See No Evil

Homeland Security Secretary Janet Napolitano has killed a domestic spy satellite program that would have been used ”to provided federal, state and local officials with extensive access to spy-satellite imagery — but no eavesdropping capabilities— to assist with emergency response and other domestic-security needs, such as identifying where ports or border areas are vulnerable to terrorism.” See: No Eyes in the Sky To me, this is one more indication that the Obama administration does not have our nation’s security as its top-of-mind issue. Add this to the list of other administration backtracks that reduce our nation’s ability to combat radical-Islamic terrorism:

- the announced year-end closing of Gitmo,
- the release of top-secret terrorist interrogation memos,
- the relocating al-Qaeda Uighur terrorists to Bermuda and Palau,
- the reading of Miranda-rights to terrorists captured on the battlefields of Afghanistan,
- and Obama’s ho-hum attitude to a terrorist’s killing of an Army recruiter in Little Rock.

I wonder how much more dismantling is still to occur to the anti-terrorism battlements that were erected by the Bush administration. And this bothers me … it bothers me quite a bit.

Boondoggle Glitch

New Orleans Mayor Ray Nagin has been quarantined in China after being exposed to the swine flu. See: Asian Boondoggle. Why do mayors and their entourages (too often including wives) indulge themselves in these obviously fake economic missions? (Boston’s mayor ,“Mumbles” Menino, has also had his share of expense-paid vacations, see Menino Italy Trip and Menino S.A. Trip ). Mayor Nagin will be out of office within the year. See: Last Days. Therefore, I suspect, any possible benefit that he can squeeze from his current boondoggle will be quickly dissipated once he is gone.

Perhaps, if the main-stream media were doing their jobs, they would grill these pols upon their return from such expensive “economic missions” to ascertain exactly what had been accomplished ... and then do follow-up stories.

Dr. Spock

Many of my dewy eyed friends, raised on Dr. Spock’s permissive, non-judgmental teachings, believe that Barack Obama has the magic formula for world peace (as demonstrated in his Cairo speech – all nations are created equal, kind words will conquer all, and nuclear weapons, especially in the hands of the U.S. are a menace.) This passivity contrasts with Ronald Reagan’s active message of “Mr. Gorbachev, tear down this wall!” This difference is especially telling when one compares Obama governing style with his rhetoric. He said in Cairo (and pledged on the campaign trail) that governments should be transparent, yet the opaqueness and reach of what his regime is actually doing is stunning. He also said there that “any world order that elevates one nation over another will fail”. This is the ultimate in non-judgmental pap … and a very dangerous notion that mirrors his (and many other liberal's) knee-jerk, hate-America-first attitude. To have thought that we were no better than Germany during World War II would have eliminated any incentive for us to stop this totalitarian menace. And to think that the United States is today on an equal moral footing with North Korea is nothing more than bubble-headed sophism.

For a man, with such rhetorical gifts, to have such anti-American and deep-seated Spockian ideals is truly dangerous … particularly when he lives in the White House.

Don’t Do as I Do ...

Barack Obama was recently interviewed by the BBC in which he said, "The danger I think is when the United States or any country thinks that we can simply impose [our] values on another country with a different history and a different culture," I, for one, think this statement is exquisitely ironic considering the fact that Obama feels no compunction about imposing his far left-leaning values, born of a different culture and history, on his own nation. See: Pravda

My Hero, Jimmy Carter

Jimmy Carter has pretty much headed my manure list for quite a few years ... but this week he went a long way toward redeeming himself. He testified in front of John Kerry's Energy Committee. After a bit of typical self-engrandizement and boring side trips, he said a few things that caused me to sit up and smile:

1) He was and is in favor of the nuclear waste storage facility at Yucca Mountain
2) He is very much in favor of nuclear power plants as the chief hope in solving our future energy needs
3) When he commanded a nuclear submarine, they had to replace their nuclear fuel every few years. Now the nuclear carrier George H.W. Bush can go its entire life without replenishing its nuclear fuel. This advancement in nuclear technology bodes very well for the efficiency of any future nuclear power plants [which we may yet have the good sense to build -- my add].

I Googled for these remarks and found this article in the Washington Post by Dana Milbank. Take a gander and see if you can find this info anywhere cited ... as another example of main-stream media bias: MSM Bias

I also was visiting Los Alamos, NM this PM and discovered the following facts:
- If you live within 5 miles of a coal powered power plant, you will receive about 0.3 rems of radiation exposure per year (out of a total average exposure of about 200 rems per year)
- If you live within 5 miles of a nuclear powered power plant, you will receive only about 0.1 rems of radiation exposure per year!
- The greatest contributor of radiation exposure to the average person is medical and dental x-rays ... followed by radon gas.

It’s Easy Being Green

Kermit the frog was wrong. It’s easy (and profitable) being green. Witness the $75,000 fee that Tom Friedman of the NY Times pulled down for spouting the Gore text recently in San Francisco. See: Green Fee. Even Al Gore himself has turned being green into greenbacks … his speaking fees of $150,000 per sermon … his half of the $1.5 million Nobel Prize … his movie and book royalties. See: The Money Spigot. Surprisingly, the money-grubbing Clintons have had to take backstage to Gore’s post-administration greenmail juggernaut. Gore even has effortlessly transitioned from profiting from his investment in big oil (Occidental Petroleum) to his insider dealings with the greenies. See: Gore’s Investment Portfolio

But this is just a start. There are enormous monies to be made messaging the egos of eco-friendly plutocrats who want to hide their profligate energy-consumption ways behind the purchase of carbon credits. See: Carbon Credit Scams. And climate researchers have learned that, in order to get project funding, it is more sensible to hype some new calamity that is to befall the world unless we stop spewing carbon dioxide into the atmosphere. See: Science Funding. And to top this all off, governments are also desirous of fleecing this same golden sheep by imposing a cap and trade policy … basically an enormous tax on corporate and individual activities that used to be freely practiced.

Union Suit

It is perfectly natural that this country’s unions would expect favors from Barack Obama and other Democrat politicians. After all, these same unions donated over $100 million last year to get these same people elected (see: Union Donations). But the actual quid pro quo seems to me to be getting a little rich, viz:

1) In bankruptcy, Chrysler Corp. debt holders (hedge funds, etc.) have been offered by the Obama administration approximately 33 cents on the dollar of the money owed to them … whereas the United Auto Workers are to receive 100 cents on the dollar for what Chrysler owes them (see: UAW Windfall). The consequence of this government cram down (see: Cram Down) is that the UAW will end up owning about 55% of the resultant Chrysler company.

2) Obama is strongly committed to eliminating the secret ballot in voting for union shops. This is called the Employee Free Choice Act (or "Card Check") but would result in exactly the opposite since employees would be consequently coerced into voting for the union (see: Employee Coercion)

3) The current Democrat administration is in the process of rolling back union disclosure requirements that have helped to quell union corruption (see: Stopping Union Disclosure)

4) The recently-passed $787 billion Stimulus Bill (the one no one read before they voted for it) has a provision that any construction project of $25 million or more MUST go to an union shop (see: Stimulus Bill Stipulation)

And, I'm sure, many more goodies.

ANGST!

Perhaps it is because of a need to fill the 24/7 news cycles of cable television but it seems to me that there is a growing number of stressful situations that are gripping the news reporting in this country. What once might have been a column on page B22 of the NY Times is now the hysterical lead on many internet blogs and cable TV talking-heads shows.

For instance, to mention but a few:
- Swine flu (or H1N1) -- In a normal year about 35,000 people die in this country from the flu. So far one person has died here from the Mexican swine influenza “pandemic” and yet our citizens are in a media-induced panic. Go figure.
- War in Afghanistan/Pakistan – Barack Obama has made this war a centerpiece of his '“Overseas Contingency Operation” (no longer “War on Terror”). So far we are not getting the daily casualty reports and dovish hysteria like we once did in Iraq under Bush. But I predict that, within 6-12 months, this conflict will be just as media assaulted.
- Somali pirates – This nuisance, it seems, could be wiped out with a few Predator drone strikes, but frustratingly lingers in the cable news cycle like a bad case of teenage acne.
- Banking crisis -- Since last October, this has been a headline grabber with the latest worry being the “stress test” which all banks recently passed (maybe not?).
- Unemployment – the media’s focus on the unemployment rate started under the Bush administration, but now the Labor Department's breathless monthly update has become a reason for the stock market to swoon.
- Nuclear proliferation in Iran/North Korea – The media is more than happy to go partners with Amadinajab and Kim Jong Il to keep their audiences in a perpetual state of angst over when and where these tin-hat dictators are going to drop the big one on the civilized world.
- Torture – the only thing more tortured than a water-boarded terrorist is the hypocritical rhetoric fanned by the American fourth estate.
- Disappearing U.S. auto industry – daily hand-wringing is the recipe for this naturally occurring bit of financial capitalism.
- Global warming – ‘nuf said.

Svengali

Al Gore is and has been playing a very high-stakes game … and so far has been winning (an Oscar, Nobel prize. etc.). His clarion calls for the reduction of man-made carbon emissions to stop the march of global warming, sea-level rising, and species extinctions has captured the imagination and slavish following of scientists, politicians and other naïve children worldwide. He, along with Barak Obama and Nancy Pelosi, have called for the elimination of all fossil fuels as the basis for our country’s energy production … to be replaced by wind, solar and other “renewables” … but, strangely, not nuclear. (One might even say that these three alarmists are quite quixotic by both literally and figuratively tilting at windmills.)

But, I am not here to argue the pros and cons of global warming but rather present some questions about Al Gore’s future emotional stability. Popular opinion in favor of man-made global warming has begun to wane in the light of increasing scientific skepticism and a willingness to question the Gore and UN dogma (see Climate Debate ). This has shifted our former Vice President and inventor of the internet into high gear. He has recently come back to his congressional playpen to pontificate some more on his emotional environmental crusade (see Gore Testifies and Alone). Now, as Al Gore sees his audience slipping away, he seems to be getting more and more frenetic (“The Earth has a fever!”) And, what will Gore do if and when his preachings about our ecological demise are finally and fully debunked? One might hope for his mental health that, like Malthus’s crackpot ideas about world over-population, this day of his reckoning does not happen until he has left this Earth … to its own self-regulating devices. At which point his place in history, IMHO, will become a very sad footnote.

Earth Day

Let's all celebrate ... like sending a recycled paper e-mail message to Al Gore.

No Sulphur Smell Now

An enemy of my enemy is my friend.

Coast Guard

Al Sharpton has done it once again. He has called the Somali pirates a “voluntary Coast Guard”. See: Al Sharpton’s fantasy. Now, as if making up multiple media lies about Towanda Brawley, castigating the Duke University soccer team with racial invective, and standing by in 1995 while a Harlem crowd was urged to “Burn down the Jew store” which killed seven of its employees … was not enough. Now Al baby is yanking another warped fantasy out of his twisted mind. Why this man has one second of time on any cable news program is indicative of the degree to which TV producers will sell their souls for ratings.

Or are the Somali buccaneers “ecological warriors” as quoted in the Huffington Post (read further in the above hyperlink.) I guess they must just be trying to mitigate global warming? And we killed three of them for heaven's sake!

Chicken Hawk?

Since Barack Obama has never served in the U.S. armed services and since our current President also courageously gave the direct order on Saturday morning allowing the U.S. Navy to use deadly force if Captain Phillips (being held by the Somali pirates) was in imminent danger and since professional Navy Seal snipers shot dead three of these pirates on Sunday morning and since the Somali pirate organization has sworn future revenge on U.S. nationals for this action … can we now call President Obama a “chicken hawk” … like we did to so many non-veteran higher-ups in the previous administration who dared stir up the Islamic terrorist wasp nest? (Just to keep things balanced.)

Atomic Ant

Barack Obama has made a dramatic commitment to “alternative energy” to combat that bubble-headed bugaboo “greenhouse gasses.” Apparently to him this only means solar and wind energy (and possibly geothermal) methodologies. He has also vowed to put out of business the utilities that burn coal for electricity (see Bankrupting Coal ). He also said in his campaign that he would “consider” expanding our nuclear electrical generating capabilities. We currently get about 20% of our electricity from nuclear power plants (see: United States Nuclear) whereas France (see: French Nuclear) gets over 75% and Japan (see: Japan Nuclear) gets over 35% of their electricity from same. And many of our nuclear power plants are getting quite old and do not take advantage of many of the advances made in this technology over the last twenty years.

But two other facts have recently been revealed to me (on CSPAN this past weekend) that show that Obama may have briefly considered expanding nuclear energy … but he has just as quickly rejected it. Witness:

- The recent $789 billion Stimulus Bill contains no governmental loan guarantees for building more nuclear power plants. Because of the incredible high capital investment required, without these guarantees, it is quite unlikely that any new nuclear plants will be built during Obama’s tenure.

- The Energy Department, under Obama, has recently stopped construction on the long-term nuclear waste storage facility being built at Yucca Mountain, Nevada. Storing nuclear waste has one of the primary barriers to our expansion of nuclear power generation.
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To put this problem in its proper perspective, take some time perusing the following table of energy consumption trends in the United States (see U.S. Energy Consumption. Print it out and put it on your refrigerator). Now these are numbers put out by the U.S. Government … so they are not more smoke being blown up our rear ends by Sierra Club tree-huggers. From this table it is very clear that, for coal generation of electricity to be replaced by solar arrays, wind farms, and geothermal energy, it would require an expansion of these latter three sources by over 30,000 %. This is pure fantasy. (Again, please, please take the time to study this data.) Are Obama and his advisors reading this data? If they are and if they persist with their fairy-tale green energy policies, then they are pulling the biggest scam in political history. And this is a scam that may well cost our economy its future and cause our future generations to retreat to cave-dwelling.

One last thought – how come Iran can pursue nuclear power generation (even if just a chimera) with liberal assent … while we are denied this option?

The Enabler

I do give President Obama credit for his good intentions toward Old Europe. (God help us if he were making these mistakes on purpose.) But, it doesn’t take much to view Old Europe as a pack of spoiled children. On his G20/NATO swing Obama has kissed the cuffs and hems of all the leaders of Old Europe and, other than fawning and adoring groupie audiences, what has he gotten in return? -- certainly no real help in Afghanistan, continued tut-tuting about America’s role in the world’s financial crisis, and an opportunity to surrender U.S. sovereignty to a bunch of Brussels bureaucrats who want to tell our financial institutions how to operate. Excuse me … it is not like the European banks did not swallow the financial-derivative bait with as much gusto and avarice as their American counterparts … only to be bailed our by the U.S. taxpayer (with the AIG pass-throughs). Obama said recently in Strasbourg, France that we Americans have been “dismissive, even derisive" of Old Europe. To my mind we have not been “dismissive, even derisive" enough.

Twice in this last century the United States has spent considerable blood and treasure to stop Europe’s self-annulations. Then we helped them rebuild after the Armageddon of World War II. We watched in painful silence as they dismantled their national defenses and forced the United States to become the world’s policemen and the only counterparty to Communist threats. (This alone permitted them their numerous self-indulgent social engineering experiments.) We tolerated their (and the Far East’s) thumb-on-the-scale trading practices that helped deplete our monetary reserves. We have bowed to their snobbish cackling about the threat of global warming and are poised to allow them even to tax our domestic energy usage. We have put up with the monstrous graft and kickback schemes between their politicians and the dictators in the Middle East and Africa. We have squirmed as they let NATO go sickly and they have done squat to help us stop the spread of nuclear technology to Iran and North Korea. And we have borne their pompous preachings on how really awful we have been in trying to protect them and the rest of the world from Islamic extremism.

Posh! Enough of this enabling of European effetism! I sincerely hope that this G20/NATO trip will cause the scales fall from Obama’s eyes and he will finally start encouraging the United States to act more in its own self interest … that is, at least until such time as Old Europe grows up and a pair.

The French Connection

The above is a view from Germany looking over the Rhine River to Strasbourg, France and seeing the results of the anti-everything riots that are taking place during the NATO summit meetings there. Now France has been reluctant to commit anything meaningful to NATO’s efforts to stop the Taliban insurgency in Afghanistan … much to President Obama chagrin (see French Reluctance). However, to me, this rioting by Code Pink or Act Up rowdies or whatever provides to France the perfect opportunity to kill deux oiseaus avec l’un rocher.

The answer: Send in droves of riot police and round up these radicals by the hundreds or even thousands. Then try them quickly and give them the option of 30 years in prison (for aiding and abetting felonious arson) or joining the French Foreign Legion. When most chose the latter course, assemble this ragtag mob into crack units of mercenaries by training the soles off their feet. Then send them to Afghanistan to fight the Taliban. If they refuse to kill their soul mates, then court-martial them and, like Laurel and Hardy in that French Foreign Legion movie, shoot them at dawn. After a few of said punishments, we should then have a real committed French fighting force to aid our GIs in their Afghan mission. And we might also start to like the French other than for their cuisine.

Do I seem too harsh?

Never Mind

Gilda Radner once played a character on “Saturday Night Live” called Emily Litella. This Emily Litella generally would sit with another news anchor on “Weekend Update,” and would read a seemingly serious editorial. She invariably misunderstood some word or issue in this editorial and would go off at length on this misunderstanding … bringing up irrelevant nonsense after irrelevant nonsense. Finally her co-anchor would tell Emily Litella that her original jumping off point was in error … at which point Emily Litella would shrug and say, "Never mind.”

Yesterday, I wrote a bit of a puff blog on Barack Obama, complementing him on his contribution to the convivial nature of the G20 economic summit in London (see: New World Order). Now, today we see Obama has given a speech in Strasbourg, France (see French Town Meeting) in which he went out of his way to disrespect the country over which he governs. He said that the United States:

- had often behaved arrogantly towards Europe, and had been “dismissive, even derisive",
- “shares the blame [for the world economic meltdown] ... we've just emerged from an era marked by [our] irresponsibility".
- “now embodies [in him] the new idealism and the new fight for progress … on climate change, on clearing up the financial and economic mess left by his predecessors, and all the other mega-problems.”
- has shown “a failure to appreciate Europe's leading role in the world."
- "made a mistake by allowing the Taliban to reemerge [in Afghanistan] during the height of the Iraq war."

So, Obama still can’t resist, on foreign soil no less, in berating the United States for its flaws and in believing that he will lead our country back on the path that Europeans will find more palatable.

Re: my new respect for Obama’s leadership, “Never mind.”

New World Order

It appears President and Michelle Obama have helped create a new conviviality among world leaders. See the G20 Results. Michelle Obama snookered up to Queen Elizabeth in a very forward but seemingly accepted manner. See Hug a Mug. And Barack Obama unexpectedly bowed to the king of Saudi Arabia. See Your Highness. But these gaffs aside, our President did help calm the waters between China and France over dealing with financial tax havens (see “G20 Results” reference). Even Dmitry Medvedev of Russia hailed Obama as “my new comrade” (at once, both a fraternal and frightening appellation.) But, giving Obama the benefit of the doubt, the G20 world economic summit seems to have been a winner for the good ole U.S.A.

Time will, of course, tell. But at least it appears that the world has endorsed our smiling savior as its new matinee idol. And I will acknowledge that this group embrace is a dollop of gravy on an otherwise dreary meal of economic gristle.

G20

The G20 economic summit is meeting tomorrow in London and there are considerable protestations … marching, breaking windows and invading buildings. Here is a sample of the kind of demonstrations that are taking place. But, there is one problem. It is Socialism and Communism that means not working. But, Capitalism means working your tuckus off. Somebody should really clue these radicals in. By the bye, I wonder how many of these extremists have real jobs?

Mr. Goodwrench

President Obama has unilaterally guaranteed the warranties on the autos sold by General Motors and Chrysler. See U.S. Auto Warranties. Now this is a pretty far-reaching commitment of taxpayer dollars for not having any public or Congressional input. To see how profound this might be consider the following: these two U.S. automakers sell roughly eight million cars a year (some years more, some years less) and I estimate the effective cost of a three-year warranty on a new car to be about $1,000 per car. So Obama has committed the U.S. taxpayer to $8 billion of cost per year in the first year and accumulating up to $24 billion per year in year three (after layering each new model year). Once these two car companies went under, this guarantee would theoretically last for at least three years after they disappeared under the waves. Now this is just problem one. There are two more serious issues:

1) What about Ford Motor? How can they compete with GM and Chrysler when these latter two companies have free access to the U.S. taxpayer’s wallet from which to extract even larger amounts of pelf.

2) What about foreign auto makers? Can they not now claim unfair trading practices for this U.S. warranty backstop? In fact, just the current Obama loan guarantees to GM and Chrysler could also be construed to be the start of an auto-industry world trade war. We know that the degeneration of world trade was a major contributing factor to the great depression. Have we just let this genie out of the bottle once again?

The Obama administration is moving so fast in its attempts to improve our economy that I am concerned that it has not spent enough time worrying about unintended consequences. Maybe they need to follow that oft-used phrase from the Clinton administration and "stop and take a deep breath".

Good Riddance

George W. Bush is comfortably ensconced back in Texas … making Laura’s morning coffee and licking his wounds. And I say, “Good riddance!” Clearly, our worst President can no longer run up huge budget deficits which our children and grandchildren will have no hope of repaying. He no longer can escalate military offenses in far away lands where American sons and daughters will go the die or lose their limbs. He can no longer gaff his way through unscripted press conferences and photo ops. He can no longer try to reward all this nation's illegal aliens with citizenship and Social Security benefits. He can no longer nominate people to his administration who are tainted with malfeasance or unethical pasts. He can no longer sully America’s standing with our foreign friends and enemies alike with his naïve diplomatic judgments. He can no longer reward his supporters with larded-up government spending. He can no longer ruin our economy with his constant doom and gloom predictions. He can no longer wage his petty “war on terror.” He can no longer endorse steps to alleviate global warming. He can no longer keep Guantanamo open so that peace-loving Islamists are constantly tortured and kept in subhuman conditions. And he can no longer fiddle-fart around while Rome burns.

Thank God for the wisdom of the American electorate.

The Piker

U.S. DEFICITS BY YEARS

Yes, George W. Bush took a budget surplus from the latter part of the Clinton administration and turned it into a deficit. This was the result of the bursting of the dot-com bubble, the 9/11 terror attack with its resultant financial meltdown, and then the wars in Afghanistan and Iraq. It was not the result of the Bush tax cuts as these did nothing but encourage economic growth and vigorous employment expansion up until the time of our current financial freeze-up (the reasons for which I will not argue here). But Bush was a piker when it comes to fiscal irresponsibility. As one can see from this chart, the Obama administration, under Rahm Emanuel’s leitmotif that “we should never waste a good crisis,” is pushing social spending and our federal deficits to undreamed-of levels … and this will occur despite a planned gutting of our defense budget. This chart shows the dramatically growth of deficits under the current Obama/Emanuel plan as projected by the White House and also the impartial Congressional Budget Office (CBO).

One picture is worth a thousand words.

The Face of American Politics

- Friend of Angelo (mortgage rate payola)

- Refusal to release mortgage paper trail
- Wife involved with AIG (on board of IPC)
- Flip-flopper on AIG bonus provision (fessed up) - Waitress "sandwich" maker w/Ted Kennedy

- Irish vacation home shady self-enrichment

- John Huang 1996-97 Chinagate scandal

- Cozy relationship with Fannie Mae

And to think, he might have been the Democrat nominee for President ...

Turd on the Table

A boss of mine once derided me for leaving him a “turd on the table.” In other words don’t bring him a problem without bringing him a solution. I guess I’ve done just that with “The Camel's Nose” blog entry. So, I will try to solution things. Unfortunately the riposte isn’t easy. The answer needs to rein in excessive executive compensation without the heavy hand of government which, if we have been awake these last twenty years, invariably brings with it more problems than it solves (witness the “Community Reinvestment Act” of 1992 which is the genesis of our current economic meltdown.)

Since the Board of Directors and the Executive Compensation Committees of corporations are where these problems start, this is where the solution must also begin. Therefore, I suggest the following remedies be enacted into law:

1) All senior executives and Board of Directors members must disclose annually in each company’s Annual Report and 10K what other corporate boards they sit on, what all their compensations, perks and considerations are from this company, and what conflict of interests they might have or have had to the financial well being of said company or to the benefit of some other entity. (For instance Edward Liddy, CEO of AIG would have to disclose that he previously sat on the Board of Goldman Sachs to which AIG funneled $12.9 billion of federal bailout monies.) These disclosures must be made fully, without obfuscation, and under the threat of severe penalties from the SEC and/or the civil justice system. I might even consider a special federal tribunal being set up that overarches state courts in these specific cases.

2) No Board member or corporate executive of a public company may also be involved, either directly or indirectly, in the political arena whatsoever.

3) All members of the Executive Compensation Committee must be outside Directors, must have had experience in constructing executive compensation packages, and the majority must come from entities which have meaningful investments in said company. They must state in writing in the 10K the specific reasons for each executive’s compensation package and disallow any variance from the terms of these packages. The SEC and general public would have the same redress options for failures under these terms as in #1) above.

4) No corporate executive or Board member can be an officer or in any way benefit from the operations of a subsidiary or non-public entity of said corporation. In fact, all off-balance sheet transactions must be fully disclosed and accounted for in the 10K of said corporation.

5) All offshore subsidiaries of said corporations need to comply with these laws as though they were operating in the United States.

6) Corporations should stop indemnifying directors from bad decisions AND paying them the big fees, stock options and perks -- possibly one but not both.

This, at least, is a start … and relies as little as humanly possible on the government actually running things.

The Camel’s Nose

The House of Representatives this past week overwhelmingly passed a 90% income tax on bonus compensation for executives earning over $250,000 per year and working for companies receiving over $5 billion in TARP or other bailout monies. This includes companies like AIG, Fannie Mae, Freddie Mac, and possibly Citigroup and Merrill Lynch (now part of Bank of America). And, in the process, Congress is ignoring the thousand fold bigger issue of how these TARP and other bailout monies are being distributed. See my blog Golden Goldman).

Although I think this was misguided legislation and may be mollified in the Senate, still executive pay packages have been soaring into the stratosphere in recent years primarily, I believe, because the checks on such largess have all but disappeared. Company shareholders are now mostly mutual funds, hedge funds, and other amalgams of monies whose investment time horizon are very short and whose managers themselves have been caught up in the frenzy of mega-salaries. (When I was an investment analyst on Wall Street in the 1970s, a top pay package for this profession was a few hundred thousand dollars … now, for essentially the same work, it is many millions.)

So, into center stage steps President Obama who is now proposing to limit the pay packages of all corporate America independent of whether any government monies have been given to them. (See Executive Pay Limits). Now while I don’t take issue with the need to reestablish some sanity into the executive pay process, I do question if the Federal Government in the form of Chris Dodd and Barney Frank have the expertise and disposition to be the arbiters of this process. In fact such a development downright frightens me. The AIG executive bonuses uproar has allowed the nose of the government camel into the tent of corporate governance which, if I read the Obama administration’s intentions correctly, will be just the first of a series of baby steps with the ultimate objective of dismantling capitalism.

The road to Socialism is paved with camel’s noses.

Breaking the China

Federal Reserve Chairman Bernanke announced yesterday that his organization will pump over one trillion dollars into the U.S. economy by buying up U.S. Treasury securities and mortgage-backed debt. (See Bernanke Buyback). This bold move has caused interest rates to plummet, the price of Treasury securities to rise, and the U.S. dollar to weaken around the world. It is now predicted that long-term mortgage rates will now decline to the 4% - 4.5% range. This buyback should include as much as $300 billion of long-term treasuries and cause the government printing presses to work overtime to print all the required dollars. Now, there may be an interesting wrinkle to this announcement. China has recently complained about its massive holdings of U.S. debt obligations (See China Complaint). It is estimated that they hold as much as one trillion dollars of U.S. debt and, if they were to decide to unload these holdings back to us, the price of such debt would plummet and U.S. interest rates would increase in step.

Now I have to wonder if these news stories are linked? Is Bernanke perhaps rubbing China’s belly by allowing it to sell a bunch of their U.S. debt holdings back to us under more favorable conditions? Isn’t it funny that effectively the same action (the Federal Reserve Bank buying back U.S. debt) can have totally opposite effects depending on who initiates the transaction? And, if my speculation turns out to be correct, then the U.S., under the wing of our International President, Hillary Clinton, clearly has blinked first.

Skin the Cat

Goldman Sachs is now making loans to its cash-strapped employees. See: Goldman Loans. This, most likely, is in response to the public outrage that has arisen over the bonuses that AIG recently gave to many of its managers. Like AIG, Goldman was also a recipient of taxpayer largess to the tune of $10 billion of TARP funds last fall PLUS a $12.9 billion pass-through of taxpayer funds from AIG (which I wrote about in my previous blog post). This loan program pretty much substitutes for what would be standard bonuses at Goldman. Instead, it is loaning its employees the money necessary to meet their internal capital calls.

Now the rub … I would be willing to bet a good steak dinner that many of these “loans” will be eventually forgiven by Goldman. Thus they effectively will turn out to be retroactive bonuses without the pejorative label. (And this legerdemain also allows recipients to defer income taxes on these payments.) So you see … there is more than one way to skin a taxpayer.

Golden Goldman

(Goldman Sachs Tower -- New Jersey)

American International Group (AIG) just released the ordered list of counterparty payments that it had made last fall from the taxpayers’ and the Federal Reserve Bank’s initial $115 billion in bailout money to this company. According to this morning’s NY Times, Goldman Sachs was second on this recipient list at $8.1 billion. However, since then, AIG has received an additional $58 billion from the U.S. Treasury and Goldman now tops the list at $12.9 billion in total bailout largess … presumably to make good on additional Credit Default Swaps or other financial derivatives that Goldman took out with AIG. (Other large benefactors from U.S. taxpayer’s and Fed’s money, via AIG, include Deutsche Bank @ $11.8 billion, Societe Generale @ $11.9 billion, Merrill Lynch @ $6.8 billion, Barclays Bank @$8.5 billion, and UBS @ $5 billion.)

Now, there are many questions surrounding such counterparty payments … such as:

- Did Goldman Sachs or any other counterparty buy these Credit Default Swaps at a discount and then turn around and sell them back to AIG at 100 cents on the dollar? (Question originally posed by Senator Shelby from Alabama in a recent Senate hearing.)

- Did AIG negotiate with any or all these counterparties to pay them something less than full par value for these CDSs as would be expected? (Question originally asked in a recent House hearing on AIG).

- Since Hank Paulson, the then Secretary of the Treasury under G.W. Bush, was a former Goldman Sachs Chairman and CEO … were such pass-through payments to Goldman Sachs from the U.S. Treasury and Federal Reserve Bank a possible conflict of interest? At the time, was Paulson made aware of this seeming breach of faith?

- The new Obama administration, under which an additional $58 billion has been funneled into AIG (and, as a consequence, an additional $4.8 billion into Goldman Sachs) also seems somewhat cozy with Goldman Sachs. Robert Rubin, a transition team economic advisor to Obama is an ex-Goldman co-Chairman and, according to Wikipedia, "Goldman was the second largest donor to the Barack Obama campaign." It is estimated that Goldman Sachs execs gave close to a million dollars to Obama (see Obama Donors) including James Johnson, a Goldman Sachs board member and former chairman and CEO of Fannie Mae, and Bruce Heyman, Managing Director, Private Wealth Mgt at Goldman. Also Larry Summers, Director of the President Obama’s National Economic Council; and Tim Geithner, the new Secretary of the Treasury and last fall’s head of the NY Federal Reserve Bank are both former protégés of Robert Rubin.

As far as I am concerned the current kerfuffle about the $165 million in bonuses paid out to AIG executives is a mere distraction from the much bigger mega-scandal of over $170 billion of make-good payments that AIG is funneling into the world’s financial counterparty community. This is the true AIG, Federal Reserve Bank, and U.S. Treasury misfeasance that Barney Frank and the rest of his masked bandits in Congress need to be investigating with their typical grandstanding vigor … instead of trying to grab headlines with this AIG bonus sidebar.

Obey

My wife and I recently visited the new Institute of Contemporary Art (ICA) museum, a spectacular cantilevered building overlooking Boston harbor. We spent at least 45 minutes waiting in a serpentine line of neo-hippies to pay an outrageous price (I think $12 @ plus expensive parking) to view, at best, a sparse and mediocre exhibit of “modern art” that rivaled the Rhode Island School of Design’s students’ exhibit in its schmaltzy glitz. (Note: the RISDI museum’s other standing exhibits, however, are well worth the entrance fee.)

The “highlight” of ICA’s current exhibits is the “Obey” section of graphic posters by “street artist,” Shepard Fairey, an iconoclast in the Andy Warhol genre from Los Angeles. See Shepard Fairey . Fairey is best known for his Andre the Giant posters and stickers (first created when he was at RISDI) and his recent “Hope” portrait of Barack Obama. This section is housed in 4 or 5 ICA exhibit halls and includes many posters filled with vitriol (greedy capitalism, George Bush as Satan) or adoration (Che Guevara, Angela Davis, Obama). These posters are so politically polarizing that it is difficult to judge their true artistic worth. However, grudgingly, they do show a modicum of creativity along with clever use of replicated computer-generated graphics.

But, I must also admit that I also foster an obsessive urge to return to the ICA with a few cans of spray paint hidden under my coat and tag many of Fairey’s more outrageous posters with my own political messages. I would continue this civil disobedience until I was hauled away in cuffs to spend the rest of my life in a Cambridge, MA gulag.

Closing observations:
- Of the many hundreds of attendees at this museum, we saw only one person of color (plenty of Asians though.) Strange?
- If you must visit ICA, spend some time sitting on the benches overlooking the serene Boston harbor (just before the “Obey” section). It will steel you for what is to come.

World’s Most Admired

FORTUNE Magazine has just published its list of the “World’s Most Admired Companies”. (Full disclosure: I was involved in the electronic publishing of this survey data for many years … when it was called “America’s Most Admired Companies”.) Even though this survey was done last Fall, it is quite revealing in which companies are leading in their industries and which companies are lagging:

Megabanks: Bank of America (#1, of all things! BAC stock now sells for $3.50))
Megabanks: Citigroup not even in the list of 7
Motor Vehicles: General Motors (#7, just ahead of Renault … stock sells for $1.60)
Computers: Xerox (#1, yes Xerox! When was the last time you saw a Xerox computer?)
Electronics: General Electric (#1, GE recently hit a 17 year low in the stock market)
Insurance: AIG, the world’s largest insurance company is no longer in the top 8
Infotech Services: IBM (#1, right ahead of Accenture)
Software: Microsoft (#5, behind Intuit, Adobe, Electronic Arts and Autodesk)

Now tell me that U.S. industries are not going through performance paroxysms.

Killing Capitalism

The stock market keeps going down hardly without a pause (see Market Plunge) … pretty much since it was clear that Obama was to be elected President. The nagging question is -- why? I have finally and reluctantly come up with my answer and it is not pretty – President Obama seems bent on killing capitalism. (Gasp!) What better way to slay the bourgeois notion of private ownership of the factors of production than to eliminate the shining symbol of this private ownership -- the stock market? Given what we learned about Obama’s friends and mentors during his campaign, I seriously doubt if this result would be inadvertent.

As a child in the 1940’s and 1950’s I remember that the Soviet Union would often use “Wall Street” as their bete noire representing the United States in their crusade to vilify and defeat us. So, someone who wants to “change” forever the fundamental character of this country might well first attack and eliminate this symbol. And Barack Obama seems to be performing creditably in his job one. For example, he has:

- continually talked down the economy and the stock market with his drum-beat doomsday pronouncements.

- systematically attacked U.S. industry groups with his plans for fundamental “change” – the pharmaceutical industry by planned drastic reductions in the government’s Medicare drug reimbursements; the coal industry by his threat to eliminate coal-powered electrical plants within ten years; the utility industry by his call for alternative energy sources without ever focusing on nuclear power and by his call for carbon “cap and trade” taxing; the health care industry by his thinly-disguised plans for the government eventually to be the sole health care insurer; the banking industry by his Treasury Secretary’s reluctance to spell out a workable rescue stratagem; the petroleum industry by backtracking on his party’s pre-election promise to begin more offshore drilling and by his eliminating tax incentives for new oil discoveries; the defense industry by his easy willingness to abandon our missile shield initiative and his implied coming draconian reductions in defense spending; the auto industry by making them effective wards of the state; and all industries in general by the crowding-out of future financing opportunities by the massive government borrowing that will be required to fund his stimulus bill (and other pork spending).

- shown little or no concern that trillions of dollars of wealth that has been destroyed by this stock market slide (reference Jim Cramer’s rants: Cramer Rants).

And apparently Jim Cramer and I are not the only people who think so. See also: Power Line and The Wall Street Journal

If this speculation of mine turns out to be true (and, believe me, we will know soon enough), it will be considerably ironic since it was many fat-cat Wall-Street capitalists who financed much of Obama’s campaign. (Sorry, no take-backs.)

Basket Case

The federal government (read the Pelosi/Reid lunatic ward) has just allocated $200 million to bail out the NBA. Are we f…ing crazy? We give this corrupt “Show Me the Money” organization our hard-earned tax money so that their million-dollar, gold-brick players can get more tattoos and wear more bling-bling? Perhaps we should just cede our government to Donald Trump or Bernard Madoff and get it over with?

Some More Pet Peeves

Conspicuous Consumption -- Take a few hours off one afternoon and watch some of the teen-directed cable channels (such as MTV) and gag your way through their presentations of the newly rich and famous (rap stars, professional athletes, etc.) giving us a tour of their McMansions ("This is my video game room." "Here are my paintings on black velvet." "This is my large collection of high-performance cars and motorcycles.") And see if you can find any redeeming social value in such lurid displays of conspicuous consumption.

Turkey Pastrami -- pastrami needs to be made from juicy beef brisket and marbled with copious fat … otherwise it is just spiced cardboard. Making pastrami out of turkey is like constructing Manhattan skyscrapers out of Tinker Toys.

Multi-colored Kids’ Plastic Outdoor Stuff -- I don't mind these toddler playground contraptions hidden away IN THE BACK YARD! But increasingly brain-dead parents are placing them in highly visible locations so that many houses are taking on the appearance of a McDonalds' playpen.

Child Car Seats -- I understand the need for infant car seats … but now we must place children up to their Sophomore years in college in contraptions that cost too much and do nothing but take up sitting space in our cars. Parents with more than two small children are therefore compelled to buy huge SUVs or vans just to hold these child cages proscribed by our nattering class.

"American people want …" -- Politicians who aver (usually on Cable TV) that "The American people want … blah blah blah". James Carville started this smarmy trend … now followed by such luminaries as Chuck Schumer and Chris Matthews. How these morons (usually liberal) know what the "American people want" is beyond me? I usually DON'T desire what is claimed of me and strongly resent such words being put in my mouth.

Hope and Change

The Dow Jones Industrial Average (DJIA) is down over two thousand points since Barack Obama was elected (from 9,617 to 7.553). I don’t know if this is a contra-indication to “hope and change” or possibly a reaction to the doom and gloom forecasts of Obama and the Democrat party. But it clearly is in spite of the fire-hose of money that is being spewed around ($700 billion of TARP funds, $20 billion to the auto industry, $787 billion in the recent Stimulus Bill to be signed into law today, AND over a trillion dollars of federal guarantees to Fannie Mae, Freddie Mac, AIG, Citicorp, Bank of America and other distressed financial companies.)

Why has this seeming disconnect occurred? Perhaps, because of the constant drumbeat of pessimistic pronouncements coming from the incoming administration. This morning, one talking head on “Morning Joe” suggested that maybe Obama had overdone this negative sell as a way of pushing through his stimulus bill. If this was the cynical case, then maybe our President, now that he has gotten what he wanted and with his marvelous rhetorical talent, could please talk us back out of this hole?

A Fast One

The fast talking team of Obama/Reid/Pelosi scammed the American people on Friday last when they pushed through Congress (not misnamed considering what “congress” is also a synonym for) the reconciled $787 billion Stimulus Bill with just three shaky Republican votes in the Senate (as opposed to eight dissenting Democrat votes in the House). This was done on the basis that we are in an economic crisis and could not spare one extra day for our legislators to actually read this 1,073 page tome which, I’m sure, contains item after item of special interest largess. (This reconciled bill was actually published just hours before it was voted on.) However, why then is Barack Obama waiting four extra days to sign this bill into law in Denver on this following Tuesday? Could not this time have been better spent uncovering all the Democrat agenda goodies hidden amongst the reams of camouflage? Perhaps these traipsing triplets could not wait for the voters to find the pea (pee?) under their rapidly moving walnut shells?

In the next six months the Obama presidency, I hope, suffers the drip, drip, drip in the media’s uncovering these honey dollops ... until such time as it becomes necessary for the next stimulus hog fest.

Elections Have Consequences

Show this to your grandkids. And then have them save it for their grandkids. (The last bar is 2009.)

Bambi

I should be supportive of Tim Geithner because he is from my alma mater. But his performance today, explaining our country’s financial itinerary out of our current economic crisis, was sub par at best. We were told last night by the Chosen One in his prime-time address to expect great things from his new Secretary of the Treasury, the Artful (tax) Dodger. Instead of getting St. Peter, we got a peter-out. His performance was devoid of promised specifics (“were not going to give the details of this plan until we get it right”) and was long on blame for his predecessors (of which he seems to forget that he was one). And, as a result the stock market is down 382 points and Obama has had to improvise in his Ft. Myers speech and pledge to redo things early next week.

Throughout his performance Geithner had that deer in the headlights look that George Bush was often criticized for having … thus Geithner’s new nickname, Bambi.

Caribou Barbie

Last night I heard some info babe on MSNBC refer to Sarah Palin as “Caribou Barbie” … bragging that she was the one who coined this appellation (she didn’t use the word “appellation” as I think it was above her pay grade.) I just Googled these words and find that Stephanie Miller, a progressive radio talk show host, is credited with this snot-nose term. And apparently this insult has been around from before Sarah Palin made her appearance on Saturday Night Live. (Surprisingly, Stephanie’s late father, William E. Miller, was Barry Goldwater’s running mate for his failed 1964 bid for the presidency.) Ms. Miller’s talk show, “The Stephanie Miller Show”, is L.A. based (surprise, surprise) and apparently is also in modest syndication (including Sirius Satellite Radio) … although I’ve never heard of it before.

So, I’ve been asking myself why am I bothered by this elitist comment? … particularly, when I am not upset by Rush Limbaugh’s insulting term, “femiNazi” or his aphorism,“feminism was established so as to allow unattractive women access to the mainstream of society.” I think what puzzles me most is why liberals seem to hate Sarah Palin with such a crazed zeal. It feels that liberals despise her mainly for her old-fashioned values (self-starting, family-first orientation, corruption fighting, rugged individualism, etc) combined with her good looks. To pose an analogy -- if Barry Goldwater (ironically) were to have a child with Annie Oakley, the result would be something like Sarah Palin. Perhaps (to play psychoanalyst), Stephanie Miller may be exhibiting a latent hatred of her father and consequently his politics? Or maybe she just wants to get more ink (like this blog entry).

I Was Wrong …

When I predicted that, after the election was won by Obama, the Democrats and the main stream media would stop talking down the economy. In fact the drumbeat of doom and gloom has intensified to the point of near hysteria. But, I now predict (with much more confidence) that, after the Democrats’ spending (er, stimulative) bill gets passed, that suddenly, within weeks if not days, the sun will rise, the birds will be singing, and the wind of Obamania will blow away the specter of economic catastrophe. This will occur despite the fact that the true impact of these spending (er, stimulative) provisions will not kick in for months or even years (and in most cases, never).

Tina Katriina

Nearly one million people are without power in our Nation’s midsection going on the sixth day. At least forty-two people have died as a direct result of devastating ice storms that have left the center of the country (mostly rural Ohio, Kentucky, Texas, Missouri, West Virginia, Oklahoma, Indiana, and Virginia) gripped in continuous sub-freezing temperatures. No heat, little water, and in many cases sparse communications are the plight of over 500,000 homes -- a huge swath of U.S. citizenry have been forced from their houses. This devastation is not as large as was experienced with Hurricane Katrina (with over one thousand deaths directly and indirectly attributed to the hurricane) … but this one is spread over a much large area and has about the same number of people having been dislocated as was the case in New Orleans … but, hopefully, for a much shorter time.

Local officials are upset at the poor response from the states and the Federal Emergency Management Agency. What has President Obama been doing? He did declare a federal emergency for Missouri – five days after the fact. But he hasn’t even flown over the region in Air Force One to inspect the plight of this mostly white area of the country. Instead, he is throwing a Super Bowl party in the White House where the steaks served cost $100 per pound. Many have been speculating as to whether President Obama indeed has much empathy for the citizenry of these mostly “red” states.

[I do realize that this, although accurate, is grossly biased reporting, but I am just trying to mimic how the drive-by media excoriated Bush after Hurricane Katrina.}

Taxing Issues

Tom Daschle has hit a snag in his appointment to head HHS. Apparently he has had to correct his tax filings for the last three years and is paying around $130,000 in back taxes and interest (no penalties). He somehow forgot to account for his use of a free limo and driver for this period of time. (I think he has also had tax problems in the past associated with a vacation home he owns in North Carolina.)

Tim Geithner, just shamelessly confirmed to head our Treasury Department, has also had to pay self-employment taxes for 2001-2004 when he worked for the IMF. After these oversights were found, he had to pay back taxes and interest (no penalties) of $43,200. (Even though Geithner was re-imbursed by the IMF for the taxes he hadn’t paid, President Obama labeled this an “innocent mistake”.)

Representative Charlie Rangel also failed to report some $75,000 in rental income from vacation properties he owns in the Dominican Republic. He will (someday) be filing amended returns. It is expected he will owe the IRS thousands of dollars. Strangely he also has paid no interest on the mortgage he used to buy this property … weird? (He heads the House committee that writes our tax code.)

There are many, many more politicians who face IRS scrutiny, Ted Stevens from Alaska and William Jefferson from Louisiana to name but two … maybe even Christopher Dodd if he ever gets around to disclosing the terms of his sweetheart mortgage from Countrywide Finance.

Therefore, my solution to our rapidly growing national deficit is for the Internal Revenue Service to give all politicians of any stripe a colonoscopic audit of their tax filings for the last five years. The money that they would recover should be monstrous. But wait, since Geithner is now head of the Treasury Dept. under which sits the IRS, this seems somewhat unlikely to happen.

Politicians vs. Statesmen

My memory is becoming more and more unreliable, but I seem to recall that we once had such things as “statesmen”. These were people who placed what would be best for our country ahead of their and/or their party’s political ambitions. I recall such people as Daniel Patrick Moynihan, John Danforth, John F. Kennedy, Everett Dirkson, Barbara Jordan, Alan Simpson, and Sam Nunn often exhibiting such patriotic selflessness. Now, we have a new administration that, together with Congress, has placed before the American public an $800 billion package of government programs that is meant to stimulate job creation and insure economic recovery. It is called the “Economic Stimulus” package. It is, in fact, a wish list of liberal power grabs, special interest spending programs, and constituent payoffs that have only a passing semblance to job creation. What we need instead is a set of tax and regulatory incentives that lead to a re-awaking of the economic giant that is the United States.

What we also need are statesmen. What we have instead are Nancy Pelosi and Harry Reid … unbridled by our new President who has promised change and is now trying to take advantage of our current economic problems to lock in four years of his leftist programs in one fell swoop. If this Economic Stimulus package gets implemented as it currently stands not only will it not bring us out of our current economic malaise, but it will surely sink us further … only to create the need for more shined-up Socialism within the following year.

Na Na Na Na-Na!

You think you could run up deficits!

Family Shopping

(a rhyming poem)

With the hours spent waiting for my wife,
I could've added two more years to my life.

Politics Ain’t Beanbag

Caroline Kennedy’s on-again, off-again, on-again, off-again quest for Hillary Clinton’s Senate seat ended with a whimper as she finally gave up, you know, and reacquired her married name, you know, Schlossberg. There is lots of speculation as to why Governor Paterson left the daughter of Camelot slowly swing in the wind for so long and then, assumedly, told Caroline that she wasn’t going to be the anointed. Now, the obvious question is, why?

May I suggest that Caroline’s early endorsement of Barack Obama (along with her uncle, Ted) and her serving as co-chairman of the Obama’s Vice President selection committee … both together made her mega-toxic to Hillary and Bill Clinton. And this Pleasantville daring-duo are not used to losing their political skirmishes. Therefore, I can easily imagine that the Clinton’s famed opposition research team finally found some real dirt on Caroline and consequently flushed her into political purgatory.

Now, despite what the Clintons may have found out, I don’t believe that she was as scummy as most politicians we are exposed to these days (Ted Stevens, William Jefferson, Charlie Rangel). So, in a strange way, I’m sorry to see her savaged by her political enemies the way she is … kind of like that doey-eyed baby impala having its throat ripped out by a cheetah.

Chicken Little

Jim Hansen, a leading NASA scientist has been crying wolf about Global Warming since 1988. His latest warning (see The Sky Is Falling) is particularly shrill and doomsday predicting. Now Herr Hensen might be right in his dire warnings but, then again, the tone of his rhetoric suggests to me a bit of panic in that there has been a decided public opinion shift toward the doubters … perhaps due to the spate of very cold weather we have had lately. (Also, perhaps because global temperatures have not increased since 1999 and, many scientists say, are falling back to levels more normal to the last century.) I chose to believe that it is cognitive dissonance that is driving the Chicken Littles of the Global Warming Cult to up the heat-level of their public pronouncements … from the sanctity of their Gore-created-and-protected Mount Olympus.

If we could only package all this bluster and shoot it off into space, we surely could delay the possibility of real global warming for another century.

More Compound Interest

In the previous piece on Interest Rate Swaps (IRSs) it is stated that these derivatives now total some $400 trillion. This is a huge number, yes, but there is some amelioration to this figure. First, this number represents the principle debt that is being hedged and not the interest on this principle. Therefore, the amount of interest that is being hedged must be something like 5 or 6% of this figure, or about $20-$24 trillion -- still a very big number, but not as large as all credit default swaps (including the Collateralized Debt Obligations, CDOs, arising from the sub-prime mortgage industry) that may total $60 trillion.

Also, in most cases (except for runaway inflation … a very important exception) the amount of exposure to the guarantor or guarantee against interest rate swings would be smaller than this number, say just one or two percentage points (100 to 200 basis points). This suggests that the total risk exposure from IRSs is smaller still, say around $4-$8 trillion, far from a trivial number. But this may have also effectively doubled (to roughly $10 trillion) the total counter-party risks that financial institutions found themselves burdened with last summer when the LIBOR swung up one and one-half basis points at the same time as Credit Default Swaps on sub-prime mortgages were being called in … if (and a big “if”) we assume just the first level of CDS exposure. One more salient point, unlike CDSs, the IRSs are zero-sum. In other words for each financial loser, there should be, without defaults, a financial winner. Who they are and were I haven’t a clue.

But still the $400 trillion of IRS’s principal does show the degree to which the world financial markets had been over-leveraged … perhaps encouraged to do so by the false sense of security that IRS derivatives seemed to provide them. This is a good reason why this whole notion of interest rate swing hedging should be rethought in the future. It might be OK if just a few do it, but not OK if everyone is doing it.

Compound Interest

I have written in the past about Credit Default Swaps (CDSs), a form of financial derivatives that appear to be a major reason for our recent banking and insurance industry crises (see here). Basically CDSs are unregulated insurance policies naively written by many companies without sufficient reserves to cover any subsequent claims. When, due to the sub-prime mortgage crisis, many of these “policies” came due and there was not enough money at the guarantors to pay the guarantees off. A rough estimate is that there are now almost $4 trillion of defaulting sub-prime mortgages but something over $50 trillion of CDSs written against them. In other words, CDSs had become a huge financial industry Lotto game.

Now I am learning about another financial derivative that may be even more onerous – Interest Rate Swaps (IRSs) … again, unregulated and seemingly out of control. IRSs are a form of financial barter that allows institutions to hedge their monetary return from variable-rate interest-bearing securities by exchanging this interest for a “less-risky” fixed-rate cash-flow stream. The unsettling statistic is that these derivatives now total some $400 trillion … yes, $400 trillion. This pile of monetary obligations far exceeds the Gross National Product of the world … and probably also is approaching total world assets ... estimated to total around one quadrillion dollars. To better understand this mare’s nest of financial legerdemain see Interest Rate Swaps and also PIMCO Explanation. And, if you do understand IRSs, please explain them to me (and to many of the Risk Assessment Officers at the companies that are now receiving TARP funds.)

When you read these explanations of IRSs you will see that the key variable interest rate that is the touchstone of many of the various IRS options is the LIBOR (London InterBank Offering Rate). This is the rate at which banks around the world are willing to lend to one another … a little like the U.S.’s Federal Reserve Discount Rate. Now, if hundreds of trillions of dollars of interest rate bets are keying off this one number, then small perturbations in this number can whipsaw IRS guarantors and guarantees dramatically. And if, as it happened, the LIBOR rose dramatically when the world-wide financial crisis hit last summer (see LIBOR Rate Chart) , then the shock to the IRS markets must have been mind-numbing. Yes, the LIBOR rate swung dramatically back at the time of Clinton’s last year in office. But, the amount of IRSs in force then were lower by at least 80%.

Now, to let my paranoia surface a little, why wouldn’t someone or some country that wanted to damage our world’s financial markets do their best to perturb the LIBOR rate? This seems to me to be an Achilles’ heel of the financial derivative markets and may be a reason to reformulate IRSs entirely.

The More Things Change …

Obama’s Clintonista pre-election advisors – Franklin Raines, Jim Johnson

Obama’s Clintonista transition team members -- John Podesta, Sandy Burgler, William Perry, Madeleine Albright, Robert Rubin, Betty Currie

New Clintonista Obama administration members -- Rahm Emanuel, Eric Holder, Greg Craig, Tim Geithner, Bill Richardson (oops), Larry Summers, Hillary Clinton, Susan Rice, Carol Browner, Shaun Donovan, Leon Pinetta, Elena Kagan, David W. Ogden, Thomas J. Perrelli, Dawn E. Johnsen, Nancy Killefer, Julius Genachowski

Can we (you) get (y)our money back?

Are We Mad?

Here are a translation of some of the cell phone conversations between the Mumbai terrorists and their Pakistani handlers: Praise Allah. I don’t know where they came from (NSA?) but surely, were they intercepted inside the United States, they would be deemed by many as an invasion of the Constitutional rights of the callers. This by itself would cause paroxysms of consternation at the ACLU to the point where what actually went on there would be drowned in the din of protest. Sigh …

Thumper Stumper

Barack Obambi proposed today an economic stimulus program which will cost taxpayers (our children and grandchildren mainly) at least $800 billion and create (or save) 3 million jobs. This works out to $267,000 per job created (or saved). Now I don’t currently have a full-time job and, considering what is happening to our economy, I think that I need to get one. But musing further on this issue, I think I would rather have the cash.

Skin Flint

Times are really tough … and I mean tough. It seems that the pornography industry is suffering because of the softening in our economy. Because the porn industry is barely making it, Larry Flint, publisher of a series of skin magazines (“Hustler”, “Barely Legal”) is traveling to Washington along with Joe Francis (“Girls Gone Wild”) to beseech Congress to pony up $5 billion of aid to revitalize their industry. Flynt is quoted as saying, "It's time for Congress to rejuvenate the sexual appetite of America." Why not? Banks are screwing us. Wall Street is screwing us. The auto industry is screwing us. Barney Frank and Chris Dodd are screwing us. Why not Larry Flint and Joe Francis? We could call it the "Public Money for Private Parts" bill.

Thought for the New Year

And see here.

And here.

And here.

And especially here.

Dark Ages

Rush Limbaugh offered something like the following perceptive observation on Friday last:

Scientists have become alarmed at the accelerating decrease in sunlight available each day in the Northern Hemisphere. Since the end of this past June, the minutes of daylight have steadily shrunk to the point of near panic. All U.N. scientists now agree that, if this decrease continues apace, our 24-hour day will be totally dark by the end of this coming June … not one glimmer of luminescence. And what is worse – it seems that this lost light has been leaking down below the equator. While we here would be forced to live without natural illumination, those in Africa, South America, and Australia would enjoy twenty-four hours of sunlight … obviously Nature’s reward for these peoples’ limited use of the world’s natural resources.

So everyone in the Northern Hemisphere is besought to stop driving their cars, heating their homes, and using electricity for any purpose. And moreover, everyone is also asked to purchase daylight offsets from the George Hamilton Daylight Offset Foundation. Each $1,000 donated will allow us to regain one more second of daylight over the next six months. Please, please, please don’t let George Hamilton fade to pastiness. Thank you all!

Bush Derangement Syndrome

President Bush was interviewed on television today … of which snippets were replayed on MSNBC tonight. I happened to catch this exchange:
Questioner: “What are you going to do about the auto industry bailout?”
Pres. Bush: “You’re assuming I’ve made up my mind.”
Switch to Keith [D]Oberman back in the MSNBC studio: “No, that’s assuming Bush has a mind!”

Also today I received the following link from my wife’s cousin in France: http://www.sockandawe.com/
At this site you get to throw shoes at President Bush. Over 44 million shoe hits have occurred (from around the world). Now, isn’t that special?

Both these instances above indicate a galloping lack of civility toward the United States and our current leadership. They display a degree of rabid disrespect and even hatred that I have seldom seen exhibited … except perhaps for our mortal enemies in time of war. This “Bush Derangement Syndrome” is freely displayed by TV commentators/talking heads, in many published venues, by most reporters, and very often in “polite” conversation. It seems that everyone is now vying with John Stewart of the “Daily Report” to out-snide him. As bad as Jimmy Carter was, I don’t recall him ever being excoriated like President Bush. We have now a wood-chipper main stream media which likes to pulverize public figures just for the sport of it. And, if Barack Obama thinks he will be forever immune from their blood lust, then he is more naïve than perspicacious.