1/30/08
After the decisive, if not overwhelming, victory of Senator John McCain (Did you know he was a POW in Vietnam?) in Florida last night, he is clearly the frontrunner for the Republican nomination. Many, probably most, of the pundits are proclaiming him the inevitable nominee. They are probably right. While Mitt Romney remains in the race and has plenty of money, he is behind in the polls in New York, Illinois, and California. It’s hard to see what could happen to put him ahead in those states. His post-Florida strategy of pandering to the right (e.g., his proclamation last night that President Bush is the reason we have been safe since 9/11) surely will not help him in those states and will only exacerbate the vulnerability of his Achilles heel, the perception (reality, really) that he is a shameless political Zelig, always able to summon up the courage to tell people precisely what they want to hear. It sure looks like John McCain (Did you know he was a POW in Vietnam?) will be the Republican nominee, but take what I say cum grano salis. I was surprised at the complete collapse of Rudy Giuliani (R, Fox News) and was quite sure he would be in the thick of the race by this time.
One has to ask why John McCain (Did you know he was a POW in Vietnam?) has had such an easy stroll to what looks like the nomination. The answer, if one thinks about it awhile, is not all that tough to discern. First, primogeniture has historically been the dominant force in GOP nomination battles, and it was simply McCain’s turn. Second, most GOPers know that the GOP nominee will be shellacked in the 2008 race (thanks to their man in the White House), so what could be the harm in letting the old man run? He’s not going to win anyway. This is the same sort of thinking that got Bob Dole nominated in 1996. But there is a difference between losing an election, even losing an election in a landslide, and getting annihilated as a party, a fate that the GOP may very well meet if it nominates John McCain. (Did you know he was a POW in Vietnam?)
In my 1/25/08 post, “THEY MIGHT AS WELL NOMINATE CHARLES BRONSON,”
I outlined the reasons that McCain’s nomination might mean curtains for the GOP. To those, I would like to add several more. First, while Iraq, despite “progress” there, will be a big issue in the 2008 race, as I said on January 25, especially with the Bush Administration slowing or stopping troop withdrawals and admitting that the security situation is “tenuous.” John McCain (Did you know he was a POW in Vietnam?) will make sure that it remains a big issue by yammering on about how great the surge has been and how he was behind it all along. He’ll probably also hold up the great Iraq victory as an example of all the good the United States could do by using our troops to tell other countries that they better conform to our way of life, or else. This will be a sure loser for the GOP.
For example, John McCain (Did you know he was a POW in Vietnam?), on the campaign trail in Florida, castigated both Hillary Clinton and Mitt Romney for favoring timetables for withdrawal from Iraq. (Mitt Romney, profile in courage that he is, quickly reversed course, thus abandoning one of the few reasonable GOP stances on this issue.) McCain (Did you know he was a POW in Vietnam?) went on to say “Never do I know of, in political history, that a leading candidate for president of the United States wants to wave the white flag and surrender to the enemy.” Thus did John McCain (Did you know he was a POW in Vietnam?) display not only a command of the English language on a par with that of the current occupant of the White House, but an appalling ignorance of history. Just in this century, The Democratic nominee in 1972, George McGovern campaigned on a promise to get us out of Vietnam. The Republican nominee, and winner of the election, in 1952, that famous surrender monkey Dwight Eisenhower, promised to “go to Korea” to negotiate an end to the Korean War. By John McCain’s reckoning, both promises would amount to “wav(ing) the white flag of surrender." One can guess what McCain’s response would be, something like “Oh yeah? Well, while my opponents and other proponents of surrender were studying their history, I was a guest at the Hanoi Hilton!” But I digress.
Second, the economy will be a huge issue in 2008, probably the biggest issue. McCain (Did you know he was a POW in Vietnam?) has admitted that he “doesn’t understand” the economy and that he “doesn’t know much” about economics. Good.
Third, if John McCain (Did you know he was a POW in Vietnam?) is the GOP nominee, the party of family values will have as its standard-bearer a man who left his wife who raised his kids while he was in a POW camp in Vietnam to marry a much younger woman who just happened to be an beer heiress who could finance his political career. Don’t think the Democrats, whose nominee will almost assuredly have been married only once, will not fail to note this…again and again and again. To those McCain fans and other GOPers who will rush to his defense by (of course) citing their imagined Promethean hero, Ronald Reagan never endured such an extended overseas stay and Nancy Davis, while not poor, was not filthy rich like Cindy McCain.
Fourth, if Hillary Clinton faces off against John McCain (Did you know he was a POW in Vietnam?), the problem the Democrats would have had convincing the electorate that their candidate is the anti-war candidate in light of her previous brimming enthusiasm for the Iraq war (See my 11/24/07 post, “THE DEMOCRATS COULD BLOW EVEN THIS ONE”) will have vanished. Everything is relative, and, relative to John McCain (Did you know he was a POW in Vietnam?), even Dick Cheney and Don Rumsfeld might look anti-war.
Fifth, in the still unlikely event that Barack Obama faces off against John McCain, can you imagine the contrast? Obama is young, articulate, bright, and appealing to youth. McCain (Did you know he was a POW in Vietnam?) is old, inarticulate, slow, and appealing to the over 70 crowd that put him over the top in Florida. One could argue that McCain’s ideas are more in line with those of the American electorate, and I would agree. However, most people no longer vote on issues; they vote on image. And Obama vs. McCain would be like Kennedy vs. Nixon in 1960 if Nixon were 25 years older with half the charisma and one-third the brains. One could argue that, while that might be true, Nixon made it close in 1960 and, were it not for the support of Kennedy by two men, LBJ and Richard J. Daley (well, maybe three if you include Sam Giancana), would have defeated Kennedy. That is also true, but Nixon was the heir to eight years of the very successful Eisenhower presidency while McCain (Did you know he was a POW in Vietnam?) will be the heir to eight years of the disastrous Bush presidency. Nixon was a bright, articulate man who knew the issues, kept his cool, and, on radio, was able to defeat, or at least tie, the much less experienced Kennedy in debate. McCain (Did you know he was a POW in Vietnam?) usually comes off as maladroit, mercurial, and stultified. In 1960, the electorate was better informed, spent time examining the issues, and voted far more on issues than on hype and less on image than today’s television addled electorate. Finally, Nixon, for all his shortcomings, was not a kook. John McCain (Did you know he was a POW in Vietnam?) is, or can easily be made to appear to be, a dangerous, irresponsible warmonger given to fatuous ditties such as “Bomb bomb bomb, bomb bomb Iran.” (Murrells Inlet, South Carolina, 4/18/07).
One can understand the GOP’s fealty to primogeniture, and one can certainly understand the “What the hell, we’re going to lose anyway, so give the old guy a chance” mentality that seemingly permeates the GOP. But, after eight years of a presidency that can only be described as devastating and disastrous for the country and for their party, the GOP cannot afford, indeed, may not survive the pulverizing annihilation they will receive if they nominate John McCain (Did you know he was a POW in Vietnam?).
Oh well.
Wednesday, January 30, 2008
Tuesday, January 29, 2008
“I’LL GLADLY PAY YOU TOMORROW FOR A USELESS GIMCRACK TODAY (IF THE GOVERNMENT GIVES ME MY MONEY)”
1/29/08
An article in this morning’s Wall Street Journal (1/29/08, page A2) describing the changes Senate Finance Committee Chairman Max Baucus (D, MT) is proposing for the “stimulus” package and the possibility that said modifications might delay the bill stated:
“The political risks to both sides of the effort (to quickly pass a stimulus bill) backfiring are huge, with many people already counting on getting rebate checks this Spring.” (Emphasis mine)
“…many people already counting on getting rebate checks this Spring”!? This shell-game stimulus scheme has only been under discussion for the last three weeks or so. Legislation authorizing the rebate checks has not come out of the Senate, as the article described, let alone been reconciled with the House version and sent to the President for his signature. And people are counting on these rebate checks?
Just how stretched are people that they are “counting on” a $1,200 to $2,000 check that may or may not arrive to bail them out? Or did people, upon first hearing of any whiff of hope for such a handout from Uncle Sam, run out to charge some trendy geegaw from China and are now counting on the rebate to pay (I must have lost my head; given that we are dealing with the American consumer, I should have not said “to pay…,” but, rather, “to make the minimum payment on…”) the Visa bill when it arrives? Can the American people really be this obtuse when it comes to personal finances?
If the answer is yes, and I suspect it is, this country is in more trouble than even I thought.
An article in this morning’s Wall Street Journal (1/29/08, page A2) describing the changes Senate Finance Committee Chairman Max Baucus (D, MT) is proposing for the “stimulus” package and the possibility that said modifications might delay the bill stated:
“The political risks to both sides of the effort (to quickly pass a stimulus bill) backfiring are huge, with many people already counting on getting rebate checks this Spring.” (Emphasis mine)
“…many people already counting on getting rebate checks this Spring”!? This shell-game stimulus scheme has only been under discussion for the last three weeks or so. Legislation authorizing the rebate checks has not come out of the Senate, as the article described, let alone been reconciled with the House version and sent to the President for his signature. And people are counting on these rebate checks?
Just how stretched are people that they are “counting on” a $1,200 to $2,000 check that may or may not arrive to bail them out? Or did people, upon first hearing of any whiff of hope for such a handout from Uncle Sam, run out to charge some trendy geegaw from China and are now counting on the rebate to pay (I must have lost my head; given that we are dealing with the American consumer, I should have not said “to pay…,” but, rather, “to make the minimum payment on…”) the Visa bill when it arrives? Can the American people really be this obtuse when it comes to personal finances?
If the answer is yes, and I suspect it is, this country is in more trouble than even I thought.
Monday, January 28, 2008
ANOTHER ATTEMPT TO EDUCATE THE APPARENTLY UNEDUCABLE
1/28/08
On page C1 of today’s Wall Street Journal, an article entitled “Hitch Your Wagon to a Rate Cut?” starts
“Some investors are disappointed that U.S. stocks haven’t rebounded more decisively after last week’s Federal Reserve rate cut, the largest since 1982. These investors have been taught that stocks rise when the Fed cuts rates, especially when it cuts this much. They want to know what is wrong.”
For these investors, or at least those among them who have been taught how to detect ironic sarcasm, I offer (I would also offer an admonition not to believe everything one is taught and a warning that the sounds emanating from the Wall Street Echo Chamber do not constitute holy writ, but the latter would surely be dismissed out of hand. I digress, but I don’t apologize.) a repost of my (apparently) now seminal 9/26/07 post:
9/26/07
THE MAGIC WAND
Home inventories are at an 18 month high.
Don’t worry—the Fed can “cut rates!”
D.R. Horton is auctioning homes at 50% discounts.
Don’t worry—the Fed can “cut rates!”
Retailers (today Lowe’s and Target—who knows tomorrow?) are feeling the pinch of the housing situation
Don’t worry—the Fed can “cut rates!”
Durable goods orders plunged in August.
Don’t worry—the Fed can “cut rates!”
Lennar lost $514mm last quarter.
Don’t worry—the Fed can “cut rates!”
Sales of existing homes fell 4.3% in August to an annual pace (5.5mm homes) that was the slowest in five years.
Don’t worry—the Fed can “cut rates!”
Northern Rock, which a year ago was the most vibrant home lender in the UK, is going to be sold to the vultures.
Don’t worry—the Fed can “cut rates!”
Oil continues to flit back and forth around $80.
Don’t worry—the Fed can “cut rates!”
Home heating oil prices will be higher than ever this winter.
Don’t worry—the Fed can “cut rates!”
Trade problems with China are heating up in the face of a Kabuki dance of recriminations and mea culpae on both sides.
Don’t worry—the Fed can “cut rates!”
The dollar is at an all time low against the euro and isn’t looking too spry against the pound, the yen, or the Canadian dollar.
Don’t worry—the Fed can “cut rates!”
The European economy seems to be running out of gas.
Don’t worry—the Fed can “cut rates!”
Crazy people are in control, and firming up their grip on power, in the Middle East.
Don’t worry—the Fed can “cut rates!”
Crazy people continue in control in Washington.
Don’t worry—the Fed can “cut rates!”
Israel and Syria are rattling sabers…again.
Don’t worry—the Fed can “cut rates!”
Iran and Israel are rattling sabers…again.
Don’t worry—the Fed can “cut rates!”
Osama bin Laden (You remember…the guy about whom George Bush said “I really don’t think about him much. I don’t care where he is.”) and his minions are rattling sabers again.
Don’t worry—the Fed can “cut rates!”
The American consumer still steadfastly refuses to save money.
Don’t worry—the Fed can “cut rates!”
We still haven’t figured out how we’re going to pay for this war.
Don’t worry—the Fed can “cut rates!”
We still haven’t figured out how to end this war.
Don’t worry—the Fed can “cut rates!”
OJ Simpson is once again dominating the headlines.
Don’t worry—the Fed can “cut rates!”
The heel of my right foot hurts so bad that I sometimes can’t walk on it.
Don’t worry—the Fed can “cut rates!”
I have a weird noise, akin to the sounds emanating from the game “Operation,” coming out of the armrest of my new car, but it always goes away when I get near the dealership.
“Don’t worry—the Fed can “cut rates!”
My fourteen year old daughter is being, well, fourteen years old.
“Don’t worry—the Fed can “cut rates!”
My twelve year old daughter refuses to go to band and my wife insists that she go. Both are stubborn beyond comprehension.
“Don’t worry—the Fed can “cut rates!”
White Castle seems to be reducing the fat content of both the delectable slider and its world famous onion rings, somewhat decreasing the sheer joy of that culinary adventure.
“Don’t worry—the Fed can “cut rates!”
ANYTHING ELSE THAT CONCERNS YOU? WELL…
“Don’t worry—the Fed can “cut rates!”
On page C1 of today’s Wall Street Journal, an article entitled “Hitch Your Wagon to a Rate Cut?” starts
“Some investors are disappointed that U.S. stocks haven’t rebounded more decisively after last week’s Federal Reserve rate cut, the largest since 1982. These investors have been taught that stocks rise when the Fed cuts rates, especially when it cuts this much. They want to know what is wrong.”
For these investors, or at least those among them who have been taught how to detect ironic sarcasm, I offer (I would also offer an admonition not to believe everything one is taught and a warning that the sounds emanating from the Wall Street Echo Chamber do not constitute holy writ, but the latter would surely be dismissed out of hand. I digress, but I don’t apologize.) a repost of my (apparently) now seminal 9/26/07 post:
9/26/07
THE MAGIC WAND
Home inventories are at an 18 month high.
Don’t worry—the Fed can “cut rates!”
D.R. Horton is auctioning homes at 50% discounts.
Don’t worry—the Fed can “cut rates!”
Retailers (today Lowe’s and Target—who knows tomorrow?) are feeling the pinch of the housing situation
Don’t worry—the Fed can “cut rates!”
Durable goods orders plunged in August.
Don’t worry—the Fed can “cut rates!”
Lennar lost $514mm last quarter.
Don’t worry—the Fed can “cut rates!”
Sales of existing homes fell 4.3% in August to an annual pace (5.5mm homes) that was the slowest in five years.
Don’t worry—the Fed can “cut rates!”
Northern Rock, which a year ago was the most vibrant home lender in the UK, is going to be sold to the vultures.
Don’t worry—the Fed can “cut rates!”
Oil continues to flit back and forth around $80.
Don’t worry—the Fed can “cut rates!”
Home heating oil prices will be higher than ever this winter.
Don’t worry—the Fed can “cut rates!”
Trade problems with China are heating up in the face of a Kabuki dance of recriminations and mea culpae on both sides.
Don’t worry—the Fed can “cut rates!”
The dollar is at an all time low against the euro and isn’t looking too spry against the pound, the yen, or the Canadian dollar.
Don’t worry—the Fed can “cut rates!”
The European economy seems to be running out of gas.
Don’t worry—the Fed can “cut rates!”
Crazy people are in control, and firming up their grip on power, in the Middle East.
Don’t worry—the Fed can “cut rates!”
Crazy people continue in control in Washington.
Don’t worry—the Fed can “cut rates!”
Israel and Syria are rattling sabers…again.
Don’t worry—the Fed can “cut rates!”
Iran and Israel are rattling sabers…again.
Don’t worry—the Fed can “cut rates!”
Osama bin Laden (You remember…the guy about whom George Bush said “I really don’t think about him much. I don’t care where he is.”) and his minions are rattling sabers again.
Don’t worry—the Fed can “cut rates!”
The American consumer still steadfastly refuses to save money.
Don’t worry—the Fed can “cut rates!”
We still haven’t figured out how we’re going to pay for this war.
Don’t worry—the Fed can “cut rates!”
We still haven’t figured out how to end this war.
Don’t worry—the Fed can “cut rates!”
OJ Simpson is once again dominating the headlines.
Don’t worry—the Fed can “cut rates!”
The heel of my right foot hurts so bad that I sometimes can’t walk on it.
Don’t worry—the Fed can “cut rates!”
I have a weird noise, akin to the sounds emanating from the game “Operation,” coming out of the armrest of my new car, but it always goes away when I get near the dealership.
“Don’t worry—the Fed can “cut rates!”
My fourteen year old daughter is being, well, fourteen years old.
“Don’t worry—the Fed can “cut rates!”
My twelve year old daughter refuses to go to band and my wife insists that she go. Both are stubborn beyond comprehension.
“Don’t worry—the Fed can “cut rates!”
White Castle seems to be reducing the fat content of both the delectable slider and its world famous onion rings, somewhat decreasing the sheer joy of that culinary adventure.
“Don’t worry—the Fed can “cut rates!”
ANYTHING ELSE THAT CONCERNS YOU? WELL…
“Don’t worry—the Fed can “cut rates!”
Sunday, January 27, 2008
DON’T BELIEVE THE HYPE, PART III
1/27/08
I almost hesitated to entitle this post as I did because the press has not rushed to proclaim Senator Barack Obama the inevitable nominee in the wake of his admittedly stunning victory in South Carolina, as they have coronated virtually ever winner of every primary of this intriguing political season. Perhaps they have been chastened by hard reality, which would mark a decided departure from the normal custom of the press. However, it is early, and I suspect that, before February 5 rolls around, you will read, see, and hear plenty of experts telling us Senator Obama has it in the bag. Again, don’t believe it.
South Carolina is a highly unusual state, as are Iowa and New Hampshire, for one opposite reason and a few of the same reasons. While Iowa and New Hampshire are overwhelmingly White, South Carolina, while not overwhelmingly Black, has a Democratic electorate that is 50% Black, way out of proportion to the nation as a whole or even to the Democratic electorate. Like Iowa, South Carolina is more rural than the country as a whole. Like both New Hampshire and Iowa, its population is small, albeit not as small as either the Granite or the Hawkeye state. Lest anyone think that I am underestimating the Palmetto state’s value as a bellwether, recall that President Jesse Jackson won the Democratic primary in South Carolina in both 1984 and 1988.
That having been said, the following must be noted about Senator Obama’s victory:
--Obama beat Clinton 55%-27%, surpassing even what some considered grossly inflated predictions of a 15% plus victory.
--Obama garnered 80% of the Black vote, dispelling the notion that he will not run as well among Blacks as one would expect either because he is “not Black enough” or because Black voters, especially older Black voters, are convinced that a Black man has no chance of getting elected in this country for the foreseeable future.
--Obama garnered 25% of the White vote. Before the elections, experts were telling us that he would get maybe 20% of the White vote, and just before the election, there was a lot of talk that his percentage of the White vote could fall to 10%.
All in all, it was an impressive victory for Senator Obama, and no one knows who will get either nomination, but it is still difficult to see how Senator Clinton does not win the Democratic nod, and only slightly less difficult to see how she doesn’t wrap it up on February 5. Why? Michael Tackett, a Chicago Tribune correspondent, put it well when he reported, as the Insightful Pontificator has been writing for months: “The time for anything remotely resembling retail politics has passed, with time spent in coffee shops or even small forums quickly becoming quaint memories. The premium will be on advertising and organization.” (Emphasis mine) As I have said and written many times in the past, money and organization wins primaries, and will be especially crucial this year with its tightly compressed primary schedule. Senator Obama may be close, or perhaps even, with Senator Obama in money, but he isn’t even close in organization.
One more interesting note on the primary front:
Clinton is reportedly making a major effort, and pouring big money, into Illinois. Apparently, she feels she has a chance to come very close, or even win, here. I still doubt it; with Mayor Daley’s people behind Obama, our junior senator should win big in the Land of Lincoln. However, if she really does have a chance in Illinois, winning the nomination could be even easier victory for Senator Clinton than I anticipate.
I almost hesitated to entitle this post as I did because the press has not rushed to proclaim Senator Barack Obama the inevitable nominee in the wake of his admittedly stunning victory in South Carolina, as they have coronated virtually ever winner of every primary of this intriguing political season. Perhaps they have been chastened by hard reality, which would mark a decided departure from the normal custom of the press. However, it is early, and I suspect that, before February 5 rolls around, you will read, see, and hear plenty of experts telling us Senator Obama has it in the bag. Again, don’t believe it.
South Carolina is a highly unusual state, as are Iowa and New Hampshire, for one opposite reason and a few of the same reasons. While Iowa and New Hampshire are overwhelmingly White, South Carolina, while not overwhelmingly Black, has a Democratic electorate that is 50% Black, way out of proportion to the nation as a whole or even to the Democratic electorate. Like Iowa, South Carolina is more rural than the country as a whole. Like both New Hampshire and Iowa, its population is small, albeit not as small as either the Granite or the Hawkeye state. Lest anyone think that I am underestimating the Palmetto state’s value as a bellwether, recall that President Jesse Jackson won the Democratic primary in South Carolina in both 1984 and 1988.
That having been said, the following must be noted about Senator Obama’s victory:
--Obama beat Clinton 55%-27%, surpassing even what some considered grossly inflated predictions of a 15% plus victory.
--Obama garnered 80% of the Black vote, dispelling the notion that he will not run as well among Blacks as one would expect either because he is “not Black enough” or because Black voters, especially older Black voters, are convinced that a Black man has no chance of getting elected in this country for the foreseeable future.
--Obama garnered 25% of the White vote. Before the elections, experts were telling us that he would get maybe 20% of the White vote, and just before the election, there was a lot of talk that his percentage of the White vote could fall to 10%.
All in all, it was an impressive victory for Senator Obama, and no one knows who will get either nomination, but it is still difficult to see how Senator Clinton does not win the Democratic nod, and only slightly less difficult to see how she doesn’t wrap it up on February 5. Why? Michael Tackett, a Chicago Tribune correspondent, put it well when he reported, as the Insightful Pontificator has been writing for months: “The time for anything remotely resembling retail politics has passed, with time spent in coffee shops or even small forums quickly becoming quaint memories. The premium will be on advertising and organization.” (Emphasis mine) As I have said and written many times in the past, money and organization wins primaries, and will be especially crucial this year with its tightly compressed primary schedule. Senator Obama may be close, or perhaps even, with Senator Obama in money, but he isn’t even close in organization.
One more interesting note on the primary front:
Clinton is reportedly making a major effort, and pouring big money, into Illinois. Apparently, she feels she has a chance to come very close, or even win, here. I still doubt it; with Mayor Daley’s people behind Obama, our junior senator should win big in the Land of Lincoln. However, if she really does have a chance in Illinois, winning the nomination could be even easier victory for Senator Clinton than I anticipate.
Friday, January 25, 2008
THEY MIGHT AS WELL NOMINATE CHARLES BRONSON
1/25/08
Several polls have come out of late that indicate that John McCain is the “most electable” of the Republican candidates. Whether poll respondents are asked to choose whom they would prefer in head to head match-ups with the Democratic candidates, or are simply asked who they think is most electable, John McCain (Did you know he was a POW in Vietnam?) leads the GOP pack, in most cases by a wide margin.
Anyone with an attention span longer than that of the typical three year old has to ask how these polls can possibly be right.
There are many reasons that people cite for being supportive of McCain (Did you know he was a POW in Vietnam?) and/or for thinking he would be the strongest GOP candidate: his (completely fabricated) outsider image, his willingness to buck the GOP conventional wisdom on many issues, including campaign finance reform, immigration, and taxes (though one has to ask why GOPers find this so endearing), his (somewhat authentic) reputation for telling people the truth rather than what they want to hear (as in Michigan, where he said that jobs that aren’t coming back are indeed not coming back), his fiscal conservatism (again, one has to ask why GOPers who seem to think that George Bush is a great president would find fiscal conservatism at all appealing), and his (almost completely fabricated) national security credentials (Did you know he was a POW in Vietnam?).
While one can understand the appeal of John McCain’s (Did you know he was a POW in Vietnam?) fiscal conservatism, and maybe of his straight talk, it is hard to fathom his appeal, especially to independent voters, of much else about John McCain (Did you know he was a POW in Vietnam?), most especially his stance on the Iraq war. While this issue is fading ever so slightly on the national political radar screen, it can’t help but be a major, even if it isn’t THE major, issue in the campaign. Recall that the Democrats did so well in the 2006 elections not because, as liberal commentators would have you believe, the American people have suddenly become enthusiastic about the usual banal Democratic laundry list of anodyne big government programs. The reason that the Democrats took control of Congress in 2006, and the reason that Democratic turnout is way up in the 2008 primaries while GOP turnout is way down, is because people realize that this the Iraq war is an idiotic, counterproductive war that will serve no purpose other than killing lots of people, making the Middle East safe for terrorists for generations, and making George Bush’s pals lots of money. And the reason that the Democratic congress is now less popular than George Bush is because it has done absolutely NOTHING to end this tragic, if not fatal, chapter in the history of U.S. foreign policy.
While it can be justly said that all the GOP candidates, with the exception of Ron Paul and, to a far lesser extent, Mike Huckabee, are brimming in their enthusiasm for the Iraq war, and that the foreign policy portions of the GOP debates so far have consisted of trying to prove who can get us into a war with Iran the most quickly, there is no doubt that John McCain (Did you know he was a POW in Vietnam?) is the GOP candidate who is most enthusiastic about continuing and expanding the war in Iraq. His “national security credentials” are limited to his background (Did you know he was a POW in Vietnam?) and his willingness to send countless number of people to their deaths in an ill-conceived and self-defeating war “on terror.” If John McCain (Did you know he was a POW in Vietnam?) gets the GOP nomination, his enthusiasm for this war will be trumpeted (at the expense of sounding VERY trite) 24/7 by the Democrats, regardless of who their candidate is. McCain’s senseless, impulsive ditty “Bomb, bomb, bomb, bomb bomb Iran” will be played more frequently than ads for Coca-Cola, GM cars, Ford cars, Toyota cars, and get out of debt schemes combined. The results will be eminently predictable: we will have a repeat of the 1964 elections, or, if you prefer, the 1972 and 1980 elections with the parties reversed. The GOP, already crippled by eight years of Bush/Cheney, may collapse as a party.
I am not predicting that John McCain (Did you know he was a POW in Vietnam?) will get the nomination; as I said in my 1/9/08 and 1/16/08 commentaries, don’t believe the hype of inevitability that has emerged after every primary or caucus so far. I also said in the 1/16/08 commentary that those who are counting out Rudy Giuliani are doing so far too early. I don’t know who will win the GOP nomination, it remains at least a three person race and Giuliani has a far better shot than most people think. I do know, however, that if John McCain (Did you know he was a POW in Vietnam?) gets the nomination, there is a good chance the GOP is through as a going concern. Perhaps that would not be such a bad thing, but that is beside the point.
Several polls have come out of late that indicate that John McCain is the “most electable” of the Republican candidates. Whether poll respondents are asked to choose whom they would prefer in head to head match-ups with the Democratic candidates, or are simply asked who they think is most electable, John McCain (Did you know he was a POW in Vietnam?) leads the GOP pack, in most cases by a wide margin.
Anyone with an attention span longer than that of the typical three year old has to ask how these polls can possibly be right.
There are many reasons that people cite for being supportive of McCain (Did you know he was a POW in Vietnam?) and/or for thinking he would be the strongest GOP candidate: his (completely fabricated) outsider image, his willingness to buck the GOP conventional wisdom on many issues, including campaign finance reform, immigration, and taxes (though one has to ask why GOPers find this so endearing), his (somewhat authentic) reputation for telling people the truth rather than what they want to hear (as in Michigan, where he said that jobs that aren’t coming back are indeed not coming back), his fiscal conservatism (again, one has to ask why GOPers who seem to think that George Bush is a great president would find fiscal conservatism at all appealing), and his (almost completely fabricated) national security credentials (Did you know he was a POW in Vietnam?).
While one can understand the appeal of John McCain’s (Did you know he was a POW in Vietnam?) fiscal conservatism, and maybe of his straight talk, it is hard to fathom his appeal, especially to independent voters, of much else about John McCain (Did you know he was a POW in Vietnam?), most especially his stance on the Iraq war. While this issue is fading ever so slightly on the national political radar screen, it can’t help but be a major, even if it isn’t THE major, issue in the campaign. Recall that the Democrats did so well in the 2006 elections not because, as liberal commentators would have you believe, the American people have suddenly become enthusiastic about the usual banal Democratic laundry list of anodyne big government programs. The reason that the Democrats took control of Congress in 2006, and the reason that Democratic turnout is way up in the 2008 primaries while GOP turnout is way down, is because people realize that this the Iraq war is an idiotic, counterproductive war that will serve no purpose other than killing lots of people, making the Middle East safe for terrorists for generations, and making George Bush’s pals lots of money. And the reason that the Democratic congress is now less popular than George Bush is because it has done absolutely NOTHING to end this tragic, if not fatal, chapter in the history of U.S. foreign policy.
While it can be justly said that all the GOP candidates, with the exception of Ron Paul and, to a far lesser extent, Mike Huckabee, are brimming in their enthusiasm for the Iraq war, and that the foreign policy portions of the GOP debates so far have consisted of trying to prove who can get us into a war with Iran the most quickly, there is no doubt that John McCain (Did you know he was a POW in Vietnam?) is the GOP candidate who is most enthusiastic about continuing and expanding the war in Iraq. His “national security credentials” are limited to his background (Did you know he was a POW in Vietnam?) and his willingness to send countless number of people to their deaths in an ill-conceived and self-defeating war “on terror.” If John McCain (Did you know he was a POW in Vietnam?) gets the GOP nomination, his enthusiasm for this war will be trumpeted (at the expense of sounding VERY trite) 24/7 by the Democrats, regardless of who their candidate is. McCain’s senseless, impulsive ditty “Bomb, bomb, bomb, bomb bomb Iran” will be played more frequently than ads for Coca-Cola, GM cars, Ford cars, Toyota cars, and get out of debt schemes combined. The results will be eminently predictable: we will have a repeat of the 1964 elections, or, if you prefer, the 1972 and 1980 elections with the parties reversed. The GOP, already crippled by eight years of Bush/Cheney, may collapse as a party.
I am not predicting that John McCain (Did you know he was a POW in Vietnam?) will get the nomination; as I said in my 1/9/08 and 1/16/08 commentaries, don’t believe the hype of inevitability that has emerged after every primary or caucus so far. I also said in the 1/16/08 commentary that those who are counting out Rudy Giuliani are doing so far too early. I don’t know who will win the GOP nomination, it remains at least a three person race and Giuliani has a far better shot than most people think. I do know, however, that if John McCain (Did you know he was a POW in Vietnam?) gets the nomination, there is a good chance the GOP is through as a going concern. Perhaps that would not be such a bad thing, but that is beside the point.
“OH GIVE ME A HOME, LONG AS FREDDIE MAC LOANS…”
1/25/08
A major piece of the what is being called a “stimulus” plan but what is really a “rob Peter to pay Paul” plan is an increase in the size of a mortgage loan that Fannie and Freddie can guarantee AND an identical increase in the size of a mortgage that the FHA can guarantee. “Identical” is probably too strong a word; there is a difference. While the Fannie and Freddie increases are designed to be temporary, expiring on 12/31/08, the FHA increase is permanent. As a practical matter, though, this will probably work out to be a distinction without a difference; as 12/31/08 approaches, homebuilders and overextended upper middle income homeowners, two key GOP constituencies who spend much of their spare time trumpeting their dedication to free markets, will increase the volume on their whining that the government has to “do something” to “save” the home market, and the “temporary” increases in the size of Fannie and Freddie conforming mortgages will, as if by magic, be made permanent.
So now responsible homeowners and taxpayers will be placed on the hook for people who borrowed up to (Are you sitting down?) $625,000 (Six hundred twenty five thousand dollars!), or maybe $730,000 (In its rush to get this legislation through, Congress was a bit murky on this detail; one wonders how many Congresspersons read the bill.). Not only will you be indirectly on the hook for homes that, in most cases, you couldn’t afford (I certainly would not even consider spending that kind of money for a home.), but you will be DIRECTLY responsible through the FHA. Recall that while Fannie and Freddie merely have an implicit federal guarantee, the FHA is a federal agency and has a DIRECT line into the Treasury.
Recall also that, while Fannie and Freddie were not designed to help lower income households, but, rather, to support the overall housing market, the FHA was created explicitly to help low and low-middle income households buy homes. This was all part of the notion, firmly embedded in the American psyche, for better or worse, that homeownership is per se a good thing. The philosophical underpinning of this idea is that if people own a home, if they own a piece of the American Dream, if you will, they will have a larger stake in the American economy and thus will be more supportive of policies that maintain prosperity and, by extension, more supportive of their country as a whole. This has led the United States to invest a far greater share of its GDP in owner occupied housing than any other nation on earth, to the relative deprivation of other sectors of the economy. One wonders if this policy has resulted in the typical American’s being more patriotic than the typical citizen of, say, France, Japan, or Germany, but I digress.
With this expansion of the FHA’s guarantee limits to maybe $730,000 (Seven hundred thirty thousand dollars! Are you nuts!?), this whole charade of the FHA’s serving the low income, on the cusp potential homeowner has been eliminated. Yes, I know houses are more expensive in sections of California and other “highly desirable” places to live, but consider a few things. First, one of the reasons that houses are so expensive in California is that credit has been so loose. Making credit more available by putting the taxpayers in, say, Nebraska or Michigan on the hook is not the obvious remedy to California’s affordability problem. Second, if house prices are so high in such “desirable areas” that taxpayers in places where the typical home might sell for $200,000 must be forced to subsidize homebuyers who want to spend over $800,000, perhaps lower, and even middle, income people should consider relocating or renting. Just a crazy, heartless idea, I know, but it just seems to make sense that if you make, say, $70,000, you have no business buying a, say, $600,000 house and even less business dipping into the pockets of your fellow citizens to do so. But I digress.
That the veneer of “helping the less privileged” and “helping calm the housing market” has been thoroughly dispensed with was confirmed by Dom Cecere, CFO of KB homes. Mr. Cecere was quoted in the Wall Street Journal today as saying “It’s (i.e., the increase in the lending limits) a shot in the arm to the market. It’s going to spur people to move up to a more expensive house (emphasis mine) and that’s going to get the new and used markets moving again.” So there you have it: the government is going to force the typical taxpayer to subsidize the purchase of more expensive homes by faux upwardly mobile types, who in many, if not most, cases already own a home that the typical taxpayer (and, come to think of it, even the subsidy seeking “homeowner,” who simply must “move up”) cannot afford. Your government at work.
One more thing…
In my 1/17/08 commentary, I outlined my suspicions that the Bush administration has a plan to bail out their free market overextended homeowner, builder, and Wall Street constituencies by expanding the role of Fannie and Freddie, while not insisting that regulation of these two monstrosities with the Treasury’s celphone number be tightened up. (I am reminded of the words of that great businessman Don Vito Corleone, in response to a question from his consigliere Tom Hagen regarding insisting that drug dealers have clean records, “Mention it; don’t insist on it,” but I digress.) Such a plan has the virtues of temporarily helping the housing market and the economy while leaving the mess for the next (highly likely Democratic) administration to clean up.
It looks like I was once again prescient. The plan unveiled yesterday expands the size of Fannie and Freddie conforming loans while abandoning efforts to tighten up regulation of these rudderless leviathans. Treasury Secretary Hank Paulson says that he wanted to tighten up regulations but “I got run down by a bipartisan steamroller…Republicans and Democrats were united on this.” I am sure that Mr. Paulson’s attempts at tightening regulation were every bit as sincere as his feigned “regular guy” approach to the language displayed in that quoted sentence.
A major piece of the what is being called a “stimulus” plan but what is really a “rob Peter to pay Paul” plan is an increase in the size of a mortgage loan that Fannie and Freddie can guarantee AND an identical increase in the size of a mortgage that the FHA can guarantee. “Identical” is probably too strong a word; there is a difference. While the Fannie and Freddie increases are designed to be temporary, expiring on 12/31/08, the FHA increase is permanent. As a practical matter, though, this will probably work out to be a distinction without a difference; as 12/31/08 approaches, homebuilders and overextended upper middle income homeowners, two key GOP constituencies who spend much of their spare time trumpeting their dedication to free markets, will increase the volume on their whining that the government has to “do something” to “save” the home market, and the “temporary” increases in the size of Fannie and Freddie conforming mortgages will, as if by magic, be made permanent.
So now responsible homeowners and taxpayers will be placed on the hook for people who borrowed up to (Are you sitting down?) $625,000 (Six hundred twenty five thousand dollars!), or maybe $730,000 (In its rush to get this legislation through, Congress was a bit murky on this detail; one wonders how many Congresspersons read the bill.). Not only will you be indirectly on the hook for homes that, in most cases, you couldn’t afford (I certainly would not even consider spending that kind of money for a home.), but you will be DIRECTLY responsible through the FHA. Recall that while Fannie and Freddie merely have an implicit federal guarantee, the FHA is a federal agency and has a DIRECT line into the Treasury.
Recall also that, while Fannie and Freddie were not designed to help lower income households, but, rather, to support the overall housing market, the FHA was created explicitly to help low and low-middle income households buy homes. This was all part of the notion, firmly embedded in the American psyche, for better or worse, that homeownership is per se a good thing. The philosophical underpinning of this idea is that if people own a home, if they own a piece of the American Dream, if you will, they will have a larger stake in the American economy and thus will be more supportive of policies that maintain prosperity and, by extension, more supportive of their country as a whole. This has led the United States to invest a far greater share of its GDP in owner occupied housing than any other nation on earth, to the relative deprivation of other sectors of the economy. One wonders if this policy has resulted in the typical American’s being more patriotic than the typical citizen of, say, France, Japan, or Germany, but I digress.
With this expansion of the FHA’s guarantee limits to maybe $730,000 (Seven hundred thirty thousand dollars! Are you nuts!?), this whole charade of the FHA’s serving the low income, on the cusp potential homeowner has been eliminated. Yes, I know houses are more expensive in sections of California and other “highly desirable” places to live, but consider a few things. First, one of the reasons that houses are so expensive in California is that credit has been so loose. Making credit more available by putting the taxpayers in, say, Nebraska or Michigan on the hook is not the obvious remedy to California’s affordability problem. Second, if house prices are so high in such “desirable areas” that taxpayers in places where the typical home might sell for $200,000 must be forced to subsidize homebuyers who want to spend over $800,000, perhaps lower, and even middle, income people should consider relocating or renting. Just a crazy, heartless idea, I know, but it just seems to make sense that if you make, say, $70,000, you have no business buying a, say, $600,000 house and even less business dipping into the pockets of your fellow citizens to do so. But I digress.
That the veneer of “helping the less privileged” and “helping calm the housing market” has been thoroughly dispensed with was confirmed by Dom Cecere, CFO of KB homes. Mr. Cecere was quoted in the Wall Street Journal today as saying “It’s (i.e., the increase in the lending limits) a shot in the arm to the market. It’s going to spur people to move up to a more expensive house (emphasis mine) and that’s going to get the new and used markets moving again.” So there you have it: the government is going to force the typical taxpayer to subsidize the purchase of more expensive homes by faux upwardly mobile types, who in many, if not most, cases already own a home that the typical taxpayer (and, come to think of it, even the subsidy seeking “homeowner,” who simply must “move up”) cannot afford. Your government at work.
One more thing…
In my 1/17/08 commentary, I outlined my suspicions that the Bush administration has a plan to bail out their free market overextended homeowner, builder, and Wall Street constituencies by expanding the role of Fannie and Freddie, while not insisting that regulation of these two monstrosities with the Treasury’s celphone number be tightened up. (I am reminded of the words of that great businessman Don Vito Corleone, in response to a question from his consigliere Tom Hagen regarding insisting that drug dealers have clean records, “Mention it; don’t insist on it,” but I digress.) Such a plan has the virtues of temporarily helping the housing market and the economy while leaving the mess for the next (highly likely Democratic) administration to clean up.
It looks like I was once again prescient. The plan unveiled yesterday expands the size of Fannie and Freddie conforming loans while abandoning efforts to tighten up regulation of these rudderless leviathans. Treasury Secretary Hank Paulson says that he wanted to tighten up regulations but “I got run down by a bipartisan steamroller…Republicans and Democrats were united on this.” I am sure that Mr. Paulson’s attempts at tightening regulation were every bit as sincere as his feigned “regular guy” approach to the language displayed in that quoted sentence.
Thursday, January 24, 2008
BIPARTISAN BALDERDASH
1/24/08
Who says that the two parties who have monopolized power in Washington for the last 148 years are hopelessly gridlocked by partisan nitpicking? (Would that such a situation prevailed, and would prevail, for the next, oh, 1,000 or so years, but that is another topic.) Senator Chris Dodd (D., CN) whose opinion matters because he is Chairman of the Senate Banking Committee, and Representative Mark Kirk (R. IL) have come both come up with what is essentially the same gormless idea: the federal government (i.e., you and I) should buy “distressed mortgages” at a discount and put the (in almost all cases irresponsible, or they wouldn’t have gotten into this mess) borrowers into government guaranteed fixed rate 30 year loans. Representative Kirk, a noted Bush administration lap dog, evinces a hankering for nostalgia in his plan, calling for recapitalizing the Home Owners’ Loan Corp., created in 1933 to buy mortgages and disbanded in 1951. Representative Kirk displays a rather loose handle on his history, however; the HOLC was designed to help out homeowners who were truly innocent victims of the government’s (Surprise!) complete bollixing of economic policy under the Fed, Hoover and, to a lesser extent, FDR, that transformed a nasty recession into the Great Depression. Any plan designed to “save” homeowners today would be, by definition, designed to rescue people from their own financial foppishness and shameless avarice, but I digress.
So what’s wrong with the government’s buying up mortgages at a discount and becoming the creditor to spendthrifts that have dug themselves into a financial hole, thus bailing out the economic illiterati that dominate our society and the financial services nabobs and other assorted scoundrels who abetted their miscreance? Only someone who believes in government uber alles would ask such a question, but here goes:
First, despite Senator Dodd’s assurance that the mortgages will be bought only at discounts and thus the investors in such mortgages will take some hits, don’t count on these mortgages being bought at true market prices. They might not even be bought at discounts. Why? Market pricing is impossible when the government is purchasing things from a favored constituency that has a history of keeping the politicians in their lifelong sinecures through the application of generous dollops of financial support. Wait until the financial services lobbyists go to work on this plan; we might even end up buying this financial detritus at premium. After all, we will be told, the very underpinnings of our financial infrastructure will be threatened if we don’t “do something.” Nothing will be mentioned regarding the generous pay packages of the executives of the financial firms who will be bailed out and the pink cheeked traders who got these institutions into the mess in the first place or regarding the financial well-being of the investors (many, if not most, of whom are professional money managers, who are paid big money to exercise prudence) who made fatuous bets on these ill-managed, overreaching, and clueless financial firms.
Second, if the people who own these mortgages (whoever they are; see the next paragraph) want to negotiate better terms with “troubled” lenders and take the appropriate write-downs on their mortgage paper, nothing is stopping them from doing so. If, as we are told, renegotiation is a better deal from the lender’s standpoint than foreclosure (and I don’t doubt that it is in most cases), banks do not need to be told by the government to renegotiate. People, even financial institutions, generally know enough to do things that have a salubrious, or at least ameliorative, impact on their finances. They don’t have to be told to do so by the government.
Third, the problem, which I have discussed in numerous past posts, of finding the decision maker would remain under this doozy of a plan. One of the reasons that so many of these loans have heretofore not been renegotiated is because no one is sure, once these mortgage loans have been thrown into the structured product stew, who has decision making authority. One would suppose that such authority would rest with the loan servicer, but, in most cases, the limits of the authority of the servicer are ill-defined. And, given the litigiousness that permeates our society, few servicers are willing to test the limits of their authority. The same paralysis would come into play were the government to make a bid on these mortgage loans.
Fourth, perhaps the only thing that this plan accomplishes that the parties involved could not do without any government prompting is to put the taxpayer on the hook for a lot of malodorous mortgages. As I have written ad nauseam in the past, why should the average taxpayer, and especially the financially prudent taxpayer, be forced, by the heavy hand of government, to pick up the tab for the financially irresponsible and the for witless Wall Street managements who put clueless kids in positions to cripple the institutions that they were charged with managing?
This latest plan by Senator Dodd and Representative Kirk ranks among the most moronic to arise from Washington’s latest manifestation of its never-ending urge to “do something” with your money to solve problems that arise from the irresponsibility and stupidity of those who bankroll the denizens of that den of iniquity we call the District of Columbia. The two parties, however, despite, or probably because of, the manifest idiocy of this plan, are completely consanguineous in their support of it.
Who says that the two parties who have monopolized power in Washington for the last 148 years are hopelessly gridlocked by partisan nitpicking? (Would that such a situation prevailed, and would prevail, for the next, oh, 1,000 or so years, but that is another topic.) Senator Chris Dodd (D., CN) whose opinion matters because he is Chairman of the Senate Banking Committee, and Representative Mark Kirk (R. IL) have come both come up with what is essentially the same gormless idea: the federal government (i.e., you and I) should buy “distressed mortgages” at a discount and put the (in almost all cases irresponsible, or they wouldn’t have gotten into this mess) borrowers into government guaranteed fixed rate 30 year loans. Representative Kirk, a noted Bush administration lap dog, evinces a hankering for nostalgia in his plan, calling for recapitalizing the Home Owners’ Loan Corp., created in 1933 to buy mortgages and disbanded in 1951. Representative Kirk displays a rather loose handle on his history, however; the HOLC was designed to help out homeowners who were truly innocent victims of the government’s (Surprise!) complete bollixing of economic policy under the Fed, Hoover and, to a lesser extent, FDR, that transformed a nasty recession into the Great Depression. Any plan designed to “save” homeowners today would be, by definition, designed to rescue people from their own financial foppishness and shameless avarice, but I digress.
So what’s wrong with the government’s buying up mortgages at a discount and becoming the creditor to spendthrifts that have dug themselves into a financial hole, thus bailing out the economic illiterati that dominate our society and the financial services nabobs and other assorted scoundrels who abetted their miscreance? Only someone who believes in government uber alles would ask such a question, but here goes:
First, despite Senator Dodd’s assurance that the mortgages will be bought only at discounts and thus the investors in such mortgages will take some hits, don’t count on these mortgages being bought at true market prices. They might not even be bought at discounts. Why? Market pricing is impossible when the government is purchasing things from a favored constituency that has a history of keeping the politicians in their lifelong sinecures through the application of generous dollops of financial support. Wait until the financial services lobbyists go to work on this plan; we might even end up buying this financial detritus at premium. After all, we will be told, the very underpinnings of our financial infrastructure will be threatened if we don’t “do something.” Nothing will be mentioned regarding the generous pay packages of the executives of the financial firms who will be bailed out and the pink cheeked traders who got these institutions into the mess in the first place or regarding the financial well-being of the investors (many, if not most, of whom are professional money managers, who are paid big money to exercise prudence) who made fatuous bets on these ill-managed, overreaching, and clueless financial firms.
Second, if the people who own these mortgages (whoever they are; see the next paragraph) want to negotiate better terms with “troubled” lenders and take the appropriate write-downs on their mortgage paper, nothing is stopping them from doing so. If, as we are told, renegotiation is a better deal from the lender’s standpoint than foreclosure (and I don’t doubt that it is in most cases), banks do not need to be told by the government to renegotiate. People, even financial institutions, generally know enough to do things that have a salubrious, or at least ameliorative, impact on their finances. They don’t have to be told to do so by the government.
Third, the problem, which I have discussed in numerous past posts, of finding the decision maker would remain under this doozy of a plan. One of the reasons that so many of these loans have heretofore not been renegotiated is because no one is sure, once these mortgage loans have been thrown into the structured product stew, who has decision making authority. One would suppose that such authority would rest with the loan servicer, but, in most cases, the limits of the authority of the servicer are ill-defined. And, given the litigiousness that permeates our society, few servicers are willing to test the limits of their authority. The same paralysis would come into play were the government to make a bid on these mortgage loans.
Fourth, perhaps the only thing that this plan accomplishes that the parties involved could not do without any government prompting is to put the taxpayer on the hook for a lot of malodorous mortgages. As I have written ad nauseam in the past, why should the average taxpayer, and especially the financially prudent taxpayer, be forced, by the heavy hand of government, to pick up the tab for the financially irresponsible and the for witless Wall Street managements who put clueless kids in positions to cripple the institutions that they were charged with managing?
This latest plan by Senator Dodd and Representative Kirk ranks among the most moronic to arise from Washington’s latest manifestation of its never-ending urge to “do something” with your money to solve problems that arise from the irresponsibility and stupidity of those who bankroll the denizens of that den of iniquity we call the District of Columbia. The two parties, however, despite, or probably because of, the manifest idiocy of this plan, are completely consanguineous in their support of it.
Tuesday, January 22, 2008
WHAT? A SELF-SERVING IDEA FROM JIM CRAMER?
1/22/08
In the midst of this mornings harrowing market action, cries for the government to “do something” from the free market tough guys on Wall Street reached unusually stentorian levels, even for this crowd. Apparently, 75 basis points from their boy Ben Bernanke were not enough to satisfy these free marketeers awaiting their turn on Mother Government’s lap.
One of the cries for the government to “do something” came from a predictable quarter, CNBC’s Jim Cramer, who apparently makes a living demanding that the government take immediate and decisive action to prevent his friends on the Street from having to suffer the ignominy of having to sell, say, the third yacht or the west coast fleet of Ferraris. In Jim’s defense, he is not one of the shameless hypocrites on Wall Street who demands government help for himself while counseling “letting the market work” for the working stiff who, say, loses his job in the wake of one of their client’s latest efforts to pad his bonus by relocating production overseas on order to save two or three percent on manufacturing costs. Cramer is no free marketeer, and does not pretend to be one. He is usually quite enthusiastic about government action and deliriously delighted with such action when it helps him or his cronies out of a jam into which they put themselves. So while Jim is quite shameless, he is not a hypocrite, or at least he is not as much of a hypocrite as his more Republican oriented Wall Street tough buy cronies. Jim is a believer in nothing but, as he once put it, what’s workin’ now. But I digress.
Cramer latest whopper was this morning’s proposal to have the federal government buy the bond insurance firms, the MBIAs, AMBACs, etc., of the world now that they got themselves into trouble by following the usual financial services path of “broadening their market” by entering a business about which they had not the slightest clue, in their case, insuring CDOs, CMOs, etc. Apparently not content with the healthy profits involved in insuring municipal bonds, or perhaps anticipating the entry into that business of rational types like Warren Buffett, the braintrusts at these businesses decided that they could “enhance shareholder value” by insuring financial Frankenstein Monsters that were not understood even by their creators. The results were predictable: It didn’t work. The instruments got into trouble, the investors want the insurance companies to pay up, the insurance companies are incapable of doing so and hence have lost their Aaa ratings (their sole raison d etre), and may be in danger of insolvency and/or bankruptcy.
So Cramer has come up with the perfect solution: have the government reward these miscreants by buying them. In the pantheon of idiotic ideas emanating from Wall Street in the wake of the “mortgage crisis,” this is clearly the most excerebrose. What Cramer is proposing is a taxpayer bailout of managements and shareholders of company who played with fire and got burned, badly and having the taxpayers guarantee the bastard stepchildren of the twenty and thirty somethings in whose hands Wall Street managements placed the fate of this nation’s most eminent financial institutions.
Some might argue that the shareholders and managements will not be bailed out at all. The shareholders will probably walk away with nothing and the managements will (horrors!) lose their jobs. Those who make this argument might be right regarding the shareholders; depending on the price Mr. Cramer proposes the government pay for these rats’ nests, the shareholders may get nothing. But maybe not. And the managements? If they do get fired, they will get Mozilo/Prince/O’Neal type “don’t call them severance” packages, at least some of which will be financed by the typical taxpayer.
Even if the shareholders are made to feel some pain, those who lent the bond insurers money, either banks or bondholders, and probably preferred shareholders, will be saved from punishment for their financial torpidity. Yes, they bought AAA paper, but bond guys, of whom I used to be one, are not paid the big money they make to merely look up Moody’s ratings. In fact, the credit game, as I and many of my old timer colleagues understand it, consists largely of second-guessing the rating agencies and thus finding value. Those who lent the agencies money are supposed to do actual credit research. At the expense of sounding trite, that is why they are paid the big bucks. Similarly, those who bought municipals relying on a bond insurers’ Aaa rating without looking into the credit of the insurer are guilty of the same lethargy and sense of entitlement but would also be able to dip into the taxpayers’ pockets under Cramer’s proposal.
Also being bailed out will be those who bought the financial Frankensteins called structured debt products without thoroughly understanding them and without demanding a sufficient spread to justify the risk involved in these securities (obviously) merely because they were insured by a AAA rated insurer. There is more to bond management than asking “Is it insured?” So Cramer is proposing that the average taxpayer reward the financial torpidity of millionaire Wall Street money managers who were too busy (doubtless attending “conferences” in sunny climes in the dead of winter) to do the job for which they were paid and save those investors who foolishly put their faith in these charlatans, doubtless because of a great commercial or a slick presentation featuring cool Power Point slides.
Even more troubling with Cramer’s proposal is its implications for federalism. Now, for people like Cramer, federalism is one of those quaint notions they learned in useless courses like history that have no chance of making them any money, so why bother? But think about it. The major business of the AMBACs, MBIAs, etc. of the world is insuring municipal bonds. Having the federal government buy these companies and assume this task would put the federal government in the business of insuring the debt of cities, states, mosquito abatement districts, etc. Proponents of a federal buyout might ask what difference it makes; taxpayers are taxpayers. But, according to that archaic document we call our Constitution, state (and local, in a sense) governments are not mere arms of the federal leviathan established to do its bidding and the tasks it feels are beneath it. State governments are separate governments who willingly cede some of their powers to the federal government when necessary. If such ideas are merely turgid claptrap to practical types like Cramer, think of it from a more conventional perspective: if the federal government insures municipal debt, taxpayers from more fiscally prudent states, states that derive their frugality from the diligence of their voters and/or flinty stubbornness of their taxpayers, will be forced to cover the profligacy of their free spending states made so by the indifference, or self-induced obtuseness, of their citizens. What incentive would remain for fiscal sanity on the part of state and local governments? Such coercion might make sense to Cramer or to anyone who considers our federal system a bothersome impediment to doing what is expedient , but wouldn’t make sense to the taxpayers of, say, Indiana or Idaho, or anyone who believes our Constitution is more than a prop in a Nicholas Cage movie.
So Jim Cramer’s proposal would force taxpayers to pick up the tab for lazy and insecure executives, long and wrong stock and bond investors, lackadaisical bond managers, and primped and pampered Wall Street tough guy dealmakers. It would also nail another coffin in our system of federalism. But it would provide succor to Wall Street tough guys who decry government until it is placed into their service.
What did you expect? Consider the source.
In the midst of this mornings harrowing market action, cries for the government to “do something” from the free market tough guys on Wall Street reached unusually stentorian levels, even for this crowd. Apparently, 75 basis points from their boy Ben Bernanke were not enough to satisfy these free marketeers awaiting their turn on Mother Government’s lap.
One of the cries for the government to “do something” came from a predictable quarter, CNBC’s Jim Cramer, who apparently makes a living demanding that the government take immediate and decisive action to prevent his friends on the Street from having to suffer the ignominy of having to sell, say, the third yacht or the west coast fleet of Ferraris. In Jim’s defense, he is not one of the shameless hypocrites on Wall Street who demands government help for himself while counseling “letting the market work” for the working stiff who, say, loses his job in the wake of one of their client’s latest efforts to pad his bonus by relocating production overseas on order to save two or three percent on manufacturing costs. Cramer is no free marketeer, and does not pretend to be one. He is usually quite enthusiastic about government action and deliriously delighted with such action when it helps him or his cronies out of a jam into which they put themselves. So while Jim is quite shameless, he is not a hypocrite, or at least he is not as much of a hypocrite as his more Republican oriented Wall Street tough buy cronies. Jim is a believer in nothing but, as he once put it, what’s workin’ now. But I digress.
Cramer latest whopper was this morning’s proposal to have the federal government buy the bond insurance firms, the MBIAs, AMBACs, etc., of the world now that they got themselves into trouble by following the usual financial services path of “broadening their market” by entering a business about which they had not the slightest clue, in their case, insuring CDOs, CMOs, etc. Apparently not content with the healthy profits involved in insuring municipal bonds, or perhaps anticipating the entry into that business of rational types like Warren Buffett, the braintrusts at these businesses decided that they could “enhance shareholder value” by insuring financial Frankenstein Monsters that were not understood even by their creators. The results were predictable: It didn’t work. The instruments got into trouble, the investors want the insurance companies to pay up, the insurance companies are incapable of doing so and hence have lost their Aaa ratings (their sole raison d etre), and may be in danger of insolvency and/or bankruptcy.
So Cramer has come up with the perfect solution: have the government reward these miscreants by buying them. In the pantheon of idiotic ideas emanating from Wall Street in the wake of the “mortgage crisis,” this is clearly the most excerebrose. What Cramer is proposing is a taxpayer bailout of managements and shareholders of company who played with fire and got burned, badly and having the taxpayers guarantee the bastard stepchildren of the twenty and thirty somethings in whose hands Wall Street managements placed the fate of this nation’s most eminent financial institutions.
Some might argue that the shareholders and managements will not be bailed out at all. The shareholders will probably walk away with nothing and the managements will (horrors!) lose their jobs. Those who make this argument might be right regarding the shareholders; depending on the price Mr. Cramer proposes the government pay for these rats’ nests, the shareholders may get nothing. But maybe not. And the managements? If they do get fired, they will get Mozilo/Prince/O’Neal type “don’t call them severance” packages, at least some of which will be financed by the typical taxpayer.
Even if the shareholders are made to feel some pain, those who lent the bond insurers money, either banks or bondholders, and probably preferred shareholders, will be saved from punishment for their financial torpidity. Yes, they bought AAA paper, but bond guys, of whom I used to be one, are not paid the big money they make to merely look up Moody’s ratings. In fact, the credit game, as I and many of my old timer colleagues understand it, consists largely of second-guessing the rating agencies and thus finding value. Those who lent the agencies money are supposed to do actual credit research. At the expense of sounding trite, that is why they are paid the big bucks. Similarly, those who bought municipals relying on a bond insurers’ Aaa rating without looking into the credit of the insurer are guilty of the same lethargy and sense of entitlement but would also be able to dip into the taxpayers’ pockets under Cramer’s proposal.
Also being bailed out will be those who bought the financial Frankensteins called structured debt products without thoroughly understanding them and without demanding a sufficient spread to justify the risk involved in these securities (obviously) merely because they were insured by a AAA rated insurer. There is more to bond management than asking “Is it insured?” So Cramer is proposing that the average taxpayer reward the financial torpidity of millionaire Wall Street money managers who were too busy (doubtless attending “conferences” in sunny climes in the dead of winter) to do the job for which they were paid and save those investors who foolishly put their faith in these charlatans, doubtless because of a great commercial or a slick presentation featuring cool Power Point slides.
Even more troubling with Cramer’s proposal is its implications for federalism. Now, for people like Cramer, federalism is one of those quaint notions they learned in useless courses like history that have no chance of making them any money, so why bother? But think about it. The major business of the AMBACs, MBIAs, etc. of the world is insuring municipal bonds. Having the federal government buy these companies and assume this task would put the federal government in the business of insuring the debt of cities, states, mosquito abatement districts, etc. Proponents of a federal buyout might ask what difference it makes; taxpayers are taxpayers. But, according to that archaic document we call our Constitution, state (and local, in a sense) governments are not mere arms of the federal leviathan established to do its bidding and the tasks it feels are beneath it. State governments are separate governments who willingly cede some of their powers to the federal government when necessary. If such ideas are merely turgid claptrap to practical types like Cramer, think of it from a more conventional perspective: if the federal government insures municipal debt, taxpayers from more fiscally prudent states, states that derive their frugality from the diligence of their voters and/or flinty stubbornness of their taxpayers, will be forced to cover the profligacy of their free spending states made so by the indifference, or self-induced obtuseness, of their citizens. What incentive would remain for fiscal sanity on the part of state and local governments? Such coercion might make sense to Cramer or to anyone who considers our federal system a bothersome impediment to doing what is expedient , but wouldn’t make sense to the taxpayers of, say, Indiana or Idaho, or anyone who believes our Constitution is more than a prop in a Nicholas Cage movie.
So Jim Cramer’s proposal would force taxpayers to pick up the tab for lazy and insecure executives, long and wrong stock and bond investors, lackadaisical bond managers, and primped and pampered Wall Street tough guy dealmakers. It would also nail another coffin in our system of federalism. But it would provide succor to Wall Street tough guys who decry government until it is placed into their service.
What did you expect? Consider the source.
Monday, January 21, 2008
IT HAS TO BE A SIGN!!!
1/21/08
As I was driving my daughter and her friend to the movies today, I noticed that, with the Illinois primary only a few weeks away, the politicians, their friends, supporters, and wanna bes, have littered my suburban burgh with a variety of insipid yard signs. I noticed, for example, that a Mr. (or perhaps Ms.) Demling is running for a seat on the bench and a Mr. (or perhaps Ms.) Cassioppi (My apologies to Mr. or Ms. Cassioppi if I have garbled the spelling of his or her name.) is running for some taxpayer funded sinecure or another. I, like all of you, have seen signs such as these pop up around election time my whole life. But today, seeing these signs got me to thinking about the purpose of these signs and their ramifications for our democracy.
When I was growing up in one of the most political wards in the most political city in the country (Some would say that Washington is the most political city in the country, but I am talking about politics in the real sense, in a sense that only a few of the imperious bureaucrats, glorified and real, who inhabit Washington understand, and then only if they came from a place like Chicago, Texas, or Louisiana and still remember whence they came.), the purpose of yard signs was well understood. If you were a precinct captain, your yard was festooned with signs in order to let your boss, the ward committeeman, know that you were most heartily supporting the candidates slated by the Cook County Regular Democratic Organization, Mayor Richard J. Daley, Chairman. If you were a city, county, or state employee or did business with the city, county, or state government, your yard was similarly littered with signs in order to let your precinct captain know, so that he would let his boss, the committeeman, know, so that he would let his boss, Mayor Daley, know that you were solidly behind the Organization’s candidates. If you didn’t work for the city and didn’t do business with the city, but were friendly with the precinct captain, had had favors done for you by the precinct captain, wanted to cover yourself just in case you might need a favor from the precinct captain, or just wanted to get with program, you put up a few yard signs, just in case. Thus, putting up yard signs in the 19th ward, or virtually any Chicago ward a reasonable distance from the lakefront, circa 1970, or even today, was, and is, perfectly rational. Signs weren’t designed to sway anyone’s vote; they were a very visible manifestation of the loyalty that made the Machine work.
(Incidentally, I am writing a novel that I hope to have out late this year about ward politics in a (very) thinly disguised city in the latter half of the 20th century. I will keep readers of the Insightful Pontificator posted.)
But now that I live out in a much less political part of the Chicago area (Lifetime residents of DuPage County will argue that DuPage is every bit as political as the south side of Chicago. People who make such arguments have never lived in the, say, 8th, 11th, 13th, 19th, or 23rd ward and/or have never worked for the Department of Streets and Sanitation or the Water Department, but I digress.), an area where the politicians do not have an iron grip on the livelihoods of their constituents, I wonder what function yard signs serve. Do people really vote for someone because they saw his or her yard sign? Does anyone vote for Joe Dokes while knowing nothing about him (At least in the old neighborhood, you knew something about, say, Joe Kowalski, Patrick Finnegan, or Tony Brancato from his sign, sometimes all you needed to know, but that, too, is grist for another post.), his stands on the issues, his background, or his education? If people don’t vote that way, why go to the expense of putting up those signs? If people do vote that way, the implications are frightening.
Imagine, if you will, a typical voter, who spends his evenings watching excerebrose situation comedies and banal action films whose only notable characteristics are their special effects and their predictable outcomes. Perhaps he watches a ball game or two and reads the sports and entertainment section of his local paper or USA Today (but then again, maybe not), but doesn’t subscribe to a real newspaper, let alone read its first section or its editorial page, and never watches or listens to the news. Since he has nothing better to do on election day, he decides to take a ride (Walk? In the suburbs? The hell you say! But I digress.) to the polls. On the way, he spies a few of the ubiquitous yard signs that nowadays are rarely found in yards but rather along main thoroughfares, on school and church grounds, etc. (and are left there for months after the election, but that is grist for another post). He walks to the voting table (The days of the old-fashioned voting booth, home to such famous Chicago traditions as four footed voting, dancing (as in “I saw you dancin’, no more dancin’ if you know what’s good for you.”), and voting carefully timed by one’s precinct captain, are, sadly, over. I just can’t seem to stop digressing today!) and then says to himself: “Hey, I don’t know who any of these people are. Wait! Joe Dokes! I saw his sign on the way here. I’ll vote for him! Sally Mokes! I saw her sign! I’ll vote for her! Johnny Yokes! Hey, he had a really neat sign…I think I’ll vote for him!”
Such a voter’s vote is as good as yours. Frightening? Downright chilling!
One might counter that yard signs, or their predecessors, have been around since the founding of the Republic, and our nation has survived so far. One could counter such a counter-argument in a number of ways. First, one might argue that, yes, the Republic has survived thus far, but, judging from the long history of yard signs, began its downward spiral years before anyone supposed and thus is in the final throes of said spiral. Second, one could argue that, once upon a time, the electorate took its responsibilities more seriously and was more educated (not in the sense of having spent more time in school, but in the sense of being able to think and reason) than is today’s electorate, was able and willing to do more of the prep work necessary to cast an informed vote, and thus was far less likely to be swayed by a mere yard sign than is today’s apathetic and ill-informed electorate. Alternatively, one could argue that people were no better informed years ago than they are today, but merely voted as they were told to vote, as in Chicago in the old (?) days. But at least someone with at least a modicum of intelligence and/or a hefty amount of skin in the proverbial game was giving the orders. Consequently, people were voting for Candidate A because someone who knew something or who had something at stake, and might be willing to share the wealth, was telling them to vote for Candidate A, not because the voters saw an inane yard sign.
The truth is that today, with a large portion of the electorate having had its collective brain thoroughly anesthetized by video games, network television, 24 hour sports radio and TV, and other forms of the insidious novocain for the brain we call “electronic entertainment,” the power of even the most banal yard sign has been magnified. Yet, some people continue to insist that the Republic’s greatest days are ahead of it. Why, they saw it on a yard sign, or heard it from a blithering idiot on a talk show, or saw it on TV, or read it in a candidate’s ad in People Magazine, or saw a sign at the mall, or…
As I was driving my daughter and her friend to the movies today, I noticed that, with the Illinois primary only a few weeks away, the politicians, their friends, supporters, and wanna bes, have littered my suburban burgh with a variety of insipid yard signs. I noticed, for example, that a Mr. (or perhaps Ms.) Demling is running for a seat on the bench and a Mr. (or perhaps Ms.) Cassioppi (My apologies to Mr. or Ms. Cassioppi if I have garbled the spelling of his or her name.) is running for some taxpayer funded sinecure or another. I, like all of you, have seen signs such as these pop up around election time my whole life. But today, seeing these signs got me to thinking about the purpose of these signs and their ramifications for our democracy.
When I was growing up in one of the most political wards in the most political city in the country (Some would say that Washington is the most political city in the country, but I am talking about politics in the real sense, in a sense that only a few of the imperious bureaucrats, glorified and real, who inhabit Washington understand, and then only if they came from a place like Chicago, Texas, or Louisiana and still remember whence they came.), the purpose of yard signs was well understood. If you were a precinct captain, your yard was festooned with signs in order to let your boss, the ward committeeman, know that you were most heartily supporting the candidates slated by the Cook County Regular Democratic Organization, Mayor Richard J. Daley, Chairman. If you were a city, county, or state employee or did business with the city, county, or state government, your yard was similarly littered with signs in order to let your precinct captain know, so that he would let his boss, the committeeman, know, so that he would let his boss, Mayor Daley, know that you were solidly behind the Organization’s candidates. If you didn’t work for the city and didn’t do business with the city, but were friendly with the precinct captain, had had favors done for you by the precinct captain, wanted to cover yourself just in case you might need a favor from the precinct captain, or just wanted to get with program, you put up a few yard signs, just in case. Thus, putting up yard signs in the 19th ward, or virtually any Chicago ward a reasonable distance from the lakefront, circa 1970, or even today, was, and is, perfectly rational. Signs weren’t designed to sway anyone’s vote; they were a very visible manifestation of the loyalty that made the Machine work.
(Incidentally, I am writing a novel that I hope to have out late this year about ward politics in a (very) thinly disguised city in the latter half of the 20th century. I will keep readers of the Insightful Pontificator posted.)
But now that I live out in a much less political part of the Chicago area (Lifetime residents of DuPage County will argue that DuPage is every bit as political as the south side of Chicago. People who make such arguments have never lived in the, say, 8th, 11th, 13th, 19th, or 23rd ward and/or have never worked for the Department of Streets and Sanitation or the Water Department, but I digress.), an area where the politicians do not have an iron grip on the livelihoods of their constituents, I wonder what function yard signs serve. Do people really vote for someone because they saw his or her yard sign? Does anyone vote for Joe Dokes while knowing nothing about him (At least in the old neighborhood, you knew something about, say, Joe Kowalski, Patrick Finnegan, or Tony Brancato from his sign, sometimes all you needed to know, but that, too, is grist for another post.), his stands on the issues, his background, or his education? If people don’t vote that way, why go to the expense of putting up those signs? If people do vote that way, the implications are frightening.
Imagine, if you will, a typical voter, who spends his evenings watching excerebrose situation comedies and banal action films whose only notable characteristics are their special effects and their predictable outcomes. Perhaps he watches a ball game or two and reads the sports and entertainment section of his local paper or USA Today (but then again, maybe not), but doesn’t subscribe to a real newspaper, let alone read its first section or its editorial page, and never watches or listens to the news. Since he has nothing better to do on election day, he decides to take a ride (Walk? In the suburbs? The hell you say! But I digress.) to the polls. On the way, he spies a few of the ubiquitous yard signs that nowadays are rarely found in yards but rather along main thoroughfares, on school and church grounds, etc. (and are left there for months after the election, but that is grist for another post). He walks to the voting table (The days of the old-fashioned voting booth, home to such famous Chicago traditions as four footed voting, dancing (as in “I saw you dancin’, no more dancin’ if you know what’s good for you.”), and voting carefully timed by one’s precinct captain, are, sadly, over. I just can’t seem to stop digressing today!) and then says to himself: “Hey, I don’t know who any of these people are. Wait! Joe Dokes! I saw his sign on the way here. I’ll vote for him! Sally Mokes! I saw her sign! I’ll vote for her! Johnny Yokes! Hey, he had a really neat sign…I think I’ll vote for him!”
Such a voter’s vote is as good as yours. Frightening? Downright chilling!
One might counter that yard signs, or their predecessors, have been around since the founding of the Republic, and our nation has survived so far. One could counter such a counter-argument in a number of ways. First, one might argue that, yes, the Republic has survived thus far, but, judging from the long history of yard signs, began its downward spiral years before anyone supposed and thus is in the final throes of said spiral. Second, one could argue that, once upon a time, the electorate took its responsibilities more seriously and was more educated (not in the sense of having spent more time in school, but in the sense of being able to think and reason) than is today’s electorate, was able and willing to do more of the prep work necessary to cast an informed vote, and thus was far less likely to be swayed by a mere yard sign than is today’s apathetic and ill-informed electorate. Alternatively, one could argue that people were no better informed years ago than they are today, but merely voted as they were told to vote, as in Chicago in the old (?) days. But at least someone with at least a modicum of intelligence and/or a hefty amount of skin in the proverbial game was giving the orders. Consequently, people were voting for Candidate A because someone who knew something or who had something at stake, and might be willing to share the wealth, was telling them to vote for Candidate A, not because the voters saw an inane yard sign.
The truth is that today, with a large portion of the electorate having had its collective brain thoroughly anesthetized by video games, network television, 24 hour sports radio and TV, and other forms of the insidious novocain for the brain we call “electronic entertainment,” the power of even the most banal yard sign has been magnified. Yet, some people continue to insist that the Republic’s greatest days are ahead of it. Why, they saw it on a yard sign, or heard it from a blithering idiot on a talk show, or saw it on TV, or read it in a candidate’s ad in People Magazine, or saw a sign at the mall, or…
Saturday, January 19, 2008
IT’S LIKE AN OPEN BAR AT AN AA MEETING
1/19/08
Yesterday, President Bush and Treasury Secretary Hank Paulson revealed some, not many, details of their “stimulus” plan designed to remedy a problem that has its genesis in overspending by encouraging consumers to spend more. (See my 1/7/08 post “They’re All Keynesians Now,” which appeared 11 days before The Wall Street Journal 1/18/08 lead editorial “We’re All Keynesians Now” (Rather than paraphrasing the Nixon quote, as I did, the Journal simply repeated it, with attribution, but I digress.) which made the same essential argument.) The total size of the deal, though not specified, was estimated by Paulson to be about 1% of GDP, which would equal about $140 billion.
The first objection, other than those outlined in my 1/7/08 post, came from the Democrats, who claimed that the package would not “do enough” and was not skewed sufficiently toward low income workers, who would be more likely to spend, and thus, one supposes, to solve the problems wrought by overspending by spending even more aggressively. House Speaker Pelosi and her henchmen are working on a plan that will spend more and be more targeted.
This Democratic objection was eminently predictable. In my 10/14/07 post, I explained how politics work in this country, and repeated this explanation in my 12/2/07 post:
“This is in the normal course of our government’s workings: The Democrats come up with some asinine plan to remedy some problem, real or imagined, with your money. The Republicans respond with a slightly less asinine plan to attack the problem, also with your money, making sure that the primary beneficiaries of the program are among the GOP’s favored constituencies. That is how the world works.”
The only thing different with this latest manifestation of the way the world works was its sequence and its intensity. In this “stimulus” plan, the Republicans have come to the table first with a colossally asinine plan. The Democrats will soon follow with a more expensive, and more colossally asinine, plan. But I digress, again.
The second objection to the Bush plan was trotted out by a panel assembled by CNBC to discuss the plan. The CNBC cabal, clearly wanting a plan designed to provide more direct, immediate, and generous government help to traders who took almost hilariously ill-advised positions and who now have taken a break from decrying the evils of big government to seek a federal rescue, decried the Bushite plan not because it is the financial equivalent of trying to cure a disease by injecting the patient with greater doses of the infection or that it involves taking money out of one pocket and putting it into another, but rather because it “won’t work.” Why? Because some surveyed consumers will use the $800 or $1600 handout to buy gas or groceries, pay utility bills, or (Saints preserve us!) pay down credit card balances rather than rush right out to buy yet another useless gimcrack made in China.
It seems to me that, if the government insists on “doing something” (and what politician can resist the urge to “do something” with your money?) about the nation’s current financial problems and that “something” must involve handing out your money, it might be a good sign, and actually have some ameliorative effect, if the recipients of your forced largesse were struck by a sudden bout of fiscal prudence and used the money to pay down some debt. It only makes sense that a shot of financial sobriety might help a situation that arose out of a ten plus year consumer spending binge. But the politicians, and the Wall Street free market tough guys who, as usual, push to the front of the line when the government is doling out help, fail to see, or pretend not to see, this logic. They, respectively, continue to insist that the remedy for our overspending problem is either more spending or encouraging more muddle-headed financial engineering by having the government kiss all those bad positions and make them better.
Yesterday, President Bush and Treasury Secretary Hank Paulson revealed some, not many, details of their “stimulus” plan designed to remedy a problem that has its genesis in overspending by encouraging consumers to spend more. (See my 1/7/08 post “They’re All Keynesians Now,” which appeared 11 days before The Wall Street Journal 1/18/08 lead editorial “We’re All Keynesians Now” (Rather than paraphrasing the Nixon quote, as I did, the Journal simply repeated it, with attribution, but I digress.) which made the same essential argument.) The total size of the deal, though not specified, was estimated by Paulson to be about 1% of GDP, which would equal about $140 billion.
The first objection, other than those outlined in my 1/7/08 post, came from the Democrats, who claimed that the package would not “do enough” and was not skewed sufficiently toward low income workers, who would be more likely to spend, and thus, one supposes, to solve the problems wrought by overspending by spending even more aggressively. House Speaker Pelosi and her henchmen are working on a plan that will spend more and be more targeted.
This Democratic objection was eminently predictable. In my 10/14/07 post, I explained how politics work in this country, and repeated this explanation in my 12/2/07 post:
“This is in the normal course of our government’s workings: The Democrats come up with some asinine plan to remedy some problem, real or imagined, with your money. The Republicans respond with a slightly less asinine plan to attack the problem, also with your money, making sure that the primary beneficiaries of the program are among the GOP’s favored constituencies. That is how the world works.”
The only thing different with this latest manifestation of the way the world works was its sequence and its intensity. In this “stimulus” plan, the Republicans have come to the table first with a colossally asinine plan. The Democrats will soon follow with a more expensive, and more colossally asinine, plan. But I digress, again.
The second objection to the Bush plan was trotted out by a panel assembled by CNBC to discuss the plan. The CNBC cabal, clearly wanting a plan designed to provide more direct, immediate, and generous government help to traders who took almost hilariously ill-advised positions and who now have taken a break from decrying the evils of big government to seek a federal rescue, decried the Bushite plan not because it is the financial equivalent of trying to cure a disease by injecting the patient with greater doses of the infection or that it involves taking money out of one pocket and putting it into another, but rather because it “won’t work.” Why? Because some surveyed consumers will use the $800 or $1600 handout to buy gas or groceries, pay utility bills, or (Saints preserve us!) pay down credit card balances rather than rush right out to buy yet another useless gimcrack made in China.
It seems to me that, if the government insists on “doing something” (and what politician can resist the urge to “do something” with your money?) about the nation’s current financial problems and that “something” must involve handing out your money, it might be a good sign, and actually have some ameliorative effect, if the recipients of your forced largesse were struck by a sudden bout of fiscal prudence and used the money to pay down some debt. It only makes sense that a shot of financial sobriety might help a situation that arose out of a ten plus year consumer spending binge. But the politicians, and the Wall Street free market tough guys who, as usual, push to the front of the line when the government is doling out help, fail to see, or pretend not to see, this logic. They, respectively, continue to insist that the remedy for our overspending problem is either more spending or encouraging more muddle-headed financial engineering by having the government kiss all those bad positions and make them better.
Thursday, January 17, 2008
NOT THE CANDY COMPANY, NOT THE PAUL NEWMAN/PATRICIA NEAL MOVIE …
1/17/08
The Wall Street Journal reported this morning that the “Bush administration appears to be softening its regulatory grip on Fannie Mae and Freddie Mac, reflecting a growing reliance on the companies to provide money for home mortgages as other investors retreat.” This “softening” involves a number of steps, including requiring semi-annual, as opposed to the previously proposed quarterly, reports by Fannie and Freddie of planned debt issuance, a relaxation by HUD of Fannie and Freddie’s affordable housing goals, and, most important, the lifting of the limits on Fannie and Freddie’s mortgage portfolios, currently around a combined $1.4 trillion.
Being a nearly reflexive deregulator, I would, one would expect, be pleased by this loosening of the regulatory noose. However, in the case of Fannie and Freddie, which have implicit taxpayer backing of their debt, the government has every right to regulate. Taxpayers’ money is on the line, albeit indirectly. Since Fannie and Freddie have shown no shyness in taking the government’s indirect handout, they have to submit to a more onerous regulatory regimen than does the typical business. This is a financial variation on “He who pays the piper calls the tune.”
However, there is something troubling, even sinister, about this latest round of proposed deregulation at Fannie and Freddie. Note that in the case of Fannie and Freddie, the two major parties’ traditional stances regarding regulations are turned on their heads. The Bush administration, and the GOP in general, have long been put in the odd position of wanting to more tightly regulate Fannie and Freddie for the reasons outlined in the last paragraph. The Democrats, on the other hand, have favored loosening regulation of these two most prominent Government Sponsored Entities (“GSEs”). The Democrats never miss a chance to pursue what they perceive as worthy social goals as long as those goals can be achieved with other people’s money, and their stance toward Fannie and Freddie is just another instance of the “my goals with your money” approach of the Democrats. In fairness, this approach to government seems to have gained immense popularity among the GOP as well, but I digress.
So why are the Republicans suddenly in favor of lightening the regulatory burden on Fannie and Freddie? Because the Bushmen see Fannie and Freddie as the perfect vehicles for bailing out the irresponsible homeowners and the witless traders who form a substantial chunk of their electoral base. Doubtless the Bushites would love to have the government bail out everyone who bought too much house and/or borrowed against his or her house in order to stock up on useless baubles and other gimcracks that no one needs and every 20-something trader straight out of an Ivy League B-School who had, and seized, the opportunity to cripple a major financial institution while spouting fealty to a free market, pull yourself up by the bootstraps approach to economics—for everyone else. After all, who was the modern GOP designed to serve? But hypocrisy has its limits, even in the Bush administration. Further, there is resistance by inconvenient genuine free market types, like a (very) few GOP Congresspersons and the Insightful Pontificator, to forcing the responsible to bail out the irresponsible.
So the Bushmen have come up with a plan: let Fannie and Freddie buy all this financial flotsam and jetsam. This gets the tough guy free market trader types the succor they so richly deserve from the government because, after all, they are the linchpin of the economy. This sleight of hand also gets the overextended, financially clueless U.S. consumer off the hook and back to what s/he does best—spending money s/he doesn’t have in order to get us more in hock to Far and Middle East “investors.” But the beauty of saving the GOP constituencies this way is that no taxpayer money is involved—for now. In a few years, Fannie and Freddie will, of course, effectively go bankrupt. But then there will be no choice but to bail those two GSEs out; after all, a default by Fannie and Freddie would shatter confidence in other agency paper and, probably, even in Treasury paper. The consequences would be too dark to ignore. That a Democrat will probably be in the White House by then, and that the Dems will also control the Congress, has probably not escaped the Bushmen’s notice either.
So, according to this latest GOP scam, everything works out perfectly for the Bushmen: they bail out their “free market until it causes me to slightest tinge of discomfort” core constituencies, but few people recognize the bailout for what it is. The economy gets a (very) short reprieve, the Democrats get the blame when the consequences of this completely political maneuver start to bear a (very) heavy cost, and the GOP gets a chance at a Lazarusian comeback after the drubbing they will get at the polls, courtesy of George Bush’s disastrous tenure, in 2008.
The Wall Street Journal reported this morning that the “Bush administration appears to be softening its regulatory grip on Fannie Mae and Freddie Mac, reflecting a growing reliance on the companies to provide money for home mortgages as other investors retreat.” This “softening” involves a number of steps, including requiring semi-annual, as opposed to the previously proposed quarterly, reports by Fannie and Freddie of planned debt issuance, a relaxation by HUD of Fannie and Freddie’s affordable housing goals, and, most important, the lifting of the limits on Fannie and Freddie’s mortgage portfolios, currently around a combined $1.4 trillion.
Being a nearly reflexive deregulator, I would, one would expect, be pleased by this loosening of the regulatory noose. However, in the case of Fannie and Freddie, which have implicit taxpayer backing of their debt, the government has every right to regulate. Taxpayers’ money is on the line, albeit indirectly. Since Fannie and Freddie have shown no shyness in taking the government’s indirect handout, they have to submit to a more onerous regulatory regimen than does the typical business. This is a financial variation on “He who pays the piper calls the tune.”
However, there is something troubling, even sinister, about this latest round of proposed deregulation at Fannie and Freddie. Note that in the case of Fannie and Freddie, the two major parties’ traditional stances regarding regulations are turned on their heads. The Bush administration, and the GOP in general, have long been put in the odd position of wanting to more tightly regulate Fannie and Freddie for the reasons outlined in the last paragraph. The Democrats, on the other hand, have favored loosening regulation of these two most prominent Government Sponsored Entities (“GSEs”). The Democrats never miss a chance to pursue what they perceive as worthy social goals as long as those goals can be achieved with other people’s money, and their stance toward Fannie and Freddie is just another instance of the “my goals with your money” approach of the Democrats. In fairness, this approach to government seems to have gained immense popularity among the GOP as well, but I digress.
So why are the Republicans suddenly in favor of lightening the regulatory burden on Fannie and Freddie? Because the Bushmen see Fannie and Freddie as the perfect vehicles for bailing out the irresponsible homeowners and the witless traders who form a substantial chunk of their electoral base. Doubtless the Bushites would love to have the government bail out everyone who bought too much house and/or borrowed against his or her house in order to stock up on useless baubles and other gimcracks that no one needs and every 20-something trader straight out of an Ivy League B-School who had, and seized, the opportunity to cripple a major financial institution while spouting fealty to a free market, pull yourself up by the bootstraps approach to economics—for everyone else. After all, who was the modern GOP designed to serve? But hypocrisy has its limits, even in the Bush administration. Further, there is resistance by inconvenient genuine free market types, like a (very) few GOP Congresspersons and the Insightful Pontificator, to forcing the responsible to bail out the irresponsible.
So the Bushmen have come up with a plan: let Fannie and Freddie buy all this financial flotsam and jetsam. This gets the tough guy free market trader types the succor they so richly deserve from the government because, after all, they are the linchpin of the economy. This sleight of hand also gets the overextended, financially clueless U.S. consumer off the hook and back to what s/he does best—spending money s/he doesn’t have in order to get us more in hock to Far and Middle East “investors.” But the beauty of saving the GOP constituencies this way is that no taxpayer money is involved—for now. In a few years, Fannie and Freddie will, of course, effectively go bankrupt. But then there will be no choice but to bail those two GSEs out; after all, a default by Fannie and Freddie would shatter confidence in other agency paper and, probably, even in Treasury paper. The consequences would be too dark to ignore. That a Democrat will probably be in the White House by then, and that the Dems will also control the Congress, has probably not escaped the Bushmen’s notice either.
So, according to this latest GOP scam, everything works out perfectly for the Bushmen: they bail out their “free market until it causes me to slightest tinge of discomfort” core constituencies, but few people recognize the bailout for what it is. The economy gets a (very) short reprieve, the Democrats get the blame when the consequences of this completely political maneuver start to bear a (very) heavy cost, and the GOP gets a chance at a Lazarusian comeback after the drubbing they will get at the polls, courtesy of George Bush’s disastrous tenure, in 2008.
Wednesday, January 16, 2008
I TOLD YOU SO
1/16/08
As our economic problems reach crisis proportions, now would be a good time to review my musings in the Insightful Pontificator since the inception in February, 2007 of this bastion of clear thought. Virtually everything that I have been predicting is coming to pass. What is truly frightening, and hence profitable, or essential, for you to anticipate is that several of the events, market phenomenon, and economic developments that I have been predicting have not yet come true, but they will. Ignore these warnings at your peril, as some of you already know.
What was derided as the ranting of an alarmist who was clearly (Heaven forbid!) out of the mainstream are now accepted as matters of fact. Despite what the Echo Chamber on Wall Street assured us, house prices don’t just stop going up, they really do go down. In many cases, the concept of “no bid,” familiar to many of us who got our start in the junk bond market 25 or so years ago, has become alarmingly relevant to homeowners. This will increasingly be the case as the housing situation gets worse. Contrary to the assurances of the cognoscenti, the “sub-prime” problem is not a “sub-prime” problem at all. Alt-A mortgages, prime mortgages, revolving lines of personal credit (a.k.a. credit cards), car loans, commercial real estate loans, junk bonds, investment grade bonds, and even investment grade commercial paper are encountering problems, in many cases critical problems. The implications for consumer spending, which is what makes our economy go, are obvious. The implications for our credit markets, and our broader markets, have been more immediate and will get more profound. Despite what the experts told us, the “credit problem” was not a problem that was or is limited to lower income and lower middle income people. Supposedly “deep-pocketed” people are defaulting on their home loans, car loans, and credit cards. And, no, experts, those businesses that cater to the “upscale” customers have not been, and will not be, immune to the problems that the credit plague has inflicted on our economy. Earlier this week, we learned that the end of last year was, and the predictions for next year are, gloomy for European luxury car manufacturers. Just yesterday, Burberry and Williams-Sonoma, two favorites of the upscale set, joined a long line of “luxury” retailers in issuing gloomy forecasts and warnings. Why? Because many people who appeared rich were enjoying, and now are merely displaying, a Potemkin prosperity built on loose credit and a gnawing compulsion to prove to themselves that they had actually achieved something. Why were the experts unable to see this? Probably because they were perhaps the most salient examples of the faux rich I have just described.
The Fed’s desperate efforts to ingratiate itself with Wall Street by coming to the aid of the tough guy free marketeers who ply their trade on that Street, literally and figuratively, whenever they suffer so much as hangnail or a slight bout of ennui, have proven ineffective. Soon, we will see how such obsequious Fed action has been not only ineffective but seriously counterproductive. Why? Because what we are witnessing is not a liquidity problem but a solvency problem. We are awash in liquidity but have a shortage of solvent borrowers. Providing more liquidity is like putting an infected bandage on a dirty, festering open wound.
Economic signals continue to be distorted, and class warfare continues to be stoked, by a corporocracy that insists on rewarding with pay packages that would have made J.P. Morgan (the man, not the organization) blush people who achieve their positions not by anything resembling talent but, rather, by connections, sycophancy toward their former superiors and ruthlessness toward their underlings and then predictably run their organizations into the ground, with the attendant predictable human suffering. Such economic distortion also arises from the politicians of both parties, most aggressively by the Democrats but most hypocritically by the Republicans, who insist on forcing the few fiscally prudent to bail out the legions of fiscally frivolous and clueless. Almost as destructively, the “remedies” for a situation that had its genesis in overspending involve encouraging people to spend more.
The Echo Chamber on Wall Street has evolved from dismissing my predictions of recession as foolhardy scare-mongering to acknowledging the possibility of recession to “realistically” assessing the probability of recession. What comes next? The Echo Chamber will (slowly, if the last few years are any indication) come around to discussing the likelihood of a financial and economic depression. I’m serious. The generations before mine were not stupid. Their wisdom was grounded in centuries (at least) of common sense; we simply cannot spend money we don’t have and consume when we haven’t produced. My generation, of Americans and the two (Yes, many, if not most, of the masters of the universe who run hedge funds or who work on Wall Street and aspire to run hedge funds are in their 30s; some are even younger.) that follow it, most distinguishable only by their hubris, insisted that their parents were crazy, that they could indeed spend more while actually producing less by figuring out a way to get everyone else to pay their bills, calling this endeavor “financial services,” and making it America’s major, quickly approaching our only, contribution to the world economy. That title, “financial services,” is especially apt; since the world has been doing the real work, paying our bills, and piling up IOUs, it will increasingly demand service from us in return. It is difficult to survive, let alone prosper and lead the world, when one is on one’s knees servicing one’s creditors.
So far, there has been, to modify an expression, purgatory to pay for our utter abandonment of the most basic financial and economic principles. Soon, to directly apply that expression, there will be hell to pay. You heard it, as you have heard many things that have come to (rotten) fruition, here first. The highly paid volume stokers of the Echo Chamber on Wall Street will eventually catch up, but why wait? Read the Insightful Pontificator regularly, tell your friends, and take the appropriate action.
As our economic problems reach crisis proportions, now would be a good time to review my musings in the Insightful Pontificator since the inception in February, 2007 of this bastion of clear thought. Virtually everything that I have been predicting is coming to pass. What is truly frightening, and hence profitable, or essential, for you to anticipate is that several of the events, market phenomenon, and economic developments that I have been predicting have not yet come true, but they will. Ignore these warnings at your peril, as some of you already know.
What was derided as the ranting of an alarmist who was clearly (Heaven forbid!) out of the mainstream are now accepted as matters of fact. Despite what the Echo Chamber on Wall Street assured us, house prices don’t just stop going up, they really do go down. In many cases, the concept of “no bid,” familiar to many of us who got our start in the junk bond market 25 or so years ago, has become alarmingly relevant to homeowners. This will increasingly be the case as the housing situation gets worse. Contrary to the assurances of the cognoscenti, the “sub-prime” problem is not a “sub-prime” problem at all. Alt-A mortgages, prime mortgages, revolving lines of personal credit (a.k.a. credit cards), car loans, commercial real estate loans, junk bonds, investment grade bonds, and even investment grade commercial paper are encountering problems, in many cases critical problems. The implications for consumer spending, which is what makes our economy go, are obvious. The implications for our credit markets, and our broader markets, have been more immediate and will get more profound. Despite what the experts told us, the “credit problem” was not a problem that was or is limited to lower income and lower middle income people. Supposedly “deep-pocketed” people are defaulting on their home loans, car loans, and credit cards. And, no, experts, those businesses that cater to the “upscale” customers have not been, and will not be, immune to the problems that the credit plague has inflicted on our economy. Earlier this week, we learned that the end of last year was, and the predictions for next year are, gloomy for European luxury car manufacturers. Just yesterday, Burberry and Williams-Sonoma, two favorites of the upscale set, joined a long line of “luxury” retailers in issuing gloomy forecasts and warnings. Why? Because many people who appeared rich were enjoying, and now are merely displaying, a Potemkin prosperity built on loose credit and a gnawing compulsion to prove to themselves that they had actually achieved something. Why were the experts unable to see this? Probably because they were perhaps the most salient examples of the faux rich I have just described.
The Fed’s desperate efforts to ingratiate itself with Wall Street by coming to the aid of the tough guy free marketeers who ply their trade on that Street, literally and figuratively, whenever they suffer so much as hangnail or a slight bout of ennui, have proven ineffective. Soon, we will see how such obsequious Fed action has been not only ineffective but seriously counterproductive. Why? Because what we are witnessing is not a liquidity problem but a solvency problem. We are awash in liquidity but have a shortage of solvent borrowers. Providing more liquidity is like putting an infected bandage on a dirty, festering open wound.
Economic signals continue to be distorted, and class warfare continues to be stoked, by a corporocracy that insists on rewarding with pay packages that would have made J.P. Morgan (the man, not the organization) blush people who achieve their positions not by anything resembling talent but, rather, by connections, sycophancy toward their former superiors and ruthlessness toward their underlings and then predictably run their organizations into the ground, with the attendant predictable human suffering. Such economic distortion also arises from the politicians of both parties, most aggressively by the Democrats but most hypocritically by the Republicans, who insist on forcing the few fiscally prudent to bail out the legions of fiscally frivolous and clueless. Almost as destructively, the “remedies” for a situation that had its genesis in overspending involve encouraging people to spend more.
The Echo Chamber on Wall Street has evolved from dismissing my predictions of recession as foolhardy scare-mongering to acknowledging the possibility of recession to “realistically” assessing the probability of recession. What comes next? The Echo Chamber will (slowly, if the last few years are any indication) come around to discussing the likelihood of a financial and economic depression. I’m serious. The generations before mine were not stupid. Their wisdom was grounded in centuries (at least) of common sense; we simply cannot spend money we don’t have and consume when we haven’t produced. My generation, of Americans and the two (Yes, many, if not most, of the masters of the universe who run hedge funds or who work on Wall Street and aspire to run hedge funds are in their 30s; some are even younger.) that follow it, most distinguishable only by their hubris, insisted that their parents were crazy, that they could indeed spend more while actually producing less by figuring out a way to get everyone else to pay their bills, calling this endeavor “financial services,” and making it America’s major, quickly approaching our only, contribution to the world economy. That title, “financial services,” is especially apt; since the world has been doing the real work, paying our bills, and piling up IOUs, it will increasingly demand service from us in return. It is difficult to survive, let alone prosper and lead the world, when one is on one’s knees servicing one’s creditors.
So far, there has been, to modify an expression, purgatory to pay for our utter abandonment of the most basic financial and economic principles. Soon, to directly apply that expression, there will be hell to pay. You heard it, as you have heard many things that have come to (rotten) fruition, here first. The highly paid volume stokers of the Echo Chamber on Wall Street will eventually catch up, but why wait? Read the Insightful Pontificator regularly, tell your friends, and take the appropriate action.
DON’T BELIEVE THE HYPE, PART II
1/16/08
Now that Mitt Romney has won the GOP primary in Michigan, look for the punditry to start arguing that, as the economy comes to the forefront on the issue list (See my other entry for today, “I Told You So.”), Romney will have a leg up because of his emphasis on economic themes and his background in consulting and private equity. (Given the role consulting and private equity have had in preparing the current economic soup in which we are swimming, the latter credential should logically be seen as a negative rather than a positive, but such deep thought is well beyond the ken of the highly paid political punditocracy.) Just as I told you (1/5/08) not to believe that Barack Obama was inevitable after Iowa and to similarly dismiss (1/9/08) the argument that John McCain (Did you know he was a POW in Vietnam?) was the frontrunner after New Hampshire, I am telling you now not to believe any “Romney the Economic Genius as Frontrunner” claptrap that might emerge in the wake of Michigan.
The biggest winner in the Michigan GOP primary paid little or no attention to that beautiful but deeply troubled state. That winner was Rudy Giuliani. The current Big 3 (Romney, McCain, and Huckabee) spent millions, nearly emptying their campaign coffers, in Iowa, New Hampshire, and Michigan. And for what? None has achieved frontrunner status. None has gained much momentum. They are all back to where they were before Iowa, more or less tied with no clear frontrunner. (The possible exception is Mike Huckabee, who is now considered a frontrunner and was considered an also-ran not long before Iowa. However, it is hard to see his viability as being anything but ephemeral.) Now they face Rudy Giuliani with a relatively fresh bankroll in large states in which he has his greatest appeal among Republican primary voters. It is looking like Giuliani’s strategy of ignoring the early primary states and saving his thunder (and money) for the big states in which he has the best chance was at least smart and at best brilliant.
Some might argue that Giuliani’s passing on the early primary states has caused him to fade from the radar screens of GOP voters, that he is therefore a non-existent candidate who will be shrugged off by voters, i.e., Rudy Who? What the pundits don’t realize, however, is that most voters do not share their obsession with politics and thus, sensibly, have not paid much attention to the early primaries and will not begin focusing on the candidates before they (the voters) will have to cast ballots in their primaries. Rudy’s absence from the early primaries will prove to have served only to fortify his position in states in which he has natural appeal.
My outlook on the election remains essentially the same:
· It’s hard to see how Hillary Clinton does not become the Democratic nominee, due to her large bankroll, smoothly functioning organization, mastery of the game, complete and utter focus on and willingness to subordinate all else, including pride and any sense of shame, to her quest for the presidency, and effective endorsement by broad swaths of the Democratic establishment. It is also hard to see how we will not know that she is the Democratic nominee by the evening of February 5. Barack Obama is an exciting, articulate candidate who inspires voters, especially young voters, and anything can happen once a spark hits the inside of a bottle. Ultimately, though, he is at best ideologically empty and at worst far too liberal for the sensible elements of even the Democratic Party. More important, it is organization and money, not enthusiastic, but fickle and easily distracted, young voters and tacit media endorsement that win primaries; this is especially true in this year’s compressed primary schedule. Clinton has the money and the organization. She also has her husband who, after eight years of George Bush, will prove to be a big asset in the general election and, albeit to a lesser extent, in the upcoming primaries.
· The outcome on the GOP side is not nearly as clear; any of the front running blow-dried yahoos could win the nomination. If I had to bet, even money, right now, I’d bet on Giuliani, largely for the reasons outlined above but also because, sadly, over the last three or so elections GOP primary voters have become more sheeplike than even Democratic voters, and it is becoming clear that Fox News and other elements of the Right Wing echo chamber are in Rudy’s corner, largely because they share his enthusiasm for Big Government on a Global Scale, which George Bush euphemistically calls “The War on Terror,” but also because they share his ghastly malady of seemingly involuntarily incessantly repeating “9/11” much like Dustin Hoffman’s character could not stop repeating “(insert number) minutes to Wapner” in “Rainman.” The hosanna chorus that is Fox News and its fellow travelers also likes Rudy’s tough guy approach to any issue, perhaps due to doubts about their own degree of testicularity, but I digress.
· Because of the hash the Bushmen have made of his term of office, the general election looks like a replay of the 1972 or 1984 elections with the parties reversed. If John McCain (Did you know he was a POW in Vietnam?) should be the GOP nominee, it could be the end of the Republican Party for good given McCain’s (Did you know he was a POW in Vietnam?) enthusiasm for the carnage in Iraq, his eagerness to spread that carnage to Iran, and his being the foremost cheerleader for the hugely unpopular Big Government on a Global Scale that has become the GOP’s most salient hallmark.
· This has surely become a more interesting primary season than most people, including yours truly, had thought it would be, and, for that, all of us who like the game of politics are immensely grateful.
Now that Mitt Romney has won the GOP primary in Michigan, look for the punditry to start arguing that, as the economy comes to the forefront on the issue list (See my other entry for today, “I Told You So.”), Romney will have a leg up because of his emphasis on economic themes and his background in consulting and private equity. (Given the role consulting and private equity have had in preparing the current economic soup in which we are swimming, the latter credential should logically be seen as a negative rather than a positive, but such deep thought is well beyond the ken of the highly paid political punditocracy.) Just as I told you (1/5/08) not to believe that Barack Obama was inevitable after Iowa and to similarly dismiss (1/9/08) the argument that John McCain (Did you know he was a POW in Vietnam?) was the frontrunner after New Hampshire, I am telling you now not to believe any “Romney the Economic Genius as Frontrunner” claptrap that might emerge in the wake of Michigan.
The biggest winner in the Michigan GOP primary paid little or no attention to that beautiful but deeply troubled state. That winner was Rudy Giuliani. The current Big 3 (Romney, McCain, and Huckabee) spent millions, nearly emptying their campaign coffers, in Iowa, New Hampshire, and Michigan. And for what? None has achieved frontrunner status. None has gained much momentum. They are all back to where they were before Iowa, more or less tied with no clear frontrunner. (The possible exception is Mike Huckabee, who is now considered a frontrunner and was considered an also-ran not long before Iowa. However, it is hard to see his viability as being anything but ephemeral.) Now they face Rudy Giuliani with a relatively fresh bankroll in large states in which he has his greatest appeal among Republican primary voters. It is looking like Giuliani’s strategy of ignoring the early primary states and saving his thunder (and money) for the big states in which he has the best chance was at least smart and at best brilliant.
Some might argue that Giuliani’s passing on the early primary states has caused him to fade from the radar screens of GOP voters, that he is therefore a non-existent candidate who will be shrugged off by voters, i.e., Rudy Who? What the pundits don’t realize, however, is that most voters do not share their obsession with politics and thus, sensibly, have not paid much attention to the early primaries and will not begin focusing on the candidates before they (the voters) will have to cast ballots in their primaries. Rudy’s absence from the early primaries will prove to have served only to fortify his position in states in which he has natural appeal.
My outlook on the election remains essentially the same:
· It’s hard to see how Hillary Clinton does not become the Democratic nominee, due to her large bankroll, smoothly functioning organization, mastery of the game, complete and utter focus on and willingness to subordinate all else, including pride and any sense of shame, to her quest for the presidency, and effective endorsement by broad swaths of the Democratic establishment. It is also hard to see how we will not know that she is the Democratic nominee by the evening of February 5. Barack Obama is an exciting, articulate candidate who inspires voters, especially young voters, and anything can happen once a spark hits the inside of a bottle. Ultimately, though, he is at best ideologically empty and at worst far too liberal for the sensible elements of even the Democratic Party. More important, it is organization and money, not enthusiastic, but fickle and easily distracted, young voters and tacit media endorsement that win primaries; this is especially true in this year’s compressed primary schedule. Clinton has the money and the organization. She also has her husband who, after eight years of George Bush, will prove to be a big asset in the general election and, albeit to a lesser extent, in the upcoming primaries.
· The outcome on the GOP side is not nearly as clear; any of the front running blow-dried yahoos could win the nomination. If I had to bet, even money, right now, I’d bet on Giuliani, largely for the reasons outlined above but also because, sadly, over the last three or so elections GOP primary voters have become more sheeplike than even Democratic voters, and it is becoming clear that Fox News and other elements of the Right Wing echo chamber are in Rudy’s corner, largely because they share his enthusiasm for Big Government on a Global Scale, which George Bush euphemistically calls “The War on Terror,” but also because they share his ghastly malady of seemingly involuntarily incessantly repeating “9/11” much like Dustin Hoffman’s character could not stop repeating “(insert number) minutes to Wapner” in “Rainman.” The hosanna chorus that is Fox News and its fellow travelers also likes Rudy’s tough guy approach to any issue, perhaps due to doubts about their own degree of testicularity, but I digress.
· Because of the hash the Bushmen have made of his term of office, the general election looks like a replay of the 1972 or 1984 elections with the parties reversed. If John McCain (Did you know he was a POW in Vietnam?) should be the GOP nominee, it could be the end of the Republican Party for good given McCain’s (Did you know he was a POW in Vietnam?) enthusiasm for the carnage in Iraq, his eagerness to spread that carnage to Iran, and his being the foremost cheerleader for the hugely unpopular Big Government on a Global Scale that has become the GOP’s most salient hallmark.
· This has surely become a more interesting primary season than most people, including yours truly, had thought it would be, and, for that, all of us who like the game of politics are immensely grateful.
Sunday, January 13, 2008
FROM EACH ACCORDING TO HIS ABILITY, TO EACH ACCORDING TO HIS GREED
1/13/08
Though no one has the precise figures as of this writing, it appears as if Countrywide Financial CEO Angelo Mozilo will emerge from the misguided Bank of America purchase of Countrywide, which was prompted by the imminent failure of Countrywide and God know what else (See the last post “It’s Not Like these CEOs Have Big Egos or Anything,” 1/11/08), with about $70mm in cash and stock. The Wall Street Journal, the Pravda of the American corporocracy, reminds its readers that, if Mr. Mozilo gets no bonus this year, only $36mm of that $70mm is in the form of cash severance. (Of course, if Mr. Mozilo does get a bonus for the stellar job he has done with Countryside this year, his cash severance, and his entire farewell gift, will be larger.) The rest of the $70mm adieu gift is composed of pension benefits, which Mr. Mozilo would have gotten even if he hadn’t run Countrywide into the ground, and restricted stock and stock options, which were given value by B of A’s purchase of Countrywide. Doubtless we are all grateful to The Wall Street Journal for that clarification.
A Countrywide spokesman defended the pay package for Mr. Mozilo, stating that “During the past four decades, the company Mr. Mozilo founded has created tremendous value for shareholders and has provided millions of families with an opportunity for home ownership.” He didn’t add “many of whom who had no business being homeowners in the first place” after “families” in the above statement. Nor did he add “and provided the pathway to bankruptcy for millions of people who have no more idea how to manage their finances than Pairs Hilton has of social propriety” at the end of the statement. But I digress. To the extent that Countrywide has made shareholders rich (not lately, one might add) and/or provided the opportunity for homeownership, it has not been Mr. Mozilo who has done so. Countrywide’s employees had something to do with whatever success the company enjoyed, including the employees who lost their jobs, with no more than a few months' severance, due to Mr. Mozilo’s mismanagement.
Several points come up in the wake of Mr. Mozilo’s goodbye kiss. First, a very minor point: could bailing out his pal Angelo Mozilo have had anything to do with Ken Lewis’s decision to have his shareholders buy Countrywide Financial? After all, the boys in the club have to take care of each other, at least when they can do so with other people’s money, don’t they?
A larger point is that Mr. Mozilo’s au revoir gift, when combined with those of Stan O’Neal at Merrill, Chuck Prince at Citi, and numerous other corporate executives who failed miserably at the helm of the companies they nominally managed and thus cost their shareholders billions and many of their employees their livelihoods, increasingly gives the lie to the notion that, in our economy, the most productive citizens make the most money. If ours were a free market economy, this would be true. But, with the help of insouciant shareholders and a growing and bloated government in the hands of politicians on the take, our economy has evolved, in a relatively short period of time, from a free market economy to a corporate kleptocracy, or corporocracy. Big corporations often make decisions on who gets paid what on the basis of little other than personal relationships and a haunting feeling that those ladling out the largesse might be the next people in line for their hefty chunk of shareholder money.
If the above is true, the ramifications are frightening. First, public policy is based on the supposition that we continue to live in a capitalist, rather than a corporatist, economy. In a free market situation, it makes sense to keep tax rates low on the highest incomes because doing so provides incentives for the most productive people to work harder and thus expand the economic pie. I used to make that argument back when it was true. But now that there seems to be no logic, at least in the corporate world, which is, after all, gobbling up a larger share of the economy, to who gets paid what, the “keep rates low at the high end to keep the economy healthy” argument has less and less merit. The problem is that the realization that the “best paid are the most productive” argument no longer holds true might lead our policymakers to pursue “soak the rich” policies (Who wouldn’t like to sock it to Angelo Mozilo, Chuck Prince, Stan O’Neal, not to mention, say, Barry Bonds (but that is another argument) about right now?) that might harm the economy by discouraging hard work among those highly paid who remain the most productive, e.g., small business people, entrepreneurs, medical doctors, etc. At the very least, these fuliginous, but always very generous, corporate pay and severance packages lead to further economic deterioration, income disparity, and class warfare.
More important is the long term impact on our economy of abandoning the capitalist model for the corporatist model. If indeed we no longer reward people in proportion to their efforts but rather in proportion to their standing in the corporate and/or Wall Street “club,” we discourage the most productive and reward the indolent and incompetent but well connected. This will surely lead to our economic ruin.
People console themselves by arguing that the free market will ultimately prevail and thus that a corporocracy cannot last forever. Yes, but, given the size of government, the indifferent population, and the grip the corporations hold on our economy, the corporocracy can last a long time. Second, when the corporocracy falls of its own weight, the transition will be far from painless; the consequences for our economy and our nation will be tumultuous.
Though no one has the precise figures as of this writing, it appears as if Countrywide Financial CEO Angelo Mozilo will emerge from the misguided Bank of America purchase of Countrywide, which was prompted by the imminent failure of Countrywide and God know what else (See the last post “It’s Not Like these CEOs Have Big Egos or Anything,” 1/11/08), with about $70mm in cash and stock. The Wall Street Journal, the Pravda of the American corporocracy, reminds its readers that, if Mr. Mozilo gets no bonus this year, only $36mm of that $70mm is in the form of cash severance. (Of course, if Mr. Mozilo does get a bonus for the stellar job he has done with Countryside this year, his cash severance, and his entire farewell gift, will be larger.) The rest of the $70mm adieu gift is composed of pension benefits, which Mr. Mozilo would have gotten even if he hadn’t run Countrywide into the ground, and restricted stock and stock options, which were given value by B of A’s purchase of Countrywide. Doubtless we are all grateful to The Wall Street Journal for that clarification.
A Countrywide spokesman defended the pay package for Mr. Mozilo, stating that “During the past four decades, the company Mr. Mozilo founded has created tremendous value for shareholders and has provided millions of families with an opportunity for home ownership.” He didn’t add “many of whom who had no business being homeowners in the first place” after “families” in the above statement. Nor did he add “and provided the pathway to bankruptcy for millions of people who have no more idea how to manage their finances than Pairs Hilton has of social propriety” at the end of the statement. But I digress. To the extent that Countrywide has made shareholders rich (not lately, one might add) and/or provided the opportunity for homeownership, it has not been Mr. Mozilo who has done so. Countrywide’s employees had something to do with whatever success the company enjoyed, including the employees who lost their jobs, with no more than a few months' severance, due to Mr. Mozilo’s mismanagement.
Several points come up in the wake of Mr. Mozilo’s goodbye kiss. First, a very minor point: could bailing out his pal Angelo Mozilo have had anything to do with Ken Lewis’s decision to have his shareholders buy Countrywide Financial? After all, the boys in the club have to take care of each other, at least when they can do so with other people’s money, don’t they?
A larger point is that Mr. Mozilo’s au revoir gift, when combined with those of Stan O’Neal at Merrill, Chuck Prince at Citi, and numerous other corporate executives who failed miserably at the helm of the companies they nominally managed and thus cost their shareholders billions and many of their employees their livelihoods, increasingly gives the lie to the notion that, in our economy, the most productive citizens make the most money. If ours were a free market economy, this would be true. But, with the help of insouciant shareholders and a growing and bloated government in the hands of politicians on the take, our economy has evolved, in a relatively short period of time, from a free market economy to a corporate kleptocracy, or corporocracy. Big corporations often make decisions on who gets paid what on the basis of little other than personal relationships and a haunting feeling that those ladling out the largesse might be the next people in line for their hefty chunk of shareholder money.
If the above is true, the ramifications are frightening. First, public policy is based on the supposition that we continue to live in a capitalist, rather than a corporatist, economy. In a free market situation, it makes sense to keep tax rates low on the highest incomes because doing so provides incentives for the most productive people to work harder and thus expand the economic pie. I used to make that argument back when it was true. But now that there seems to be no logic, at least in the corporate world, which is, after all, gobbling up a larger share of the economy, to who gets paid what, the “keep rates low at the high end to keep the economy healthy” argument has less and less merit. The problem is that the realization that the “best paid are the most productive” argument no longer holds true might lead our policymakers to pursue “soak the rich” policies (Who wouldn’t like to sock it to Angelo Mozilo, Chuck Prince, Stan O’Neal, not to mention, say, Barry Bonds (but that is another argument) about right now?) that might harm the economy by discouraging hard work among those highly paid who remain the most productive, e.g., small business people, entrepreneurs, medical doctors, etc. At the very least, these fuliginous, but always very generous, corporate pay and severance packages lead to further economic deterioration, income disparity, and class warfare.
More important is the long term impact on our economy of abandoning the capitalist model for the corporatist model. If indeed we no longer reward people in proportion to their efforts but rather in proportion to their standing in the corporate and/or Wall Street “club,” we discourage the most productive and reward the indolent and incompetent but well connected. This will surely lead to our economic ruin.
People console themselves by arguing that the free market will ultimately prevail and thus that a corporocracy cannot last forever. Yes, but, given the size of government, the indifferent population, and the grip the corporations hold on our economy, the corporocracy can last a long time. Second, when the corporocracy falls of its own weight, the transition will be far from painless; the consequences for our economy and our nation will be tumultuous.
Friday, January 11, 2008
IT’S NOT LIKE THESE CEOs HAVE BIG EGOS OR ANYTHING
1/11/08
Bank of America’s purchase of Countrywide has been interpreted by experts as a huge vote of confidence in the beaten down mortgage market or in our financial system in general, exploitation of an opportunity to buy what remains a viable business at 20% of book, or an offer from the Treasury Department and the Fed that B of A couldn’t refuse.
Todd Hagerman, a bank analyst at Credit Suisse, comes closer when he says that B of A has “a vested interest in protecting their (sic) investment.” Ken Lewis has a vested interest in shoring up his ego. He was the guy who bought a big chunk of Countrywide at $18 in August only to see the stock trade below $5.00. No CEO wants to be seen as being as foolish as he is, especially when he can use other people’s money to try to salvage a misguided investment and his reputation. This purchase by B of A looks like a case of Ken Lewis’s averaging down with shareholders’ money in a desperate bid to save his reputation, and his job.
I also like the “offer B of A couldn’t refuse” theory, given the demonstrated “free market until the tough guys on Wall Street feel a touch of discomfort” philosophy of the Bush administration and the Bernanke Fed.
Bank of America’s purchase of Countrywide has been interpreted by experts as a huge vote of confidence in the beaten down mortgage market or in our financial system in general, exploitation of an opportunity to buy what remains a viable business at 20% of book, or an offer from the Treasury Department and the Fed that B of A couldn’t refuse.
Todd Hagerman, a bank analyst at Credit Suisse, comes closer when he says that B of A has “a vested interest in protecting their (sic) investment.” Ken Lewis has a vested interest in shoring up his ego. He was the guy who bought a big chunk of Countrywide at $18 in August only to see the stock trade below $5.00. No CEO wants to be seen as being as foolish as he is, especially when he can use other people’s money to try to salvage a misguided investment and his reputation. This purchase by B of A looks like a case of Ken Lewis’s averaging down with shareholders’ money in a desperate bid to save his reputation, and his job.
I also like the “offer B of A couldn’t refuse” theory, given the demonstrated “free market until the tough guys on Wall Street feel a touch of discomfort” philosophy of the Bush administration and the Bernanke Fed.
Wednesday, January 9, 2008
DON’T BELIEVE THE HYPE
1/9/08
Before yesterday, the experts were telling us that the race for the Democratic nomination was over. Readers of the Insightful Pontificator knew better. (See “This Isn’t America; this is Iowa!”, 1/5/08).
As for Hillary Clinton’s the tears in the diner, many pundits were telling us they were sincere. It is hard, though, to think that anything the Clintons do is not contrived, calibrated, and orchestrated. At any rate, the tears worked. The lesson one can draw from the effectiveness of those tears is how easy it is to manipulate the typical American voter. O tempora, o mores!
At any rate, the Democratic race will continue, contrary to what the deep thinkers were telling us before New Hampshire, and it is hard to see how Hillary Clinton will not have the nomination wrapped up by the evening of February 5. One note of caution: if Clinton does not win the nomination (again, a highly unlikely event), the slip that will have caused such a loss is one comment in her New Hampshire victory speech. In that testimony to treacly torpidity, Clinton told us that she will get the troops out of Iraq “the right way.” That can be taken as code for saying that she will keep us in the war she so ardently supported for a long time, and sounds positively Nixonesque. This could hurt her among the Democratic primary electorate in the upcoming contests. It could, but it probably won’t.
Just as I cautioned you not to get caught up in codswallop about Obama’s inevitability that followed Iowa, please don’t get suckered by the McCain (Did you know he was a POW in Vietnam?) fatuosity coming out of New Hampshire. Evangelical heavy South Carolina will be difficult for McCain (though perhaps not as tough as the experts tell us), Romney has a natural base in Michigan, and Giuliani enters the race in earnest in Florida. In all likelihood, New Hampshire will have turned out to have been a flash in the pan for McCain (Did you know he was a POW in Vietnam?), just as it was in 2000, and this time it will be McCain himself, not George II’s facinorous spin doctors, who bring McCain (Did you know he was a POW in Vietnam?) down.
If by some unforeseen and unfortunate turn of events, the Republicans do nominate McCain (Did you know he was a POW in Vietnam?), what I had predicted to be a landslide Democratic victory in the general election (One of the most salient lessons of the NH primary this year is that the predominance of Democratic ballots over Republican ballots cast, roughly 210 to 170, adding to the evidence that this will be a BIG Democratic year.) may turn out to be the election that destroys the GOP for good. McCain is most notable not for his completely contrived “maverick” image, but for his belief that the Iraq war was a terrific idea and that keeping troops there for the next 50 years or so would be an even better idea. Why did the Democrats do so well in 2006? Not because the electorate had a sudden nostomania for their big government palliatives, but because the electorate wanted out of Iraq, and not because things were going so poorly there in 2006 but because the Iraq war was at best an asinine idea in the first place. If the Republicans nominate McCain (Did you know he was a POW in Vietnam?), they will have nominated the war’s most ardent proponent short of George Bush and Dick Cheney. Further, McCain’s puerile ditty “Bomb, bomb, bomb, bomb bomb Iran” to the tune of “Barbara Ann” will be played round the clock should he become the Republican standard-bearer. This childish gibberish will be constantly contrasted with McCain’s boasting of his maturity, sense of responsibility, and foreign policy “expertise.”
There is another problem with McCain (Did you know he was a POW in Vietnam?). Anyone who watches and listens to him and honestly assesses his performance and appearance cannot help but conclude that McCain (Did you know he was a POW in Vietnam?) is something of a dullard. The easiest questions seem to baffle him. He “answers” most questions by gazing into the distance, as if the answers were floating somewhere above him, sniffing and implying that answering such troublesome questions is beneath his dignity before falling back on his POW in Vietnam shtick.
If the Republicans do nominate McCain (Did you know he was a POW in Vietnam?) , after putting George II in the White House for the last eight years, one can only conclude that the GOP has a death wish.
A few more things on New Hampshire…
I watched the coverage on CNN and MSNBC, and a common feature was incessant whining from the pundits about how the polls had been so wrong on the Democratic side. One commentator went so far as to sniff that the pollees had lied to the pollsters. How dare they! Even with the huge premium I put on honesty in all matters, I heartily endorse lying to pollsters, especially exit pollsters. Why? Because I love the game of politics, and I have fond childhood and young adulthood memories of real election nights when we sat by the radio or television and listened to or watched actual vote tallies coming in. Election night was always a big deal in the Quinn household. It took hours, or longer, until we knew who the victors were. In this age of exit and other polls, such entertaining election nights are rare. (Rare, but not non-existent—note the 2000 and, to a lesser extent, the 2004 general elections for president.) I, for one, was delighted that the polls had it so wrong, and not because I prefer Clinton over Obama.
Further, as a fan of the political game (Yes, it is a game, contrary to Hillary Clinton’s assertions to the contrary, until we get a viable candidate from either party the election of whom will make a measurable difference in the direction of this country.), I am delighted by the caucus/primary results so far. This means we will have a couple of races to watch, at least until February 5 and possibly, but probably not, later on the Republican side. Of course, it would be a political junkie’s dream to have the conventions actually mean something this year, but that remains unlikely, well nigh impossible. That hasn’t happened since 1976 and is not likely to happen again in our lifetimes. But a month’s entertainment is more than many people expected as recently as a few days ago.
Before yesterday, the experts were telling us that the race for the Democratic nomination was over. Readers of the Insightful Pontificator knew better. (See “This Isn’t America; this is Iowa!”, 1/5/08).
As for Hillary Clinton’s the tears in the diner, many pundits were telling us they were sincere. It is hard, though, to think that anything the Clintons do is not contrived, calibrated, and orchestrated. At any rate, the tears worked. The lesson one can draw from the effectiveness of those tears is how easy it is to manipulate the typical American voter. O tempora, o mores!
At any rate, the Democratic race will continue, contrary to what the deep thinkers were telling us before New Hampshire, and it is hard to see how Hillary Clinton will not have the nomination wrapped up by the evening of February 5. One note of caution: if Clinton does not win the nomination (again, a highly unlikely event), the slip that will have caused such a loss is one comment in her New Hampshire victory speech. In that testimony to treacly torpidity, Clinton told us that she will get the troops out of Iraq “the right way.” That can be taken as code for saying that she will keep us in the war she so ardently supported for a long time, and sounds positively Nixonesque. This could hurt her among the Democratic primary electorate in the upcoming contests. It could, but it probably won’t.
Just as I cautioned you not to get caught up in codswallop about Obama’s inevitability that followed Iowa, please don’t get suckered by the McCain (Did you know he was a POW in Vietnam?) fatuosity coming out of New Hampshire. Evangelical heavy South Carolina will be difficult for McCain (though perhaps not as tough as the experts tell us), Romney has a natural base in Michigan, and Giuliani enters the race in earnest in Florida. In all likelihood, New Hampshire will have turned out to have been a flash in the pan for McCain (Did you know he was a POW in Vietnam?), just as it was in 2000, and this time it will be McCain himself, not George II’s facinorous spin doctors, who bring McCain (Did you know he was a POW in Vietnam?) down.
If by some unforeseen and unfortunate turn of events, the Republicans do nominate McCain (Did you know he was a POW in Vietnam?), what I had predicted to be a landslide Democratic victory in the general election (One of the most salient lessons of the NH primary this year is that the predominance of Democratic ballots over Republican ballots cast, roughly 210 to 170, adding to the evidence that this will be a BIG Democratic year.) may turn out to be the election that destroys the GOP for good. McCain is most notable not for his completely contrived “maverick” image, but for his belief that the Iraq war was a terrific idea and that keeping troops there for the next 50 years or so would be an even better idea. Why did the Democrats do so well in 2006? Not because the electorate had a sudden nostomania for their big government palliatives, but because the electorate wanted out of Iraq, and not because things were going so poorly there in 2006 but because the Iraq war was at best an asinine idea in the first place. If the Republicans nominate McCain (Did you know he was a POW in Vietnam?), they will have nominated the war’s most ardent proponent short of George Bush and Dick Cheney. Further, McCain’s puerile ditty “Bomb, bomb, bomb, bomb bomb Iran” to the tune of “Barbara Ann” will be played round the clock should he become the Republican standard-bearer. This childish gibberish will be constantly contrasted with McCain’s boasting of his maturity, sense of responsibility, and foreign policy “expertise.”
There is another problem with McCain (Did you know he was a POW in Vietnam?). Anyone who watches and listens to him and honestly assesses his performance and appearance cannot help but conclude that McCain (Did you know he was a POW in Vietnam?) is something of a dullard. The easiest questions seem to baffle him. He “answers” most questions by gazing into the distance, as if the answers were floating somewhere above him, sniffing and implying that answering such troublesome questions is beneath his dignity before falling back on his POW in Vietnam shtick.
If the Republicans do nominate McCain (Did you know he was a POW in Vietnam?) , after putting George II in the White House for the last eight years, one can only conclude that the GOP has a death wish.
A few more things on New Hampshire…
I watched the coverage on CNN and MSNBC, and a common feature was incessant whining from the pundits about how the polls had been so wrong on the Democratic side. One commentator went so far as to sniff that the pollees had lied to the pollsters. How dare they! Even with the huge premium I put on honesty in all matters, I heartily endorse lying to pollsters, especially exit pollsters. Why? Because I love the game of politics, and I have fond childhood and young adulthood memories of real election nights when we sat by the radio or television and listened to or watched actual vote tallies coming in. Election night was always a big deal in the Quinn household. It took hours, or longer, until we knew who the victors were. In this age of exit and other polls, such entertaining election nights are rare. (Rare, but not non-existent—note the 2000 and, to a lesser extent, the 2004 general elections for president.) I, for one, was delighted that the polls had it so wrong, and not because I prefer Clinton over Obama.
Further, as a fan of the political game (Yes, it is a game, contrary to Hillary Clinton’s assertions to the contrary, until we get a viable candidate from either party the election of whom will make a measurable difference in the direction of this country.), I am delighted by the caucus/primary results so far. This means we will have a couple of races to watch, at least until February 5 and possibly, but probably not, later on the Republican side. Of course, it would be a political junkie’s dream to have the conventions actually mean something this year, but that remains unlikely, well nigh impossible. That hasn’t happened since 1976 and is not likely to happen again in our lifetimes. But a month’s entertainment is more than many people expected as recently as a few days ago.
Monday, January 7, 2008
THEY’RE ALL KEYNESIANS NOW
1/7/08
A story surfaced late last week, and gained momentum over the weekend, that the free market Bush administration is putting together a package of tax cuts to stimulate the economy with the help and advice of none other than Martin Feldstein, former chairman of the Council of Economic Advisors, current president of the National Bureau of Economic Research, and lifetime proponent of the “economy as a big machine that responds precisely to the proper inputs” school of economics.
This time, the administration is not even trotting out its supply side rhetoric but is admitting that the purpose of these tax cuts is to put cash into people’s hands to spend in order to ward off recession. Even though the administration’s idea is to give the economy a jolt just in time for the November elections, it is doubtful that the Bushmen will get much opposition from the Democrats, who rarely shrink from an opportunity to put your cash into other people’s hands and take the credit for doing so.
Recall that the origin of our current economic problems is excessive borrowing (in the form of mortgages and other consumer credit) and spending by consumers and the final realization that, by golly, we have to actually repay the money we borrowed and, gee whiz, we don’t have it. So what the administration is proposing is to solve the problem of excessive spending by encouraging more spending.
I hate to be in the position of opposing a tax cut, but this one is clearly wrong-headed. What the economy needs is not a temporary spending jolt, but a fundamental reexamination on the part of the American people of their approach to money. For too long, we have treated money as a perishable commodity, to be spent in a hurry before it spoils. We have forgotten that saving a portion of our money is an option, indeed, a necessity both on the micro and macro levels. We have gone as far as to denigrate saving as at best useless, at worst some sort of masochistic exercise in self denial. Indeed, the Keynesianism on which the free market Bush administration’s tax cut is premised (though no Republican would ever admit that Lord Keynes’ thinking is behind this plan) can easily be construed (some might say, legitimately, misconstrued) as treating savings as some sort of deadweight loss for the economy. While most Americans would not recognize the name of John Maynard Keynes, they surely share his enthusiasm for spending.
The only way to address our current economic difficulty on anything approaching a long term basis is for people to wake up to the necessity of saving. Giving them more money while telling them they are not spending enough is worse than counterproductive. The fundamental reexamination we need as a people will come only when we are made to feel the economic pain our policymakers have been striving so mightily to have us avoid. Forget the band-aids and the bromides; let this thing run its course, let the free market do its job. It will be painful, but necessary for our long term survival as an economy and as a people.
A story surfaced late last week, and gained momentum over the weekend, that the free market Bush administration is putting together a package of tax cuts to stimulate the economy with the help and advice of none other than Martin Feldstein, former chairman of the Council of Economic Advisors, current president of the National Bureau of Economic Research, and lifetime proponent of the “economy as a big machine that responds precisely to the proper inputs” school of economics.
This time, the administration is not even trotting out its supply side rhetoric but is admitting that the purpose of these tax cuts is to put cash into people’s hands to spend in order to ward off recession. Even though the administration’s idea is to give the economy a jolt just in time for the November elections, it is doubtful that the Bushmen will get much opposition from the Democrats, who rarely shrink from an opportunity to put your cash into other people’s hands and take the credit for doing so.
Recall that the origin of our current economic problems is excessive borrowing (in the form of mortgages and other consumer credit) and spending by consumers and the final realization that, by golly, we have to actually repay the money we borrowed and, gee whiz, we don’t have it. So what the administration is proposing is to solve the problem of excessive spending by encouraging more spending.
I hate to be in the position of opposing a tax cut, but this one is clearly wrong-headed. What the economy needs is not a temporary spending jolt, but a fundamental reexamination on the part of the American people of their approach to money. For too long, we have treated money as a perishable commodity, to be spent in a hurry before it spoils. We have forgotten that saving a portion of our money is an option, indeed, a necessity both on the micro and macro levels. We have gone as far as to denigrate saving as at best useless, at worst some sort of masochistic exercise in self denial. Indeed, the Keynesianism on which the free market Bush administration’s tax cut is premised (though no Republican would ever admit that Lord Keynes’ thinking is behind this plan) can easily be construed (some might say, legitimately, misconstrued) as treating savings as some sort of deadweight loss for the economy. While most Americans would not recognize the name of John Maynard Keynes, they surely share his enthusiasm for spending.
The only way to address our current economic difficulty on anything approaching a long term basis is for people to wake up to the necessity of saving. Giving them more money while telling them they are not spending enough is worse than counterproductive. The fundamental reexamination we need as a people will come only when we are made to feel the economic pain our policymakers have been striving so mightily to have us avoid. Forget the band-aids and the bromides; let this thing run its course, let the free market do its job. It will be painful, but necessary for our long term survival as an economy and as a people.
Sunday, January 6, 2008
“A SMALLER ENGINE? WHAT KIND OF MAN WANTS A SMALLER…ENGINE?”
1/6/0/8
Below is a letter I sent to Jim Mateja of the Chicago Tribune, certainly one of the best automotive journalists in the nation and, given my love of things automotive, one of my favorite and most frequent correspondents. The letter was sent in response to his review of the Mazda CX-9, but my main point had little to do with that specific (and outstanding, I might add) vehicle:
1/6/08
Hi Jim,
Nice review of the CX-9, which is perhaps the best station wagon (er, sorry, crossover) on the market.
You listed as one of the positives of the CX-9 the “engine upgrade for more zoom.” C’mon, Jim; could you really feel the additional 10 hp (3.8%) or 21 ft.lbs. (8.4%) of torque in the new CX-9? I certainly can’t, and I like to think I’m something of an enthusiast. Most people would have no clue which was the “more powerful” if you put them in last year’s and this year’s CX-9 without telling them which was which.
I am convinced that most of the increase in horsepower we have seen over the last twenty years or so is a product of marketing hype. Witness the elderly couple in the four porthole Lucerne going 55 in the left lane who just had to have eight cylinders. We all know that people don’t need all, or anything like, the power sitting under their hoods. I know: if we all got by on what we needed, we would all be leading a pretty bare-bones existence. (Whether that we be such a bad thing is another issue.) So asking the typical consumer what he needs is unthinkable in modern American society. But how about if people consider what they actually use, or even can use, in the horsepower department? We would have far less powerful, and more fuel efficient vehicles. But then Americans would have to go beyond asking political candidates to “do something” about dependence on foreign oil and actually do something, even an undetectable something, themselves. Perish the thought!
Mark Quinn
Naperville
Below is a letter I sent to Jim Mateja of the Chicago Tribune, certainly one of the best automotive journalists in the nation and, given my love of things automotive, one of my favorite and most frequent correspondents. The letter was sent in response to his review of the Mazda CX-9, but my main point had little to do with that specific (and outstanding, I might add) vehicle:
1/6/08
Hi Jim,
Nice review of the CX-9, which is perhaps the best station wagon (er, sorry, crossover) on the market.
You listed as one of the positives of the CX-9 the “engine upgrade for more zoom.” C’mon, Jim; could you really feel the additional 10 hp (3.8%) or 21 ft.lbs. (8.4%) of torque in the new CX-9? I certainly can’t, and I like to think I’m something of an enthusiast. Most people would have no clue which was the “more powerful” if you put them in last year’s and this year’s CX-9 without telling them which was which.
I am convinced that most of the increase in horsepower we have seen over the last twenty years or so is a product of marketing hype. Witness the elderly couple in the four porthole Lucerne going 55 in the left lane who just had to have eight cylinders. We all know that people don’t need all, or anything like, the power sitting under their hoods. I know: if we all got by on what we needed, we would all be leading a pretty bare-bones existence. (Whether that we be such a bad thing is another issue.) So asking the typical consumer what he needs is unthinkable in modern American society. But how about if people consider what they actually use, or even can use, in the horsepower department? We would have far less powerful, and more fuel efficient vehicles. But then Americans would have to go beyond asking political candidates to “do something” about dependence on foreign oil and actually do something, even an undetectable something, themselves. Perish the thought!
Mark Quinn
Naperville
Saturday, January 5, 2008
THIS ISN’T AMERICA; THIS IS IOWA!
THIS ISN’T AMERICA; THIS IS IOWA!
1/5/08
As much as I love Iowa, I caution everyone this year, as I would any year, against reading too much into the results of the Hawkeye State’s presidential caucuses. There are a number of reasons for this, many of which have been repeated ad nauseam in the press.
Demographically, Iowa is not very representative of the nation as a whole. It is 97% white. While more of its people live in cities than live on farms (which is probably the case in any state, if you think about it), Iowa is more rural than the nation as a whole. Politically, while the state is more or less centrist in its politics, the liberals in Iowa tend to be very liberal and the conservatives tend to be very conservative. Further, people in Iowa tend to be very sensible and, given the strength of public and private education in Iowa, from kindergarten through graduate school, well read and thoughtful, factors that clearly distinguish the Hawkeye state from most of the country.
The nature of caucuses also cautions one against reading too much into them, whether they are conducted in Iowa or anywhere else. On the Democratic side, caucusing can take two hours or longer, and requires one to declare one’s candidate to one’s neighbors. While the process is quicker and easier on the Republican side, it is still more involved and less private than a secret ballot. So while it is said, correctly, that the true believers decide who wins the primaries in both parties, the same could be said to a greater degree, and with more certainty, in a caucus situation. Admittedly, this tendency for party stalwarts to control caucuses was less pronounced this year due to the surge in turnout and the large numbers of first time caucus attendees (caucusers?) at this year’s caucuses, but one can be assured that the casual voter, who will decide the outcome of this year’s presidential contest, was not present at this year’s Iowa caucuses.
The spotty, at best, record, of winners of past Iowa caucuses in securing their parties’ nominations also tends to counsel caution in extrapolating last Thursday’s results into later state primaries and caucuses.
There are also factors unique to this year’s contests, and this year’s candidates, that dilute the impact of the Iowa caucuses. On the Democratic side, Barack Obama’s big victory has served to make the primary season more interesting than most of us thought it would be, but will probably ultimately do little else. As I have said before, money and organization win primaries. This is especially the case this year with the tightly compressed primary season. In all likelihood, we shall know the nominees of both parties by the evening of February 5, when the votes from Super Tuesday are counted. There is no time this year to “build momentum” or to raise substantial funds for use in the upcoming Niagara of primaries and caucuses. The money that will decide the nominations has been raised and, highly likely, spent. Hillary Clinton has more money and better organization than Obama. Iowa has not changed that.
Further, Clinton maintains a nearly 20% nationwide lead. Also note that she leads in New Hampshire, leads big in Nevada and Florida, and is in a statistical tie with Obama in South Carolina. Then we move into the big states on February 5, where, in most cases, her lead is even stronger and her money and organization even more crucial.
While Obama is an articulate, exciting, and inspiring candidate who has really struck a chord with the young, the smart money should still be on Clinton.
On the Republican side, who knows? About the only thing Iowa decided is that Mitt Romney will not get the nomination. It looks as though his campaign will prove to have been as financially futile as that of John Connelly in 1980. This is indeed ironic because Mr. Romney made his fortune consulting on matters financial. The supposedly big story, Mike Huckabee’s victory, is diluted by the characteristics of both Iowa and the caucuses. Given the utter bereftness of the Republican field, Huckabee might have a shot at the nomination, but it won’t be because of Iowa and it really won’t matter. (See the last paragraph of this entry.)
Two of the most interesting results of the caucuses barely got a mention from the press. First, Ron Paul, having spent almost nothing in Iowa, captured 10% of the Republican vote. Remember, he wasn’t supposed to break out of single digits in Iowa; his only chance at catching people’s notice lay in New Hampshire, the experts told us. So how well will Dr. Paul do in New Hampshire? If Iowa is any indication (and it probably isn’t, in line with the general theme of this entry), Dr. Paul could really shake things up on Tuesday.
Second, twice as many Iowans participated in the Democratic caucuses as participated in the Republican caucuses. Given the mess Mr. Bush has made of the presidency, the nation’s disenchantment with the war (Even if the war is “going better,” the disenchantment will not disappear or even dissipate to a significant degree. People are angry that we are in Iraq at all, not that Iraq is, or, if you insist, was going poorly for us or for Bush’s puppet government there.), the disillusioning effect he has had on the Republican base, and the very high probability that the nation will be in dire economic straits on election day, the Republican nomination was never going to be worth much this year. If Iowa is any indication, people are even angrier with the GOP than I had supposed, making the Republican nomination about as desirable as the position of goalie on a darts team. This election has the look of a 1972 or a 1980 landslide…with the parties reversed.
1/5/08
As much as I love Iowa, I caution everyone this year, as I would any year, against reading too much into the results of the Hawkeye State’s presidential caucuses. There are a number of reasons for this, many of which have been repeated ad nauseam in the press.
Demographically, Iowa is not very representative of the nation as a whole. It is 97% white. While more of its people live in cities than live on farms (which is probably the case in any state, if you think about it), Iowa is more rural than the nation as a whole. Politically, while the state is more or less centrist in its politics, the liberals in Iowa tend to be very liberal and the conservatives tend to be very conservative. Further, people in Iowa tend to be very sensible and, given the strength of public and private education in Iowa, from kindergarten through graduate school, well read and thoughtful, factors that clearly distinguish the Hawkeye state from most of the country.
The nature of caucuses also cautions one against reading too much into them, whether they are conducted in Iowa or anywhere else. On the Democratic side, caucusing can take two hours or longer, and requires one to declare one’s candidate to one’s neighbors. While the process is quicker and easier on the Republican side, it is still more involved and less private than a secret ballot. So while it is said, correctly, that the true believers decide who wins the primaries in both parties, the same could be said to a greater degree, and with more certainty, in a caucus situation. Admittedly, this tendency for party stalwarts to control caucuses was less pronounced this year due to the surge in turnout and the large numbers of first time caucus attendees (caucusers?) at this year’s caucuses, but one can be assured that the casual voter, who will decide the outcome of this year’s presidential contest, was not present at this year’s Iowa caucuses.
The spotty, at best, record, of winners of past Iowa caucuses in securing their parties’ nominations also tends to counsel caution in extrapolating last Thursday’s results into later state primaries and caucuses.
There are also factors unique to this year’s contests, and this year’s candidates, that dilute the impact of the Iowa caucuses. On the Democratic side, Barack Obama’s big victory has served to make the primary season more interesting than most of us thought it would be, but will probably ultimately do little else. As I have said before, money and organization win primaries. This is especially the case this year with the tightly compressed primary season. In all likelihood, we shall know the nominees of both parties by the evening of February 5, when the votes from Super Tuesday are counted. There is no time this year to “build momentum” or to raise substantial funds for use in the upcoming Niagara of primaries and caucuses. The money that will decide the nominations has been raised and, highly likely, spent. Hillary Clinton has more money and better organization than Obama. Iowa has not changed that.
Further, Clinton maintains a nearly 20% nationwide lead. Also note that she leads in New Hampshire, leads big in Nevada and Florida, and is in a statistical tie with Obama in South Carolina. Then we move into the big states on February 5, where, in most cases, her lead is even stronger and her money and organization even more crucial.
While Obama is an articulate, exciting, and inspiring candidate who has really struck a chord with the young, the smart money should still be on Clinton.
On the Republican side, who knows? About the only thing Iowa decided is that Mitt Romney will not get the nomination. It looks as though his campaign will prove to have been as financially futile as that of John Connelly in 1980. This is indeed ironic because Mr. Romney made his fortune consulting on matters financial. The supposedly big story, Mike Huckabee’s victory, is diluted by the characteristics of both Iowa and the caucuses. Given the utter bereftness of the Republican field, Huckabee might have a shot at the nomination, but it won’t be because of Iowa and it really won’t matter. (See the last paragraph of this entry.)
Two of the most interesting results of the caucuses barely got a mention from the press. First, Ron Paul, having spent almost nothing in Iowa, captured 10% of the Republican vote. Remember, he wasn’t supposed to break out of single digits in Iowa; his only chance at catching people’s notice lay in New Hampshire, the experts told us. So how well will Dr. Paul do in New Hampshire? If Iowa is any indication (and it probably isn’t, in line with the general theme of this entry), Dr. Paul could really shake things up on Tuesday.
Second, twice as many Iowans participated in the Democratic caucuses as participated in the Republican caucuses. Given the mess Mr. Bush has made of the presidency, the nation’s disenchantment with the war (Even if the war is “going better,” the disenchantment will not disappear or even dissipate to a significant degree. People are angry that we are in Iraq at all, not that Iraq is, or, if you insist, was going poorly for us or for Bush’s puppet government there.), the disillusioning effect he has had on the Republican base, and the very high probability that the nation will be in dire economic straits on election day, the Republican nomination was never going to be worth much this year. If Iowa is any indication, people are even angrier with the GOP than I had supposed, making the Republican nomination about as desirable as the position of goalie on a darts team. This election has the look of a 1972 or a 1980 landslide…with the parties reversed.
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