Consider the following report from The Nation magazine that refers to well documented events that occurred in 1991:
Just six months after being rebuked by the Senate Ethics Committee for exercising "poor judgment" when he interfered with federal regulators on behalf of a wealthy donor, Senator John McCain engaged in activities that may have constituted an abuse of his office for personal gain. In August 1991, McCain hosted a family reunion at the Bermuda Naval Air Station (BNAS) for at least seven days at taxpayer expense. McCain's entourage of eleven included his wife, Cindy, and several of his children. The trip took place as Washington was still dealing with the fallout from the Keating Five scandal, an episode that involved other improper luxury Atlantic-island trips for McCain.
The McCain campaign, and in particular its VP candidate have been on the campaign trail pounding rumor upon innuendo about the supposed questionable character of Barack Obama because he has served on the Board of Directors with William Ayers. Ayers, you will recall, was associated with the Weather Underground nearly a half century ago and alleged to have engaged in domestic terrorist activities at a time when Barack Obama was 8 years old or less and not even living within thousands of miles of Ayers. While we might point out that Obama was never associated in any way with Ayers’ youthful activities and has repudiated the philosophies and actions of the weather Underground, the absurd strategy of irrational smear tactics persists.
But a more proximate question is whether the country should embrace the leadership of individuals that are tainted, not by some greatly attenuated “guilt by association,” but rather by their own personal actions. McCain wants to dredge up history selectively. He would prefer that the public not focus on his own direct relationship with Keating and his wife’s dealings with Keating even after the banker’s fraud and criminality was exposed. And McCain would no doubt rather not have the public focus on his own disregard of ethical rules and constraints, as evidenced by the junket reported by The Nation.
Sarah Palin has been in the chair of Governor for less than two years and already has two formal sanctions from the Alaska Legislature for her ethical abuses of executive authority. Like Ted Stevens, her mentor and fellow Alaskan GOP Congressional colleague indicted last week, Palin passes off the sanctions as motivated by “politics” and overly aggressive prosecutors. No measure of ambition or aggression on the part of investigators could have yielded the results handed down unless there was substantial evidence to support the allegations of wrongdoing. The charges were well documented and no fabrication has been advanced or proven. The difference of opinion was simply that the actions of these public officials, in their own view, were either untouchable or did not constitute something that the public should consider wrong.
And therein lies the rub. When one starts to point fingers, as my father used to say to me, remember that there are three fingers pointing right back at the person doing the pointing. If you want to hold someone else up to standards, make sure that you can pass careful scrutiny yourself. McCain & Palin are clearly in no position to impugn Obama’s character, and to do so on such nonsensical and groundless charges is just plain knuckleheaded.
Wednesday, October 29, 2008
Sunday, October 26, 2008
Just when you thought.....
After having deflected and deferred any formal investigation of claims of illegal intervention in the electoral process that resulted in George W. Bush “winning” an election in which he lost the popular vote, the Bush Administration now seeks to throw its weight behind a desperate effort by the GOP in Ohio to suppress voting in the upcoming election. The Supreme Court that Bush has packed with Right Wing apologist judges has declined to support this GOP strategy. So when the law fails, John Boehner turns to the person whom he believes will attempt to go above the law – George W. Bush.
It is not clear whether George W. Bush actually believes that the law does not matter. He has lived off the spoils of such political trickery and deceit so long that he might believe that he truly is above the law. Certainly the tutelage of Dick Cheney, who is the unrepentant progeny of the Nixonian philosophy of an imperial Presidency, has encouraged Bush to believe that there is no prerogative higher than Executive Privilege.
Desperate that the GOP might not only lose the Presidential election, but might take a drubbing in Senate and Congressional as well, Boehner has asked Bush to intervene in a blatantly political maneuver. There is no doubt that such a patently obvious move to seek political interference in the election would not be even considered unless there was a fear that a fair contest would not go their way. So the resort to extralegal maneuvers is the option that the GOP has taken. It is not clear whether the Congress has the spine to step in to address this tawdry spectacle. The viability of the Constitution is at risk, and that is not hyperbole. Historically, the US population has felt comfortable criticizing Latin American and other “Third World” nations for their tendency to allow corrupt politicians to manipulate elections and defraud the public out of free and fair elections. The US is in serious danger of stooping to that same level that previously would have been unthinkable. Just when you thought it could not get any worse....
It is not clear whether George W. Bush actually believes that the law does not matter. He has lived off the spoils of such political trickery and deceit so long that he might believe that he truly is above the law. Certainly the tutelage of Dick Cheney, who is the unrepentant progeny of the Nixonian philosophy of an imperial Presidency, has encouraged Bush to believe that there is no prerogative higher than Executive Privilege.
Desperate that the GOP might not only lose the Presidential election, but might take a drubbing in Senate and Congressional as well, Boehner has asked Bush to intervene in a blatantly political maneuver. There is no doubt that such a patently obvious move to seek political interference in the election would not be even considered unless there was a fear that a fair contest would not go their way. So the resort to extralegal maneuvers is the option that the GOP has taken. It is not clear whether the Congress has the spine to step in to address this tawdry spectacle. The viability of the Constitution is at risk, and that is not hyperbole. Historically, the US population has felt comfortable criticizing Latin American and other “Third World” nations for their tendency to allow corrupt politicians to manipulate elections and defraud the public out of free and fair elections. The US is in serious danger of stooping to that same level that previously would have been unthinkable. Just when you thought it could not get any worse....
Saturday, October 25, 2008
Why Jerry Lewis Makes Us Uneasy
For the second time in two years, ultra-famous comedian and recognized humanitarian Jerry Lewis has been called to task for apparently injudicious slur remarks about gays. In an interview on Australian television to promote his tour there, Lewis reportedly referred to Cricket as a homosexual or effeminate sport. The Gay and Lesbian Organizations have reserved comment until after they review exactly what Lewis said. Jokes that juxtapose macho sport and effeminacy are not uncommon in the milieu of the stage, even if such humor is hackneyed and outdated. In other words, the remarks may have been a feeble attempt at comedy by an aged clown, but not a truly malicious aspersion. That Jerry Lewis has a venerable record for opening doors in society for Blacks in Hollywood and for raising millions of dollars to support medical research may make it worthwhile to cut him a little slack. The fact that Lewis is 82 years old is another important consideration.
What causes us unease, however, are not so much the ill considered remarks of a famous comedian as the recognition that Lewis is slipping in his old age. For someone who has been in the public eye for over half a century, we would expect him to be practiced in knowing what to say and in what circumstances to say things. The tension is painfully evident between the “experience” factor and the onset of age-related dementia. That is not to say that Lewis is not still a talented and sometimes entertaining stagecraft veteran. But at this point, each time he takes the stage there is a sense of uncertainty as to whether he is in control of his faculties and capable of making the fine and balanced judgments about what is truly funny and what is simply in poor taste.
While many would cringe at the mention of the shadow that lurks in our minds, and perhaps consider it politically incorrect, the same concern sits at the back of our minds regarding John McCain. His erratic performance during the last few months of the campaign have given cause for concern about whether he is sufficiently in charge of his faculties to be entrusted with the responsibilities of the Presidency. McCain is 72 years old and has a significant health history that cannot be ignored. He himself has acknowledged his tendency to make “gut” decisions rather than carefully considered judgments. He does not regret those decisions, but the question is whether the citizens of the US will be placed in a position where they might have to regret such decisions. There is a huge difference in the impact of poor judgment by a stage comedian and poor judgment by the Commander in Chief of the largest military industrial complex in the world.
From the Rubiyat to common cliché we are constantly reminded that time is inexorable. The finger of fate writes and cannot unwrite; time waits for no man, etc. We shun and protest that age does not disqualify one from positions of responsibility. At the same time we cannot deny that each of us dances our way toward that final coda, be it a spritely jig or a somnolent dirge. And with each round, we all notice a slight lessening of coordination and a slowing of our steps. Each time I step out on the soccer pitch or the basketball court I am reminded that my physical resources often cannot deliver what my imagination might concoct and my mind would direct. Only self awareness and humility keep me from making foolish moves. These qualities of self-awareness and reflection seem in short supply in the Bush Administration and in the McCain camp.
So we hear about the indiscretion of the aged Jerry Lewis, consider the incredibly high stakes involved in placing a septuagenarian in the White House, and we look for signs in McCain’s behavior to assure us that our shadows of doubt are unwarranted. Unfortunately, such reassurance is very difficult to find.
What causes us unease, however, are not so much the ill considered remarks of a famous comedian as the recognition that Lewis is slipping in his old age. For someone who has been in the public eye for over half a century, we would expect him to be practiced in knowing what to say and in what circumstances to say things. The tension is painfully evident between the “experience” factor and the onset of age-related dementia. That is not to say that Lewis is not still a talented and sometimes entertaining stagecraft veteran. But at this point, each time he takes the stage there is a sense of uncertainty as to whether he is in control of his faculties and capable of making the fine and balanced judgments about what is truly funny and what is simply in poor taste.
While many would cringe at the mention of the shadow that lurks in our minds, and perhaps consider it politically incorrect, the same concern sits at the back of our minds regarding John McCain. His erratic performance during the last few months of the campaign have given cause for concern about whether he is sufficiently in charge of his faculties to be entrusted with the responsibilities of the Presidency. McCain is 72 years old and has a significant health history that cannot be ignored. He himself has acknowledged his tendency to make “gut” decisions rather than carefully considered judgments. He does not regret those decisions, but the question is whether the citizens of the US will be placed in a position where they might have to regret such decisions. There is a huge difference in the impact of poor judgment by a stage comedian and poor judgment by the Commander in Chief of the largest military industrial complex in the world.
From the Rubiyat to common cliché we are constantly reminded that time is inexorable. The finger of fate writes and cannot unwrite; time waits for no man, etc. We shun and protest that age does not disqualify one from positions of responsibility. At the same time we cannot deny that each of us dances our way toward that final coda, be it a spritely jig or a somnolent dirge. And with each round, we all notice a slight lessening of coordination and a slowing of our steps. Each time I step out on the soccer pitch or the basketball court I am reminded that my physical resources often cannot deliver what my imagination might concoct and my mind would direct. Only self awareness and humility keep me from making foolish moves. These qualities of self-awareness and reflection seem in short supply in the Bush Administration and in the McCain camp.
So we hear about the indiscretion of the aged Jerry Lewis, consider the incredibly high stakes involved in placing a septuagenarian in the White House, and we look for signs in McCain’s behavior to assure us that our shadows of doubt are unwarranted. Unfortunately, such reassurance is very difficult to find.
The John McCain Campaign Message – “Vote For Me – How Stupid Can You Be?”
In the closing days of the campaign for the next President of the US, the rhetoric of the GOP candidate John McCain has become, not only more shrill and desperate, but more incredible. We can even discount the irresponsible and disgraceful pandering remarks of Gov. Palin, seeking to brand Sen. Obama and who knows how many other members of Congress as “un-American.” Such tactics, reminiscent of Joe McCarthy, are also coded racist attacks on Obama because of his multi-ethnic ancestry and unusual name. Although one might hope that a responsible candidate would curb such idiotic excesses, the remarks of McCain himself show him as unable or unwilling to even recognize how far astray his message has gone.
To put a fine point on the matter, the McCain campaign message challenges and insults the intelligence of the voting public. Consider the two main talking points that seem to be the most recent in a constantly shifting cacophony of conflicting messages and strategies. First, McCain attacks Obama on the Illinois Senators proposal to cut or maintain tax levels on taxpayers earning less than $250,000. McCain’s solution is to make permanent the current tax cuts primarily benefiting the top 1% wealth holders in the country. While McCain repeatedly argues that he really has the interests of the average citizen at heart, the main street business owners he supposedly champions are struggling and losing under the economic regime of George W. Bush based largely on such "feed the rich and let the crumbs trickle down to the less fortunate" policies. In other words, the actual experience of the public clearly and starkly demonstrates the failure of such policies.
Second, McCain contends [and apparently believes] that a message that Obama is "inexperienced and unprepared" to “take the helm” of the country’s ship of state in such turbulent times. This argument is all but laughable coming from McCain. Experienced leaders from Former President Bill Clinton to Democratic and GOP former cabinet officials to former Secretary of State Colin Powell have all carefully scrutinized Obama and found him ready to step into the role of President with a sharp mind, steady nerves and optimistic yet realistic vision. As the backwoods folk would say: “that dog won’t hunt.” McCain would do better in seeking to reassure voters that HE is adequately prepared for the job than trying to persuade voters that Obama is not.
This takes us to another item, calm judgment. The seemingly unfocused and constantly shifting direction of the McCain campaign suggests instability and a dearth of true leadership even within McCain’s own team. That does not bode confidence in his ability to take on the much larger role of directing a disciplined and competent administration. McCain’s choice of Sarah Palin only underscores a tendency toward opportunistic and poorly considered judgment. He apparently believes that the majority of Americans do not see the real "Wizard of Oz" hiding behind the curtain.
Finally, if the analogy of experience at the helm is to be considered anything more than empty rhetoric, we would be well to remember that the Naval Officer John McCain managed to crash not one, but FIVE expensive and sophisticated naval aircraft. He used his family connections to avoid being washed out of a career as Navy pilot, a fate that anyone with less political pull would clearly have suffered for such poor performance. So if we are to consider who is more of a risk “at the helm” of the country, it would be foolish to ignore the evident incompetence of John McCain is piloting during critical moments in his military career. His intemperate remarks during the recent crisis in Georgia and South Ossetia suggest that his steadiness in critical moments has not improved much from his crash and burn days in the Navy.
So the real question for the voters is “how stupid can you be?” Are you capable of ignoring all of the neon sign warnings regarding the lack of vision, the lack of policies and the lack of character on the part of John McCain [and his running mate who was censured by the Alaska legislature for abuse of executive power]? Can you convince yourself that all of the evidence amassed by Obama during nearly two years of being scrutinized and tested in primaries and the general election campaigns? Are you willing to ignore the impact of the failed Bush Administration and its incompetence, corruption and venal greed that McCain has consistently backed and supported, despite his claims to being s “maverick?” If you are stupid enough, and if you can toss away basic concepts of enlightened self-interest, then McCain implores you to vote for him. How stupid can you really be?
To put a fine point on the matter, the McCain campaign message challenges and insults the intelligence of the voting public. Consider the two main talking points that seem to be the most recent in a constantly shifting cacophony of conflicting messages and strategies. First, McCain attacks Obama on the Illinois Senators proposal to cut or maintain tax levels on taxpayers earning less than $250,000. McCain’s solution is to make permanent the current tax cuts primarily benefiting the top 1% wealth holders in the country. While McCain repeatedly argues that he really has the interests of the average citizen at heart, the main street business owners he supposedly champions are struggling and losing under the economic regime of George W. Bush based largely on such "feed the rich and let the crumbs trickle down to the less fortunate" policies. In other words, the actual experience of the public clearly and starkly demonstrates the failure of such policies.
Second, McCain contends [and apparently believes] that a message that Obama is "inexperienced and unprepared" to “take the helm” of the country’s ship of state in such turbulent times. This argument is all but laughable coming from McCain. Experienced leaders from Former President Bill Clinton to Democratic and GOP former cabinet officials to former Secretary of State Colin Powell have all carefully scrutinized Obama and found him ready to step into the role of President with a sharp mind, steady nerves and optimistic yet realistic vision. As the backwoods folk would say: “that dog won’t hunt.” McCain would do better in seeking to reassure voters that HE is adequately prepared for the job than trying to persuade voters that Obama is not.
This takes us to another item, calm judgment. The seemingly unfocused and constantly shifting direction of the McCain campaign suggests instability and a dearth of true leadership even within McCain’s own team. That does not bode confidence in his ability to take on the much larger role of directing a disciplined and competent administration. McCain’s choice of Sarah Palin only underscores a tendency toward opportunistic and poorly considered judgment. He apparently believes that the majority of Americans do not see the real "Wizard of Oz" hiding behind the curtain.
Finally, if the analogy of experience at the helm is to be considered anything more than empty rhetoric, we would be well to remember that the Naval Officer John McCain managed to crash not one, but FIVE expensive and sophisticated naval aircraft. He used his family connections to avoid being washed out of a career as Navy pilot, a fate that anyone with less political pull would clearly have suffered for such poor performance. So if we are to consider who is more of a risk “at the helm” of the country, it would be foolish to ignore the evident incompetence of John McCain is piloting during critical moments in his military career. His intemperate remarks during the recent crisis in Georgia and South Ossetia suggest that his steadiness in critical moments has not improved much from his crash and burn days in the Navy.
So the real question for the voters is “how stupid can you be?” Are you capable of ignoring all of the neon sign warnings regarding the lack of vision, the lack of policies and the lack of character on the part of John McCain [and his running mate who was censured by the Alaska legislature for abuse of executive power]? Can you convince yourself that all of the evidence amassed by Obama during nearly two years of being scrutinized and tested in primaries and the general election campaigns? Are you willing to ignore the impact of the failed Bush Administration and its incompetence, corruption and venal greed that McCain has consistently backed and supported, despite his claims to being s “maverick?” If you are stupid enough, and if you can toss away basic concepts of enlightened self-interest, then McCain implores you to vote for him. How stupid can you really be?
Sunday, October 05, 2008
Seriously Now Folks....
Lest I be accused of cheap humor at the expense of beleaguered Banking executives, or being too glib, let me posit just a few concrete examples that make sense, to me at least, of steps that should be taken in response to the current financial crisis:
1. There should be no severance compensation of significant value to any executive with managerial responsibility for lending practices that resulted in significant losses to the failed institutions. If they are paid anything, it should be in the lowest grade/highest risk commercial paper that was created under their management. This would result in relief on the institution’s balance sheet by removing a liability [in the form of a contractual severance payment or other compensation due expense] and also eliminate some of the “toxic” assets that the taxpayers are being asked to purchase. If the subordinated instruments turn out to have some value at some indefinite point in the future, then the executives could cash them in and pay taxes on the gain.
2. The Government should restrict purchases to risky or defaulted loans that actually have tangible assets behind them. In the case of the RTC, mortgages purchased by the government were based upon actual real estate, not speculative derivative profits from the purchase and future sale of sometimes undefined assets. In many cases, the financial institutions cannot say specifically what assets the “toxic” commercial paper represents. In such cases, the Government should not buy them. Let the institution eat the losses as the government purchases higher grade asset based instruments. The result would be that the banks would still get infusions of cash, but the risk to taxpayers in the deal would be lessened. There would at least be a chance to recoup the buyout expense.
3. The Government should consider a mortgage loan program. If the Government chooses to implement a program to restructure the purchased defaulting mortgages or to extend more time for the borrower to pay before actual foreclosure, the process would be facilitated by having identifiable property that could be assessed. This action would help stem the decline in home values, albeit indirectly, because the inventory of housing would not to continue to swell with properties being offered at lower and lower prices because of foreclosures.
4. Medium sized institutions that can be saved with infusion of capital should be targeted so that the trend of consolidation of large financial institutions that are buying up assets and other financial institutions can be slowed or halted. The consumers cannot expect to benefit from a Government funded monopolization of the credit industry.
These are just a few examples of the steps that seem to me most obvious. At the same time, new regulations and oversight must be fashioned and implemented to try to prevent the current crisis for recurring.
1. There should be no severance compensation of significant value to any executive with managerial responsibility for lending practices that resulted in significant losses to the failed institutions. If they are paid anything, it should be in the lowest grade/highest risk commercial paper that was created under their management. This would result in relief on the institution’s balance sheet by removing a liability [in the form of a contractual severance payment or other compensation due expense] and also eliminate some of the “toxic” assets that the taxpayers are being asked to purchase. If the subordinated instruments turn out to have some value at some indefinite point in the future, then the executives could cash them in and pay taxes on the gain.
2. The Government should restrict purchases to risky or defaulted loans that actually have tangible assets behind them. In the case of the RTC, mortgages purchased by the government were based upon actual real estate, not speculative derivative profits from the purchase and future sale of sometimes undefined assets. In many cases, the financial institutions cannot say specifically what assets the “toxic” commercial paper represents. In such cases, the Government should not buy them. Let the institution eat the losses as the government purchases higher grade asset based instruments. The result would be that the banks would still get infusions of cash, but the risk to taxpayers in the deal would be lessened. There would at least be a chance to recoup the buyout expense.
3. The Government should consider a mortgage loan program. If the Government chooses to implement a program to restructure the purchased defaulting mortgages or to extend more time for the borrower to pay before actual foreclosure, the process would be facilitated by having identifiable property that could be assessed. This action would help stem the decline in home values, albeit indirectly, because the inventory of housing would not to continue to swell with properties being offered at lower and lower prices because of foreclosures.
4. Medium sized institutions that can be saved with infusion of capital should be targeted so that the trend of consolidation of large financial institutions that are buying up assets and other financial institutions can be slowed or halted. The consumers cannot expect to benefit from a Government funded monopolization of the credit industry.
These are just a few examples of the steps that seem to me most obvious. At the same time, new regulations and oversight must be fashioned and implemented to try to prevent the current crisis for recurring.
The "Mystery" Will Unfold, or Hold Onto Your Wallet!
Nothing is “foolproof” in the hands of a sufficiently talented fool! - GWB
If ever there was a time to “follow the money” in search of the true meaning and effect of a major historical mystery event, now is the time. The Congressional approval of a $700 Billion bailout of the financial industry has many economists shaking and scratching their heads. Under intense pressure from a Bush Administration panic campaign that the nation faced an economic collapse not seen since the Great Depression, the House of Representatives reversed course within a week and approved the amended measure. Truth be told, no one can really say whether the legislation will be effective. The simple reason is that there is so little definitive detail and guidance in the law, that no one can realistically say what steps will be taken to “rescue” the economy. That is what the Bush Administration sought and received in this latest crisis gambit the Bush administration is so famous for managing. The “mushroom cloud” images predicted and promoted in connection with the “Weapons of Mass Destruction” prepared by Saddam Hussein for launch against the US and its allies provide an apt simile.
If anyone questions whether the game is still afoot, consider the hedging coming from one hedge fund and financial market specialist:
“Investors still have to face some significant challenges in the broad economy that can’t be magically removed by a group of our Congressional leaders,” said Marc D. Stern, the chief investment officer at Bessemer Trust. “Investors have to confront a series of unknowns in the weeks ahead that can be disconcerting.”
Banking CEO’s are disembarking their perilous flights of fancy at this point because they want to cash in on the security of the multi-million dollar golden parachutes they will receive to ease their landings. And who could blame them? The recent departure of one of these "captains of industry" with a $17 Million plus severance package, after only three weeks in the job before his failed bank was sold, attests to the rampant greed and insanity that has ruled Wall Street since the removal of nearly all regulatory controls during the last eight years. If you have a truly “free market” economy, why not expect a “free lunch?”
Hank Paulson, Secretary of the US Treasury and former head of Goldman Sachs, now has the flexibility to spend as much as $700 Billion to rescue his fellow Wall Street barons from their irresponsible gambling decisions. He is authorized to relieve them of the losses from “toxic” assets [the new name for what used to be called a bad loan] and infuse their banks and financial institutions with cash that they will be free to make new loans with. Hank’s only lament is that many of his old friends have gone into seclusion as Lehman Brothers, Wachovia Bank, Merrill-Lynch, AIG and others have been sold or gone bankrupt. How sad to finally be given the keys to the vault and so few friends left to party with!
Let’s see, I extend Billions of dollars in loans to creditors that probably cannot pay them back on properties that are not really worth the inflated value ascribed to them in the loan documents, based upon traditional lending criteria. I make a profit off the interest that comes in on those loans in the short term and put that cash in offshore accounts. When the creditors lose their jobs or the housing bubble bursts so that the loans are not repaid, the taxpayers come in and buy the worthless commercial paper and I get a huge chunk of the original loan dollars put back in my bank. Now, since there has been no significant actual change in regulation, I can start all over with the lending cycle, although I will need to be careful not to extend exactly the same kind of irresponsible loan schemes that I used last time. I need to find a new scheme. Does that sound like a good plan?
One thing is mysterious, however. “Money laundering” is a crime, and is usually defined as the fraudulent manipulation of financial transactions to extract profit from unlawful activity. If a person were to make huge profits from selling cocaine, and then translate those profits into separate cash payments as “management fees,” would we hesitate to prosecute that person? Why then are the heads of these financial institutions not being prosecuted for money laundering when they have manipulated financial markets to defraud retirees and IRA account holders of Billions of dollars while lining their pockets indirectly through excessive compensation schemes and incredibly disproportionate severance payments? Are we to be persuaded that these finance executives did not know that they were trafficking in phony securities?
“Almost no one expected what was coming. It’s not fair to blame us for not predicting the unthinkable.“— Daniel H. Mudd, former chief executive, Fannie Mae
“We didn’t really know what we were buying,” said Marc Gott, a former director in Fannie’s loan servicing department. “This system was designed for plain vanilla loans, and we were trying to push chocolate sundaes through the gears.”
If so, then there must be an alternative pursuit of conduct that was in reckless disregard of their fiduciary responsibilities. We can only watch with bated breath as this “mystery” unfolds.
When October 2009 arrives, we will probably look surprised when the question is asked: “where did the money go?” This will probably be accompanied by questions about why the taxpayers are left holding Billions of dollars in worthless securities. Many economists will likely still be shaking and scratching their heads. Former heads of these financial institutions will be lolling in the sun in tropical isles or secluded palatial estates with their cell phones on speed dial to their Swiss or other private bank account managers, their names all but forgotten, like Charles Keating. Will be then be surprised? And will we be asking who really was the “fool?”
If ever there was a time to “follow the money” in search of the true meaning and effect of a major historical mystery event, now is the time. The Congressional approval of a $700 Billion bailout of the financial industry has many economists shaking and scratching their heads. Under intense pressure from a Bush Administration panic campaign that the nation faced an economic collapse not seen since the Great Depression, the House of Representatives reversed course within a week and approved the amended measure. Truth be told, no one can really say whether the legislation will be effective. The simple reason is that there is so little definitive detail and guidance in the law, that no one can realistically say what steps will be taken to “rescue” the economy. That is what the Bush Administration sought and received in this latest crisis gambit the Bush administration is so famous for managing. The “mushroom cloud” images predicted and promoted in connection with the “Weapons of Mass Destruction” prepared by Saddam Hussein for launch against the US and its allies provide an apt simile.
If anyone questions whether the game is still afoot, consider the hedging coming from one hedge fund and financial market specialist:
“Investors still have to face some significant challenges in the broad economy that can’t be magically removed by a group of our Congressional leaders,” said Marc D. Stern, the chief investment officer at Bessemer Trust. “Investors have to confront a series of unknowns in the weeks ahead that can be disconcerting.”
Banking CEO’s are disembarking their perilous flights of fancy at this point because they want to cash in on the security of the multi-million dollar golden parachutes they will receive to ease their landings. And who could blame them? The recent departure of one of these "captains of industry" with a $17 Million plus severance package, after only three weeks in the job before his failed bank was sold, attests to the rampant greed and insanity that has ruled Wall Street since the removal of nearly all regulatory controls during the last eight years. If you have a truly “free market” economy, why not expect a “free lunch?”
Hank Paulson, Secretary of the US Treasury and former head of Goldman Sachs, now has the flexibility to spend as much as $700 Billion to rescue his fellow Wall Street barons from their irresponsible gambling decisions. He is authorized to relieve them of the losses from “toxic” assets [the new name for what used to be called a bad loan] and infuse their banks and financial institutions with cash that they will be free to make new loans with. Hank’s only lament is that many of his old friends have gone into seclusion as Lehman Brothers, Wachovia Bank, Merrill-Lynch, AIG and others have been sold or gone bankrupt. How sad to finally be given the keys to the vault and so few friends left to party with!
Let’s see, I extend Billions of dollars in loans to creditors that probably cannot pay them back on properties that are not really worth the inflated value ascribed to them in the loan documents, based upon traditional lending criteria. I make a profit off the interest that comes in on those loans in the short term and put that cash in offshore accounts. When the creditors lose their jobs or the housing bubble bursts so that the loans are not repaid, the taxpayers come in and buy the worthless commercial paper and I get a huge chunk of the original loan dollars put back in my bank. Now, since there has been no significant actual change in regulation, I can start all over with the lending cycle, although I will need to be careful not to extend exactly the same kind of irresponsible loan schemes that I used last time. I need to find a new scheme. Does that sound like a good plan?
One thing is mysterious, however. “Money laundering” is a crime, and is usually defined as the fraudulent manipulation of financial transactions to extract profit from unlawful activity. If a person were to make huge profits from selling cocaine, and then translate those profits into separate cash payments as “management fees,” would we hesitate to prosecute that person? Why then are the heads of these financial institutions not being prosecuted for money laundering when they have manipulated financial markets to defraud retirees and IRA account holders of Billions of dollars while lining their pockets indirectly through excessive compensation schemes and incredibly disproportionate severance payments? Are we to be persuaded that these finance executives did not know that they were trafficking in phony securities?
“Almost no one expected what was coming. It’s not fair to blame us for not predicting the unthinkable.“— Daniel H. Mudd, former chief executive, Fannie Mae
“We didn’t really know what we were buying,” said Marc Gott, a former director in Fannie’s loan servicing department. “This system was designed for plain vanilla loans, and we were trying to push chocolate sundaes through the gears.”
If so, then there must be an alternative pursuit of conduct that was in reckless disregard of their fiduciary responsibilities. We can only watch with bated breath as this “mystery” unfolds.
When October 2009 arrives, we will probably look surprised when the question is asked: “where did the money go?” This will probably be accompanied by questions about why the taxpayers are left holding Billions of dollars in worthless securities. Many economists will likely still be shaking and scratching their heads. Former heads of these financial institutions will be lolling in the sun in tropical isles or secluded palatial estates with their cell phones on speed dial to their Swiss or other private bank account managers, their names all but forgotten, like Charles Keating. Will be then be surprised? And will we be asking who really was the “fool?”
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