Main Street Muse

Folk Fest!

2012-01-16T18:40:00.003-06:00

Awards season is upon us, which is reminding me of a great bit of live music from the 2011 Grammies. This clip offers almost 10 minutes of some of the best modern folk music available today... Mumford & Sons, Avett Brothers, and Bob Dylan (kind of a family affair!)

Screwed! By Chase Bank, no less...

2012-01-12T16:57:00.001-06:00

A few years ago, I succumbed to a phenomenal sales pitch by a BankOne banker and agreed to open a traditional IRA at the bank. I blame it on exhaustion - I had very young children at the time. Sleep was hard to come by in those days and I was, at times, out of my mind with fatigue.

And so, exhausted and inexplicably charmed by the salesman at the bank, I plunked down a small amount of money and opened a retirement account.

Moments later (it seemed, in my sleep-deprived state), BankOne was acquired by Chase. And all my accounts became Chase accounts.

Over the years, this Chase IRA earned little money. Very, very, very little money. After the initial deposit, I never again deposited money into it, preferring to invest in other, better retirement plans.

Recently, we moved to a town not blanketed in Chase bank branches - the nearest one is more than 100 miles away from us, forcing me to take a harder look at all our accounts and stuff like that.

And when I looked at this Chase IRA, I realized that it earns 0.01 percent.

One-one hundredth of a percent.

Really, Chase? That's the best you can do? After all we've done for you and your cohorts at other TBTF banks?!

This week, I tried to close that account and transfer the funds to a different (non-Chase) IRA. It was an ulcer-inducing, highly irritating, very unfriendly experience. One that involved snail mail - and only snail mail (no tying into the electronic transfer system at Chase!), paperwork, a search for the snail mail address to send the paperwork back to Chase (found only on the envelope the paperwork came in, not on the paperwork itself), surly customer service reps, a drive to the notary public and more snail mail with the promise that someday, they'll snail mail me a check.

A nightmare just to close a piddly retirement account.

I am very much looking forward to the day I close this IRA. Am at the point where I will pop a bottle of Champagne when I'm done with this bank.

One should not be so happy to be done with the big banks, but there you have it, TBTF banking in America is NOT an experience designed with the customer in mind....

After all these years, green shoots at last?!!

2012-01-06T09:41:00.003-06:00

WSJ covers the emerging green shoots of the economy - the unemployment rate is dropping, as are the new claims for unemployment.

Kinda looking like THIS drop in unemployment is for real, not just the "fuzzy math" that comes by not counting people who've given up all hope of ever getting a job.

Can it be that years after Ben Bernanke so optimistically groomed us for "green shoots," they're finally popping up at last?! Well, according to the WSJ, the Fed's not doing a jig just yet:

"The Federal Reserve, charged with maintaining stable prices and maximum employment, has remained cautious."

Strange to see such caution from an organization that proclaimed the arrival of [the false] spring back in March 2009...

A "tweaker's" guide to real genius....

2012-01-06T06:23:00.002-06:00

Am reading Isaacson's bio of Jobs right now - it's one of those great, can't-put-down kind of reads, a fascinating glimpse into the life of a man whose inventions literally changed our lives.

Concurrently, I've just read Malcolm Gladwell's New Yorker review of the bio. And feel his characterization of Jobs as a "tweaker" is about as far off base as one could be.

To prove his point, Gladwell takes us to England at the dawn of the Industrial Age, pondering why England proved the center of innovation at that time:

"In an article published earlier this year, however, the economists Ralf Meisenzahl and Joel Mokyr focus on a different explanation: the role of Britain’s human-capital advantage—in particular, on a group they call “tweakers.” They believe that Britain dominated the industrial revolution because it had a far larger population of skilled engineers and artisans than its competitors: resourceful and creative men who took the signature inventions of the industrial age and tweaked them—refined and perfected them, and made them work.

In 1779, Samuel Crompton, a retiring genius from Lancashire, invented the spinning mule, which made possible the mechanization of cotton manufacture. Yet England’s real advantage was that it had Henry Stones, of Horwich, who added metal rollers to the mule; and James Hargreaves, of Tottington, who figured out how to smooth the acceleration and deceleration of the spinning wheel; and William Kelly, of Glasgow, who worked out how to add water power to the draw stroke; and John Kennedy, of Manchester, who adapted the wheel to turn out fine counts; and, finally, Richard Roberts, also of Manchester, a master of precision machine tooling—and the tweaker’s tweaker. He created the “automatic” spinning mule: an exacting, high-speed, reliable rethinking of Crompton’s original creation. Such men, the economists argue, provided the “micro inventions necessary to make macro inventions highly productive and remunerative.”

For Gladwell, Steve Jobs is the Richard Roberts of the Information Age - the "tweakers teaker" - one of many men man provided "micro inventions" that pushed the productivity of the creations of true inventors:

"But Isaacson’s biography suggests that he was much more of a tweaker. He borrowed the characteristic features of the Macintosh—the mouse and the icons on the screen—from the engineers at Xerox PARC, after his famous visit there, in 1979. The first portable digital music players came out in 1996. Apple introduced the iPod, in 2001, because Jobs looked at the existing music players on the market and concluded that they “truly sucked.” Smart phones started coming out in the nineteen-nineties. Jobs introduced the iPhone in 2007, more than a decade later, because, Isaacson writes, “he had noticed something odd about the cell phones on the market: They all stank, just like portable music players used to.”

In the end, Gladwell writes, "...Jobs’s vision, brilliant and perfect as it was, was narrow. He was a tweaker to the last, endlessly refining the same territory he had claimed as a young man." To Gladwell, Jobs' contributions are simply refinements of existing tools; Jobs was a man who somehow (inexplicably) "tweaked" his way into the zeitgeist.

But he is so very wrong.

Gladwell is pushing 50. He is old enough to remember talking to a friend on the phone while twining oneself in the cable that connected the phone's receiver to the base in another room. Gladwell is old enough to understand that it was the original cell phones that were "tweaks" on Alexander Graham Bell's original invention (an invention that "was the subject of the most involved patent litigation in history" - seems that true invention is something often claimed by many.)

And he is right to say that in launching the iPhone, Apple focused its attention on improving an existing technology. In an article on the initial iPhone launch, Time magazine says:

"Cell phones interested Jobs because even though they do all kinds of stuff--calling, text messaging, Web browsing, contact management, music playback, photos and video--they do it very badly, by forcing you to press lots of tiny buttons and navigate diverse heterogeneous interfaces and squint at a tiny screen.

The iPhone, on the other hand, pushed the boundaries of what phones could do. Apple created a entirely new communication tool, one that combined phone connectivity with music, photography and video. Anyone who owned one of those original iPhones could create personalized set lists of favorite songs and take video of events as they're happening and post them on the web. He turned the phone, that communication tool once anchored firmly to the wall, into a revolutionary new tool for use in the Digital Age.

We saw the power of this "tweak" just this fall with the UC Davis pepper spray incident. Cell phone video taken by protesters showed a policeman calmly spraying pepper spray into the faces of students who were passively seated on the ground. With videos of the event circulating on YouTube, we did not need to see this event through a UC Davis communications blitz or via the Fox or MSNBC newsroom filter. We could see just the event and judge it for ourselves.

Now, thanks to Apple's innovative approach to phone technology, the whole world is indeed watching - but we don't need to wait for Walter Cronkite to explain it to us,.

Time says this about the initial iPhone launch:

"Perhaps it's not quite right to call the iPhone revolutionary. It won't create a new market or change the entertainment industry the way the iPod did. When you get right down to it, the device doesn't even have that many new features--it's not like Jobs invented voice mail, or text messaging, or conference calling or mobile Web browsing. He just noticed that they were broken, and he fixed them.

But that's important."

Yes, that's important. And to call the iPhone a "tweak" is like saying Hemingway "tweaked" novel-writing, or George Eastman "tweaked" photography. What Hemingway and Eastman and Jobs did was to revolutionize literature and photography and communication. In taking radically different approaches to existing forms, these men changed how we looked at the world.

You simply cannot say that about the first generation of cell phones, created and produced by people whose names we never knew, not geniuses we remember.

In reading Gladwell's review, it's as if he feels compelled to "tweak" the existing hagiography of Jobs in order to make an impression of his own. In an article where the genius of Jobs is referred to only in the headline, it's as if Gladwell needs to diminish the giant in order to stand apart from the collective adulation of a true innovator.

Perhaps it is Gladwell who is the tweaker, not Jobs.

A read of Isaacson's bio is all you need to understand that Jobs was no saint. He was a confrontational boss, a conflicted parent, and a man who viewed much of the world as populated by "bozos." His insistence on perfection was imperfect, yet it was this insistence that led his teams to improve, innovate and invent tools that have changed how we work, how we listen to music and how we communicate with the world around us.

And in this age of golden parachutes, bloated CEO salaries and economic wreckage wrought by greed, Jobs was a leader who never forgot why he was in business - to innovate products in ways that enhanced the consumer experience, not just fatten his paycheck. Sadly, that focus on the consumer experience showcases Jobs' innovation in leadership as well.

In calling Jobs a "tweaker to the last," Gladwell is simply wrong. Steve Jobs was indeed a man who "reimagined the world."

A day that will live in infamy

2011-12-07T07:19:00.001-06:00

Seventy years ago, the Japanese bombed Pearl Harbor, igniting a force that changed history.

Though it's a movie about the European theater of World War II, I think of that lovely quote near the end of Saving Private Ryan, when the mortally wounded Captain Miller leans in to Private Ryan as he whispers his last words... "Earn this."

Those are words that should inspire all of us.

Showers of doubt and shame

2011-11-16T13:05:00.001-06:00

In 1998, a boy came home from school one day with wet hair. His sharp-eyed mother noticed. A conversation was had.

And Jerry Sansdusky first fell into the sightlines of the law.

You can find this described in the state of Pennsylvania's grand jury presentment about the Sandusky criminal investigation. This is the story of Victim 6.

In 1998, Sandusky was still coaching for the Penn State Nittany Lions. In 1998, Sandusky was a highly respected, very successful man who devoted a great deal of free time to The Second Mile, a charity he founded to help "at-risk" youth.

In the case of Victim 6, there was a lengthy investigation by University Police. But the case was closed "after then-Centre County District Attorney Ray Gricar [who vanished without a trace in 2005] decided there would be no criminal charges."

However, the mother of Victim 6 decided to have a couple of conversations with Sandusky, conversations that local detectives had eavesdropped on. According to the grand jury presentment, the conversations were about the wrongness of showering naked with young boys:

"The mother of Victim 6 confronted Sandusky about showering with her son, the effect it had on her son, whether Sandusky had sexual feelings when he hugged her naked son in the shower and where Victim's 6's buttocks were when Sandusky hugged him.

[Asking a man about the sexual feelings he has for her child while showering naked with him is not a question any mother expects to be asking a highly respected icon of the community! Just saying!]

The grand jury presentment continues....

"Sandusky said he showered with other boys and Victim 6's mother tried to make Sandusky promise never to shower with a boy again but he said he would not. She asked him if his 'private parts' touched Victim 6 when he bear-hugged him. Sandusky replied, "I don't think so... maybe.' At the conclusion of the second conversation, after Sandusky was told he could not see Victim 6 anymore, Sandusky said, 'I understand. I was wrong. I wish I could get forgiveness. I know I won't get it from you. I wish I were dead....'"

More than a decade ago, Jerry Sandusky was confronted by a woman who wanted him to promise that he'd never again shower with young boys. He refused to make such a promise. And clearly, he continued to shower with little boys long after he ceased talking to the mother of Victim #6. Long after he acknowledged to the mother that he "was wrong."

Now in a highly publicized interview, Sandusky tells Bob Costas that yeah, the only wrong thing he did was that inappropriate activity known as showering with young boys.

In the Costas interview, Jerry certainly set the record straight. He's a man who showered repeatedly with young boys. And he did this despite the conversation he had had with the mother of Victim 6 back in 1998. He knew it was wrong. And, as Sandusky knew then, he's going to have a hard time finding forgiveness for this, and other things....

On the McQueariness of our Morality

2011-11-13T07:04:00.001-06:00

When he was 28 years old, Mike McQueary walked into the Penn State locker room one evening and saw a man raping a ten year old boy.

It wasn't just any man. It was McQueary's former coach, Jerry Sandusky.

And it wasn't just any victim; it was a naked, young boy.

Now McQueary is a big man. A former Penn State quarterback. A man who had played at Penn State during Sandusky's tenure as a Penn State football coach.

So on this night, McQueary sees his old coach (who had "retired" three years earlier, a year after a janitor reported seeing Sandusky performing oral sex on a child) naked in the showers raping a child. Here's what the grand jury report says about this incident:

"He saw a naked boy, Victim 2, whose age he estimated to be ten years old, with his hands up against the wall, being subjected to anal intercourse by a naked Sandusky. The graduate assistant [who, as we all now know, is McQueary] was shocked but noticed that both Victim 2 and Sandusky saw him. The graduate assistant left immediately, distraught."

(Click here for a detailed timeline and a link to the report.)

McQueary does not jump in to stop this pervert from abusing this boy. He does not call the police. He does not call campus security. McQueary heads out of the locker room post-haste.

In other words, he leaves the child alone with the rapist.

[I think about that boy - who is being abused in such a terrible way - and I think about that moment he sees a potential rescuer - and then watches as the red-haired rescuer vanishes, leaving the victim at the mercy of a monster.]

But apparently McQueary's instincts screamed for action - so he acted - he called his father. Who seems not to have suggested that McQueary go back into the locker room to get this defenseless child away from a very terrible man.

The next day, McQueary pays a visit to his other father, Joe Paterno, AKA JoePa, AKA McQueary's boss, the man who today is the winningest coach in Division 1 college football history. JoePa waits another day and then goes to the authorities at Penn State and says that McQueary "had seen Jerry Sandusky in the Lasch Building showers fondling or doing something of a sexual nature to a young boy."

A week and a half go by, and the Penn State authorities call a meeting with McQueary, hear what he has to say, and then let the "distraught graduate assistant" know that "they would look into it."

A "couple of weeks later," McQueary was told that "Sandusky's keys to the locker room were taken away and that the incident had been reported to The Second Mile."

End of story.

Until a local high school acted to protect one of its students from Sandusky and got the authorities involved [authorities that would actually do something]. Sandusky is now charged with multiple counts of sexual abuse of minors.

The Penn State scandal is a horror show, a nightmare, a story so awful in its facts that it's difficult to acknowledge the truth:

A slew of men knew one of their colleagues was a child molester and they did nothing about it.

Instead, they found it morally imperative to protect their football program instead of protecting children from such a monster.

We can look at this incident in isolation. Or we can look at it lumped together with all the other scandals - sexual and otherwise - we've witnessed in the last decade or so. Enron. World Com. Mortgage-backed securities. Iraq's non-existent WMD. All those incidents where something truly awful was going - a morally perverted action, a corrupt business model that would topple not just a company, but the economy, a war declared to protect the nation from weapons that did not exist.

With each situation, there were McQuearies involved - innocent bystanders who had opportunities to speak up, to say no, to report something disgraceful to authorities. But in each instance, most of the bystanders stood silent, missing an opportunity to stop an immoral act from mushrooming into a full-blown catastrophe.

The truth is: McQueary is not alone in turning his back on a heinous crime. He's not alone in seeking to protect a respected, yet morally bankrupt, criminal. Unfortunately, he's in very good company.

That's what makes the McQueariness of our morality so terrible. McQueary shares this moral collapse with far too many people. A question to consider: are you one of them?

Niall Ferguson: the Ann Coulter of Harvard

2011-10-15T20:02:00.000-05:00

Niall Ferguson has a post in the Daily Beast in which he lambasts the Occupy Wall Streeters for blaming "big business" for our ills, rather than the real culprits, which (in his mind) are the Baby Boomers.

For Ferguson, a Harvard professor, it's easier to point a finger at a generation, rather than at the highly compensated Ivy League grads on Wall Street, whose fiscally unsound business practices dragged our economy into a sewer. Here's Ferguson, on the protestors:

"Yet if I were a young American today, occupying Wall St. would not be my objective. Just reflect for a minute on the unbridled economic mayhem that would ensue if the protesters actually succeeded. The headline “Goldman Sachs Under Control of Hip Teenage Revolutionaries” would be the last straw for an already fragile economic recovery."

Ferguson feels the protesters need to shift attention away from Wall Street and focus on Boomers - the source of our ills today is the Boomers' profligate spending, their upcoming age-related illnesses and their inability to die inexpensively after a long and expensive life.

Myself, I am not aware that the goal of OWS is for teens to takeover Goldman Sachs. I was under the impression they wanted Wall Street to clean up its act, not for Lloyd Blankfein to capitulate to those not old enough to drink legally.

But for a Harvard professor, it's easier to be glib and facile and point the finger a a particular generation, rather than examine the serious business flaws within our financial sector (the sector that required an astronomical bailout to "protect" the economy from failing in 2008). Generational discord is Ferguson's snappy retort to those protesting the fraud and corruption of Wall Street.

By doing so, he's become the Ann Coulter of Harvard, a media hound willing to say anything to get attention. Because, after all, it works. Which is not at all "way cool..."

In Memoriam: The Bright Sky, Obscured....

2011-09-09T15:33:00.002-05:00

An impossibility becomes possible; it has been a decade since 9/11/01, the day that shook our world. Ten years have passed since the planes pierced the Twin Towers in Manhattan. Ten years since the Pentagon was hit. Ten years since ordinary people wrestled with mad men flying a plane over a field in Pennsylvania.

No one who was alive that day will forget it. I will never forget it. On that September day, ten years ago, the sky over Chicago was as bright a blue as the sky seen in New York. Bright, cloudless, breathtakingly blue. A sky and a day full of the beauty of autumn.

But halfway across the continent, planes like bombs flew into the towers. Red and black flames licked the white buildings. The towers collapsed and the dust swirled like thick, black smoke, choking life out of the glorious day.

And the dark cloud blotted out the bright sky. The beautiful day darkened into early night. Hatred begat a violence that was beyond the imagination of all of us. A hatred so strong it enabled men to transform planes into powerful missiles pointed at the heart and soul of our nation. A hatred so overpowering that it put ordinary citizens in the sight lines of a war we didn't know we were waging.

On that day ten years ago, my son was not quite two years old. 9/11/01 fell on a Tuesday, which happened to be my day off of work. My son and I had a busy morning planned; a trip to the farmer's market followed by a big workout at the YMCA Tiny Tot tumbling class. It was an ordinary day filled with the ordinary moments of an ordinary life.

We were oblivious to the catastrophe swirling in New York until we were in the car heading to the farmer's market. I turned the radio on, and the announcer, in a voice full of shock, announced the collapse of the first tower. And the cessation of air traffic. It was about nine o'clock in Chicago.

I looked up at the bright blue sky and realized how empty it was that morning. No planes at all. I hadn't realized how the buzz of air traffic insinuated itself into the everyday sounds of life until the planes had been grounded.

The silence was more deafening than the air traffic.

Terrorists brought down the towers that day. And galvanized the country into action. We saw unbelievable courage that day. Fireman risking (and losing) their lives to save the people in the towers. Ordinary people helping others to safety. Supposedly the last words said by those flying in doomed planes and trapped in the doomed Towers was "I love you" in messages left on the voice mails of their beloveds.

And after the collapse of the Twin Towers, after the day darkened into night, we saw those signs posted - the heartbreaking signs asking for any information about a missing loved one.

Hope dies last in a situation like that.

We felt a strong sense of community born of the fact that we were all Americans on 9/11; we were all united in grief and confusion and yes, even pride in the courage we saw our fellow Americans display in New York and Washington and over that desolate field in Pennsylvania.

Almost 3000 people died that morning. We are still haunted by the devastating grief and loss from that day. The story that most haunts me a decade later is that of the little girl on her way to Disneyland. Juliana McCourt, four years old, was traveling with her mother to the Magic Kingdom. Instead, she flew with her plane into one of the Twin Towers and was obliterated in a gigantic fireball.

Tendrils of grief made their way across the nation. We mourned collectively. We mourned privately. We mourned the loss of our citizens, our friends, our family. We mourned the loss of our innocence.

Eventually, we moved on from that moment. Resumed our lives once again. Went on with the day-to-day bustle of life in modern America. Took our children to Wiggle Worm classes. Watched them get on the bus that took them to their first day of school. Felt the tremors of the collapse of Enron. Watched our nation declare war on two fronts in Iraq and Afghanistan. Came to the realization that the weapons of mass destruction that caused us to declare war on Iraq did not exist. Endured the collapse of our financial sector. Witnessed massive unemployment on a scale not seen since the Great Depression.

We realized that not all the threats to our nation existed outside of our borders. And that is a realization that is as haunting as the memory of 9/11.

And now summer transitions into autumn. And now it's here, the tenth anniversary of a most terrible day. And now the day that changed America confronts us once again, begging us to remember what we die for when we die for our country.

Hank Paulson takes on a new role...

2011-06-27T14:49:00.001-05:00

Just what students of public policy need... lessons from Henry Paulson.

He's apparently joining the University of Chicago's Harris School of Public Policy Studies for a five-year stint as a senior distinguished fellow.

Curious as to the lessons he'll pass on to his students - the need for extreme leverage ratios (as he preached when CEO of GS) or the urgent need to bailout those institutions whose leverage ratios gutted their businesses (as he preached when US Treasury Secretary).

Does paying out $250K over 4 yrs really bring "huge" returns?

2011-06-27T13:02:00.003-05:00

David Leonhardt has a post on the NY Times Economix blog, talking about the "huge" returns that come from earning a college degree. (You can link to his longer piece in the Sunday Review here.)

My children are small - we're focused on the elementary school education right now. But my beloved niece is in high school - she's just turned onto that road that will determine her future. And college most definitely is in that future of hers.

But what kind of college? Her parents (my sister and brother-in-law) just attended a presentation by Northwestern University, and learned that starting next fall, a year's worth of education at NU will set you back $60,000 a year. 60,000 bucks per annum.

Sixty thousand dollars a year.

Forgive the repetition, but that figure astonishes me.

Multiply that times four and you discover that you'll be paying out nearly a quarter of a million dollars for the highly desired NU education. (I have twins and shudder to think of our tuition bills a few years from now...)

And this is in a time when the median household income is about $50K.

So is it worth it?

Leonhardt shows some graphs that he feels prove it's definitely worth it.

According to one graph, it looks like demand exceeds the supply of college graduates in the work force. But then I wonder - where is this info coming from? We're seeing some of the highest unemployment in years and most of the recent college grads I know are having one hell of time getting a job that will help them pay down that college debt they've accrued. I'd like to know how this graph was created - what figures are they finding that shows college grads are in high demand right now?

And then another graph shows the income one can expect with the college degree, compared to those with the high school degree. And if you're good, the graph seems to indicate, the college grads will top out at about $78,000 a year. And you start out post-college earning less than $30,000 a year.

(A rather daunting prospect, to pay down a quarter million dollar loan with that kind of salary! Or even paying down a $100K loan, assuming the family's set aside money for college and it didn't all vanish in the recent crash.)

Those without a diploma start out at less than $20K and top out at about $30K.

If you look at it from that perspective, yes, college makes sense.

But does paying $60K for the knowledge that in your 40s and 50s you may earn about $80K (if you're not dumped by your employer for reaching that "golden" age of experience companies don't want to pay for any more) make for a "huge" return?

Not really. Tuition costs are rapidly reaching the point of diminishing - not "huge" - returns. College tuition is dangerously close to the point of being unaffordable for most families outside of the wealthiest families in America.

And if colleges don't come to grips with their astronomical increases in tuition, they will find themselves like the housing market - a sector with a whole lotta supply and very little demand for their services.

How's this for a lede?! From Harvard Law School no less...

2011-06-26T12:28:00.000-05:00

In an article called Too Big to Fail or Too Big to Change, Harvard Law School starts with a bang...

"Two and half years removed from the worst financial crisis since the Great Depression, the investing public has grown increasingly frustrated with the lack of criminal prosecutions of, and absence of truly significant fines levied against, the senior executives and companies responsible for igniting the subprime meltdown."

Good point! Jail the crooks who dragged the economy off the cliff. But that would require a system backed by ethics and law, not greed and corruption. And that would require BIG CHANGES in America....

The market has vanished.

2011-06-19T09:27:00.001-05:00

An opportunity knocked. We're moving cross country to pursue it.

Which means we need to sell a house.

The first time we sold a house, many, many years ago, we sold without a broker to friends of friends. That house never went on the MLS at all. And both parties walked away very happy. Last time we sold a house, seven years ago, we sold it by owner for close to the asking price in less than three days. That was then.

This is now. And what we've discovered - the market for homes has vanished completely. There are no buyers at all.

We are motivated sellers. We've priced our home competitively. Yet let me repeat: there are no buyers. And if you look at market metrics, for several years now, the supply of homes for sale far exceeds the number of buyers. Within any given month, there are several hundred homes for sale, and just a handful of sales.

That's grim news if you've signed the contracts and are moving cross-country in a couple of months. The one bit of green we see - the market for renters is apparently robust. And at least we're not under water with the mortgage.

But I remain absolutely stunned at the absolute absence of the housing market.

What our financial sector did to the housing market is unconscionable. They maxed out the housing market with leverage - as is their habit - and then got bailed out when the market collapsed.

For people like me, however, those who got the 30 yr fixed mortgage we could afford - we're screwed. Totally and completely screwed by "the market." Which was totally and completely manipulated and destroyed by our financial sector.

And there's no bailout for us.

Stop the ego trip! Newt's team wants to get off...

2011-06-09T17:41:00.001-05:00

Apparently Newt Gingrich's top campaign team members resigned en masse, frustrated to work with a man who'd rather vacation with his wife than hit the campaign trail.

He's alienated the House Republicans by trashing Paul Ryan's "Prosperity" plan. He's alienated those who believe the marriage contract is binding, and not something to be tossed aside (especially when the wife is in the hospital being treated for cancer.) He's alienated working class Republicans with his half million dollar loan from Tiffany's.

And now he's alienated the top tier of his campaign staff.

I myself will never understand the enormity of the Newtonian ego, nor what props it up, seeing as a reality-check would pop it faster than a pin. But what passes for reality on Main Street seems but a strange dream to those in DC. Thus Newt remains a candidate in name only, a man with no hope of winning at all.

The parade of penises must stop!

2011-06-07T07:54:00.000-05:00

So not only is Anthony Weiner lumbering under an unfortunate moniker, he chose to display his very own weiner for all to ponder on Twitter, of all places. He says he won't resign over this. However, he should be fired for being one of the stupidest people in Congress these days.

Just a few weeks ago, the Terminator's revelation that he fathered a "love child" some years ago with a household employee who just retired after two decades of service to the Schwarzanegger family terminated his marriage to Maria Shriver.

And then the sperm of the head of IMF has been found on the clothing of a cleaning woman at the hotel he was visiting. She's accusing him of sexual assault. He's apparently saying she wanted it. Because all women who clean hotel rooms for a living are eager to suck the dicks of powerful men they've met just prior to scrubbing out the bathtub. Or so the theory goes.

And before all this, we had the US government spending millions to bring us the Starr Report, which, in its quest to uncover the ills of Whitewater, discovered only a semen-stained blue dress. Concurrently, there was Newt Gingrich sneaking around on wife #2 as he loudly chastised his president for the sexual indiscretions with the blue-dress wearing intern. Then there was Senator Larry Craig, the anti-gay crusader who was found tap-tap-tapping his way in a bathroom stall to get him some (male) sexual satisfaction.

And the list goes on and on.

The 24/7 tabloid news media has no shortage of sex scandals of the rich and powerful to share with the world. And that is a huge problem in America. For when we are dealing with significant crises, the men in power are pondering not the problems, but where to stick their penis.

Can't they just keep it zipped up?!

Disturbing stats from NYT's Economix blog...

2011-06-06T09:33:00.000-05:00

A recent Economix column has a chart comparing this recession against others we've experienced. And guess what? This one's pretty bad!

Unemployment has risen to 9.1%, thanks to the tepid movement on new jobs in May. Under-employment remains high. And the numbers of those who've "dropped out of the employment market" is large as well. Here's what Economix has to say about it:

"Since the downturn began in December 2007, the economy has shed, on net, about 5 percent of its nonfarm payroll jobs. And that does not even account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.....

There are now 13.9 million workers who are looking for work and cannot find it; the figure nearly doubles if you include workers who are part-time but want to be employed full-time, and workers who want to work but have stopped looking."

If you add it up, it looks like 20% of our work force is without a decent job.

Clearly, it's a bit of a fiction to view the 9.1% figure as the national "unemployment rate," given how many people are not being properly utilized in the labor market, but that's how we do it here in America; we charge blindly into that dark night!

Once again, Peggy Noonan shows off her delusional mental state...

2011-05-28T14:04:00.008-05:00

Peggy Noonan has written some wonderful speeches in her day, but her columns in the WSJ are so married to ideology as to be fiction, rather than commentary. Here I express my alarm that such a prominent conservative voice pointed the finger of blame for the BP oil spill at Obama, instead of at BP, the hugely profitable, multi-national corporation that made the error-ridden business decisions leading up to the spill.

Today, Noonan's word of the day is "unsustainable."

"The American establishment, on both sides of the political divide, is admitting as never before that we are in an existential challenge. And this is progress. It was not always so! It wasn't so two years ago."

As Noonan acknowledges, many Americans outside of the "American establishment" recognized back in 2008 that it was time for a change - that the challenges facing America were severe, painful and absolutely needed to be addressed. That it's taken the "establishment" some years to catch on is a symptom of the blindness facing our leaders today.

"Elected officials began to get the message. Now they've got it. Our spending and debt are—and it is interesting that this is the first great buzzword of the new decade— 'unsustainable.'"

So who does Noonan feel is the savior of our nation?

Paul Ryan, the man who is "at the summit, soldiering on."

The big problem of Ryan's Medicare plan, she feels, is that "people fear the complexities and demands of a new delivery system."

Oh Peggy! That's SO not the problem with Ryan's plan! The problem with Ryan's plan is the plan itself. It's asking people on fixed incomes to assume more of their health care costs. It's dumping seniors back onto the free market - the market that doesn't want anything to do with them at all! - so that we can control the costs of health care for our senior citizens. And it's handing senior citizens an $11,000 voucher to cover their health care needs.

So yes, under Ryan's plan, health care costs will be "controlled" because seniors won't be able to afford health care - though Paul Ryan and Peggy Noonan don't want anyone to say that.

But seniors aren't as stupid as the GOP thinks - they know $11,000 won't cover a hip replacement or chemotherapy or most of the prescriptions they need to help with glaucoma, high blood pressure, etc and so on. They know that to preserve the stash of dough our government needs to bail out banks (because in case Noonan hasn't noticed, that massive TBTF issue has not yet been resolved, leaving our banks still TBTF and thus, ripe for future bailouts), we've apparently got to ask seniors to head bravely out into that "free market" health care model that profits most when it pays out the minimum for the health care costs of its insured customers.

Worse, Ryan's plan ties voucher increases to inflation, though for years, health care expenses have risen dramatically higher than inflation. Here's what Ryan has to say about that in his Path to Prosperity (p. 45):

"Today, Medicare spending is growing at a rate of 7.2 percent every year. This is more than twice as fast as this nation’s economy is growing."

Which means that people on the GOP's voucher program will soon find their ability to pay for health care severely limited.

Noonan thinks she knows what "the people" are thinking about this:

"...Normal people are more likely to sit slouched at the kitchen table with their head in their hands. 'Oh no, another big decision, another headache, 50 calls to an insurance company, another go-round with the passive-aggressive phone answerer who, even though she's never met me, calls me Freddy as she puts me on hold.'"

Normal people aren't sitting around the kitchen table with their head in their hands. Ryan's plan does not have them worrying about the "go-round with the passive-aggressive phone answerer" at the insurance company, though they are immensely irritated by such things.

They're freaked out about how they'll pay for health care at all.

For Noonan to view "normal humans" as those who "don't relish making informed decisions about things they're not sure of..." is so condescending. And so wrong.

Decisions surrounding health care are not the same as decisions about which toilet paper to buy. When at Target or WalMart, you can compare brands of toilet paper. You can decide what to buy based on the pricing, softness and squeezability of the product.

You simply cannot shop for health care that way. Insurance companies negotiate complex and opaque pricing arrangements with health care providers and medical supply companies. A consumer is not privy to the pricing until after the procedure or product has been purchased. A consumer cannot fully know which product or procedure is better because they've not spent years in med school training to be a physician. A consumer of health care is often someone who is panicked at the news of a terrifying diagnosis and thus cannot think practically about the "purchase."

So for people like Noonan and Ryan to think that "normal people" will be happy to be handed $11K for their health care, at a time in life when their health care is the most expensive it will ever be, and their ability to earn an income to pay for it is limited by age and health issues, that's demagoguery of the worst kind.

Brad Delong (and other economists) are asking the wrong question

2011-05-26T18:25:00.000-05:00

Since the economy crashed in 2008, Brad Delong has periodically wondered how the small losses seen recently in the securitized mortgage market have added up to the worst recession since the Great Depression. He's got such a post over on his blog today.

I am not an economist. But my big post-crisis question isn't how "a $2 trillion impulse in lost value of securitized mortgages has set in motion a financial accelerator that we do not understand at any deep level but that has led to ten times the total losses in financial wealth of the impulse."

My big question is: when did we become so dependent on debt at every level of our economy - consumer, banking, government? In 2008, leverage became the only pillar of our economy that was left standing, apparently, until it, too, crashed.

Brad Delong recognizes a key fact: "You need money to buy stuff. If you don't have money, you can't buy stuff--and so when you are short of money you cut back your spending because you must and so build your money balances back up."

For decades, our consumer-driven economy has been driven by consumers with shrinking budgets to work with. For me, the equation for our current crisis is thus:

Stagnant wages + rising health care costs + astronomical tuition that most consumers can pay for only by acquiring massive debt = consumers hanging on by a thread.

Add on a massive housing bubble, where the biggest asset for most Americans became a financial bomb that blew up their net worth = consumers terrified of losing everything + consumers who've lost everything.

Then add on a financial sector that proves beyond a shadow of a doubt to be corrupt and incompetent (all at once! And led by our best and brightest too, scores of Ivy-educated men who used their intelligence and training to create instruments of "innovation" that turned out to be weapons of mass destruction) and you've added the vivid and powerful emotion of panic into the recipe, which brings the cauldron of crisis to a boil.

The problem, as I see it, is not in the numerical smallness of the loss. It's in the pervasiveness of the corruption that runs throughout our entire financial system. It's in the income inequity we've seen develop in the last quarter of a century. It's in the capture of our elected officials who cater to the lobbyists and not the voters.

In 2008, our financial sector failed. Capitalism in the most powerful nation on earth failed in 2008. Our entire banking system exists today only because of a massive and very costly federal welfare program. We privatized profit and socialized the losses of the biggest banks in America.

That's a terrible, horrible, no good very bad problem that cannot be summed up by a labeling it a "$2 trillion impulse."

Economists focused on numerical sums will never see this. And that's a big contributor to the "crisis in economics" that Delong has been also pondering.

DUH!!!

2011-05-26T10:44:00.003-05:00

NPR reports that consumers who are squeezed at the pump have pulled back on spending in other areas. The result is being felt on the economy.

"High gasoline prices, government budget cuts and weaker-than-expected consumer spending caused the economy to grow only weakly in the first three months of the year."

Thanks to NPR for pointing out the obvious - that higher gas prices cut into money consumers would rather spend elsewhere.

That's why the corporate leaders who feel that squeezing as much out of their employees for as little as possible are remarkably short-sighted. A consumer-driven economy needs consumers with funds to spend.

So dip into the profit goody bag and start giving employees much-deserved raises. Hire new talent to fill key positions. (There's a lot of talent looking for a compatible work hook-up right now, FYI.)

If business leaders want to sell their product, they need to make sure America's got consumers with money to put towards consumption. And by consumers, I mean the broader market beyond just the high-paid folks in the C-suite.

And if the GOP wants to continue to assert that stopping the only spender in town (the government) from spending is the best way to jump start the economy, good luck fellas! Way to remain blind to the evidence! Their "big idea" is not showing much traction today.

The man who wrote "Forever Young" just turned 70

2011-05-25T15:06:00.004-05:00

If Bob Dylan turned 70 yesterday, it means the one time I saw him live in concert was ten years ago.

[A decade! It's flown. The baby I left with his grandparents so I could see Dylan perform heads off to middle-school next year...]

Ten years ago, Dylan was celebrating his 60th birthday by performing at state fairs (an odd choice of venue for the Greenwich Village poet of the Boomer generation). It was 2001, the same year Madonna was wandering the world on one of her widely publicized mega-tours, a huge show with numerous moving parts, you know, a show full of dancers, choreography, music and fog.

And then there was Dylan, playing in Springfield, IL. In August. At the State Fair.

It was a crowd of about 10,000. Not quite a full house, but close. The scent of clove cigarettes mingled with the odor of manure. As the sun began to set, we wandered from a draft horse competition to the racetrack where Dylan would be performing.

[This was the pre-9/11 world we were living in. Bush was most likely on vacation (he spent a great deal of his first year in office on vacation, it seemed.) Cheney was mixing it up with reporters who wanted to know which oil execs had influenced his oil policy. Cheney's stock answer was that it was none of America's business.

Just weeks later our world would crash down around us.]

That sultry night in August, Dylan strode on stage with his band, and never stopped singing until the show was done. His set list included a rousing version of All Along the Watchtower (one of my favorite Dylan songs) and a powerful rendition of Masters of War.

He said nothing at all to the audience. It was about his music. Only the music.

When it was done, he walked off stage and onto the bus that would take him to another State Fair.

What he left with his audience - indelible memories of a man hard at work at a craft he loved more than anything else. No glitz. Certainly no glamor. Just the music and the master.

Though Dylan's shows can be unpredictable, the show he put on at the Illinois State Fair in 2001 was incredible.

Here's one of the first music videos ever created: Dylan playing Subterranean Homesick Blues...

And here's on older Dylan, dressed in a shiny gold shirt, growling out the tune "Forever Young" - accompanied by the Boss...

Springsteen-Dylan "Forever young" by betterday

A Master at Work

2011-05-20T19:54:00.000-05:00

One of my girls was reading Easter Parade. Felt compelled to show her this, one of the greatest dance scenes ever filmed.

Ronald's not the reason why...

2011-05-20T14:13:00.001-05:00

Though I applaud the physicians of America for going after the obesity epidemic (according to the Centers for Disease Control, 17% of children and adolescents are obese), lining up Ronald McDonald in their sights isn't exactly the right target.

More than 500 physicians have signed a letter to McDonalds, asking the corporation to retire Ronald. As reported in the WSJ, the letter says:

"The letter, slated to run in the form of full-page ads in six metropolitan newspapers around the country on Wednesday, acknowledges that 'the contributors to today's (health) epidemic are manifold and a broad societal response is required. But marketing can no longer be ignored as a significant part of this massive problem.'"

(It's looking more and more like marketing is the answer AND the problem!)

I actually like McDonalds. But I like McDonalds largely because we use it as a rare treat, not as a frequent source for sustenance.

I also acknowledge that marketing is a big reason why McDonalds is successful. Long before they learned how to read, my children recognized the Golden Arches as the place for a burger and a toy. The marketers at Micky D's are really very good at what they do - they long ago recognized their brand identity as a place for predictable and affordable family meals - and they've used marketing to continually reinforce that brand identity and reach new customers throughout the years. Though I've never been to B-school, I'll bet Mickey D's provides an excellent case study for aspiring marketers.

But to say that McDonalds' marketing department is a "significant part" of the massive problem of obesity is wrong. McDonalds' marketers do not force us at gunpoint to gulp down multiple Big Macs. McDonalds is known to offer a number of high calorie meal options - and their calorie counts are now on the back of every place mat placed on every tray used when dining in at McDonalds. If you're not aware that burgers and fries eaten in excess are not good for you, then you've been living under a rock.

It's the consumer who chooses to buy the burger - and the fries - and the full-of-sugar soda. And it's parents who are choosing to take the family to fast food restaurants all too frequently. They're the ones responsible for the food their children eat, not McDonalds.

To blame "marketing" scapegoats a corporation for choices made by individuals. And that's the real problem with so many of our issues today in America. It's always someone else's fault.

To Scott Walker - where's the love, dude?!

2011-05-19T08:33:00.000-05:00

Apparently going after teachers and unions isn't enough for Wisconsin Governor Scott Walker. He's now focusing his attention on banning the hospital visitation rights of same-sex couples.

Here's what the Milwaukee Journal Sentinel has to say:

Madison - Gov. Scott Walker believes a new law that gives gay couples hospital visitation rights violates the state constitution and has asked a judge to allow the state to stop defending it.

Who goes to see dying patients in the hospital? Only those who really love them. So why Wisconsin's governor wants to ban the dying from receiving visits from a loved one is beyond me. But then again, understanding the rabidly conservative mindset is beyond the scope of my imagination.

Here's the Harvard Business Review, on the marketing of one's soul...

2011-05-18T15:41:00.002-05:00

Let's just say I'm a little skeptical of what they're teaching over at Harvard. That's because so many of those who were nurtured and educated in the Ivy League later went on to develop "innovation in finance" that caused our economy to drop off a cliff back in 2008.

But I'm always curious to hear what Harvard has to say about key topics, and was highly intrigued when this eye-catching headline, Don't Sell Your Soul, Market It, came across my Twitter feed.

Turns out it's a post by Dan Pallotta about building up the "philanthropy" market. According to this article:

"Most people want to help others. Their lives would feel incomplete without this connection to humanity. We can tap into this human desire by marketing compassion with the same rigor as we market luxury cars."

(Highlighting is Pallotta's, not mine.)

Which I guess is a good idea, though now I see images of sleek cars snaking their way across challenging terrain, not starving children who need to be fed or offered polio shots for free.

One thing I don't understand - who'll pay for this marketing? In business, marketing departments are paid for and funded by income generated by the commodity they are selling. So who pays for the marketing budget of a philanthropy? Are we going to divert funds from those who need the particular charity and instead flow that funding into marketing campaigns? For what purpose?

Toward the end of the article, you realize what the purpose is: to provide work for Pallotta's new venture - a humanitarian marketing firm whose "purpose is to begin marketing benevolence as brilliantly as Budweiser markets beer."

(Now I'm seeing Clydesdales! Damn that power of marketing!)

I understand what Pallotta's trying to say. But I'd like to see a cost/benefit analysis of one of his campaigns. Did spending X dollars on a breast cancer awareness campaign bring in significantly more research dollars? Or were resources allocated to marketing that perhaps would have had more impact if they'd been allocated to breast cancer research? How much does the cost of litigation over rights to use the philanthropic "paradigm" take away from the philanthropic work to be done?

Pallotta ends with this:

"The only way that humanitarian organizations will ever become self-sustaining — and will ever approach the scale needed to address today's massive social problems — is by stimulating demand for philanthropic goods and services. The market for that philanthropy must be built, in the same way Starbucks built a market for lattes.

If humanitarian organizations market their souls this way, they won't have to sell them. We can advertise our way to humanity."

I REALLY hope that Pallotta understands that the demand for philanthropic goods and services does not require marketing for growth. That demand is there - and growing without the benefit of marketing - in part due to massive global income inequity. And I kinda hope they've taught the students at Harvard that there are quite a few people in this world who believe the problems caused by income inequity need to be addressed by methods other than philanthropy.

And I also wonder what kind of cars the people who work at Dan's company are driving. Are they driving luxury cars as a result of their work developing marketing campaigns for philanthropic organizations (as many who are successful in private sector marketing drive)?

I hope not. Because when the people I know donate to philanthropic organizations, they want their money to matter - they want the money to reach the people in need - not plump up a marketer's lifestyle.

After reading Dan's post, I realize that the brilliant thinkers of Harvard are now going to take the charitable world by storm - to "advertise our way to humanity." Because at Harvard, there's no other way to acquire a soul except through the marketing of it.

Who is Paul Ryan?

2011-05-18T11:44:00.005-05:00

[Yes, there is the intentional hint of Ayn Rand in the headline, for those who are wondering. Because why not evoke John Galt when talking of Paul Ryan?]

But it's a fair question to ask - this "who is Paul Ryan" question, since he seems to have seized control of the GOP's platform of late.

He's so out in front of the curve that Newt Gingrich, a man who aspires to be the GOP nominee for president, slammed Ryan's Medicare reform plan, which has been adopted by the GOP-dominated House. Referring to the Ryan plan, Gingrich said he was "against a conservative imposing radical change." [Why do I believe that Newt's campaign is not long for this world?]

A Product of America's Dairyland
What we know about Ryan: that he comes from Wisconsin - a Midwestern state with an economy that wears its cheesehead proudly. Yes, there's a mix of agricultural, industrial and dairy in its economy, but Wisconsin brands itself as "America's Dairyland" right there on its license plates. Its largest city, Milwaukee, is bordered less by suburbs and more by farmland, a strong contrast to the miles upon miles of suburia that ring Chicago.

I live not far from the Wisconsin border - and whenever I cross over into Wisconsin for a visit, I always marvel at the roads. To this Illinoisan, Wisconsin seems to take care of its infrastructure. At least on the surface. Their public pension plan, deemed by Pew Research as one of the most fiscally responsible in the nation, is still underfunded and has come under strong attack by Scott Walker, the state's Republican governor.

Ryan sits in the congressional seat once occupied by Democrat Les Aspin. He hails from the state that once gave us Senator Joe McCarthy and today is presided over by Walker, who is actively shaping state government into a very conservative mold.

Wisconsin is Midwestern, proud of its heritage as a dairy producer and relatively ignored by national media. [Until recently - when was the last time you saw tweets about any state's Supreme Court elections?! Way to grab the national focus, Cheeseheads!].

And obviously there are great passions that run through some of its political leaders, Ryan included.

Just a Janesville boy
According to Ryan's official biography, he is a practicing Catholic and a "fifth-generation Wisconsin native." He's raising his family in the same town he was raised in, Janesville, which is also home to the Ryans' family-owned business, Ryan Incorporated Central, a company with both public and private customers.

His father died when Ryan was 16; according to US News and World Report, Paul Ryan used Social Security survivors' benefits to pay for college.

He received a bachelor's degree in economics and political science from Miami of Ohio. He was under 30 when first elected to the US House of Representatives.

The Devil is in the Details
These details are important; they tell the story of a man who grew up in the Midwest - outside the influence of Wall Street and Washington, D.C. It's likely he does not believe (as so many who focus exclusively on the Wall Street/Washington beltway believe) that the Ivy League is the only place for a college education. And he was a young man when he first assumed power and headed over to the nation's capital.

His is a story of a man with deep roots in middle America, a man who experienced early loss, a man who is publicly committed to faith, family and country.

He's a man who did not hesitate to take advantage of a government welfare program when he needed it to fund his own pursuit of higher education.

He's a man that seems unaware that our nation has endured the worst financial crisis in decades - otherwise he could not possibly define the extreme measures taken by the government to prop up and sustain the economy as "the spending spree of the last two years" (as he calls it in his Path to Prosperity plan.) And he fails to note that a good chunk of the "spending spree" was done to rescue our "free market" financial sector from its precipitous fall off the cliff (using funds granted through programs he voted for.)

What he doesn't mention in Path to Prosperity is that bankers got bonuses through the Ryan-endorsed TARP. And the rest of us got to see the economy outside of Wall Street tank. We got to see highest unemployment in decades. We got to see the value of our homes decline precipitously. And as we saw and experienced a major economic catastrophe, Ryan saw a government "spending spree."

He does call for an end to "corporate welfare" - but in this age of "systemically risky" financial institutions, such a sentiment needs to be backed up with a plan. I am not sure how his budget will free banks from the umbilical cord that attaches them to the Federal Reserve - but I'd like to hear what Ryan has to say about this.

He is also a man who's likely never had to purchase health insurance on his own. Otherwise, he would never, ever in a million years be able to say with any honesty:

"Our plan is to give seniors the power to deny business to inefficient health care providers."

I read that sentence in the Trib and thought it would LOL funny if it were not uttered by a man intent on reshaping the delivery of health care to seniors - it's that delusional and that ignorant about health care in America.

We have Medicare today because seniors had no power in the market back in the 1960s. They have no power in the market today. They are cost drains on the system, not powerful purveyors of commerce.

The power in the health care market belongs to insurance companies. They can and do deny coverage to anyone who needs health care. They can and do dump covered patients onto public plans when they can get away with it. They can and do deny individual claims and make it very very difficult for physicians to get paid.

In which the "invisible hand" is inflicted with paralysis
The problem with health care as a "market" is simple: the for-profit insurance company's goal of minimizing "medical loss ratios" (payouts for health care) is diametrically opposed to the customer's goal of getting health care when needed. The payor and the customer want completely different things. That's a far cry from Adam Smith's "mutually beneficial" economy. And it's a model that can only offer up ongoing conflict, not an efficient resolution of the problem.

As someone who is self-insured, I will tell you what I've learned. The high-quality doctors do not waste time on low-paying patients. They gear their practices toward those who can pay the private-sector rates. If you're on an HMO or other restricted pay type of program, the physicians you want to see most likely won't honor your plan.

Ryan wants to hand seniors an $11,000 voucher, with increases tied to the cost of living, not to the much higher increases in health care costs. Certainly, this plan will cut costs, because seniors will rapidly run out of money, and thus, the ability to purchase health care of any kind at all. And apparently, Ryan's convinced that insurance companies will actually offer premium-based coverage to seniors, which will only happen with a government-enforced, government-written mandate. That's a big injection of "government" into a market Ryan wants to free up.

Those so eager to let the markets decide (like Paul Ryan) seem always to forget that, throughout the centuries, the markets have decided that those lacking money also lack power, Ryan's tactics are completely at odds with his stated goal of giving "patients more power to reward providers."

And what happens when the health care problems cost more than the voucher? In a free market, consumers without money are outta luck. No more health care for those so sick they eat up their voucher! Costs are cut. Done! Health care? We don't need no stinking health care. Especially for all those who will follow the Boomers into retirement.

So who is Paul Ryan?
What we discover if we match Ryan's words with reality is that he is a modern day Don Quixote. With his goal to hand patients less money in an attempt to give them "more power to reward providers who deliver high-quality, low-cost care (and deny business to those who fail to provide quality, affordable care)," he's a man eager to slay giants by tilting at windmills.

Only in the Paul Ryan version of the tale, some of our most vulnerable citizens will end up taking the hit. And we won't need "death panels" to decide any outcomes because the issue of health care for seniors will be decided - and rationed - by "the market."

More links to Ryan-related stories:

Wisconsin Magazine feature on Ryan

Ryan's Path to Prosperity

A look at "unconscionable math" that is used in health care

Paul Krugman on "what's in a name"

30 + years of Newt bombs

2011-05-11T09:34:00.000-05:00

Fasten your seatbelts - the war for attention in 2012 has begun!

Newt Gingrich is apparently taking his contract with America seriously once again. He's running for the nation's highest office. He's not one to let serving divorce papers to a woman undergoing cancer treatment stop him from such a noble pursuit.

Mother Jones has pulled together some Newt bombs - utterances made by Gingrich over the last 30+ years. Let's take a look! And let's consider if a man with this rhetorical history should serve as the leader of the world's most powerful country...

1978 In an address to College Republicans before he was elected to the House, Gingrich says: "I think one of the great problems we have in the Republican party is that we don't encourage you to be nasty. We encourage you to be neat, obedient, and loyal and faithful and all those Boy Scout words." He added, "Richard Nixon…Gerald Ford…They have done a terrible job, a pathetic job. In my lifetime, in my lifetime—I was born in 1943—we have not had a competent national Republican leader. Not ever."

1983 "If in fact we are to follow the Chamberlain liberal Democratic line of withdrawal from the planet," he explains, "we would truly have tyranny everywhere, and we in America could experience the joys of Soviet-style brutality and murdering of women and children."

1985 Upset with Democrats' foreign policy stance, Gingrich observes, "Adolph Hitler must somewhere be burning in hell, wishing he had lived two generations later, so he could manipulate Americans instead of Englishmen."

1985 "I have an enormous personal ambition. I want to shift the entire planet…I just had breakfast with [administration officials Richard] Darman and [David] Stockman because I'm unavoidable. I represent real power."

1988 "I spent a fair length of time trying to come to grips with who I was and the habits I had, and what they did to people that I truly loved. I really spent a period of time where, I suspect, I cried three or four times a week. I read Men Who Hate Women and the Women Who Love Them and I found frightening pieces that related to...my own life."

1989 He explains to the Washington Post why he fights with his second wife, Marianne: "It's not even that it matters to me. It's just the habit of dominance, the habit of being the center of my staff and the center of the news media."

1994 He sums up his political philosophy: "People like me are what stand between us and Auschwitz. I see evil all around me every day."

2011 Secular-socialists give way to atheist-Islamists: "I am convinced that if we do not decisively win the struggle over the nature of America, by the time [his grandchildren are] my age they will be in a secular atheist country, potentially one dominated by radical Islamists and with no understanding of what it once meant to be an American." His spokesman later clarified that Gingrich meant either Islamists or atheists would take over America, not both.

There's plenty more over at Mother Jones. Check it out...

When following the leader could lead to corruption...

2011-05-10T09:51:00.001-05:00

I think it is safe to say that Goldman Sachs is one of the leading investment banks in the United States today - if not the leading bank. Our financial sector has become so shrunken, who else could rival the golden boys for the title of America's Greatest Bank? Perhaps JPMorgan Chase, but as I understand it, they're weighed down by the debt-laden consumer side of banking.

That's why it is incredible that the nation's leading bank is so very busy this year fending off corruption charges. Sad for the nation when the leading financial institution is alleged to be acting corruptly in multiple instances.

So they put aside journalistic ethics for a moment

2011-05-10T09:35:00.000-05:00

Whoopsie! Lots of egg on lots of faces when the glowing tributes made by many Chicago journalists about the outgoing ~~King~~ Mayor of Chicago ended up in a furniture ad.

After the shit hit the fan, many of the journalists had themselves removed from the promotional video.

And the furniture company ended up apologizing for not being more clear about the purpose of the video. (Journalists believed it to be a gift to Mayor Daley, not an ad to be broadcast on TV with the furniture company's name prominently displayed.)

Hat tip to the very best tweeter of all time - Roger Ebert... if he's not on your twitter feed, he should be!

A career trajectory rivaling the Rock's for oddity...

2011-05-08T18:18:00.001-05:00

Mitch Marrow has been on the ride of a lifetime, with a career that rivals the Rock's (Dwayne Johnson > The Rock > The Tooth Fairy) for twists and turns.

Marrow started in the Ivy League, graduated to the NFL, transitioned to Wall Street and has now left the big leagues for a gig babysitting dogs.

His mother is his partner.

Here's the WSJ story with all the details...

When it comes to torture, Bush/Cheney/Rummy can't have it all...

2011-05-08T10:30:00.026-05:00

Paul Krugman's NY Times blog post, "Shadow of the Torturers," is a painful reminder of inconvenient truth that all Americans not molded in the model of John Wayne had to confront back in the days of Bush-Cheney: we became a country that openly endorsed torture as a national security measure.

It is interesting to note that those who endorsed the use of torture during the war on terror were also those who did anything they could to get out of serving their country during the war on Viet Nam.

In the late 1960s, when the Viet Nam war was raging, GW Bush - son of an authentic war hero - joined the National Guard, not active military duty, and in the early 1970s, apparently went AWOL and failed to fulfill his National Guard commitments.

As a young man in the 1960s, Dick Cheney pulled any string available to get out of the draft, and in return, received five draft deferments. Though eligible to serve his nation as a soldier in a time of war, he chose instead to stay home.

The two men grew up to become leaders of the most powerful nation in the world. In their roles as leaders of a nation devoted to liberty and freedom, they endorsed and employed the use of torture on military noncombatants.

Today, some of those Bush administration policy makers rue Obama's decision to move away from the use of waterboarding and other "enhanced interrogation techniques."

A Fox News interview scheduled for Mother's Day 2011 has Dick Cheney saying this:

"'I'm still concerned about the fact that, I think a lot of the techniques that we had used to keep the country safe for more than seven years are no longer available,' [Cheney] said."

In this instance, Dick Cheney is right. In 2009, at the National Archives, standing before the founding documents of our nation, President Obama categorically rejected the use of torture against enemy combatants and prisoners of war.

"I know some have argued that brutal methods like waterboarding were necessary to keep us safe. I could not disagree more. As Commander-in-Chief, I see the intelligence. I bear the responsibility for keeping this country safe. And I categorically reject the assertion that these are the most effective means of interrogation. What's more, they undermine the rule of law. They alienate us in the world. They serve as a recruitment tool for terrorists, and increase the will of our enemies to fight us, while decreasing the will of others to work with America. They risk the lives of our troops by making it less likely that others will surrender to them in battle, and more likely that Americans will be mistreated if they are captured. In short, they did not advance our war and counterterrorism efforts -- they undermined them, and that is why I ended them once and for all."

So our torture policy ended in 2009. But today, members of the Bush administration are claiming that information obtained through the use of torture during the Bush presidency was instrumental in finding Bin Laden in the age of Obama. Donald Rumsfeld, former Defense Secretary under Bush, recently went on Sean Hannity's show to claim that waterboarding (done, not at Gitmo by US military, but off-site by CIA) provided key information leading to Bin Laden in 2011.

It's been years since the US has waterboarded anyone. So if Rummy is correct, and the Bush/Cheney administration used torture to obtain vital information leading to the whereabouts of Bin Laden, why were they so unsuccessful in finding Bin Laden when they were in power?

What Cheney and Rummy seem unable to understand is that the claim that torture authorized years ago by the Bush/Cheney administration provided key information needed to take down Osama years after they left office makes the Bush administration look like incompetent failures.

If indeed the Bush administration had powerful evidence obtained through torturing "enemy combatants" that could help them find Bin Laden, why didn't they find him when they were in power?

What took so long?

By continuing to advocate for torture - and by claiming that torture done under Bush's watch help get Obama get Osama in 2011 - the Bush/Cheney administration once again exposes itself for what it truly is - vindictive, destructive and devoted only to the advancement of their disreputable techniques. And incompetent to the core. When handed incredible intelligence obtained through the use of torture, they were unable to accomplish a mission we so desperately needed to accomplish - they proved incapable of capturing Osama Bin Laden once and for all.

For that, we had to wait for the Obama presidency. The man Cheney, et al. consider soft on terror had the courage and audacity needed to take down America's most wanted terrorist. And in their vicious, unwarranted crowing about the value of torture, Cheney and Rummy prove once again that when it comes to courage, they are sadly lacking.

Links to related stories on torture of our "military combatants" and the military service of our former leaders...

Fox News Mother's Day 2011 interview with Dick Cheney about the death of Osama Bin Laden and President Obama's decision to move away from waterboarding and other "enhanced interrogation techniques."

Transcript of a 12/2008 ABC interview with Dick Cheney about torture and other assorted matters

President GW Bush's military service: a critical analysis by a retired Army colonel

US News & World report story on critical gaps in Bush's National Guard service

History of an Interrogation Technique: Waterboarding, by ABC News

Guardian UK story on how "Bush administration decided not to charge Jose Padilla" because evidence against him was "extracted using torture on members of Al-Qaida..."

Technology: Helpful or Harmful?

2011-05-07T08:22:00.000-05:00

Mark Thoma posts a 70 minute video of a panel of experts looking at the impact of technology on the noggin.

Like Thoma, too distracted to watch the entire thing right now, but I urge you to watch the opening. It's hilarious.

"The F***ing Epic Twitter Quest of @MayorEmanuel"

2011-05-07T08:07:00.000-05:00

For those intrigued by fusion of twitter and Rahm Emanuel's recent and successful quest for the top spot in Chicago, Dan Sinker's "The F***ing Epic Twitter Quest of @MayorEmanuel is available for pre-order.

Pointing to an unusual suspect for the increase in unemployment claims

2011-05-05T11:31:00.000-05:00

Troubling unemployment figures this week - according to a widely quoted AP story, it looks like new unemployment applications have hit an 8-month high. This elevates fears that the "recovery" has hit a bump in the road, which could mean anemic hiring patterns this spring.

According to the story, New York is to blame - specifically, their schools:

"A Labor department spokesman blamed much of the increase in unemployment applications on an unexpected spike from New York. More school systems than usual closed for spring break last week. That resulted in 25,000 layoffs. The department didn't anticipate the closures when making seasonal adjustments, the spokesman said.

Huh? Schools closing for spring break resulted in 25K layoffs? The Labor department did not realize that spring break in NY would require seasonal adjustments? Is it a "layoff" when hourly workers stay home for the week of spring break?

Anyway, in this "recovery," a spike in unemployment claims is not good, no matter what the reason.

The advantages of size and might, as revealed by the Easter egg hunt...

2011-05-04T14:38:00.002-05:00

A large crowd clusters near the glass doors. All are gathered together on this morning via the annual ritual known as the Easter brunch, celebrating the epic Christian holiday that commemorates resurrection and rebirth.

Outside, it is a sunny but chilly spring morning. Inside, the room is full of people preparing for the Easter egg hunt. Little girls dressed in pretty dresses. Boys wearing button down shirts and khaki pants. Adults happy with the knowledge that spring has (hopefully) arrived.

All of the children are eager for the impending hunt. They cluster near the door for easy access to the patio outside. They see bright plastic eggs splash vibrant color on the beautiful green lawn. The excitement builds. You can hear the murmur of children wondering when it will start.

And finally, the moment all the children have been waiting for arrives. The doors open - and the crowd spills out past the patio and onto the well manicured lawn where the eggs lay in plain view.

Only the eagerness has turned into a frenzy. Younger children are getting pushed around by the bigger children. In the adults who watch, a worry tickles the mind - that the race for the eggs may get ugly. The stampede may result in a trampled child. That the lovely Easter morning may turn tragic.

Such fears are not realized on this day, however. There is, however, another issue to address. The larger, bigger, stronger children are scooping up all the eggs. Smaller, younger, weaker children are getting shoved out of the way. Some of the smaller children look to their parents and wonder why there are no eggs for them. Larger children come back to the patio with their bags stuffed with goodies.

In the competition for eggs, size matters. With larger size comes strength and agility that give the older children a decided edge. Smaller, younger children are simply muscled out of the game.

Leaving parents to intervene, should they desire, to achieve a more equitable distribution of eggs. For some, the Easter egg hunt teaches children that egg wealth goes to the big and mighty. And for other families in attendance on this day, parental intervention that slightly changes the distribution of eggs is seen as essential for keeping the peace at home....

A quick look at consumer leverage

2011-05-03T09:12:00.001-05:00

Two posts in the blogosphere caught my eye this morning - both focusing on consumer leverage.

Calculated Risk points us to a Federal Reserve press release noting the "April 2011 Senior Loan Officer Opinion Survey." Opinions are good, but the release also seems to indicate there is data showing banks are easing standards and terms on loans for both businesses and consumers. Especially consumers:

"...And the net fraction of banks that reported having become more willing to make consumer installment loans rose to its highest level since the first half of 1994."

The whole mortgage-backed thing is kind of in the toilet right now, along with home prices, but this info from the Fed indicates banks are willing to lend to consumers without requiring a home to serve as collateral for the loan.

My initial response was cautious optimism. Perhaps the investment the nation had made in the banks (via TARP, etc.) was finally paying off with bankers now investing in consumers.

Then I saw this post from Paul Krugman. And my optimism was shattered once again. He's got a chart that shows a sharp upward shift in consumer leverage starting in 2001. As corporations were deleveraging, consumers were leveraging up. According to Krugman, "it's now standard to focus on household leverage as a key part of what went wrong in 2008."

So it seems like the opportunity for consumers to leverage up once again is a double-edged sword. Do we want consumers to become even more indebted and leveraged? Seems not the way to go. The answer seems to lie in boosting salaries of American consumers, not just their ability to borrow. Here's hoping we see wage increases in the recovery we're supposed to be experiencing. But that may prompt the Fed to issue other releases, warning of the dangers of inflationary wage increases...

Reflections on the death of Osama Bin Laden

2011-05-02T10:43:00.004-05:00

If you are old enough to remember 9/11/01, it is a day seared into memory. Bright flames flickering against white walls. Fingers of fire illuminating a deep and overwhelming hatred of our country. Thick, black smoke choking out the sun. Ash-covered survivors expressing terror and shock. The silence that comes when all forms of flight are grounded.

Above all, the grief. The tear-stained burden of grief assumed not just by the families who lost a loved one that day, but by millions of us who witnessed the devastation. Grief on a massive level. The kind of national grief we are unaccustomed to experiencing in America.

Osama Bin Laden was given credit for creating the monstrous rubble of 9/11. His will was done that day, the day that thousands of Americans died in the attacks.

The insanity of the attack was what struck me most. It was astonishing to learn that people were possessed of the kind of hate that could cause them to fly planes into buildings, bring down the World Trade Centers, turn the Pentagon into flames, create a black hole in a Pennsylvania field, exterminate thousands of Americans and kill a little girl on her way to Disney.

Last night, President Obama announced that Osama was dead. The man who was rumored to be living in Afghan caves was hiding out in a compound located in a resort town in Pakistan just a mile from the Pakistan military academy.

[How did we not know that?! How is it possible for the world's most wanted man to hide out in plain sight like that? And how can we possibly consider Pakistan an ally?!]

The attack was live-tweeted by a man who had no idea what was going on at the time. In learning of Bin Laden's death, I did not feel an overwhelming sense of victory. I did not feel that the enemy was now vanquished.

When I learned Osama was dead, I struggled to understand why it took nearly a decade to take him down. I wondered how he came to live in a massive compound located near a Pakistani military school. Who Pakistan is allied with - us or them. Why our intelligence remains as faulty as when it was used to scare Americans into fearing a nuclear attack of America launched by Iraq.

The mastermind is dead. But the war he initiated seems without end. And that it took a decade to find a man hiding in plain sight in the land of an ally is something that many Americans will be hard-pressed to forget. Just like the images of the fire and smoke and death and grief that Osama launched upon us nearly ten years ago on a bright and beautiful September day.

When God's work requires building walls, not bridges

2011-04-28T13:35:00.002-05:00

A story in Mother Jones points us to the historian favored by the GOP elite (Gingrich, Bachmann, Huckabee), a man named David Barton. Here's how MoJo describes him - as a...

"...Republican activist and minister who founded WallBuilders, a for-profit evangelical outfit that works to inject religion into politics. Barton holds some pretty unconventional views, and in the past he has spoken alongside fringe figures like Holocaust deniers and white supremacists. Among other things, he claims that Jesus would oppose the capital gains tax and the minimum wage; that global warming is "self-correcting"; and that the nation's homeland security apparatus has been infiltrated by members of the Muslim Brotherhood. He also contends that the separation of church and state is a perversion of the Founding Fathers' intention to create a Christian nation."

Let's just say Barton and I are not likely to be invited to the same parties.

Here's what Mike Huckabee says about Barton:

"I just wish that every single young person in America would be able to be under his tutelage, and understand something about who we really are as a nation," Huckabee said. "I almost wish that there would be…a simultaneous telecast, and all Americans would be forced—forced at gunpoint, no less—to listen to every David Barton message, and I think our country would be better for it."

Leave it to a Republican to bring guns into a discussion of religion!

I suppose in Huckabee's Christianity, the best way to take your religious instruction is by gunpoint, but again, I differ widely from current GOP leaders on pretty much everything.

Barton's organization - WallBuilders - is aptly named. On the website, the reason given for the name is, of course, biblical.

"In the Old Testament book of Nehemiah, the nation of Israel rallied together in a grassroots movement to help rebuild the walls of Jerusalem and thus restore stability, safety, and a promising future to that great city. We have chosen this historical concept of "rebuilding the walls" to represent allegorically the call for citizen involvement in rebuilding our nation's foundations. As Psalm 11:3 reminds us, 'If the foundations be destroyed, what shall the righteous do?'"

Unfortunately, what we need in this divided nation of ours is not more walls. What we need the "righteous" to do is to reach out and build bridges that connect those with differing viewpoints. The foundation of America is in need of connection, not walls that divide us even more.

As WalMart is my witness, consumer budgets are stretched thin...

2011-04-27T13:19:00.000-05:00

WalMart didn't reach the number one spot on the Fortune 500 list by being wishy-washy in its offerings. No, the company has seen incredible success because it lives up to its brand promise every day by offering consumers the opportunity to Save money. Live better. Since it first opened its doors in 1962, the world's biggest retailer has fueled company growth by consistently offering low prices to its customers.

Today, WalMart is struggling. The company has seen seven consecutive quarters of declining sales.

In an article in the Wall Street Journal, Mike Duke, WalMart's CEO, says that for the WalMart consumer, "there is more pressure today than a year ago," and notes that rising gas prices are impacting the consumer's ability to purchase other goods, like those sold at WalMart.

What does it say when a company known for its focus on cost-conscious consumers is struggling? That too many people are finding it very hard to make ends meet in America.

Here's the story:

BUSINESS
APRIL 27, 2011, 11:57 A.M. ET

Wal-Mart Sees Pressure on Customers

By KAREN TALLEY

Wal-Mart Stores Inc. Chief Executive Mike Duke reaffirmed the company's commitment to get U.S. sales back on track, but said customers are increasingly finding it hard to spend.

There is "more pressure today than a year ago" on Wal-Mart's core customers, Mr. Duke said at an executive breakfast sponsored by The Wall Street Journal. (News Corp. owns The Wall Street Journal.)

Customers continue to do heavy shopping at the beginning of the month when paychecks come in, but buying tapers off after that, showing they are already struggling. Consumers are now further pressured by rising fuel costs. Gasoline prices, which are running over $4 a gallon in many parts of the country, "are really having an impact on the consumer," Mr. Duke said.

Consumers are also dealing with inflation in key areas like fresh foods, while at the same time enjoying lower prices in more discretionary areas such as consumer electronics.

Wal-Mart is trying to position itself as the place to reduce gas use by being a one-stop-shopping destination with the lowest prices. The approach is part of the retailer's larger plan to add new customers and win back those that left when merchandise selections were winnowed.

Striking the right levels of pricing and compelling assortments are Wal-Mart's greatest challenges to stop a slide in U.S. same-store sales, Mr. Duke said.

Mr. Duke said a key strategy is to "widen the gap of savings" for Wal-Mart shoppers.

Prices at Wal-Mart already pressure mass merchants and grocery stores in particular.

Mr. Duke also said the company plans to be a leader in e-commerce and welcomes high-tech shopping innovations. He added that customers are seen in its stores using mobile devices to comparison shop, which the chief executive says plays into Wal-Mart's low-cost approach. In general, Mr. Duke said, "The consumer has learned and is paying more attention to how they shop."

Wal-Mart's efforts to bring in more customers are already seeing traction, Mr. Duke said, but he didn't commit to a time that Wal-Mart will break what is currently a seven-straight-quarter run of declines in sales at U.S. stores open more than a year.

Mr. Duke, who spoke about U.S. operations on Tuesday at another event in New York, received a different reception about a quarter of the way through his comments on Wednesday in an atrium at Bryant Park in midtown New York. About 60 union representatives, community activists and a band gathered outside to drown out his comments—but Mr. Duke continued on.

A representative said the group is protesting Wal-Mart's possible entry into the city. Mr. Duke had said earlier, "I do hope I get to make more visits to this great city," but added the company has nothing to announce.

It's been no secret that Wal-Mart is scouting locations in New York and unions have been protesting the move.

Mr. Duke said a New York Wal-Mart makes sense, given that city residents last year spent $195 million at Wal-Marts outside the city.

Outside the U.S., China "is probably our largest retail growth opportunity" because of its growing middle-class population, Mr. Duke said.

Write to Karen Talley at karen.talley@dowjones.com

On the failure of "the invisible hand" to influence our financial sector

2011-04-27T12:07:00.002-05:00

In Alan Greenspan's book, The Age of Turbulence, one of the issues he explores is the failure of economic populism in Latin America. Here are his thoughts:

"The dictionary defines 'populism' as a political philosophy that supports the rights and power of the people, usually in opposition to a privileged elite. I see economic populism as a response by an impoverished populace to a failing society, one characterized by an economic elite who are perceived as oppressors. Under economic populism, the government accedes to the demands of the people, with little regard for either individual rights or the economic realities of how the wealth of a nation is increased or even sustained."

So in Greenspan's view as a self-described Libertarian Republican, economic populism comes to life in "failing societies" that have significant income inequality and are dominated by an economic elite. And in Greenspan's mind, it is not the government that can make the required changes to address the failures of the society; it is the markets that are the key to reducing failure.

Our own economy is a mixed economy, market-driven, but with government policy and regulation developed to counterbalance the very real excesses of the markets. Though it is mixed, the US economy is not driven by the visible hand of a government acting as an economic populist, but is instead an economy that predominantly looks to the invisible hand of the markets to address and resolve economic failure.

Or at least, so I thought.

The Age of Turbulence was published in 2007, prior to the very turbulent collapse of our own economy. What we saw when our economy catastrophically crashed in 2008, was the US government acting to bail out and prop up the numerous failed businesses within our banking sector.

What we learned in 2008 was that in certain sectors - like our financial sector - the markets are not allowed to work their invisible magic. Banks that failed in 2008 were not allowed to fail. They were instead fed a steady stream of income from the federal government that propped them up, kept them going and allowed astronomical bonuses to be paid to the banking executives involved in their failure.

Under the very conservative, pro-business regime of GW Bush/Cheney/Paulson, the invisible hand was quite visibly shoved aside. We were told this had to be done because the consequences of the failure of these many banks would be too much for our economy to bear. Thus we needed to bail out the banks in order to see unemployment only push above 10%, underemployment that added to the burden of the populace, a housing market crippled by overvaluation and over-saturation of product, employees unable to move to better opportunities because of housing lock, banks showing profits as the debt of the US government reached astronomical levels.

Despite these significant problems our economy faces today, little has been done since the crash to wean the financial sector of their impractical and senseless dependence on the federal government. Dodd Frank is exploring the issue, but we do not have a resolution authority in place as of yet that will allow banks to fail in an orderly way. Our banks are as vulnerable to the domino-theory of collapse (if one goes, they all go) as they were back in 2008.

Today in America, rather than having an economy driven by the market, or economic populism, or the invisible hand, we have an economy reliant on a welfare program for bankers that is without question a failure. It is a failure of our banking sector, a failure of political philosophy, a failure of public policy, and most of all, a catastrophic failure of vision from both our business and political leaders.

And it is a failure that has cost our nation far too much.

My questions for Ben's first press conference

2011-04-26T16:16:00.001-05:00

Yves Smith at Naked Capitalism has issued a crowd-sourcing call for questions we'd like Ben Bernanke to answer at the first ever press conference by a Fed chairman. Here are somethings I'd like to know...

1) How much has the Federal Reserve spent on acquiring toxic assets from banks since their collapse?

2) How has absorbing the toxic assets of banks helped the residents of Main Street?

3) What benefit does the US gain from having investment banks considered "bank holding companies"?

4) How has becoming a "bank holding company" changed the behaviors of investment banks in ways that have created stability for the US economy? Or has it simply allowed them to continue to engage in risky business activities backed by the full faith of the US government?

5) Does the fear of inflation lead the Fed to develop policies that discourage wage increases?

6) Do you see a time in the near future when the banks in our financial sector will be force to deal with the consequences of their own losses - even if it means bankruptcy for the company - without federal support to prop up their operations?

7) What, for you, are the key lessons of the Lehman bankruptcy, and how can we use those lessons to help us wean the American financial sector from its dependence on the Fed?

8) Do you see the possibility of having a financial sector able to stand alone without Federal support when times get tough or are we permanently wedded to bailing the TBTF banks?

9) Does Dodd Frank go far enough to ensure we'll get a financial sector that can exist without federal bailouts and support when they take risks too big to succeed?

10) If you knew then in 2008 what you know now, would you allow bankers at banks requiring massive federal bailouts to used tax dollars to pay for bonuses? Do you feel that protecting bankers from the consequences of their failure is the correct approach to protecting the American economy?

Numbers lie - AKA Why Mike Konczal is wrong about housing lock

2011-04-15T17:37:00.001-05:00

Mike Konczal of Rortybomb has a long post with many graphs that he feels prove housing lock is "not a major part of this crisis."

He's wrong. Housing lock exists now; it is a problem; and it will continue to be a problem until people get their heads above water once again. Now how that will happen, I'm not sure at this point. But that millions of people are trapped in houses that cost less today than the value of their loan remains a big issue for many reasons. Though I am not an economist, nor do I have charts to display, I will explain some of the flaws of his argument.

The first quote he uses to prove his point includes this statement: "Homeowners with extremely negative equity are especially mobile.” That's from a white paper by Sam Schulhofer-Wohl out of the Minneapolis Fed. If you check out the paper, it also says that 23% of mortgages in America are today underwater. (see footnote 1, page 1.)

The fact that nearly a quarter of all mortgages in America are underwater in and of itself shows our economy is in crisis mode. As the Schulhofer-Wohl paper notes, "negative equity was quite unusual until recently" (p. 4). That is it so prevalent today is an astonishing statistic.

Conversely, it is not at all astonishing that people with extremely negative equity are especially mobile. They have absolutely no skin in the game.

What Mike does not recognize is that the mobility of those who can easily abandon their house and mortgage is not relevant to the problem of housing lock. Severely underwater homeowners are not "invested" in the structure at all and according to the Schulhofer-Wohl white paper, they can and do walk away with exceptional mobility. They're not "locked" at all.

Their ability to walk away is relevant to their credit rating, something employers look at. Having a poor credit rating makes them less desirable as an employee, which can make it harder for them to find a job.

The housing lock's real impact is on those who've invested money in their house, or who have the morality and ethics that leave them unwilling to walk away from a mortgage, or who recognize that the hit to their credit rating, should they walk away from their mortgage, could make them undesirable to employers seeking new hires. These people are locked into a bad deal and there is little they can do to get out of it without losing a lot of money. They have lost the ability to move to better opportunities. They've lost the ability to move at all. For them, the American Dream has become a terrible and paralyzing nightmare. Maybe Mike doesn't think so, but this is a significant issue, one that we've had little experience in dealing with prior to the crash.

Another issue ignored by Mike is the impact the loss of a home's value has on the family's net worth. For many in the middle class, their home is their biggest asset. We saw with banks, having toxic assets on the books is a recipe for disaster. Same holds true for families. That the home is now a toxic asset for many Americans poses a new problem for middle class homeowners to solve. And for those homeowners not underwater, the loss of value of their home means they've received a significant hit to their personal wealth.

For homeowners who now find their home to be a toxic asset, however, there is no hope of a federal bailout. Not only is there a financial negative to the drop in housing values, the disparity in how homeowners are treated today versus how bankers - who profited enormously by the boom - were treated after the crash (bailed out and bonused) has the potential to create huge political discord in a country already roiling in antagonism.

Let's look at another source Mike uses to prove his point - another paper issued by the Minneapolis Fed titled: Interstate Migration Has Fallen Less than You Think: Consequences of Hot Deck Imputation in the Current Population Survey." This paper shows "that the significant drop in the annual interstate migration rate between the 2005 and 2006 Current Population Surveys is a statistical artifact," and concludes that "The 2007–2009 recession is not associated with any additional decrease in interstate migration relative to trend."

This paper apparently proves that removing a "statistical artifact" from another model shows there has been "no significant drop in interstate migration" in recent years "relative to trend."

As I noted, I am not an economist. So first of all, how do I know that they're not offering up a "statistical artifact" of their own in this analysis?

More importantly, so what if their statistics are right? What the paper does not indicate is where are people migrating to and from? Are they moving to a better job? To be closer to family? Or are they fleeing an underwater mortgage? How much does post-crash mobility cost compared to the cost of relocating prior to the crash? Did they take a bath on their home? Dip into the retirement fund to pay for the move? Numbers are meaningless without proper context.

A third paper quoted by Mike has this interesting nugget buried in a footnote (see footnote 16 on page 12):

"Based on the Panel Study of Income Dynamics, individuals are also more likely to have moved across state lines if they were unemployed or renters in the previous year. "

I don't know about you, but that tidbit makes it look like people who do not own a home are more likely to be mobile than home owners, which does not support Mike's primary thesis that "housing lock" is not a factor in mobility.

Now let's take a look at another analysis of the market: employee relocations. In that employment in America is a key metric for the economic recovery, mobility leading to employment is a key factor in determining if housing lock plays a significant role in the crisis.

Here's a report from Challenger, Gray & Christmas, an outplacement organization. What does an outplacement firm say about "job seeker relocation"? Take a look...

"HOME VALUES KEEP JOB SEEKERS NEAR HOME;
WORKER IMMOBILITY COULD SLOW RECOVERY

The percentage of unemployed managers and executives relocating for a new position fell to a record low in the third quarter of 2010, as a slightly improved job market and greatly depreciated home values combined to eliminate this option for most job seekers.

Just 6.9 percent of job seekers who found employment in the third quarter relocated for the new position. That was down from a relocation rate of 13.4 percent in the same quarter a year ago, according to the latest Challenger Job Market Index, a quarterly survey conducted by global outplacement consultancy Challenger, Gray & Christmas, Inc. among approximately 3,000 successful job seekers from a wide range of industries nationwide.

The relocation rate has been low for four consecutive quarters, averaging just 7.3 percent since the fourth quarter of 2009. The 6.9 percent figure in the quarter ending September 30 was the lowest ever recorded by the firm, which began its tracking in 1986.

'Continued weakness in the housing market is undoubtedly the biggest factor suppressing relocation. Job seekers who own a home – even if they are open to relocating for a new job – are basically stuck where they are if they are unable or unwilling to sell their homes without incurring a significant loss,' said John A. Challenger, chief executive officer of Challenger, Gray & Christmas."

According to this outplacement firm, an organization that studies more than the just the statistics of mobility, "greatly depreciated home values" are contributing to the diminished mobility of American homeowners.

This is echoed by Worldwide ERC, another organization that tracks workforce mobility. In a recent survey, they show the two top reasons employees decline relocation are "slowed real estate appreciation/depressed housing market at old location" and "old home is in a negative equity situation." Worldwide ERC's 2009 survey on workforce mobility showed a 16.6% decline in transfer volume from 2008. Some of that was do to hiring freezes within companies, due to the collapse of the economy. But seventy-two percent of employers in 2009 reported having at least "minor problems with employee reluctance to move," and more than 40% of employers reported "moderate to major problems with employee reluctance to move." As in 2010, "slowed real estate appreciation/depressed housing market at old location" was the top reason for employees to decline relocation.

According to this data, the housing lock has frozen many potential employees out of better job opportunities.

What does a moving company have to say about mobility? For many years, Atlas World Group has conducted a Corporate Relocation Survey. The 2010 survey found that more than half the employees of the companies surveyed declined relocation. Housing and mortgage concerns - at 77% - topped the list of reasons for the decline.

Those with "boots on the ground" - outplacement firms, relocation experts, moving companies - are not only seeing a workforce immobilized by the housing crisis, the housing lock has dangerously dried up their businesses since the crash.

And here's one more problem associated with housing lock, one that cannot be quantified neatly onto a chart - this from one of Mike's Minneapolis Fed references (see p. 12):

"Beyond the damage to households’ balance sheets, negative equity may be socially harmful if it reduces homeowners’ incentives to invest in their homes and communities..."

Housing lock limits the ability of workers to move for a better employment opportunity. The loss of mobility for homeowners creates a talent drain and potential financial loss for employers who find employees unwilling or unable to relocate, which may require employers to offer more costly incentives to get the right talent in the right place. Loss of the home's value negatively impacts the wealth of American families, particularly the middle class.

To have millions of families locked in homes worth less than the loan remains a serious issue in today's current economic crisis. Contrary to what Mike says, it is absolutely not a "small issue or perhaps even a plus." Numbers lie, unless they're given proper context. We may be "mobile" but it's not the "upward mobility" we've long associated with America.

The scariest sentence ever seen in the WSJ

2011-04-06T12:59:00.005-05:00

Lots of hullabaloo over Paul Ryan's op-ed piece in the Wall Street Journal, you know, the one with the headline that reads: The GOP Path to Prosperity.

Given how devoted the GOP is to their very rich base, I shudder to think about how they define prosperity. And since their path prior to this has led to much of the nation being placed on rickety life boats in danger of being swamped by the wake of the big yacht sailing majestically away on rising tides, I don't have much hope this path will be built for the likes of me.

But the scariest sentence ever seen in the WSJ is not found in Ryan's op-ed piece. Doesn't mean his piece isn't scary - it's actually very scary to think we will get rid of this massive post-recession deficit by apparently gutting Medicare for those of us not old enough to need it right now.

[Can we really say, as Ryan does, that Medicare has a flawed incentive structure that "rewards states for adding to the rolls?" Or are states adding to the rolls because demographically, the Boomers have reached the age needed to join the plan? And how do private insurers - the ones whose refusal to pay for health care services back in the 1960s - feel about adding an influx of elderly patients to THEIR rolls?]

Scary stuff, yes. But that scariest sentence ever in the WSJ is in another story about the Ryan plan, bearing the headline: New Proposal Hits Old Hurdles of Budget Math.

And that sentence I find so frightening is:

"The hope is that competition among private insurers will yield hitherto-unrealized efficiencies."

I don't know that Mr. Ryan has ever tried to purchase insurance without the benefit of an employer subsidy, but if there's one thing I've learned in my life, it's this: the health insurance business model focuses on diminishing payouts as much as it possibly can. As someone who's purchased my own insurance for the better part of a decade, I'm fully aware that I am one diagnosis removed from losing health insurance completely.

To profit, health insurance companies dump patients onto Medicaid when they can. They deny claims of covered expenses whenever possible. For those unlucky enough to have a pre-existing condition, they will refuse to cover you or they price a policy far out of your reach or completely rider out the condition for which you need health care. [Yes, that pre-existing stuff is supposed to go the way of the dinosaurs, but not until 2014...]

There is nothing at all efficient about insurance companies today. There is nothing at all in the history of insurance that leads me to believe that if they do discover hidden efficiencies, their "path to prosperity" will include passing those efficiencies on to consumers in the form of reduced costs. When has that ever happened?

So basing a deficit reduction program in part on this "hope" that competition amongst insurers will inspire "hitherto-unrealized efficiencies" that will somehow help us reduce the federal budget deficit is terrifying indeed. It's an assumption similar to the assumption used until recently in the financial sector - that housing prices would never, ever fall. And we see where that assumption got us - into a very, scary mess.

Finding Walker at the intersection of ideology and corruption

2011-04-04T17:58:00.003-05:00

With no managerial experience, no college diploma and two drunk driving convictions to his credit, there seems to be little that would recommend Brian Deschane for an $81,500 managerial job in the Wisconsin state government.

Especially in today's politically charged environment, what with Governor Scott Walker looking to shed kazillions from the government budget by slashing education and other social services and going to battle over the state's pension funds for government employees.

So it's a surprise to learn that the anti-big government, "let's trim the budget" governor of Wisconsin has hired Brian Deschane for that $81,500 managerial job.

What's Brian's key qualification? He's the son of a lobbyist who gave big to the Walker campaign.

Think he got this job on his own merits? If you do, I've got some CDOs for you that will without a doubt give you a big return on your investment...

Have we learned enough in the last century?

2011-03-25T13:05:00.001-05:00

Buzz Potamkin at Naked Capitalism takes a look at the 100th anniversary of the Shirtwaist Fire. And realizes that we've not grown as much as we could have in the last 100 years - at least in terms of protecting workers. In this post, he reminds us of some business-driven catastrophes that have happened in this millennium...

"2005
BP refinery in Texas City – 15 dead, over 150 injured

2006
Sago mine, West Virginia – 12 dead
Darby mine, Kentucky – 5 dead

2007
Deutsche Bank fire, NY – 2 firefighters dead, 2 injured

2008
Sugar refinery, Georgia – 13 dead, over 40 injured

2010
Power plant, Connecticut – 6 dead, over 50 injured
Upper Big Branch mine, West Virginia – 29 dead
Deepwater Horizon – 11 dead, GOM decimated by worst US oil spill

Interestingly, the Deutsche Bank fire brings us back full circle to Triangle: faulty standpipe, inoperable sprinklers, blocked exits, no city inspections, even no permits, and parties that should be indicted but aren’t, including the City of New York for gross negligence."

And now it looks like more than 25% of nuclear power plants in the US are not properly reporting defects at their plant...

Advocates of deregulation don't ever seem to remember any of these accidents. But what we don't need in America is less regulation and more life-threatening accidents that result from terrible business practices.

"Someone like you"

2011-03-24T13:56:00.001-05:00

This woman has incredible pipes. Here's Adele at the 2011 Brit awards...

An event noted for its striking use of color...

2011-03-24T11:31:00.000-05:00

The American Enterprise Institute for Public Policy Research is hosting a lecture on "the state of white America."

Once I picked my chin off the floor, I wondered if the red-staters in the audience will don brown shirts for this rally around the white folk...

Questioning the morality of a $54.5 million pay package

2011-03-23T12:13:00.002-05:00

Ford's gearing up for upcoming negotiations with the United Auto Workers by offering Alan Mulally, Ford's CEO, stock options in the company worth $54.5 million.

And that's just a piece of Mulally's package. According to the Chicago Tribune, "his full compensation package has yet to be disclosed."

UAW president Bob King is outraged:

“I think Alan Mulally is a great CEO, but I don’t think any human being in the world deserves that much money. I think it’s outrageous,“ said King, speaking to reporters during a three-day union convention in Detroit.

In September, Ford is set to have the first negotiations with the UAW since the collapse of our economy and the bankruptcies of GM and Chrysler. The union made concessions during and after the crisis. Entry level auto workers get paid $14/hour. For workers who work 40 hour weeks, that's less than $30,000 a year in salary.

King says that's not enough to maintain a middle-class standard of living, though he recognizes that autoworkers are competing in a global arena against competitors abroad who pay less than American workers.

But those are newly hired employees. What about more experienced workers? According to this Washington Post story, more experienced workers make $28/hour, which is about $60,000 a year.

Ford earned $6.6 billion in 2010, its best results in more than ten years. Clearly, its CEO deserves to be compensated for his success. And Ford was, of course, the only big-three car company NOT to need a bailout in 2008. Obviously Mulally's running a tight ship over there at Ford. And the $54.5 million stock package seems in line with what other CEOs have gotten over the years.

Still, the questions linger... What's enough? What's fair pay for a successful CEO? Is it morally acceptable to receive such a dramatically large payment for one's services? Especially when so many in our nation are struggling to keep their heads above water?

Let's go Dutch!

2011-03-22T13:24:00.003-05:00

WSJ has an interesting story today about ING's CEO's decision to "give up his €1.25 million bonus for 2010, in a bid to allay public anger on his reward for steering the bailed-out Dutch financial-services company back into a profit last year."

Now the way that quote is written suggests some kind of communist uprising from people who are anti-business - that "the people" don't want smart people to be rewarded for bringing a company "back into profit."

That's not true, actually. "The people" just don't want leaders of bailed out companies that are still on the dole to get bonuses. I hear that over here in America a lot, but no one ever seems to listen to those complaints.

So what we have with ING is something completely unimaginable in America. Not only do Dutch citizens get angry over what they perceive to be unfair and unreasonable bonuses to bankers, the bankers actually listen to them!

And check out this nugget:

"The move can be seen as a peace offering to lawmakers and unions, who said last week that ING shouldn't pay bonuses when it is still reliant on taxpayer money. To address these concerns, Finance Minister Jan Kees de Jager said last weekend that he will propose a new law under which Dutch banks will be forbidden from paying bonuses until they are free from state aid."

The Dutch government is actually considering creating a law that will forbid bankers from receiving bonuses until they are free from state aid.

I'm sure American bankers are scornful of this development. They are, after all, the ones with the biggest swinging dicks in the world. The thought of giving up a bonus is beyond comprehension for them. Even if it comes as a result of a massive government welfare program...

A remarkable shift in consumer spending habits

2011-03-21T09:53:00.002-05:00

The NY Fed has an article seeking to answer the question "Have consumers been deleveraging?"

And according to the story, the answer is a dramatic "yes."

Here's a quote:

"Between 2000 and 2007, consumers’ borrowing added an annual average of about $330 billion to the cash they could spend; by 2009, consumers were diverting $150 billion away from potential spending in order to reduce the debts they had built up. This represents a remarkable $480 billion reversal in cash flow in just two years."

That IS a remarkable change in spending habits! The NY Fed is not clear whether this is by consumer choice or by design:

"A remaining issue is whether this deleveraging is a result of borrowers being forced to pay down debt as credit standards tightened, or a more voluntary change in saving behavior. There is evidence on both sides of this question."

It's probably a little of both, from what I'm seeing. But in the science of economics, there seems a compulsion for the "either, or" scenario.

The gift that doesn't keep on giving...

2011-03-19T10:16:00.002-05:00

Back in 2008, when our economy was in the midst of its nose dive, Warren Buffet stepped in and gave Goldman Sachs a shot in the arm with a $5 billion "investment" in the "bank holding company."

At the time, Buffet was quoted in the Guardian as saying::

"Five years from now, ten years from now, we will look back at this period and we will say you could have made some extraordinary buys.

"The American economy over a period of time will do very well, and people that own a piece of it will do very well."

At that time, he also praised Goldman Sachs for being "an exceptional institution" with an "unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Back then, Buffet's investment boosted confidence in the markets and calmed the markets.

Today, Buffet has proved to be right about the "extraordinary buys" to be had back in 2008. He was certainly right about characterizing Goldman Sachs as an "exceptional institution."

But he's proving wrong about how people who invested in those "extraordinary buys" would "do very well."

Buffet himself did great by his investment in Goldman Sachs. He drove a hard bargain with the bank, asking for 10% interest on the loan. When the government stepped in a week later with its loan to Goldman Sachs, they were much kinder, asking only a 5% return on their investment in the company.

As Dean Baker, co-director of the Center for Economic and Policy Research in DC points out, it was a very generous gift our government gave to the bank:

"The Treasury boasted of getting a $1.1 billion profit on its loans to Goldman, but as Mr. Buffet showed, this was far below the market rate of interest on loans to Goldman at the time. The difference between the return received by Buffett and the return received by the Treasury was in effect a gift from taxpayers to the top executives at Goldman and their shareholders."

And as Baker notes, it's a gift our country can ill-afford today:

"At a time when all the tough guys in Washington are making plans to cut Social Security and Medicare benefits for high-living seniors and to cut Head Start for low-income kids, it was generous of Warren Buffett to point out that we taxpayers gave over $1 billion to Goldman Sachs through TARP. Buffett probably didn't intend to point out this fact to the country, but it is an unavoidable implication of his $2 billion profit on his loans to Goldman."

As legislators throughout the country begin sharpening their knives to slice billions from state and federal budgets mauled by the Great Recession, voters will begin to take a closer look at the deals we made to save our financial community. With drastic cuts in education and other social services on the horizon, it's looking more and more like the brilliant save of our economy is actually a bad deal for taxpayers.

The "powers that be" better watch out...

2011-03-15T10:27:00.004-05:00

Parents are beginning to get mad...

I live in Illinois, a state on the brink of financial disaster, a state that is looking to shed billions of dollars from its budget. In its quest to shed those billions, it's floating the idea that school districts now must be consolidated from almost 900 districts to 300.

This idea of consolidation has sparked a lively dialogue in my community. And from what I see is that parents and (unionized) school employees are united in what we don't want to see happen. We don't want more kids in the classroom. We don't want less teachers. We don't see the value of cutting art, physical education and music from the curriculum.

What we want is for our children to have access to the best education we can provide.

What I'm also beginning to hear from fellow parents of school-aged children are questions about the current national focus on pumping billions into our financial sector while our schools are beginning to starve for funds.

What is a society that rewards bankers as it penalizes children?
Short-sighted indeed. Our children are the key to the future success of our nation.

As part of my desire to "give back to the community," I occasionally write articles for my school's newsletter. I was privileged last year to talk to the man who was principal of my school in the 1950s, around the time when Sputnik took off, shattering the American dream of being first to space. The retired principal told me that because of the global challenges we faced at the time, because of our desire to emerge victorious over communism, our government created funding sources for programs focused on math and science specifically to enhance the education of our children. It was seen as an investment in our future.

Once upon a time in America, we understood that funding education held the key to defeating our enemies. Apparently we don't have the money to invest in America like that any more. The financial situation for public education is complex, yes. It involves property taxes, state and federal budgets, all of which were hit catastrophically by the 2008 crash of our economy.

What parents saw, when our financial sector crashed, was a federal government that fed an extraordinary amount of money into the hands of people who were, in large part, responsible for the crash. Bankers who get paid large salaries to manage financial risk had done a terrible job, and we all paid the price for their incompetence.

And what do we see today? Social services on the chopping block. Educational funding being cut.

The cost of rescuing our dysfunctional financial sector is now coming due, and is proving very costly indeed.

The current budget conversations taking place in states throughout the country are now raising questions for residents in communities throughout those states - questions about what we, as a nation value, and what we, as a nation, want to invest in. And over here on Main Street, it is absolutely clear that we don't want our money invested in bonuses for bankers.

A snapshot of all that is wrong with healthcare in America

2011-03-11T09:35:00.008-06:00

If you've ever been to a neonatal intensive care unit (NICU), you know the pain, terror, hope, fear, grief and love that can be found there. This is where premature babies are nurtured and cared for, a place where you can find diapers the size of big bandaids, a place where medicine can work incredible miracles. Sometimes, it's a place where tiny babies take their first and last breath.

It's a place you hope you never have to be.

There is a drug that can help prevent premature birth. It's a progesterone shot administered weekly, and it's been used for years to help families stay out of the NICU.

In 2003, a study sponsored by the National Institute of Child Health and Human Development showed these weekly injections "resulted in a substantial reduction in the rate of recurrent preterm delivery among women who were at particularly high risk for preterm delivery and reduced the likelihood of several complications in their infants" (as reported in the New England Journal of Medicine.)

This week, the shot costs about $10 to $20 a dose. Next week, thanks to KV Pharmaceuticals and the FDA, a single dose will now cost $1500.

What happened?
Apparently, progesterone has been used successfully for years as an "off-label" drug, made on site at specialty pharmacies. Thus, this product - readily available to women who need it - had never been "branded." Until now.

KV Pharmaceuticals saw a great opportunity to enhance its bottom line by packaging up research done by others and submitting it to the FDA as a "new drug application," which the FDA approved. They're also conducting new research about the effectiveness of the product, but the FDA approved KV's NDA prior to the completion of the new research. Which means they're comfortable with the research to date showing the safety and efficacy of this drug.

With a "branded" product on the market - known as Makena - specialty pharmacies now must purchase progesterone shots - which they've been making for years - exclusively from KV Pharmaceuticals.

KV considers themselves the good guys. Here's their spin, from their press release:

“Prior to FDA approval of Makena, women who could benefit from therapy may have faced barriers to access due to the absence of a commercially-available, FDA-approved product,” said Greg Divis, Chief Executive Officer, K-V Pharmaceutical Company and President, Ther-Rx Corporation. “We established this comprehensive patient assistance program as part of our commitment to ensure that all eligible women have access to FDA-approved Makena.”

Their patient assistance program lets insured patients with incomes up to $100,000 pay only a $20 copay for the product. Uninsured patients with incomes up to $60,000 get it for free, and uninsured patients with incomes between $60,000 and $100,000 get it for the cost of the copay.

So the patient pays only $20 or so a dose (unless they make more than $100k!) But SOMEONE has to pay for the rest of the cost of this product. That would be the health insurance companies. And how do they pass on rising costs? By having their customers (patients) pay more in premiums.

The whole thing is a disaster. Slapping a brand name onto a commonly used product to justify an astronomical price increase is a terrible way to address a significant health care challenge.

It's been a busy news week for KV Pharmaceuticals, who also saw their former CEO plead guilty to two federal charges of misbranding drugs...

Some links...

KV Pharmaceutical press release on the "patient assistance program" it has in place for people who need financial help obtaining KV's very expensive progesterone shots to prevent premature pregancy.

NEJM article on the 2003 study

Mayo Clinic article on preterm pregnancy, including mention of progesterone shots to prevent premature delivery

The FDA's press release

WSJ story on Makena

Newt's "come to God" moment, nicely timed...

2011-03-09T19:50:00.002-06:00

He's been divorced twice. Served the divorce papers to the first wife when she was in the hospital being treated for cancer. Then married a second time to the woman he'd had an affair with while married to the first.

Then he dumped wife #2 for a woman 23 years younger than him. It was an affair he conducted right around the time he was putting the heat on Bill Clinton for his affair with Monica Lewinsky...

Three marriages into his life, Newt Gingrich is now a convert to Catholicism (in 2009). The church that will excommunicate parishioners if they remarry after divorce.

(Though I guess if you pay the annulment fee, you can pretend the first marriage was a figment of your imagination. Apparently, annulments are booming in the US.)

What's even worse than Newt's three marriages? According to the Chicago Tribune, he's apparently now blaming his infidelities on his love of country. Here's how he's quoted in the Chicago Tribune:

"There's no question at times of my life, partially driven by how passionately I felt about this country, that I worked far too hard and things happened in my life that were not appropriate," Gingrich said.

"What I can tell you is that when I did things that were wrong, I wasn't trapped in situation ethics, I was doing things that were wrong, and yet, I was doing them," he said. "I found that I felt compelled to seek God's forgiveness. Not God's understanding, but God's forgiveness."

Quotes come from an interview he gave to the Christian Broadcasting Network. One wonders just what he means when he says he "wasn't trapped in situation ethics." Does it make it better or worse to be trapped in "situation ethics?"

What does it all mean? That the 2012 season has begun. I myself am weary of politicians who try get good and Godly on us right around the time they decide to run for a big office.

Newt may have asked for God's forgiveness, but he's not gonna get mine. Any man who served divorce papers to a woman undergoing cancer treatment does not have the moral character we need in a president.

Articles you won't see promoted on www.newt.org include:

Politico's bit on Callista Gringrich (wife #3)

The Trib's story

WaPo's take on Newt's conversations about past indiscretions.

What do teachers make?

2011-03-07T15:56:00.000-06:00

Spoken word artist Taylor Mali has an answer...

In other words, they make a difference.

When the real meets the virtual, laughter ensues

2011-03-03T10:36:00.003-06:00

The real Rahm Emanuel met up the other day with the fake Rahm, Columbia College professor Dan Sinker, the man behind the @mayoremanuel twitter feed. According to the Trib, Real Rahm was in good humor and Fake Rahm was more than a bit nervous:

"Hi, honey, I'm home," the mayor-elect said as he extended his hand to Dan Sinker, the 36-year-old Columbia College journalism assistant professor whose @MayorEmanuel Twitter account became an online sensation before its anonymous author sent his protagonist into the cosmos the day after Emanuel was elected mayor. "Relax, man."

"I am so not relaxed," Sinker said with a laugh, the cheeks above his pointy salt-and-pepper beard having turned beet-red.

"You have tenure," Emanuel quipped. "Don't worry about it. I already called it in."

Real Rahm also suggested that he'd hook up Sinker with his brother, an agent at William Morris, "so I can get my $5,000 back."

When the laughs were done, the mayor-elect handed over a $5,000 check to Sinker's charity of choice - Young Chicago Authors, an after-school organization that teaches creative writing to Chicago Public School students. Chicago media personalities Dan Coe and Richard Roeper each kicked in $1000 and Causes.com promised to match the mayor-elect's $5,000.

Wanna donate?
Here's the weblink to Young Chicago Authors.

Here's the Sun-Times story.

And WaPo covered it too.

A rose by any other name still smells as sweet...

2011-03-02T11:44:00.002-06:00

That's why rebranding "too big to fail" (TBTF) institutions as "systemically important" doesn't really change the fact that they are still TBTF. In fact, due to consolidation and bankruptcies, these institutions are even bigger and more "systemically important" than in 2008.

I had never heard of "TBTF" until the crash of 2008, but apparently, the phrase had been bandied about at least since the 1984 collapse of Chicago's Continental Bank, a failure that motivated Ronald Reagan to abandon his free market principles and bail out the bank.

I myself prefer VoxEu's characterization of these institutions as "systemically risky." Let's use language that does not cloud the reality of our financial sector today. Is a "preowned" car any different than "used"? That's why I like "systemically risky." It does not obfuscate the fact that our financial system is as rickety (or even more rickety) than in 2008, when the sector collapsed in that terrifying global panic.

In 2009 testimony to Congress, Ben Bernanke shows he understands how the "systemically important" designation can lead to a risky identification with TBTF:

"Indeed, a more macroprudential focus is essential in light of the potential for explicit regulatory identification of systemically important firms to exacerbate the 'too big to fail' problem. Unless countervailing steps are taken, the belief by market participants that a particular firm is too big to fail, and that shareholders and creditors of the firm may be partially or fully protected from the consequences of a failure, has many undesirable effects. It materially weakens the incentive of shareholders and creditors of the firm to restrain the firm’s risk-taking, provides incentives for financial firms to become very large in order to be perceived as too big to fail, and creates an unlevel competitive playing field with smaller firms that may not be regarded as having implicit government support."

I know the Fed is working on developing resolution criteria to be used when a very large bank fails. But that doesn't change the fact that today's "systemically important" financial institutions remain as risky to our economy as the TBTF banks that dragged us off that cliff in 2008.

Some additional links:
A 2010 Mother Jones article on the influence of Wall Street lobbyists over regulatory legislation

FDIC 1997 report/book chapter on the failure of Continental Bank

Miami Herald article on Ben Bernanke's testimony before the Financial Crisis Inquiry Commission (09/03/10)

FCIC's report on the financial crisis

Politcal unrest in America, as shared with friends on Facebook

2011-03-02T10:42:00.003-06:00

Facebook is interesting because you communicate with friends from all phases of your life. And if you're on Facebook, you know that certain topics and videos get shared by a variety of people from very different backgrounds.

Here's the political chit chat that's trending today with my Facebook friends:

A unionized public employee, a teabagger, and a CEO are sitting at a table. In the middle of the table is a plate with a dozen cookies on it. The CEO reaches across and takes 11 cookies, looks at the teabagger and says, 'Watch out for that union guy. He wants a piece of your cookie."

Not sure of the source of that joke, but to me, it's a sign that the out-of-balance compensation program we've got going on in America is beginning to simmer on the burner of public opinion. Hope we're not that frog, continuing to sit in increasingly hotter water until we boil to death.

So not everyone is happy with GM these days...

2011-03-02T08:51:00.000-06:00

Two WSJ reporters, Evan Newmark and Dennis Berman, offer up some reasons to "hate GM."

Reasons to hate GM include:
— Falling share prices
— The recently profitable automaker operates in an industry "plagued by overcapacity"
— Incentive payments in US went up in 2010 Q4
— Rising price of oil a problem for an automaker dependent on the sale of its trucks
— A small competitor (Volvo) has just gotten a big backer (China)

A Bold Prediction Becomes a Happy Reality

2011-02-25T10:15:00.001-06:00

About a year ago, the WSJ posted a story about a very, very bold prediction: the folks over at GM were predicting 2010 would be a "profitable year" for the company.

It was a very bold prediction because GM had not seen a profit since 2004. 2009 saw the forced exit of its leader, Rick Wagoner, a man who'd occupied various positions in the C-suite at GM for nearly 20 years. Under his leadership, GM ended up a recipient of a massive and unpopular government bailout, and then filed for bankruptcy soon after.

So for a company that had been so buffeted by terrible leadership and the headwinds of our grim economy, its prediction of profitability in 2010 seemed a bit of a reach.

But apparently, its predictions of success have become reality. According to a story in the Wall Street Journal, GM posted its "strongest annual performance in more than a decade" in 2010.

And a profit of $4.7 billion.

However, they're not out of the woods yet. Higher gas prices seem inevitable. They still have billions in unfunded pension obligations and the economy needs to continue to improve. But it's nice to see a Motor City icon having a comeback, at least in 2010.

When the private sector places "undue burden" on government

2011-02-24T18:06:00.002-06:00

If you need yet another reason to understand why healthcare reform is desperately needed, check out this story in today's Chicago Tribune with this alarming headline:

Illinois Blue Cross settles allegations that it denied sick kids coverage.

Here's what happened, according to the Trib:

"The cost of the medical care, which included so-called private-duty nurses for sick children and other ill patients, should have been covered by Illinois Blue Cross, but instead was shifted to Medicaid at a cost of nearly $12 million, prosecutors said. The claims were denied based on 'internal, undisclosed guidelines that were more restrictive than the language provided to patients in plan policy materials,' Madigan’s office said."

As a result of the lawsuit, the company will "pay $25 million to settle allegations that it denied coverage to sick children in need of nursing care by 'fraudulently' shifting their claims to Illinois’ Medicaid program, state and federal prosecutors said this morning."

The case against BCBSIL was initiated by the Illinois Attorney General's office after "years of complaints" from consumers. These are consumers with children who are seriously ill - in need of medical services that included at-home nursing.

Imagine that you are those consumers - imagine that you are a parent of a desperately sick child - and in addition to taking care of your seriously ill child, you are concurrently fighting your insurance company to pay for covered services.

Lisa Madigan, Illinois Attorney General, pulled no punches when talking about the settlement:

"'Blue Cross Blue Shield’s inappropriate denial of legitimate claims placed an undue burden on the state’s finances,' Madigan said in a statement. 'My office is committed to holding health care insurers accountable on behalf of the people of Illinois for this type of deception and fraud.'"

Blue Cross denies the allegations that it engaged in "inappropriate conduct." Of course they deny the allegations. Because for an insurance company, diminishing claims payouts improves their medical loss ratio. So why not "fraudulently" deny coverage to sick children until a regulator cracks down on them for doing it?

Here's a link to the Illinois Attorney General's press release.

BCBSIL does not have a press release on this. However, in the Trib story, they offer this explanation for the situation:

"'This dispute began many years ago when we reviewed certain claims and determined that the benefits sought were not covered by the applicable insurance plans and policies,' Illinois Blue Cross spokesman Jack Segal said. 'These plans and polices determine which benefits are covered and which are not. Several years ago, in cooperation with the state attorney general, we expanded our explanation of benefits to ensure that our members understood what nursing benefits are covered under their plans.'"

But why would a company like BCBSIL pay out this $25 million settlement if they did nothing wrong? Has the Illinois Attorney General's suit inspired them to be nice and pay for services that were not covered?

Or is this yet another example of of a company privatizing profit and socializing loss?

From the city that works to the city that shrinks...

2011-02-17T09:40:00.000-06:00

As Richard M. Daley wraps up his reign, one thing is certain. The city's population shrank dramatically during his tenure. According to the 2010 census, Chicago's population is the lowest its been since 1920, the year Prohibition was enacted.

A key factor in the decline: black flight. The next mayor of "the city that works" may want to think about investing outside of the Loop - in ways that revitalize the neighborhoods. Education and affordable housing are two key areas to explore.

The population decline of Chicago is the most read story in the WSJ online edition today.

The Chicago Tribune and the Sun-Times also cover the story.

On the magical thinking coming out of Chrysler

2011-02-11T12:11:00.006-06:00

If you watched the Superbowl, you probably saw the Chrysler ad (AKA one of two Eminem Superbowl ads.) If not, you can watch it here:

Beautifully filmed, beautifully edited, it's a love song to Detroit. Told by Eminem. And it starts with a question:

What does this city know about luxury?

And I've got some stats that indicate the answer would be "not much." The lead in a 2009 Wall Street Journal story goes like this:

They call this the Motor City, but you have to leave town to buy a Chrysler or a Jeep.

The Journal goes on to note that Borders had just closed its last Detroit store, and that Starbucks, "known for saturating U.S. cities with its storefronts, has only four left in this city of 900,000 after closures last summer." The story then points out that there are no national grocery stores in Detroit.

That was then, in 2009. What about now?

Well, the good news is that unemployment decreased in 2010 (according to preliminary data) to just 11.1 percent, down from 14.9 percent in 2009.

Still, an 11 percent unemployment rate is higher than the high national average and does not signify the return from hell mentioned in the Chrysler ad.

And Starbucks looks like it has reduced its Detroit offerings to just three stores in the metropolitan area. Those lucky few with the money to splurge on affordable luxuries will have more luck finding a Starbucks over the Canadian border in Windsor.

And what of Chrysler's presence in the Motor City? The company headquarters can be found in Auburn Hills, a Detroit suburb. Its CEO is Italian-born Sergio Marchionne, who also heads up Fiat, based in Italy. However, according to the Chrysler website, there IS a Chrysler dealer within the city limits!

But though Detroit has its very own Chrysler dealer, it remains, as the ad acknowledges, "no one's Emerald City." It is in fact a city still firmly situated in the hell of high unemployment, poverty and abandonment. In 2010, the Wall Street Journal ran a story about the latest hit to the city: black flight:

Today, frustrated by plummeting property values and high crime, many diehards have hit their breaking point. Their exodus is consigning borderline neighborhoods to full-blown blight and putting prime residential areas at risk.

When the black middle class abandons you years after the white middle class fled, what remains? Vandalism, poverty and blight. So when Eminem ends the ad with "This is the Motor City. And this is what we do," I really don't know what they mean. Because the Motor City is in terrible shape right now, even worse than our economy at large.

Which makes Chrysler's tag - "imported from Detroit" - all the more prescient. The film shows us Detroit as we once knew it, our Motor City, our Motown, the center of the American auto industry. But that once proud American city is fast becoming a third world entity in the middle of America, a place stricken by poverty and lack of leadership. The Chrysler ad that heralds the great American city of Detroit is also a reflection of our utter blindness to the reality of today's economy.

Let's hope Chrysler pulls its head out of the sand, puts its money where its mouth is, and invests wisely in its business and in Detroit. Let's hope that Chrysler can recover - thanks in part to its second federal bailout - and reclaim its once proud heritage as a great American auto manufacturer. Otherwise Chrysler's message, as conveyed by this very expensive Superbowl ad, is utterly meaningless.

Note to Fox and the NFL: TONE DOWN THE RHETORIC!

2011-02-07T13:33:00.001-06:00

Yesterday, much to the disappointment of my young children (who wanted to watch Horton Hears a Who on FX), I commandeered the remote and switched over to the Superbowl pregame show. I realize the pregame show goes on for much of the day, but we switched over at 5pm (CST) - just in time to watch Colin Powell and someone from the NFL school us on the Declaration of Independence.

Huh? What's that got to do with football?

Why we needed such a civics lesson just moments before the start of Superbowl XLV, I'm not quite sure. The video was filled with stirring music, employed bunches of people (mostly men) to recite bits and pieces of the Declaration of Independence, used a range of locations as backdrop for the speakers, and included lots of people in military garb.

[It was at this time that my children demanded (unsuccessfully) a return to Horton Hears a Who.]

Yes, the Superbowl is part of the American fabric. Though I watch few football games throughout the year, even I make a point of watching the Superbowl. And this year, I forced my Horton-loving children to watch it as well.

But when we switched from Horton ("a person's a person no matter how small!"), to the Superbowl pregame show on Fox, we were expecting info on the two teams, not an over-the-top presentation of the Declaration of Independence.

The stirring recitation of the Declaration of Independence ends; we wonder at its inclusion in the pregame hype; and then Fox cuts to the Michael Douglas piece called The Journey.

I watch, astonished, at images of suffragettes and Iwo Jima and 9/11, and the space shuttle and Katrina, and wonder if the creators of that video REALLY want us to believe that the sacrifices of Americans on all the many "darkest days" we've experienced as a nation (the Depression, Pearl Harbor, 9/11, Katrina, etc. and so on) are simply stepping stones on the journey to Superbowl XLV. Did suffragettes march to gain the right to vote so men and women could sit down together to watch the Superbowl? Did Martin Luther King's dream include a match up between the Packers and Steelers in 2011?

Please, dear God, I hope not. Contrary to the message of the video, the Superbowl is NOT bigger than a football game. It is a football game. It is JUST a football game.

Which makes it entertainment. Mega-hyped entertainment. Fun, yes. Important at shaping the the future of our nation, no.

Despite what Fox and the NFL think, entertainment is not history. The events depicted in The Journey are simply far bigger, far more important and significantly more influential in our lives than whatever happened on the field during Superbowl XLV. The sacrifices that overpaid pro football players make to get to the Superbowl are pathetic and irrelevant when compared to the sacrifices our troops and citizens have made during our "darkest days."

And honestly, if the Superbowl takes us to one of those moments that is "bigger than football," please let us remember the words to the National Anthem!

Pros and cons of the financial-sector rescue...

2011-01-14T08:09:00.002-06:00

Two interesting headlines in the WSJ: One headline says "J.P. Morgan Profit Jumps 47%."

The other reads: "New Hit to Strapped States."

So what is the new hit to the distressed states? Borrowing costs are on the rise. Here's an example of the duress states are feeling:

In Texas, J.P. Morgan Chase & Co. has taken control of a debt that it back-stopped in a 2001 deal that requires the public agency running the Houston Texans' football stadium to pay back a 30-year bond over the next three-and-a-half years.

"Think of having a 30-year mortgage, and then someone suddenly says you have to pay your house off in five years," said Janis Schmees, executive director of the Harris County Houston Sports Authority, which built the stadium. "That is pretty much our scenario." A representative for J.P. Morgan declined to comment.

What shows as profit for bankers exerts an extremely heavy burden on everyone else.

TARP not big enough for those NOT too big to fail...

2010-12-27T12:15:00.000-06:00

In recent months, there has emerged a terrible mythology around Henry Paulson's audacious plan to save our financial sector. The whispers have grown into kind of a roar: TARP will turn a profit for the government.

To understand this mythology, we need to go back to those dark days of the fall of 2008, when our economy went into a free-fall of its own weight and it looked like nothing would save us from a Depression as terrible as the one that we call the Great Depression. Henry Paulson, then Bush's Treasury Secretary, cobbled together his rescue plan we all know as the Troubled Asset Relief Program, or TARP.

In September 2008, Paulson did his best to explain his new plan. Here's some of what he said back then:

As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighborhoods, with 5 million homeowners now delinquent or in foreclosure. What began as a sub-prime lending problem has spread to other, less-risky mortgages, and contributed to excess home inventories that have pushed down home prices for responsible homeowners.

A similar scenario is playing out among the lenders who made those mortgages, the securitizers who bought, repackaged and resold them, and the investors who bought them. These troubled loans are now parked, or frozen, on the balance sheets of banks and other financial institutions, preventing them from financing productive loans. The inability to determine their worth has fostered uncertainty about mortgage assets, and even about the financial condition of the institutions that own them. The normal buying and selling of nearly all types of mortgage assets has become challenged.

These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions.

Here's what he wanted us to do about it:

The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy. This troubled asset relief program must be properly designed and sufficiently large to have maximum impact, while including features that protect the taxpayer to the maximum extent possible. The ultimate taxpayer protection will be the stability this troubled asset relief program provides to our financial system, even as it will involve a significant investment of taxpayer dollars.

We all know that he was not immediately able to "remove these illiquid assets that are weighing down our financial institutions." He instead revised the plan to infuse billions of federal money into the financial system in an effort to recapitalize banks.

Today, some of the big banks are paying back their TARP loans with interest. The cost of the program appears to be significantly less than the $750 billion figure Paulson had originally thrown out for us to consider.

And thus today, the loud claims that TARP is a profitable enterprise for our economy. In fact, Tim Geithner, the man who replaced Paulson as the nation's Treasury Secretary, calls TARP "one of the most effective crisis response programs ever implemented."

And for the big banks, those too big to fail, it's been nice. But TARP was just one element in the generous bailout package the government offered them.

For smaller banks, however, a different story. TARP was, for many, the extent of the bailout they received. And now many continue to struggle. In fact, a recent Wall Street Journal story reports that the number of TARP recipients on the verge of collapse is on the rise. According to the story, there are nearly 100 banks now in jeopardy of failing.

And "seven TARP recipients have already failed, resulting in more than $2.7 billion in lost TARP funds."

TARP's failures are not the big banks:

Most of the troubled TARP recipients are small, plagued by wayward lending programs from which they might not recover. The median size of the 98 banks was $439 million in assets as of Sept. 30. The median TARP infusion for each was $10 million, federal filings show.

What we are seeing is that the "too big to fail" institutions, the ones that got TARP AND other programs, are doing well. Paying out enormous bonuses. Spending large sums on advertising. (Here's one example!)

The smaller banks, the ones that got some funds from TARP, but little else, remain in trouble, which means our financial system has grown even more imbalanced. Far from fixing the financial system, TARP has created an even bigger disparity between large and small banks. Large banks remain too big to fail. Small banks... well, they fail. And the TARP monies invested in them simply vanish.

So the next time someone talks about the profitability of TARP, remember those small, struggling banks. Despite what you hear, TARP is the kind of profitable venture we simply cannot afford to repeat.

Progress... the Goldman way

2010-10-20T09:46:00.001-05:00

Truly, it's one of the most interesting business dilemmas of the new millennium. Goldman Sachs is raking in money, hand over fist, maximizing opportunities to profit despite an enduring and severe recession that is crippling the rest of the country.

If you look at their website, they tell you right up front what they believe in: progress. Because it's everyone's business. And Goldman Sachs is bringing "people, capital and ideas together to help our clients and the communities we serve."

They've also launched a new PR campaign that helps educate the masses on the benefits Goldman offers to the nation.

And yet, they get no respect.

Why is that, one wonders?

Because their PR campaign about their impact on progress is a lot of hogwash. It's PR mumbo jumbo. If we've learned ANYTHING about Goldman Sachs during this recession, it's that they'll do ANYTHING for a buck.

And the only client they serve faithfully, with dedication and respect, is their internal customer. Themselves.

How do I know? Because for two years now, they've told us that if they don't get their bonuses, the bright minds of Goldman Sachs will leave. In a huff. Because their bonus didn't live up to the brand promise of working for Goldman.

NEVER MIND that the financial sector (of which Goldman is the self-professed leader) exists today thanks only to a generous welfare policy coming out of Washington.

NEVER MIND that the economy is in a shambles, thanks in part to questionable investment instruments coming out of companies like Goldman Sachs, investment "opportunities" that packaged up bad debt and sold it to pension funds, etc.

NEVER MIND that Goldman Sachs can sell an investment instrument to one party, while simultaneously selling insurance to another guaranteeing a tidy profit should the Goldman Sachs investment instrument explode like a grenade, killing all the investors.

Try translating that business model to any other industry - meat packing, pharma, toy manufacturers, etc. As an example, let's just say an egg distributor knew its egg farms were filled with salmonella, that the eggs they sold were tainted by this bug, and it was, in their expert mind, a possibility that their eggs would cause serious illness to those who consumed them. [After all, they know how to count their chickens and eggs!] To maximize profit, to hedge against the catastrophe of an impending salmonella outbreak, they not only sold the eggs, but packaged up and sold a generous insurance policy to an outside firm (for a nice sum) that allowed the outside firm to profit enormously from the pain and agony caused by a salmonella outbreak.

Goldman Sachs can do what an egg company cannot. Yes, it paid a fine of $550 million for "mistakes" it has made in the Abacus deal, for "misleading investors," providing "incomplete information" and failing to clue the investors in on the fact that John Paulson was on the other side of the deal. But the deal itself would have been okay, if not for those paperwork issues.

Not really. Not if you want people to respect you. You cannot sell something to one party and sell insurance to another that ensures profit if your instrument fails catastrophically.

To earn respect, you actually need to stand by your instruments. You need to help your investors, not make them realize that if you choose to invest with Goldman, it's "buyer beware."

PR mumbo jumbo is meaningless without action to back it up, and Goldman Sachs has a long way to go to burnish the image of a once proud firm. In the meantime, they can happily count on their bonuses. Because let's face it. The bankers at Goldman are very, very, very good at capitalizing on the distress of others.

Strange that they suddenly need respect to go with their bonuses. But they might just be realizing that a "buyer beware" business model can turn customers into former customers.

A hero died on Sunday...

2010-09-07T21:41:00.000-05:00

The hero's name was Jefferson Thomas. He was 68 when he died of pancreatic cancer on Sunday.

He was a true American hero.

He was a hero because as a teenager, he was one of the Little Rock 9. One of the very brave teenagers who stood up to segregation. Stood up to racism. Stood up to hatred.

In 1957, he and eight other students required the National Guard to protect them as they did what so many students take for granted today: they showed up for high school. In those days, schools were segregated. "Separate but equal." Blacks legally barred from attending school with whites.

Mr. Thomas worked to change that.

It could not have been easy to have been on the front lines of the war to integrate schools. But Mr. Thomas and eight other high school students took a risk to take a stand for equality.

He was the almost namesake of another advocate of freedom, Thomas Jefferson, who wrote the Declaration of Independence and who was also a slaveholder in Virginia.

Frankly, Jefferson Thomas was the true advocate of freedom. A man who actually lived for freedom as if he really meant it. Who understood that color should not be a barrier to one of the most basic human rights.

Thomas Jefferson, the man who wrote the Declaration of Independence, was somehow able to justify the ownership of others. Justify the ownership of his own kin, actually.

As a student in high school, Jefferson Thomas acted in the spirit of American liberty, with the kind of bravery most people can't even imagine ever needing. He was a true American hero who made a difference in our nation. I appreciate his faith in the American principles of freedom and equality.

Bum rush proving to be a REALLY bad deal for Chicago

2010-08-21T12:42:00.004-05:00

Nice to know that Chicagoans are really helping out Morgan Stanley improve their bottom line this year. Here's the lead in a recent Bloomberg story:

"Chicago drivers will pay a Morgan Stanley-led partnership at least $11.6 billion to park at city meters over the next 75 years, 10 times what Mayor Richard Daley got when he leased the system to investors in 2008."

Privatizing the parking meters in Chicago's been great for Morgan Stanley. But what about for Chicago?

Well - we signed over a lucrative franchise for BILLIONS less than it appears to be worth.

Morgan Stanley and its partners seem poised to reap phenomenal profits from this deal. Again, from the Bloomberg story:

"Morgan Stanley, Abu Dhabi Investment Authority and Allianz Capital Partners may earn a profit of $9.58 billion before interest, taxes and depreciation, according to documents for a $500 million private note sale by their Chicago Parking Meters LLC venture. That is equivalent to 80 cents per dollar of projected revenue

That's one HELL of a return! Wish I had access to investments like that!

Parking meter costs skyrocketed almost immediately after Mayor Daley shoved the deal through with no time for the aldermen to consider it. Now today, as a result of privatization, we pay more in Chicago to park at a meter than the Morgan Stanley bankers will pay to park in NYC. From the article:

"Morgan Stanley’s partnership raised parking rates twice since the lease began, and more are planned, the debt document says. Fees at some central business district meters rose to $4.25 an hour from $3 since January 2009 and will go to $6.25 in 2013. In midtown Manhattan, hourly rates are as much as $2.50, according to the New York City Department of Transportation."

The dubious deal gives Morgan Stanley the profit, and the people who pay to park in Chicago the shaft. Business as usual when an investment bank is involved.

The benefits of government assistance...

2010-08-21T10:46:00.000-05:00

Wall Street Journal has a fabulous story today about the success of one particular government entitlement program - the bailout of the banks. While unemployment remains high in America, while those on Social Security are likely to see cuts in their entitlement program in the near future, while our federal, state and local governments are seriously in debt, our financial sector gleams brightly as a vision of success.

According to the WSJ story, the average monthly salary in 2009 in finance and insurance is nearly $12,000.

A month.

Up 23% from a year earlier.

More than double the average in NYC.

And that's just the wages paid to the new hires.

Imagine the possibilities for growth in this sector!!!

Especially when you can sell an instrument to one party and sell insurance (or take out insurance for yourself) that allows one to profit when the instrument you created blows up after you sell it off.

(As long as you disclose the names of the people who purchase the insurance!)

Also according to the story, we've seen a great divide grow in recent years between the salaries of bankers compared to the salaries of everyone else:

"Back in the 1970s, bankers’ salaries didn’t differ much from those of other folks. Amid the deregulation and financial innovation that followed, though, they began to break away from the pack. As of 2006, wages in finance were about 72% higher than the average for all professions, according to economists Ariell Reshef of the University of Virginia and Thomas Philippon of New York University

The bailout that was supposed to help the general economy start purring again has failed in that regard. But the engine that drove us off the cliff – the financial sector – the sector that got bailed out and bonused – is humming strongly now.

Don't let ANYONE tell you that government assistance doesn't work. Just look at our bankers. After requiring billions and billions of dollars in in federal assistance, they've managed to secure top wages during one of the worst recessions our country has experienced. What's been a terrible crisis for much of the country has been a bounty of riches for Wall Street. But that's what happens when failed bankers get the full backing support of the US government. They win. We lose. Or at least that's how it's looking today.

On the language of unemployment...

2010-08-08T13:06:00.001-05:00

I am slowly realizing that what we talk about when we talk about unemployment in this economy is largely fictional. A couple of months ago, we celebrated a decline in unemployment. We're no longer looking at 10% unemployment; the number is now hovering at 9.5%.

But when you look closer, that decline is not the result of improved employment and expanding economy. It's the result of not counting people who've despaired of finding a job in this market. If you stop looking for a job, you're no longer considered "unemployed."

That's a pathetic way to look at unemployment - that we're not going to count people who've given up hope of getting a job. Because for us to truly recognize the enormity of the problem, we need to fully count ALL the millions of people who are not employed, not just the ones who remain hopeful of getting a job once again someday.

Here's a link to Mark Thoma's post on the August unemployment report. Two years ago, we rescued our financial sector, we were told, to help the economy. However, two years after the rescue, two years of nice bonuses packages for those on Wall Street, the economy remains in peril.

A breathtaking image in today's WSJ

2010-06-09T22:47:00.003-05:00

Was startled by the photo that appeared on the front page of today's WSJ. It seems strangely plopped into the general news of the day: showdown on fund taxes; incumbents in danger of losing; poor South Africans protest against government neglect.

And in the middle of the page, a striking photograph of two men in a moment of intimacy. Click on that link and you'll see the image of one soldier comforting a seriously wounded comrade.

This is a picture of man at his most vulnerable. A soldier wounded in Afghanistan. A man far from home. Surrounded by enemies in a foreign land. Sent there to protect his country.

A friend holds a Bible and offers a cigarette to comfort the wounded man. He is reading the wounded soldier's favorite Psalm, Psalm 91. It appears as if someone else not in the picture is holding the wounded man's hand.

In a moment of horror, a wounded soldier finds solace from God and men.

This picture haunts me. It reminds me that in our time of need, we reach out to others - and they reach out to help us. And it reminds me that at this very moment, soldiers are risking their lives to protect our rights as Americans.

Amidst the news of the terrible black plume poisoning the ocean, the struggle to inject a sense of duty, honor and an emotion other than greed into the financial sector, the ridiculous spectacle that is the Blago trial, it is essential to remember that men and women are dying to protect America. We cannot forget this. Our soldiers are protecting our right to be American. We must honor them with our actions.

The Psalm the soldier wanted to hear:

Psalm 91
He who dwells in the shelter of the Most High, who abides in the shadow of the Almighty, will say to the Lord, "My refuge and my fortress; my God, in whom I trust." For he will deliver you from the snare of the fowler and from the deadly pestilence; he will cover you with his pinions, and under his wings you will find refuge; his faithfulness is a shield and buckler. You will not fear the terror of the night, nor the arrow that flies by day; nor the pestilence that stalks in darkness, nor the destruction that wastes at noonday.

A thousand my fall at your side, ten thousand at your right hand; but it will not come near you. You will look only with your eyes and see the recompense of the wicked.

Because you have made the Lord your refuge, the Most High your habitation; no evil shall befall you, no scourge come near your tent.

For he will give his angels charge of you to guard you in all your ways. On their hands they will bear you up, lest you dash your foot against a stone. You will tread on the lion and the adder, the young lion and the serpent you will trample under foot.

Because he cleaves to me in love, I will deliver him; I will protect him, because he knows my name. When he calls to me, I will answer him; I will be with him in trouble, I will rescue and honor him. With long life I will satisfy him, and show him my salvation.

The songbird sings a horribly discordant note...

2010-06-02T19:09:00.002-05:00

Peggy Noonan wrote a terrible column in last weekend's Wall Street Journal. "He was supposed to be competent" is the headline, and it's about how Obama's incompetence is the reason the Gulf Coast is soaked in oil right now.

Come again?

Peggy Noonan was Reagan's songbird. Her speechwriting for the man who named a revolution was elegant, eloquent and inspirational.

Does she forget that her boss considered government the problem? That businesses were dying under the yoke of regulation? That for America to succeed, a bloodless revolution needed to take place that severed the government from the responsibility of regulating much of American business?

Because untethered, according to the Reagan Revolution, businesses could fly high and soar. And their profits would trickle down into the pockets of all of us on Main Street. Which would have been great, since salaries have remained stagnant since Reagan was in office. That trickle down money could have meant something. Maybe it would have given us all enough pin money to have averted the consumption crisis we're facing today...

Oh we still had regulatory agencies after Reagan, but they were starved of funds and talent. Or the talent they had in house ended up spending their days watching porn. Or they grew frustrated after seeing Dick Cheney develop energy policy with the help of the companies they were supposed to regulate....

And what have we seen since the Reagan Revolution changed our perception of the government's role in regulating businesses? Banks gone wild, acting like college girls on spring break, pushing boundaries because they knew daddy would pick up the tab. Auto companies existing thanks only to the largess of the federal government. Oilmen pointing fingers at everyone else when catastrophe occurs.

Here's how Noonan characterizes the situation in the Gulf:

"And now the past almost 40 days of dodging and dithering in the face of an environmental calamity. I don't see how you politically survive this.

"An environmental calamity," she calls it. And it is.

But this is no natural disaster. This is not Katrina. Obama has not lingered on vacation while his fellow Americans in the Superdome ran out of food and water.

This is a man-made disaster of the worst kind. According to Noonan, key to Obama's incompetence is that "he wanted people to associate the disaster with BP and not him." She continues:

"His philosophy is that it is appropriate for the federal government to occupy a more burly, significant and powerful place in America—confronting its problems of need, injustice, inequality. But in a way, and inevitably, this is always boiled down to a promise: 'Trust us here in Washington, we will prove worthy of your trust.' Then the oil spill came and government could not do the job, could not meet the need, in fact seemed faraway and incapable: 'We pay so much for the government and it can't cap an undersea oil well!'"

What Noonan fails to understand is that this is BP's disaster. They owned the rig. They made the plans. They cut expenses. Rushed the process. Employed people whose decisions resulted in catastrophe.

BP is the 4th largest company in the world. Their revenues increased 25% from 2007 to 2009. That's the time when many of the citizens of the globe saw their net worth disappear like puffs of smoke in the great crash of 2008.

In their 2009 annual report, BP talked about what a great year they had:

"2009 was an outstanding year. Reported production grew by 4% and unit production costs were down by 12%."

You can have that kind of year when you do things on the cheap. Here's what the WSJ uncovered in their investigation of the spill:

"BP made choices over the course of the project that rendered this well more vulnerable to the blowout, which unleashed a spew of crude oil that engineers are struggling to stanch.

BP, for instance, cut short a procedure involving drilling fluid that is designed to detect gas in the well and remove it before it becomes a problem, according to documents belonging to BP and to the drilling rig's owner and operator, Transocean Ltd.

BP also skipped a quality test of the cement around the pipe—another buffer against gas—despite what BP now says were signs of problems with the cement job and despite a warning from cement contractor Halliburton Co.

Once gas was rising, the design and procedures BP had chosen for the well likely gave this perilous gas an easier path up and out, say well-control experts. There was little keeping the gas from rushing up to the surface after workers, pushing to finish the job, removed a critical safeguard, the heavy drilling fluid known as "mud." BP has admitted a possible "fundamental mistake" in concluding that it was safe to proceed with mud removal, according to a memo from two Congressmen released Tuesday night."

No wonder production costs were down significantly in 2009. But the cost of saving money has been astronomically expensive. We will be dealing with the repercussions of this gusher for years to come. And people are wondering - BP earned so much money in recent years and yet they cannot cap the well. That's their job - drilling wells. They assumed the risk of drilling in deep water. And, if you believe their 2009 annual report, they fully understood the risks they were taking.

"Risk remains a key issue for every business, but at BP it is fundamental to what we do. We operate at the frontiers of the energy industry, in an environment where attitude to risk is key. The countries we work in, the technical and physical challenges we take on and the investment we make - these all demand a sharp focus on how we manage risk. We must never shrink from taking on difficult challenges, but the board will strive to set high expectations of how risk is managed and remain vigilant on oversight."

The risk was not managed. Nor was there a plan in place for what to do in case of catastrophe. That's an oversight that has left the world with a terrible "environmental calamity," as Noonan calls it.

Now in the minds of people like Peggy Noonan, the fault lies not in the corporation, who has profited mightily in recent years, but in the president, who can't put a cap on the gusher. The president needs to fix it or he is a failure. BP - not accountable.

That's a terrible political philosophy - that government is solely responsible for cleaning up the mess left by large, profitable global companies. That businesses are no longer responsible for their actions. That to "fix it" requires socialization of loss, while the privatization of profit continues. It's not what Reagan wanted. At least I don't think that's what he wanted. One never knows with politicians.

What we have learned in the years since Reagan, as the bankers informed Congress in 2009, self-regulation doesn't work. That's something Obama needs to address. That's his job. And yes, there were likely failures in that area. But let's be clear: BP is as responsible for the explosion on the rig as they are responsible for the profit they've made in recent years. And they need to be held accountable for the mess they've made.

No matter what the songbird says.

The computer did it!

2010-05-07T05:45:00.001-05:00

Innovation in the financial sector is once again turning Wall Street into the biggest roller coaster in America. It was a "glitch," apparently, that sent the markets down a very steep trajectory yesterday.

According to the NY Times article on the crash, at least half of all trading is done via these "high frequency" trades. A computer is programed to do the buying and selling that once were the sole domain of the trader.

"'We have a market that responds in milliseconds, but the humans monitoring respond in minutes, and unfortunately billions of dollars of damage can occur in the meantime,' said James Angel, a professor of finance at the McDonough School of Business at Georgetown University"(as quoted in the NY Times.)

I love computers as much as anyone. But innovation coming out of the financial sector is a little scary these days.

From the Times story:

"The near-instantaneous swings left brokers dumbfounded."

Traders weren't the only ones shocked by the fall. So were retirees and families saving for college–Main Streeters whose finances have been savaged by the collapse of the economy.

Now this - the collapse of the markets because of a glitch in a highly sophisticated trading program. Like we need a computer malfunction to shock the markets even more these days.

Who benefits from such programs? Not sure. But for many people, the brilliance of the financial sector is getting very expensive.

Looking forward to the day when financial sector innovation creates growth for those outside of Wall Street!

A loss so big, it seems "synthetic"

2010-05-02T10:23:00.001-05:00

Anyone remember the big Soviet demonstrations of military might on May Day? It used to be that every year on May 1st, the Soviets would unveil the power of all their many weapons by parading samples of them down some expansive street in Moscow. Grim soldiers would walk in precise steps past the aged members of the Politburo. It was indeed an impressive display of strength, impressive enough to foster "the arms race."

Moscow's May Day is, of course, ancient history, taking place back when our only enemy, it seemed, was communism.

Today, we face various dangerous enemies on many fronts. And in a story with a May 1st dateline, the Wall Street Journal gives us a glimpse into a mighty enemy that today threatens the United States. You can find the description of this enemy in the story they call "Number of the Week."

This is one of the enemies we face today:

"$132 billion."

That's the dollar amount of the total losses generated by synthetic mezzanine ABS CDOs. These are the innovative financial instruments created and sold by firms like Goldman Sachs, Merrill Lynch, Morgan Stanley and other big players in the financial sector. They're the kind of tools the helped drag our economy off the cliff in September 2008.

That's why that number is an enemy. It represents the terrible business practices that have inflicted serious wounds to our economy. "$132 billion" in losses. I look at that number and marvel at its impressive size. And then I wonder what the hell a "synthetic mezzanine ABS CDO" is.

Here's what the WSJ has to say:

"The names of the deals serve only to obscure their true nature, so we’ll just call them a betting game. This game allowed investors — including banks and insurance companies such as UBS, Merrill Lynch, AIG and Germany’s IKB — to make huge side bets on the performance of subprime borrowers, dramatically increasing the amount of money that would have to change hands if things went wrong."

Still hazy on what these "synthetic mezzanine CDOs are. So hazy that I wonder why our federal government had to bail out banks in order to rescue them from the consequences of a "betting game."

So I googled "mezzanine ABS CDOs" and got 94,100 links.

Time crunched as I am, I went to Wiki Answers first. Here's their description:

"A CDO is a collateralized debt obligation, a security whose principal and interest are repaid by the cash flows generated by a portfolio of assets (usually loans and bonds). The portfolio of assets is the collateral and it is usually in the balance sheet of a separate entity, called special purpose vehicle, which has the CDO as its only liability and the assets in the portfolio as its only assets. ABS CDO is a CDO whose portfolio is comprised of ABS (asset backed securities). A CDO is subject to credit risk, because some of the assets in the portfolio might not generate the expected cash flows (when the underlying credits go into default). Often, the CDO is tranched in tranches of different seniority, which have different priority in absorbing the eventual losses. The equity tranche, the less senior, absorbs the first losses (if there are any). Then comes the mezzanine. Finally come the senior tranches."

All clear now? Not really. In my attempt to translate that info into English, it seems that CDOs are instruments that are supposed to have cash flowing into them - "generated by a portfolio of assets (usually loans and bonds.)"

Sounds great! I like investing in instruments that create a return on my investment!

Who knows if Wiki Answers is right! But where else would I turn for this info? Websites of our strong and successful financial firms? The ones who assure us that "synthetic CDOs" are innovative tools we need to make America strong? No thanks!

But the Wiki Answer is describing "mezzanine CDOs." What about "synthetic mezzanine CDOs?"

Apparently, it's an instrument created out of the fumes of a real CDO. As Gertrude Stein once said of Oakland, "there's no there there" in synthetic CDOs.

Well then! Perhaps that's a reason why they contributed to such a massive loss?

From the WSJ "Number of the Week" story:

"It’s as if our entire financial system went to the racetrack and put a big chunk of its money on a single horse."

Sounds like the investment banks who like to brag about their focus on customers lost sight of the customer. Betting "big chunks of money" on single horse is a terrible methodology for "risk management." (Though it worked well for that guy who bet $100K on Super Saver at the Derby this year!)

Risk management's a key job for our financial sector. Isn't it? Or have they transformed into Vegas gamblers, with the generous backing of the US government as the key differentiator between success and bankruptcy?

That's why this figure - this $132 billion in losses from synthetic CDOs - is such an enemy. It represents massive failure on many fronts.

The economy has been gutted; the government, under George Bush and Henry Paulson, bailed out the financial sector; unemployment soared, as did federal debt, as did profits for the financial firms that were rescued.

It's an equation for continued disaster, frankly. We cannot afford to bail out the banks any more. The socialization of loss and privatization of profit is a terrible model of capitalism.

If this is the kind of innovation our financial sector is peddling, it is as dangerous to the United States as the Soviet tanks and bombs that were once paraded through Moscow on May 1st.

What is our financial sector doing about this? Claiming that their work (God's work!) was done right. Here's what Lloyd Blankfein, CEO of Goldman Sachs, said the other day in his prepared statement to Congress:

"Much has been said about the supposedly massive short Goldman Sachs had on the U.S. housing market. The fact is we were not consistently or significantly net “short the market” in residential mortgage-related products in 2007 and 2008. Our performance in our residential mortgage-related business confirms this.

During the two years of the financial crisis, while profitable overall, Goldman Sachs lost approximately $1.2 billion from our activities in the residential housing market.

We didn’t have a massive short against the housing market and we certainly did not bet against our clients. Rather, we believe that we managed our risk as our shareholders and our regulators would expect."

No regrets coming out of Goldman Sachs! In losing $1.2 billion dollars in the housing market for their own firm, in creating an instrument - this synthetic CDO that gained John Paulson (no relation to Henry) a billion bucks and lost IKB the same amount - Goldman Sachs, according to its leader, "managed our risk as our shareholders and our regulators would expect."

Actually, Blankfein is wrong. In America, we expect far better of the number one investment bank in the country. And we deserve a financial sector that is held accountable for its business decisions, not bailed out and rescued when they fail.

My wish list...

2010-04-11T21:42:00.000-05:00

Things I'd blog about if I had the time to blog these days:

– Paulson's book
– The game that got us to this point (Liar's Poker)
– A review of Atlas Shrugged
– Musings on the fate of Ken Lewis, and how the Merrill deal has destroyed his legacy, even with Paulson's stamp of approval

There is more. But there is less time than usual these days.

Work/life balance out of whack these days... (at least I'm working, right?!)

Musing on the cost of college...

2010-03-27T18:31:00.003-05:00

Brad Delong, economics professor, blogger, expert on money stuff, has a sidebar on his blog noting that he's signed up for a speaker's bureau because "the Eighteen-Year-Old is going to college next year, which means that I need to think about making more money."

Which makes it a bit odd that he's got a guest post on the Berkely Blog called Is It Fair for Education to Be Cheap?

A man now on the hustings to raise money for college is well aware that "cheap" and "college" are not a likely pair.

What he's referring to is the subsidized higher education one can acquire at a public university.

In my state, the in-state tuition is about $22,000 a year, which makes the cost of a four-year degree close to six figures when it's all said and done.

That's not "cheap" education. Or if it is, I'd like to know how a family that makes today's average income of $50K can afford to send multiple children off to school and pay for it without loans.

The cost of private colleges are approaching $40,000 to $50,000 a year. So it's essentially priced out of the realm of possibility for many families, unless draconian loans are taken out or colleges slash tuition costs for poor yet desirable students.

Now I am some years away from writing out those hefty tuition checks – still writing out less-hefty Montessori checks right now, but I shudder to think of the impact college tuition will have our family's bottom line.

And I have twins, so for us, it will be college expenses x 2 students x 4 years x the older brother's college expenses.

We've started saving for future educational expenses, but as we all know, investments have taken a big beating thanks to the crash. For many families, money has been lost in the gamble know as the college savings fund. God only knows what influences college savings fund will experience when it is finally time to send my kids off to college. One hopes not to be on the wrong side of a market adjustment!

Back to DeLong's post on the fairness of cheap college education, a post filled with rather bold claims that don't seem to have a foundation in fact. Like this one:

"On the one hand, the people who benefit from public and publicly-funded higher education are primarily people who are or will be relatively rich...."

I'd like to know what Brad DeLong's definition of "relatively rich" is. Certainly, a college professor's salary does not make one "relatively rich" enough to set aside enough money to send the 18-year-old off to college without additional income.

The most intriguing of DeLong's assertions is this:

"If we don’t keep college cheap–and publicly-funded–we find it next to impossible to increase educational opportunity; if we subsidize college with public money, we are transferring from the not-so-rich to the relatively rich."

First, where is the "cheap" college education? And how is this money being transferred? Are state schools filled only with the "relatively rich?" Are only the not-so-rich paying taxes these days?

Instead of a strange post seeking to answer the fairness of an issue that doesn't exist, I wish bright economists would focus on answering the question: why has the cost of college soared in recent years? Why do American colleges and universities believe that students graduating from college loaded down with ever-increasing amounts of debt is a sustainable business model?

What has motivated them to raise their fees significantly each year? And what are colleges doing to bring costs increases more inline with the cost of living increases? If only the "relatively rich" can afford the debt needed to acquire a college degree, we're looking at an economy that's pricing far too many people out of college. That's not good for a nation interested in retaining its superpower status.

Tim Geithner: Going Vogue

2010-03-14T16:25:00.004-05:00

It will take a while, but you'll find him if you look hard. Page past the metal-clad Gucci model...

Past the the starved-looking girl in the Juicy Couture ad (note to Juicy Couture marketing execs: nothing juicy about anorexia!)...

Past Kate Moss wearing little more than a purse in a cab...

Past the spread on "the Warrior Way" (which has nothing to do with warriors and everything to do with "tattered minis strapped with shoulder armor and breastplates")...

Past the story on Tina Fey (but before the pic-heavy story on Robert Pattison)...

And there you'll find him.

Tim Geithner going Vogue, "on the money," spilling his guts about the bailout, all in the March issue of Vogue magazine.

Who needs the New Yorker and Atlantic profiles when Vogue is there to chat with the US Treasury Secretary about TARP and bonuses and all the other topics so dear to the hearts of Vogue readers?

The article opens with this:

"If last year's bailout of the financial industry caused you to start muttering words like investment banker and robber baron in the same sentence, it may cheer you to know that Timothy Geithner, the man responsible for crafting much of that bailout, agrees with you.

"'I am,' he says, seated in his Washington, D.C. office, an intimidatingly ornate room worthy of a Hogwarts headmaster, 'incredibly angry at what happened to our country.'"

Truly, he looks a little pissed - or kind of angry - or bemused in the pic they use to visualize the Secretary for us.

But even in Vogue, Tim Geithner seems to have a hard time conjuring up the look that suggests "incredibly angry."

Frankly, when I see a profile of Geithner in Vogue magazine, I see a White House press organization desperate to rehabilitate the Secretary's image. And when I see how Vogue describes the Secretary, I think this profile was a bit of a mistake all around:

"A lithe and athletic 48 years old, Geithner, who was named one of the 100 most beautiful people by People magazine (it may have helped that his brother works for the publication), has the the kind of looks that can go either way: Half an inch one way he's John F. Kennedy; half an inch the other he's Lyle Lovett."

God help us! Did not need to Vogue to help us visualize the Treasury Secretary as a JFK/Lyle Lovett combo!

Why Vogue? Are the Elle Woods of the world truly interested in what Geithner has to say? Are they wondering why their dollar is not buying as much Gucci any more? Or will they just page past Geithner in search of Robert Pattison pix?

Do Vogue readers really want the answers to why the economy crashed? Here's Geithner, on the "irksome aspect" of being blamed for the collapse:

"'Think of all the stuff that burned first,' he says. 'Fannie and Freddie, the investment banks, AIG, the monoline insurance companies – it was their collapse that broght the system to the point of panic, but those things were outside the scope of the Fed's jurisdiction. They all got dumped on us when they went bad, but we had no authority up front.'"

There are people who once thought the head of the Federal Reserve of NY should have been able to wield some power over the events that led to the crash. But apparently, according to Geithner, it was a position without much ability to impact the financial sector at all until all hell broke loose.

Vogue is on the money here:

"As the Obama administration's point person for a cratering economy, Geithner knows thing or two about unpopularity."

Progressives think Geithner has sold out to Wall Street. Wall Street thinks Geithner is too tough (according to Vogue.) Which makes Tim Geithner a very unpopular man today.

So Geithner's out on the trail, chatting up with reporters, giving them the skinny on the skinny guy at Treasury. Through Vogue, we learn what Geithner really thinks:

"'In the end,' he says, sounding very much like his political hero, Lyndon B. Johnson, 'it's not about what you believe. It's about what you can achieve.'"

The answer to a Treasury Secretary's unpopularity isn't multiple profile pieces in a variety of publications.

The solution is creating jobs. Reforming the financial sector so that the financial firms can never again drag the economy off the cliff. Reinstating accounting standards so that off-balance accounting, like that which Lehman allegedly practiced, is an immediate red flag to investors and regulators alike warning everyone that funny money is not the sign of strength and stability.

As a war room once reminded all its warriors: "It's the economy, stupid." And improving the economy would be an achievement we could all be happy with.

Innovation that makes you smile...

2010-03-14T11:29:00.000-05:00

A video by OK GO 'This too shall pass." (And if this innovative production doesn't leave you with a smile, don't despair. Spring is coming...)

Having spent a portion of my career in production, I know this one-shot video was no easy task!

FASTEN YOUR SEATBELTS...

2010-03-12T19:33:00.001-06:00

The Chi-rish are about to let loose.

It's St. Patty's weekend in Chicago.

Which means the Metra today let us know that there would be no glass objects or alcohol allowed on the trains this weekend.

Yes, we love our St. Patty's day in Chicago - it's our way to let loose during Lent. Unlike New Orleans, we still feel compelled to party hard during the time of abstinence. We dye the river a bright, unnatural green. And we all add an O' or a Mac after our name, no matter where our ancestors came from.

Everyone is Irish on St. Patty's Day! At least in Chicago. Not sure what it's like elsewhere. I've heard that until recently, St. Patty's day was a day to go to church in Ireland. That was until the Americans flooded the place wondering where the parade was.

I had no idea that booze was allowed on trains on other days! Just thought the people surreptitiously drinking beer out of gigantic cans during non-festive days was their surreptitious way of getting drunk before getting home.

According to a friend, some bars in Chicago will open at 7 a.m. on Wednesday, March 17.

A fab way to celebrate the saint who drove snakes out of Ireland...

(Wonder if Starbucks' numbers diminish in Chicago in March.)

Bailout & Bonuses at BoA

2010-01-20T08:38:00.001-06:00

Bank of America has posted its third consecutive quarterly loss. Apparently, the double whammy of paying back TARP and defaults on consumer loans has packed quite a punch to the firm's bottom line.

From Bloomberg:

"'Economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth,' [Bank CEO Brian] Moynihan said in a statement. 'We are encouraged by signs the economy is improving, as we have seen in the stabilization of our credit costs, particularly in the consumer business.'"

Specks of sun are breaking through, perhaps, but clouds of high unemployment and sluggish consumer spending remain heavy and dark everywhere you look.

Given the gloom surrounding the current economic outlook for consumers outside of Wall Street, why would BoA consider taking the hit now to repay TARP? Wasn't TARP designed to help struggling, massive banks recapitalize?

More from Bloomberg:

"The company repaid $45 billion of government rescue funds in December. Getting out of TARP freed the bank from federal pay limits and as much as $2.85 billion a year in dividends to the U.S."

With TARP repaid, BoA can take money they don't seem to have and pay bonuses to people whose business behaviors left the bank on the rocks.

Of course! It's bonus season. BoA can't afford to lose the people whose questionable business decisions landed them in a swamp. Seems a dubious business practice. But one that is SOP in the financial sector - establishing bonuses that will be awarded no matter how terrible the company does.

As long as the feds back them up with the necessary financing, it's a business model that works - if you're in line for those bonuses. Outside of BoA - well, as Moynihan said, the outlook "remains fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.”

Not an outlook that offers much to bank on.

Am I dreaming?

2010-01-16T16:59:00.001-06:00

The man reluctant to cut his vacation short to help Katrina victims is working with Bill Clinton to help Haitian earthquake victims?

Is this a dream or the transformation of George W. Bush into a philanthropist?

From a story in the Washington Post:

"Bush said that his heart, and that of former first lady Laura Bush, 'are broken when we see the scenes of little children struggling without a mom or a dad or the bodies in the streets.'

He pledged to work alongside Clinton to encourage Americans to dig into their pockets. In the near term, he urged people to avoid donating blankets or other items but to just 'give your cash' to aid organizations that can spend it wisely.

(Just had a flashback to those pallets filled with $12 billion in cash that vanished in Iraq in 2003 - 2004. Is Halliburton involved in anyway with the relief effort?)

Strange that a man who failed to mobilize the FEMA forces during the worst natural disaster to hit America has found himself assisting the victims of another terrible natural disaster. Will it be another "heck of a job?"

More from the Washington Post:

'The Haitian people have got a tough journey, Bush said. "But it's amazing how terrible tragedies can bring out the best of the human spirit ... While that earthquake destroyed a lot, it didn't destroy their spirit."

A prediction so bold it landed on the front page of the WSJ!

2010-01-07T22:23:00.005-06:00

GM predicts a profitable year in 2010.

Now that IS bold! The company, clawing its way out of bankruptcy. The economy, still shedding jobs by the tens of thousands each month (down from the hundreds of thousands shed in a few months ago - leading many to predict the beginning of the jobless recovery.)

And a prediction unprecedented in optimism.

The Wall Street Journal characterized GM's statement as a "bold and surprising forecast," and noted the company has not seen a profitable year since 2004.

The WSJ also noted that "significant hurdles remain to repairing GM's bottom line, namely winning back tens of thousands of customers and improving the profitability of vehicles sold."

And the newspaper gives us another curious statement:

"When GM started piling up billions of dollars in losses in 2005, Rick Wagoner, its CEO at the time, stopped offering financial guidance."

Does this mean the CEO shut down from stress? Failed to steer the ship back to profit? Threw up his hands in despair as the Titanic sank?

Oh well. He's set for HIS retirement, having received a $10 million package upon his hasty departure a year ago. Nothing like the golden parachute to let those inhabiting the C-suite know that no matter how badly they screw up (they can even "stop offering financial guidance" all together in a time of catastrophe), they STILL get a fat golden parachute when they're shoved out the door.

All this seems a far cry from the Randian paradise GM once inhabited, back when the Beach Boys included GM brands in their catchy, summery songs, the Big 3 ruled the roads, CEOs earned their salary and the thought of a company surviving thanks only to a government bailout was a capitalist's worst nightmare...

Passing on a great post about TR

2010-01-04T08:55:00.000-06:00

The Edge of the American West blog has a wonderful post on Teddy Roosevelt.

It's a lovely post with a lovely conclusion:

"It is always easier to explain why Washington, Jefferson, and Lincoln belong on Mount Rushmore. Lincoln is America’s Christ. And Washington plays God the Father to Lincoln’s martyred savior. Which leaves to Jefferson the role of Holy Spirit: just so, as the author of the Declaration of Independence, the deeply flawed Jefferson nevertheless carried enough divine fire to channel into words the nation’s enlivening ideal of equality and natural right.

With such an established trinity, what need for a fourth figure? If we can see elements of the godly in each of Washington, Jefferson, and Lincoln, what can we do with the rather thoroughly earthly Roosevelt? But perhaps that is the point. Alongside gods humanity also has a place, and a man who did so much to make daily life in America a little better, and to create the expectation that daily life in America must be better, belongs there."

It's worth a read...

Unlocking the code to financial innovation!

2010-01-03T12:15:00.013-06:00

I will be the first to admit that I am a CDO ignoramus. After a year of research, I still can't figure out how collateralized debt obligations work or why we need them. What I find mystifying is the opacity of the offering. And from what I understand, we have not only CDOs that we can buy, but synthetic CDOs, which, as far as I can tell, function as a sellable mirage of the original CDO, which is itself a bunch of debt lumped into various tranches of different risk classes.

But apparently we need this kind of innovation - regulations for the financial sector would squash this kind of innovation, so we're told, and then the market for Ferraris would drop significantly.

(JUST KIDDING about those Ferraris!)

In my search for knowledge, I find myself exploring all sorts of econ blogs - enjoying the journey while remaining mystified by the CDO conundrum. So I read with interest the latest post on the Economics of Contempt blog - "On Goldman and synthetic CDOs."

EoC seems a pretty smart guy - he knows far more about the intricacies of finance than I do. He's not shy about expressing his opinion, which makes his blog enjoyable to read.

This post of his is a rebuttal to a post on Yves Smith's Naked Capitalism blog that denounced Goldman's synthetic CDO practices.

You'll have to read both Yves' and EoC's posts to understand the full gist of their debate. Here's what I found so interesting in EoC's post:

"More importantly, what you have to realize — and where I think Yves goes wrong — is that Goldman wasn't necessarily placing an independent bet against the synthetic CDO market; rather, it was using synthetic CDOs to bet against the housing market."

And what, exactly, does it mean when Goldman bets against the US housing market? EoC gives us the formula:

"The mechanism was this: declining housing prices → higher default rates → reduced cash flows to mortgage-backed securities → lower RMBS/CDO prices → higher value of CDS protection on RMBS/CDOs → ca-ching!"

Ferraris for everyone (at Goldman Sachs) when those foolish home owners default on the loans the banks never should have approved.

Now those are some really smart peeps over there at Goldman Sachs. They saw the tsunami coming and made sure they'd ride the wave in a highly profitable manner and not get swamped like Lehman Brothers and Bear Stearns.

(And when they sent Henry Paulson, their CEO, to head up the Treasury Department back in 2006, I guess he didn't much know about this, or he would have done more to prevent the economy from falling off the cliff, rather than wait for it to crash before taking any action.)

EoC knows there is nothing nefarious in Goldman's actions - this is the world of Wall Street - it is inevitable that profit for some means loss for others. Here's EoC's take on this:

"If Goldman's plan all along was for the synthetic CDO market to collapse, then why were they consistently the biggest liquidity provider (by far) in structured products and structured finance CDS (i.e., ABX tranches)? The point is that Goldman didn't need to artificially drive down the synthetic CDO market. They set themselves up to profit from the decline in synthetic CDOs that would follow naturally from weakening fundamentals in the housing market. By the same token, Goldman didn't need to manipulate the structure of the synthetic CDOs they arranged; any run-of-the-mill synthetic CDO referencing subprime-backed cash CDOs (to the extent there was such a thing) would've suffered steep price declines once housing prices started plummeting."

EoC points out that Goldman was public in feeling bearish on housing - and we see now, it was bearish with good reason.

But for me, that code for success (declining housing prices → higher default rates → reduced cash flows to mortgage-backed securities → lower RMBS/CDO prices → higher value of CDS protection on RMBS/CDOs → ca-ching!) is innovation we don't much need today. Betting against the US housing market seems like a terrible way to make a buck. Phenomenally successful for Goldman, but catastrophic for the economy at large.

And so I find myself still mystified at the innovation known as the CDO. Seems like innovation in finance leads us to meander down a rocky trail that takes us from the approval of terrible mortgages to the creation of mortgage-backed securities chock full of those really bad mortgages to higher default rates on those same mortgages to "ca-ching" for Goldman Sachs.

Goldman Sachs saw the collapse of the housing market coming, and its brilliant staff was able to sell synthetic CDOs to customers as they bet those same instruments would lose value.

Those who found themselves with mortgages they couldn't afford and those who bought the innovative financial instruments from firms like Goldman Sachs discovered they owned "the big oops" - products with all loss and no gain.

That's an interesting innovation - creating products that provide an inevitable loss for someone. Hard for me to wrap my head around innovation designed to create massive profit for the innovator when the mortgage default rate goes up as the entire US housing market tanks.

Which leaves me to wonder if modern American financial innovation is designed solely to enrich the sellers of the innovation, with enormous losses in store for consumers of the products.

Here's what Joseph Stiglitz, an Economics Nobel laureate, had to say on financial innovation in a story he wrote for China Daily (an interesting media outlet for Stiglitz's story.)

"Indeed, financial engineering did not create products that would help ordinary citizens manage the simple risk of home ownership - with the consequence that millions have lost their homes, and millions more are likely to do so. Instead, innovation was directed at perfecting the exploitation of those who are less educated, and at circumventing the regulations and accounting standards that were designed to make markets more efficient and stable. As a result, financial markets, which are supposed to manage risk and allocate capital efficiently, created risk and misallocated wildly."

And in the end, the major players in the financial sector, including Goldman Sachs, found themselves on the receiving end of one of the most expansive government entitlement programs ever created. And thus, thanks to innovation that led to a crash that led to a bailout, 2009 was a very, very, very good year for Goldman Sachs.

Analyzing a half century of American income tax

2010-01-01T10:13:00.001-06:00

Mark Thoma shares an article written by David Cay Johnston of Tax Analysts that compares 1961 income taxes with what we have now. Johnston's goal is to analyze if our tax system is helping us create wealth.

What do you think the data shows?

That the vast majority of Americans have seen only a modest rise in income in the last 45 years. In a span of years that stretches longer than a traditional career, the average income of the bottom 90% of wage earners has risen almost $9300, from an average of $22,366 in 1961 to $31,642 in 2006.

In the last 45 years, GDP has grown - up 227 percent.

Average income for the top 400 taxpayers has also grown from $13.7 million to $263.3 million. That's nearly 20 percent growth in 45 years.

If you've felt a financial squeeze over the years, there's a big reason why. David Cay Johnston explains:

But wages and fringe benefits did not grow with the economy. For most workers, they fell. Wages peaked way back in 1972-1973, were on a mostly flat trajectory for more than two decades, rose briefly in the late 1990s, and then fell sharply in the new century. ... Millions are out of work, and the jobs they once held are ... not coming back. And even if the Great Recession is coming to an end, we face years of jobs growing more slowly than the working-age population, which could radically transform America’s culture, work ethic, and sense of progress.

In 2006 families worked on average about 900 more hours than families did in the 1960s and early 1970s. That is a roughly 45 percent increase in hours worked... For many, the reality is that two jobs produce the same or a smaller after-tax income than just one job did three and four decades ago. ...

During the 45 years starting in 1961, payroll taxes have gone from a minor levy to almost a sixth of wages for the bottom 90 percent of American households. This $760 in income tax savings that the average taxpayer enjoyed in 2006 was taken back, and more, by the increased tax rates for Social Security and Medicare. Those rates rose from 3 percent withheld from pay in 1961 to 7.65 percent in 2006. Not all income is from wages, of course, but those higher payroll taxes wiped out the seeming reduction in the income tax and more. ...

The wealthy have benefited enormously from the income tax code. Again, Johnston explains:

"Without a doubt, the much lower tax rates at the top encouraged people to realize more income in the tax system. And if the only measure is that some people made more, then this would be a good. But let’s ask the question that the classical economists would have asked back when they were known as moral philosophers and their leaders spoke of policies that benefited the majority. Let’s go back to a time before Vilfredo Pareto’s observations began what is the overwhelmingly dominant orthodoxy today, neoclassical economics with its focus on gain.

What is the social utility of creating a society whose rules generate a doubling of output per person but provide those at the top with 37 times the gain of the vast majority? ...

Is a ratio of gain of 37 to 1 from the top to the vast majority beneficial? Is it optimal? Does it provide the development, support, and initiative to maximize the nation’s gain? Are we to think that the gains of the top 398 or 400 taxpayers are proportionate to their economic contributions? Does anyone really think that heavily leveraged, offshore hedge fund investments are creating wealth, rather than just exploiting rules to concentrate wealth, while shifting risks to everyone else?"

In the early 1980s, Ronald Reagan promised that wealth would "trickle down" and benefit all Americans. Johnston's data shows the promise didn't pan out as planned:

"Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?

Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families with children whose head is age 50 or younger, is smaller today than it was in 1983."

The Lost Decade

2009-12-27T09:13:00.001-06:00

The first decade of the new millennium is the "lost decade" for America, the one where we lost a surplus, gained a massive deficit, declared two wars with no intention of funding them, rounded up the usual suspects in those wars and set them to rot without charges in Gitmo for an undetermined amount of time, and threw in some VP-sanctioned torture as an add-on to the new millennial approach to national security.

It was a decade that began with all the drama of the hanging chad, a hotly contested presidential election teetering on the decision of Florida voters, a state led by the brother of one of the presidential candidates.

We finally came to decide the next president of the United States based on the opinions of the nine justices of the US Supreme Court.

The brother of the Florida governor won. When it comes to allegations of rigging a presidential election, the Daleys of Chicago have got nothing of the Bushes of America.

The transition of power happened peacefully; Democrats handed over the reins to Republicans and the spending began in earnest.

The new president realized that a vacation was in order, and many landmark moments happened when Bush was resting up – our president was in Crawford the month of August 2001 (just months after taking the oath of office) and thus missed CIA memos on possible terrorist attacks; he was on vacation when Katrina hit, and remained on vacation after it was apparent Katrina was the worst national disaster to hit the nation. Cutting branches seemed to be the occupation of preference for this particular president.

The decade included 9/11/01, the first attack on American soil since Pearl Harbor. A shocking, astonishing, grief-stricken moment. The president rose to the challenge and gave us that lovely and unforgettable image of him standing on the rubble of the Twin Towers, bullhorn in hand, supporting the heroic firefighters and encouraging America to look forward, to never give up.

We went to two wars in this decade with the army we had, not the army we wished to have – so said Donald Rumsfield, in response to questions about lack of proper equipment in the field.

Arthur Anderson crashed in this decade, after making the decision to throw out rules of accounting - if numbers not adding up to the client's desired outcome pissed off the client, Arthur Anderson's accountants decided it was best revise established accounting practices to make sure the numbers added to whatever the client wanted, truth be damned.

Enron was the result. A massive collapse of a massive company just months after we all witnessed the collapse of the two towers in NY. This tragedy was American made, with many thousands of people crushed by the crash of the giant E.

(Have a sneaky feeling that Skilling will be let off, when the Supreme Court comes to its decision on his fate.)

This was the decade that saw the collapse of our financial system, that saw the conservative president and his conservative Treasury Secretary (Bush and Paulson) initiate one of the most massive entitlement programs for American business - TARP. One year after TARP began, we also are now seeing some of the biggest bonuses ever for bankers who'd received federal bailout funds and survived the crash.

This was the decade that saw the most precipitous loss of jobs in decades, job losses that began in earnest once TARP went into law and job losses that have not yet been halted by the trillions in federal money thrown at the problems.

This was the decade that saw the election of America's first African American president. The election night celebration in Chicago 2008 was an extraordinary moment in American history.

As we move forward into a new year, a new decade, we have many problems to resolve. We have enormous deficits to overcome. As Americans, we have a legacy of hope and strength to draw from as we work to solve our problems.

Of Fog and Phones

2009-12-20T07:48:00.000-06:00

Jon Stewart's take on the absence of three CEOs from an important meeting with the President of the United States...

The Daily Show With Jon Stewart

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Apparently, phoning it in was the best way for these top-notch bankers, mired in fog, to touch base with Obama...

It's a bitch when weather gets in the way of a personal meeting with the president.

The business that credit forgot...

2009-12-17T20:52:00.000-06:00

New job requires a daily commute on the Metra. Went to buy my monthly pass and discovered a notice posted on the ticket window informing all patrons that credit cards will be accepted at the train stations in the spring of 2010.

It's cash or check until then...

Ten years into the new millennium, credit cards will FINALLY be accepted at Chicago's metra train system.

Nice way to reinforce the antiquated nature of this mode of transport...

Goldman Sachs changes compensation plan...

2009-12-12T15:44:00.001-06:00

...for all 30 members of its management team.

Nice press release includes few pertinent details. Would love to know if this means the 30,000+ employees not affected by this plan now get bigger bonuses.

After all, Goldman's $17 billion bonus stash needs to be distributed to the many thousands of deserving employees, right?

In the press release, Lloyd Blankfein offers up this quotable nugget:

"The measures that we are announcing today reflect the compensation principles that we articulated at our shareholders' meeting in May. We believe our compensation policies are the strongest in our industry and ensure that compensation accurately reflects the firm's performance and incentivizes behavior that is in the public’s and our shareholders’ best interests.

"In addition, by subjecting our compensation principles and executive compensation to a shareholder advisory vote, we are further strengthening our dialogue with shareholders on the important issue of compensation.”

Strengthening the dialogue, perhaps, but giving the shareholders no real say in the matter, according to the press release.

"Shareholders will have an advisory vote on the firm’s compensation principles and the compensation of its named executive officers at the firm’s Annual Meeting of Shareholders in 2010."

Was not aware that shareholders needed Goldman Sachs to grant them "advisory" status on this issue. Seems like the shareholders have not been shy about offering their advice on this topic already.

Goldmans "news" provides valuable PR spin. But let's be realistic. Putting a limit on bonuses for 30 people in a company with 30,000 employees will hardly change a thing.

Freedom!

2009-12-02T20:44:00.000-06:00

Bank of America is set to pay back $45 billion it owes TARP.

Funny how the need to free the company from CEO pay restrictions provided motivation for such an action...

For more, here's Felix Salmon's report.

And here's what the WSJ has to say.

In time for Thanksgiving - a film review of The Searchers

2009-11-25T10:22:00.002-06:00

Tomorrow is Thanksgiving, a day filled with symbols of our great American mythology. Our founders, the European settlers, yearned for a new life free from the restrictions of Europe, so they got on those rickety boats and crossed an ocean to reach an unknown land.

The Pilgrims, in their quest for religious freedom, sought Nirvana far from home. The place they landed on was harsh, unforgiving, a landscape that required skill and knowledge in order to survive.

And instrumental to their survival, according to the American mythology, were the inhabitants of the "New World." As we all know, the Pilgrims shared a harvest feast with the Wampanoag Indians in 1621. The modern American Thanksgiving dinner not only gives us the opportunity to give thanks for our blessings, but commemorates the cooperation between Native Americans and foreign born visitors who sought new life in a new world.

Of course, cooperation turned into warfare not long after. Another component of American story is the "cowboys versus Indians" mythology, in which cowboys wrested the land from violent, scalp-taking Indians.

Which brings me to The Searchers, a classic western made by John Ford in 1956.

For me, The Searchers ranks up there as one of the definitive American movies. Our mythology, particularly our Western mythology, focuses on our independence from others. Our heroes seem to need no one. They are self-contained and powerful. They save us from the evils that exist beyond the pale.

With The Searchers, Ford shows us the reality behind the myth. Ethan Edwards, for whatever reason, shunned love, rejected the home. Those early scenes in the film are so powerfully eloquent in visually expressing his love for Martha, and her love for him.

A 47 second scene from early in the movie that visually shows the relationship between Ethan and his sister-in-law:

We'll never know why they never married, but I believe it is because Ethan was not a settled man. Walls could not contain him. And so Martha settled for Ethan's brother.

With this film, did Ford and Wayne endorse Western racism or regret it? To me, it seems clear. The racist shoots people in the back. He's angry. He wants to kill his niece because the Comanches have defiled her. He's nasty to the young man who trails around the west with him in search of the lost white girl. There is far more than regret in John Wayne's portrayal of Ethan - there is condemnation too. It is Marty, tainted with that drop of Indian blood, provides the moral center of the film. The man not fully white, the man without blood relatives, is the one man in the story who truly understands the value of protecting one's kin.

In a 2001 review of the film, Roger Ebert says, "in The Searchers I think Ford was trying, imperfectly, even nervously, to depict racism that justified genocide."

I disagree. To me, watching John Wayne's extraordinary performance, it was clear that this is a sharply defined portrait of the internal destruction that comes from living under a twisted moral code. Wayne exposes the myth for what it is, a sham. "What do want me to do, draw you a picture?" he screams at Lucy's fiance, when he finally has to reveal what happened to Lucy. The violence he's witnessed has destroyed him.

In The Searchers, we see that the Western hero is not impervious to grief and sorrow, as the myth would lead you to believe. The Western hero is isolated by independence, shut out from the soft, warm intimacies of family life. Is there any other Western that is so framed by the home? Those iconographic opening and closing images of the film are startling - the great, expansive beauty of the west, framed and enclosed by the love of family. Even at the end, Ethan rejects the comfort of love. His love is the land. But his independence is obtained at a very high price.

It is rare that I see a movie that affects me like this one. And while I admire John Wayne for accepting the challenge of playing Ethan Edwards, I do not admire Ethan. He is ambiguous and twisted. His courage is not necessarily the same as heroism. For me, the one flaw of the film is that in the end, his decision to save Debbie instead of kill her is completely unmotivated. The real Ethan Edwards would have shot her.

When God's Work requires an apology...

2009-11-24T20:44:00.000-06:00

In a year that has seen unemployment spike to its highest levels in decades and government debt reach record levels, Goldman Sachs is on track to pay out its highest employee bonuses ever in the firm's history.

All part of "God's work," Lloyd Blankfein suggested in a recent interview with the London Times.

Here's the intro from that story:

"Number 85 Broad Street, a dull, rust-coloured office block in lower Manhattan, doesn’t look like a place to stop and stare, and that’s just the way the people who work there like it. The men and women who arrive in the watery dawn sunshine, dressed in Wall Street black, clutching black briefcases and BlackBerrys, are very, very private. They walk quickly from their black Lincoln town cars to the lobby, past, well, nothing, really. There’s no name plate on the building, no sign on the front desk and the armed policeman stationed outside isn’t saying who works there.

There’s a good reason for the secrecy. Number 85 Broad Street, New York, NY 10004, is where the money is. All of it.

It’s the site of the best cash-making machine that global capitalism has ever produced, and, some say, a political force more powerful than governments. The people who work behind the brass-trim glass doors make more money than some countries do. They are the rainmakers’ rainmakers, the biggest swinging dicks in the financial jungle."

Not sure which God Blankfein prays to, but it's the rare God that places high value on owning "the biggest swinging dick in the financial jungle." In my Bible, the excessive acquisition of wealth is generally frowned upon. And in the Gospel of Luke, the wealthy end up in hell, actually.

But in Blankfein's mind, the acquisition of record-breaking bonuses is God's work indeed. In fact, as he told the Times, "everyone should be happy."

But they're not - all those many people outside of Number 85 Broad Street. Congress isn't happy. Main Street isn't happy. And now Goldman Sachs shareholders aren't happy.

So what's Blankfein going to do?

Why apologize, of course.

“We participated in things that were clearly wrong and have reason to regret,” Blankfein, 55, said at a conference in New York hosted by the Directorship magazine. “We apologize.”

A bizarre public relations move from a man usually more on top of his game.

But not to worry. The apology is not going to get in the way of the bonus payout. Because as the Goldman Sachs spinmeisters have told us repeatedly over the year, the best and brightest, the brilliant minds who "participated in things that were clearly wrong," will leave Goldman Sachs if they do not get their bonus.

Making some consumers feel like the economy is being held hostage by people who want astronomical sums for screwing up, then maximizing profit to be made from the government's generosity.

There'd be no Goldman Sachs today if not for the government bailout of the financial sector, a bailout that cost billions and added to the nation's debt.

But God works in mysterious ways. The bankers who survived the collapse of the financial sector - not because of their brilliance - but because the feds bailed them out, will be richly rewarded in this year of high unemployment and record government debt.

November is the cruelest month...

2009-11-15T20:36:00.003-06:00

Yes I quibble with Eliot, whose most famous poem, The Wasteland, began with the most famous disparagement of the month of April.

November is the cruelest month in the calendar, bringing with it dead skies, the hint of winter and two of the most vivid memorials to our war dead... Veterans Day and the anniversary of Lincoln's Gettysburg address.

On the 11th hour of the 11th day of the 11th month, the day we now know as Veteran's Day, we honor those who sacrificed their lives for the sake of the greater ideal of honor, courage and country.

And on November 19th, 1863, Abraham Lincoln uttered less than 300 words in one of the most famous speeches ever given to honor those who died for their country.

Let us always remember that neither Veteran's Day nor Lincoln's famous speech would have happened were it not for the incredible sacrifices of our soldiers.

I will show you fear in a handful of dust... said Eliot in The Wasteland, a poem both famous and obscure of meaning.

I can only imagine the fear of those men slaughtered at Gettysburg. I can only imagine the fear of our soldiers who are now fighting today in the name of honor, virtue and passionate dedication to our country.

To me, Lincoln was a more gifted poet than Eliot. So I end with his words, said in honor of our soldiers...

Four score and seven years ago our fathers brought forth on this continent a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation, or any nation, so conceived and so dedicated, can long endure.

We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live.

It is altogether fitting and proper that we should do this.

But, in a larger sense, we can not dedicate...we can not consecrate...we cannot hallow this ground.

The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here.

It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced.

It is rather for us to be here dedicated to the great task remaining before us – that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion – that we here highly resolve that these dead shall not have died in vain – that this nation, under God, shall have a new birth of freedom – and that government: of the people, by the people, for the people, shall not perish from the earth.

Our nation has been consecrated by the blood of all those who've died to protect it. We need to remember their sacrifice - we need to make sure that this American ground was not hallowed in vain.

How's Your Retirement Account Doing?

2009-11-04T20:30:00.001-06:00

Schmuck! That's if you're like most Americans and have seen the value of your retirement fund dip alarmingly with the collapse of the economy.

Shoulda been a "top executive!" According to the WSJ, their pensions have risen an average of 19 percent in 2009 - with more than 200 excecs seeing a 50 percent increase in their pension...

Also news in the WSJ, the private sector shed more than 200,000 jobs in October and big bonuses are back for Wall Street bankers...

The yin and yang of life in America.

Ayn Rand's Greatest Defender?

2009-11-01T21:19:00.000-06:00

Ayn Rand is all the rage these days (and unbeknownst to me, has apparently been all the rage in certain circles since her career as an author began), with current interest jacked up thanks to the publication of Anne Heller's biography of Rand.

In catching up with my reading this weekend, I noticed Newsweek had a review of Rand cleverly called "Atlas Hugged." As I read it, I found myself irritated by some of the thoughts of the reviewer, who found The Fountainhead "a stunning evocation of the individual and what he can achieve when unhindered by government or society."

The reviewer pulls a quote from The Fountainhead to support the assertion, a claim by Roark:

"I do not recognize anyone's right to one minute of my life. Nor to any part of my energy. Nor to any achievement of mine. No matter who makes the claim, how large their number or how great their need... I recognize no obligations toward men except one: to respect their freedom and to take no part in a slave society."

As a working mother, I find such sentiments to be appallingly unrealistic - in all honesty, once one becomes a parent one is engulfed by responsibility toward others - one's children. To pound one's chest and brag about having no obligations at all in life except oneself - well good luck and all, but one needs relationships in life in order to survive. Show me a man who lives as independently as Howard Roark and I'll show you a Travis Bickle.

I wondered who was so inordinately drawn toward this rather heartless and impossible ideal. And then discovered that the reviewer is none other than Mark Sanford, the disgraced governor of South Carolina, the man who vanished over Father's Day weekend so he could hang with his mistress instead of his children.

I suppose that such a man would be a fan of Rand. That such a man as Sanford would love an author whose books proclaimed the primacy of self-obsession.

I read The Fountainhead a million years ago - it was not a book that changed my life or offered me a phenomenal new philosophy to follow. In truth, I thought the book highly unrealistic. I don't know a person alive who could live as isolated a life as Roark did. We're not built for isolation - rugged independence is the American myth, not the reality of our culture. There is not one CEO who could go it all alone, without any support or alliances - or without a fabulous admin assistant to schedule the CEO's life and act as the keeper of the gate.

I've yet to read Atlas Shrugged, apparently the book that replaced the Bible over on Wall Street. I started it, but it's lengthy; my life is full; the demands of my own personal schedule meant I had to return the book to the library before I could finish it. I WILL finish it... some day.

The capitalists have it hard in Atlas Shrugged - the dreck also known as the laboring class throws up millions of obstacles in the way of progress, damn them! And then there are the wives of the capitalists and the mothers of the capitalists and the "friends" of the capitalists. Life sucks when you just want to work all the time and exploit labor to get ahead. No one "gets" you!

But in Atlas Shrugged, the capitalists overcame the obstacles set in play by all those collectivist types. Heroes, those capitalists, every last one of them! The saviors of America. Saviors we could use today, of course.

Today, in Mark Sanford's eyes, there is only one enemy to blame for our current malaise and that is government itself. Strange that a governor, a person actively engaged in the workings of government, feels government is the problem. He might want to think about a new career, come to think of it. Governors who loathe government are best suited for careers outside of government. He might just want to go with that particular flow...

Anyway, back to Rand. Back to Sanford's review of Rand. Here's what he has to say:

"As Rand shows in [Atlas Shrugged], when the government is deprived of the free market's best minds, it staggers toward collapse."

Sanford seems to have forgotten that the best minds of the free market (Goldman Sachs power structure) tend to end up in government - and precisely at the moment our economy was collapsing, a great free market mind - Henry Paulson - was leading the Treasury, and apparently listening intently to what another great free market mind - Lloyd Blankfein - had to say.

Sanford points out a major flaw in Rand's thinking: "She believed that man is perfectible – a view she shared with the Soviet collectivists she hated."

As Sanford himself knows all too well, man is inordinately flawed. And so, too, is Rand's philosophy. A society filled with people who believe they're beholden to no one is dangerous, not empowering. And if a man like Mark Sanford, who so clearly lacks ethical standards, is so inspired by Rand, we should question the source of his inspiration.

Things must be worst than I thought...

2009-10-29T21:11:00.000-05:00

Walmart is getting into the death market.

As in caskets and urns used for cremains.

When planning a funeral, I suppose it's good to know that there are bargains to be had...

Here's a link to the AP story, if you want more details. It's got a great lead:

"The world's largest retailer wants to keep its customers even after they die."

A House Divided...

2009-10-29T20:38:00.001-05:00

…Cannot stand.

Thus spoke Abraham Lincoln in an address to Illinois Republicans that he gave in 1858, two years prior to his assumption to the presidency. In his mind, the nation could no longer live half-slave, half-free. Shortly after Lincoln became president, the Civil War began, a terrible and bloody war waged to determine whether we’d live all slave or all free.

We know the outcome of that war. Slavery ended with the Emancipation Proclamation.

Today, this American house is again extremely divided... between the over-leveraged and the over-compensated.

On the one hand, much of our house exists in chaos. Highest unemployment in decades (a rate that doesn't even include those who've given up the search for a job.) Hundreds of thousands of jobs lost each month. Consumer side of the financial system in a shambles. Still loaded with toxic assets. Still crumbling from the weight of consumer loans that consumers can no longer afford.

Because as we’ve seen this year, with job loss comes the loss of income. For those in the trenches, the impact of the collapsing economy has trickled down to the consumer in ways that have been catastrophic for many.

Contrast that with the golden era today on Wall Street. Record profits. Record bonuses. Record compensation for many of the people who dragged the economy off the cliff.

The feds have clamped down by limiting compensation for the 25 most highly compensated employees at seven firms (Citi, BoA, AIG, GM, GMAC, Chrysler and Chrysler Financial.)

In other words, they placed compensation limits on 175 people who work at firms that employ tens of thousands of employees. For these few top wage earners, their cash salaries (excluding bonuses) are limited to $500,000. This in a year when the average family of four has an income of about $70,000 a year (if they're working).

Since everyone seems to recognize that the badly behaved business leaders cannot exist on half a mil alone, they get the rest of their compensation, which can head back up in the stratosphere, in stock options that cannot be cashed out for a number of years.

For those living day to day, wondering when the economy will get a jump-start on employment, that $500,000 cash “limit” would be a hefty pay day. On Wall Street, the limit is a federally imposed disaster. Apparently those who trash their businesses don’t feel compelled to hold themselves accountable for terrible business decisions that led to a massive federal bailout.

If you watched Frontline earlier this week, you saw middle-aged members of the middle class realizing that they'd been bumped from relevance. Unable to get a job. Discovering that all they'd worked toward, all they'd sacrificed over the years, all the skills they'd acquired meant nothing in today's job market.

They meant nothing in today's job market.

In the history of labor, this is a turning point. The middle class has been traditionally been protected from the punitive actions of capitalism. The middle class has thrived in capitalism. The middle class has grown fat on capitalism.

But not today. Not in this America. The middle class is just catching on to the fact that it has become an endangered species in 21st century America.

In speaking of "the house divided," Lincoln had borrowed from another source – the Bible.

“...Every kingdom divided against itself is brought to desolation... ” Matthew 12:25

There is wisdom in to be found in the experience of history. There is wisdom in that passage from Matthew. Let us not fail to learn the lessons of history.

The terrible divisions that separate Main Street from Wall Street must be healed. But they cannot be healed if those on Wall Street continue to suck billions of dollars out of the system and into their pockets. The parasite is in danger of killing the host.

What we've learned in the years since Paulson unveiled TARP is that investing in bankers is no way to heal a nation. In fact, that kind of investment is rapidly bringing us closer to desolation every day.

An Olympian Failure...

2009-10-25T02:59:00.000-05:00

Richard J. Daley, the father, was known as "the kingmaker." As mayor and as head of Cook County Democratic Central Committee, he controlled the votes of one of the largest block of Democratic votes.

Thus, back in the old days, when powerful Kennedys were plentiful, all Democrats seeking the highest political office in the land came to see Chicago's mayor, Richard J. Daley, the man from Bridgeport, hizzoner, the boss. The men who would be president would come to see to see this man who rose to prominence from very humble beginnings.

Richard M. Daley, the son, is not a kingmaker. There's no one in America who thinks Daley is the reason Obama was elected president last year. The vast blocks of city voters have been chopped up, segmented into smaller chunks, often powered-up by single issues like abortion.

In the third largest city in America, Daley is instead the king, ruling virtually unopposed in all areas.

He came to power after a turbulent decade of non-Daley rulers, including the first female (Jane Byrne) and black mayors (Harold Washington & Eugene Sawyer) for the city.

And today, he rules as an autocrat. When his father was mayor, you could count on the lakefront alderman of the 43rd ward to raise up an alarm over some issues. You had Mike Royko writing columns and his famous book that named the mayor for the world as "Boss."

The son has no voice raised against him. Not the Republicans, who've been emasculated in Chicago for decades. Not the City Council, which rubber-stamps virtually everything the mayor wants - without reading it apparently. There is no Royko in the local media to act as a gadfly.

Daley rules alone. A king over all.

And when one rules in such isolation, there is no one else to blame for failure.

In the weeks leading up to the big IOC vote, it became increasingly clear that Chicagoans were reluctant to assume the cost-burden of such an event. They live in a city with the highest sales tax. Thanks to a terrible 75 year parking deal, Chicagoans also pay some of the highest meter parking rates in the country. Property taxes have skyrocketed in recent years - as has the debt load carried by the city.

Daley's 75 year parking contract brought in $1.2 billion, but apparently short-changed the city. Not only did the terrible deal mean parking rates increased dramatically overnight, Daley actually could have gotten at least a billion more - but didn't. And Daley's using that money now - apparently taking money we've been paid for existing and future assets (parking and Skyway revenues) to today pay for the debt acquired yesterday.

Apparently to pay for everything this year, we'll saddle future generations of Chicagoans with even more debt.

So a great many citizens of my favorite city looked at the Olympics with absolute fear. How could we afford such a spectacle, given the very poor financial situation we face today? As the IOC came closer to its vote, Chicago support for the Olympics waned dramatically. Less than 50 percent of Chicagoans polled wanted the event to come to Chicago.

The king failed in his bid for glory. And the city that works is increasingly becoming the city that's broke. A terrible legacy for any ruler to leave.

Irrelevance, Interrupted...

2009-10-19T21:40:00.001-05:00

He came to the swamplands of the Potomac swathed in a cloud of scandal. He's been ignored since the day he arrived at his new job.

And today, my senator, Roland Burris, has me humming a little Janis Joplin right now (lyrics by the talented Kris Kristofferson)...

"Freedom's just another word, for nothing left to lose
And nothing's all that [Roddy] left me, yah."

Yes, Roland Burris rolled into Washington with a a whole lotta nothing in his back pocket. He'd been handed the senate seat by a man charged with trying to sell it, Rod Blagojevich, the Kipling-quoting ex-gov of Illinois – and allegedly a future "Celebrity Apprentice" contestant.

(Can one be The Donald's apprentice from behind bars? Because the ex-gov's someday going to stand trial on corruption charges and sometimes such things end up with a jail term....)

So Roland Burris came to DC as a lame duck senator, with just two years left in the term Obama left when he became president. Because of the scandal surrounding his appointment, because a great many people believed Roland wanted to carve out "Senator" on that big old gravestone he's already purchased for himself, wanted the title of senator badly enough to purchase the rights to it, Roland Burris has been utterly irrelevant in Washington. He was supposed to show up, remain quiet, vote the way the Dems wanted him to vote. And for a good few months, Roland has behaved. He's been quiet.

Until now. The man from Illinois has decided that his lame duck status has given him a certain power. Like that sad, mournful lover of Bobby McGee, Roland's got nothing to lose - and he's taken that bit of nothing Rod gave him and maneuvered his way to the front and center of the health care debate.

In one of the most hotly contested issues of 2009 - in a year filled with bitterly contested issues - Roland Burris has drawn a line in the sand. He will not vote for any "health care reform" unless it includes the public option.

And thus, the most irrelevant man in Washington has made himself utterly relevant once again. In a town devoted to ensuring the interests of health insurers and banks are well-served, Roland Burris wants to make sure the public is not totally forgotten.

So for all those lobbyists working so hard to sway our senators and reps to do their bidding, I close with another Janis Joplin song of "great social and political importance." Here's what the highly paid lobbyists are working so hard for out there in the swamps...