For The Layperson

Leave aside the ofay, twee incidental music (for which the show is famous); even moreso, leave try to ignore Ira Glass’ intro to the podcast, which just makes him sound, curiously, very dim and incurious; this week’s This American Life has one of the better, more balanced explanations of the banking crisis I’ve seen anywhere.

Democrats Are To Economics As Dogs Are To Opera

Dave Mindeman at mnpACTed has the vapors over TCF Bank’s planned shell-move to South Dakota:

TCF Bank announced that they are moving their headquarters to South Dakota. Now before we get all that bogus high corporate tax nonsense, here is the reason:TCF National Bank will move its headquarters from Minnesota to Sioux Falls, S.D. in April to take advantage of more bank-friendly usury laws.

Mindeman goes on to quote an explanation of “usury” laws – state caps on interest rates.  South Dakota has none; banking is a completely free-market operation there (as well as in Delaware).  That’s why so many banks moved their headquarters to the two states over the past twenty years.
To Mindeman, of course, there’s only one response:

So, TCF (TARP recipient) is setting things up to jack up future interest rates on consumers.

Glad to see TCF is going to “help” out on our economic troubles by helping us part with more of our money.

The first question that jumps to your mind should be “is Mindeman that ignorant? Or is he just counting on his readers to be that ignorant? Or could it be both?”

He gives a tiny little glimmer of evidence that he could be “b”:

Consumers beware!

Well, duh.  Don’t sign up for no-cap-rate credit.  It’s one of those things in life – unlike, say, government “stimulus” packages that we and the next four generations of our progeny get sucked into on the “wisdom” of Nancy Pelosi and Barney Frank – that you can opt out of by (radical concept here) not taking the credit card.

TCF is a bank that’s built its model on low cost, low-entry-point banking.  They own an amazing amount of the low-end banking business in the Twin Cities, and earned it by offering aggressive no-cost checking and card accounts.  They pay for those low-cost services, among other ways, by having high fees on their services and, yes, high interest rates.

But just for fun, let’s assume Mindeman really doesn’t know better; why does  he suppose TCF is moving its headquarters (albeit not shedding the HQ jobs in Minneapolis; it’s a change of incorporation more than anything else)?

Because South Dakota banking laws are more amenable to the bank’s long-term health than Minnesota’s.  So they don’t need any more bailouts (not that they needed them in the first place; by all accounts TCF got TARP money as a credit pump-primer, not a rescue).  TCF is doing its fiduciary duty to its shareholders; securing the best conditions in which to do business.
And, it’s not unreasonable to assume, because TCF has no confidence that the DFL-controlled government won’t make things much, much worse.

I Mean, Good Luck With That And All…

…but isn’t it possible that the time to demonstrate to save your Starbucks would be before it is slated for closing?

Customer movements to “save our Starbucks” have sprung up in cities large and small since last July, when the Seattle-based chain began closing hundreds of its stores. While online petition drives and phone calls to the company are common, public demonstrations are rare.In Fresno, Calif., an anonymous supporter created an elaborate display with a “Save Our Starbucks” sign plastered outside an empty storefront next to the doomed coffee shop.

At a Starbucks in Rockport, Texas, a customer learned that managers from the corporate office were scheduled to visit the store and announce that it was closing. Upon hearing this, the customer, Dee Parker, mobilized a group of residents to show up and protest the closing when the managers arrived. Starbucks officials found out about the plot and moved the meeting to another location.

Last month, the company announced that it was shuttering 300 “underperforming” stores, including the one in the historic Grand Garage building in Stillwater. It’s been there for 10 years.

Of course, in good news, the former Starbucks on West Seventh in Saint Paul just re-opened as a Dunn Brothers.

And that’s a net gain.

Calling In The Markers

The most galling thing about the Bush Administration was it gave the Dems – the party of Tip O’Neill and Ted Kennedy and Barney Frank – the opportunity to try to claim to be the party of fiscal responsibility with a straight face.

I told myself down all those long years “if, heaven forfend, those chattering chipmunks get into power again, they’ll revert to their true colors.  Of course, it’ll bankrupt the country…”

Of course, I was right…

President-elect Barack Obama warned of dire and long-lasting consequences if Congress doesn’t pump unprecedented dollars into the national economy, making an urgent pitch Thursday for his mammoth spending proposal in his first speech since the election.”In short, a bad situation could become dramatically worse” if Washington doesn’t go far enough to address the spreading crisis, the Democrat said as fresh economic reports showed an outlook growing increasingly grim.

…but it’s probably not worth bragging about.

So, all you “Hope and Change” voters; if your kids ask you “why can’t I find a job, and why does a house cost me 15% interest” one of these years, have you started working on your response yet?

(And yes, I know Bush spent like a crack whore with a gold card.  I was warning Republicans of this in 2000.  And there’s nothing about “a bad spender” that justifies “a worse spender”, so just (to coin a phrase) move on).

Jim Cramer: A Stream of Uncalibrated Opinion

I have faith that the average reader of this blog is discerning enough to know where not to gather thine financial advice.

The ilk that is The Motley, Suze, and Jim Cramer is categorized by many financial advisers as “Financial Pornography.”

In a not-so-shocking analysis of one of the most-watched TV investment advisers, author Eric Tyson argues that Jim Cramer’s actual stock-picking performance doesn’t match the strength of his bellowing.

Besides his show Mad Money, Cramer is all over CNBC dispensing investment advice left and right. He’s got to be out-performing other investment advisers and especially the market, right? Not really.

Cramer’s picks, after being held accountable for trading fees, have performed worse than the broad market averages. His overall average with simply picking stocks that go up is pretty dismal. The most recent tally shows that out of more than 1500 stock recommendations, more than half have gone down!

Cramer’s stock market predictions (monitored from 2000 onward) were worse than average and even worse than simply flipping a coin. Cramer’s prognostications fared better than the market averages only 47 percent of the time. Regarding Cramer’s predictions, CXO comments that, “His predictions sometimes swing dramatically from optimistic to pessimistic, and back again, over short periods. It is difficult to infer his guiding valuation theory, if he has one.

…but he stayed at a Holiday Inn Express.

If only double-digit ratings translated to double-digit returns for viewers.

In times like this, in times not like this, and all the times in between, the strategies that work for investors are not sexy, not even exciting, rarely worth raising one’s voice over, and are so very, very rarely dispensed by entertainers.

The Panic That Never Ends

Sanden Totten at MPR’s “LoopHole” blog writes about the “phenomenon” of ‘Survival Panic’:

In the coming months, mental health experts expect a rise in theft, depression, drug use, anxiety and even violence as consumers confront a harsh new reality and must live within diminished means.”People start seeing their economic situation change, and it stimulates a sort of survival panic,” said Gaetano Vaccaro, deputy clinical director of Moonview Sanctuary, which treats patients for emotional and behavioral disorders. “When we are in a survival panic, we are prone to really extreme behaviors.”

The U.S. recession that took hold in December last year has threatened personal finances in many ways as home prices fall, investments sour, retirement funds shrink, access to credit diminishes and jobs evaporate.

A little background here.

My first job out of college paid a princely $3.35 an hour; by the time I got tubed at KSTP, I was making maybe $6 an hour. It was OK at the time – my bills were minuscule. My rent was $135 a month, no car payments, gas was cheap, no real serious other bills; if I sold an article or did a voice-over or production gig on the side, I was living pretty large for the month.

Then, of course, follow many lean years – exacerbated by what (if you’ve been following the last year or so of my endless “Twenty Years Ago Today” series) would probably have been diagnosed as clinical depression, if I’d been smart enough to see a doctor at the time. I worked in bars, and then more low-paying dead-end jobs in radio, and then some even worse temp jobs. The kids entered the picture around this time, which straitened things even more. I didn’t top $20K a year until 1994, after my youngest was about a year old, when I’d finally snuck into the world of IT, first as a technical writer and, from 1998 on, as a User Experience guy.

That wasn’t the end of it, of course; IT isn’t always much more secure or stable than radio. Companies fold; contracting jobs end without warning or, seemingly, reason. The 2001 recession left me out of work for five months, and doing subsistence contracting for five or six more in 2003.

I do fairly well these days, of course; it’ll be interesting to see if I can ride out a recession without another dislocation. Knock wood.

In short, I don’t know that I, personally, have “survival panic” over the economy, so much as an ongoing,lifelong “100 years’ war of survival”.  I guess I’ve gotten to age 46 without a whole lot of expectations about the material manifestations of “Success” in life.

Which, on the one hand, means my house isn’t getting into VH1 Cribs or Architectural Digest any time soon and, on the other, means I probably won’t be one of these any time soon…:

For those who need to abruptly curtail spending, that leaves a major void, said James Gottfurcht, clinical psychologist and president of “Psychology of Money Consultants,” which coaches clients on money issues.

“People that have been … identifying with and defining themselves by their material objects and expenditures are losing a definite piece of their identity and themselves,” he said. “They have to learn how to replace that.”

Now, don’t get me wrong; growing up as I did around all sorts of survivors of the Great Depression, I know that pathological frugality can be pretty debilitating, too.

Still – if this is the alternative…:

Beth Rosenberg, a New York freelance educator and self-professed bargain hunter, said she stopped shopping for herself after her husband lost his publishing job in June.

She is now buying her son toys from the popular movie Madagascar for $2 at McDonald’s, and is wearing clothes that have hung untouched in her closet for years.

She said it has been stressful to stick to an austere budget after she used to easily splurge on $100 boots. “I miss it,” she said of shopping.

…I don’t feel so bad.

Hopefully Bush’s late-administration Hooveresque socialist thrashings and Obama’s FDR-like delusions don’t stall the recovery so long that the pathology has to swerve from one pathology all the way to the other one.

President-Defect Obama: Create 5 million green jobs.

As long as we are “lowering” expectations for his disciples, here’s another Hopey-Changey campaign promise that needs to be broken.

Let’s be clear on how wealth and jobs are created because a politician that says “we (the government) will create jobs” is either unaware of how capitalism works, or is (once again) just plain lying to the American people in the interest of political gain. In the case of [the man formerly known as Obammy], I’d say it’s a little of both. “Jobs” are not “created” by the government.

Make no mistake, the government has many legitimate functions. Those functions are funded and employees are hired to implement and administer them. Those particular jobs however, are not yielding net economic benefit and as such should not be taken into account as it relates to economic benefit. Creating even more of them for their own sake is simple liberal lunacy.

The dollars to fund whatever program for whom these employees would work have to come from somewhere, and there is always an opportunity cost, short term and long term, for those dollars, usually borne in “real” jobs lost somewhere else.

Nowhere is it mentioned that these “green-collar jobs” would be terribly costly, and that the planned “investments” are really just subsidies. And, as we know, things that require subsidies aren’t competitive in the market, and thus aren’t profitable.

Spending money on projects where costs exceed benefits simply to “create jobs” is a bad idea. Taking capital from productive uses and redeploying it to politically popular but nonproductive uses lowers productivity by paying those with “green jobs” more than their output is worth. It’s not welfare, it’s “greenfare.”

The “Green” movement is big business, from Hybrid cars to new forms and uses of battery and lighting technology to specialized architectural disciplines. If Obama’s ideas are superterrific, why aren’t entrepreneurs lining up first?

Claims that such “investments” will create five million jobs are false. It’s likely more jobs will be killed than created due to higher costs and increased inefficiency of the U.S. economy. A recent report from the Center for Data Analysis at the Heritage Foundation found that limiting CO2 emissions under recent proposed legislation would destroy 900,000 net jobs.

Until Barack Obama starts getting behind proven strategies like tax and (especially) spending cuts to stimulate our economy, stagnation, job loss and a volatile stock market will rule; the cycle will continue to repeat itself. Government largess got us here; it won’t get us out of here.

If You’re Ugly And You Know It Honk Your Horn

Hybrid automobiles are ugly. The Honda insight, which will presumably be successful, is no exception.

Uhhh-gly.

The Honda insight is a mirror image of the Toyota Prius and equally hard on the eyes.

By design.

People don’t buy Hybrids for the energy savings; at least those that can do math. Relative to comparably-sized cars, you can’t drive a Hybrid enough miles to make up the difference in cost or to mitigate the environmental impact of manufacture and disposal.

Anyone want Nickel Metal Hydride in their back yard?

People buy Hybrids because they want to make a statement. They want a pat on the back and a place to put their Franken sticker.

Honda acknowledged poor sales of the previous generation Honda Accord Hybrid and ceased its production: they had not adequately “differentiated” the Hybrid variant. Read: not ugly enough.

Even the Cadillac Escalade Hybrid was accompanied by a memo to dealerships assuring them that the unsightly “Hybrid” monikers and badges could be removed without cosmetic damage for well-heeled but less conspicuous tree-huggers.

Being “Green” – or at least looking “Green” is big business and consumers willingly pony up, even when the costs are too high and the benefit negligible.

Six Weeks

According to David Brauer, the Strib’s management is counting down to bankruptcy – or at least that’s what they’re telling their unions:

Publisher Chris Harte, who sent what I’m now calling the “six weeks to bankruptcy” memo Tuesday afternoon, wasn’t at a meeting Royce and other Guild leaders shortly before the communication was released. Instead, the Guild types found representatives of the Blackstone Group — the Strib’s “restructuring consultant” — and “a couple, three lawyers,” Royce says.Management, which seeks $20 million in cuts from the Strib’s unions, met its major locals separately. I asked Royce if he received the newsroom’s expected share; he declined to comment.

The question for readers, of course, is how many journalists will be left after the wreckage clears.

(Sarcasm on)  “No, David: the real question is how many journalists are there now, and if having more actual journalism and less strident agenda-flogging might have helped the paper out (/sarcasm off).

No, I suspect that even a paper that had spent decades building a reputation for rigorously balancing points of view would be having trouble today.  An interesting question might be “would a paper with a reputation for meticulous balance, or an out-and-out conservative paper, be in this kind of trouble today”?

Of course, there are painfully few examples of either.  The Wall Street Journal is mistakenly considered “conservative” (their columnists are, but their news coverage is all over the place), and they seem to be holding their own, more or less, but then their market is a lot more specialized.

Examples?

It Was Just A Matter Of Time

“Black Friday” stampede on Long Island kills a store worker:

A worker died after being trampled and a woman miscarried when hundreds of shoppers smashed through the doors of a Long Island Wal-Mart Friday morning, witnesses said.

The unidentified worker, employed as an overnight stock clerk, tried to hold back the unruly crowds just after the Valley Stream store opened at 5 a.m.

Witnesses said the surging throngs of shoppers knocked the man down. He fell and was stepped on. As he gasped for air, shoppers ran over and around him.

Europe has soccer games; we have Black Friday.

The Matrix Is On Line Two

Last week in the process of renewing a business credit line, my bank checked my credit as a matter of course.

The next day, “Jeff” with “American Equity” or something along those lines left me a message. He was “verifying” a recent transaction and was calling “…to assure me that the terms of my loan were the best options available to me or to make sure that I was offered the best terms available in the marketplace”….or some other malarkey.

It was pretty convincing. It sounded like someone calling on behalf of my bank. It would have to be right? My bank wouldn’t inform any other entities of my business dealings with them…right?

So I called “Jeff” back. He was a bit surprised by my accusatory tone once he informed me that he had nothing to do with my bank and where he got the information.

It turns out Jeff’s company, which has absolutely nothing to do with my bank, subscribes to a service that alerts them to credit checks of highly qualified borrowers. Within 24 hours. Name, phone number and amount borrowed are all provided for a fee.Who provides this data you ask? Is it a form of identity theft?

It turns out Experian, one of the “Big Three” credit bureaus, provides this data to other lenders when you apply for credit. Apparently, they don’t have to inform you, and if I hadn’t received “Jeff’s” cold call, I would never have known that my name, phone number, credit score and transaction information are available to anyone willing to pay a fee for it.

Cross-Sell Triggers (sm)

Daily triggering tool for expanding customer relationships.

Cross-Sell TriggersSM, an event-based triggering tool, empowers you to deliver daily cross-sell and up-sell offers based on customer-initiated inquiries for new credit occurring within the last 24 hours.

Retain your most profitable customers

Cross-Sell Triggers allows you to respond immediately to retain customers who inquire about credit elsewhere.

Build loyalty and expand customer relationships

Respond to changing customer needs by making the right offer at the right time, thereby increasing your product-to-customer ratio.

That’s nice. I’d actually prefer a little privacy when I shop for credit.

Scumbags.

I haven’t verified this yet but apparently you can call Experian and opt out. Gee, thanks for the consideration. Thanks for taking up my time to call you, presumably wait on hold, and take back my rights to privacy.

Scumbags.

I guess I always considered the credit bureaus to be in the business of tracking and evaluating potential credit consumers. I also assumed that my credit information was not accessible without my consent.

Wrong on both counts.

Word to the wise.

Why Triumph, Aston Martin and Leyland Are So Powerful These Days

Dems push for the fed gobbling up a stake in the Big Three automakers:

Congressional Democrats are pushing legislation to send $25 billion in emergency loans to the beleaguered auto industry in exchange for a government ownership stake in the Big Three car companies.

House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., hope for quick passage of the auto bailout during a postelection session that begins Monday.

Of course, the British auto industry went through a similar (in many respects) process starting around 40-odd years ago. 

Note the British auto industry’s powerful position in the world car market – and the fearsome reputation they had for quality during their nationalized years.

Social Security: The Sequel

There are a lot of movies whose sequels should not have been made. The first installment sucked bad enough.

The pay-as-you-go Social Security system is another such performance for which a sequel would be inadvisable to say the least.

A lot of Conservatives are concerned that a Democratic Trifecta may lead to a level of catastrophic creativity not seen since The New Deal.

Unfortunately, we don’t even have to wait for the election to see some of the most obtuse products of this alliance.

If you have a 401(k) or equivalent retirement plan, you’ve probably been watching nervously the past few weeks as your nest egg has shrunken owing to the current turmoil in the markets.

Well, it could be worse. But don’t take heart, for what we mean is it could get worse. The market turmoil has some politicians on Capitol Hill eyeing the end of the 401(k) as we know it.

We have a Social Security system that is currently running on fumes, backed by a trust fund containing a treasure trove of I.O.U.s.

We have a generation of taxpayers that hold little hope of ever recouping their contributions, many (most?) of which aren’t saving enough to make up for it. What is the solution?

Take away the tax benefits of saving into a 401k including the incentive the employer has to match contributions.

In exchange for what?

Another Social Security benefit. Guaranteed by whom?

The U.S. Government.

The same government that has pissed away $10,000,000,000,000 (and counting).

What would the money be invested in?

Special “Government Bonds” that would pay inflation plus three percent. Forfeit a bouquet of shares in a carefully arranged and assorted arrangement of global enterprises that have averaged between 8 and 12 percent per year over periods of time that easily fit twice within the average career span. Trade them for a share of the magnificent crater that forty years of tax-once, spend-thrice government corruption and mismanagement has left for us and the next twenty generations.

Sounds swell.

I’ll take my chances with the stock market, thank you.

Democrats think Americans are too stupid to save for retirement. The sad thing is, they might be right. Most don’t save enough. We know that.

As usual, the Democrats think it’s the government’s job to confiscate the hard-earned assets of the self-reliant, the prudent, and the hard-working and dole it out to the spendthrifts, the lazy, the leeches who can’t or won’t do anything for themselves…but vote.

Save Yourselves

Mitch and Ed are talking about despondent conservatives on the radio on my credenza as I type. Many of us have resigned ourselves to the fact that we are likely to have a Democratic President, House and Senate and may even have lost filibuster protection in Congress. In a sick example of double jeopardy, Al Franken could be the last building block of a Liberal Supermajority.

The huns are at the wall. Soon, no one; nothing may stand between hard-working, self-reliant folks and those that think we are a people of the government, by the government, for the government, and not the other way around as Abraham Lincoln set forth in his Gettysburg Address.

Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven’t since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s.

Why do you suppose that happened? Because those were very bad times. America’s economy at its near worst. You’d think that there are enough of us around to remember how bad things were back then, but as they say, history tends to repeat itself; humans being humans after all.

As for being a despondent conservative, I have found my optimism wavering to say the least but at the same time I have given much thought, especially as a financial advisor, as to how this translates into pragmatic action and counsel.

Assuming the worst, what does it mean for the average American? What should we do? How can we prepare?

Sorry Senator Biden, but you are so very wrong, again. Sadly, for the foreseeable future, it will actually be “patriotic” to save more and spend less.

Obama’s “tax cut”, characterized more accurately as a wealth redistribution scheme by analysts with a little more economic acumen than “That One,” will essentially be taking capital from those that have historically known what to do with it and giving it to those that historically have not.

Job creation, investment, and growth will give way to an insignificant blip in consumer spending, mostly on imported goods, and visits to the casino. A drop in consumer spending and job growth will create a cyclical effect that will magnify the effects, even the perceived future effects of a more burdensome government.

You see when you run a business, every dollar you spend is a dollar not spent or invested somewhere else. It’s called opportunity cost. If the government increases its burden on consumers and employers, those dollars have to come from somewhere.

Even the prospect of higher taxes and slowed economic growth will be cause for pause among business owners and consumers. It’s happening already, which is why many believe we have been in a recession for some time now.

And in fact, I have some advice for you: make adjustments now, before you are forced too. Look at your finances with an eye for necessity. Discretionary spending should be closely scrutinized to maximize its value to you and your family or business.

Build a financial buffer of safety around you and your family as the taxman is coming and he doesn’t care what damage he does to your employer. He will simply be doing the bidding of Obama and his liberal economic pinheads.

The verdict isn’t in yet, but your financial advisor may also start to advise you to move your portfolios into allocations slightly more conservative than they have been in the past as financial analysts may determine the higher potential returns earned by investors in exchange for taking more risk (versus risk-free investments) may be reduced for the foreseeable future.

Assuming that a recession has already begun, and the liberal powers that be are likely to make exactly the wrong moves, a recession could extend itself into a depression – essentially the term for a very long recession.

Cash will be King.

And much to the surprise of the liberals that will have caused it, the rich will get even richer as assets will return to their rightful owners as the wealthy scoop up many and varied bargains in equities and real estate discarded by those who have become under or unemployed.

So don’t wait for the effects of an Obama administration and an activist liberal congress to trickle down to your financial situation. Prepare yourself now.

Fingerhutted

I never had anything to do with Tom Petters.  I’ve certainly never met the guy.  But I don’t think I’d have liked him much.

When you meet a person in a bar, or on a date, or wherever, you can usually get a pretty fair sense of what that person’s about via all sorts of little cues; their body language, the way they pick their words, the way they spell things, the way the respond (or not) to questions, the tone and manner in which they speak, their eye contact, and a million other little telltale signs most of us have internalized after a lifetime of dealing with people.

Companies are the same.  In my years of working – especially in my years as a contractor, where I’d sometimes be with three or four different companies in a year, with months of interviewing, and researching companies, and interviewing some more – I like to think I’ve developed a pretty keen sense of how a company is when I get a first impression.  Of course, at various times in my life, I’ve had to just get a damn job, now, and so I’ve taken jobs where that little sense in the back of my head told me that there was something about the people I’d interviewed that wasn’t quite right.  That little sense was always right.

And of course, I’ve walked away from job opportunities when that little sense was insistent enough (and other opportunities were available, naturally). 

Over the years, I’ve interviewed with two Petters group subsidiaries – I’m not going to name names.  And both times, that little voice in the back of my head said “RUN AWAY“.  The gist I got both times was the same feeling you get when a salesman is pitching you on a very dubious proposition; he’s pouring his heart into it, but it just doesn’t add up.  In both cases, there was a sense of – to coin a phrase – frantic sleaziness about the operation that set my internal “warning meter” to jackhammer.  I left both interviews with no intention of coming back for a second.  If presenting a frantically-sleazy veneer to interviewees was a tactic to weed out less-than-enthusiastic possible recruits – well, it worked.  Twice. 

And judging by this kind of story, I’m glad:

I’m trying to get official confirmation, but two previously credible sources tell me that GreatWater Media, part of Tom Petters’ empire, was shuttered today. All employees — I think we’re talking about three dozen folks — were terminated…When the acquisition was announced July 17, Petters officials told MMG employees they would not be paid for the previous three weeks. After stories appeared in MinnPost and the Star Tribune, Petters relented — offering 38 rehired workers “retention bonuses” equal to three weeks pay…according to one laid-off worker’s spouse, it was never paid and now won’t be.

Even worse, the spouse says workers won’t be paid for the past three weeks at GreatWater Media — meaning they’ve lost six weeks worth of pay overall.

Yick.

In the interest of fairness, I’ll add that I do have friends who have worked in various corners of Petters’ former empire, and had good experiences.  I’ve also worked with “alumni” of Petters’ empire who carried the frantic sleaziness with them to their next jobs.

Conclusion?  There is none – except that that little voice in the back of your head can be a very useful thing. 

Risk

Chris Dodd, lefty demigogue extraordinaire, has been out front attacking the big bad capitalists and the “appetite for risk” that he holds put us in this jam.

Naturally, he not only benefitted handsomely from that same risk – he benefitted from my loathsome mortage paper-holder and one of the key offenders, Countrywide.

Former Countrywide Financial loan officer Robert Feinberg says Mr. Dodd knowingly saved thousands of dollars on his refinancing of two properties in 2003 as part of a special program the California mortgage company had for the influential. He also says he has internal company documents that prove Mr. Dodd knew he was getting preferential treatment as a friend of Angelo Mozilo, Countrywide’s then-CEO.

That a “Friends of Angelo” program existed is not in dispute. It was crucial to the boom that Countrywide enjoyed before its fortunes turned. While most of the company was aggressively lending to risky borrowers and off-loading those mortgages in bulk to Fannie Mae and Freddie Mac, Mr. Feinberg’s department was charged with making sure those who could influence Fannie and Freddie’s appetite for risk were sufficiently buttered up. As a Banking Committee bigshot, Mr. Dodd was perfectly placed to be buttered.

Is it too late to bring back public flogging?

“Now It Is Safe”

The blast walls that criscrossed Baghdad to contain car bombs and other terrorist acts are starting to come down:

“They protected against car bombs and drive-by attacks,” said Adnan, 39, a vegetable seller in the once violent neighborhood of Dora, who argues that the walls now block the markets and the commerce that Baghdad needs to thrive. “Now it is safe.”

The slow dismantling of the concrete walls is the most visible sign of a fundamental change here in the Iraqi capital. The American surge strategy, which increased the number of United States troops and contributed to stability here, is drawing to a close. And a transition is under way to the almost inevitable American drawdown in 2009.

There are now more than 148,000 United States troops in Iraq, down from the peak of around 170,000 a year ago, and President Bush has accepted the military’s recommendation to remove 8,000 more by February.

It sure is a good thing for the Democrats that the economy tanked before this news could get out, isn’t it?

Dissent

John Kline has been, for a couple of terms now, the Minnesota Second District rep in Congress.  He’s a reliable and solid conservative, and therefore I support him unabashedly and without reservation. While I believe that “endorsing” a candidate would make me sound like a pretentious fop (I’m a blogger, not an institution of any importance at all), I actively encourage anyone who lives in MNCD2 to vote for Kline as many times as you are legally able. 

Not to say Kline’s perfect – no politician is, and indeed none should ever try to be. 

One of his most controversial votes was for the bailout bill.  It’s a vote about which I’m of two minds.  On the one hand, it does continue the national trend of socializing risk and privatizing gain; it will take the sting out of making stupid decisions for financial institutions; it is (or will be, without immense vigilance on the part of the people and their representatives) a socialization of the credit market.  To a free-marketeer, the concept is noxious.

But I also agree with King; this is different from previous downturns in that it’s a meltdown in credit, not liquidity; without credit, the dip and the recovery will be much longer, much more difficult, and much more painful.  So while I’m as dogmatic a free-marketeer as anyone, I can go along with the notion that government can try to spread a net over the abyss – provided that is combined with fanatical vigilance as the recovery gathers to make sure that the nationalization is reversed, and that we don’t repeat the mistakes that led us here.  (This will require a huge leap in the economic and financial literacy of the American people, which will in return require a Republican administration).

Kevin Masrud, however, has taken umbrage at Kline’s support of the bailout bill, and is mounting a conservative Republican write-in campaign against Kline in response.  He appeared with King Banaian on NARN III “The Final Word” yesterday. 

On the one hand, I’m going to continue to support Kline in the coming election (for what little it’s worth; I live in the Fourth district).

I also believe that conservatives should fight like hell to (to use the metaphor I’ve been beating to death for the past year) “pull the party to the right” in the big tug of war I described in this piece, all the way through the caucuses and primaries – and then forgive whatever transgressions against pure Hayekian conservative orthodoxy the candidate holds onto, realize that “the best we can do” is better than “the next worst we can do” come November, and close ranks behind the candidate.  It’s why I support the likes of Tim Pawlenty, Norm Coleman, and John McCain – none of whom are as conservative as I am or as I’d like to see in their offices in an ideal world, but each of which are light-years better than Roger Moe, Mike Hatch, Fritz Mondale, Al Franken and Barack Obama. 

The discriminating reader will note that the caucuses were in February, and the primaries were last month. 

True. 

And the bailout bill came after both. 

The timing of Mr. Masrud’s quixotic campaign is both unavoidable and unfortunate.  Given my tepid, conditional support for the bailout and my otherwise-unabashed support of Rep. Kline, who is absolutely correct on a formidable majority of issues and tepidly (I believe) correct on this one, I’d much rather Mr. Masrud had waited until after the election…

…when i would unreservedly support his push to drive Kline, and all elected representatives, to the right on all financial legislation, up to and including the 2010 caucus and primary season.  This is an effort that can not end in 22 days; it is an effort whose urgency needs to redouble after the election, and to do it again after inauguration day, when the orcs will likely really be at the gates.

UPDATE:  Brain fade.  It was Kevin Masrud, not Jeffrey Williams, challenging Kline.  Blah.

It Wouldn’t Be A Crisis…

…without the Minnesoros “Independent” sending ace reporter Molly “Is It White In Here” Priesmeyer – AKA “The Margaret Grebe of the 21st Century” – out to the nightclubs to show how the Sturm and Drang of the Zeitgeist was causing Angst among people who are…er, hanging around in bars on a weeknight:

The cover photo of this week’s Time magazine has been lurking in the psyche of America for the past two weeks: A bread line, circa 1931, buttressed by the headline “The New Hard Times.” Whether or not that’s overstating things by the liberal media elite remains to be seen, but I took my own pulse of America this week, stopping in at Minneapolis bars and music clubs (and one strip club), to imbibe in the healing qualities of good music and gathered people, and to gauge the post-crash mood.

Unlike the Republican candidate for vice president, it wasn’t pretty. In fact, the only comparable such club tour I’ve taken was in the week immediately following 9/11, when hushed roomfuls of people stuck their head in the live music sand and wondered what the bleep would happen next.

Profound.

UPDATE:  My bad; the piece was in the MNPost, and it’s by Jim Walsh, who is not a bad music critic.  Which is sort of like saying “Leukemia isn’t such a bad cancer”; I’ve gotten progressively less and less tolerant of “rock critics” over the years, in the same way “sports journalism” has come to strike me as an oxymoron among all but a few “sports journalists” tiny enough in number to fit into Frank DeFord’s jacket pockets.

UP-UPDATE: OK, I lied.  I knew it was Walsh all along – and I followed the “Priesmeyer Tangent” because “Rock Criticism” frequently – usually? – falls back on the same trite answers to life’s persistent questions that seem to dominate her oeuvre.  Perhaps it’s because most rock critics are lousy writers (and the craft’s dubious standards, in this era of freebie, “citizen” “journalism”, seems to be eroding year by year; I’m flummoxed to think of a rock in the AAA leagues who’s fit to carry Dave Considine or Jim DeRogatis’ Ipod case.  Perhaps the eternal adolescence of the rock club world – a place that’s a combination of Peter Pan and Logan’s Run, a place where everyone, whether musician or bartender or booker or waitress or the audience, either stays a pissed-off 21-year-old or eventually disappears, un-lamented and unremembered – makes the whole enterprise terminally self-limiting. 

And for those of us who disappear from those clubs – those of us who stomped around The Entry’s claustrophobic stage, fought with The Uptown’s cranky sound system and crankier booking agent, cadged drinks from girls at Lyle’s for a year or four, and then…disappeared, vanished into a world of babies and mortgages and day jobs and newer lives lived in daylight?

I’m not going to speak for all of us – but I’m not exactly hanging on Liz Phair’s reaction to the economic crisis.  Or anything.

But, as I said, Walsh is not one of the semi-literate slapnuts that glut “rock criticism” today.  He’s a sharp guy, a good writer and, often enough to notice, a sharp observer.

And amid the pop-culture dross, he scores a few good points:

After 9/11, the president famously told Americans to go shopping. At the moment, it might behoove him to remind “we the people” that going out — to clubs, bars, music venues — gets us out of ourselves and out of our own burrowed-in blues, and that it’s important to keep the blood pumping and the elbows rubbing, even when the world can make you feel, as one mourner put it to me at a funeral home recently, “I’m lost.”

You could ask – “did we grow up and stop having fun because life got difficult, or did life get difficult because we grew up and stopped having fun?”   The answer would be “probably not entirely”, of course, because life is rarely that black-and-white. 

So no – you won’t see me giving a rat’s ass about what some adolescent, or arrested-adolescent, in a bar on a Tuesday night thinks about politics or the economy.  But Walsh is right – isolation is as big a killer than the stress that isolates us.

The Net Over The Abyss

Once upon a time, someone asked Winston Churchill what he believed about government welfare. This was, of course, at a time when most of the world’s nattering classes believed that socialism and the welfare state were not only the best possible idea, but in fact inevitable.

Churchill, a conservative, responded “I propose not to level out the peaks to fill in the valleys, but to put a net over the abyss”.

That, for me, has always been one of the tenets of being “center-right”, as opposed to a paleoconservative; government has a place – in the few places were the free markets don’t have a presence.

As re the current economic crisis? I’m not nearly smart enough to be an economist.

King Banaian is smart enough – so much so that he is in fact an economist. And a conservative.

And a proponent of some kind of bailout:

The free market has taken an enormous amount of abuse as regards the current financial crisis. It shouldn’t; it had nothing to do with it, as many of the other authors in this series have pointed out (and will). To the extent that the market has failed, it has done so largely because of government coercion over the years.

The “free market” did not get us into this mess, but we need the free market to get us out. For that to happen, the free market needs government as a partner, whether conservatives like that idea or not.

But the free market solves everything,right?

Well, yeah – as long as there is a market. As King points out, this is not like the Great Depression, or any of the depressions before it; those were liquidity crises. This is a credit crisis; the engine of recovery, in our economy, is credit. And much of our credit market is based on assets – crummy mortgages, exotic derivatives based on other numbers – that may or may not have any value.

And without a market for credit? No recovery.

King:

Free markets do not mean always private markets. Free markets mean markets with an absence of coercion. It is possible for government to step forward for a missing market and not be coercive. A bailout that did not consume taxpayer dollars would be one example. Forcing banks to alter their lending standards would be coercive and unfree.

The problem we face is the absence of a market. Government can help create a free market where none exists today, and that would be a good thing. It may be that we cannot avoid costs associated with previous government meddling in the market that helped create this crisis, but we can all hope that the costs will not extend beyond those already sunk.

Which is not to say that any government intervention doesn’t need to be watched closely to prevent it becoming the pork-fest the House Democrats tried to inflict on the nation last week. Government may need to act; it doesn’t need to be stupid.

Read King’s entire article – and the Center of the American Experiment series of which it’s a part.

UPDATE:  Government doesn’t need to be stupid.  But it seems to come naturally, as Kevin Ecker notes.  Kevin – every bit as paleo as i am – is willing to be convinced.

But…:

However, my willingness to be convinced diminishes greatly, when I read through the bill and see things like this:

  • Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.
  • Sec. 310. Extension of mine rescue team training credit.
  • Sec. 311. Extension of election to expense advanced mine safety equipment.
  • Sec. 316. Railroad track maintenance.
  • Sec. 317. Seven-year cost recovery period for motorsports racing track facility.
  • Sec. 324. Extension of enhanced charitable deduction for contributions of book inventory.
  • Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.
  • Sec. 502. Provisions related to film and television productions.
  • Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children.

Look expanding FDIC and things like that I get.  You’re giving yourself the tools necessary to fix the economy.  But if you had the time to be concerned about wool research and motorsports tracks I start getting the impression that you aren’t taking this seriously.

Yeah.  That’s a problem a lot of us are having with this proposed “fix”.

I wasn’t aware that “film and television production” was that essential to the economy.

Guess who else doesn’t know how to use email?

Pelosi urges Bush to take action in letter 

House Speaker Nancy Pelosi is sending a letter to President Bush pressuring him to offer a “comprehensive and effective systemic response to ongoing market turmoil.”

Ooooh. Nancy. The mumbo. The jumbo. I love it when you use multiple syllables.

“We need to hear from you about a comprehensive and effective systemic response to ongoing market turmoil — one that will restore stability, grow our economy, create jobs, and insulate hardworking, middle-class Americans on Main Street from Wall Street’s crisis,” Pelosi writes in the letter.

Geez, Nancy is that all? As long as you’re at it, why didn’t you ask for the cure for cancer? Government is the solution for all ills, right. Maybe now would be a good time for everyone to get Hillary’s $5,000?

Translation:

We don’t know what the f*ck we’re doing. Harry Reid is crying in the balcony. The Senator from Illinois isn’t even “Present.” So Mr. President, if you don’t mind, we’d like you to look the fool. Please overlook the fact that it is we that have blocked reform legislation since 1992.

Legislation that may have prevented this debacle in the first place.

She also says Congress will be willing to stay on Capitol Hill beyond the target adjournment date of September 26 to deal with the problem.

Well, we know they will be hanging around for at least two or three days until the President gets his letter.

Joe Biden Opens His Mouth

…and removes all doubt.

…and is utterly, completely underwhelming.

Biden waffles on AIG bailout 

“The truth is I don’t know what the bailout is yet,” Biden said Wednesday afternoon in Maysfield, Ohio. “It looks like they’re lending them a little bit of money. I don’t know what they’ve done, I haven’t had a brief on it. I haven’t spoken to the Secretary of the Treasury.”

…and these are the people we’ve been waiting for?

Gee Joe, the economy is the political issue now. Ya’ think y’all might wanna get schooled on the subject?

Truth is, the Democrats don’t know anything about “The Economy, Stupid.” 

…and blaming the “suffering” of the middle class on Bush’s policies is political dejecta. 

The federal government is loaning AIG $85 Billion at eight percent interest which is to say the Fed could potentially profit in the deal. 

Make no mistake. This is an unwise installment is what in looking more and more like a serial government bailout that will only encourage more deservedly failed enterprises to line up with their hand out. Further, these short-term fixes only serve to undermine the long-term health of our economy by weakening our dollar.

The prospect of a government bailout (now in place) of Fannie and Freddie emboldened them to take risks they would otherwise not have taken. The cascade effect allowed Washington Mutual, AIG, and others to follow suit. They, along with GM are now raising the white flag.

These companies should be condemned to suffer quick, conspicuous deaths, allowing their assets to be picked up by their rightful owners – those institutions that wisely resisted the lure of chasing too little reward by accepting too much risk.

Meanwhile, Joe Blow Biden incredulously believes this to be the time to talk of raising taxes.

Democratic vice presidential candidate Joe Biden said Thursday that paying more in taxes is the patriotic thing to do for wealthier Americans. The Republican campaign for president calls the tax increases their Democratic opponents propose “painful” instead of patriotic. 

“We want to take money and put it back in the pocket of middle-class people,” Biden said in an interview on ABC’s “Good Morning America.”

Versus stimulating and enhancing the opportunities to earn it themselves, right Joe? You arrogant socialist hack.

A more accurate choice of words is “confiscate”. Only a liberal democrat would assert that “taking” money from those that have leveraged the American Dream by investing, working hard, and employing others will somehow result in a stronger America.

I’m actually starting to believe Obama’s assertion that Joe Biden is a regular “lunchbucket” kind of guy. Just exactly the wrong kind of myopic mind to be assuming leadership of our nation.

It shouldn’t surprise you…

…that the man leading the party that has ascribed an insignificant fluctuation in worldwide temperatures to mankind, packaged the phenomenon as a crisis, and crowned a failed Presidential candidate (don’t miss the link – it’s Al Gore – 100 lbs. ago!) and hypocrite as it’s King…

…would blame the failure of a private financial services company during what Alan Greenspan called yesterday a “once in a century” financial crisis brought on by a completely predictable (as to what, not when) collapse in the price of homes when the American congress is controlled by Democrats.

…and John McCain is the liar, huh?

Obama, the Democratic nominee, said President George W. Bush‘s policies have caused “the most serious financial crisis since the Great Depression.” He also called for “modernizing” regulations at a rally in Grand Junction, Colorado.

Obama’s economic literacy is limited to the balancing of a checkbook, and even that is an assumption on my part. Obama’s paycheck has never originated from anything other than a government entity. Anyone want to take a guess as to what Obama means by “modernizing” means in this context?

Here – let me give you a hint. Is it…

a. Augmenting

b. Expanding

c. Multiplying

d. Swelling

e. Widening

f. All of the Above

In all fairness, McCain was also quoted as saying more regulations are indicated, but at least he wasn’t obtuse enough to make a lame attempt to leverage the situation politically and blame it on President Bush.

Both candidates were trying to score points with voters looking for reassurance after Lehman Brothers Holdings Inc. became the latest casualty on Wall Street.

Guess what America? Our economy has cycles. Companies that have irrelevant or outdated business models are supposed to fail and all the better if it happens quickly. Sometimes the risk reward quotient yields the risk; the risks of doing business are realized. Our government can’t be expected to mitigate every risk of life and living in America.

…unless you are a pandering politician.

The Chicken and the Egg

By now everyone is buzzing about the federal government bailout of Fannie Mae and Freddie Mac.

Riddle me this:

  1. Whose idea was it?
  2. Was it smart?
  3. Was it necessary?
  4. Could it have been prevented?
  5. How did this happen?

The answers to these questions are easy.

  1. Treasury Secretary Hank Paulson
  2. Yes
  3. Yes
  4. Yes
  5. Fannie Mae and Freddie Mac knew that the federal government would bail them out if they ever got into trouble

The Chicken and the Egg.

More on “Whose idea was it?”:

WASHINGTON — President Bush may be the nation’s first M.B.A. president, but when Mr. Bush and a small coterie of advisers met in the Oval Office last week to complete their plan to rescue the mortgage giants Fannie Mae and Freddie Mac, there was no question who was in charge.

It was Treasury Secretary Henry M. Paulson Jr. who first proposed the idea of a government conservatorship, and broached it with Mr. Bush while the president was at his ranch in Crawford, Tex. It was Mr. Paulson who set the guiding principles for the subsequent deal; Mr. Bush endorsed them, a departure from usual White House practice, in which the president articulates principles for his underlings to follow.

Had the federal government not taken over these giants, we would most likely have experienced what is called a systemic breakdown of our nation’s financial system resulting in most likely a recession (already likely by most accounts) or even the next depression.

The moral of the story? You can’t have a free market system unless you truly have a free market. The implied bailout of these mortgage giants, which until this week were public companies, allowed (encouraged?) them to take unnecessary and unmitigated risks.

Risks otherwise unadvisable, especially given the small margin of extra return that could have potentially been delivered to investors, had the potential upside been fully realized.

And now the taxpayer has become the beneficiary of the not yet fully realized downside.

So who’s the idiot (sorry) uninformed overseer behind the formation of this disaster in the first place?

Care to wager as to what party he represents?

Taxpayers are now on the hook for as much as $200 billion to rescue Fannie Mae and Freddie Mac, and if you want to know why, look no further than the rapid response to this bailout from House baron Barney Frank.

Asked about Treasury’s modest bailout condition that the companies reduce the size of their high-risk mortgage-backed securities (MBS) portfolios starting in 2010, Mr. Frank was quoted on Monday as saying, “Good luck on that,” and that it would never happen.

There you have the Fannie Mae problem in profile. Mr. Frank wants you to pick up the tab for its failures, while he still vows to block a reform that might prevent the same disaster from happening again.

Could it have been prevented? (Yes – emphasis mine)

At least the Massachusetts Democrat is consistent. His record is close to perfect as a stalwart opponent of reforming the two companies, going back more than a decade. The first concerted push to rein in Fan and Fred in Congress came as far back as 1992, and Mr. Frank was right there, standing athwart. But things really picked up this decade, and Barney was there at every turn.

That is what happens when Democrats are allowed to stand behind our nation’s cash register. They’re like one of Donald Trump’s ex-wives…only you and I get to pay the bill.

You own your house…and now mine too

Congratulations America. You just bought half the homes in America.

NEW YORK (CNNMoney.com) — Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back.

Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing.

Which is to say forever?

Time will tell if this move will only serve to lengthen the “house cleaning” that the market would have delivered without the government’s intervention. Institutions of this size represent a pillar in our economy and financial infrastructure, and it’s hard to say whether a free market approach, a government intervention or something in between is indicated.

Treasury secretary Paulson hints that this may not be a permanent takeover.

Government support needs to be either explicit or nonexistent, and structured to resolve the conflict between public and private purposes,” Paulson said. “We will make a grave error if we don’t use this time out to permanently address the structural issues presented by the GSE’s,” he added, a reference to the companies as government-sponsored enterprises.

How much will this cost? No one knows yet. It will have a “B” in front of it.

Paulson said the Treasury Department would provide as much money as needed to keep the companies’ capital reserves from falling below the levels that would trigger rules that automatically put them into receivership.

I guess they were right…

Critics have long argued that Fannie and Freddie were taking advantage of the widespread assumption by investors that the federal government would bail them out if they got into trouble. Administration officials as well as the Federal Reserve have argued that the two companies used those implicit guarantees to borrow money at below-market rates and lend money at above-market returns, and that they had become what amounted to gigantic hedge funds operating with only a tiny sliver of capital to protect them from unexpected surprises.

Is there an upside?

Probably. The stock market should react favorably. Mortgage rates should fall almost immediately. 

The future? With a Dem-controlled Congress…guess who’s next:

Don’t Bail Out Detroit…Bury It