fed's press release issued at 3 a.m. today.

Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.

Federal Reserve Actions
The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks.

The FOMC has authorized increases in the existing swap lines with the ECB and the Swiss National Bank. These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $110 billion by the ECB, an increase of $55 billion, and up to $27 billion by the Swiss National Bank, an increase of $15 billion.

In addition, new swap facilities have been authorized with the Bank of Japan, the Bank of England, and the Bank of Canada. These facilities will support the provision of U.S. dollar liquidity in amounts of up to $60 billion by the Bank of Japan, $40 billion by the Bank of England, and $10 billion by the Bank of Canada.

All of these reciprocal currency arrangements have been authorized through January 30, 2009.

And then we have the Treasury selling $60 billion of bonds to shore up the Federal Reserve's balance sheet. We're getting close to the end of the line here.

Will there be any stock brokers left?

Morgan Stanley, whose shares were down 24% yesterday, is talking with Wachovia. At the rate things are moving, there could be a deal within 24 hours.

Goodby, Carly

Carly Fiorina does not think that either Palin or McCain could run a major corporation. She should know as she almost ran HP into the ground.

If McCain's campaign strategy and execution is an example of his executive skills, he couldn't run a small company either. Yet, many think he can run the largest economy in the world. It's a weird world we live in.

Staking Claims in the Arctic

Medvedev says Russia should get serious about this and redefine its borders, particularly regarding the Arctic, which will soon become another area the world can fight over.

China, Sports Capital of the World?

Beijing was the site of the Olympics and the Paralympics. And I read yesterday in The Atlantic thyat it will be the site of the first World Mind Sports Games, where 'athletes' will compete in chess, bridge, checkers and go. As with the Olympics, some of the athletes will be tested for drugs.

China is doing well - very well - in the Paralympics. It has 207 medals so far. The UK has 102 and US 98.

$85 Billion Here. $85 Billion There

I guess Paulson feels that AIG is more important to our economic health than Lehman as the Feds will loan the firm $85 billion. In exchange, we, the taxpayers, will own 80% of the company, in exactly what format or what cost, if any, is unknown. Supposedly, it's the parent company that is in dire straits, the subsidiaries have tons of money. Have you heard a similar message in the recent past?

Paulson's argument seems to be based on the fact that AIG is an insurance company, with whom many companies and people have contracted (about $1 trillion worth). If the company could not fulfill its contractual obligations, the ripple effect would likely be of tsunami proportions.

It looks as though the primary culprit is credit default swaps, another arcane instrument that developed a religious following. The last time I checked AIG had overvalued their swaps by $3.6 billion.

My Two Cents

Which is what my AIG stock will likely soon be worth.

You've heard various theories as to how we got to the collapse of Wall Street. Here's mine. It is comprised of several interlocking parts.

• The repeal of the Glass-Stegall Act which prohibited a single company from engaging in regular banking, investment banking and insurance.
• The belief that everyone should own a home. As some people cannot pitch in the National League, some don't earn enough to own a home.
• The rise of securitization, whereby the local bank did not hold your mortgage but sold it to another company that packaged your mortgage with hundreds of others as quickly as it could and, in turn, sold the package to another company that combined this package with other packages. Along the way, the credit companies rated these packages and were able, through magic, to figure out that I was a better risk than you and so they told the current packager that they could sell my mortgage and the other hundred mortgages so rated to another packager as an AA-rated security. This credit rating took place in Lake Woebegon, where everyone is above average. This re-packaging went on ad nauseam, with no one really knowing much about the underlying assets.
• The rise of computer modeling as a religion which analyzed and evaluated risks attendant on securities very few understood.
• The acceptance of supposed market values placed on securities not publicly traded.
• Over-reliance on leverage
  
• And, of course, greed.

Palin and Clinton

He's Embarassing We Old Folks

I'm almost as old as John McCain. I know many people who are a lot older than McCain. Very, very few of these older citizens would have been so obtuse as McCain in his comments yesterday about our economy.

In Jacksonville, he said, "You know that there's been tremendous turmoil in our financial markets and Wall Street. And it is, it's - people are frightened by these events. Our economy, I think, still, the fundamentals of our economy are strong but these are very, very difficult times. And I promise you, we will never put America in this position again. We will clean up Wall Street. We will reform government."

Something must have happened with the economy by the time McCain got to Orlando for 'very, very difficult times' had turned into a 'crisis' and a crisis that was not the fault of the American people who have elected the leaders who let this country get into this mess.

Here's what he said in Orlando. Oops, here's what he read as I guess it was too much to remember, "Today we are seeing tremendous upheaval on Wall Street. The American economy is in crisis. Unemployment is on the rise and our financial markets are in turmoil. People are concerned about our economic future. But let me say something: this economic crisis is not the fault of the American people. Our workers are the most innovative, the hardest working, the best skilled, most productive, most competitive in the world," And then went on to say, "My opponents may disagree, but those fundamentals of America are strong. No one can match an American worker. Our workers sell more goods to more markets than any other on earth. Our workers have always been the strength of our economy, and they remain the strength of our economy today."

What really got me about the second statement was that he read it from a cue card. How bad is his memory?

IT Contracting in the 21st Century

The Veterans Administration has issued an RFP for a computer system to screen claims under the new GI Bill. The problem is they seem to know very little about they want or need; they are expecting the bidders to specify the system. They have gone to such an extremer that the bidders are defining the penalties they would incur if their system does not work.

One Congressman said, “This is incredible. You don’t know what you get. You don’t know what it costs. You don’t know what happens if it fails. What are you getting us into here?”

Take the Quiz

Bill Quigley has a test for you.

1. How many deaths are there worldwide each year due to acts of terrorism?

2. How many deaths are there worldwide each day due to poverty and malnutrition?

3. 1n 1965, CEOs in major companies made 24 times more than the average worker. In 1980, CEOs made 40 times more than the average worker. In 2007, CEOs earned how many times more than the average worker?

4. In how many of the more than 3,000 cities and counties in the US can a full-time worker who earns the minimum wage afford to pay rent and utilities on a one-bedroom apartment?

5. In 1968, the minimum wage was $1.65 per hour. How much would the minimum wage be today if it had kept pace with inflation since 1968?

6. True or false? People in the United States spend nearly twice as much on pet food as the US government spends on aid to help foreign countries.

7. How many people in the world live on $2 a day or less?

8. How many people in the world do not have electricity?

9. People in the US consume 42 kilograms of meat per person per year. How much meat and grain do people in India and China eat?

10. How many cars does China have for every 1,000 drivers? India? The US?

11. How much grain is needed to fill an SUV tank with ethanol?

12. According to The Wall Street Journal, the richest one percent of Americans earns what percent of the nation's adjusted gross income? Five percent? Ten percent? Fifteen percent? Twenty percent?

13. How many people does our government say are homeless in the US on any given day?

14. What percentage of people in homeless shelters are children?

15. How many veterans are homeless on any given night?

16. The military budget of the United States in 2008 is the largest in the world at $623 billion per year. How much larger is the US military budget than that of China, the second-largest in the world?

17. The US military budget is larger than how many of the countries of the rest of the world combined?

18. Over the 28-year history of the Berlin Wall, 287 people perished trying to cross it. How many people have died in the last four years trying to cross the border between Arizona and Mexico?

19. India is ranked second in the world in gun ownership with four guns per 100 people. China is third with third firearms per 100 people. Which country is first and how widespread is gun ownership?

20. What country leads the world in the incarceration of its citizens?

For the answers, go here.

Monday Will Be An Interesting Day

It looks as though Lehman cannot find a buyer unless we, the taxpayers, pony up money. Merrill is looking to be bought by Bank of America, AIG is trying to raise cash. These three firms have been pillars of our economy for most of the 20th century. Now the question is will they survive on their own beyond September. Lehman appears to be in the worst spot and may be in Chapter 7 when you read this.

I hope that Paulson holds to his claim that the government will not spend our money on Lehman. Life is tough. Businesses do die. We can't afford to save them all. We are paying the price for an unbridled 'free' market where greed has been king. Sooner or later reality intrudes. Maybe this will be the wakeup call this country needs.

Going to Extremes

From today's The Ethicist column in the NY Times:

Sometimes my normally obedient dog, Ornette, escapes our fenced yard and will not return on command. We open the car door and tell her excitedly that we will take her for a walk, her favorite activity, to entice her into the car. Then we put on the leash and take her home, no walk. Although dogs don’t really understand language in the way that humans do, I’m worried about the ethical propriety of our misleading ploy. Should I be? — DAVID SCHADE, VICTORIA, BRITISH COLUMBIA

I thought Randy Cohen made up these entries but there is a David Schade listed in the Victoria telephone book.

A Former McCain Supporter

Andrew Sullivan has finally been convinced that McCain is more concerned with becoming president than doing the right thing. The Palin selection put him over the edge although why it should have taken him so long is something I don't understand as he lists as number of examples of pandering by McCain going back several years.

How Not to Audit

The Defense Contract Audit Agency (DCAA) appeared before the Senate Committee and Homeland Security and Governmental Affairs last week. DCAA has been the subject of reprimands from GAO for its mishandling of audits as reported by whistleblowers within DCAA.

It looks as though there are two basic operational problems. The primary goal of the audit is to finish it as quickly as possible, rather than assay the quality and reliability of the financial statements. since DCAA is part of DOD, whose efforts are being audited, there is not the level of independence needed for a real audit.

Even the IG for DCAA was criticized by the Senators for revealing the name of the whistleblower to those complained about and for sitting on the complaint for three months.

Will any changes be made? Administration after administration has been mouthing threats to cut staff and make DCAA more effective. Results to date - nada.

One Way to Handle Bad TV

I know that television programs in this country are pretty bad and do get some people upset. But, I haven't heard of anyone - i.e., a sane anyone - who has gone as far as saying it's okay to kill Les Moonves. Les should be very glad he does not operate in Saudi Arabia. For there a leader of the Supreme Judicial Council has declared it permissible to kill the owners of TV channels that show "immoral" programs.

I think that this is unlikely to happen as most of the channels are owned by Saudi royals or their very close friends. However, stranger things have happened.

Another Principled, Courageous Move by Democrats

The NY Times reports that it is likely that the Democrats will push for offshore drilling. We need leaders, not followers. We need people who can think, not pander. What will they give in on next?

Help for the Interviewers

If the interviewers of our leaders would ask just half of the questions posed by the Nieman Foundation, we'd all be better off - another "if" - if the interviewers could get a straight answer out of the four of them. But, if we got a straight answer to a meaningful question, we wouldn't be living in America.

The Nieman Watchdog has a section devoted to very good questions on Russia, missile defense, health care, Medicare, Homeland Security, Afghanistan, the income tax system, Iraq, torture, the country's debt, nuclear weapons, etc. I can dream that the candidates will seriously address some of these issues.

More Screwing of the Workers

Delphi, formerly part of GM, has not made its payments to its pension plan for the past three months. PBGC is dunning them for $900,000,000. Like many pension plans, this one was underfunded by a small amount, $3 billion. Delphi has been in bankruptcy for three years. Will their 85,000 workers get their pension?

Maybe they'll get it from the $50 billion loan the auto companies are asking us for.

Canada Shows the Way

Wouldn't you just love to have this constant election blathering be over? It seems to have been going on for all of the 21st century. Wouldn't it be nice if the entire campaign and the election took all of thirty-six days? That's what they do in Canada. And many other countries around the world do not go through the agony and aggravation we do. Here's something I wrote some years ago. The names differ but our process has gotten worse, if that is possible.

When the polls close on November 2, another long national nightmare – an overly lengthy presidential campaign – will hopefully be over. I don’t know about you, but I found this presidential campaign especially interminable. Whether it was the bitterness of the candidates or my increasing age I know not. I suspect the campaign of 2008 will be even more so, as the way things are going they’ll begin active campaigning as the next president is being sworn in on January 20, 2005.

At the risk of offending the political consultants and the media who derive so much revenue and story material from a permanent campaign, there has to be a better way, one that is less costly and less time consuming. I spent the 2000 presidential campaign out of the country and had the opportunity to see a better way – the way practiced by our neighbor to the north, Canada.

On October 22, Prime Minister Chretien announced that a federal election would be held not years hence but on November 27, thirty-six days away. While this announcement was anticipated by many, there was no real campaigning until the day of the announcement. No talking heads on television pontificating about the campaign, no political ads. All the speculation was about when the election would be held.

A thirty-six day campaign certainly dramatically cuts the costs of campaigning. The sixty million dollars Bush had raised relatively early in his campaign that year would have paid for two national elections of the 301 members of parliament. That is, just a portion of the funds raised by Bush would be adequate for each member of parliament – all 301 of them – to run two separate campaigns. It boggles the mind.

You could argue that a thirty-six day campaign prevents the rise of a previously unknown candidate. There is some merit in that argument. However, the leader of the major opposition party, Stockwell Day of the Canadian Alliance, was really unknown nationally until he was elected party leader earlier that year. He did not need the 2+ years our candidates seem to require to make themselves known, a few months were enough.

How can voters come to know the candidates and the issues in thirty-six days? It’s simple really. In Canada there is a real distinction between political parties and, by and large, members of parliament follow the party platform and/or the party leaders. So, attention is focused more on the party than the person who plays better on television or has a more effective ad campaign.

Had Nader and Buchanan run in Canada, they very likely would have participated in the debates. Sure, you did not see the Canadian Marijuana party at the televised debates, as a party needs to have a base of support of roughly 2% of the popular vote at the previous election. But you had a chance to evaluate five (that’s right, 5) national parties: the ruling Liberals who appear to have the chameleon-like attributes necessary to have been the ruling party in 80 of the last 100 years; the Canadian Alliance, an attempt to reinvigorate the rather conservative policies of Canada’s West; the left leaning New Democrat Party (incidentally led by a woman for several years); Progressive Conservatives, who last ruled under Brian Mulroney, a friend of Ronald Reagan; and the Bloc Quebecois, who, while espousing the uniqueness of Quebec and the need for separation from Canada, want Canada to pay most of their bills. It’s quite a change from the vapid, one-on-one debates we seem to specialize in.

Yes, we in the States do not have a parliamentary form of government. True, political parties have become anemic and virtually indistinguishable from each other. But I can’t see that the calibre of the presidential candidates produced by the primary system is any better than that produced in the smoke-filled rooms of the past. I haven’t seen a Roosevelt or Eisenhower emerge in the past thirty years. Have you?

Despite the different form of government, we can learn something from the Canadian style of elections. At a minimum we can learn to keep it shorter, to get the campaign season back to just that – a season, not a permanent state. Doing so will lower our costs and our boredom quotient. Maybe then we’ll see a growing number of people actually voting for president.

Deeper and Deeper

We are bailing out another investment bank. The Fed and Treasury are helping Lehman sell itself in pieces. Supposedly, there will be no government money involved. But, we've heard that before.

Are We Ready for Another 9/11?

The major thrust of the report of the 9/11 Commission was that we were complacent about the threats posed by terrorists. Unless our leaders actually do something, instead of talking about it, the next commission will come to the same conclusion should a terrorist attack succeed here. And, according to security experts, things have gotten worse in the past seven years.

I do not feel that we can protect ourselves from all attacks. However, we can do more than we are now doing.

For example, we could develop standards for dealing with radioactive materials and nasty germs that can be found in hospitals and labs so that it would be difficult for someone to steal the material. Yes, some labs will ignore any standards; but most will follow them.

We need to figure out a better way to control the existing arsenal of nuclear and biological weapons.

We could adequately fund the plan to put sensors around NYC to detect the presence of nuclear and other hazardous material. It would only take another $10,000,000 which could be taken from the Pentagon's programs to produce obsolete weapons.

Firefighter Saves Cat

Albert Machado did not climb a tree to rescue a cat that was trapped in a fiery apartment. He saw that the cat was in dire straights so he took the cat outside and gave him mouth-to-snout resuscitation.

Earnings Growth in the 21st Century

The title should be 'Earnings Decline' as the chart shows. Education is having less and less to do with the growth in one's earnings. Only those considered to have professional degrees (mainly doctors and lawyers) have bettered their wages. Everybody else is making less now than at the start of the century.

Will our leaders start talking about this issue?

Sex, Drugs and Money

It's been a year since the Inspector General of the Interior Department released a scathing report on the Minerals Management Service but his findings have finally made the major media. And the findings document a "culture of ethical failure" - bribes of money, sex and drugs; revisions to over 100 contracts which cost us $4,400,000; acceptance of gifts exceeding regulations; granting contracts to former employees. The list goes on and on.

It looks as though many of the perpetrators will pay a price and serve time in prison.

One more domino?

Is Lehman Brothers the next firm to find its name is simply part of history? The company has been denying rumors of its ill health for a number of months now. But a quarterly loss of $3.9 billion plus a write-down of $5.6 billion is not cheery news. Nor is the statement that it will try to sell off pieces - including some that are important - of the company.

Lehman was not a Bear Stearns type. Yet it may suffer the same fate.

A Different Argument

Jonathan Moreno argues against intelligent design on the basis that it harms our national security. I've never seen this argument before, but it makes a great deal of sense, especially in an age where it is getting easier and easier to create lethal weapons that can create mass destruction. Moreno asserts that science is the key to creating and defending against these weapons. Failure to do so will be the result of teaching intelligent design, a non-science.

We may yet thank the Electoral College

If you believe the polls, McCain and Obama are just about tied. I'm worried that McCain may win as many voters will overlook what I see as McCain's many weaknesses and focus on Obama's color and the ineptitudes of the Democratic Congress and Senators.

However, John Wildermuth of the San Francisco Chronicle tells me not to worry. Obama has a big lead in the Electoral College; some see him being as close as ten votes away from the majority needed. He may be right. Obama did win the primary largely through his efforts in the states having caucuses.

Objects and Memories

You will see many 'remembrances' about 9/11 over the next few days. You will not see anything as powerful as "Objects and Memories", which was on PBS last night and will be repeated this week a couple of times, I'm sure.

To the left are some of the objects that were retrieved from the ashes of the World Trade Center.

A thousand men and women worked nine months sorting through the debris in what was "the largest crime scene ever". They retrieved items as small as a kid's marble and as large as a fire truck.

It's been almost two weeks....

...since the NY Times sports pages featured an amputee athlete. Now they have a reason - the Paralympics being held in Beijing. Mr. Shirley to the left of Mr. Pistorius is the fourth athlete with a leg amputation to be featured in the Times in the past year.

Mike Smith in the Las Vegas Sun

There Are Many Ways to Make Money in the Drug Business

In the current Foreign Policy Roger Bate discusses the growing market for fake drugs. He thinks that annual sales of fake drugs is approaching $70 billion a year. The business is moving from making 'lifestyle drugs' (e.g., Viagra) to making drugs that supposedly treat major problems, such as cancer. One of the biggest benefits to the fake drug business in recent times is the rise of the web. The World Health Organization (WHO) thinks that half of all drugs bought over the web are not what they are purported to be. The two countries that are industry leaders are China and India. WHO estimates that 20% of all drugs used in India are counterfeit.

While WHO and others are well aware of the counterfeiting, little is done to combat the problem. Governments deny that their citizens are producing the fake drugs. Drug companies don't want to make noise about it as this may negatively impact their sales. In the meantime, people die from these fakes. Bate estimates that 1,000,000 die each year.

More Bad News

Another record was set in the mortgage market this week: 6.41% of all mortgages are overdue. Further, the amount of new foreclosures (1.19%) topped 1% for the first time in the 29 years mortgage bankers have been conducting this survey.

It's going to be the people issue all over again

The people our current president has hired/appointed have been, by and large, not of the highest calibre (to be charitable about it). Those who read this blog know that I don't think highly of McCain's managerial abilities. I'm sure he didn't hire the fellow who decided that the photos below were of the Walter Reed Army Hospital. But couldn't one of McCain's high-powered aides have seen that it was the Walter Reed Middle School in North Hollywood, California?


These were the photos used in last night's McCain speech.

Not Getting Better

Unemployment is at 6.1%, in February it was less than 5%. There are a lot more numbers in this WSJ article, most of which are bad. The worst is yet to come.

January 20, 2001 - Today

John Hanrahan summarizes the period and, along the way, gives grounds for impeachment.

Suppose that early in 2001 someone had described to you a government that did the following: tortured enemy combatants and suspected terrorists; claimed the drowning interrogation technique known as waterboarding used on prisoners was not torture; had a network of foreign and offshore secret prisons; sent prisoners to foreign countries for interrogation and likely torture; engaged in illegal warrantless monitoring of phone calls, email messages, and Internet activity; abridged the right of habeas corpus; kidnapped individuals in other countries and held them indefinitely without trial or public acknowledgment; built a wall to seal off its southern border; launched a preventive war and claimed the right to launch preventive or preemptive wars apparently anywhere in the world.

Further, this was a government that had a president who claimed the right to ignore or flout laws passed by the national legislature by issuing hundreds of “signing statements,” as well as to hold secret tribunals in which defendants could be denied access to key evidence against them. And this same president through his attorney general was pushing for even more powers by proposing to the national legislature a measure declaring the nation is involved in an apparently perpetual “armed conflict.” Under this proposal, the president would have power to declare anyone in any country, including the United States, a “terrorist” and (in the words of the American Civil Liberties Union) “hold the person forever – without ever charging anyone with a crime.”

Additionally, this was a government that authorized its agents, without warrants, to seize from travelers their laptop computers, cell phones and cameras at airport checkpoints and download data from these devices; to coordinate with local authorities to set up special so-called “free-speech zones” as the only authorized locations for political protest when the president or other government leaders come to a community; to snoop in your financial, travel and other personal transactions; to give grants to cities to purchase surveillance cameras and license plate readers to track every car entering a city; to establish airport “no-fly lists” that for secret reasons bar certain travelers from flying. And on and on.

Change Afoot?

In 2005 China allowed the yuan to float in the market to some degree. In that time the yuan has appreciated 21% vs. the dollar. This appreciation makes China's goods more expensive and ours more competitive.

The situation may change as the central bank is feeling the pinch of having bought $1 trillion of our government bonds since 2001. That's a big number and, measured against a capital base of $3.2 billion, a really big number. To really make matters worse, their investment in our bonds ($350 billion in Fannie and Freddie) has not produced exactly stellar results. The central bank has been able to do this largely because they obtain very cheap money from Chinese commercial banks, who, in turn, take it out of the hide of the Chinese bank customers by paying them peanuts for interest on their accounts but charging high rates for loans. As you would expect, some Chinese do not like such a situation. One of the best-selling books in China recently has advocated the thesis that we suckered China into poor investments.

The Chinese economy is such that the central bank is not in trouble as they can get money from other branches of the government. The real issue is what will happen to the yuan, as this effects global economies.

Sad Statistic

It looks like the number of soldiers committing suicide will be up again this year. It is expected that the number will be up 10% and, significantly, the rate of suicide among the military is higher than that of the civilian population. And, as I reported earlier this year, the number of soldiers who attempt suicide is way up.

Hubert Humphrey Must Be Rolling in His Grave

Who would have thought that the leaders of Minneapolis and St. Paul would authorize their police forces to infiltrate groups that would be protesting at the GOP convention? I certainly never thought that what I considered a liberal state would countenance the behavior that resulted - in Glenn Greenwald's words, "teams of 25-30 officers in riot gear, with semi-automatic weapons drawn, entering homes of those suspected of planning protests, handcuffing and forcing them to lay on the floor, while law enforcement officers searched the homes, seizing computers, journals, and political pamphlets." Reporters were stopped at gunpoint. Lawyers representing detainees were handcuffed at the scene.

The Land of the Free?

How Much Does Laura Make?

Okay, the Bushes don't need more money. But, if they were the top dogs in Kenya, their wives would be very well compensated as compared to the average American. They could make as much as $170,000 a year in a country where the average person makes $1,300. The wives of Kenya's top dogs are paid $70,000 each for embodying family values. I guess that this was not enough as they can now earn another $100,000 annually for their social responsibilities.

Consistency on Display

"What do we do now?"

That's the question Robert Redford asks at the end of "The Candidate", a movie made more than thirty years ago. The question is asked just after Redford realizes that he has won a toughly contested race for Senator. I caught the last hour or so of this classic movie last night, a movie which I can't ever recall seeing.

It reminded me of current day America where so much attention, effort and time has been spent for so long on the race, yet we still have not much of an idea what our candidates - from local to national levels - really believe. They speak in bromides, reciting old ideas, proposing to bring nirvana to our daily world. And we, in the role of the media, go along with this inanity. Did he wear his freedom pin today? Does he have 7 or 9 houses? What relevance do these questions have to the quagmire the world is in today?

Yes, democracy is not a pretty thing. But, we have turned it into a truly ugly thing.

The Convention

Clearly, some cops and other law enforcement people have over-reacted as in the following video of the arrest of Amy Goodman. But there are some varied photos here that you should also look at.

Again, the Managerial Thing

It's not easy hiring people. It is not something one does lightly, particularly if the candidate will be working directly for you. It's beginning to sound as though McCain does not have the same ideas.

Media reports say that he has met Palin once and maybe spoken with her another time. McClatchy says that no one in Alaska has been asked about Palin, not her neighbors, not politicians for or against her. The FBI is not talking.

This has to be a very strange way to choose someone who may have her hand on the nuclear trigger. How can this guy feel that he has the qualifications to manage this country? How could anyone vote for him?

Centuries-old Traditions

One such tradition in some parts of Pakistan is that women should have no say in selecting a husband.Five girls who wanted a say were shot and dumped into a ditch. A member of parliament defended the killings thusly,"These are centuries-old traditions, and I will continue to defend them. Only those who indulge in immoral acts should be afraid."

The Start of What I'd Like To Hear From Our Leaders

I don’t have all the answers to all of the problems that confront us in this first decade of the 21^st century. No one does. You will not like all of the things I try to do as president. Some of these things will hurt some of you because every action – your actions, my actions - has costs and consequences. But, I will always try to act in what I see as the best interests of this country and the world.

Determining what are those best interests is not easy. I cannot do it alone. I need your help and the help of everyone in government, whether that government is in a small town in Kansas, at the State House in Boston or in our nation’s capital. We, all of us, are in this together. And we have to band together, especially today when our world is in a phenomenal state of change. We need the talents of all of us to cope with this change. We need the talents of all of us to solve the problems that we are facing today. We need the talents of all of us to minimize the problems the future will bring us.

The world is changing in many ways. The biggest change may be that we are no longer the sole superpower; we have to pay a lot more attention to the other nations of the world. We need to develop other sources of energy. Our climate is changing. The world’s economy is going in the toilet, if it is not already there.

Our stature in the world has changed not only politically but in ways that affect our everyday lives. For example, we spend more per person on health care than any other country, yet we die at a younger age. Our rate of stillborn births is the same as Croatia and Cuba. We have the largest prison population in the world. We lead the world in terms of the percentage of our children who live in poverty. My share - and each of my children’s share and your share - of our country’s national debt is $150,000, yet we spend billion and billions of dollars on weapons, many of which are obsolete by the time they are ready for production. We have some of the leading universities in the world, but our grammar and high school kids no longer have the top scores in tests conducted around the world.

I could go on, but you know we are in very deep water and there is no lifeguard to rescue us. We must save ourselves. And we can begin to do so by practicing American values, by believing once more in our ability to solve problems, by going beyond belief and actually working at understanding and solving problems.

We need to restore America to a three part government – an executive branch, a legislative branch and a judicial branch. I am running for president, not emperor; it is my job to execute, not to legislate and not to judge. Our Congress must return to its constitutional role. It must work for the people of America, not for the Democrat or Republican party. It must execute its power of oversight. Our judges must stop pontificating and return to their role as judges.

I know that things will not change overnight. But you can help this change start and gather momentum. It is you who can light that one little candle that will enable this nation to once more see the path that leads to freedom, justice, liberty and hope for us, for our children and for our children’s children.