September 22, 2008

John Steele Gordon on the Financial Mess: Greed, Stupidity, Delusion and Some More Greed - Freakonomics - Opinion - New York Times Blog

John Steele Gordon on the Financial Mess: Greed, Stupidity, Delusion and Some More Greed - Freakonomics - Opinion - New York Times Blog

The truth is so inconvenient for the Congressional elite. Obama is lucky to have been there such a short time that the nasty spatter probably won't hit him. McCain is fortunate he's been a reformer...more or less. But there's plenty of fallout for others, among them Senator Dodd of Connecticut.

You must read this post by John Gordon to see where a good portion of the blame for the financial meltdown, particularly of Fannie Mae and Freddie Mac, lies!

September 21, 2008

A Professor and a Banker Bury Old Dogma on Markets -

A Professor and a Banker Bury Old Dogma on Markets -

Worth a read for a description of Bernanke's and Paulson's actions, perosnalities and response to the crisis in the capital markets and unfolding events last week. The ~$700 billion insertion of taxpayer dollars in an attempt to provide liquidity and stability is a monumental step. There seemed no other choice.

Now, what will the Congress do?

An excerpt:

"Befitting their roles and personalities, Mr. Paulson has become the public face of their team — he plans to appear on four Sunday talk shows — while the less visible Mr. Bernanke provides the historical underpinnings for their strategy.

Along the way, they have cast aside the administration’s long-held views about regulation and government involvement in private business, even reversing decisions over the space of 24 hours and justifying them as practical solutions to dire threats.

“There are no atheists in foxholes and no ideologues in financial crises,” Mr. Bernanke told colleagues last week, according to one meeting participant.

The improvisational nature of their effort has turned President Bush and Congressional Democrats into virtual bystanders, sometimes uncertain about what comes next and left to wonder about the new power dynamics in the capital. Seemingly every time lawmakers tried to get a handle on what was happening and what role they might play with elections around the corner, Mr. Paulson and Mr. Bernanke would show up again on Capitol Hill for another evening meeting with another surprise development."

September 20, 2008

Op-Ed Columnist - The Post-Lehman World - Op-Ed -

Op-Ed Columnist - The Post-Lehman World - Op-Ed -

David Brooks, ever the sage, speaks truth to panic and calls the shots correctly, particularly his parenthetical comment below, in discussing regulation.

"We’d need regulators who could spot a bubble and squelch a boom just when things seem to be going good, who can scare away foreign investment and who could over-rule popularity-mongering presidents. (The statements by the two candidates this week have been moronic.)

To sum it all up, this supposed new era of federal activism is going to confront some old problems: the lack of information available to government planners, the inability to keep up with or control complex economic systems, the fact that political considerations invariably distort the best laid plans."

I claim no exceptional financial expertise or insight, but an out-of-control, greed and fear driven financial system does not serve our world and country well. A meltdown would be even worse. Neither the President nor Presidential candidates personally have a clue about the intricacies of this mess. Congressional leaders seem equally clueless. Should we expect them to know more?

In any event, Treasury Secretary Paulson and the Fed's Ben Bernanke seem to understand the vast financial morass and its dire implications and are willing to act boldly to salvage it.

When the dust settles, the boards of directors of these failed firms and the chief executives should be forced to suffer financial pain and not be rewarded for this mess. I would also like to know how the curricula of the nation's top business schools will be revamped to teach tomorrow's business leaders how to act differently.

More importantly, I want Congress to tell us how they will revamp their profligate spending habits in order to afford the massive increase in debt and debt service created by this commitment of up to a trillion (Can you say TRILLION?) dollars for bailout services.

September 18, 2008

Worst Crisis Since '30s, With No End Yet in Sight -

Worst Crisis Since '30s, With No End Yet in Sight -

The WSJ analyzes the problem as the financial markets rock and roll. This is not a pretty picture and most people think it will get worse before stabilizing. As people cast about for villains and point fingers of blame, one name seems to be missing: Alan Greenspan.

He  was the man in charge of the huge increase in borrowing enabled by the Fed's providing easy credit during the years leading up to this deleveraging.

I wonder what's being taught this week is the business schools of our major universities. Perhaps the previous teaching about 'complex financial instruments'  is tempered with some basics such as 'understand your assets and value them properly.

"Fed and Treasury officials have identified the disease. It's called deleveraging, or the unwinding of debt. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can't pay back the loans, a problem that is exacerbated by the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.

At least three things need to happen to bring the deleveraging process to an end, and they're hard to do at once. Financial institutions and others need to fess up to their mistakes by selling or writing down the value of distressed assets they bought with borrowed money. They need to pay off debt. Finally, they need to rebuild their capital cushions, which have been eroded by losses on those distressed assets."

Worst Crisis Since '30s, With No End Yet in Sight -

September 15, 2008

Deal Journal - : Where Was Lehman's Board?

Deal Journal - : Where Was Lehman's Board?

Seems like aged, less than intense board. The story suggests the Lehman board was mostly 'out to lunch.' When I vote for directors of companiues whose stock I own, I automatically vote no for any director more than 70 years old. It's important to have vibrant, 'with it' board members for proper company oversight.

I'm not against old people generally, but a healthy company needs more that old buzzards looking after things.

Who was on this board? Until the 2008 arrival of former US Bancorp chief Jerry Grundhofer, the group was lacking in current financial-knowledge firepower. A number of the members did have past financial-markets expertise, but most of their working lives were tied to a different era: The one before massive securitization, credit-default swaps, derivatives trading, and all the risks those products created.

The board’s members include John Macomber, 80 years old, a former McKinsey & Co. consultant and chief executive of chemical-maker Celanese Corp; John Akers, 74, former IBM chief; Thomas A. Cruikshank, 77, chief executive of Halliburton Co. prior to Vice President Dick Cheney; and Henry Kaufman, 81. In the 1970s and ’80s, Kaufman, the chief economist at Salomon Brothers, was known as “Dr. Doom” for his bearish views on the U.S. economy. Ironically, in April, Mr. Kaufman termed the credit crisis a “global calamity” and criticized the Federal Reserve for “providing only tepid oversight of commercial banking.”

Other current members include: Sir Christopher Gent, 60, the one-time chief of mobile-phone company Vodafone PLC; theater producer Roger S. Berlind, 75; former Telemundo Chief Executive Roland Hernandez, 50; Michael Ainslie, 64, former chief executive of Sotheby’s Holdings; Marsha Johnson Evans, 61, one-time head of the Red Cross and a former Navy rear admiral.

September 14, 2008

Is the U.S. Going Broke? -

Ahem, may I have a moment of your time Senator Obama and Senator McCain? I really would like your proposed solutions to the terrible problem outlined in this article from Forbes (click on the link below). Or would you prefer to tell me the sky isn't falling? Or is it more fun to talk about lipstick and pigs?

  • How will you pay for the massive energy transformations you both promise?
  • What will you do to control the costs and pay for Medicare and Medicaid?
  • You are apparently not willing to bail out any more investment banks... because the Feds don't have the money?


Just one quote to entice you to read the full column:

"The real liability facing our government is $70 trillion. This represents the present value difference between all the government's projected future spending obligations and all its projected future tax receipts. This fiscal gap takes into account Uncle Sam's need to service official debt--outstanding U.S. government bonds. But it also recognizes all our government's unofficial debts, including its obligation to the soon-to-be-retired baby boomers to pay their Social Security and Medicare benefits.

Given current policies, each of the 78 million boomers can expect, on average, to receive $50,000, in today's dollars, from these programs in each and every year of retirement. Multiply 78 million boomers by a $50,000 annual payment and you get close to $4 trillion per year. This helps you see why our nation's true indebtedness is so extraordinarily high."

Is the U.S. Going Broke? -

September 13, 2008

Champlain Wind Power Plan

(Published in the Burlington Free Press September 13, 2008)

Wind Power Plan

Now that Ms. Symington says she wants 20 percent of Vermont's electricity in ten years from windmills, here's how to bring that dream to reality. In addition to using our beautiful windswept mountains, Lake Champlain's southerly breezes should be captured, too, for the 200 plus towers needed.

The shallow bays of Lake Champlain, near Addison, Chittenden, and Grand Isle counties, where electricity demand is growing rapidly, would be ideal for the giant windmills. In fairness, this windy watery playground also should be contributing to Vermont's renewable electricity.

Of course, new sub-stations are necessary. Burlington's Moran Plant could be revitalized as a mixed-use facility delivering a higher public benefit than wall climbing. Shelburne Bay and Shelburne Farms have a few optimal shoreline spots too. These will conveniently serve Charlotte and Shelburne's wealthy couples living in 5,000 square foot homes, espousing wind and conservation, while underwriting a pack of attorneys to ensure that neither compromises their own consumption or scenic views.

The shallow waters of the Inland Sea are a perfect spot for a dozen or two windmills to serve fast-growing Grand Isle County.

'Scientists' claiming human health hazards from VELCO's new overhead transmission lines surely could tune the electromagnetic fields from the underwater connections to attract and zap lamprey eels, thus improving lake fisheries.

Discarded car and truck tires attached to the towers underwater provide perfect artificial reefs. Fish really do like these spots, evidenced by the magnificent fishing around the oil rigs in the Gulf of Mexico. By gosh, in addition to a Fathers Day derby, we could have Mothers Day, Labor Day and Veterans Day fishing tournaments adding millions to the economy.

Attaching more tires above the water line would serve as ideal bumpers for boaters mooring to enjoy the soothing 'whoosh-whoosh-whoosh' of the rotating blades. A further attraction, electrical outlets, would encourage overnight stays. Mooring fees collected by the coastal towns would dampen escalating local property taxes. Ice fisherman will also benefit from the windmills by plugging into handy electricity to heat shanties and cool beverages.

Over the years, thousands of double-crested cormorants have guanoed all other living things to extinction on Young, Mud, Bixby Islands, and elsewhere. This problem, too, could be cured with a few strategically placed towers. Depending, of course, on wind speed, the cormorants would be more or less finely diced by the windmill blades, providing a new food source for fish swarming around the tire reefs.

A few multimillion dollar research studies will certainly validate the project's overall potential. With 200 or more of these towers of power, we could generate enough clean electricity to reduce our carbon footprint by another three percent. Vermont will be the envy of green folk everywhere!

With all these benefits, why does Vermont's Department of Public Service Electricity Plan miss the potential for wind power from Lake Champlain? The Legislature must surely scrutinize the opportunity as intensely as climate change. They could solve the cormorant and lamprey problems, increase our fun on the water and ice, provide local tax benefits and tourism dollars, and the towers could host antennas for next generation wireless broadband Internet access. Our solons can claim hero status rather than be cast as villains bent on eliminating Vermont Yankee with no replacement electricity!

So, let's get cracking on the Champlain Wind Power Plan. Ms. Symington should immediately contact Mr. T. Boone Pickens for advice and funding. We can't afford to miss this opportunity! If we start now, with expedited permitting, chances are better than even that CWPP will be online in 10... maybe 15 years at the outside.

Lomborg Reviews Tom Friedman's Latest Book

I've read Friedman for several years, but it seems he has gone off the rails on climate change and remediation in his new book (which I have not read).

However, I've read Lomborg's book and I generally agree with his basic thesis highlighted below:

"Because Mr. Friedman single-mindedly focuses on climate as the problem and massive renewable energy subsidies as the solution, he misses the policies that will make this world much better. In a sense, his prediction of the news being "weather, other news and sports" is a scary dystopia that would result if we followed his book to the letter -- if we made climate subsume every other issue. Although he briefly mentions the need to tackle health care, crumbling infrastructure, immigration reform, Social Security and Medicare, his proposal to spend trillions on global warming means that trillions can't be spent on other of the world's ills.

Toward the end of "Hot, Flat, and Crowded," Mr. Friedman wonders why we can't just implement the sort of policies he prefers. "What is our problem? If the right things to do are so obvious to the people who know the most about the energy business, why can't we put them in place?" Maybe the reason is that most people recognize a bad deal when they see one."

You can find more about Lomborg's work here. He is also a prime mover of the Copenhagen Consensus Center which is involved in some fascinating work.

In Vermont our problem is that too many are also drinking the climate change Kool-Aid. Symington and others would run this state off the rails with their alternative energy proposals paid for by government subsidies to support all these wonderful 'green' jobs. They think we can change our energy sources at a pace that defies common sense.

They seldom talk about the price of the energy produced, whether it's paid in taxes, product prices, or cap and trade schemes. But bet on it, we will pay far, far more than we do now. Where is the discussion of the total economic impact?

September 11, 2008

We Will Never Forget!

Radical Islamic Terrorists did this
. These are not misunderstood people who but for America's policies would not have done this terrible espoused by some who fail to see the realities in this world. They mean to destroy our way of life!

This destruction and killing of nearly 3,000 innocent people was perpetrated by evil people who must be hunted down and eradicated.

Killing Osama Bin Laden is not sufficient. All Radical Islamic Terrorists who espouse or support this ideology of death and destruction and act to kill innocent people must be found and eliminated.

In a recent NY Times opinion piece Jeffrey Goldberg among other things had this to say:

"In my conversations with Senator Obama, he seems to understand the menace — early last year, even while trying to secure the support of his party’s left wing, he told me the possibility of a terrorist group obtaining a nuclear weapon was “the No. 1 threat” facing America. But does he understand that this threat cannot be neutralized mainly by law enforcement; that it must be anticipated by intelligence agencies, and eradicated by the military? The paramount goal is not prosecution, but pre-emption." (emphasis added).

We must find and eliminate the threat. Law enforcement actions are not the tool we need to reach into areas outside the USA to kill these bastards.

Finally, here's a link to a list of all our innocent dead in this act of terrorism.

September 10, 2008

Vermont Tiger: Kill The Nuke ... Kill, Kill

Vermont Tiger: Kill The Nuke ... Kill, Kill

This piece by John McLaughry, who by the way has a masters degree in nuclear engineering, is worth a read. There is a major effort by the anti-nuke gang to close Vermont Yankee making outrageous claims about plant safety. For those legislators who would close VY, here's where I stand:

My simple question to current and prospective solons is this: If you would vote in 2009 to close Vermont Yankee in 2012, you have an equal obligation to propose and support an affordable alternative for the foregone baseload power at comparable cost. Please tell me what that is.

If the answer is along these lines: Well, we need to/should/must develop clean, sustainable alternative sources like wind, solar, geothermal, etc., they are ignorant of the realities of near term electricity generation. Someday those sources will contribute measurably to our needs, but not within the next decade.

Op-Ed Columnist - From the Gut - Op-Ed -

Op-Ed Columnist - From the Gut - Op-Ed -

Thomas Friedman has his gut wrenched because his hero, Obama, has suddenly appeared shallow in comparison to his opponents. How can that be? Gut reactions are supposed to be what it's all about in politics. After all, details, policies, leadership capability, sound thinking cannot possibly be a substitute for coolness, can they?

Come on Tom, get a grip!

September 6, 2008

Op-Ed Columnist - What the Palin Pick Says - Op-Ed -

Op-Ed Columnist - What the Palin Pick Says - Op-Ed -

Once again, David Brooks nails the reality that McCain/Palin face if they are elected. However, they stand to restrain not only the forces of corruption and lethargy in government, but also will stand against the interest groups that would move us toward a more socialistic nanny state that are sure to be unleashed if the Obama-Biden duo is elected.

"My worry about Palin is that she shares McCain’s primary weakness — that she has a tendency to substitute a moral philosophy for a political philosophy.

There are some issues where the most important job is to rally the armies of decency against the armies of corruption: Confronting Putin, tackling earmarks and reforming the process of government.

But most issues are not confrontations between virtue and vice. Most problems — the ones Barack Obama is sure to focus on like health care reform and economic anxiety — are the product of complex conditions. They require trade-offs and policy expertise. They are not solvable through the mere assertion of sterling character.

McCain is certainly capable of practicing the politics of compromise and coalition-building. He engineered a complex immigration bill with Ted Kennedy [my view: which should have failed and did ] and global warming legislation with Joe Lieberman. But if you are going to lead a vast administration as president, it really helps to have a clearly defined governing philosophy, a conscious sense of what government should and shouldn’t do, a set of communicable priorities."