I read the Administration has a new Czar... an Asiatic carp czar. Maybe we are seeing a job creation initiative at work. I think we are now up to 33 or 34 czars.
I wonder if she/ he has ever met a payroll?
Monday, September 27, 2010
Tuesday, September 21, 2010
Unusually Uncertain/ Inherently Uncertain
These were the most recent summaries of the economic outlook released by the Fed ... not much to smile about but entirely understandable given current and recent economic performance. Our government has much to do with feeding the uncertainty.
People scurry to pay down debt and trim expenses, reducing demand for products and services. Businesses hoard cash rather than invest because of sluggish demand and uncertainty about tomorrow's business environment: what is the outlook for corporate taxes...after all we have the highest corporate tax rates in the OECD. Of the OECD countries only the US taxes on a worldwide basis.
How about the carbon tax or least a higher gasoline tax to make things more certain?
What is the health care bill going to cost medium and small businesses?
Will secret ballots no longer be required for union certification?
Why all the anti-business rhetoric, could it be populism?
Speaking of anti business talk, populism and taxes all at once, what about the move to further tax oil and gas firms in the name of deficit reduction ? Is there any more popular target? Wait a minute! what about the Chinese?
People scurry to pay down debt and trim expenses, reducing demand for products and services. Businesses hoard cash rather than invest because of sluggish demand and uncertainty about tomorrow's business environment: what is the outlook for corporate taxes...after all we have the highest corporate tax rates in the OECD. Of the OECD countries only the US taxes on a worldwide basis.
How about the carbon tax or least a higher gasoline tax to make things more certain?
What is the health care bill going to cost medium and small businesses?
Will secret ballots no longer be required for union certification?
Why all the anti-business rhetoric, could it be populism?
Speaking of anti business talk, populism and taxes all at once, what about the move to further tax oil and gas firms in the name of deficit reduction ? Is there any more popular target? Wait a minute! what about the Chinese?
Thursday, August 19, 2010
Travelers
Sarkosy is on the move again. The French are to expel ~700 Roma from Romania and Bulgaria primarily.... this because they can expel people from these EU countries until 2013. The Hungarian, the Slovak gypsies are presumably free to stay.
The news [at least BBC] was interviewing a number of people who had no resemblance to Roma; they even indicated they were born in France and in some cases their parents were born in France. No doubt they are "travelers" complete with caravans, the modern day tinkers not to be confused ethnically with Roma, gypsies, tzigane. Lets hope the French do not tar everyone with the same brush.
There is a problem in the south of France with gypsies and yes many are from Romania. A typical scene in downtown Toulouse; e.g. the main park just out side of the tourist office would include a dozen or more gypsies lounging on the grass or bathing fully dressed in the fountains at lunch hour or the end of the day. They spent the day begging money or cigarettes on key street corners or perhaps even less savory endeavors. They beg in the park also and can be very persistent; I have seen them terrorize a young woman following her for some distance. The gendarmes seldom do anything; explaining themselves by saying its too much trouble to lock them up they would be back in a few hours unless they are wanted for something.
We saw two of them get into a fight in this park over money or drink, scuffle and knock down a old French lady who struck her head and was bleeding. The gypsies vanished literally in seconds when the gendarmes magically appeared and arrested the two who were fighting. The lady was taken to the hospital and presumably was OK. Next day the dynamic duo were back in the park.
Many of the gypsies one sees in western Europe are begging, or washing car windscreens at intersections. According to police in Italy, France etc. there is significant pick-pocketing, stealing or crimes against people [mugging] as well as prostitution. In Rome there have been a number of high profile attacks on people in recent years including homicides that have made gypsies essentially persona non grata. Most of these Roma are from eastern Europe and arrived in recent years. In contrast to this, there is e.g. a community in the south of France at Perpignan [close to the Spanish boarder] who have been there for over a hundred years and are "assimilated" [at least as much as they wish to be].
Interesting dilemma in trying to protect human rights... whose rights take preference?
The news [at least BBC] was interviewing a number of people who had no resemblance to Roma; they even indicated they were born in France and in some cases their parents were born in France. No doubt they are "travelers" complete with caravans, the modern day tinkers not to be confused ethnically with Roma, gypsies, tzigane. Lets hope the French do not tar everyone with the same brush.
There is a problem in the south of France with gypsies and yes many are from Romania. A typical scene in downtown Toulouse; e.g. the main park just out side of the tourist office would include a dozen or more gypsies lounging on the grass or bathing fully dressed in the fountains at lunch hour or the end of the day. They spent the day begging money or cigarettes on key street corners or perhaps even less savory endeavors. They beg in the park also and can be very persistent; I have seen them terrorize a young woman following her for some distance. The gendarmes seldom do anything; explaining themselves by saying its too much trouble to lock them up they would be back in a few hours unless they are wanted for something.
We saw two of them get into a fight in this park over money or drink, scuffle and knock down a old French lady who struck her head and was bleeding. The gypsies vanished literally in seconds when the gendarmes magically appeared and arrested the two who were fighting. The lady was taken to the hospital and presumably was OK. Next day the dynamic duo were back in the park.
Many of the gypsies one sees in western Europe are begging, or washing car windscreens at intersections. According to police in Italy, France etc. there is significant pick-pocketing, stealing or crimes against people [mugging] as well as prostitution. In Rome there have been a number of high profile attacks on people in recent years including homicides that have made gypsies essentially persona non grata. Most of these Roma are from eastern Europe and arrived in recent years. In contrast to this, there is e.g. a community in the south of France at Perpignan [close to the Spanish boarder] who have been there for over a hundred years and are "assimilated" [at least as much as they wish to be].
Interesting dilemma in trying to protect human rights... whose rights take preference?
Friday, July 23, 2010
Another Teachable Moment
Are I the only one who is is tired of hearing of screw-ups being described as teachable moments? The administration eventually accepts responsibility for being wrong but works hard to do everything but, and muddies the water with this preachy teachable moment nonsense. To wit Harvard's Prof Gates and the pronouncement that the Boston police were "acting stupidly" before the facts were known. And then we had the almost instant firing and subsequent apologies and job offers to a Mrs Sherrod.
If that weren't enough we now have the President in-artfully defending the right of Muslims to erect a mosque very close to ground zero. That was a proper idea and Obama's prerogative but then the next day he undoes any good he did when he walks it back by saying he was not commenting on the decision to build the mosque. If this were the Bush administration we would be hearing much about incompetence and little if anything about teaching moments. That works for me.
Perhaps in reality this is another example of the President's lack of true grit... or cajones as some of our less polite conservative pundits suggest. Now that Palin has picked up on cajones, I promise again to revert to true grit.
Despite having the right to build the mosque at this controversial site I believe building at that location would signal a remarkable insensitivity.
If that weren't enough we now have the President in-artfully defending the right of Muslims to erect a mosque very close to ground zero. That was a proper idea and Obama's prerogative but then the next day he undoes any good he did when he walks it back by saying he was not commenting on the decision to build the mosque. If this were the Bush administration we would be hearing much about incompetence and little if anything about teaching moments. That works for me.
Perhaps in reality this is another example of the President's lack of true grit... or cajones as some of our less polite conservative pundits suggest. Now that Palin has picked up on cajones, I promise again to revert to true grit.
Despite having the right to build the mosque at this controversial site I believe building at that location would signal a remarkable insensitivity.
Monday, July 12, 2010
The Beautiful Game
You both know that my knowledge of soccer is limited to what I learned on the sidelines of your games years ago. Having said that, I must say Holland's tactics of aggressive [to put a nice face on it] play to physically intimidate the Spanish wasn't pretty, was dirty at times and certainly not very sporting. I guess if you can't intercept the pass you take out the passer ... any way you can.They deserved to lose on that alone.
After getting 9 yellows and one red, the Dutch then blamed their loss on the referees. Hypocrisy? Never my favorite people the Dutch. Of course the ref wasn't perfect; that would be impossible. For example he should have immediately ejected the karate kicker who kicked the Spanish mid fielder right in the chest.
Good world cup overall except for the vuvuzelas. Amazing noise, must have been dreadful up close.
After getting 9 yellows and one red, the Dutch then blamed their loss on the referees. Hypocrisy? Never my favorite people the Dutch. Of course the ref wasn't perfect; that would be impossible. For example he should have immediately ejected the karate kicker who kicked the Spanish mid fielder right in the chest.
Good world cup overall except for the vuvuzelas. Amazing noise, must have been dreadful up close.
Friday, June 25, 2010
Vuvuzela
I think vuvuzelas' take the prize as the most irritating innovation, think noise, of the current World Cup.
I suspect there will be a parallel in a Toronto suburb this weekend. The vuvuzela will be Obama's [no doubt erudite] plea for the G8 and G20 to continue stimulating their economies rather than concentrating on getting their fiscal houses in order.
I think this is a lost cause; Germany and the GB have their minds made up and will focus on cost reduction and in the main debt reduction; China, Canada, Brazil, India and Australia didn't suffer as others did and are unlikely to push stimulus programs. Some one, no doubt, will suggest that Europe sell Greece or has already been suggested Greece should sell some of it's islands to middle east oil billionaires.
China having emerged from the crisis in good shape and better spirits will be unlikely to cooperate on anything of real import ... after all they just volunteered to "free" the yuan exchange rate[at least at the 3rd decimal place] but not enough to please anyone other than themselves.
As with Germany, the other major economies of the EU will concentrate on the fiscal issues [or in the case of France give them lip service] so Obama will be singing solo. It's unclear whether additional stimuli makes sense vs the fiscal restraints that others are pursuing.
What is clear is that once again the West will look to the US to be the west's engine of growth despite the reality that we cannot afford it.
I suspect there will be a parallel in a Toronto suburb this weekend. The vuvuzela will be Obama's [no doubt erudite] plea for the G8 and G20 to continue stimulating their economies rather than concentrating on getting their fiscal houses in order.
I think this is a lost cause; Germany and the GB have their minds made up and will focus on cost reduction and in the main debt reduction; China, Canada, Brazil, India and Australia didn't suffer as others did and are unlikely to push stimulus programs. Some one, no doubt, will suggest that Europe sell Greece or has already been suggested Greece should sell some of it's islands to middle east oil billionaires.
China having emerged from the crisis in good shape and better spirits will be unlikely to cooperate on anything of real import ... after all they just volunteered to "free" the yuan exchange rate[at least at the 3rd decimal place] but not enough to please anyone other than themselves.
As with Germany, the other major economies of the EU will concentrate on the fiscal issues [or in the case of France give them lip service] so Obama will be singing solo. It's unclear whether additional stimuli makes sense vs the fiscal restraints that others are pursuing.
What is clear is that once again the West will look to the US to be the west's engine of growth despite the reality that we cannot afford it.
Thursday, June 24, 2010
Dysfunctional
So Macchrystal is out and Petreus is taking over. It's a sad end to a ~ 30 year military career but necessary to maintain the semblance of civilian control of the military. The comments made to Rolling Stone by the general and his staff were out of order. Having said that, it is also clear that there is dysfunctional relationship among the diplomats, the politicians and the military relative to Afghanistan.
The VP tells new media that "lots of troops" will be leaving next July, Sec Def says it isn't decided yet, the ambassador leaks cables that denigrate Karzai and his administration, Karzai fires 2 senior aides who are close to the Americans. Holbrooke has difficult relationships with everybody and on and on. Obama says he wants unity and on and on. He'd better do more than talk, he'd better bang some heads together. Actually he would be better off firing the ambassador and Holbrooke. But I do not think he will do any more than he has already.
Petreus is probably better equipped to handle the BS this dysfunctional organization creates; he manages upward. Macchrystal is more of an operating manager; he manages downward. He was ill equipped to handle the BS. Probably just too direct.
One wonders if Petreus' price to play was some additional sense of flexibility on Obama's July 2011 withdrawal plans?
The VP tells new media that "lots of troops" will be leaving next July, Sec Def says it isn't decided yet, the ambassador leaks cables that denigrate Karzai and his administration, Karzai fires 2 senior aides who are close to the Americans. Holbrooke has difficult relationships with everybody and on and on. Obama says he wants unity and on and on. He'd better do more than talk, he'd better bang some heads together. Actually he would be better off firing the ambassador and Holbrooke. But I do not think he will do any more than he has already.
Petreus is probably better equipped to handle the BS this dysfunctional organization creates; he manages upward. Macchrystal is more of an operating manager; he manages downward. He was ill equipped to handle the BS. Probably just too direct.
One wonders if Petreus' price to play was some additional sense of flexibility on Obama's July 2011 withdrawal plans?
Wednesday, June 23, 2010
Crossing the Rubicon?
Has General Macchrystal crossed his Rubicon with his [and his staffs' comments to Rolling Stone? It may not be as traumatic or as direct as Mac Arthur's defiance of Harry Truman but he has crossed the line on the military's acquiescence to civilian authority and not for the first time.
So Obama has another decision to make.
What makes it doubly difficult is that the General's comments illuminate the apparent dysfunctional relationship that exists and has existed between/among inter alia the US diplomatic leadership, the Afghan leadership and the military leadership.
Whatever Obama does, I trust he will not dither.
So Obama has another decision to make.
What makes it doubly difficult is that the General's comments illuminate the apparent dysfunctional relationship that exists and has existed between/among inter alia the US diplomatic leadership, the Afghan leadership and the military leadership.
Whatever Obama does, I trust he will not dither.
Tuesday, June 22, 2010
But don't hit them too hard
When I was in school I worked weekends as a bartender/waiter at a young peoples watering hole called The Rathskeller [not very original I know]. The owners were nervous about the occasional fight that broke out late at night; their solution was to tell their staff to break up the fights in a unique way...if necessary the staff was to get physical including ... "to hit them but don't hit them hard". I always thought this was a silly idea; it was unlikely to happen in the heat of the moment. I hasten to add that, at 6 foot and 170 pounds I was the baby of the staff and unlikely to do much damage if I hit anybody which I didn't.
The current rules of engagement in Afghanistan with their emphasis on avoiding civilian casualties unfortunately reminds me of the owners admonition. This is a worthwhile objective but can result in greater casualties to our troops. I think force protection must be the primary goal in any such situation.
The current rules of engagement in Afghanistan with their emphasis on avoiding civilian casualties unfortunately reminds me of the owners admonition. This is a worthwhile objective but can result in greater casualties to our troops. I think force protection must be the primary goal in any such situation.
Monday, June 21, 2010
Children's Hour... redux
It may very well be that BP was negligent in it's management of the drilling of the gulf well... lots of smoke so probably some fire also. There is a little solace for some in that it is abundantly clear the administration and its regulator were also negligible as well as incompetent to wit the shoddy oversight. Congress was its usual bumptious, over the top during the recent hearings.
The losers in all this is we the people. Cleaning up the environmental mess may for the most part be done with BP money. But securing needed regulatory reform and professional upgrading of staff so that regulations are executed and regulators actually perform will subject us to seemingly unending political BS.
In the end, capitalism will be the big loser. There is far too much vitriol in this affair [e.g. the unceasing references to British Petroleum]. The company's conviction before arraignment much less trial by congress must be making business nervous.
No, I don't think Obama is a socialist but he doesn't remotely understand business nor does he try. This and his poor management [the ongoing paralysis by analysis, the belief that the government is the answer and mediocre people selection] are significant weaknesses.
The losers in all this is we the people. Cleaning up the environmental mess may for the most part be done with BP money. But securing needed regulatory reform and professional upgrading of staff so that regulations are executed and regulators actually perform will subject us to seemingly unending political BS.
In the end, capitalism will be the big loser. There is far too much vitriol in this affair [e.g. the unceasing references to British Petroleum]. The company's conviction before arraignment much less trial by congress must be making business nervous.
No, I don't think Obama is a socialist but he doesn't remotely understand business nor does he try. This and his poor management [the ongoing paralysis by analysis, the belief that the government is the answer and mediocre people selection] are significant weaknesses.
Saturday, June 19, 2010
Children's Hour... continued
Well my worse fears about the televised congressional sub committee hearings have come to pass. BP's non-English mother tongued non-executive chairman gets castigated for using the term " small people" to mean the ordinary citizen... horrors! Haywood is excoriated for saying BP is undecided as to which one or more of several technical areas [which he enumerated] caused the rupture and explosion 60 days after the event. This is from a government still investigating 2 year old financial crisis events. Its the usual theater.
BP finally put an American in charge of the spill investigation/response leaving Haywood to run the business, that's long overdue. How Waxman, Stupack etc could reasonably expected the BP CEO to be conversant contemporaneously with e mails between technical types many levels down the organization and more ludicrously to have personally intervened in the decision making on the well ignoring the organization structure is not rational.
It is yet unclear how the concerns voiced by technical personnel were settled [or dismissed] by on site operations management and the well completed in the mode it was. That is what is important in this event. Were valid technical concerns ignored by the relevant operating management, if so why? This is the key to determining whether negligence, recklessness etc was involved.
Great noise was made about the boiler plate response plans by all the major drillers being "almost identical" "xeroxed" etc. including references to dead experts and walruses. Lost in the furor was the Exxon Mobil CEO's statement that much of the form and content of the response plan were proscribed by MM Services. Various technical appendices include whatever specifics these plans contain. I am familiar with governments' dictating the content of submissions in essence relegating the individual company response to "filling in the blanks".
In the end, the pitchfork carrying politicians, local citizenry and hallowed 4th estate won the day. The industry looks cavalier, its executives insensitive and uninformed. BP looks the villain without all the pertitent facts being known. Maybe they are the villain, time will tell.
BP finally put an American in charge of the spill investigation/response leaving Haywood to run the business, that's long overdue. How Waxman, Stupack etc could reasonably expected the BP CEO to be conversant contemporaneously with e mails between technical types many levels down the organization and more ludicrously to have personally intervened in the decision making on the well ignoring the organization structure is not rational.
It is yet unclear how the concerns voiced by technical personnel were settled [or dismissed] by on site operations management and the well completed in the mode it was. That is what is important in this event. Were valid technical concerns ignored by the relevant operating management, if so why? This is the key to determining whether negligence, recklessness etc was involved.
Great noise was made about the boiler plate response plans by all the major drillers being "almost identical" "xeroxed" etc. including references to dead experts and walruses. Lost in the furor was the Exxon Mobil CEO's statement that much of the form and content of the response plan were proscribed by MM Services. Various technical appendices include whatever specifics these plans contain. I am familiar with governments' dictating the content of submissions in essence relegating the individual company response to "filling in the blanks".
In the end, the pitchfork carrying politicians, local citizenry and hallowed 4th estate won the day. The industry looks cavalier, its executives insensitive and uninformed. BP looks the villain without all the pertitent facts being known. Maybe they are the villain, time will tell.
Thursday, May 27, 2010
Children's Hour
Politicians are infantile. How else to explain diatribes like "our boot on the neck of BP", "unlike the prior administration's MM services cosy relation with the industry", the One being "outraged at BP" , "so I know whose ass to kick" and on and on.... Surely, it can't be a political ploy to change Obama's nickname from "no-drama" to something more positive while appealing to populist anger on the Gulf coast? As of June 13th, Obama has yet to meet with BP personnel, could it be that's too close to the fire? He has preferred long range bomb throwing.
What kind of reaction is he looking for by repeatedly calling BP by its former name British Petroleum? Surely this most well briefed of executives has been made aware that there are almost as many American shareholders as there are British? Populism again? Blaming the foreigners for our ills? Giving Pelosi the microphone to lecture BP on priorities for its cash payments gave us some insights to her novel philosophy ... suddenly spill claimants take priority on cash flow over employees, suppliers, tax liabilities. Even better, Nancy lectures on BP's integrity! Marvelous. Keep talking US Government, you will be in danger of bringing this company down. This company makes 30 billion in operating profit and could no doubt afford to meet its obligations, talking the company shares down is akin to shooting yourself in the foot.
As for firing Haywood, he may get his wish. Haywood has demonstrated a tin ear at times in this mess. BP would have been better off putting the US executives up front, at least they know the ground better. I can't wait for the political theater in the inevitable congressional hearings where once again its redeeming humanity is best illustrated by its nearly total lack of sophistication and often circus like behavior. If memory serves, the BP Chairman is not English mother tongued. Perhaps it will be more entertaining than the Toyota hearing was ... it was clear congress had no idea of the role of a large Japanese company CEO; it will be equally amusing when they try to "fathom" the role of a non-executive chairman of a PLC vs the CEO!
Yes, it seems very clear BP wasn't prepared for something of this magnitude and perhaps for any thing significant at this depth. Their contingency plans for a spill were vague at best and they are paying the price. Should it be established that BP was seriously negligent or more importantly criminally negligent the government should take them to the wall.
I haven't seen an explanation for how this administration for all its talk about professional vetting and hiring practices wound up appointing such a lightweight to a mission sensitive position to oversee offshore drilling ... no industry experience or technical grounding, and a resume that appeared more staff than line. Frankly, whoever proposed and whoever agreed her selection; those are the heads that should roll. How about the Sec of Interior, isn't he the senior man below Obama? Off with his head!
While on the topic of competence, how did the congress support the announcement of opening up off shore drilling when the administration knew "under the earlier administration the industry had a cozy relationship with the regulator"? Hm-mm. The administration did a year long study prior to the announcement... must be a helluva study. And with all those czars and other experts they couldn't get it right? And now we have a 6 month moratorium and the US expects BP to pay the resulting unemployment costs for 000's of people employed by the entire industry? Good luck.
Increasingly, it is clear Obama is all that I feared; elitist, very partisan, thin-skinned and controlling. Did I overlook unprepared for the management challenge of his job? Most importantly he has demonstrated real zeal only for big government solutions and all too often given us the impression that "capitalism is something unpleasant he found on the sole of his sneaker".
Now, if we only had some credible Republican alternatives.
What kind of reaction is he looking for by repeatedly calling BP by its former name British Petroleum? Surely this most well briefed of executives has been made aware that there are almost as many American shareholders as there are British? Populism again? Blaming the foreigners for our ills? Giving Pelosi the microphone to lecture BP on priorities for its cash payments gave us some insights to her novel philosophy ... suddenly spill claimants take priority on cash flow over employees, suppliers, tax liabilities. Even better, Nancy lectures on BP's integrity! Marvelous. Keep talking US Government, you will be in danger of bringing this company down. This company makes 30 billion in operating profit and could no doubt afford to meet its obligations, talking the company shares down is akin to shooting yourself in the foot.
As for firing Haywood, he may get his wish. Haywood has demonstrated a tin ear at times in this mess. BP would have been better off putting the US executives up front, at least they know the ground better. I can't wait for the political theater in the inevitable congressional hearings where once again its redeeming humanity is best illustrated by its nearly total lack of sophistication and often circus like behavior. If memory serves, the BP Chairman is not English mother tongued. Perhaps it will be more entertaining than the Toyota hearing was ... it was clear congress had no idea of the role of a large Japanese company CEO; it will be equally amusing when they try to "fathom" the role of a non-executive chairman of a PLC vs the CEO!
Yes, it seems very clear BP wasn't prepared for something of this magnitude and perhaps for any thing significant at this depth. Their contingency plans for a spill were vague at best and they are paying the price. Should it be established that BP was seriously negligent or more importantly criminally negligent the government should take them to the wall.
I haven't seen an explanation for how this administration for all its talk about professional vetting and hiring practices wound up appointing such a lightweight to a mission sensitive position to oversee offshore drilling ... no industry experience or technical grounding, and a resume that appeared more staff than line. Frankly, whoever proposed and whoever agreed her selection; those are the heads that should roll. How about the Sec of Interior, isn't he the senior man below Obama? Off with his head!
While on the topic of competence, how did the congress support the announcement of opening up off shore drilling when the administration knew "under the earlier administration the industry had a cozy relationship with the regulator"? Hm-mm. The administration did a year long study prior to the announcement... must be a helluva study. And with all those czars and other experts they couldn't get it right? And now we have a 6 month moratorium and the US expects BP to pay the resulting unemployment costs for 000's of people employed by the entire industry? Good luck.
Increasingly, it is clear Obama is all that I feared; elitist, very partisan, thin-skinned and controlling. Did I overlook unprepared for the management challenge of his job? Most importantly he has demonstrated real zeal only for big government solutions and all too often given us the impression that "capitalism is something unpleasant he found on the sole of his sneaker".
Now, if we only had some credible Republican alternatives.
Thursday, April 29, 2010
Financial Reform Part II
There is an old expression that says... when you are up to your ass in alligators it is easy to forget that your original objective was to drain the swamp. We should bear that in mind as congress addresses financial reform.
The original cause of the financial crisis was no doubt poor lending practices; these include excessive stated income loans, interest only loans, sub prime ending , aggressive credit card issuance as well as more than a little irresponsible borrowing etc. Far too creative securitization products designed to free up even more lending capacity followed on. Then came aggressive selling of synthetic products. This was further buoyed by clever packaging and more blurring of the line that separates acceptable business practice from sleazy behavior.
Having said that, none of Goldman Sachs, ACA, IKB, ABN Amro or the rating agencies had a legal obligation to protect the buyer; each of these had disclosure requirements regarding specific assets. IKB is a regional German bank that from all accounts had a inexhaustible ability to shoot itself in the foot. ABN Amro was a formerly well regarded Dutch bank that invested over the top in eastern Europe and in derivative products. Greed knows no nationality.
Only the government had the duty to protect us. The regulators including the FRB, the SEC and others certainly fell down on the job. Look how long it took to catch up with Madoff despite being tipped off numerous times. Now it's alleged Dick Fuld may have substantially understated his income several times and that the regulators were made aware on this on more than one occasion.
Fannie and Freddy have yet to pay the piper for their role in dramatically running up risk. The rating agencies have gone relatively unmarked. When do we fix the fannies' the freddies' and other GSES? Finally, it was the congress that did nothing although consumer advocates warned that people were getting loans they could never pay back; it was congress that repealed Glass Steagall without strengthening regulations and who failed to regulate derivatives. Talk about regulatory capture! There is monumental irony in the Senate investigations committee calling in Goldman so they can have a "post -hoc televised conniption fit on the amorality of Wall St."
It's a shame we can't subject our congressional and regulatory leaders to the same sort of tar and feathering. After all they deserve a great deal of the blame.
It's a greater shame [and a greater irony as well] that given the DC establishment didn't see the housing/loan/securitization/derivatives bubble and its build up of abuses and that we may give them more power to anticipate and prevent the next one! Care to make a prediction?
This is not to say that Wall St works the way it should. It's too clever by half that "market makers" and others can package garbage, get a AAA rating based on the sum of the parts having less risk than the components with minimal toxic product labeling. It reminds me of shoddy home repair firms or used car salesmen. The e mail messages sent by fabulous fab suggest a smug and entitled individual who was not very engaging individual and didn't give a s**t .
But most importantly the swamp isn't drained. We have barely started the pumps.
The original cause of the financial crisis was no doubt poor lending practices; these include excessive stated income loans, interest only loans, sub prime ending , aggressive credit card issuance as well as more than a little irresponsible borrowing etc. Far too creative securitization products designed to free up even more lending capacity followed on. Then came aggressive selling of synthetic products. This was further buoyed by clever packaging and more blurring of the line that separates acceptable business practice from sleazy behavior.
Having said that, none of Goldman Sachs, ACA, IKB, ABN Amro or the rating agencies had a legal obligation to protect the buyer; each of these had disclosure requirements regarding specific assets. IKB is a regional German bank that from all accounts had a inexhaustible ability to shoot itself in the foot. ABN Amro was a formerly well regarded Dutch bank that invested over the top in eastern Europe and in derivative products. Greed knows no nationality.
Only the government had the duty to protect us. The regulators including the FRB, the SEC and others certainly fell down on the job. Look how long it took to catch up with Madoff despite being tipped off numerous times. Now it's alleged Dick Fuld may have substantially understated his income several times and that the regulators were made aware on this on more than one occasion.
Fannie and Freddy have yet to pay the piper for their role in dramatically running up risk. The rating agencies have gone relatively unmarked. When do we fix the fannies' the freddies' and other GSES? Finally, it was the congress that did nothing although consumer advocates warned that people were getting loans they could never pay back; it was congress that repealed Glass Steagall without strengthening regulations and who failed to regulate derivatives. Talk about regulatory capture! There is monumental irony in the Senate investigations committee calling in Goldman so they can have a "post -hoc televised conniption fit on the amorality of Wall St."
It's a shame we can't subject our congressional and regulatory leaders to the same sort of tar and feathering. After all they deserve a great deal of the blame.
It's a greater shame [and a greater irony as well] that given the DC establishment didn't see the housing/loan/securitization/derivatives bubble and its build up of abuses and that we may give them more power to anticipate and prevent the next one! Care to make a prediction?
This is not to say that Wall St works the way it should. It's too clever by half that "market makers" and others can package garbage, get a AAA rating based on the sum of the parts having less risk than the components with minimal toxic product labeling. It reminds me of shoddy home repair firms or used car salesmen. The e mail messages sent by fabulous fab suggest a smug and entitled individual who was not very engaging individual and didn't give a s**t .
But most importantly the swamp isn't drained. We have barely started the pumps.
Thursday, April 1, 2010
Spitballs III
Financial Reform
Lots of talk about financial reform, some of the nosiest is around the edges: who does a consumer protection agency/group report to, legitimacy of short selling [at least naked short selling], banning speculators [???], hedge funds and venture capital, regulators, even the morality of capitalism.
A few things are clear and well supported: increased capital limits, a levy on banks assets as well as liabilities to "recoup taxpayer rescue monies" or prepare for the next debacle, enhanced consumer protection of some sort, pushing standard derivatives through a clearing house and improved governance.
As for too big to fail, I believe it more appropriate to think about "too big and/or too complex to be managed and /or regulated"
Changes should include an upgrading of regulators particularly the SEC, those associated with the "shadow banking system" as well as the government sponsored enterprises involved with the housing industry.
Resolution authority needs to be clearly assigned and not just for the largest "traditional" financial institutions but also for the shadow banking industry. Ideally this would amount to the government actively pushing the failing institution into traditional bankruptcy proceeding.
Barring banks from buying /selling non government securities as principal may be more difficult as is clearly distinguishing between what is a loan and what is a security instrument these days. Perhaps a return to the days where such investments were made with partners equity rather than shareholders equity would work.
There may be a case for a tax on speculative trading e.g. 0.125% [see the Defazio- Harkin bill]. This exempts pension funds and other tax sheltered accounts protecting the small investor and people saving for retirement. This would raise circa $100 billion a year in the US doing wonders for our deficit or infrastructure. The trick is to get every country that counts to do it also.
Custom derivatives are more complicated but should be as transparent as possible.
An in-depth review of the rating agencies business model is called for... it would be a shame if they got off without any thing more than a scolding.
Re speculators and short selling, its a fact that the Dutch in the 1600's tried to ban short selling and no less than Napoleon tried again without much luck. There is inherently nothing wrong with placing pessimistic bets; the difficulty comes when everyone piles on and creates the equivalent of a bank run.
It's a fact that the biggest objectors to increased consumer protection are not the big international banks but the Main St small and mid sized banks. Perhaps their share of the sub prime garbage that clogged the system needs a bit more airing as does the business practices that got them that market share.
Greece
Would you lend money to California at the same interest rate you lend to Texas? Of course not but that's what Greece wants... of course their Texas is Germany... this is after 10 years of financial games and fudging by Greece. Europe should assist them to right their finances; not doing so would have serious repercussions for the euro zone. But make sure Greeks retire at 65 or even 67 not 58 as they do now.
Its hardly true that speculators caused the Greek crisis, you can see the numbers. And by the way the big Greek banks hold an significant amount of their government debt and its widely believed that many of them doubled down with CDS.
The EU finally agreed how they would help Greece if necessary. It would be the IMF and the EU. Predictably Germany wanted to use the IMF and IMF money while France wanted to avoid the IMF. Why? Germany doesn't wish to use its money to help spendthrifts and Sarkosy doesn't want Strauss Kahn to get any more press between now and France's presidential elections.
The big struggle was to describe Brussels monitoring the work out. Was it the EU machinery demonstrating its role in "economic government" or was it "economic governance". The compromise was "asymmetric" translation; the document in French said government while the English translation said governance! This from the leadership of the union of nearly 500 million people who wish to treated as a world power... or is it leader?
Doubling Exports Obama wants to double exports in five years and makes a deal of promotion for small firms. This unfortunately is much to do about very little; less than 5% of American firms actually export. and about 80% of US trade is done by just 1% of the firms that export or import. It is the big companies that can make the difference in the near to mid term; big companies don't need government promotion, big companies require better access through trade agreements and a level playing field in taxation...the US has the highest corporate tax rates amongst the OECD nations.
The near term answer lies in resolving issues like completing the trade deals with Colombia, Panama and South Korea as well as resurrecting Doha and its off springs. We might even try to incentivize potential markets, e.g. reducing import duties on Brazilian ethanol which is far more economic and climate friendly than the Midwestern corn based version. After all, it is not just the other guy who erects trade barriers .
It would be helpful were Democrats to stop complaining about violence against unions in Colombia and our inability to sell American cars in South Korea. Yes, the yuan is undervalued but letting it float won't rejuvenate the US textile industry or commodity steel producers. Better we play that one multilaterally.
Incentivizing smaller companies will help in the future. The US should have informed professionals able to advise smaller companies on access to export markets. EXIM bank facilities can be expanded. Export controls on technical products need to be intelligently established not just by state department bureaucrats who may earnest but lack technical knowledge.
Lots of talk about financial reform, some of the nosiest is around the edges: who does a consumer protection agency/group report to, legitimacy of short selling [at least naked short selling], banning speculators [???], hedge funds and venture capital, regulators, even the morality of capitalism.
A few things are clear and well supported: increased capital limits, a levy on banks assets as well as liabilities to "recoup taxpayer rescue monies" or prepare for the next debacle, enhanced consumer protection of some sort, pushing standard derivatives through a clearing house and improved governance.
As for too big to fail, I believe it more appropriate to think about "too big and/or too complex to be managed and /or regulated"
Changes should include an upgrading of regulators particularly the SEC, those associated with the "shadow banking system" as well as the government sponsored enterprises involved with the housing industry.
Resolution authority needs to be clearly assigned and not just for the largest "traditional" financial institutions but also for the shadow banking industry. Ideally this would amount to the government actively pushing the failing institution into traditional bankruptcy proceeding.
Barring banks from buying /selling non government securities as principal may be more difficult as is clearly distinguishing between what is a loan and what is a security instrument these days. Perhaps a return to the days where such investments were made with partners equity rather than shareholders equity would work.
There may be a case for a tax on speculative trading e.g. 0.125% [see the Defazio- Harkin bill]. This exempts pension funds and other tax sheltered accounts protecting the small investor and people saving for retirement. This would raise circa $100 billion a year in the US doing wonders for our deficit or infrastructure. The trick is to get every country that counts to do it also.
Custom derivatives are more complicated but should be as transparent as possible.
An in-depth review of the rating agencies business model is called for... it would be a shame if they got off without any thing more than a scolding.
Re speculators and short selling, its a fact that the Dutch in the 1600's tried to ban short selling and no less than Napoleon tried again without much luck. There is inherently nothing wrong with placing pessimistic bets; the difficulty comes when everyone piles on and creates the equivalent of a bank run.
It's a fact that the biggest objectors to increased consumer protection are not the big international banks but the Main St small and mid sized banks. Perhaps their share of the sub prime garbage that clogged the system needs a bit more airing as does the business practices that got them that market share.
Greece
Would you lend money to California at the same interest rate you lend to Texas? Of course not but that's what Greece wants... of course their Texas is Germany... this is after 10 years of financial games and fudging by Greece. Europe should assist them to right their finances; not doing so would have serious repercussions for the euro zone. But make sure Greeks retire at 65 or even 67 not 58 as they do now.
Its hardly true that speculators caused the Greek crisis, you can see the numbers. And by the way the big Greek banks hold an significant amount of their government debt and its widely believed that many of them doubled down with CDS.
The EU finally agreed how they would help Greece if necessary. It would be the IMF and the EU. Predictably Germany wanted to use the IMF and IMF money while France wanted to avoid the IMF. Why? Germany doesn't wish to use its money to help spendthrifts and Sarkosy doesn't want Strauss Kahn to get any more press between now and France's presidential elections.
The big struggle was to describe Brussels monitoring the work out. Was it the EU machinery demonstrating its role in "economic government" or was it "economic governance". The compromise was "asymmetric" translation; the document in French said government while the English translation said governance! This from the leadership of the union of nearly 500 million people who wish to treated as a world power... or is it leader?
Doubling Exports Obama wants to double exports in five years and makes a deal of promotion for small firms. This unfortunately is much to do about very little; less than 5% of American firms actually export. and about 80% of US trade is done by just 1% of the firms that export or import. It is the big companies that can make the difference in the near to mid term; big companies don't need government promotion, big companies require better access through trade agreements and a level playing field in taxation...the US has the highest corporate tax rates amongst the OECD nations.
The near term answer lies in resolving issues like completing the trade deals with Colombia, Panama and South Korea as well as resurrecting Doha and its off springs. We might even try to incentivize potential markets, e.g. reducing import duties on Brazilian ethanol which is far more economic and climate friendly than the Midwestern corn based version. After all, it is not just the other guy who erects trade barriers .
It would be helpful were Democrats to stop complaining about violence against unions in Colombia and our inability to sell American cars in South Korea. Yes, the yuan is undervalued but letting it float won't rejuvenate the US textile industry or commodity steel producers. Better we play that one multilaterally.
Incentivizing smaller companies will help in the future. The US should have informed professionals able to advise smaller companies on access to export markets. EXIM bank facilities can be expanded. Export controls on technical products need to be intelligently established not just by state department bureaucrats who may earnest but lack technical knowledge.
Wednesday, March 24, 2010
Epic Movie
Well, the health care bill is done ... at least the first phase. A few observations irrespective of whether one likes the bill or not:
Obama deserves credit for sticking to his agenda despite enormous pressure to either punt or piece meal it in the past 90 days.
Nancy Pelosi managed with a substantial effort to get the votes in the house... reluctantly I give her credit
The time warp aspects of the bill, e.g. 10 years of revenue vs 6 years of costs, delays in ending preexisting conditions, postponed taxes on Cadillac plans, the delays in medicare cost reduction vote as well as the failure to address tort reform, interstate competition, the failure to endorse individual rather than employer based tax credits, no change in drug imports, the very recently dismissed bias for union based plans all trouble me. Perhaps most fundamentally, I regret the bill doing nothing to preclude health care decisions being made by bureaucrats [whether they be insurance company employees or government employees] rather than patients and doctors.
Pretending in the legislation that congress is about to cut Medicare reimbursements by 20% , while delaying for 8 years the tax on Cadillac plans [leaving both sources of "revenues" for some future congress to levy] are the most egregious insults to our intelligence. Until these revenue sources are secured there is no way this program can really reduce the deficit. It may get a good CBO score but it's smoke and mirrors
Many will say all this can be chalked up to either the necessities of sausage making or desirable but expendable items in the interests of getting anything passed.
And yes, the process was totally partisan. That I lay at Obama's doorstep up front ... you don't give the heavy lifting to a very left leaning speaker if you truly have interest in a bipartisan bill. Nor do you call for a bi partisan TV show at 10 minutes to midnight; that was theatre. With all there was to debate and criticise why ridicule Cantor for bringing the 2700 page bill that was the subject ? He could have been more presidential and still made his point ... everyone knows Cantor is invariably into the detail.
On the other hand, the Republicans may have looked principled very early on during 2009's discussions but pretty ridiculous as time went on.
At least getting something passed is better than getting nothing passed for many people. In fact time will tell that in reality the bill does wonders for expanding coverage but puts a very heavy cost on the tax payer unless and until the cost side of the equation is tackled.
Even Krugman says "we will spend years if not decades fixing this thing."
Obama deserves credit for sticking to his agenda despite enormous pressure to either punt or piece meal it in the past 90 days.
Nancy Pelosi managed with a substantial effort to get the votes in the house... reluctantly I give her credit
The time warp aspects of the bill, e.g. 10 years of revenue vs 6 years of costs, delays in ending preexisting conditions, postponed taxes on Cadillac plans, the delays in medicare cost reduction vote as well as the failure to address tort reform, interstate competition, the failure to endorse individual rather than employer based tax credits, no change in drug imports, the very recently dismissed bias for union based plans all trouble me. Perhaps most fundamentally, I regret the bill doing nothing to preclude health care decisions being made by bureaucrats [whether they be insurance company employees or government employees] rather than patients and doctors.
Pretending in the legislation that congress is about to cut Medicare reimbursements by 20% , while delaying for 8 years the tax on Cadillac plans [leaving both sources of "revenues" for some future congress to levy] are the most egregious insults to our intelligence. Until these revenue sources are secured there is no way this program can really reduce the deficit. It may get a good CBO score but it's smoke and mirrors
Many will say all this can be chalked up to either the necessities of sausage making or desirable but expendable items in the interests of getting anything passed.
And yes, the process was totally partisan. That I lay at Obama's doorstep up front ... you don't give the heavy lifting to a very left leaning speaker if you truly have interest in a bipartisan bill. Nor do you call for a bi partisan TV show at 10 minutes to midnight; that was theatre. With all there was to debate and criticise why ridicule Cantor for bringing the 2700 page bill that was the subject ? He could have been more presidential and still made his point ... everyone knows Cantor is invariably into the detail.
On the other hand, the Republicans may have looked principled very early on during 2009's discussions but pretty ridiculous as time went on.
At least getting something passed is better than getting nothing passed for many people. In fact time will tell that in reality the bill does wonders for expanding coverage but puts a very heavy cost on the tax payer unless and until the cost side of the equation is tackled.
Even Krugman says "we will spend years if not decades fixing this thing."
Sunday, January 10, 2010
New Boy on the Block
It would seem the world's future is tied to China; the overall economic recovery, sanctions on Iran, nuclear disarmament in North Korea, climate change, the green economy, our deficit situation, the economy of half of sub-Sahara Africa. This is not a reassuring position to be in given China's penchant for treating its international relationships whether they be economic or geo-political as a zero sum game. Their behavior at the Copenhagen climate conference is a good example of their attitude.
Likewise, the PRCs remarkable increase in military spending, its activities in space, the string of pearls in SE Asia and construction of blue water ships including aircraft carriers doesn't make me sleep easier at night. Overall, despite protestations about it's peaceful rise to great power status China is behaving like the new boy on the block. At some point the rest of the world will have to treat China accordingly.
In the economics sphere, China's growth has been astounding. It may now be the world's largest auto market and it's largest exporter. This growth is for the most part driven by state companies that receive very favorable finance from state owned banks. Yes, consumers are no doubt better off than they have been but the real winners have been the state corporations... where do you think the cash from the enormous trade surplus is residing? It is in corporate savings destined for reinvestment. However, a substantial component of the surplus is due to the currency imbalance; the renimbi is seriously undervalued and the government is unlikely to do any thing much about it for some time. So much for global cooperation by a world player. This is a mercantilist actor on the world stage. Look at their behavior in Africa, their squabbles with Australia. How do they behave on intellectual property? Check out what they did to Mongolia's cashmere industry? What about their cyber spying/warfare activities -commercial as well as political.
Politically, see how they interface on Iran, Afghanistan? Human rights? And oh my aren't they sensitive to criticism, even of the mildest sort?
China is important and will become increasingly more important. But are they part of the solution to the world's problem or an increasingly large part of the problem? I am afraid they are the new boy on the block. In which case treat them that way ... as a competitor for technology, e.g. for rare earth materials for the fabled green economy products [electric motor magnets], as an obstacle in the globalization of financial services, legal services and as a competitor for world opinion.
As for China's behavior on climate change, it is ludricrous to consider their building some renewable energy facilities as an example of proactive leadership role in green energy. The bulk of their new electricity generating facilities are known to be coal fired conventional technology. The astounding economic growth of the past 20 years has come at the expense of their environment. The air in the bigger cities has been polluted for years, the hillsides are denuded, the rivers silted and flood prone. Just Google "environmental disasters and China" for a long list. I know and I have only been to Beijing and along the SE coast a handful of times. China's smiley face diplomatic posture is just that.
We need to consider them as a competitor accross the board; they are likely to cooperate only when it clearly to their advantage to do so. They are the new boy on the block. The sooner we realise that the better. It will not get any easier as they get stronger.
Likewise, the PRCs remarkable increase in military spending, its activities in space, the string of pearls in SE Asia and construction of blue water ships including aircraft carriers doesn't make me sleep easier at night. Overall, despite protestations about it's peaceful rise to great power status China is behaving like the new boy on the block. At some point the rest of the world will have to treat China accordingly.
In the economics sphere, China's growth has been astounding. It may now be the world's largest auto market and it's largest exporter. This growth is for the most part driven by state companies that receive very favorable finance from state owned banks. Yes, consumers are no doubt better off than they have been but the real winners have been the state corporations... where do you think the cash from the enormous trade surplus is residing? It is in corporate savings destined for reinvestment. However, a substantial component of the surplus is due to the currency imbalance; the renimbi is seriously undervalued and the government is unlikely to do any thing much about it for some time. So much for global cooperation by a world player. This is a mercantilist actor on the world stage. Look at their behavior in Africa, their squabbles with Australia. How do they behave on intellectual property? Check out what they did to Mongolia's cashmere industry? What about their cyber spying/warfare activities -commercial as well as political.
Politically, see how they interface on Iran, Afghanistan? Human rights? And oh my aren't they sensitive to criticism, even of the mildest sort?
China is important and will become increasingly more important. But are they part of the solution to the world's problem or an increasingly large part of the problem? I am afraid they are the new boy on the block. In which case treat them that way ... as a competitor for technology, e.g. for rare earth materials for the fabled green economy products [electric motor magnets], as an obstacle in the globalization of financial services, legal services and as a competitor for world opinion.
As for China's behavior on climate change, it is ludricrous to consider their building some renewable energy facilities as an example of proactive leadership role in green energy. The bulk of their new electricity generating facilities are known to be coal fired conventional technology. The astounding economic growth of the past 20 years has come at the expense of their environment. The air in the bigger cities has been polluted for years, the hillsides are denuded, the rivers silted and flood prone. Just Google "environmental disasters and China" for a long list. I know and I have only been to Beijing and along the SE coast a handful of times. China's smiley face diplomatic posture is just that.
We need to consider them as a competitor accross the board; they are likely to cooperate only when it clearly to their advantage to do so. They are the new boy on the block. The sooner we realise that the better. It will not get any easier as they get stronger.
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