Insomma

If It Seems Too Good To Be True It Usually Is

Just last night I was having dinner with a past executive director of the NYT. We were discussing Obama and his potential and I indicated that, to date, all of Obama's appointments and policy statements coincided precisely with my points of view. That, I said, made me weary and today, finally, I disagreed with his last decision. Arne Duncan may be acceptable to both opposite camps in education and he may have obtained excellent results within the Chicago school system but I believe that what was needed was a clearer message to the Teacher's Union that business as usual was over, that bad teachers would not be allowed to go on teaching and would not be rammed down the throats of Principals for reason of seniority and that huge sums - badly needed for educational purposes - would no longer be wasted to pay full salaries to teachers pulled out of their classes for child molestation and who, instead of being in prison, where they belong, sit on full pay in Department of Education buildings set aside to house them while they do nothing. Maybe an Arne Duncan, less treatening to the TU that a Joel Klein, will be able to obtain more concessions and make more headway in reforming our public education system and the TU; however, if he will not deal enrgetically with the problems at hand, we will be, by the end of Obama's term(s), a third world country as far as education is concerned.

Lucky Obama

Success requires, often, ability and hard work. Nonethless, I have always been convinced that its main ingredient by far is, always, luck. I think that Obama's presidency will be very successful since all the stars seem to be aligning just right for him. By the time he will be sworn in, on January 20th, the economy will be well on its way towards the bottom of the worst recession since the Great Depression; consequently, any President would be governing during four years of recovery, capital growth and reduced unemployment and could expect to be reelected, probably, by a land slide. But Obama, actually, seems to be putting in place an excellent plan and, should it succeed, we may, indeed, be on our way to decreased reliance on oil and availability of economically viable alternative energy sources. We should also have an improved infrastructure, a reasonably regulated finance industry and greatly improved relations with both friends and foe. As the saying goes, you make your own luck and Obama will have to make his; however, the elements for success are there and it will be up to him to make it or break it.

Second Thoughts On The Auto Bailout

Now they have scared me. They tell me that letting GM, Ford and Chrysler fail would wipe out some 3 million jobs, 10% of all US jobs. Components factories would close forcing the closure of the US auto manufacturing facilities of foreign makes as well as that of thousands of Ma and Pa shops, stationary shops, pharmacies, butchers, grocers, restaurants, etc. that are servicing those who will have lost their jobs. This would result in additional unemployment, home mortgage defaults and shrinking of the economy. I am also offended. The Government has bailed out the "Wall Street Gang", those greedy, parassitic crooks, and it is dragging its feet to do the same - with a much smaller outlay - for those poor blue collar workers who, with the sweat of their brow, are the underpinning of this country's economy. Poor Government! It finds itsel in a pickle because of the greedy finance speculators and the incompetent mangement of the auto industry. But wait a second: am I ready to swallow all the above hook, line and sinker? Hell no! It is the Government that is the number one culprit. For years they have deregulated irresponsibly and have pushed Fannie Mae and Freddy Mac to lend irresponsibly, totally disregarding something that was obvious from the founding days of the Republic: that man is greedy and, uncontrolled, he will always put his own interest ahead of the interest of the community. Unfortunately, most self-serving members of Congress cannot be held legally accountable for all the messes they create - I would love to see most of them in jail - and when the next election will come around they'll find, no doubt, a way to talk their way out of trouble and blame for their own incompetence and greed - yes greed - circumstances or someone else. So why was the finance industry bailed out? Because almost every American has a bank account and credi cards, because widows, orphans and holders of 401K retirement plans could not be allowed to lose everything and because failure to intervene would have landed us streight into a depression. The amoral bankers certainly did not deserve to be saved and many more strings should have been attached to the bailout money; I hope that the next government will regulate the hell out of what compensation top management can get and under what circumstances, since the owners (the small shareholders) deserve to be and should be protected from these corporate predators. Clearer accounting of the use of the money should have been mandated but this is, once more, Washington catering to special interests and, of course, to their own. As for Detroit, today's problems are the inheritance of over 50 years of mismanagement, arrogance fed by an initial lack of domestic competition and abuse of power by the unions, who never understood that you cannot eat the goose that lays the golden eggs. Since we are a capitalist society - imperfect but better the the alternatives - maybe we should stop fearing the bogeyman and tell GM, Ford and Chrysler that they must go into Chapter 11 and, since we shouldn't cut off our nose to spite our face, the Government should help them put together a pre-packaged Chapter 11. Any Government money should go to back warrantees for the cars that will be sold by the Big Three and to help any components company that may need to borrow.  It is likely that only under Chapter 11 the US auto manufacturers will be able to restructure quickly, bringing the salaries they pay and the number of their dealerships in line with those of their foreign competitors and saving as many as possible of the Detroit jobs. Do I have no feeling for the auto workers who will earn substancially less than they earn now, have smaller benefit packages and some of whom will lose their great jobs? I do but the restructuring beats by a mile not having a job at all. Most American industries have gone through the same pains in order to become globally competitive and now, unfortunately, it seems to be the auto industry's turn. Most American retirees have to make do with an imperfect Medicare system; it is unfortunate but from now own the UAW's retirees will have to make do the same way, They've had it good for a long while and have taken full advantage of the situation. As the adage goes "all good things come to an end"; apparently, the end is now, unfortunate though this may be. Should the auto industry succeed in convincing the UAW and the dealerships to make all the concessions necessary to constructively complete a successful restructure, let's bail them out; however, experience teaches that short of Chapter 11 this will not be possible. Yes! I am scared. But there comes a time when one must swallow the bitter medicine and suffer through its side effects. Experience teaches as well that once any high gasoline price crisis is over the American public demands once more large, gas guzzling cars. While this cannot be prevented in a free society, it certainly could be regulated by a responsible Government, not owned by Detroit's Big Three and by the oil companies. As I had suggested in my previous blog, the cost of yearly car registration should be set geometrically progressive according to engine displacement. Anyone who must have an inefficient, unecological car should pay dearly for the privilege, the money going to alternative energy research. There are solutions but I trust our Government to set its sights on ideology and on the self-interest of individual members and to screw up once more. Who knows, maybe Barak Obama will have the charisma, the power and the perseverance to bring about positive change and actually change Washington's modus operandi.

To Bail Or Not To Bail...

After years of downward spiraling, the American Automobile Industry is on life support in the intensive care unit. Its lobbyists, those for Big Oil and Congressmen and Senators whose pockets they filled and lifestyles they improved have constantly prevented retooling for fuel efficient cars and have kept indulging the American public's hunger for excessively big automobiles with excessive horse power. Their powerful unions demanded and obtained prohibitively large and comprehensive compensation packages that cannot be sustained under present economic conditions. The most logical scenario would be to let the Big Three go into bankrupcy. The piper must be paid and it is unfair to ask the taxpayer to foot the bill. Let the greedy management and the greedy unions take their well-deserved punishment and we can go on driving Japanese and Korean cars. But it's not so simple. A wise man told me once that one should always owe the banks a lot of money since it would be unecomonical to put in Chapter 11 a large debtor. In order to do the right thing we would have to let millions of jobs go down the drain and this would, in all likelyhood, send us streight into a 1929-type deflationary depression. We have no choice but to bail out the Automobile Industry; however, we should do this with lots of strings - nay, cables - attached. Managment should be forced to cash-in their options at their strike price by year end or lose them; they shouldn't profit, thanks to the injection of taxpayers money, from the rebirth of the firms they have killed and their ongoing compensation packages should be brought in line with the new reality. Labor contracts should be renegotiated to a sustainable level and, should the unions not be prepared to do so, let their members remain jobless while their employers go bankrupt. Furthermore, the new government should appoint an 'Automobile Tsar' who will have wide supervisory powers over the industry and will oversee labor negotiations and wholesale retooling to produce fuel efficient, hybrid cars. There should be a national car registration fee - a few tens of dollars for cars that can do over 40 miles on a gallon; say $1,000 for cars doing between 30 and 40 miles to the gallon; $5,000 for cars doing between 20 and 30 miles to the gallon and, say, $10,000 for cars doing less than 20 miles to the gallon - and a variable tax should be levied that would fix the price of gasoline to $5 per gallon. The proceeds from the gas tax and the registration fees should go towards research for alternative sources of fuel to power automobiles. All this would be hell to implement but we are already on the brink of hell and, unless we want to land right in the middle of it, there is no choice.

Kaput!

We've lost 20% of our net worth over that last year and an additional 20% over the last two weeks and, probably, we have not hit bottom yet. I've been railing about deregulation for years; I believe in capitalism and in a free economy but there must be rules by which to play. As Eric Lane and Michael Orskes so eloquently explained in "The Genius of America", there is a basic difference between the Articles of Confederation and the Constitution; the former assumed that man is unselfish and ready to sacrifice self-interest for the common good while the latter - drafted fourteen years later and after the new republic had almost collapsed because of individual self-serving - acknowledged that man is selfish and that the social conract must recognize this and enact a set of rules aimed at protecting the common good from individual greed. It is thanks to this underlying principle that the USA became the greatest democracy and has enjoyed unparalleled success both politically and economically. After the economy last collapsed, in 1929, FDR enacted regulatory agencies and laws aimed at protecting us from the greed of those who had great economic power. After decades of prosperity the laissez-faire, Republicans believed it was time to deregulate and what followed was an orgy of greed. They should have learned their lesson from the Savings and Loans Banks debacle but, since we do not hold our politicians accountable for the disasters they create, after the taxpayer paid the bill the banquet went on. Top executive salaries were totally out of proportion with their actual contribution to the companies they were managing and kept growing even as operating results worsened. These bonuses were geared to short term results; consequently, being greedy humans, the CEO's operated their companies so as to maximize short-term results - and their bonuses - and believed, like King Louis XIV: "apres nous le deluge". Banks looked for ever-more risky venues to lend money they had in abundance and credit card companies offered their clients what seemed to be an easy way to live above one's means. The Domocrats, however, share in the blame. They didn't realize that the light some were seeing at the end on the tunnel was an oncoming train and they didn't do much to stop the excesses. Furthermore, wanting to give all Americans a better shot at owning a house, they encouraged Fannie Mae and Freddy Mac to give out mortgages with little or no down payment even to purchasers that would, otherwise, not have been considered credit worthy. Now we are all paying for our government's irresponsible behaviour and those who created the mess are still not accountable. It will take years to regain what has been lost and, of course, most of FDR's regulations - and maybe more - will be reinstated. Had we not chosen to overlook man's natural greed - which was ever visible and obvious - we could have avoided this mess. I hope that in the future we shall remember that a game can be played succesfully only if there are well established and recognized rules that evryone is held to play by. So what can be done now? If I knew for certain I'd interrupt my blogging and fly to Washington to fix things... All I can do is to conjecture, so here it goes. I would have the government buy from the banks all the bad mortgages and all the greatly devalued securitized mortgage paper at a maximum discount, giving the sellers just enough to keep them from going bankrupt. They and their shareholder would take a big hit but, with conservative management, they would be in a position to do profitable business and to pull themselves up by their shoestrings. Then I would set up an agency - if one doesn't exist already that could fulfill this role - that would try to workout with deserving homeowners refinincing that the latter can live with. For example, a $100,000 mortgage the government will have bought for 40 cents on the dollar could be reissued as a $50,000 or $60,000 mortgage that the borrower could sustain while giving the government (ergo the taxpayer) a margin to cover expenses and, maybe, make a small profit. This would clear the balance sheets of the banks and provide them with the liquidity needed to go on operating. I would establish a minimum downpayment percentage to purchase a house, would give mortgages only to credit worthy buyers and forbid any mortgage that is not fixed rate. Both of the above should help resolve the housing problem and put home purchases back on a healthy path. As I had already suggested in 1989, I would forbid automatic, computer generated sale programs: they turn a small snow slide into an avalanche and give those who operate them an unfair advantage over the small investor who needs to follow the market, make a sale decision and then put in an order. I would not forbid short selling but I would instruct the SEC to keep a close eye on this activity and stop it when it appaers to get out of hand, influencing unduely to market. I would review the activities of credit card companies, put some limits - based on credit-worthiness - on how much any individual can borrow in total on credit cards and, having reduced the risk of the lender, I would lower substantially the maximum interests that can be charged on credit card debits while regulating also the amount of fees that can be charged for late payment. Undoubtedly, this would haver a deflationary effect and shrink a number of industries but, from there, we could grow in a healthy fashion rather than running once more like lemmings toward the cliff. Finally, I would regulate executive compensation. If I have learned anything over the last 45 years it is tha no one is indispensible. We must debunk the myth that, having scratched and clwed his or her way to the top of a publicly owned company an executive should be able to secure him/herself much of the cream before the shareholders, whose capital is at risk, can earn their profit. I had believed that the junk bond fenomenon had opened the tower of power to many who had been excluded from it, finally putting a break on executive abuses such as company paid country club memberships, private school tuition for their children, etc. Unfortunately, it is obvious that, if unregulated, top executives will always find ways to steel from the absentee owners of their companies, the shareholders. I am certain that neither Republicans nor Democrats would like my suggestions; that is why we need leadership that cares about the future of the country  and can detach itself from right wing or left wing demagoguery.

The $700 Billion Question

I cannot see Congress agreeing to the $700 billion (or more) bailout package as requested by Secretary Paulson. He has given no details as to how he would use these funds nor has he indicated that Main Street will also be helped and that the salaries of on-the-brink-of-bankrupcy companies CEO's will be kept in check. Representatives and Senators voting for the package "as is" would jeopardize greatly their chances at reelection in November. Yet, something needs to be done urgently. My suggestion is to grant the package but not to Paulson; as ex CEO of Goldman Sachs and the hand on the stearing wheel when and before the shit hit the fan he is not to be trusted. I would draft immediately Mayor Bloomberg and put him in charge of the bail-out.

A Bankrupt System (?)

Poor U.S.A.! The economy is scary, our foreign policy has failed and we are in the midst of an exciting presidential electoral race with unexciting candidates. Barak Obama is intelligent and well spoken and  the fact that a Black man is making what could be a successful run for the presidency is very encouraging and amazing. However, his call for "change" leaves me doubtful; voting 'present' 120 times in the Illinois legislature and having had a 20-year close relationship with rev. Wright are problematic issues. In any case, although the President sets the tone, it takes much more to bring about significant change and, although I like Obama, I have doubts about his ideas on taxes and about his ability to succeed in other areas. Should he get elected - and I may have no choice but to vote for him - I will support him, keep my fingers crossed and wish him well. I could have voted for McCain in the year 2000. Now, however, he is eight years older, has flipped back from the attractive views - for a Republican - during his short period as a maverick and has become once more a bona fide conservative Republican. I understand that he needed to do that in order to have any chance of becoming the candidate but, should he be elected, which McCain will we end up with? What is certain from all that has been aired and proven reliable is that he is too adept a liar to be a maverick reformer and his choice of Sarah Palin was one of the most cinical political acts I have witnessed of late. He may have been a patriot in his army days but now, obviously, he cares much more about himself than about is country. Sarah Palin indeed! My wife would be one hundred times - at least - a better candidate; but being honest and never claiming to know what she doesn't know she wouldn't have a chance. She may be an awesome executive and may have covered half the world for a wire service but she was never a stage mom, didn't even get involved with the PTA, doesn't know how to field- dress a moose - or anything else - and could never have said thaks but no thanks to a bridge to nowhere since, under an administration run by her, a bridge to nowhere would never have had a chance to become an issue in the first place: she's just no good.

Could I Vote for a Ticket that Includes Sarah Palin?

Sarah who? When she was announced as Mc Cain's running mate, in order to find out more about this obscure Vice-Presidential choice I went on the internet, well aware of the fact that anyone can put anything on the internet. The first thing I found was Anne Kilkenny's open letter. I wondered whether there really was an Anne Kilkenny living in Wasilla and articles on both the Daily News and the New York Times confirmed it, since they had found her, interviewed her and determined that it had been actually she who had written the letter. Anne Kilkenny is a Democrat who is, obviouslly, not very favorable to Palin; however, I have learned that where there is smoke there is fire and the tone of the letter convinced me that most of its contents were, probably, reliable. She is, certainly, smart, energetic, devious and dangerous but there are doubts about her actual executive experience since, while Mayor, she dedicated herself to politics and hired an administrator to do the actual work. The sobriquet, barracuda, seems very appropriate. She fired (and was then forced to reinstate) the Wasilla librarian because she was unwilling to ban books from the library that Sarah, as a born-again Evnagelical Christian, didn't approve of. As Governor, she fired the police commissioner for refusing to go along with her personal vendetta against her trooper ex brother-in-law. She keeps a black list, is very vindictive and everyone in Alaska seems to be afraid of her. They say that she has bitten every hand that was ever extended to help her: that would suggest to me that she is a paranoid. Of course she thinks she could deal with Vladimir Putin: they are two chips of the same block (albeit she a much smaller and inferior chip) and the facts suggest that she would have had a good career in his KGB. She seems to subscribe to the creed: "Believe what I say and not what I do." A fiscal conservative, she increased by one third Wasilla's expenditures during her six yeras in office and raised the city's debt from zero to $22 million, in spite of recurring annual supluses derived from tax increases. As Governor, she distributed to the citizens the growing state surpluses, derived form ever increasing oil prices, while borrowing to meet current needs; no wonder that she has an 80% approval rate!  Obviously, there is no way I could vote for this autocratic fundamentalist (no better than Islamic, Jewish or any other fundamentalists) who doesn't want other women to have the choice her teenage daughter has had, who thinks that having assault weapons in one's home is perfectly normal and ok and who cannot be trusted to execute any of the things she may promise while running to be elected. It also seems that the curruption she is against is mostly that in which others engage and I am starting to think that four more years of Bush may be preferable to a single day of Sarah Palin one heart-beat away from the Presidency. If there was any doubt that the Republicans have become a rogue party, intent only on winning in spite of their bankrupt policies, their choice of the Vice-Presidential candidate is the proof.

Handicapping the Field

I've always liked John McCain. He was a real war hero and always seemed to be unafraid to break with his party if he thought they were wrong. He stood for fiscal conservatism and did not embrace the issues dear to his party's right wing and evangelical crazies. He was a moderate Republican I could agree with on many issues. But this was the John McCain of 2000. Today's McCain is openly pro-life, pro NRA, anti-stem cell research, pro mingling of State and Church, anti an illegal immigrant solution, anti significant alternative energy research and pro Big Oil while his foreign policy views, right in some instances, are such that I worry about having his finger on the doomsday button. If elected, he may revert, at least partly, to the old McCain but there are no guarantees and it is unlikely that the party and that his chosen Vice-President would make it possible for him to do so.

Sarah Palin was impressive last night. Undoubtedly, her speach was totally scripted but her delivery was excellent and she came across as pleasant, tough, earnest and energetic. She is no push-over. What she has achieved in 20 months as Governor of Alaska is remarkable. She has cleaned up a lot of ingrained corruption, has turned down Washington's 'bridge to nowhere' and has an 80% rate of approval. However, how could I be for someone who threatened to fire a school librarian who wouldn't censor some books, someone who got rid of the chief of police for refusing to fire her ex-brother-in-law, someone who wants Creationism to be thought in school, someone who wants to enforce her religious beliefs, by law, on everyone else, someone who is far too green and too provincial to be entrusted with dealing with other heads of state? I may like the McCain/Palin fiscal views much more than Obama's but eveything else about them is distasteful and it would be downright stupid to believe that the party that has put us in today's mess is equipped to pull us out of it.

I've liked Obama since I first heard him speak at the 2004 Democratic Convention; he is very charismatic and much of what he says makes good sense. However, I still do not know whether he has the ability to actually implement what he says and his voting record in the Illinois legislature puts many doubts in my mind. He is pro-choice, pro-stem cell and alternative energy research and I believe he will try to find an equitable solution to the illegal immigrants problem. However, I do not like his tax and spend ways (let's first save where we can since tens of billions are being wasted) and I fear that he may turn out to be too far to the left for my liking and for the good of our economy.

Biden had always been my first choice for Democratic nominee and I would feel much better if his and and Obama's roles were reversed. Should the Democrats win, time will tell whether Biden will be given enough responsibility to make a difference on how the country is governed.

One of the best comments I've heard is: "McCane is running eight years too late and Obama eight years to early." It is likely to be a close race and, as usual, a beauty contest. The ideas are never aired in sufficient detail to really make a difference. Good luck to us: we'll need it.

Signed, Sealed and Delivered

One day before Obama's acceptance speech I got off the fence and decided that, although I still had doubts, I would vote for him. Hearing him speak in Denver's Mile High Stadium strengthened my conviction, as he seemed to have his priorities right and looked and sounded Presidential. I still thought I should listen carefully to the debates but, after McCain announced that he had chosen as his running mate Sarah Palin my vote for Obama was signed, sealed and delivered and I feel, somehow, that most independents like me will come to the same conclusion. I have heard Republicans gush that she is highly qualified because she was a basketball standout nicknamed Sarah Barracuda, because she was a hockey mom and president of the PTA and because she was the mayor of a hole-in-the-wall town of 9,000 inhabitants and two years ago was elected - it beats me why - Governor of that very populous state: Alaska. I am certain that Vladimir Putin, Ahmedinejad, Bin Ladin and Hu Jintao are duly impressed and worried and I am so glad and reassured at the thought that, should anything happen to 72-year old McCane, she will be there to represent the U.S.A. What were McCain and his advisers thinking? I thing that rather than be guided by reason they were guided by desperation. Probably, they hope that by being an extreme right winger she will bring out the vote of all the Republican crazies who view McCain as too moderate and by being a woman she will attract the vote of those Hillary supporters who are still upset by her defeat. They may be right in the first instance but I doubt that Democratic, pro-choice women will chose to vote, as a protest, for a pro-life, right wing ticket. As I have already mentioned, it seems certain to me that McCain has chosen to forfeit the independent vote in the hope that die-hard Republicans will bring him to victory. In view of the hundreds of thousands of Democrats newly registered to vote and of the fact that this Republican ticket will be viewd by Democrats as a red cloth by a bull, I think he has taken a huge gamble that may well cost him the election; I sure hope so.