Tuesday, September 23, 2008

The Mother of all Bailouts: Nigerian email scam

Found in a comments thread at VC...

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully,
Minister of Treasury Paulson

The subject post is worth a glance, as well as the rest of the comments.

A Simple Argument Against the Bailout:

Economist Steven Landsburg, writing for the Atlantic, presents what seems to me a simple, but powerful argument against the bailout. I don't know enough about finance economics to be sure whether it's right. But I thought that it's at least worth passing along to our readers. Even if it doesn't succeed in proving that no bailout at all was necessary, it at least casts doubt on the need for a plan as massive as the $700 billion monstrosity that the administration is trying to ram through Congress:

What's clear is that a bunch of financial institutions have made mistakes and lost money. What's unclear is why anyone (other than the owners and managers) should care. People make mistakes and lose money all the time. Restaurants fail, grocery stores fail, gas stations fail. People pick the wrong stocks, they buy the wrong cars, and they marry the wrong spouses without turning to the Treasury for bailouts.

So what's special about banks? According to what I keep reading, it's that without banks, nobody can borrow, and the economy grinds to a halt.

Well, let's think about that. Banks don't lend their own money; they lend other people's (their depositors' and their stockholders'). Just because the banks disappear doesn't mean the lenders will. Borrowers will still want to borrow and lenders will still want to lend. The only question is whether they'll be able to find each other.

That's one reason I feel squeamish about the official pronouncements we've been getting. They tell us bank failures will make it hard to borrow but never that bank failures will make it hard to lend. But every borrower is paired with a lender, so it's odd to state the problem so asymmetrically. This makes me suspect that the official pronouncers have not entirely thought this thing through.

In the 1930s, a wave of bank failures did make it hard for borrowers and lenders to find each other, and the consequences were drastic. But times have changed in at least two relevant ways. First, the disaster of the 1930s was caused not just by bank failures, but by a 30% contraction of the money supply, which is something today's Fed can easily prevent. Second, as any user of match.com can tell you, the technology for finding partners has improved since then. When a firm wants to raise capital, why can't it just sell bonds over the web? Or issue new stock? Or approach one of the hedge funds that seem to be swimming in cash? Or borrow abroad?

Ultimately the key question is this: why shouldn't these banks be treated like any other business whose management has displayed bad judgment and lost a great deal of money as a result? Capitalism works because we insist that businesses bear the cost of their own losses, a process that gives them strong incentives to make good decisions and transfers their wealth to others with better judgment if they persist in screwing up anyway (as the big banks have done in this case). Perhaps really big banks are somehow special and deserve bailouts that we would deny to other businesses. But there is a heavy burden of proof on those who claim that this alleged specialness really exists and that it justifies hundreds of billions of dollars in public expenditures, unchecked executive power, and unprecedented control of the economy by the federal government. Like Landsburg, I am skeptical that the burden has been met.

Obama: "Joe should have waited..."

Calm, cool and collected.
And not afraid to be candid.

Monday, September 22, 2008

Barack Obama on the Economy

This video was made well before the current crisis.

No need to "revise and extend" what he said here. Barack Obama's measured response to this and every crisis that comes along makes him the best person to be in the Oval Office. One British observer I read said that McCain as president would be like a flame thrower in a fireworks factory.

I prefer Obama's more circumspect response to crises any day.

I found this video at Tom Watson's blog. His recent post, The Race Race is worth reading.

Twelve men to hold office of President were slave-owners during their lifetimes - eight of those keeping black men and women in bondage while they were chief executive. The first was George Washington, who freed his slaves upon his death and was the rare American leader of his day to change his mind about the actual humanity of African slaves. Of the first five presidents, only John Adams never owned a black man. The last slave-owning American to serve as President was Ulysses Grant, the great Union general who died in 1885 - a year after Senator John McCain's paternal grandfather was born to a former slave-owning plantation family from Mississippi...and only ten years before Barack Obama's paternal grandfather was born in Kenya.

You can tease the family roots of both of our major candidates for president, and unwind a fading history of slavery, racism, colonialism and segregation. Indeed, Obama's unusually broad genealogy may contain the ultimate irony: several of his mother's ancestors appear to have been slave owners. To me, it's the immediacy of that history that stirs the imagination; in terms of generational advance, the turning over of leaves in the family scrapbook, most American history is shockingly near to us as we choose the 44th President of the United States.


Clearly, there's a generational change in the wind; the group of African-American politicians who came to prominence during and after the civil rights movement of the 50s and 60s is fading. But age is just part of the equation. Obama represents a new path: the African-American politician who happens to be black - perfectly aware of the problems of the black community in America - but not tied entirely to representing those concerns as (in general perception) almost the entirety of his policy brief. Early in Obama's candidacy, the combination of Obama's refusal to "be black" politically and close historic ties to President Clinton, kept many prominent African-American politicians from his side. Winning changed that, of course. Evident talent changed that. And perhaps the chance to move finally from the traditional we/they structure of racial politics in the United States also played a role.

In the last few weeks of this campaign, as Senator Obama attacks the treacherous economy, our perilous foreign policy, and issues like poverty, infrastructure, taxation, the environment, health care and education, the descendants of slaves and slave owners alike will see a politician of color take on the broad responsibility for public policy - and make his final, specific arguments for the highest office.

And that ain't hope, baby. That's change.


Viral video find.
Over four million views already! Where have I been???

Robert Reich on the Mother of All Bailouts

I got yet another of those dumb viral emails maligning Barack Obama. This time I was moved to send a reply to the sender and everyone on his list which included in part...

This week we are watching helplessly as the "deregulation" eggs laid during the Carter administration, incubated and hatched during the Reagan and first Bush years, accommondated by the Clinton administration and ignored by everyone for the last eight years have grown a nasty flock of greedy birds that have now come home to roost. Panic-stricken elected officials all over the place are running around working hard to shift blame to anyone but themselves. I even heard someone the other day try to lay it all at the feet of Alan Greenspan, whom eveyone regarded as a saint by both political parties as the problems we now face were swelling unchecked.

Come on, folks. Let's get back to our responsibilities as responsible voters. The time for serious homework on everyone's part is here and now. And viral emails is not the way to go.

Robert Reich advanced the following proposal yesterday which looks about right to me...

What Wall Street Should Be Required to Do, to Get A Blank Check From Taxpayers

The frame has been set, the dye cast. Treasury Secretary Hank Paulson, presumably representing the Bush administration but indirectly representing Wall Street, and Fed Chief Ben Bernanke, want a blank check from Congress for $700 billion or possibly a trillion dollars or more to take bad debt off Wall Street’s balance sheets. Never before in the history of American capitalism has so much been asked of so many for (at least in the first instance) so few.

Put yourself in the shoes of a member of Congress, including our two presidential candidates. The Treasury Secretary and Fed Chair have told you this is necessary to save the economy. If you don’t agree, you risk a meltdown of the entire global financial system. Your own constituents’ savings could go down with it. An election is six weeks away. Besides, in the last two days of trading, since rumors spread that the Treasury and the Fed were planning something of this sort, stock prices revived.

Now – quick -- what do you do? You have no choice but to say yes.

But you might also set some conditions on Wall Street.

The public doesn’t like a blank check. They think this whole bailout idea is nuts. They see fat cats on Wall Street who have raked in zillions for years, now extorting in effect $2,000 to $5,000 from every American family to make up for their own nonfeasance, malfeasance, greed, and just plain stupidity. Wall Street’s request for a blank check comes at the same time most of the public is worried about their jobs and declining wages, and having enough money to pay for gas and food and health insurance, meet their car payments and mortgage payments, and save for their retirement and childrens’ college education. And so the public is asking: Why should Wall Street get bailed out by me when I’m getting screwed?

So if you are a member of Congress, you just might be in a position to demand from Wall Street certain conditions in return for the blank check.

My five nominees:

1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.

2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year’s other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?

3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street’s outsized political power – especially when that power is being exercised to get favorable terms from taxpayers?

4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.

5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?

Wall Streeters may not like these conditions. Well, you should tell them that the public doesn’t like the idea of bailing out Wall Street. So if Wall Street doesn’t accept these conditions, it doesn’t get the blank check.

Thursday, September 18, 2008

McCain ad misrepresents Obama's tax plan. Again.

From Fact Check dot Org

The McCain-Palin campaign has released a new ad that once again distorts Obama's tax plans.

  • The ad claims Obama will raise taxes on electricity. He hasn't proposed any such tax. Obama does support a cap-and-trade policy that would raise the costs of electricity, but so does McCain.
  • It falsely claims he would tax home heating oil. Actually, Obama proposed a rebate of up to $1,000 per family to defray increased heating oil costs, funded by what he calls a windfall profits tax on oil companies.
  • The ad claims that Obama will tax "life savings." In fact, he would increase capital gains and dividends taxes only for couples earning more than $250,000 per year, or singles making $200,000. For the rest, taxes on investments would remain unchanged.
The McCain campaign argues in its documentation for this ad that, whatever Obama says he would do, he will eventually be forced to break his promise and raise taxes more broadly to pay for his promised spending programs. That's an opinion they are certainly entitled to express, and to argue for. But their ad doesn't do that. Instead, it simply presents the McCain camp's opinion as a fact, and it fails to alert viewers that its claims are based on what the campaign thinks might happen in the future.

Comparing Candidates

I don't have time for a serious post, so I'm cheating. This is from a viral email worth passing on...

Let me see if I have this straight…

If you grew up in Hawaii, raised by your grandparents, you're 'exotic and different.'
BUT IF you grew up in Alaska eating mooseburgers, yours is a quintessential American story.

If your name is Barack, you're a radical, unpatriotic semi-foreigner.
BUT IF you name your kids Willow, Trig and Track, you're a true-blue, mainstream American.

If you graduated from Harvard law School, you are unstable.
BUT IF you attended five (5) different colleges before graduating, you're stable and well grounded.

If you spent three (3) years as a community organizer; became the first African American President of the Harvard Law Review; created a voter registration drive that registered over 150,000 new voters; spent twelve (12) years as a Constitutional Law professor; spent eight (8) years in the Illinois State Senate representing a district with more than 750,000 people; spent four (4) years in the United States Senate representing 13 million people while sponsoring 131 bills and serving on the Foreign Affairs, Environment & Public Works and Veteran's Affairs committees, you don't have any real leadership experience.
BUT IF your total resume is: local weather girl; four 4 years on the city council and six 6 years as the mayor of a town with fewer than 7,000 people; 20 months as the governor of a state with 650,000 people, if all that is true, then your ”extensive” experience qualifies you to become the country's second highest ranking executive.

If you have been married to the same woman for 19 years while raising two (2) beautiful daughters, all within Protestant churches, you're not a real Christian.
BUT IF you cheated on your first wife with a rich heiress, then you left your wife and married that heiress the next month, you're a Christian.

If you teach responsible, age-appropriate sex education, including how to protect yourself from predators, you are eroding the fiber of society.
BUT IF you staunchly advocate abstinence education with no other option in your state's school system while your unwed teen daughter ends up pregnant, you're very responsible.

If your wife is a Harvard graduate lawyer who gave up a position in a prestigious law firm to work for the betterment of her inner city community, and then gave that up to raise a family, your family values don't represent America's
BUT IF your husband is nicknamed 'First Dude,' with at least one DUI conviction and no college education, who didn't register to vote until age 25 and once was a member of a group that advocated the secession of Alaska from the USA, your family is extremely admirable.

Thursday, September 11, 2008

Tuesday, September 02, 2008

Hootsbuddy's Hiatus

Dear readers, both of you...

I have accepted work as a live-in caregiver for someone recovering from a broken ankle. He has other issues as well, but no need to go into them here.

This post is my "Out of the Office" notice for what will probably be the next six or more weeks.

I will try to get internet access to keep up with G-mail, but I definitely won't have time to surf, do homework and put together new posts.

Enjoy my time off. Think of it as the Lord's way of protecting me from making snide comments about soccer moms running for high office, especially when she comes from the only state that may have more oil interests than Texas itself. I tried to resist something snarky about the latest poster child for "abstinence only" but it came out anyway.

I'm excited about the future.

I have no idea what will happen, but in the same way that the Clinton years were at once the fulfillment and last gasps of the Sixties, the Bush years may represent the last shudders of oil which has manipulated our politics since before my birth. All that remains is to figure out how to untangle the tentacles of the insurance industry which has skimmed profits from health care for far too long.