Monthly Archives: February 2010

Did you see The Warning?

For anyone who would like to know how the economic meltdown could happen and when it will happen it again, you just have to see this show: PBS Frontline: The Warning. As you’d expect, it stars a bunch of rich powerful middle-aged white men in courageous battle to protect Ayn Rand’s dream of unfettered capitalism against one woman, Brooksley Born, who dared to raise her hand and suggest that the super secret, totally unregulated, multi-trillion dollar derivatives markets needed adult supervision. It is riveting. Find out how we hunted down those responsible and made sure they can’t do it to us again. Spend a few minutes strolling memory lane with the greatest leaders of our lives: Ford, Reagan, Greenspan, Clinton, Rubin, Gramm and others. Here’s a 4 minute preview:



In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

“I didn’t know Brooksley Born,” says former SEC Chairman Arthur Levitt, a member of President Clinton’s powerful Working Group on Financial Markets. “I was told that she was irascible, difficult, stubborn, unreasonable.” Levitt explains how the other principals of the Working Group — former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin — convinced him that Born’s attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was “clearly a mistake.”

Born’s battle behind closed doors was epic, Kirk finds. The members of the President’s Working Group vehemently opposed regulation — especially when proposed by a Washington outsider like Born.

“I walk into Brooksley’s office one day; the blood has drained from her face,” says Michael Greenberger, a former top official at the CFTC who worked closely with Born. “She’s hanging up the telephone; she says to me: ‘That was [former Assistant Treasury Secretary] Larry Summers. He says, “You’re going to cause the worst financial crisis since the end of World War II.”… [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'”

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. “Born faced a formidable struggle pushing for regulation at a time when the stock market was booming,” Kirk says. “Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves.”

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

“It’ll happen again if we don’t take the appropriate steps,” Born warns. “There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.” – PBS Frontline

Get Me Off The Road, Please

Driving on the interstates is inherently irrationalDriving on the interstates is inherently irrational. To think that the drivers of all those other cars would voluntarily and routinely entrust theirs and their family’s lives to me is nuts. Based solely on a ten minute driving test in high school, with no knowledge of  my driving skills, my car maintenance or my attention span, and regardless of whether I’m returning a call, Twittering, checking email, drinking coffee or booze, locating an iPod playlist, picking my nose, watching a DVD, lost or lost in thought, they have enough faith in me to share the highway at speeds guaranteed to to kill and maim. With my car aimed directly at theirs, they ride along fearlessly believing they are more likely to fall asleep from boredom than my minimum breaking distance. Why do they do it? What makes where they are going so important? Why do they trust me completely at 75 miles an hour, but while standing still they lock their doors? Beat’s me. My driving scares the bejesus out of me. It’s a miracle we make it safely any time I drive. I believe I need to be stopped. I’m hoping all those other drivers will organize and decide it is time to get me, and all the others like me, off the road. Trains come to mind. Trains that go places people, especially drivers like me, want to go. Modern, fast, clean, energy efficient trains. Spurs the economy. Creates jobs. And will save lives – maybe yours. Think about it. Then write your Congresspeople. Your life may depend it on it.

Jubilee for the middle class

The American middle class is dying off in huge numbers. It has been going on for more than a decade, but we are facing a catastrophe of biblical proportions. I have a plan to stop it and to save those left.

Hyperbole? You decide.

Formerly known as the middle classWhen someone speaks for the middle class, most often they continue to use a post-World War II snapshot. Average salary. Average house. Average everything. Most Americans believe they are a member. Because of the enormous changes in concentration of wealth, they are wrong. More Americans than they realize are actually poor by prime time standards. More are joining them every day. But this piece is not about the poor.

Lcurve.com took the most recent census figures (it has gotten worse since then) and plotted it on a football field (sports metaphors are the best way to communicate complicated issues in terms that sound good, but seldom do more than confuse things further). If median income were used, the stack of money earned at the fifty yard line would equal a stack of $100 bills, 1.6 inches high (median household income ranging from $61,000 in Maryland to $31,000 in West Virginia  – 1.6  inches is about the size of your big toe, OK, a boy’s big toe). At the five yard line, the stack of $100 bills is 4″ high. At the one foot line, the stack of $100 bills is 40 inches tall, or 3-feet, 4 inches. At the one inch line, the stack is over 30 miles high.

The middle class now lives somewhere between the five and the ten yard line. At one time, and in my lifetime, they owned half the field.

There are many advocates for the poor – I am among them, but they can do without me for the day. Admittedly, the working poor are suffering something terrible and are too busy working three jobs to advocate for themselves and only have Joe Biden. The rich? They hire hire lobbyists. Today, I’m focusing on the middle class.  The faux alter ego of the rich… and the poor. The people who are portrayed on television commercials during prime time. Beautiful, healthy, making-it- in-America kind of people who bought in to the American work ethic, performed to it, and subsequently have more to lose and yet further to fall. They are the poster children for the American dream.

Formerly known as the middle classThese are the people who look as if they made it – good education, ambition, hard work and a couple of good decisions landed them with a good job and on a career path. They had the audacity of hope ten years ago. They bought into the ownership society. They believed. They purchased more home than they needed because they knew it would grow in value along with their wages. They had good credit and used it. They consumed and charged some of it on their single-digit-rate credit cards. They pay huge amounts of income, property and sales taxes. Buy or lease the new cars. Send their kids to private schools in new uniforms. And go out to dinner.

Where are they today? They are holding on by their nails (no longer professionally manicured). They are being squeezed to death. Those who didn’t get laid off are working longer hours, many for less pay. The raises and the bonuses, known as the big hits, didn’t happen as hoped and planned, unless they are on Wall Street.  The AMT (Alternative Minimum Tax) has hit them hard. Very hard, an annual battering. Their property taxes skyrocketed because they bought their houses before the prices fell, but after the reassessments. Some have extended families who are out of work or under-employed. They have had to help out. Their health insurance has gone up, along with their co-pays and their need for care. Their equity lines have been cut , and not-so-coincidentally, so too have their credit card limits. For the first time in modern history, consumers are paying against their credit card debt before paying their mortgage payments – a feeble attempt at false liquidity at the risk of the most basic of human needs – housing.

One by one, they were either a day late paying their credit card bill, or a dollar short on guessing their new lower credit limits. The late charge, or over-limit fee hit their Equifax report and their 3% Chase card with the $30,000 balance, and $35,000 credit limit overnight turned into a 33% card with a $30,000 limit. Their monthly payments went up by a thousand dollars and with it all their “disposable income.” Suddenly, all the other cards matched the 33% rate. They cut back immediately, but it wasn’t enough. They cashed out their retirement. Got rid of their extra car. Postponed their health needs. Then the collectors started calling. They never knew they were living on the edge. The precipice was looming.

I’m not making this up. Our middle class – those making $100,000 to $250,000 a year are suffocating – their financial livelihood is being squeezed out of them, and with it their contribution to consumerism. Almost all of the air is going to the bank (a euphemism for “the company store”). They have exhausted their savings, have no equity, no credit, less than zero leftover money, and are losing it. Sure, many have been able to hold on to that one nice car and that wonderful home with the for-sale sign in the front yard. But their “comfortable” life is only in the living room. Disposable income provides economic freedom – it is gone.

I realize that creating sympathy for those on the five yard line is almost impossible. These are the people that we all need to take us out of the recession. They are the customers of those who are still working. They are, or were , the employers of the working poor. These are the people who pay the taxes that keep our government working. Ironically, they are the only class who are still vaguely in touch with those on the one foot line, who otherwise, would (pick one or more: have no friends at all; no one to betray, or no one to aspire to them).

So, what’s my plan? My proposal? A middle class bail out that won’t cost the taxpayer a dime.
Premise: those who are already 30 to 90 days behind on their credit cards and owing the exorbitant interest rates are unlikely to make it. Fortunately for the banks, all of these accounts are insured… by AIG. Yes, the company that is 80+% owned by the US government. The insurance that banks have on these accounts returns 70-80% of the balance to them, which is why they add on all the late payments and hidden charges in order to jack up the balance prior to handing the debt to AIG. The banks get it all back and the government ends up picking up the tab.

I propose that we offer a deal to save those middle class patrons who can still be saved. A deal that won’t cost the taxpayers a penny. In return for cutting up their credit cards, getting no new ones, paying on time and not declaring bankruptcy, we (using the rates being charged to banks) would let them pay off their debt at near zero interest rate (the near zero will pay for the servicing). If they renege, the deal goes back to the bank to collect and they don’t get another chance.

For someone who has $100,000 in credit card debt, this will save them $25-$30,000 a year – about the same deal they had before this “greatest economic crisis since the great depression” began. Enough money to pay off their debt in a few years instead of never. To get their mortgage caught up and keep them in their home. Enough for them to get back soon to consuming, paying taxes and saving us all.

What about all that interest that’s being written off, is that a cost to someone? Only on paper. The government now lends money to banks for virtually nothing (it is why the banks have so much to gamble on Wall Street). The banks are charging exorbitant rates for credit cards, but their earnings are only on paper,  as much of it will never be collected. They justify these rates and charges because of the risk of default, but this isn’t new money or new risk. The only thing that changed was the economy. Why should we bail out the banks, give them free money for their bad decisions and not bail out the people, who – should they survive –  pay for the bank bailout? The banks do not deserve the spread and bankruptcy is bad for everyone (except the banks).

This solution is not another big government bailout (even the servicing can be privatized). It is simply extending, for a limited time, the rate we charge banks to a group who had the audacity of belief in the American dream and wants to pay their debt. They bear the costs, are responsible for their decisions, and will give us all a chance to get out of this mess.

One more note – this is fairly progressive. Credit card debt is relative. Credit card jubilee (at least in concept) could be just the thing to get us out of this mess.

It's the stupid jobs bill, stupid

It's jobs, stupid!Jobs. Jobs. Jobs. Washington’s focused on them like a laser. Yesterday, Harry Reid (soon to be former Democrat Senator from Nevada and current Majority Leader), announced the revised Senate bill designed for bi-partisan appeal and to help create the nine plus million jobs needed to offset just those that have been lost since the worst depression since the great one began.

The cost of the total package, according to estimates released by Reid, would be about $15 billion over 10 years. This is what he said was actually in the bill (I’m not making this stuff up):

  1. A payroll tax holiday that would waive the 6.2% Social Security tax for any employer who hires a worker who has been out of a job for at least 60 days. In addition, the bill would provide a $1,000 income tax credit for every new employee retained for at least 52 weeks.
  2. A tax break that would allow businesses to write off up to $250,000 in capital investments in 2010 rather than depreciating the costs over time.

Waiting for more? That’s it. Yeah, really. Nothing to help re-capitalize small businesses, which have historically pulled us out of economic doldrums and been the hiring engine that could. Nothing to spur consumption. Nothing for expansion. Nothing for training. Nothing to get the banks lending to business. Nothing to help with the crippling, double digit health insurance premium increases that have been announced. Nothing to help create jobs of those hardest hit groups or regions.

In fairness, there are other versions of the bill. One of those versions had bi-partisan support, an $85 billion price tag, extended unemployment benefits and would subsidize interest on bonds for local infrastructure products (a more expensive version of nothing). Reid pretty much squashed that.

They take this stuff really seriously up in Washington. This is their answer? Somebody get me a tea bag.

A survival recipe for Valentine’s Day

Surviving Valentine's DayMostly for the guys… Like the other major holidays, pretending is critical to the success of Valentine’s. On Christmas, we must believe in Santa and that they’ve been good. On Easter, that the Bunny delivers eggs. On her birthday, that she looks younger. And like anniversaries, on Valentine’s, we must pretend that we are capable of deep romantic thoughts. This is very important, because on Valentine’s, it is the thought that counts. This year, it will be harder than normal because Valentine’s Day falls on a Sunday. No room for empty gestures here. It will last all day. So here are some ideas to get you thinking right:
The minimum:

  • A card (available at most any modern gas station or drug store). The important thing here is that it isn’t funny. Look for something that includes the word “love” or “sweetheart” or “Valentine.” For extra points look for the word, “forever.”
  • A flower (available at most any modern gas station and most major intersections). Roses are best, but most anything will do including whatever is growing in your neighbor’s yard.
  • Breakfast (available at any modern gas station, drive-through or in frozen foods in any grocery store). Breakfast in bed is best and it is the thought that counts. Whatever you can fix will be just fine even if it’s from a can. Though it has been suggested to me that most women do not like to wake up to a steak biscuit with chicken gravy – preferring, perhaps, a croissant and a mimosa.
  • A wake-up kiss (you’re on your own here). Make sure you brush your teeth first.

Options:

  • Candy (available at most any modern gas station or drug store). This is listed as an option, because there is some risk. Not just any candy will do. It must be Valentine’s candy and come in a heart shaped box or at least have those wonderful little sayings like “cutie pie” or “lovebug” written on them.
  • Gifts (only available at jewelry stores, in mall lingerie departments and on-line variations thereof). I suggest you stay away from this, they set a dangerous precedent for future years. You might also consider a day at a spa. The spa is tricky. Make sure you tell her how beautiful she is, before she goes. If you tell her upon her return she’ll surely say, “I had no idea I looked so bad before” which would, of course, change the dynamics of the day.
  • Brunch (available at any modern gas station, drive-through or many restaurants).
  • Make a reservation for Saturday night at one of the nicer hotels in town.

A sincere effort
Most women know that even the clumsiest of men can cook eggs. So if you’re sincere about your Valentine, then try this recipe for breakfast in bed. My wife really likes this dish. More importantly, she loves the name… Moonstruck Eggs… she thinks it’s romantic. I call them Moonstruck Eggs because I watched Cher make them or something similar for Nicolas Cage in the movie, Moonstruck.

Ingredients:

  • Rye Bread
  • Egg
  • Cheese
  • Butter
  • Skillet
  • One or more dog

Heat one tbsp. of butter in a skillet on medium high. Make a hole in the bread about the size of a baseball. Toss the hole to the dogs for a morning treat. Put the bread in the skillet and crack an egg just over the hole. When the egg is cooked to the desire of your beloved (pokey or not),  place a slice of cheddar cheese on top of the egg. Broil in the oven until the cheese is melted and the bread is crisp. Serve with great fanfare and maybe a napkin.

One more suggestion: check out LikeTheDew’s Dew Shops – if you click on one of the sites listed, you can get something really nice for your Valentine and a small commission will go to support LikeTheDew.com.

Don't fly me to the moon

bush to the moonThe President’s budget for 2011 has been unveiled. What’s news is not what’s in it, but what’s not: $3.5 billion out of the GAO estimated $97 billion needed to send former President Bush back to the moon by 2020. Worthy goal? Undeniable. Priority at a time of record deficits, unspeakable unemployment and in the midst of two wars? Hardly.

Sure, you might say, “Hey, this is a jobs program. This will cost Florida, Texas, California, Ohio, Maryland, Virginia, Alabama, Louisiana, Mississippi and New Mexico big time and the hurt will spread to Congressional districts all over. Plus, we need Lockheed, Boeing and Pratt & Whitney’s stock strong.” Yeah, politicos hate the idea of ever stopping a Federal jobs program. It will be a big fight. One, I suspect, that might provide leverage for some savvy bi-partisan-don’t-wannabes to sell their vote for something deemed worthy.

But just wait, there’s more news to hit the fan – another $5 billion in cuts is buried on the OMB’s web site. Popular programs that affect the DOE’s historic whaling program, Pentagon procurement of even more C-17’s it doesn’t want, many programs that are duplicates of other programs, tax subsidies that are used to pretend that we are developing something commonly known by its oxymoronic name, “clean coal”, payments to store peanuts and cotton, EOC grants for emergency preparedness in areas that will never ever be at risk, subsidies to pay banks to be the profitable middle man for student loans, Pentagon programs for weapons that have been determined to not work and never will, grants to worsted wool manufacturers, countless demonstration programs that have demonstrated they don’t work, and repeal of subsidies to the oil and gas industries. When critics were calling for the President to present a responsible budget, they were looking for cuts in help for the poor and sick. Not the connected and wealthy. This budget, if you’ll pardon the pun, will never fly.