Monday, December 26, 2011

Wall Street, Financial Meltdown, TARP, American Free Enterprise and Haman in the Book of Esther

Here's a personal story that should really capture your full attention and brand the whole sordid episode of the financial meltdown in 2008 deep into your brain so you can fully understand just how much you have been bamboozled by the financial 'wizards' and 'warlocks' on Wall Street and Main Street:

A friend of ours was at a party in New York City just over 3 years ago now in late 2008 on the weekend when all of the final negotiations were taking place about which investment banks to save and who to let die on Wall Street.

The New York investment banker, of course, had let it be known that he was 'worth in the vicinity of $100 million' prior to October, 2008. In pure money terms. Not personal integrity or valor, that is for sure.

Heading into that weekend, the deal to save AIG had been floated which was necessary since Goldman and other large investment banks had a lot of their capital tied up in the collateralized debt obligations (CDOs) and other guaranteed payments between all the large international investment banks.

If the deal was not completed that weekend, as it appeared on Friday evening, the debt liabilities of AIG would overcome all of the net assets of the large investment banks. By Monday morning at the opening of the day's markets, every one of them would be not only technically 'bankrupt' but officially bankrupt and unable to conduct any further transactions around the world.
'Joe' (names changed to protect the innocent) he said: 'Come with me out on the terrace and take a good look around!'
Our friend was more than a little nervous to accompany him for fear of watching him jump off the ledge as so many did during the Great Depression. The investment banker had been drinking heavily, and why not?  Our friend was probably more than a little afraid that the investment banker would actually jump and possibly take him with him.
'Take a look around, {Joe}. All of this, all of my life's work is now gone. Kaput, P-tooey! Nothing is left. We are going to watch AIG take down the whole banking system on Monday morning and with it will go all of this, my wealth and my world!'
We think our friend may have shown some compassion for this so-called 'gentlemen'. Maybe. He probably poured himself and his Wall Street buddy another stiff drink to ease both of their collective pain.

Well, to make a long story short, the AIG deal was cut over the weekend and the financial system of America was put on the life-support system known as the first tranche of the Banking Bailout Plan Part I.

And guess what? This 'so-called gentleman' has now had ALL of his wealth restored through the recovery of the Goldman stock! His net worth probably has topped $150 million this year as a result of your generosity and largesse.

Gives you sort of a 'tingly feeling' all up and down your leg like Chris Matthews, right?

We all know that the financial system of America was about to blow sky-high by the fall of 2008.

Years of extraordinary excess in the form of debt, speculation, greed, contempt and deceipt by the investment bankers on Wall Street and the regular bankers and mortgage bankers on Main Street, along with the usual suspects of real estate speculators, financiers and manipulators set the table for such a magnificent meltdown in October of 2008.  (it happens every single time there is a financial panic on America...or anywhere else in the last 800 years. See 'American Financial Panics' and read Kenneth Rogoff's book, 'This Time is Different: Eight Centuries of Financial Folly')

Couple this with extremely lax regulation, supervision and oversight by Capitol Hill and the White House from 2001-on (yes, that includes the W White House and the GOP-controlled Congress in both the House and Senate) and the stage was set for the American financial system being one short weekend away from completely melting down like Chernobyl or Three-Mile Island or the Fukushima Nuclear Reactors in Japan.

Perhaps less than 24 hours according to some accounts.

Read 'On the Brink' by Hank Paulson; 'The Big Short: Inside the Doomsday Machine' by Michael Lewis; and 'Too Big To Fail' by Andrew Ross Sorkin if you haven't done so already.  A small budget B-level movie producer truly could make a great slasher horror movie series based on these 3 accounts of those dark days in late 2008 which would rival any trilogy of Freddy Krueger, Leatherface and Michael Myers. Combined.

Why does any of this matter to us in 2011?

Well, because many, perhaps a majority of the Wall Street financiers and big-bank presidents profiled in these horror stories are still working in their chosen fields of 'mismanagement', er, 'malfeasance', er... 'work'!

And guess what? They have had almost all of their wealth regenerated and restored to them by the good folks of the United States of America. Namely you. The American Taxpayer. In the form of the TARP bailouts among other machinations of the federal government and the Federal Reserve over the past 3 years.

If it wasn't 100% solely the gift of you, the Great American Taxpayer, then the balance of the funds used to restore the wealth of Croesus to King Croesus himself came from the unknowing and/or unwitting government of Red China who provided funds in the form of more lending to our profligate ways of governance in America again.

Ultimately, how these things always have ended in history, the inflation that inevitably occurs following such financial debacles will provide the ultimate 'way out' for the federal government to get out of paying off these massive debts dollar-for-dollar.  Inflation is not going to be friendly to your standard of living, or your children's future, nor to your savings which will be eroded downward in a commensurate manner.

These guys might just be the 'Hamans' of the 21st century. Haman the Agagite was the manipulative Prince under King Xerxes who not only wanted to kill Mordecai in the Book of (Queen) Esther for failing to kneel before him but to destroy the entire Jewish people to boot. Haman plotted and connived and schemed to get poor innocent Mordecai to step up on the gallows and have that noose slipped around his neck but in the end,Haman got his just due comeuppance on the very same gallows he built to hang Mordecai.

Our modern-day financial manipulators just have not been called to account yet for their actions in the worldly sense.

Maybe they will in the spiritual, moral and justice realms one day.

We are assuming there must be some honest, God-fearing people on Wall Street and in the Main Street banking system somewhere in this great land of ours.  Someone who actually has taken their responsibility to manage depositors money seriously and at least tried to do the right thing when making money the easy way seemed to take precedence over doing it the right way.

But These Wall Street Bankers and Financial Services Execs.  They plotted and schemed and connived their way into protecting their wealth and way of life instead of doing 'the right thing' and just declaring bankruptcy in 2008.

Which would would have wiped out their personal wealth but it would have also allowed a planned reorganization of the assets of Goldman Sachs to continue doing business so the rest of the financial system would not have completely collapsed around us all.

It would have been the right thing to do. For them and for our country.

Friday, December 16, 2011

Congressional Salaries: Too High? Or Too Low?

LegisStorm has just announced the first successful electronic publication of all Congressional staff salaries for the past 10 years.

Go ahead. Click on the link and type in a few names of people you have known who worked on Capitol Hill since 2000. LegisStorm seems to think they have uncovered the Holy Grail lost since antiquity.

Big deal. Congressional staff salaries and office expenses have been public knowledge ever since the first Congress sat in 1789.

Did you know that 2/3's of the 14th Congress were voted out of office in 1816?  'Why?' you might ask.

Because the 14th Congress voted themselves a hefty pay raise to the lofty sum of $1500 per year. Henry Clay, the Speaker of the House, got the gargantuan (for then) salary of $3000.

Mr. Clay almost was defeated himself in 1816 in which case, the nation may never have come to know just how brilliant he was as a legislator and the 'Uncompromising Compromiser' as the authors of the great book, 'Henry Clay: The Essential American', Daniel and Jeanne Heidler, chose to characterize him. Read it over these holidays and learn more about how our government matured into the form it is today under his leadership in the early days of the Republic.

Here's the problem with the reporting of congressional salaries nowadays:  There is never any context in any reporting about them to provide the public any idea of what our elected representatives, senators and staff do on a regular day in Congress.

I have always challenged people who harrumph 'congressional pay was too high!' or staffers 'get paid too much' to either run for office or apply for a job on Capitol Hill and see what they think then.

Not one person has ever taken me up on my challenge.  Not a single solitary person.

Why is that? Let's go to the video tape.

Let's set the record clear from the get-go. Every Member of Congress and US Senator is paid the same base salary. This year it is $174,000. Majority Leaders and Speakers get paid additional amounts to account for their leadership responsibilities.

Which is more than a little 'weird' since a US Senator covers an entire state and a US Congressman 'only' represents the 690,000 or so constituents in one congressional district in the same state. Maybe Senators should be paid at least double for their work or maybe 10 times as much in a large state such as California or Texas. After all, when a state such as California has 37 million people living there as opposed to 563,000 people living in Wyoming, the 2 California Senators have about 74 times as much work to do representing them, correct?

There is no 'magic' pension plan or medical benefit package available 'only' to Members of Congress and US Senators as one particularly idiotic email about the '28th Amendment That Should Be Passed!' which seems to have circled the globe in cyberspace at least 100 times asserts that 'they do!'

They don't. And here's the place for you to go to find out more: The Congressional Institute's great website called 'Mythbusters'.

Prepare to have all your preconceived notions about Congressional benefits popped like a balloon.

But getting back to Congressional and Senate salaries, everyone of them have to use those funds to:
  1. pay for their expenses to maintain their home in their home district; 
  2. pay for a place to live in the very expensive Washington market;  
  3. put their kids through school and college like other people in our country; 
  4. raise their families during the time they leave their other line of work in the 'real world' to enter politics and help try to save this republic of ours.
So it is more like they get paid $87,000 per year to maintain a home and support a family in their home district or state and $87,000 per year to pay for a home in Washington, DC.

Those are big numbers for millions of people struggling in this extended recession that just will not go away.  But if you think you have the experience, background and training to go to Washington and solve the complex immense problems of the budget, financial reform and foreign affairs, try working out a household budget sometime based on the numbers above.

Bet you come to the conclusion you won't do it in about 15 seconds.

I took a job as chief of staff to a congressman from North Carolina in 1985 (which I was thrilled and honored to do); took a 40% pay cut from the job I had in North Carolina to move to Washington, DC in less than 2 weeks time and eventually bought a townhouse in Arlington, Virginia that had less than half the space of the home I had in Durham, North Carolina...and which cost 3 times as much to boot.

There is a cost associated with working as a public servant, especially a young person working on Capitol Hill.

Which brings us to the congressional salaries LegisStorm has now announced the electronic publication thereof.

We would have ZERO need to pay ANY staffer if all of the following were not asked of them to do:
(By the way, most of the congressional staffers are fresh out of college. The average age of congressional staff people is around 23 today and perhaps 25 in the Senate. So how does that make you feel today when you are concerned about having experienced people on Capitol Hill help balance the budget?)
  1. Get a lost Social Security check for your grandma
  2. Get a visa and passport overnight for you since you 'forgot' to get one for your next trip to China or the Maldives
  3. Write legislation on any issue of concern to you
  4. Answer ANY of the 10,000 pieces of mail that come into a US Senate office each week or the 5,000 emails that come in each night or the 3000 automated faxes or answer any of the 1000 phone calls per day, multiplied times 10 when an issue is on the floor for a vote
  5. Help you get tours set up for your family when you visit Washington
  6. Take you on a personal tour of the US Capitol during said-same trip
  7. Help get information from the Pentagon on a relative who might be wounded in Iraq
  8. Balance the budget
  9. Push for the passage of the Greyhound Racing Act that you are so concerned about
  10. Argue with you about whether or not a bazooka or a Stinger missile should be re-categorized as a 'firearm' so you can own 1 or 2 of them in your local hometown under the freedoms guaranteed you in the Second Amendment. (Don't laugh. It happened. On more than one occasion)
So, any takers yet to go up on Capitol Hill as a congressional staffer? If I was still a chief of staff, I might could offer you today a starting salary of perhaps $25,000 right out of graduating from Duke University or Harvard, maybe $30,000.

If you had any relevant extensive experience in the field of interest my boss had interest in, such as banking since he was on the banking committee, I might be able to offer you $45,000 to start as his banking legislative assistant so you could spend hundreds of hours going to committee briefings and hearings to hear more testimony about Dodd-Frank, Glass-Steagall and God-Knows-What-Else.

Any takers? Send me your resume through the comment section below and I will forward it to anyone I know in Congress. I promise.

Congressional member and staff pay is one of the easiest things to focus on and 'hate' about our wonderful democratic republican form of government. Sure, there are some excesses in the legislative branch that could and should be culled back just like in every other part of the US budget today.

But it is not the boogeyman many try to make it out to be. 95% of the people on Capitol Hill, members and staffers alike, are well-meaning, serious, principled, motivated people trying to do what they think is right for the nation.

Just because Congress has failed to balance the budget, for example, is not reason to get mad at them and hurl insults their way over their pay.  Just vote their bosses out of office in 2012 and then see if you can help find better people to take their places and try it your way.

If anyone still wants to do any of those jobs for those salaries we have just now highlighted and given you some insight into the work you will be doing for the public interest, that is.

Let me know if you apply to take a job in Washington after learning these facts.  It is either that or stop complaining about how much they are being paid.  They are doing us all a big favor by offering to work as a public servant even for a short while.

Saturday, December 10, 2011

'The 'New Majority' Among Us' By Lee Atwater

Lee Atwater, love him or hate him, was a unique piece of work in American political history.

He was a South Carolina-born, guitar-playing rhythm-and-blues politico who helped start dozens of Red, Hot and Blue Barbecue restaurants around the South.  He also happened to help, in his spare time, Ronald Reagan and George H.W. Bush 41 get elected President of the United States along with hundreds of other US Senators, congressmen and governors.

There have been many imitators of the inimitable and sometimes harsh scorched-earth politics of Mr. Atwater but none have come close to commanding the political field like he did in his short 40 years of life on earth. Not Karl Rove. Not James Carville. And certainly not Dick Morris.

In 1986, Lee Atwater was the campaign consultant to former US Congressman Alex McMillan of North Carolina for whom I served as chief of staff for a decade. NC-9 was the #1 targeted congressional race in the nation as designated by the NRCC and the DCCC, the respective national political organizations dedicated to electing a majority of their candidates to the US House of Representatives.

We needed him and the very best campaign talent in the nation to help hold that seat since Mr. McMillan won his first race against formidable foe, D.G. Martin, in 1984 by a mere 321 votes. He won re-election with 4221 votes, a virtual landslide in a terrible year for Republicans nationwide.

We are not going to rehash that long-ago battle here today.  It was 'intense', let's just leave it at that.

We do want to point out a very prescient statement Mr. Atwater made back in 1986 while we were walking around the entire circumference of the City of Alexandria one day, mostly because Lee had so much energy coursing through his body that he could not sit still for more than like 5 minutes at a time.
'In 25 years, the predominant majority in American politics will be 'socially libertarian and fiscally conservative'. And neither the Democratic Party or the Republican Party will be able to get in front of that massive parade.' 
Let's get the obvious math out of the way for effect:  1986+25=2011.  So whatever Lee said in 1986 is supposed to be happening right now, correct?

He went on to describe how the political parties were going to be taking increasingly strident positions and tones over the ensuing quarter decade: the Democrats on expanding and maintaining the social welfare state while 'soaking the rich' to pay for it all; the Republicans on cutting taxes, maintaining a strong national defense and ending abortion, just to name one of many social issues that the religious right was just then getting into politics to solve in the 1984/86/88 elections.

Sound familiar?

The reason why we are bringing all this up today is that we have been struck recently by just how many people are clearly identifying themselves as 'not Republican' and 'not a Democrat' but as an 'Independent' or 'Unaffiliated' for voting registration purposes.

In two of the largest counties in North Carolina alone, the officially registered-to-vote rolls show that 30% or so of the officially registered voters are now registered as 'Independent' or 'Unaffiliated'.  Registered Democrats hover around 41% or so and Republican registration ranges between 24-28%.  A smattering of Libertarians and Whigs fill out the remainder of the officially registered voters.

We are not sure what the breakdown of the 'unofficial registered voters' in North Carolina are but we heard that 2200 deceased people voted in the 2010 election along party lines as well.  Voting illegally is not as hard as you might think it should be.

Here's the real reason why we wanted to bring this to your attention as we come to the close of 2011 and head into what is sure to be one of the most expensive, nasty and yes, vicious, presidential campaigns in American history:

'Where are you on the move to Independent voting status and political affiliation?'

We lost count about 1 year ago as we were talking with people about what party they were a member of anymore. Hundreds of former Republicans we know pretty well long ago went down to the local board of elections and changed their registration from R to I.  Dozens of Democrats have done the same thing.

We hear from virtually every person that we speak with that: 1) they are dissatisfied with both political parties (hence, the ridiculously low 8% Congressional approval ratings today); 2) they just want Congress and the President to 'get something done!' on this budget impasse before it swamps us all, rich and poor alike and 3) 'there has to be a better way!'

Almost every single time we speak with a person or group of people nowadays, we hear the following words come out of their mouth, almost eerily as if they were channeling Lee Atwater's predictions of 25 years ago:
'I don't really care so much about whether two men or women are sleeping together as I am about the inability of Congress to balance this budget and end this humongous $14.7 trillion national debt!
'I am for protecting America and defending our borders but we have spent way too much time and money in Iraq and Afghanistan at the same time we have been wrecking our nation's economy!' 
'If Congress and the President would focus more on cutting out wasteful spending and reforming entitlements like by raising the retirement age, I would support higher taxes in some form or another like the elimination of special tax loopholes for everyone just so we can finally say we have 'fixed' the budget and move on to fixing our economy.'
Sounds like a lot of people are now more socially libertarian in their outlook towards social issues than in the 1980's and '90s when the Christian right joined with traditional small government, low tax, strong national defense hawks like Ronald Reagan to form massive winning majorities at the presidential level. Even President Bill Clinton himself was able to connect with many Bible-believers in the South mainly because of his Southern charm and experience as an Arkansas Governor for 2 terms.

But guess what? This budding majority, if that is what is going on here, has nowhere to go politically in America in 2011. Nowhere. Nada. Zippo.

If you are 'socially libertarian', you are labeled a 'RINO' by many in the Republican Party and the Tea Party. Whatever that means. Ronald Reagan was a 'RINO' by the same definition: he signed bills that contained tax hikes, 2 of them massive tax hikes, 11 times between 1981-1988.

And if you are fiscally conservative, there is no room for you at the inn near the Democrat Party manger either. The last time they proposed any substantial cuts to anything other than defense was, well, never! And to see them fight vehemently against even the most sensible of all spending cuts and entitlement reforms in the recently discarded-to-the-trash-heap-of-history recommendation of the Bowles/Simpson Commission was truly a sickening moment in American political history.

There will be no one from the first decade of the 21st century to write about in a future edition of 'Profiles in Courage', will there?

So, maybe Lee Atwater was a prophet, a soothsayer and a crystal ball gazer to boot.  If the officially registered percentage of Independents is 32% today, (it was 4% in 1992 when Ross Perot won 19% of the general election vote but no electoral votes), it doesn't seem like too much of a stretch to imagine 10% of now-Democrats and 8.5% of now-Republicans voting for great Independent candidates across this land, if there were any running, now would it?

Successful people like the George Washingtons, Thomas Jeffersons and James Madisons of our day (they didn't 'have to run' back then either you know, but aren't you glad they had the guts to do so for our sakes today?).

You know who they are. They are all around you. The ones with the courage and guts to say:

'I am willing to run for public office and do the right thing and stop signing pledges and listening to unelected people who do not have the guts or kahunas to run for public office themselves!

The only oath I am ever going to sign is the one I will take when I get sworn in as your next Congressman or US Senator:
'I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.'
There is nothing in here about never considering any new taxes.  Nothing about protecting SS and Medicare 'or else some burly senior citizen is going to come to your office and kick your butt!'

Isn't that the sort of representative you want to send to Congress to solve all these problems these current incumbents have completed swung and whiffed at for these past 10 years?  It sorta looks like Romper Room up there nowadays, doesn't it?

It is time to send 536 new people to Washington in 2012.  Maybe they will all be part of the 'Lee Atwater Revolution' he predicted in 1986. It can't come a moment too soon.

Sunday, December 4, 2011

'Suppose You Were An Idiot....

And suppose you were a member of Congress.  But I repeat myself.' (Mark Twain-'Biography')

We Americans often make fun of our elected officials, sometimes too much.  It is part of the our collective American heritage and DNA to not take any centralized concentration of power in any elected official 'too seriously.'

After all, the very best and smartest leaders we had in 1776-- Jefferson, Madison, Washington, Franklin, Adams all agreed that the young American colony should rise up and revolt against the capricious behavior of King George III and the British Empire to declare independence for our new nation.

After that, there was no way in Hades the citizens of the United States of America were ever going to bend over backwards and just give any President, or any Congress or elected Senate 100% obeisance and dutiful homage without reservation, directly or humorously.

If you have been following the news lately about the inability of Congress and the President to come to any sort of an agreement on the budget, however, you may come to the same conclusion as Mr. Twain himself.  And mean it this time.

Especially if you are a conservative, low-tax, strong national defense true blue believer.

Because the 'conservatives' of this Congress have painted themselves not only into the 'proverbial corner', but into the 'actual outhouse' of budget negotiations.

Here are two hard-rock certain realities in American public policy today that will directly affect you, the American citizen and taxpayer in 2013 absent any legislative changes between now and January 1 of the same year:
  1. Your taxes will go up effective December 31, 2012 at midnight.  Happy New Year!
  2. The budget sequester will cut major portions out of the existing defense and domestic budgets but more out of defense due to the way it is structured.
If you want lower taxes and a full defense budget, guess what?  As of January 1, 2013, as a result of these last several 'major' budget negotiations and deals in Washington, DC, absent any legislative changes, you. will. lose.

President Obama didn't veto the extension of the Bush Tax Cuts in December of 2012.  He ALLOWED them to be extended for every millionaire and billionaire in this country, completely contrary to his promise to 'raise the taxes of the wealthy and make them pay their 'fair share' (whatever that is).

Not only are these lower tax rates scheduled to expire on everyone, rich and medium-income, 24 million more Americans will be socked with the dreaded AMT (Alternative Minimum Tax) absent any further legislative action in the next 12 months.  Read about it and weep.

If you are an Obama supporter, you have to be cackling like a happy hen nowadays.

If (when) President Obama wins re-election in November, 2012, you get to see all of your dreams, beyond the national health care plan that is now law called 'Obama Care', go into full fruition:  1) higher tax revenues coming in to the tune of $4 trillion over the next 10 years and 2) the defense budget being gutted far above what is going to be a lower baseline simply due to the phase-down of troops in Afghanistan.  Full withdrawal is expected to be completed by the end of 2014.

Why in the world would President Obama want to negotiate against himself and his party's stated principles in 2012 heading into a presidential election and do anything with the Republicans in the upcoming year?  He has already 'won' on everything he wanted, hasn't he?

If he just lets the Bush Tax Cuts expire on 12/31/12 after his re-election, our projected budget deficits will plummet to about 2% of GDP, down from 8.5% of GDP this year in 2011.  See it for yourself at CBO Projections. (Remember, the 'baseline' already includes higher revenues from the expiration of the Bush Tax Cuts because that is 'current law')

President Obama could then take credit for being one of the greatest deficit-cutters in American history.  And he would not even need the acquiescence of the US Congress....all he would have to do is veto any extension by December 31, 2012.

His only Achilles' Heel is the fact that the expiration of the Bush Tax Cuts will really sock it to the middle-class with higher taxes that he has also 'promised' he would never raise on them.

But so what?  He is our duly-elected leader.  He has also 'promised' to bring our deficits down to less than half of what they were before he took office, especially since that dastardly old President Bush and a GOP Congress had raised deficits to about 3% of GDP in 2008 when he left office.

The ONLY way we see ANYTHING happening in 2012 is if President Obama's 'Chicago Guys' get a strong whiff of the swamp gas called 'Taxpayer Anger' in 2012 when everyone starts to figure out that their taxes are indeed going to skyrocket at the end of the year if nothing is done in Congress.

Then you will see the GOP work out a more favorable defense budget (meaning more spending and less cuts) with President Obama because they also want to extend ALL the Bush Tax cuts again and Obama wants everyone to keep their tax cuts...except the wealthy, yada-yada-yada.

In the end, we see the tax cuts being extended for the less-than-wealthy, the defense budgets being fully restored and some of the very-high end tax breaks for the wealthy being curtailed on a single-shot basis.

The budget deficits, however, will remain in the 5%+ of GDP range for the rest of this decade. Alas.

What did you think would happen? President Obama, the GOP House and the Democrat Senate all of sudden become President George Washington, Thomas Jefferson and Henry Clay all at the same time and do something heroic for our nation?

Even Mark Twain knew better than to expect such a ridiculous outcome.