Traveling this week

I'll be on the road the rest of the week. I'm sure there will be something worth a comment when I return.

Wouldn’t you really rather have a Buick?

Rick Wagoner spent the last 10 years trying to catch a falling knife, and yesterday it bounced off the table and stabbed him in the heart. He’s a decent man who tried to do the right thing, but it was never enough fast enough. When you’re borrowing tens of billions from the taxpayers, a human sacrifice may be called for. Wagoner is it.

My question is, “when do we start sacrificing bankers?” At least Wagoner can point to Buick coming in number one in the latest J.D. Power study for vehicle dependability (tied with Jaguar). Can anyone name a single thing any of America’s top banks have ranked number one in lately other than quantity of bad investments, boldness of consumer exploitation, or size of taxpayer bailout?

And has the government forced out a single bank CEO? No. Their specialized knowledge is too valuable, their experience too extensive, and their judgment too sound. We just can’t lose them.

If Lincoln had managed the Civil War the way President Obama is managing the financial crisis, McClellan would have still been holed-up in Washington in 1864 while Lee controlled the rest of the continent.

I understand the need to get tough with Detroit. Let’s just dish out the same medicine to Wall Street.

Don't get too excited

There we lots of newspaper headlines and smiley faces on the network news programs yesterday, reporting that house sales were actually "up 4.7% in February!"

That does kind of beg the question, however, "compared to what?" One might be excused for assuming that was compared to February 2008, but it was actually compared to January 2009, which was abysmal. Compared to February 2008 (the more logical month to contrast, and one in which sales were only kind of bad), Feb '09 house sales were actually down 41%, which is not really that good; although you'd never know it by the big goofy grin on Brian Williams' face as he told us there was "finally some good economic news to report."

I read recently that fewer than one-third of Americans can name the three branches of government. An even smaller percentage of journalists can interpret data.

We’re #3! (Or is it #4?)

Japan won the World Baseball Classic for the second consecutive time this week, and despite having the most major leaguers of any team in the tournament, the U.S. was eliminated by Japan and came in either third or fourth overall (no one seems to be able to say for sure which it was). How could this have happened? After all, we introduced baseball to the Japanese in the 1930s after we’d been playing it nearly 100 years.

According to the American players, Japan did the little things, and played with basic fundamentals; the United States did not. Players repeatedly referred to the Japanese team’s attention to detail as if it were a foreign concept or a long-lost art.

Brian Roberts, the team’s second baseman, said: “When you play Japan, when you play Korea and those countries, they’re going to play fundamentally sound baseball. They’re going to do all the little things. You have to focus on the fundamentals. Americans, we probably don’t do as good a job of that as they do at times.”

Shortstop Jimmy Rollins added: “They don’t worry about the big things. They didn’t worry about trying to drive the ball out of the ballpark. When you put the ball in play, you can find holes. And they play with passion.”

Derek Jeter said, “They don’t strike out. “Everybody puts the ball in play. They all run. If I could do it or teach it, I would.”

After winning the championship game and celebrating for an hour or more, the Japanese players showered, and then put on a clean Japanese team uniform. They were still representing Japan, and the team comes first.

Who said sports aren’t an apt metaphor for life in America today?

ALSO: Tom Friedman makes my point better than I could in his column today urging President Obama to be bold.

Another good read courtesy of AY: "The Big Takeover" from the current Rolling Stone. Excerpt: "People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations."

And as reminder that there is always another side to the story, read the resignation letter from an AIG employee that was reprinted today in the Times.

Duplicity

I hope everyone had a chance to see Charlie Rangel express his outrage over the A.I.G. bonuses last week. What a performance by Cadillac Charlie. If you didn’t know better you’d never know that he solicited millions from the insurance giant and its former CEO, all the while inserting provisions in bills that saved the corporation many times that amount. If it seems I’m picking on him, believe me I realize that’s what Congressmen who gain the sort of power he has do, but he’s close to home and the Times does a good job of outing him – not that anyone seems to care. Read the latest here.

Another act of Congressional duplicity that ranks at the top of the list of double dealing the public was the provision inserted in the bill that created prescription drug benefits for older Americans which prohibited Medicare from using the buying power of the 40 million Americans who use Medicare to get competitive pricing. It’s been three years and now we know the cost of that provision, drafted by drug lobbyists and passed by our Congress: $30 billion over 10 years. There’s a good update in a column about it here.

I know many of you don’t want President Obama to take on Congress, but how else do we stop grand larceny on this scale?

A third, less damaging form of duplicity, is the new movie of the same name. It’s a fast paced, stylish, old-fashion caper movie with Clive Owen and Julia Roberts, and they are both great. Owen may be the coolest guy (other than Clint) in the movies today. One warning however: if you are easily confused by complicated plot twists, this may not be the movie for you. This one has more switchbacks than an Afghan mountain road.

My brain hurts

Does the world of credit default swaps (CDOs), derivatives, counter parties and such, make your brain hurt (as Jethro Bodine was found of saying)? Try this analogy:

Imagine that A.I.G. wrote insurance policies (CDOs), for a specific period of time, for fleets of cars owned by Goldman Sachs, Merrill Lynch and a bunch foreign banks (the counter parties). A.I.G.’s credit rating was cut last September, which required it to put up additional capital in reserve against potential claims. They didn’t have the money, so in order to prevent the cascading collapse of counter parties, the government gave A.I.G. a series of capital infusions which have now reached $170 billion -- money supplied by the taxpayers.

Either A.I.G. didn’t tell the government, or the government didn’t tell us, how that money was going to be used, but this week we found out that A.I.G. used almost $50 billion of the money to buy the fleet of cars from Goldman, Merrill and the foreign banks, paying them the full value of the cars even though there has been no accident claims against them so far. Here are a couple of things A.I.G. and the government could have done instead:

1. They could have waited until one of the cars was in an accident, and paid that claim only; after all, it’s unlikely that all the cars are going to have accidents. If an accident did occur, they could have negotiated with the clamant, offering, say 75 cents on the dollar, since this was taxpayer money. What could Goldman do about it?

2. They could have offered the banks fifty cents on the dollar for the cars. Then at the end of the insurance time period they could have sold the cars at market value and had the possibility of making a profit. (But, since they paid full value, that possibility no longer exists.)
So A.I.G. was simply a clearing house for the funds which were passed on to other large financial firms that may, or may not, have had a pressing need for the funds.

This analogy is flirting with the border of Oversimplificationland, but is essentially the reality of what has gone on. The five largest sums went to:

Société Générale $11.0 B
Goldman Sachs 8.1 B
Deutsche Bank 5.4 B
Merrill Lynch 4.9 B
UBS 3.3 B

This, you will notice, is quite a lot more money than the $165 million in bonuses that everyone has their knickers in a twist over now. And while I don’t think those bonuses should be paid, the bonus flap is a pimple on Lawrence Summer’s behind compared to this. If one guy on Wall Street ever earned his money, I think we can say the Henry Paulson earned every penny Goldman ever paid him for arranging this deal for his long-time employer. And he’ll never have to buy a meal again when traveling through France, Germany or Switzerland.

Where's my money bitch?

I'm sure there are layers upon layers of political motives at work here, but don't you find it really disconcerting to have the Chinese openly warning us that they expect their money back? It's only a trillion or so -- I guess that's still big money in China.

How about a little good news? Read Tom Friedman's column in today's New York Times. Maybe good old American ingenuity will get us out of this mess eventually.

Why earmarks matter

While it has no relevance to today’s topic, I found this chart fascinating.

Earmarks: So, even though the mere mention of the word brands one as a cranky old white man, I’d like to return to the topic of earmarks, because they are important, and here is why:

First, BHO promised to go through his budgets “line-by-line,” eliminating waste and unproductive spending. To now call this “yesterday’s budget” and promising to start eliminating earmarks next year is very disappointing to a lot of people who voted for him, believing in the promise of change.

Second, at best, earmarks are nothing but graft that a Congressman uses to grease constituents in order to strengthen his hammerlock on his job. At their worst, they are pure corruption.

Third, they are anti-democratic and regressive.

Finally, and most importantly, they were a pivotal issue for many people who voted for John McCain. Being “bipartisan” doesn’t mean inviting a few Republican politicians over to the White House to watch the Super Bowl, it means recognizing that you only won 53% of the voters, and that you need to do something occasionally to make the other 47% believe you actually care about them.

Cracking down on earmarks is the easiest thing to do for the McCainiacs. First of all, it’s the right thing to do; secondly, Obama needs to control Congress, which will only increase his popularity.
And don’t tell me “they’re only a couple percent of the budget.” Please. They will take $8 billion from the current budget. That could have paid for health care for 8 million families for a year. We can’t afford this kind of waste, and Obama can’t afford to ignore promises of this scale.

Wall Street: Just in case you have any lingering feelings that Wall Street was a “victim” of the economic crisis just like the rest of us, the Times had two really good columns this week to refute that idea: “Tsunami of Excuses,” by William D. Cohan, the author of a new book on the fall of Bear Stearns, and “The Looting of America’s Coffers,” by regular columnist Tim Leonhardt.

I dream of Martha

I know, I’ve been AWOL. It isn’t writer’s block. As originally stated above: “I have more opinions than opportunities to express them, so I created this blog.” But I’m finding the current state of things so confusing I don’t even know my own opinion on most issues.

So let me tell you about this dream I had last night. I was selected by the president of the club where I play golf to take Martha Stewart on a tour of the course. For some reason we made this tour at night, and it looked more like the foothills of the Rockies than my actual course. I suspect this was my subconscious describing the way the course typically plays for me.

We were on foot and I had to carry a lot of Martha’s stuff, which made it a long hike. Since it was dark, Martha didn’t really seem overly impressed with the vistas, but we happened to come up behind the 11th green just at sunrise and it was spectacular.

We went up to the clubhouse to have breakfast. Martha asked me to open the big book she had me lugging along, which was a detailed profile of every person she had ever met. She was sure she’d been to this club before and dined with a man named Fred. I was able to find the profile, and Fred turned out to be this guy I used to work with when I lived in Ohio. He had morphed from a 280 pound, bearded, tattooed, member of the United Steel Worker's Union, into a pink and green bedecked, boat-shoe wearing, über-clubbie.

At this point, Fred showed up for the meal, which had turned into a dinner with lots of wine. Martha then suggested that I come home with her because the book was too heavy for her to carry. I got nervous. (I know where this part of the dream came from. Dinah Shore had a thing for a guy for whom I used to work, and she was always calling his hotel room late at night asking him to come to her room to “help her” with something. Very creepy.)

Anyway, when I hesitated, Fred jumped in and offered his assistance, which seemed to be just fine with Martha.

They left together. I went out and played 18 with Bernie Kozar.

St. Barack and the dragon

The dragon is Congress and we are the Princess. If BHO can’t get the Parliament of Whores ("Democrats are the party of government activism, the party that says government can make you richer, smarter, taller and get the chickweed out of your lawn. Republicans are the party that says government doesn't work, and they get elected and prove it.") under control, and soon, they may just ruin his Presidency before he even gets a chance to show us what he can do.

Why does he continue to play Obambi with them? Americans hold Congress in lower esteem than even the reviled GWB. What could make better political sense than using his considerable political capital to take them on and break them of their belief that the U.S. Treasury is their own personal slush fund?

Good Lord, even Maureen Dowd is starting to comment on the bountiful portions of pork they ladled into the current budget, and on BHO’s unwillingness to stop them despite his campaign promise to end this practice. The earmarks may represent a small portion of the budget, but they are a powerful symbol of Washington’s arrogance and waste.

Watching the Congressional budget hearings yesterday and listening to the ignorance that oozed from nearly every question our legislators asked made me cringe. These people are truly fools.
If he stomps on them now he’ll be a hero to millions – including to many of his critics on the right. If he doesn’t, he’ll be a prisoner to Pelosi and Reid for four years and will be building his Presidential Library by 2012.