The three page proposal by Henry Paulson was clearly written.  There was no misunderstanding of the language.  It was an improper proposal because the plan put too much authority in the hands of the Treasury Secretary.  In just two weeks the House of Representatives rewrote the proposal into a 110 page law that is not understandable by most people.  I have read 12 pages of this bill entitled ‘‘Emergency Economic Stabilization Act of 2008.’’  I know you have to write law in proper legal form but this law has been written to hide its true purpose and provide political coverage.  Even the candidates for president (Obama is a Harvard law graduate) have given mediocre support for this law.

 

An example is the section on executive pay.  This was written to obfuscate the issue.  It obviously is not intended to prevent golden parachutes to incompetent executives. Apparently Chris Isidore of CNNMoney.com agrees.

 

SEC. 111. EXECUTIVE COMPENSATION AND CORPORATE

GOVERNANCE.

(a) APPLICABILITY.—Any financial institution that sells troubled assets to the Secretary under this Act shall be subject to the executive compensation requirements of subsections (b) and (c) and the provisions under the Internal Revenue Code of 1986, as provided under the amendment by section 302, as applicable.

(b) DIRECT PURCHASES.—

(1) IN GENERAL.—Where the Secretary determines that the purposes of this Act are best met through direct purchases of troubled assets from an individual financial institution where no bidding process or market prices are available, and the Secretary receives a meaningful equity or debt position in the financial institution as a result of the transaction, the Secretary shall require that the financial institution meet appropriate standards for executive compensation and corporate governance. The standards required under this subsection shall be effective for the duration of the period that the Secretary

holds an equity or debt position in the financial institution.

(2) CRITERIA.—The standards required under this subsection shall include—

(A) limits on compensation that exclude incentives for executive officers of a financial institution to take unnecessary and excessive

risks that threaten the value of the financial institution during the period that the Secretary holds an equity or debt position in the financial institution;

(B) a provision for the recovery by the financial institution of any bonus or incentive compensation paid to a senior executive officer

based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; and

(C) a prohibition on the financial institution making any golden parachute payment to its senior executive officer during the period

that the Secretary holds an equity or debt position in the financial institution.

(3) DEFINITION.—For purposes of this section, the term ‘‘senior executive officer’’ means an individual who is one of the top 5 executives of a public company, whose compensated is required to be disclosed pursuant to the Securities Exchange Act of 1934, and any regulations issued thereunder, and non-public company counter parts.

 

If Congress refuses to go along with this bill I will totally understand.  If this law is adopted I fear that it may be a wasted effort.

The news reports indicate that it’s the Republicans who have concerns about the bailout package but look at my Democratic representatives.  They too are voicing their concerns.

 

I called my congressman and both senators to voice my objections to the bailout.  

 

Henry Waxman a leading congressman and I am in his district:

“I have serious reservations about the Administration’s bailout proposal. The structure of the plan appears designed to maximize returns for Wall Street and minimize protections for the taxpayer.” This was part of a one page press release.

 

Dianne Feinstein, Senior California Senator

On September 26, 2008, Senator Feinstein speaks on the Senate floor about the national economic crisis and Congressional efforts to negotiate an economic rescue bill. Click here to watch the video.

 

Nancy Pelosi, Speaker of the House and San Francisco congresswoman

“We’re very pleased that the President acknowledged last night in his remarks four of the principles that we had been looking for, which was oversight, forbearance for homeowners, CEO compensation, and equity for the American taxpayer. We think in making this large of investment, the taxpayer should have sole ownership, some upside to it, get some of the benefit of the investment.”  This was part of her statement this past Thursday.

I watched the president’s speech tonight.  Halloween haunted houses will not be scarier.  The speech was designed to frighten everyone into agreeing with his plan to bail out Wall Street.  He had the audacity to ask us to believe him when he is the man who led this nation into the war in Iraq with faulty data.  That he had the chutzpa to make his presentation without a piece of evidence to support his dire predictions is remarkable.

 

Just look at these quotations from the speech.

–We’ve seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money.

–We’re in the midst of a serious financial crisis,

–Financial assets related to home mortgages have lost value during the housing decline. And the banks holding these assets have restricted credit.

–The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses.

 

If Congress buys this malarkey they should all be removed from office.

 

 

It is 3 a.m and the candidate who can provide leadership ought to win the presidency.

Perhaps the question ought to be, has deregulation by government been successful? Maybe the question should be, how does deregulation affect a free economy? 

 

Let’s look at the items that are involved.

 

1. Jim Cramer at Bucknell University

An impassioned and sometimes fiery Jim Cramer, the investing guru and host of CNBC’s “Mad Money,” told a packed audience at Bucknell University’s Weis Center that government deregulation was nothing short of a “covert attempt” to eliminate the federal government’s responsibilities to its citizens.  He blamed both Republicans and Democrats for a “hands-off democracy” and “rough-and-tough capitalism,” but was especially critical of government institutions like the Federal Reserve under then-Chairman Alan Greenspan for failing to “curb the Internet boom before it became the dotcom bomb recession of 2001.”

He said Greenspan could have curtailed that boom by using the rules that Congress gave the Fed to curb excessive margin lending that exacerbated the Internet stock boom.

2. Airline Industry

This is part of a commentary and explanation from alternet.org. The High Price of Airline Deregulation dated September 15, 2005.  “In the 27 years before airline deregulation, no airline went bankrupt. Since 1978, 160 airlines have come and gone. In the last quarter-century, the rate of bankruptcy among air carriers has been as much as 10 times higher than that of the general business community. In 2005, virtually all major airlines are either in bankruptcy (United and US Air were joined Wednesday by Delta and Northwest) or on the verge of bankruptcy. How did we come to this?

In the late 1970s, the airline system was straining under an inflexible and cumbersome regulatory system. A long, drawn-out proceeding was needed simply to get permission from the Civil Aeronautics Board (CAB) for employees of two affiliated airlines to wear similar uniforms! Something needed to be done.”

We all know what is happening today in the airline industry.  The high cost of fuel is driving up prices and reducing service.

 

3. Radio and Television Industry

This is Los Angeles.  It’s the second largest city in the nation.  The UHF local television stations are channels 2, 4,5, 7, 9, 11, and 13.  Channels 2 and 9 are owned by the same company.  Channel 5 is owned by the Tribune Company along with the Los Angeles Times newspaper.

 

The Tribune Company also owns the Chicago Tribune, Newsday, Hartford Courant, Orlando Sentinel, and the Baltimore Sun.  Tribune Broadcasting is now immersed in television, with 23 stations located in 19 markets including WGN.

 

Radio is now dominated by major companies that own multiple outlets in many cities.  At least threee major stations in Los Angeles are own by Clear Channel.  The are KFI AM, KOST FM, and KTLK AM.

 

Most cable televison stations are owned by the large networks Fox, NBC, ABC, and CBS.  This is no news to anyone.   

 

4. California Energy Utilities

The crises of 2000 and 2001 resulted from the gaming of a partially deregulated California energy system by energy companies such as Enron and Reliant Energy. The energy crisis was characterized by a combination of extremely high prices and rolling blackouts.  The city of Los Angeles was spared because the city owns the water and power company that serves those living within the city limits.  The rest of the state’s population suffered from the deregulation.  The governor’s sucessful recall was a consequence of this horrible event.  Someone actually acquired a recording of manipulators laughing about the entire situation and tellinghow they had impacted the state. 

 

5. Banking and Financial Industry

It’s obvious there was little or no oversight.  Banks are now permitted to act a stock brokers.  Mortgage companies were allowed to enter the banking system (Countrywide Mortgage had its own bank).  Insurance companies were permitted to operate banks.  There are no capital requirements established for stock brokerage companies, insurance companies, or investment banks.  No one said “No” to home loans for those who could not afford them.

 

6. Food and Drug Administration

There have been numersous incidents of a lack of oversight by the FDA in the management of food processing companies.  The one coming to mind ws the slaughtering of sick cows at a processing plant in the Los Angeles area that was caught on video tape.

 

 

Barack Obama is too new to have a record.  It will be easy for him to take a strong position in favor of more regulation.

 

This column by James Moore appeared on the HuffingtonPost.com.  It deserves appearing here.

—

 

Don’t let them tell you this economic meltdown is a complicated mess. It’s not. Our national financial crisis is readily understood by anyone who has seen greed and hypocrisy. But we are now witnessing them on a profound, monumental scale.

 

Conservative Republicans always want the government to stay out of business and avoid regulation as long as they are making lots of money. When their greed, however, gets them into a fix, they are the first to cry out for rules and laws and taxpayer money to bail out their businesses. Obviously, Republicans are socialists. The Bush administration has decided to socialize the debt of the big Wall Street Firms. Taxpayers didn’t get to enjoy any of the big money profits on the phony financial instruments like derivatives or bundled sub-prime paper, but we get the privilege of paying for their debt and failures.

 

Let’s just consider the money. The public bailout of insurance giant (becoming a dwarf) AIG is estimated at $85 billion. According to one report, that’s more than the Bush administration spent on Aid to Families with Dependent Children during his entire time in office. That amount of money would also pay for health care for every man, woman, and child in America for at least six months.

 

How did we get here?

 

That’s pretty easy to answer, too. His name is Phil Gramm. A few days after the Supreme Court made George W. Bush president in 2000, Gramm stuck something called the Commodity Futures Modernization Act into the budget bill. Nobody knew that the Texas senator was slipping America a 262 page poison pill. The Gramm Guts America Act was designed to keep regulators from controlling new financial tools described as credit “swaps.” These are instruments like sub-prime mortgages bundled up and sold as securities. Under the Gramm law, neither the SEC nor the Commodities Futures Trading Commission (CFTC) were able to examine financial institutions like hedge funds or investment banks to guarantee they had the assets necessary to cover losses they were guaranteeing.

 

This isn’t small beer we are talking about here. The market for these fancy financial instruments they don’t expect us little people to understand is estimated at $60 trillion annually, which amounts to almost four times the entire US stock market.

 

And Senator Phil Gramm wanted it completely unregulated. So did Alan Greenspan, who supported the legislation and is now running around to the talk shows jabbering about the horror of it all. Before the highly paid lobbyists were done slinging their gold card guts about the halls of congress, every one from hedge funds to banks were playing with fire for fun and profit.

 

Gramm didn’t just make a fairy tale world for Wall Street, though. He included in his bill a provision that prevented the regulation of energy trading markets, which led us to the Enron collapse. There was no collapse of the house of Gramm, however, because his wife Wendy, who once headed up the Commodities Futures Trading Commission, took a job on the Enron board that provided almost $2 million to their household kitty. And why not? Wendy got a CFTC rule passed that kept the federal government from regulating energy futures contracts at Enron.

 

If John McCain gets elected and chooses Phil Gramm as his Treasury Secretary, which many politico types see as likely, they will be able to talk about the good old days when Gramm was in congress and McCain was in the senate and they were in the midst of the Savings and Loan crisis.

 

The S and L scandal, which may look precious when compared to our present cascade of problems, isn’t hard to understand, either. But it is impossible to take John McCain seriously on our current financial Armageddon since he was dabbling in the historic collapse of 747 S&Ls that occurred during Ronald Reagan’s era. In the early 80s under the Republican president, congress deregulated the savings and loan industry in much the same way that Gramm made sure there were no laws hindering our current financial malefactors on Wall Street. S&Ls simply lobbied until they had less regulation and then began making rampant, unsound investments.

 

The guy who was going the wildest with financial freedom was Charles Keating, who headed up Lincoln Savings and Loan of California. Because the S&L industry had managed to get congress to increase FDIC insurance from $40,000 to $100,000 on deposits, the irresponsible investing of people like Keating began to put taxpayer insurance funds at great risk of loss. Keating placed money in junk bonds and questionable real estate projects and because so many other S&Ls started acting the same way the Federal Home Loan Bank Board (FHLBB) began to push for a regulation that limited these dangerous speculative “direct” investments to 10% of an S&L’s assets.

 

And Keating didn’t like it; he called on a private economist named Alan Greenspan, who promptly produced a study saying that there was no danger in “direct” investments.
But that didn’t convince the FHLBB and as further scrutiny showed Lincoln Savings and Loan was making even more historically bad investment decisions, a federal investigation was launched.

 

So Keating called his home state senator John McCain.

 

McCain and four other US senators (known to history as the Keating Five) met with Edwin Gray, then chairman of the FHLBB. McCain had been hesitant to attend but had reportedly been called a “wimp” behind his back by Keating. The message to the FHLBB and Gray from the Keating Five was to lay off Lincoln and cool the investigation. Gray and the FHLBB did not relent but Lincoln stayed in business until 1989 when it collapsed with the rest of the S&L industry. The life savings of more than 20,000 elderly investors disappeared with the failure of Lincoln. Keating went to prison for five years.

 

Charles Keating was John McCain’s pal. They met in 1981 and Keating dumped $112,000 in the McCain campaign bank accounts between ’82 and ’87. A year before McCain met with the FHLBB regulators, his wife Cindy and her father, according to newspaper reports at the time, invested about $360,000 in one of Keating’s shopping centers. The Arizona Republic reported McCain and his wife and their babysitter took nine trips on Keating’s private jet to the Bahamas to stay at the S&L liar’s decadent Cat Cay resort. The senator didn’t pay Keating back for the plane rides until years later when he was under investigation.

 

McCain wasn’t found guilty of anything but bad judgment, which is an historic understatement. Republicans, who led deregulation of the S&L industry, delayed the bailout until after the 1988 election to make sure George H. W. won the White House. The cost to taxpayers for helping these 747 bad actors in the S&L industry was finally estimated at $1.4 trillion. If the bailout had begun in 1986 instead of after the presidential election, the cost would have been contained at $20 billion.

 

And now the Republicans who engineered our present crisis and got us into the S&L debacle of the 80s are before us saying the markets need regulation. No, actually, they don’t need regulation. Why don’t you Republican capitalists who believe in the free markets get out of the damned way and let them work and allow these various financial nuthouses be crushed by the weight of their own stupidity? When it is all over, we’ll have sane and sober people create laws to make sure it doesn’t happen again, assuming we survive this chaos.

 

Also, while you are handing out our tax money to idiots on Wall Street, save a little of the long green for the unemployed auto and construction workers and all of the other people who have lost their jobs because you were too stupid to notice what Phil Gramm was doing and you were convinced everything was going to be just fine because the markets work.

 

These, then, are the people — the Republicans — who want to run our government for four more years. John McCain isn’t just one of them. He rides their jets. He takes their campaign donations. He makes them his campaign advisors. And he tells us to trust him.

 

 

He must think we are a nation of village idiots.

 

Hell, maybe we are.

Once again the United States is facing another economic down turn.  It is not a new phenomenon.  According to a report by CNBC there have been 21 recessions since 1900.  However there were recessions in the 1800s too.  They called them “panics.”

 

The one part of all successful economies has been their ability to provide a product not a service.  The products have been mined, grown, or manufactured.  The United States has been blessed with resources to produce products from all three of these sources.  Somehow the United States lost its way and no longer is the leader in any of these categories.

 

This country has become a “service” economy.  While manufacturing still exists here it is no longer a major part of our gross domestic product.  More than 40% of GDP are services.  Autos (3.6%) and furniture (3%) are part of an 8% manufacturing sector of GDP.  What is making matters worse is that those service jobs are going overseas along with manufacturing jobs.

 

An additional issue is that the remaining jobs do not pay as well as manufacturing jobs.  The nearby General Motors assembly plant was shut down about 20 years ago.  It was replaced by a shopping center that provided sales clerk jobs that offer pay of less than one half of those at the GM facility.  Where have all those jobs gone?  Look in Mexico, China, Japan, Taiwan, Indonesia, India, Bangladesh, etc.  The clothes you wear and most of the other commodities you use were made elsewhere.  Walmart, Costco, Target, and others buy most of the items they sell from another country.

   

I do not expect that Barack Obama or John McCain personally know how to resolve this very significant issue.  They need wise economic advisors who should step forward now with the way forward.  John McCain saying that “the fundamentals of our economy are strong” is no answer.

 

Herbert Hoover said the economy is fundamentally strong.  Is McCain really Herbert Hoover reincarnated?