November 12, 2009
When I started this blog in April of 2008, my focus was on that year’s political campaigns and the exciting Presidential primary season. At the time, I expressed my concern that the most prominent centrist in the race, John McCain, would continue pandering to the televangelist lobby after winning the nomination, when those efforts were no longer necessary. He unfortunately followed that strategy and went on to say dumb things about the most pressing issue facing America in decades: the economy. During the Presidential campaign of Bill Clinton, James Carville was credited with writing this statement on a sign in front of Clinton’s campaign headquarters in Little Rock: “It’s the economy, stupid!” That phrase quickly became the mantra of most politicians until the attacks of September 11, 2001 revealed that our efforts at national security were inadequate. Since that time, we have over-compensated in that area. Nevertheless, with the demise of Rudy Giuliani’s political career, the American public is not as jumpy about terrorism as it had been — despite the suspicious connections of the deranged psychiatrist at Fort Hood. As the recent editorials by Steve Chapman of the Chicago Tribune and Vincent Carroll of The Denver Post demonstrate, the cerebral bat guano necessary to get the public fired-up for a vindictive rampage just isn’t there anymore.
President Obama’s failure to abide by the Carville maxim appears to be costing him points in the latest approval ratings. The fact that the new President has surrounded himself with the same characters who helped create the financial crisis, has become a subject of criticism by commentators from across the political spectrum. Since Obama’s Presidential campaign received nearly one million dollars in contributions from Goldman Sachs, he should have known we’d be watching. CNBC’s Charlie Gasparino was recently interviewed by Aaron Task. During that discussion, Gasparino explained that Jamie Dimon (the CEO of JP Morgan Chase and director of the New York Federal Reserve) has managed to dissuade the new President from paying serious attention to Paul Volcker (chairman of the Economic Recovery Advisory Board) whose ideas for financial reform would prove inconvenient for those “too big to fail” financial institutions. As long as JP Morgan’s “Dimon Dog” and Lloyd Bankfiend of Goldman Sachs have such firm control over the puppet strings of “Turbo” Tim Geithner, Larry Summers and Ben Bernanke, why pay attention to Paul Volcker? The voting public (as well as most politicians) can’t understand most of these economic problems, anyway. I seriously doubt that many of our elected officials could explain the difference between a credit default swap and a wife swap.
Once again, Dan Gerstein of Forbes.com has directed a water cannon of common sense on the malaise blaze that has been fueled by a plague of ignorance. In his latest piece, Gerstein tossed aside that tattered, obsolete handbook referred to as “conventional wisdom” to take a hard look at the reality facing all incumbent, national politicians:
It’s the stupidity about the economy in Washington and on Wall Street that’s driving most voters berserk. Indeed, the financial system is still out of whack and tens of millions of people are (or fear they soon could be) out of work, yet every day our political and economic leaders say and do knuckleheaded things that show they are unfailingly and imperviously out of touch with those realities.
Gerstein’s short essay is essential reading for a quick understanding of how and why America can’t seem to solve many of its pressing problems these days. Gerstein has identified the responsible culprits as three groups: the Democrats, the Republicans and the big banks — describing them as the “axis of cluelessness”:
We have gone long past “they don’t get it” territory. It’s now unavoidably clear that they won’t get it — and we won’t get the responsible leadership and honest capitalism we want–until (as I have suggested before) we demand it.
Surprisingly, public awareness concerning the root cause of both the financial crisis and our ongoing economic predicament has escalated to a startling degree in recent weeks. This past spring, if you wanted to find out about the nefarious activities transpiring at Goldman Sachs, you had to be familiar with Zero Hedge or GoldmanSachs666.com. Today, you need look no further than Maureen Dowd’s column or the most recent episode of Saturday Night Live. Everyone knows what the problem is. Gordon Gekko’s 1987 proclamation that “greed is good” has not only become an acceptable fact of life, it has infected our laws and the opinions rendered by our highest courts. We are now living with the consequences.
Fortunately, there are plenty of people in the American financial sector who are concerned about the well-being of our society. A recent study by David Weild and Edward Kim (Capital Markets Advisors at Grant Thornton LLP) entitled “A wake-up call for America” has revealed the tragic consequences resulting from the fact that the United States, when compared with other developed countries, has fallen seriously behind in the number of companies listed on our stock exchanges. Here’s some of what they had to say:
The United States has been engaged in a longstanding experiment to cut commission and trading costs. What is lacking in this process is the understanding that higher transaction costs actually subsidized services that supported investors. Lower transaction costs have ushered in the age of “Casino Capitalism” by accommodating trading interests and enabling the growth of day traders and high-frequency trading.
The Great Depression in Listings was caused by a confluence of technological, legislative and regulatory events — termed The Great Delisting Machine — that started in 1996, before the 1997 peak year for U.S. listings. We believe cost cutting advocates have gone overboard in a misguided attempt to benefit investors. The result — investors, issuers and the economy have all been harmed.
The Grant Thornton study illustrates how and why “as many as 22 million” jobs have been lost since 1997, not to mention the destruction of retirement savings, forcing many people to come out of retirement and back to work. Beyond that, smaller companies have found it more difficult to survive and business loans have become harder to obtain.
Aside from all the bad news, the report does offer solutions to this crisis:
The solutions offered will help get the U.S. back on track by creating high-quality jobs, driving economic growth, improving U.S. competitiveness, increasing the tax base, and decreasing the U.S. budget deficit — all while not costing the U.S. taxpayer a dime.
These solutions are easily adopted since they:
- create new capital markets options while preserving current options,
- expand choice for consumers and issuers,
- preserve SEC oversight and disclosure, including Sarbanes-Oxley, in the public market solution, and
- reserve private market participation only to “qualified” investors, thus protecting those investors that need protection.
These solutions would refocus a significant portion of Wall Street on rebuilding the U.S. economy.
The Grant Thornton website also has a page containing links to the appropriate legislators and a prepared message you can send, urging those legislators to take action to resolve this crisis.
Now is your chance to do something that can help address the many problems with our economy and our financial system. The people at Grant Thornton were thoughtful enough to facilitate your participation in the resolution of this crisis. Let the officials in Washington know what their bosses — the people — expect from them.
A Look Ahead
December 7, 2009
As 2010 approaches, expect the usual bombardment of prognostications from the stars of the info-tainment industry, concerning everything from celebrity divorces to the nuclear ambitions of Iran. Meanwhile, those of us preferring quality news reporting must increasingly rely on internet-based venues to seek out the views of more trustworthy sources on the many serious subjects confronting the world. On October 29, I discussed the most recent GMO Quarterly Newsletter from financial wizard Jeremy Grantham and his expectation that the stock market will undergo a
“correction” or drop of approximately 20 percent next year. Grantham’s paper inspired others to ponder the future of the troubled American economy and the overheated stock market. Mark Hulbert, editor of The Hulbert Financial Digest, wrote a piece for the December 5 edition of The New York Times, picking up on Jeremy Grantham’s stock performance expectations. Hulbert noted Grantham’s continuing emphasis on “high-quality, blue chip” stocks as the most likely to perform well in the coming year. Grantham’s rationale is based on the fact that the recent stock market rally was excessively biased in favor of junk stocks, rather than the higher-quality “blue chips”, such as Wal-Mart. Hulbert noted how Wal-mart shares gained only 14 percent since March 9, while the shares of the debt-laden electronics services firm, Sanmina-SCI, have risen more than 600 percent during that same period. Hulbert pointed out that the conclusion to be reached from this information should be pretty obvious:
My favorite reaction to Jeremy Grantham’s newsletter came from Paul Farrell of MarketWatch, who emphasized Grantham’s broader view for the economy as a whole, rather than taking a limited focus on stock performance. Farrell targeted President Obama’s “predictably irrational” economic policies by presenting us with a handy outline of Grantham’s criticism of those policies. Farrell prefaced his outline with this statement:
At the first point in the outline, Farrell made this observation:
Farrell’s discussion included a reference to the latest article by Matt Taibbi for Rolling Stone, entitled “Obama’s Big Sellout”. The Rolling Stone website described Taibbi’s latest essay in these terms:
Since the article is not available online yet, you will have to purchase the latest issue of Rolling Stone or wait patiently for the release of their next issue, at which time “Obama’s Big Sellout” should be online. In the mean time, they have provided this brief video of Matt Taibbi’s discussion of the piece.
The new year will also bring us a new book by Danny Schecter, entitled The Crime of Our Time. Mr. Schecter recently discussed this book in a live interview with Max Keiser. (The interview begins at 16:55 into the video.) In discussing the book, Schecter explained how “the financial industry essentially de-regulated its own marketplace. They got rid of the laws that required disclosure and accountability …” and created a “shadow banking system”. Shechter’s previous book, Plunder, has now become a film that will be released soon. In Plunder, he described how the subprime mortgage crisis nearly destroyed the American economy. The interview by Max Keiser contains a short clip from the upcoming film. Danny also directed the movie based on (and named after) his 2006 book, In Debt We Trust, wherein he predicted the bursting of the credit bubble.
It was right at this point last year when Danny’s father died. The event is easy for me to remember because my own father died one week later. At that time, I was comforted by reading Danny’s eloquent piece about his father’s death. Danny was kind enough to respond to the e-mail I had sent him since, as an old fan from his days at WBCN radio in Boston, during the early 1970s, my friends and I tried our best to provide Danny with any leads we came across. These days, it’s good to see that Danny Schechter “The News Dissector” is still at it with the same vigor he demonstrated more than thirty-five years ago. I look forward to his new book and the new film.