Apology Not Accepted

I was struck yesterday by the appearance of Akio Toyoda at a meeting the House Committee on Oversight and Government Reform. It was not that he offered the expected apology over the recent safety issues that his company's products have experienced, which genuine or not was simply good corporate theater. Instead, I was struck by the fact that this hearing was being held in a Congressional committee purportedly dedicated to government oversight and reform, and the sheer gall of members of Congress for thinking that they had the stature to hold such hearings. 


Was it not the failure of Congressional oversight of Fannie Mae and Freddie Mac that contributed greatly to the bursting housing bubble? Was it not the failure of Congressional oversight in the banking industry that allowed this bubble to expand into a banking crisis requiring a massive bailout? Was it not a failure of Congressional reform and oversight that allowed the Federal Reserve to live in an unnatural relationship with major banks and brokerage houses of this country, largely causing the escalation of the current financial crisis? Was it not a failure of Congressional oversight that has allowed the Social Security and Medicare to become bankrupt in all but name? Was it not a failure of Congressional oversight and reform that allows the deficit to spiral out of control, forcing Congress to recently raise the debt ceiling yet again? (An effort that they admit will be but a stop gap measure ...) 


Where do these politicians get the brass ones to call anyone in front of the cameras to perform in a rather poorly acted version of the Spanish Inquisition? How can they who have failed in their own tasks so grandly and consistently ask anyone to submit to questioning that is little more than a public pillory? How can members of this group that has so greatly placed the safety of every man, woman, and child in this country at risk attempt to show righteous indignation over the apparent lapse of one company to serve the needs of its customers? 


There is a difference between Toyota and Congress in such lapses however. With Toyota, they are not only willing to admit past their mistakes, but their record of pride and dedication can lead to no other conclusion than that they will resolve the issues recently come to light to everyone's satisfaction. 


With Congress however, there is no admission of guilt for failure forthcoming, nor any real possibility that they will do anything substantive to address the issues (mostly of their own creation) that lie before them. I am therefore more than willing to accept the apology that Mr. Toyoda has generously offered. As for Congress, even if they ever do finally offer an apology (Olympic hockey finals being played in Hell has a better chance), it will not be accepted.

The Safety Net

My ideological counterpart at the Toledo Free Press Don Burnard, wrote an interesting piece for this weekend's edition of the the paper (I was absent this weekend, but will be returning soon). I say interesting because there are parts of it with which I am in total agreement. 


That is not to say that we don't disagree on a few major points however. Mr. Burnard writes.: "One of the biggest differences between this recession and the Great Depression is that the Depression was a combination of government spending, regulation and the advent of World War II brought us out of it. Today, wartime spending is adding to the problem rather than helping." 


I would agree that our current level of wartime spending is not helping an already horrible situation; though I am sure that as is typical, military contracts are stimulating some parts of the economy. I would disagree however, with the premise that government spending and regulation brought us out of the Great Depression, as many economists now agree that FDR's policies in fact extended a crisis that would have corrected itself more quickly without the government's intervention. 


I find instead that one of the biggest differences between this recession and the Great Depression is that in 1929, the country was not already burdened with the crushing debt of the very "safety net" that he looks to for salvation. There was no Welfare, no food stamps, no Medicare and Medicaid, and no Social Security system to burden the federal debt at a far greater level than the "two wars" that we are fighting. 


 In fact, I would point out that according to the Obama Administration, we are not actually fighting wars, but Overseas Contingency Operations; but that's beside the point. I agree with Mr. Burnard that we have little chance of "emerging victorious" from either of these conflicts. No amount of time or money is going to change the culture of Pakistan, Afghanistan, Iraq, Iran, or most parts of the Middle East. There have been tribal wars going on in each of areas for thousands of years; and it is sheer hubris to believe that we can force an American mindset or peace on these areas by force of will. 


I believe in fact that the only responsibility that we have in any of these conflicts is that in Iraq, since it was only through our support and funding that Saddam Hussein was able to take power and make a mess of that country in the first place. I likewise disagree with the repetitive cheer voiced in the column that all of this is the fault of the Bush Administration. I believe that this ridiculous policy notion can trace its history back through many years and many presidents on both sides of the aisle, with such examples of Korea, Viet Nam, Panama, Grenada, and Nicaragua on the list of attempts at nation building or enforcing American values on a foreign population. 


I agree wholeheartedly that both parties have been the willing accomplices of special interests in the banking industry, among others. The efforts to subvert capitalism in recent years has been a truly bi-partisan effort; with little change between a Republican or Democratically controlled Congress, and with both Bush and Obama attempting to orchestrate the flawed process. Bush may need to take credit for starting this snowball rolling, but the Obama Administration must likewise take credit for its increased size and speed. 


The solution proposed is the worthy call to build a solid middle class (which cannot be done by the government by the way); but quickly becomes tainted, as its only purpose apparently would be to provide a "strong tax base" (code for increasing taxes) to fund the growth of this safety net. Forgive me if I cringe while reading those words. I have a copy of the Declaration of Independence and Constitution before me, and in no place is such an obligation of the citizenry therein established. The government in this country was created to serve the people, not act in loco parentis. 


I do not believe, as potentially accused, that Mr. Burnard is a socialist, a communist, or a co-conspirator in a global plot to take over the economy. (I chose not to wear my tin foil hat while writing this, though many say I look damn good in it.) I do believe however, that he is misguided in his proposed solution through drinking a bit too much of the progressive Kool-Aid that so many now seem to use as their primary form of sustenance. I believe that many of the problems that he cries out against, and that I agree need solutions, have been caused by the continued and increased interference of government in business. 


I would agree that banking bailouts are wrong and should never have been done, but so is the creation of a "salary czar" to insure some equitable distribution of monies between workers and management. I believe that bailing out corporations like GM and Chrysler is wrong, but so is taking the recompense due to legitimate bond holders and giving it to the UAW. I especially believe that adding to the already poisonous debt load that this country is burdened with in the name of expanding the safety net that Mr. Burnard sees as its salvation is without a doubt the wrong direction for this country.

Fractured Fairy Tale: The Watchdog

Yes boys and girls, I know that it's been a while, but fear not, for it's time for another Fractured Fairy Tale. Time once again for one of those cautionary tales of life and politics in this crazy, mixed up world around us. Much like the first fairy tale that I wrote for this blog, this one is an original, if cautionary tale of "what if" that may very well soon become a "what now". I hope you enjoy it. 


Once upon a time there lived a man named John Q. Public. There was nothing at all remarkable about Mr. Public. John (and I'm sure he'd let us call him that) did have one thing that set him apart however, it was his watchdog. 


 Now this dog was not really owned by John in the strictest sense of the word, as he had never actually purchased it. The truth of the matter was that he had simply started feeding this dog upon discovering it, eventually naming the animal Newspaper. 


Newspaper, liking the attention that he got from John (and more especially the feeding), adopted John Q Public as its master, and was soon performing the duties of watchdog where John was concerned. Now Newspaper was never the most attractive of dogs, though occasionally he cleaned up rather well. Neither was he particularly well-behaved, sometimes serving his own or the needs of others as well as those of his master. 


Newspaper was in fact an often ill-tempered mutt, treating John with measured disdain (much like a cat, come to think of it). In fact if anything, Newspaper behaved more like a junk yard dog than anything else; good enough at being a watchdog, but just as likely to bite the hand that fed it as it was to snap at that of strangers and villains. 


Time passed, and Newspaper had been around for some time. Some had begun to say that he was getting a bit long in the tooth (if you know what I mean), and no longer able to hold up his end of the bargain. John of course, was no youngster either, though he often acted like one. Quite frankly, he was reaching that age where one begins to think about turning things over to the next generation, and if the truth were known they didn't much care for his watchdog. 


Much like the wayward child that he had become, John had begun to pay less attention to the care and feeding of his long-time adopted pet. This treatment did nothing good for the health and well being of his watchdog, and as a consequence it began to look even thinner and shabbier than usual. 


As time passed, an almost starving Newspaper began to become a bit resentful of this treatment. It howled at its sorry lot in life and tended to snap at anyone who came near it. While never completely leaving off at its watchdog post, even Newspaper had to admit that it wasn't doing the job that it once did. 


Now one day, one of the worst of the miscreants that this watchdog had kept at bay crept forward once again to work his mischief. This ill-mannered neighborhood bully had been hanging around for years, often trying to do ill to Mr Public; but with Newspaper on the job, he was never really able to succeed. 


This nefarious individual (let's call him Government) was well known as one of the worst of criminals. A strong-armed thief who was often known to take money at the point of a gun, a loan shark who lent money that always had strings attached, and a bully who loved to throw his weight around in the neighborhood; Government was most well known for his operation of a massive protection racket and for running the biggest Ponzi scheme that had ever been seen. In other words, Government was a pretty nasty guy.


With the lack of attention from his adopted owner and a hunger that was soon bordering on starvation, Newspaper finally started sniffing around at the treats that had been dangled for years in the outstretched hand of Government. Knowing that continued refusal of these morsels might portend the end of its days (while perhaps scarcely realizing that accepting them could do likewise), this watchdog began to whimper over the potential of such offered nourishment. 


Long at the service of its adoptive master John Q Public, Newspaper didn't know what else to do if he was to survive to continue in his duties. While still somewhat loyal to his master's needs, Newspaper was equally interested in his own survival. And so there we see them, much like the scene of Kevin Costner extending a bit of jerky to the wolf 'Two Socks' in "Dancing With Wolves". Government now carefully extends the hand of potential survival to Newspaper, and this once faithful watchdog creeps ever closer to accepting it.

THE END

I know, I know, this is one hell of a way to end a Fairy Tale. The truth of the matter is we don't know the end of this story yet. Quite frankly, the fate of Newspaper, Government, and John Q Public are hanging in the balance right now. If this self-appointed watchdog of our freedoms begins to accept anything from government, there is little doubt that it will be unable to properly perform this long-held function in the future. If it doesn't however, there is real doubt that this watchdog may be around much longer. For good or ill, the end of this tale has yet to be written. For newspapers, for government, but especially for the Public; these are perilous times indeed!

The Best Talent

Some concern is being expressed in the last few days as the government "Pay Czar" Kenneth Feinberg reaches out for some of the lavish pay enjoyed by senior managers of businesses that have received a government bailout. 

Make no mistake about this, the concept that the United States even has a Pay Czar is abhorrent to me. The idea that our government should in any way decide what pay a job is worth in a free market economy (which we haven't really had in years I suppose) is frightening. The fact that a legal contract between an employer and an employee no longer means anything; and that a bureaucrat that was neither elected to office by the voters, nor confirmed by the Senate can rule on legal issues which Constitutionally are the province of the courts should be of great concern to all of us. 

That being said, I am amused by the released comments by these businesses that controlling the pay of executives may prevent the best and brightest from seeking jobs with these companies, and that such interference by the government may prevent them from recruiting necessary talent. My question is this: 
 

If these companies were getting the best and brightest in management before the Pay Czar jumped in to interfere with the salary process, why did they need the government bailout in the first place?

 

Katrina Victims

It appears that some of the politicians and residents are less than happy with the brief visit that the president made today to "The Big Easy". They feel that still not enough time, enough effort, and of course enough money has come their way in light of the disaster that they experienced when the hurricane struck in 2005. While I am sympathetic to their plight, as my daughter and son-in-law were residents of the city when Katrina struck and were forced to leave a city that they dearly loved, I nevertheless have three words for you 'victims'. 

Cedar Rapids, Iowa
 

The Town Criers

Getting the news to the public has always been a rather perilous profession. Called heralds or town criers, these couriers used to travel from village to village providing information on military victories. 

All of course, know of the Battle of Marathon, where a Greek runner crossed some 26 miles to bring back the news of victory over the Persians to the populace ... and died from the effort of doing so. The subsequent Olympic Games, where the races commemorating this achievement were held, were in fact opened by a contest of those heralds or town criers. 

The tradition of heralds continued throughout history, evolving into using town criers in each city to announce laws, warn of impending danger, and pass on such news as was worthy. Since writing was something mostly restricted to the clergy and most of the populace was illiterate anyway, such a method seemed to be the most expedient way of circulating information to growing urban populations. The profession still had its dangers however, as the expression which grew up at the time, "don't shoot the messenger" implies. 

With the evolution in technology of the printing press and the extension of literacy to greater numbers of citizens, this function over time began to fall more and more to a newsletter or "newspaper". The herald no longer ran from city to city and the town crier no longer stood at the center of town, providing all of the news that was fit to speak. 

For the many years since, it was the responsibility of the daily newspaper to serve as that herald, and they have had success in doing so. But while they often made claims to some loftier perch than deserved as a consequence of their responsibilities, failures were often as spectacular as successes. While serving as the voice of the people, they were just as often the tool of unscrupulous politicians. While attempting to serve the needs of the common man, they were equally guilty of the vices of well-to-do ownership. While often the lone voice crying out against injustice, they were likewise the mouthpiece of more nefarious purposes. 

What has become of this noble purpose today? Well certainly some of those original names survive. The Herald, The Reporter, and The Courier among others still survive as the names of many daily newspapers around the country. Information on battles, on laws, and on local news and opinion are still a regular part of what they print every day. But like what once came before them, daily newspapers now face potential extinction in the evolution of information disbursement technology. 

Newspapers appear unwilling face such demise quietly however, and some now cry out to have the government subsidize what may be in fact an outmoded system. Undoubtedly like the heralds at the time of their replacement, they beg to be kept on to serve a need that may no longer exist. No longer able to reap the vast profits that for so many years made them such a lucrative business, they now claim to be a necessity of freedom as reason for continued existence and therefore financial support . 

I mourn this potential passing of my beloved daily printed printed page (a passing that could have serious implications for me personally), but find this no reason to provide them with taxpayer support. I am concerned about how this time of change will affect protection from the infringement of government, but find this insufficient reason to subsidize them. 

I feel sure that just as the first newspapers were sold on the street, their predecessors railed out at the injustice of it all and warned the populace of the impending danger if they were to be no more. Bellowing in stentorian tones (a term which comes from a Greek herald from Trojan War days who was said to have a voice as loud as 50 men), I have little doubt that they cast a pall of doom on their positional demise. Using the voices which had served their profession so well over the years, they now no doubt whined and cajoled for solace and support. 

And so with the clamor of the daily newspaper today for such support, we see a return to its true roots. As they join the line of businesses tightly grasping their "Oliver Twist" begging bowls in the hope of something more, they truly become what once they were ... a Town Crier. 

Founding Principles Under Threat

Being a Constitutional Conservative, I am always looking for signs of a return to the principles of the Founding Fathers. While I recognize that they were a bunch of "old white guys" who were for the most part flawed personally, and holding divergent opinions on a number of fundamental principles; they were never the less able to come together at a critical time in this country's history. They were able to create a cohesive document of Founding principles, fight a successful war against the greatest empire in the world at the time, and create a form of government that had never been seen before in the history of Man. 

Perhaps this last was the most impressive, not because that form of government has survived for over two hundred years, when few Monarchies and empires of the past have surpassed that number. No, the more impressive fact is that after passing the Articles of Confederation, they were both smart and humble enough to recognize that their first attempt at constructing a form of government was doomed to eventual failure and were able to restructure those original principles into a much more cohesive and successful document to both define and limit their form of governing, the Constitution. 

 Not since the battles of Lexington and Concord have those principles been under such assault. Not since the heady days of Teddy Roosevelt and Woodrow Wilson, or of the overbearing nature of the FDR dynasty (Presidency just isn't a strong enough term for that misguided period of American history), has that form of government been so close to failing in its support of those founding principles. 

The national government in the last year (and I include Bush II in this), has or is attempting to:

• Turn over massive government funding and influence to a combined community organizing group and union, ACORN / SEIU
• Nationalize the better part of the US auto industry
• All but nationalized mortgage, mortgage insurance, and student loan industries
• Is attempting to control take control of the banking industry
• Is attempting to set salary levels at private corporations
• Is attempting to take control of health care insurance and health care dispersal
• Is considering subsidization of the newspaper industry, something which must inevitably signal the death of the free press in this country

And when, in the spirit of those Founding Fathers, citizens take up the right to speak out against these usurpations, what is the response of that government:

• Demonize those assembling in Tea Parties as disaffected, racist, or corporate puppets

• Refuse to investigate the ACORN/SEIU organization apparently guilty of a variety of offenses and seek instead to investigate two private individuals uncovered the nefarious deeds of this group (though they likewise sought to remove funding from this group)

• Attack companies such as Humana Healthcare, whose very existence may be threatened by government pursuits, with investigation, fines, and sanctions if they do not stop disseminating the facts regarding the government's attempts.
• Saturate the airwaves with non-stop government directed speeches in justification of such abuses

While I am encouraged by the grassroots efforts attempting to assert those Founding principles and do battle with this overwhelming government encroachment, I remain concerned with the increasing efforts of that government to exceed the limits placed on it by the Constitution. I am likewise alarmed by the apparent lack of regard by that government to the limits so placed upon it. 

Our founding principles are under the largest threat that they have been since being codified in the Declaration of Independence. Whether they, and the society that we are a part of survives may be up to the actions of individual citizens in opposition to that attack. 

Judge Ye Not Chrysler, Lest GM Also Be Judged

Justice Judith Bader Ginsburg issued a writ today, stalling the sale of major assets by Chrysler to Fiat. This writ was issued based on a case brought before The Court by a group of pension and construction funds in Indiana who stand to lose millions of dollars from lost investment in Chrysler secured bonds (or loans).  
Normally such secured credit holders are the first to be paid off in bankruptcy proceedings, but in the case of Chrysler, these bond holders were in fact placed at the end of the line (or not in the line at all). The interesting part about the action brought on behalf of these pensions funds is the two-prong attack:  

1. Why were normal bankruptcy procedures bypassed in this situation by the lower courts, and was it do due to improper pressure brought to bear by the government?
2. The funds used by the federal government to prop up Chrysler prior to bankruptcy and the reason that the federal government has had so much to say about how reorganization would work were taken from the TARP funds.  

For those of you who can't remember all the way back to the last months of the Bush Administration, TARP funds were originally designed to buy toxic assets from banks (hence the name Toxic Asset Relief Program). While actually never used to buy any toxic assets, the funds were generally understood to be used for the bailout of the banking industry. Congress, recognized that TARP funds might not be able to be used for bailing out automobile makers however when that situation appear imminent, and tried to get a separate bailout package passed for that purpose. They were unsuccessful in doing so. 

Ignoring the legislative defeat however, the Administration at the time simply decided to take the money from TARP anyway. Since the fund had no real Congressional oversight in place, they were able to apply it where and how they saw fit. If the Supreme Court now rules that TARP funds were used improperly for one bailout, then obviously they would have been used improperly for both. 

If this turns out to be the case, how will both companies give back money that has already been spent to a government that doesn't want it? An equally interesting part of this is case is not just what happens to these bond holder pension funds and to Chrysler as a result, but what impact this could have on the bankruptcy re-emergence of General Motors, whose bond holders were likewise given short shift when asset reallocation was performed and approved. Not only could this case re-establish the rule of law where these auto bankruptcies are concerned, it could also prove a serious roadblock to the Obama Administration's continued attempts to take oversight control of operation and reorganization of private sector companies. (Can you say medical insurance?)  

We will all be waiting and watching with great interest ...  

Update:

The Court turned down hearing the petition and more's the pity. There seems to be no brakes on this runaway train of government. 

Buy American Automobiles: An Idle Question or Two

There has been a lot of discussion in recent weeks over the automobile industry in the United States (some of it in this blog today). In spite of the fact that almost all of the manufacturers of automobile in the United States have manufacturing relationships with each other for various parts or parts of their product line, we never the less insist upon defining them as either foreign or domestic.  

This definition gets plenty of discussion as well. Is a car foreign or domestic based on where the preponderance of its parts are manufactured, where it is assembled, or where the company in questioned is Incorporated? There are many good arguments for all of these points, but all discussion seems to end when we talk about the country of incorporation comes up. 

We are told that we should buy from the Big Three not because the parts for these vehicles are manufactured in this country (which in many cases they are not), not because they are assembled in this country (which again, in many cases they are not), but because these corporations return and reinvest their profits in the US economy. Forgive me for asking the obvious, but:  

What profits?
 The Big three have routinely proved themselves unable to make a profit, in fact losing money. So what profits are we actually worried about them reinvesting. In many cases quite frankly, the only profit that the Big Three are making is in their overseas sales. Which leads to my next question.

 If we restrict ourselves to the purchase of "American Automobiles", what do we do if the rest of the world decides to do the same kind of restrictive auto purchasing? Where would the Big Three be if their only market was in the United States?  

Maybe I'm being a bit simplistic here, but this problem will not be solved by trade barriers, or worse trade wars, over the manufacturing of automobiles. I recommend a bit of reading on a situation that eerily relates to the current auto crisis, "Well Made In America" by Peter C. Reid. It is the story of the fall, and rise of Harley Davidson in the motorcycle market. It's a real eye opener.

 

GM: Government Motors

Well, General Motors has unveiled its plan for how to move forward in the business of automobile manufacturing; and it is unique in the annals of American capitalism. As a part of this reorganization, GM will drop its Pontiac brand, eliminate an additional 21,000 jobs, and do likewise with some 2,600 dealers. It announced this plan under a government deadline of reorganization that it hopes will get it another $11.6 billion in government aid, on top of the $15.4 billion in that has already been invested by our leaders in Congress and the White House. GM likewise has a deadline of just one month to get both bondholders (who are far less than happy) and the government to sign off on the final details of this plan. It must also get the UAW to agree some kind of settlement on over $20 billion in cash obligations that GM has with the healthcare plan of its union retirees. If it fails to meet this deadline with any of the three groups in question, it faces bankruptcy. Should this perfect storm of economic events manage to occur however, the GM of the future would look something like this:

• The government would end up with at least 50% of the common stock of the company, making them the majority stockholder.
• The UAW would end up with as much as 39% of the common stock.
• Bondholders would end up with the remaining 10%+ of the stock in exchange for $27 billion of GM's current debt.
• Current shareholders of GM stock would effectively have their investment wiped out.

For those of you have somehow managed to miss the signs (Signs, more like billboards!) of a fundamental shift in capitalism in the US (and the world), this would be it. This is no longer a loan or a temporary fix, this is a company voluntarily and permanently turning over voting control of its stock to the federal government. While the taxpayer will foot the bill for this, Congress, the White House and a small group of Federal bureaucrats will determine the long term future of what was once the world's largest company. What's more, they will do this in partnership with one of the nations largest labor unions. I cannot imagine a more ill-suited group to run a business of any kind, let alone one of such size and importance.
And ask yourself this:

• If GM is owned in the majority by the government, will it change it's name to "Government Motors"?
• What level of debt, in a government which seems to treat debt as its closest ally, will this new GM be allowed to roll up?
• If this plan, boldly put forward by current management, fails to return GM to profitability, what amount of red ink in this new company will determine when it fails?
• What unsupportable contracts with its partners in the UAW will be allowed to continue regardless of a lack of profitability because the UAW controls so much of the stock and the government has the taxpayers bank account to fill any gaps?
• What new levels of expensive federal bureaucracy will be required to direct, manage, and regulate this new Government Motors?
• What impact on competition (from the standpoint of both US and foreign automakers) will a government owned auto manufacturer have?

And most importantly,

Would you buy a car from a company where the design, manufacture, sale, and long-term service of your vehicle would be ultimately performed by the federal government?

I have to tell you that I will be purchasing a new car later in the year, and that this situation has certainly given me pause over the potential selection that I will make...

Banking Confusion

I have been trying to follow the government handling of the banking bailouts lately, but I must tell you that I am beginning to find the whole thing rather confusing. 

Let me see if I have this right. It was the injudicious use and improper lending of money that got the banks in trouble in the first place. Much of this improper lending was done under threat from the Justice Department of the Clinton Administration in the first place (but I only throw that out as a sidelight). 

Having overextended themselves, these banks then found themselves in a rather precarious capital position when the those people to whom they lent money couldn't pay it back. The stock market responding in turn, then found itself in an equally precarious position, which made the bank's position even worse. The government agreed to loan these banks government (taxpayer) dollars in order to remain solvent, in exchange for “preferred stock”, a position which would place the government (taxpayers) first in line for receiving any dividends from the bank’s return to profitability. The government (taxpayers) would not however, receive the same voting rights as those owning common stock, and would therefore have little to say in how the bank ran from day to day. Being a government however (especially a progressive one), ours was unwilling to be in a position where they could not control how these businesses were run and reneged on their promise to not interfere. 

The banks, realizing that they were in yet another bad deal, this time at the hands of the government (remember the cause now), decided that in the choice between the rock and the hard place, they preferred the rock. Many therefore announced that they would like to give the government (taxpayers) their money back. 

Now you would think that the government would welcome a repayment of monies that were at serious risk, would take their money (with interest), and would go back to the business of government (which is normally bad enough). Instead, the government refused repayment (of taxpayer money remember), and announced to the banks that they would like to exchange the preferred stock for common stock. This meant that we would be far less likely to get this money paid back (HEY!), but that the government would now have a voting interest in how the banks were run from day to day. 

So starting out with an issue caused by government interference with the operation of banks on a day to day basis, they attempt to fix the problem by throwing government (taxpayer) money at it. When this solution proves even more egregious than the original problem to these businesses, those businesses decided to step back from this fix. The government, which remember again caused the problem in the first place, rejects getting its (our) money back, and in turn chooses more of the same and perhaps even greater control than that which caused the problem in the first place. The sum total of this assistance program in fact, is that in the name of capitalism, our government would like to commit the socialist act of nationalizing the banking industry. See my confusion?

 

Circular Lending & The Economy

Imagine that you are a family facing tough times (not much of a stretch these days, I know). You have some assets, but lately they seem to be equaled or exceeded by the debt load that you carry. Revenue continues to come in, but it seems that it does so at a decreasing rate. You make your payments (at least the minimum); but with a tough economy, you are finding it tough to balance the budget. As a consequence of the increasing burden on your budget, brought on the the continuing struggle of the economy, you find yourself sinking slowly and inexorably into increasing debt. 

Finally, reaching a point where you think that there is nothing you can do and pushed to your last alternative, you proceed to ...

... sign two new credit card applications and proceed to max the suckers out in an attempt to fix your budget problems.

Sounds pretty ridiculous, doesn't it? There is no way in hell that you can hope to balance household budget by putting yourself into even more debt. Increases in the total interest that you will be obligated to pay on the higher balance, higher minimum payments due because of the increase in debt load that you just assumed, and probably higher interest rates for the money that you borrowed (because your credit can't be that good by now) mean that not only will you not recover from the original problem; but that you will now have created a situation that you have no hope of recovering from. 

So maybe you can tell me why that is exactly what our government just proceeded to do. After complaining for the last eight years the impending doom of government deficit was looming like a Sword of Damocles above the country, the only solution that they can discover is to increase the number of weapons hanging above us. Do the expressions "one-armed paper hanger" or "one-legged man in an ass kicking contest" mean anything to you? Now I am not a leading national economist, but I do have some experience with crushing debt. 

I likewise have some experience with the concept of how to balance a checkbook. Perhaps such talent is exactly what's needed in Congress today. Perhaps the experience of spending other people's money in Congress, of passing legislation on spending that have no real impact over those very members of our legislature, of having the ability to print more money when they run out has simply gone to their head (turning it to the consistency of tapioca pudding). 

Hey, maybe the answer is that I should put myself in line for the job of Treasury Secretary. Maybe in fact, I could just move in and take over the job. After all, I'm sure that to the unwashed public (you know, us) all Timothy's look alike anyway. ... Nah

 

Blast From The Past

I was all set to write what I believed would be a thoughtful, interesting post combining a couple of thoughts that had been occurring to me in recent days. 

The first was something that I have touched on in the past, the concept that society today is too caught up in instant gratification. From microwave food to downloadable movies, we want what we want when we want it, and we can become downright surly when something gets in the way or interferes with achieving any part of the reward that we desire. 

The second was about increasing influence of the government “nanny state” in our lives. Between the increased societal influence of political correctness, the increasingly litigious society that we have become (suing anyone and everyone over any offense, real or imagined), and the increasing role of mindless government bureaucracy in our lives (deciding everything for us from what kind of power plants we can and will have to what kind of bug spray chemicals we can use … remind me to tell you about DDT someday). 

The third was about the dramatic change in our lives that is about to come about as a part of the passage and signing of the Economic Stimulus Package (I refuse to use the made up name from Congress). Even the small part of what I see on the horizon scares the living crap out of me, and I believe that there is far more out there that I do not yet understand. Just when I was poised to produce this masterpiece of logic, reason, and conservative argument, I came across something from my continuing process of adult education. It describes far better than I could, the storm approaching. I share it with you out of a sense of awe and sadness:  

“The power is absolute, thoughtful of detail, orderly, provident, and gentle. It would resemble parental authority if, father like, it tried to prepare its charges for a man’s life, but on the contrary, it only tries to keep them in perpetual childhood. It likes to see the citizens enjoy themselves, provided that they think of nothing but enjoyment. It gladly works for their happiness but wants to be the sole agent and judge of it. It provides for their security, foresees and supplies their necessities, facilitates their pleasures, manages their principle concerns, directs their industry, makes rules for their testaments, and divides their inheritances. Why should it not entirely relieve them from the trouble of thinking and all the cares of living.”
 - Alexis de Tocqueville, from his ground-breaking work “Democracy in Americas”, first printed in 1835  

It’s not that I mind being trumped you understand, but to be put in my place the French no less, and by a man who, while undoubtedly a genius, died almost 100 years before I was born is simply mind-numbing. To have to accept the fact that he saw where this country could be going over 170 years ago when oh so few of us see it happening even now is a tragedy that I am having trouble comprehending.

 

Quote of the Day

The passage of the Economic Stimulus Package by our Legislative Branch on Friday has had me thinking all weekend. I thought that the question that came as a result of that seldom used process would be one that I would throw out for you: 

 If con is the opposite of pro, is Congress the opposite of Progress?

TFP Column: The Wheels On The Bus ...

Well another weekend is almost upon us, and I have been once again favored with the acceptance of a column in the Toledo Free Press. This particular effort deals with the circular logic of regulation and bailout in the auto industry; and you should pay attention, as this will end up being your money on both sides of the equation.

Michael Miller this week describes what I believe to be the typical experience with the red light / speeding cameras with an column "I fought the law" (and forgive me for quoting the old song Michael, but it looks like the law won). This is a subject that Maggie Thurber spoke about in a column just a couple of weeks ago. 

Maggie contributes this week with some interesting thoughts on how drillling for oil might be better than the $1,000,000,000,000.00 stimulus package (I'm going to keep writing out all of these zeroes until I finally start to scare the hell out of everybody.)

There is also a fantastic article by Adam Mahler on one of my favorite subjects in the world. His take on the wine the opinions of the wine magazines is well worth your time.

But as usual there is a lot to this weekend's edition of the TFP, in either the print or online edition.

The Holiday Diet?

I have been thinking about going on a diet this week. I know that it's close to Christmas, and the temptations will be even greater than usual. I know that there are big dinners ahead for both the Christmas and News Years holidays. I also know that there will be more chocolate and other sweets within reach of my lack of will power than at any other time of the year. 

Unfortunately, there have also been a couple of full length mirrors in the hotel rooms that I have been staying in over the last couple of weeks. Without going into detail that might frighten the children and cause the women to faint, I have to tell you that picture reflected in those glass torture devices was frightening on a scale that I have difficulty describing. ("Scale" ... did you catch that clever use of comparative analogy?)

Aside from the pure vanity aspect however, I should point out that my blood pressure is a little high, as is my cholesterol and my blood sugar. My doctor isn't counting me out yet, but she is shaking both her head and her finger at me. If I don't do something soon, my only alternatives will involve medications (none of which contain mood enhancing chemicals dammit).

Just as I was about to embark upon yet one more attempt to lead a healthier lifestyle however, I was stopped in my tracks. Perhaps this was not the best time after all. Perhaps in light of the current financial crisis, I should hold off just a bit longer, while pumping money into the economy through the purchase of mass quantities of snacks with no food value at all. Perhaps, other than my normal lack of will power, there was a more than valid reason to wait before attempting improvement to both my health and appearance. Yes, I will wait just a bit longer before going on the diet that I know is necessary, for while continuing my these bad habits ...

I am too big to fail.

This of course, means that I retain some chance of a government bailout. Heck with Henry Paulson on the job, there is every reason to believe that I might be on a short list. Oh, I'm not really sure that I would take one if offered, but I will never be able to prove that I am above such temptation unless I keep the option open. I guess that the diet will just have to wait until January 20th, when the new team takes the field. So in the meantime, pass the egg nog and the Christmas cookies over here, I'm feeling a bit peckish. 

Have a Merry Christmas, a Happy Hannukah, and safe and prosperous New Year! 

Oversight Is Overlooked

As everyone is well aware of by now, Congress passed a massive $700,000,000,000.00 (the number looks as scary as it actually is if you use all the zeros) bailout program to keep the US financial system from suffering a catastrophic crash. In pushing through this emergency legislation, Congress insisted that officials be named to act as a watchdog for the taxpayer's money. 

Each House of Congress had its own version of this watchdog function and it's own unique way of selection. Now that we are fully two months into the full-scale "bailing" and with nearly half of the $700 Billion allocated, I thought that you might be interested in hearing how those Congressional watchdogs were doing in the performance of their duties.  

The Senate Monday approved the appointment of a federal prosecutor to be a special inspector general for oversight of the bailout. The vote on that appointment was delayed by two weeks by the anonymous hold of a member of the Senate, but even if this act of unadmitted cowardice had not occurred, it would have taken six weeks after the money was approved and was being handed out for the Senate to get around to the vote to approve a watchdog.  This doesn't mean that anyone has actually been appointed yet, that a staff has been assembled, data collected, or that the actual work had begun; only that someone can now be appointed to the position.  

The House on the other hand chose to appoint a five member special oversight panel in late November. This group of fiscal sentinels has met only once to date since being formed. Thus far, the only results of their meetings is that one of the five has already quit their job. Their first report on their efforts was due out yesterday, so we will have to see how diligent in their assigned task they have been.  

Update: The Congressional Committee has released its reports, querying 10 the Treasury Departments decisions and asking if its strategies are "an adequate response to the financial crisis". (Pretty good for two months and one meeting.)  

Let me repeat for those of you who missed it earlier, HALF OF THE MONEY HAS ALREADY BEEN HANDED OUT! As we now look forward to Congress passing their bailout of the automobile industry, and appointing a "car Czar" (Is anyone else concerned that we are naming this watchdog after a Russian ruler, whose title is taken from the Roman one of Caesar?) to be some part of the oversight of this $15 Billion, we have to wonder if they will do equally well in the assigned responsibility of guarding this money.  

Congress has proved itself a horrible watchdog of taxpayer money over the years, but has reached a new low in recent months. It is now little more than an fat and lazy hound, more worried about sleeping in the sun and its own food bowl than its responsibilities. Instead of removing our valuables from its care however, we seem intent on putting more of the family fortune in the care of this mangy mutt. Which forces me to ask the question:

How long will we overlook Congress's lack of oversight?

 

Bailing Out The Things We Need

I think that I have finally figured out the Congressional thinking on the penchant for government bailouts, and strangely enough the connection came to mind while watching an old Steve Martin movie, "The Jerk".

For those of you unfamiliar with the plot of this engaging little comedy, it is a 1979 Rob Reiner movie that follows the life of Navin R. Johnson, a white man adopted as a child by a southern black family. Johnson is an innocent and mostly clueless individual who blissfully stumbles through life until almost by accident becoming rich and famous by creating a ridiculous handle for eyeglasses called the "opti-grab". 

Unfortunately for our hero, his fame and riches are short-lived however, when it's discovered that his invention causes the people who use it to become cross-eyed. Naturally he is sued, and in the settlement our intrepid inventor loses everything that he owns. Despondent, he turns to drinking and begins a personal spiral downward. It is at that low point that we join Navin, as he decides to walk away from everything in his life, taking only what he deems necessary to survive.

"And that's it and that's the only thing I need, is this." he says, picking up an ashtray. "I don't need this or this. Just this ashtray. And this paddle game, the ashtray and the paddle game and that's all I need. And this remote control. The ashtray, the paddle game, and the remote control, and that's all I need. And these matches. The ashtray, and these matches, and the remote control and the paddle ball. And this lamp. The ashtray, this paddle game and the remote control and the lamp and that's all I need. And that's all I need too. I don't need one other thing, not one - I need this. The paddle game, and the chair, and the remote control, and the matches, for sure. And this. And that's all I need. The ashtray, the remote control, the paddle game, this magazine and the chair."

There it is in a nutshell folks ... Congressional thinking on solutions to the current financial crisis!

All we need to do is bail out the Wall Street firm Bear Sterns and that's it... oh and Goldman Sachs, we need to bail them out too, but that's all. Wait, we need to bail out Fannie Mae and Freddie Mac too, but just the the two Wall Street firms and the two mortgage groups ... oh and their insurance company AIG, but that's it. Just Bear Sterns, Goldman Sachs, Fannie and Freddie, and AIG need to be bailed out and that's all for sure. And the other banks, we need to bail them out too. But that's it, just the Wall Street firms, Fannie and Freddie, AIG, and the banks ... oh and the Big 3 of the auto industry. We need to bail them out too, but that's it. We just need to bail out Bear Sterns, Goldman Sachs, Fannie, and Freddie, AIG, the banks, GM, Ford, and Chrysler; but that's all we need to bail out...

And once again, the truth proves to be even stranger than fiction. Once more we find ourselves confronting a reality far more ridiculous than the anything ever produced in Hollywood. Isn't it sad (and sadly fitting), that our elected leaders can be summed up so completely by a fictional character of no intelligence and little common sense? Isn't it amazing that our government's solution to what may be the most critical problem of our age seems to be coming out of a slapstick comedy from almost 30 years ago? Don't laugh through your tears too quickly yet my friends. It is after all, your money that they are using to make these bailouts and it appears that Congress hasn't made it completely out the door yet. I wouldn't be surprised if they found a couple of more things that they "need" to add before they finally walk away. 

 

TFP Column - The Big Three Bailout

While the Toledo Free Press Website is back up and functioning, my column from last week no longer appears in the online edition (maybe they are getting wiser about the burden that they are willing to place on their readership). At any rate, I have had numerous requests (OK, a couple from family members) to permit those of you outside of the circulation area of the TFP to see one of my more venomous rants. I hope that it gets you as stirred up as I am about this.  

Following a series of disturbing clues, I was finally able to decipher the secret message in the “DiVinci Code” from the latest puzzle of the current bailout program(s). It came as Congress, currently in lame duck session (a strangely appropriate term considering), and in the midst of its seemingly non-stop effort to throw good money after bad, was trying to decide whether they should funnel additional bailout money into the auto industry. Surprisingly enough, they couldn’t. 

Make no mistake; the auto industry is going through tough times. Consumer cash and the credit to finance major purchases is in short supply and the brief but abrupt rise in gasoline prices has forced consumers to reconsider their purchasing decisions. Not surprisingly as a consequence, sales of cars are down. 

These bleak financial conditions are further exacerbated for automakers GM, Ford, and Chrysler because of their poor decision to manufacture big cars, SUV's, and big pickup trucks; vehicles which fit neither the current consumer’s fuel efficiency requirements, nor their depleted budgets, but do have a higher profit margin for manufacturers. 

Do not fear for our intrepid US auto manufacturers however, as the Federal government had already decided to make $25 billion available to the US auto industry to retool itself in order to meet the CAFÉ standards (Corporate Average Fuel Economy) that these car makers claim is one of their biggest problem. Not content with this piddling amount however, they came to beg for another $25 billion (and probably more later); saying without it that they might not survive, and that 2.6 million jobs may disappear. (Can you say doomsday threat?) 

This additional money is not for additional retooling however, to build manufacturing plants utilizing the latest in labor-saving technology (something mostly forbidden to them in the US by current labor contracts), or even to provide them with capital for the massive change to their business plans that's undoubtedly required for their survival. Amazingly, the bulk of this money appears to be needed to cover the pension and medical funds of union workers, current and retired. After much debate and negotiation however, the vote on their bailout has been delayed this week to provide the automakers time and opportunity to provide something that looks like a business plan. 

Their plight will then be taken up after Thanksgiving in Senate committee review, and relief undoubtedly provided in some form using part of the original $25 billion in special session. They will then get to make their case for even more cash with the new Congress next year. Let’s be clear however, about the fact that this bailout has little to do with the continued operation of these US automakers (as opposed to all of the other automakers in the world currently operating manufacturing plants in the US and employing non-union US workers in those plants). 

This bailout is little more than a quid pro quo by a bunch of politicians attempting to prop up the unsupportable pension and medical plan of unions who have supported them through yet another election cycle. Worse, it’s a poorly hidden attempt to tell taxpayers that they should willingly hand over this cash knowing that it will undoubtedly raise taxes, increasing the odds that they will have to look forward to retiring on little more than the pittance provided by what is an all but bankrupt Social Security System and hope to survive on whatever level of medical care is capable of being doled out by a Medicare / Medicaid Program already strained past the breaking point. 

They should do this so that union auto workers can sleep safer at night, knowing that they will have bullied the elected representatives of those taxpayers into supporting what for them will be a much more comfortable level of retirement and better grade of medical care (you know, like Congress gets), negotiated at almost the point of a gun with their former employers and now ultimately funded at the expense of their fellow citizens. Based on this new found revelation, the secret message of the puzzle is obvious for all but the most gullible to decipher. It reads that "The Big Three really means: U A W”. 

 

My Bailout Plan

With the increasing pressure to add GM, Ford, and Chrysler to the list of companies that need to be bailed out, I began to ask myself: "Who should be bailed out?" Now not being an expert in economics or government, I decided to look for alternate reasons for who should be bailed out and why. In the end, I realized that like government, I should use arbitrary and irresponsible guidelines for such critical path thinking.

Here therefore are my list of companies that should receive multi-billion government bailouts, based on nothing but their importance to me personally. (Please note that I am not saying that any of these companies actually need bailing out, but when have I ever let logic like that ever get in the way of my decision making processes?):

Google - For no other reason than that they provide me the platform (Blogspot) to spew this nonsense upon an unsuspecting public. Blizzard Entertainment - The creators of World of Warcraft (one of my other sources of non-productive entertainment) to insure that this source of significant wasted hours in my life remains available to me.

Dell - The choice of manufacturer is arbitrary; but without some form of computer, it would be impossible to use either of the above.

Cigar Manufacturers / Retailers - For without out them, how would I blow smoke?

California Wine Growers / Wineries - Hey, you need something to sip while smoking a cigar and playing WOW or writing a blog posting.

Coca Cola & Pepsi Cola - Man does not live by wine alone.

AM Radio Stations - For I am well and truly addicted to talk radio.

Yum! Brands Inc. - You probably don't recognize this company, but they own the franchises for Taco Bell, KFC, A&W, Pizza Hut, and Long John Silvers. That should keep me in fast food even if McDonalds falls.

Kroeger - OK, I will concede that I probably need a grocery store around to buy food not found at the fast food places listed above (you know, like snacks and the previously mentioned Soda and Wine).

This list is by no means complete, and I am sure that others will come to mind over time. There may also be worthy and valuable inclusions from readers out there that I have simply overlooked, so please feel free to suggest.

Please note that while being completely self-serving in my list, I do not mention my employer in this list. While I am relatively sure they would accept the money if offered, I will not mention for them out of a fear of losing the checks that keep me bailed out from week-to-week.