Tuesday, September 30, 2008

Thanked my Congressman for Voting Against HR3997

I have read HR3997 and I am convinced this is a bad deal. I am also disappointed that so many of our politicians have been so poor in articulating the probem; don't just tell me it's no good (another version of "trust me; I'm more knowedgeable than you", or "it's too complicated and you would never understand it"). Don't pander to me either; simply tell me "why" in plain english!!!

This is the note I emailed and faxed to my congressman:

"Thank you for voting against HR 3997 Emergency Economic Stabilization Act of 2008.

I read the act and I have many questions. One of which is, why are we including the troubled assets of "any" financial institution, and specifically "foreign authorities and central banks"?

I further agree with the numerous statements of Rep. Marcy Kaptur, D. Ohio on the subject of rushing to bail out wall street and ignoring the problems on main street.

I understand the compexity and the issues of bailing out home owners who may have made poor decisions or stupid ones. However, why are we spending $700B (or at the very least guaranteeing that amount)???

There must be a better way that protects american assets, provides the credit that the markets requires and does not hand billions of dollars to the same people who got us into this mess in the first place. If this problem is so complex, that ordinary citizens can't understand it, as has been said, then I must question the wisdom of the people who got us into the mess in the first place.

They obviously didn't understand the compexity of what they were doing, or if they did, they they made rash and equally poor decisions and must not be trusted to implement a solution.

Thank you again!"

Full Text of "HR 3997 Emergency Economic Stabilization Act of 2008"

The following site has the full text of the ""HR 3997 Emergency Economic Stabilization Act of 2008"

http://www.rules.house.gov/110/text/110_hr3997_amnd_samnd.pdf

HR 3997 is a 109 page document. The following is a condensation of the first 32 pages including selected excerpts:

The US Government, that is, the US Taxpayer, will establish a fund called "the TARP" and will purchase "any and all" of the troubled assets from "any" financial institution. This includes "foreign authorities and central banks". The terms and conditions (if any) will be determined by the Secretary of the Treasury.

Everyone, that is, Paulson and the politicians in favor of this legislation, say there is a "good chance" the taxpayer will break even on this. However, this could only be a good deal for the taxpayer if the government were to purchase the troubled assets at market prices. However, our government has already said it WILL NOT be paying market prices. Our government will purchase these troubled assets by paying ABOVE MARKET prices. It appears the purpose of this legislation is to recapitalize the banks without getting much equity in exchange. The cost of this WILL be passed on to the taxpayer!

It gets worse. What "troubled assets" are we talking about? "Any residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages...originated on or before March 14, 2008...[and] any other financial instrument that the Secretary after consultation with the Chairman...of the Federal Reserve System,"

"The Secretary shall take such steps as my be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section [section 101 - purchases of troubled assets]."

There is also a provision for an "insurance program". This is contained in "Sec. 102. Insurance of Troubled Assets". "the Secretary shall establish a program to guarantee troubled assets originated or issued prior to March 14, 2008". "the Secretary may guarantee the timely payment of principal of, and interest on, troubled assets in the amounts not to exceed 100 percent of such payments." "the Secretary shall collect premiums from any financial institutions participating in the program". "Such premiums shall be in the amount that the Secretary determines necessary to meet the purposes of this Act and to provide sufficient reserves ["to meet anticipated claims, based on an actuarial analysis, and to ensure that taxpayers are fully protected."]."

The Secretary will be "providing financial assistance to financial institutions... that have assets less than $1,000,000,000, that were well or adequately capitalized as of June 30, 2008, and that as a result of the devaluation of the preferred government sponsored enterprises stock will drop one or more capital levels..".

The Secretary will be "protecting the retirement security of Americans by purchasing troubled assets held by or on behalf of eligible retirement plan described in clause (iii), (iv), (v) or (vi) of section 402(c)(8)(B) of the Internal Revenue Code of 1986 except...not compensation arrangements subject to section 409A..". "and the utility of purchasing other real estate owned and instruments backed by mortgages on multifamily properties." [Note: IRS section 402(c)(8)(B) defines an "eligible retirement plan" as (i) and individual retirement account as described in Code section 408(a), (ii) an individual retirement annuity as described in Code section 408(b), (iii) a section 401(a) qualified retirement plan, and (iv) and an annuity plan as described in section 403(a)].

"there is established the Financial Stability Oversight Board, which shall be responsible for...reviewing the exercise of authority under..this Act, including.. policies implemented by the Secretary and the Office of Financial Stability...including appointment of financial agents [and]... the asset classes to be purchased.." The FSOB will be "reporting any suspected fraud, misrepresentation, or malfeasance to the Special Inspector General for the Troubled Assets Relief Program.."

"The Financial Stability Oversight Board shall be comprised of..the Chairman of..the Federal Reserve System, the Secretary, the Director of the FHA, the Chairman of the SEC and the Secretary of HUD." "The chairperson shall be elected by the members of the board of the FSOB from among the members other than the Secretary."

The bill includes a list of reporting requirements.

Section 106 of the bill pertains to "Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds". "the Secretary shall have authority to manage troubled assets purchased under this Act, including revenues and portfolio risks therefrom." "the Secretary may, at any time...sell or enter into securities loans, repurchase transactions, or other financial transactions in regard to, any troubled asset purchased under this Act." "Revenues...shall be paid into the general fund of the Treasury for the reduction of public debt."

Steamlined Process. "the Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest."

"Additional Contracting Requirements. In any solicitation or contract....to the maximum extent practicable, the inclusion and utilization of minorities...and women- and minority and women-owned business."

"Eligibility of FDIC". "the Corporation...shall be elibible for...selection of asset managers for residential mortgage loans and residential mortgage-backed securities, and shall be reimbursed by the Secretary for any services provided."

Section "108. Conflicts of Interest." "The Secretary shall issue regulations or guidelines...to address and manage or to prohibit conflicts of interest..."

Section "109. Foreclosure Mitigation Efforts." "the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to tak advantage of the HOPE for Homeowners Program..".

Section "110. Assistance to Homeowners". To the extent that the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] holds, owns or controls mortgages, mortgage backed securities, and other assets secured by residential real estate including multi-family housing...shall implement a plan that seeks to maximize assistance for homeowners and use its authority to encourage the servicers of underlying mortgages, and considering net present value to taxpayer, to take advantage of the HOPE for Homeowners Program...". Modifications... of a residentail mortgage loan... may include... reduction in interest rates, reduction in loan principal and other similar modifications. Tenant protections..on residential rental properties, modifications..shall ensure...the continuation of existing...subisidies; and that modifications take into account the need for operating funds to maintain decent living conditions at the property.

"Actions with respect to servicers. In any case in which [the FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] is not the owner of a residential mortgage loand, but holds an interest in obligations or pools of obligations secured by residential morgage loans, the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] shall encourage implementation by the loan servicers of loan modifications developed in section (b) [Homeowner Assistance by agencies] and... assist in facilitating such modifications...".

Section "111. Executive Compensation and Corporate Governance". "Any financial institution that sell troubled assets to the Secretary under this Act shall be subject to the executive compensation requirements of subsections (b) and (c) and the provisions under the Internal Revenue Code of 1986, as provided under the amendment by section 302, as applicable". " The standards requited under this subsection [criteria] shall include...limits on compensation that exclude incentives for senior executive officers [defined as one of the 5 top highly paid executives of a public company, whose compensation is required to be disclosed pursuant to SEC act of 1934...] of a financial institution to take unnecessary and excessive risks...". "A provision for the recovery by the financial institution of any bonus or incentive compensation paid to a senior exective officer...based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; and ...a prohibition on ...making golden parachute payment..".

Section "112. Coordination with Foreign Authorities and Central Banks." "...to the extent that such foreign authorities or banks hold troubled assets as a result of extending financing to financial institutions that have failed or defaulted on such financing, such troubled assets qualify for purchase...".

Why Americans are Really Mad!

While Americans were enthralled by the campaign rhetoric about "tax cuts" and the drama unfolding in congress to pass a "Bailout" to the bankers and investment bankers out there, congress actually trashed the small guy. It's time for a reality check.

Congress has appeared unwilling to act on the tax bill which includes extending tax breaks to million of Americans. This will allow the Alternative Minimum Tax, or AMT which has been described as a stealth tax, to ensnare about 25 MILLION Americans next year.

This has been reported in the WSJ and elsewhere and is not an accident. "Some fiscally conservative House Democrats have insisted that extensions of expiring tax cuts should be paid for so as not to add to the deficit."

Tax breaks that will be eliminated, therefor INCREASING taxes for the same Americans on "Main Street" that the politicians keep crying crocodile tears over, including the elimination of deductions for state sales taxes, deductions for college tuition, deductions for teachers to help pay for "out-of-pocket" classroom expenses.

Businesses will be dinged by the roll back or elimination of tax cuts for research and development, renewable energy credits and so on. This will, however, raise $Billions in taxes.

How does the congress justify this? To quote House Majority Leader Rep. Steny Hoyer (D., Md.) "We cannot continue simply using the credit card of the nation to continue to buy without paying for what we buy." A group of 49 fiscally conservative Democrats called the "Blue Dogs" have taken a hard stand. Said Rep. Dennis Cardoza, D-Calif. "It's time for us to say 'no more.'" One of the leaders of the group Rep. Mike Ross, D-Ark., was widely quoted as saying that they have "taken the morally and fiscally responsible position."

Meanwhile, congress is to work on legislation to pass $700B or more to bail out Wall Street and the banks. Should we be surprised that millions of Americans have said "enough"?

Monday, September 29, 2008

A Note to the Chairman of the RNC on the Failure of the $700B Bailout Bill

I also sent a letter to the RNC, to spread the bile around a bit:

"Mr. Mike Duncan, RNC Chairman:

As a registered Republican, I must tell you that I am very concerned. How can you expect me or my spouse to vote for the Republican Party? Today, while Rome was Burning, I saw Republicans in the House vote down the $700B “Bailout Bill” and use partisan politics as their excuse. I saw Republican Congressmen justify this with political blather about protecting the future of their children! Another stunning failure for the 110th congress as a “Do Nothing and Say NO to Everything” Congress!

In the last two weeks, I have personally witnessed two plant closings. I am watching people make a run on the bank. I am watching people hunker down and freeze up expecting the end of the world.

I am listening to Senator John McCain promote plans and make speeches. However, it seems that the party he is to lead is incapable of achieving the results necessary.

The road to hell is paved with good intentions, as the saying goes. Senator McCain may be a “maverick” running on a platform as a “reformer” but if he cannot lead or if his party has a totally different agenda, then he will be a lame duck from the get go, as they say.

I will remember this day and if the Republican Party can't get this job done, than we will certainly be voting for someone else, and we’ll vote for a candidate and a majority in congress that can get the job done!"

A Note to John McCain on the Failure of the $700B Bailout Bill

I also skewered the Republicans with signed letters to my congressman and to Senator McCain and the RNC:

"Senator McCain:
How can you expect me or my spouse to vote for you and the Republican Party? Today, while Rome was Burning, I saw Republicans in the House vote down the $700B “Bailout Bill” and use partisan politics as their excuse. I saw Republican Congressmen justify this with political blather about protecting the future of their children! Another stunning failure for the 110th congress as a “Do Nothing and Say NO to Everything” Congress!

In the last two weeks, I have personally witnessed two plant closings. I am watching people make a run on the bank. I am watching people hunker down and freeze up expecting the end of the world.

I am listening to you promote plans and make speeches. As a Senator with decades of experience and a leader in your party, you seem incapable of achieving the results necessary with your party.

The road to hell is paved with good intentions, as the saying goes. You may be a “maverick” running on a platform as a “reformer” but if you cannot lead, then you will be a lame duck from the get go, as they say.

I will remember this day and if you can't get this job done, than we will certainly be voting for someone else!"

A Note to Barack Obama on the Failure of the $700B Bailout Bill

How can you expect me or my spouse, a registered Democrat, to vote for you and the Democratic ticket? Today, House Speaker Pelosi again took the position of “Party First” to prevent action in the House. I am referring to the non-partisan and very rational statement her office issued on September 28 regarding the $700B "bail out” plan, which she then contradicted with the typically partisan remarks made from the floor today and which resulted in the voting down of that bill as the Democrats of the House cowered before the retreating Republicans and decided to save their seats.

She and the Democratic Party have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!

Democrats seem to forget that President Bush is a lame duck and we the electorate are voting for a different Republican or a Democrat this year. Frankly, I consider the congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!

Senator, I realize you may consider the issues in the house as none of your concern as you campaign your way across the USA. However, you would have me believe that you will be the leader of your party and will march us down that road of "change" as you call it. Well, show some leadership now and lead your party to a rapid resolution of this crisis. If you can't get this job done, than we will certainly be voting for someone else!

Congratulations to the DNC!

I sent a signed copy of the following to the Democratic National Committee today:

"How can you expect me or my spouse, a registered Democrat, to vote Democratic? Today, House Speaker Pelosi again took the position of “Party First” to prevent action in the House. I am referring to the non-partisan and very rational statement her office issued on September 28 regarding the $700B "bail out” plan, which she then contradicted with the typically partisan remarks made from the floor today and which resulted in the voting down of that bill as the Democrats of the House cowered before the retreating Republicans and decided to save their seats.

She and the Democratic Party have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!

Democrats seem to forget that President Bush is a lame duck and we the electorate are voting for a different Republican or a Democrat this year. Frankly, I consider the congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!"

Congratulations to House Speaker Pelosi

I sent a signed copy of the the following to House Speaker Nancy Pelosi today:

"Congratulations, House Speaker Pelosi on again allowing your position of “Party First” to prevent action in the House today. I am referring to the non-partisan and very rational statement your office issued on September 28 regarding the $700B ‘bail out” plan, which you contradicted with the typically partisan remarks you made from the floor today and which resulted in the voting down of that bill as your fellow Democrats cowered before the retreating Republicans and decided to save their seats.

You have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!

You and your party seem to forget. President Bush is a lame duck and we the electorate are voting for either a different Republican or a Democrat this year. Frankly, I consider you and your congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!"

"No Banker Left Behind" Bailout Fails

Just got the word, the House failed to pass the $700B bailout bill with a vote of 205-228 against the plan.

It was just a few hours ago that a conciliatory sounding House Speaker Pelosi announced calmly that an agreement had been reached. I read the statement released by the House Speaker and it was very matter of fact with none of the political bile that Pelosi likes to interject at any opportunity.

However, Pelosi just couldn't keep her mouth shut and so she reverted to her normal "Party First" position and decided to give another one of her speeches in which she claimed credit for rescuing the economy for the Democrats and blasted Republicans for their resistance. So what was the result? She succeeded in driving away Republican votes. Other Democrats in the House, apparently fearful of looking timid and backing the bankers, and therefore fearful for their seats, bailed.

Here is what Pelosi said from the floor. You decide who screwed this one up:

"Today, we will act to avert this crisis, but informed by our experience of the past eight years with the failed economic leadership that has left us left capable of meeting the challenges of the future. We choose a different path. In the new year, with a new Congress and a new president, we will break free with a failed past and take America in a New Direction to a better future."

Note the marked difference of the above from the statement she issued on Sunday:

"Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers."

I think we ought to give Speaker Pelosi a "Good Job" button for keeping party first and maintaining the reputation of the "Do Nothing and Say NO to Everything" 101st Congress!

The Bushwhacking that has been going on by this "Do Nothing, Say "No" to Everything" Congress finally came home to roost. They thought they were above the fray. Not so and the electorate has spoken: "We don't trust any of you" and for good reason. So when the chips were down, the Democrats ran. And the electorate won!

The game of "party first" has finally turned the electorate on the self styled aristocrats and the rich bankers. Two years of party bickering and jockeying to take over the white house has come to roost. I don't think we'll be listening to debates about Iraq any longer; that one has been milked for all it was worth and now the politicians are forced to face real issues.

I suspect the electorate isn't crazy and we all want this resolved in a manner in which the economy can go forward. I certainly don't trust these politicians and the line has to be drawn somewhere. Enough is enough!

Good, may the games begin!

Saturday, September 20, 2008

First Post September 20, 2008

I decided that a separate blog was warranted for my observations about politics and our culture.
I love this country. I think it is and can be "the land of opportunity". I have worked with Europeans, middle easterners, Eurasians, South Americans and others. They don't necessarily agree with our politics or our culture, but they do generally admire the opportunity that is available in this country.

That opportunity is not "free" and it takes application, hard work and "sweat equity", good luck and the will of God to succeed. Success is, however, a real possibility. And yes, it does also require education. Some careers require more than others and in this increasingly competitive world, some college is probably mandatory. But there are exceptions to the rule, and in some careers, such as "entertainment" too much education could be an impediment.

What disturbs me about our country and our culture is the social and economic engineering that our politicians are willing to promote and advance, with no certainty of what the exact outcome will be. Some changes take decades for the consequences to fully appear and many are not trivial. It is unfortunate that our politicians are seldom willing, able or capable of managing these changes for more than an election interval.

A case in point, is the wholesale selling of the "service economy" to the American public in the 1990's. It sounded good, and if it didn't politicians worked overtime to make it sound good. Even "Hizzonor" Mayor Daley of Chicago went on the public record and said "we don't need manufacturing any more". Frankly, at the time this frightened me. I had a lot of questions. Such as: if manufacturing is passe' then what jobs will replace them? Are our citizens fully prepared for this "new economy" and if not, then how do we get from here to there? Are our schools teaching curriculum's that will permit American workers to learn the necessary skills and prepare our children for this brave new world? If not, have we designed and implemented and budgeted the necessary education programs to get us there? What about those who are unable, unwilling or incapable of adapting to this change? What jobs will we prepare them for and how will we get these people to a place where they can be a viable part of society?

I also was very skeptical as our political leaders have done a poor job to date of managing change. So here they were, promoting it!

Now, I had been very skeptical of President Clinton. In terms of the domestic economy, he didn't do all that poorly. Probably would be rated a "C" in my book. On the other hand, he had a penchant for wetting his finger and raising it into the air so he could determine which way the political wind was blowing, and then moving in that direction. He also picked his spouse to head the most significant change agenda he had campaigned on, and that was "health care reform". She bombed and while I was disappointed, I wasn't too surprised by this. Ms. Clinton after all was a relatively inexperienced newcomer. That was my problem with President Clinton. He should have picked the absolute best people to do this job and he didn't. So here we are in 2008, a few $trillion under the bridge and health care in this country is a joke. Far too expensive and far too ineffective. And the politicians have successfully changed this into an agenda about health insurance. So we can all get the same mediocre care, but someone else should pay!

In defense of President Clinton, as a former governor of a state with a relatively small economy, I don't think we should be surprised that he was constantly checking the political wind. That was possibly a shrewd mechanism acquired in his success as the governor of Arkansas. But that approach is totally inadequate when leading a diverse and fractious country like ours.

President Bush, another product of state leadership, has demonstrated his faults time and time again. A penchant for spending money, poor judgement and leadership in the war in Iraq. He and his administration have been completely absorbed in the "war on terror" and then in Iraq. When he was elected, I told some associates that he was a "spend and tax" Republican, as in, he would spend the money and his successors would raise the taxes necessary to pay the bill. He has proved me correct in this.

As for the "service economy" people today are very unhappy with the loss of manufacturing jobs. Very few sectors of our economy are growing. Well, when we went down this road of "service economy" what did we expect? That we would all become "web site" designers? In the 1990's there were naysayers who said we would all wind up working in a fast food restaurant. That was a bit melodramatic. However, we may still get there! So what economic sectors have prospered in the last 20 years? Apparently finance and banking, and health care. For the most part, that is it!

Energy has become a problem. This too, escaped our politicians. No nuclear plants, no wind generators off of the shores of the political haunts of the north east, no improvements to transmission and distribution infrastructure, no national energy policy of any kind, except "NO" to everything! But a few doomsday predictors have done well and have prospered. Former Vice President Gore is a notable example.

Here we are in the soup of our own making. Another 20 years squandered. GM is asking for help in developing high energy batteries for automobiles so we can drive electric cars. However, the politicians argue about the issues of interfering in the "market driven economy" or "free markets" and we are told there is no money available for this type of endeavor. Nor is there an electrical distribution or generation system capable of supporting such a transformation. The government argues about "drilling" for oil. I understand the multi billion dollar pipe line carrying oil southward through Alaska won't have enough oil to pump in a few years to even fill it! We send hundreds of billions of dollars to countries for oil and complain about ever "mounting deficits"! But we have no political will to solve these problems. However, at present we can bail out banks, brokerages engaged in all kinds of speculative activities. And I mean bail out to the tune of hundreds of billions of dollars, perhaps a trillion dollars or more. The government is also gearing up to bail out homeowners who got loans they could not afford for homes they could not afford!

It's OK to interfere with the economy to the tune of hundreds of billions of dollars, when it is for the powerful banking and finance lobby in the east. But GM and the electric car is a different matter.

Politicians are debating this and talking about the unfairness of bailing out "Wall Street"and ignoring "Main Street". The conversation they have is that some of these entities are "too big" to fail. Apparently, sub prime and other prime mortgage holders and "homeowners" who made really poor choices are too small to fail. So it will be up to me and the other hard working, saving and not spending every darn nickel, never mortgage our future forever members of the middle class, to take on the tax burden of paying for this.

Meanwhile, the politicians say "don't you worry, we won't raise your taxes". Who are they talking to? All I have to do is check the http://www.opensecrets.org/ website and I can see who the McCain and Obama donors are. It's obvious who is buying access to the candidates and a lot of them are in finance, etc. Besides, history in this country over the past 20 years shows that the "rich" are definitely getting richer.

So should I be concerned about the direction of this country under our political leaders? I think so and I most certainly am! I am also concerned that with these ill conceived government plans, we will lose the opportunity so many generations of Americans worked, fought and died for to hand to us, the current generations. So that is what this blog will be about.