Just back from a week in LA, where I scoped out UCLA's Center for Social Theory and Comparative History lecture on Economic Meltdown: Causes and Consequences. Call it a History Dept. vs. Economics Dept. smackdown. (More on that in a future Shot).
I'd have gotten you some student attendee commentary -- the young shoulders upon which said consequences shall weigh heavily -- but I had to dash to my friend's VIP suite at the Staples Center for the LA Kings versus Vancouver Canucks hockey game. I think you'll find this metaphor apt to the Team USA economy.
The score was 3-2, Kings. The only reason: the Kings' goalie. Offensively, the Vancouver natives passed fluidly and with fierce determination. Defensively, they nixed the Kings at nearly every foray. There was hardly a moment in the 2nd and 3rd periods for the Canuck goalie to work it. (Lucky thing the Kings played hard in Q1.)
Right now, the fate of America's economic system rests on one "goalie": Timothy Geithner.
Late in the 3rd Quarter, Geithner Scrambles
Here's my main beef with Timothy the Timid. He hasn't got enough gusto to be Obama's right-hand money man and stand up to gale-force winds of economic change. (Obviously, Congress agreed, and took AIG matters into their own hands.)
Geithner writes to Pelosi: "I registered my strong objections to Mr. Edward Liddy, the CEO of AIG, last week." It is said that in the halls of the now-dead Salomon Bros., swearing was how they breathed. I wonder if Geithner's "strong objections" ran thus. That way, he'd accomplish nothing -- but win populist appeal -- just like Mr. "Resign or Suicide " Grassley. There's no better way for a man to make his feelings understood.
Instead, cowering behind the Bush-era American Recovery and Reinvestment Act, he proves such regs had little bite and all bark in the face of contract law. Go, corporate lawyers and outside consultants! Earn that dough!
I know we shouldn't overturn centuries of contract law precedent (companies won't roost here from Asia otherwise). But Geithner could have lead the charge and barked about tax legislation. (Perhaps he's hoping not to take a fall, should things go awry). In 2008, there were 500 changes to the tax code...and any idiot could have seen the AIG bonus payments coming.
However, the Johnnies-Come-Lately of Congress are eager to oblige. The same day I penned my thoughts below, the House passed a 90% surtax. The tally in favor: 328-93. (As you read this, we'll be here, manning the screens, counting the Senate votes as they come in.) The Senate proposal offers a more modest move: 70% surtax, split between company and worker.
But I say, let's bypass the heavyweight voting hand of Congress. The states should be free to go after this one on their own (Cuomo-style). After watching my sis prepare her fiance's New York state tax return, I think it's a plum shot.
As you may be finding out this filing season, there are plenty of ultra-specific credits and subtractions already on the N.Y. code. Since they're already there...let's add more. Isn't that the mantra of a "can-do" gov't?
Consider these gems:
I'd have gotten you some student attendee commentary -- the young shoulders upon which said consequences shall weigh heavily -- but I had to dash to my friend's VIP suite at the Staples Center for the LA Kings versus Vancouver Canucks hockey game. I think you'll find this metaphor apt to the Team USA economy.
The score was 3-2, Kings. The only reason: the Kings' goalie. Offensively, the Vancouver natives passed fluidly and with fierce determination. Defensively, they nixed the Kings at nearly every foray. There was hardly a moment in the 2nd and 3rd periods for the Canuck goalie to work it. (Lucky thing the Kings played hard in Q1.)
Right now, the fate of America's economic system rests on one "goalie": Timothy Geithner.
Late in the 3rd Quarter, Geithner Scrambles
Here's my main beef with Timothy the Timid. He hasn't got enough gusto to be Obama's right-hand money man and stand up to gale-force winds of economic change. (Obviously, Congress agreed, and took AIG matters into their own hands.)
Geithner writes to Pelosi: "I registered my strong objections to Mr. Edward Liddy, the CEO of AIG, last week." It is said that in the halls of the now-dead Salomon Bros., swearing was how they breathed. I wonder if Geithner's "strong objections" ran thus. That way, he'd accomplish nothing -- but win populist appeal -- just like Mr. "Resign or Suicide " Grassley. There's no better way for a man to make his feelings understood.
Instead, cowering behind the Bush-era American Recovery and Reinvestment Act, he proves such regs had little bite and all bark in the face of contract law. Go, corporate lawyers and outside consultants! Earn that dough!
I know we shouldn't overturn centuries of contract law precedent (companies won't roost here from Asia otherwise). But Geithner could have lead the charge and barked about tax legislation. (Perhaps he's hoping not to take a fall, should things go awry). In 2008, there were 500 changes to the tax code...and any idiot could have seen the AIG bonus payments coming.
However, the Johnnies-Come-Lately of Congress are eager to oblige. The same day I penned my thoughts below, the House passed a 90% surtax. The tally in favor: 328-93. (As you read this, we'll be here, manning the screens, counting the Senate votes as they come in.) The Senate proposal offers a more modest move: 70% surtax, split between company and worker.
But I say, let's bypass the heavyweight voting hand of Congress. The states should be free to go after this one on their own (Cuomo-style). After watching my sis prepare her fiance's New York state tax return, I think it's a plum shot.
As you may be finding out this filing season, there are plenty of ultra-specific credits and subtractions already on the N.Y. code. Since they're already there...let's add more. Isn't that the mantra of a "can-do" gov't?
Consider these gems:
Sport utility vehicle expense deduction (do not include hearse)
Income earned before 1960 and previously reported (applies to descendents)
Purchasing a defibrillator
Payments to restore historic N.Y. barn
Income from assets stolen, hidden, or otherwise lost to a victim persecuted by the Nazis (do not include if you are NOT a: victim, spouse of victim, descendent, or first recipient of assets).
There's our precedent. So let's write us some tax code:
Group A
IF you are one of the AIG employees making over $100,000 in 2008 year- end bonuses asked by Edward Liddy, your CEO, to return half of that, first check box labeled "Distateful" and either give us the other half or, should you prefer, pay other half back directly to AIG. (Distateful's choice.)
Group B
IF you are shockingly absent from aforementioned Group A, or are no longer with AIG altogether, your president hates you and drafts you for his Hope Now AIG Mending Package. Mandatory enrollment includes a one- time "uniform" fee of $100,000 or half of your 2008 bonus, whichever is the larger sum.
Group C
IF by some miracle you managed to unwind a derivative contract successfully in the last year on record, pat yourself on the back and take a credit of 0.0001% of said derivative contact's closing value -- as determined by Hank Paulson and Co., c/o the Office of Thrift Supervision's interim director: Scott M. Polakoff
IF you are one of the AIG employees making over $100,000 in 2008 year- end bonuses asked by Edward Liddy, your CEO, to return half of that, first check box labeled "Distateful" and either give us the other half or, should you prefer, pay other half back directly to AIG. (Distateful's choice.)
Group B
IF you are shockingly absent from aforementioned Group A, or are no longer with AIG altogether, your president hates you and drafts you for his Hope Now AIG Mending Package. Mandatory enrollment includes a one- time "uniform" fee of $100,000 or half of your 2008 bonus, whichever is the larger sum.
Group C
IF by some miracle you managed to unwind a derivative contract successfully in the last year on record, pat yourself on the back and take a credit of 0.0001% of said derivative contact's closing value -- as determined by Hank Paulson and Co., c/o the Office of Thrift Supervision's interim director: Scott M. Polakoff
This brings me to our second Team USA economy defender -- over at the Office of Thrift Supervision (OTS) -- John M. Reich. And he's just quit the game.
What the Office of Thrift Supervision Does for Banking
John Reich was set up in the director's post by our dearly departed W in 2005. In such capacity he also warmed a seat on the board of directors of the FDIC.
In short (and polite) terms, all this dog and pony show happened under his watch -- since he was acting chair and vice chair of the FDIC 2001- 2002.
When, in November 2008, he announced his departure, he said charmingly: "I am honored to have led this agency during one of the most challenging economic periods in U.S. history."
Yes, it was a great time to get the hell out of Dodge -- just when the challenges need to be unwound as fast as possible -- and run properly. Reich didn't give a date back then, but added that his departure would be "sooner, rather than later." That sooner was Feb. 27, 2009.
Enter the Heir to the OTS Challenge
But be consoled, Reich is "confident in his successor." In accordance with statute, Scott Polakoff serves as director until Obama offers a successor. He joined the OTS in 2005 -- the same year as Reich. But Polakoff has logged over two decades with the FDIC. He's come a long way from trainee bank examiner in Tulsa, in 1983. Unlike some of the other players on the Team USA economy, Mr. Polakoff hails from the non- WASP world of Southern Methodist University in Dallas, on an accounting degree from West Chester U. in Pennsylvania.
Does this bode well for Team USA? Hard to say. Trolling the OTS news of recent months, we find little fodder for confidence.
Chew on these facts, courtesy of Washington Post writers Binyamin Appelbaum and Ellen Nakashima, back in November.
The greatest thrift failures we had -- which cost us a pretty penny -- all struck under the OTS watch: Countrywide, IndyMac, and WaMu. In fact, with other government regulators hot on its tail, Countrywide Financial switched regulators in that perilous spring of 2007. It switched to OTS.
Going back a little farther, the OTS lauded the thrift culture's embracing the "innovation" of the option ARM -- the hair trigger of the whole crisis. Then the OTS director, pre-Reich, offered this: "Our goal is to allow thrifts to operate with a wide breadth of freedom from regulatory intrusion."
By late 2006 -- post-Reich -- the OTS-regulated banks had the lowest capital reserves in two decades. If a simple thing like making sure there is adequate capital cushion escapes these regulators...well, why pay them?
For bedtime reading, you could check out Polakoff's recent testimony before Dodd and the Senate Banking Committee...or wait a few days, and I'll offer you the "plain-speech" take in a morning Shot.
And this just in -- from our colleagues over at The 5 Min. Forecast: There's a new defender behind Geithner: Lewis Alexander. Don't know the name? Maybe all you want to know is that he's a former Citigroup economist. In fact, Alexander was chief economist at Citi circa 1999- 2008. He'd thought the housing market would recover in mid-2007. Think that poor prediction cost him his job?
I'm banking on the fact that he actually found some sense -- too late in the game.
The official word leaked to the press: his sympathy for the "staff shortage" at the Treasury. How's that for team spirit?
What the Office of Thrift Supervision Does for Banking
John Reich was set up in the director's post by our dearly departed W in 2005. In such capacity he also warmed a seat on the board of directors of the FDIC.
In short (and polite) terms, all this dog and pony show happened under his watch -- since he was acting chair and vice chair of the FDIC 2001- 2002.
When, in November 2008, he announced his departure, he said charmingly: "I am honored to have led this agency during one of the most challenging economic periods in U.S. history."
Yes, it was a great time to get the hell out of Dodge -- just when the challenges need to be unwound as fast as possible -- and run properly. Reich didn't give a date back then, but added that his departure would be "sooner, rather than later." That sooner was Feb. 27, 2009.
Enter the Heir to the OTS Challenge
But be consoled, Reich is "confident in his successor." In accordance with statute, Scott Polakoff serves as director until Obama offers a successor. He joined the OTS in 2005 -- the same year as Reich. But Polakoff has logged over two decades with the FDIC. He's come a long way from trainee bank examiner in Tulsa, in 1983. Unlike some of the other players on the Team USA economy, Mr. Polakoff hails from the non- WASP world of Southern Methodist University in Dallas, on an accounting degree from West Chester U. in Pennsylvania.
Does this bode well for Team USA? Hard to say. Trolling the OTS news of recent months, we find little fodder for confidence.
Chew on these facts, courtesy of Washington Post writers Binyamin Appelbaum and Ellen Nakashima, back in November.
The greatest thrift failures we had -- which cost us a pretty penny -- all struck under the OTS watch: Countrywide, IndyMac, and WaMu. In fact, with other government regulators hot on its tail, Countrywide Financial switched regulators in that perilous spring of 2007. It switched to OTS.
Going back a little farther, the OTS lauded the thrift culture's embracing the "innovation" of the option ARM -- the hair trigger of the whole crisis. Then the OTS director, pre-Reich, offered this: "Our goal is to allow thrifts to operate with a wide breadth of freedom from regulatory intrusion."
By late 2006 -- post-Reich -- the OTS-regulated banks had the lowest capital reserves in two decades. If a simple thing like making sure there is adequate capital cushion escapes these regulators...well, why pay them?
For bedtime reading, you could check out Polakoff's recent testimony before Dodd and the Senate Banking Committee...or wait a few days, and I'll offer you the "plain-speech" take in a morning Shot.
And this just in -- from our colleagues over at The 5 Min. Forecast: There's a new defender behind Geithner: Lewis Alexander. Don't know the name? Maybe all you want to know is that he's a former Citigroup economist. In fact, Alexander was chief economist at Citi circa 1999- 2008. He'd thought the housing market would recover in mid-2007. Think that poor prediction cost him his job?
I'm banking on the fact that he actually found some sense -- too late in the game.
The official word leaked to the press: his sympathy for the "staff shortage" at the Treasury. How's that for team spirit?
"Dear Gary.
"I just wanted your mailbox not to be empty, but I have no parting shots to take. I can't tell you how much I appreciate the Biblical view presented in W&G today. I have no faith in this government or the leader right now. I am not scared, yet, but am really wondering what will happen to our country in four years. I remember being a kid and loving JFK so very much as that charismatic president, romanticized and publicized. I wonder if my parents were thinking what I am thinking today about the condition of the country.
"I am living in Slovakia at the moment and surrounded by the after affects of total Socialism. When the town loudspeaker came on today and the voice droned on about whatever and the music played a little, I was reminded of 20 years ago and wondered what the voice said then-- surely not just the current events of the town. People here--the older ones--do miss communism. They are confused, scared, and riding some very bumpy waves of economic downturn as bad or worse than in the States. But like us, they just get up and go to work the next day--if they have a job--and don't know what they can possibly do to change anything. Their elections come up soon--next week, I think, and the talk I hear is that the two top choices are not great, but the other better choices have no chance to win, so many will vote for the lesser of two evils. It's just a little country--2/3 the size of Iowa, my home. But it is all these citizens have. Husbands have gone off to another land to work--France, Spain, Germany--leaving wives and children to fend for themselves as well as they can. It's sad and I feel sorry for them. I feel sorry for us, too. I think the ocean- erupting volcano yesterday is a good parody of what is boiling under our surface.
"I'll be home in late April, in time for sunshine and warmth of spring, sorry to be missing the hope that hopefully blooms here in this land of concrete high-rises. I wish to get a taste of it before I have to go. It's been a long, hard winter. I wonder how different home will be--my friends and relatives have been warning me of the depressed (oppressed) economy and that I will notice the changes though I have only been away for two months--since two days after Obama took office.
"At any rate, thanks for the newsletters. I do read them fairly often. Lost my socks on some small stocks upon advice from someone awhile ago- -can't even remember who. I am not the only sockless person, though, and my investments were small--it was a challenge. I taught "Easy come; easy go" to my English learning class last week. How true. Taxation breaks the back of the people--here people pay 19% across the board on every purchase, but everyone has health insurance! What a deal.
"Thanks again. I think Bill Jenkins is my kind of guy. You are, too, for publishing him and taking a stand. By the way, I visited Auschwitz last weekend."
"I just wanted your mailbox not to be empty, but I have no parting shots to take. I can't tell you how much I appreciate the Biblical view presented in W&G today. I have no faith in this government or the leader right now. I am not scared, yet, but am really wondering what will happen to our country in four years. I remember being a kid and loving JFK so very much as that charismatic president, romanticized and publicized. I wonder if my parents were thinking what I am thinking today about the condition of the country.
"I am living in Slovakia at the moment and surrounded by the after affects of total Socialism. When the town loudspeaker came on today and the voice droned on about whatever and the music played a little, I was reminded of 20 years ago and wondered what the voice said then-- surely not just the current events of the town. People here--the older ones--do miss communism. They are confused, scared, and riding some very bumpy waves of economic downturn as bad or worse than in the States. But like us, they just get up and go to work the next day--if they have a job--and don't know what they can possibly do to change anything. Their elections come up soon--next week, I think, and the talk I hear is that the two top choices are not great, but the other better choices have no chance to win, so many will vote for the lesser of two evils. It's just a little country--2/3 the size of Iowa, my home. But it is all these citizens have. Husbands have gone off to another land to work--France, Spain, Germany--leaving wives and children to fend for themselves as well as they can. It's sad and I feel sorry for them. I feel sorry for us, too. I think the ocean- erupting volcano yesterday is a good parody of what is boiling under our surface.
"I'll be home in late April, in time for sunshine and warmth of spring, sorry to be missing the hope that hopefully blooms here in this land of concrete high-rises. I wish to get a taste of it before I have to go. It's been a long, hard winter. I wonder how different home will be--my friends and relatives have been warning me of the depressed (oppressed) economy and that I will notice the changes though I have only been away for two months--since two days after Obama took office.
"At any rate, thanks for the newsletters. I do read them fairly often. Lost my socks on some small stocks upon advice from someone awhile ago- -can't even remember who. I am not the only sockless person, though, and my investments were small--it was a challenge. I taught "Easy come; easy go" to my English learning class last week. How true. Taxation breaks the back of the people--here people pay 19% across the board on every purchase, but everyone has health insurance! What a deal.
"Thanks again. I think Bill Jenkins is my kind of guy. You are, too, for publishing him and taking a stand. By the way, I visited Auschwitz last weekend."
Thank you very much for writing in with that.
And thank you all for filling up my mailbox. Keep 'em coming!
And thank you all for filling up my mailbox. Keep 'em coming!
"What bothers me most and what socialists fail to understand, is that a so-called right to free food, free housing, free education, free medicine, or free anything means those who work automatically have the 'right' to pay for it. Even worse is that the cost is greater because of the government handling fee for taking and disbursing."
Nothing to add to that.
And finally! A dissatisfied reader! "Too much rant, where is the information for the independent investor or is it all just a prelude to another 'Buy My Newsletter Here.'"
Dear Shooters, your Whiskey editors work very hard to bring you our carefully considered macroeconomic analysis for free every day. We have very good actionable ideas and we're sure they're all worth good money. We suppose we could give those away for free, too, but then we'd have absolutely no income...and before too long we'd be cold and dead. Then you wouldn't even get the free stuff.
And finally! A dissatisfied reader! "Too much rant, where is the information for the independent investor or is it all just a prelude to another 'Buy My Newsletter Here.'"
Dear Shooters, your Whiskey editors work very hard to bring you our carefully considered macroeconomic analysis for free every day. We have very good actionable ideas and we're sure they're all worth good money. We suppose we could give those away for free, too, but then we'd have absolutely no income...and before too long we'd be cold and dead. Then you wouldn't even get the free stuff.
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