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The New Welfare Queens

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February 26, 2009

In 1999, UCLA Professor Franklin D. Gilliam wrote a report for Harvard University’s Nieman Foundation for Journalism.  That paper concerned a study he had done regarding public perception of the “welfare queen” stereotype and how that perception had been shaped by the media.  He discussed how the term had been introduced by Ronald Reagan during the 1976 Presidential campaign.  Reagan told the story of a woman from Chicago’s South Side, who had been arrested for welfare fraud.  The term became widely used in reference to a racist (and sexist) stereotype of an iconic African-American woman, enjoying a lavish lifestyle and driving a Cadillac while cheating the welfare system.

Ten years after the publication of Gilliam’s paper, we have a new group of “welfare queens”:  the banks.  The banks have already soaked over a trillion dollars from the federal government to remedy their self-inflicted wounds.  Shortly after receiving their first $350,000,000,000 in payments under the TARP program (which had no mechanism of documenting where the money went) their collective reputation as “welfare queens” was firmly established.  In the most widely-reported example of “corporate welfare” abuse by a bank, public outcry resulted in Citigroup’s refusal of delivery on its lavishly-appointed, French-made, Falcon 50 private jet.  Had the sale gone through, Citi would have purchased the jet with fifty million dollars of TARP funds.  Now, as they seek even more money from us, the banks chafe at the idea that American taxpayers, economists and political leaders are suggesting that insolvent (or “zombie”) banks should be placed into temporary receivership until their “toxic assets” are sold off and their balance sheets are cleaned up.  This has been referred to as “nationalization” of those banks.

Despite all the bad publicity and public outrage, banks still persist in their welfare abuse.  After all, they have habits to support.  Their “drug” of choice seems to be the lavish golf outing at a posh resort.  The most recent example of this resulted in Maureen Dowd’s amusing article in The New York Times, about a public relations misstep by Sheryl Crow.

The New Welfare Queens have their defenders.  CNBC’s wildly-animated Jim Cramer has all but pulled out his remaining strands of hair during his numerous rants about how nationalization of banks “would crush America”.  A number of investment advisors, such as Bill Gross, co-chief investment officer at Pacific Investment Management Company, have also voiced objections to the idea of bank nationalization.

Another defender of these welfare queens appears to be Federal Reserve Chairman Ben Bernanke.   In his latest explanation of Turbo Tim Geithner’s “stress test” agenda, Bernanke attempted to assure investors that the Obama administration does not consider the nationalization of banks as a viable option for improving their financial health.  As Craig Torres and Bradley Keoun reported for Bloomberg News on February 25, the latest word from Bernanke suggests that nationalization is not on the table:

. . .  while the U.S. government may take “substantial” stakes in Citigroup Inc. and other banks, it doesn’t plan a full- scale nationalization that wipes out stockholders.

Nationalization is when the government “seizes” a company, “zeroes out the shareholders and begins to manage and run the bank, and we don’t plan anything like that,” Bernanke told lawmakers in Washington today.

The only way to deal with The New Welfare Queens is to replace their directors and managers.  The Obama administration appears unwilling to do that.  During his February 25 appearance on MSNBC’s Countdown, Paul Krugman (recipient of the Nobel Prize in Economics) expressed his dread about the Administration’s plan to rehabilitate the banks:

I’ve got a bad feeling about this, as do a number of people.  I was just reading testimony from Adam Posen, who is our leading expert on Japan.  He says we are moving right on the track of the Japanese during the 1990s:  propping up zombie banks — just not doing resolution.

. . .  The actual implementation of policy looks like a kind of failure of nerve.

*   *   *

On the banks — I really can’t see  — there really seems to be — we’re going to put in some money, as we’re going to say some stern things to the bankers about how they should behave better.  But if there is a strategy there, it’s continuing to be a mystery to me and to everybody I’ve talked to.

You can read Adam Posen’s paper:  “Temporary Nationalization Is Needed to Save the U.S. Banking System” here.  Another Economics professor, Matthew Richardson, wrote an excellent analysis of the pros and cons of bank nationalization for the RGE Monitor.  After discussing both sides of this case, he reached the following conclusion:

We are definitely caught between a rock and a hard place.  But the question is what can we do if a major bank is insolvent?  Sometimes the best way to repair a severely dilapidated house is to knock it down and rebuild it.  Ironically, the best hope of maintaining a private banking system may be to nationalize some of its banks.  Yes, it is risky.  It could go wrong. But it is the surest path to avoid a “lost decade” like Japan.

As the experts report on their scrutiny of the “stress testing” methodology, I get the impression that it’s all a big farce.  Eric Falkenstein received a PhD in Economics from Northwestern University.  His analysis of Geithner’s testing regimen (posted on the Seeking Alpha website) revealed it to be nothing more than what is often referred to as “junk science”:

Geithner noted he will wrap this up by April.  Given the absurdity of this exercise, they should shoot for Friday and save everyone a lot of time.  It won’t be any more accurate by taking two months.

On a similar note, Ari Levy wrote an illuminating piece for Bloomberg News, wherein he discussed the stress testing with Nancy Bush, bank analyst and founder of Annandale, New Jersey-based NAB Research LLC and Richard Bove of Rochdale Securities.  Here’s what Mr. Levy learned:

Rather than checking the ability of banks to withstand losses, the tests outlined yesterday are designed to convince investors that the firms don’t need to be nationalized, said analysts including (Nancy) Bush and Richard Bove from Rochdale Securities.

*   *   *

“I’ve always thought that this stress-testing was a politically motivated approach to try to defuse the argument that the banks didn’t have enough capital,” said Bove, in an interview from Lutz, Florida.  “They’re trying to prove that the banks are well-funded.”

Will Turbo Tim’s “stress tests” simply turn out to be a stamp of approval, helping insolvent banks avoid any responsible degree of reorganization, allowing them to continue their “welfare queen” existence, thus requiring continuous infusions of cash at the expense of the taxpayers?  Will the Obama administration’s “failure of nerve” —  by avoiding bank nationalization — send us into a ten-year, “Japan-style” recession?  It’s beginning to look that way.

McCain Loses His Chance

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October 2, 2008

It was the opportunity for a “game-changing move” in the 2008 Presidential campaign.  Just as John McCain was dropping back in the polls, providing Barack Obama the chance to “close the deal” even more decisively than he did with Hillary Clinton, McCain missed the opportunity to turn the game around.  Last week, he arrived in Washington (after the pseudo-suspension of his campaign) on a mission to save us all from the crisis declared by Treasury Secretary Henry Paulson.  After McCain arrived, he found a number of both Republican and Democratic members of the House of Representatives opposed to the revised, 110-page, economic “bailout bill” (the Emergency Economic Stabilization Act of 2008).  At that point in time, McCain had the opportunity to break with the unpopular Bush Administration and band together with the 133 Republican and 95 Democratic House members (who eventually voted against the bill) to form a “coalition of mavericks” (oxymoron, non-sequitur or both?) resisting this bailout of the big banks and other “fat cats” on Wall Street.  He didn’t.  He chose instead, to copy whatever Barack Obama was doing.  Besides, his move dovetailed well with the pseudo-“bipartisan” duet he had been playing, throughout the entire campaign, with Joe “The Tool” Lieberman.  Had McCain stood with those 133 young Republican members of the House and the 95 Democrats (many of whom consider themselves conservative, “Blue Dog” Democrats) he could have re-ignited his flatulent campaign.  (Is it really safe to do that?  —  Let’s ask Johnny Knoxville.)

Howard Fineman provided an interesting retrospective of this phase in the evolution the economic “bailout bill” at the Newsweek website on September 30:

The Paulson Plan is not great. Some two hundred academic economists have ridiculed it, and so have the House Republicans, by a 2-1 margin.  Public opinion (and not just the angry phone callers) is turning against the measure—to the extent that anybody understands it.

But the consensus is that Washington has to do something, and that the current version is far better than what the lawmakers started with.

McCain made a show of returning to Washington to try to jam the original measure through.  He deserves credit for the instinct. An old Navy motto is: Don’t just stand there, DO something!  That is McCain to the core, and so much the better for it.

But when he got to town, he realized something that no one had bothered to tell him, apparently:  the grassroots of his own party (the grassroots that has never really trusted him) hated the Paulson Plan.  They weren’t about to support it and risk their own necks.  McCain worked the phones, but fell back in the ranks.

When the second revision of this bill (at over 400 pages) finally made it to the Senate floor for the vote on Wednesday, October 1, there were 9 Democrats, 15 Republicans and Independent Senator Bernie Sanders of Vermont, voting against it.  McCain again missed the opportunity for a truly bipartisan resistance to this measure.  Such an act would have demonstrated genuine leadership.  He could have rejoined his old buddy, Wisconsin Senator Russ Feingold, as well as Florida Democrat Bill Nelson and rising Democratic star, Maria Cantwell from the State of Washington, all of whom voted against this measure.  Such a move would have emboldened resistance to the “bailout bill” in the House of Representatives, where the term of office lasts only two years.  (The short term results in greater accountability to American voters, who are believed to have notoriously short memory spans.)

Is this bill really necessary?  On the October 1 edition of MSNBC’s Countdown with Keith Olbermann, Paul Krugman, Economics Professor at Princeton University, admitted that:

…  it will be relatively ineffective, although rejecting it will cause a big run on the system.  Then we will come back and do it right in January or February  …

When Keith Olbermann asked Krugman about the likelihood that nothing consequential would happen if this bill did not pass, Krugman responded by saying that such possibilities have “shrunk in the past week”.  Krugman went on to claim that “the credit crunch has started to hit Main Street”, using, as an example, the rumor that: “McDonald’s has started to cut credit to its franchisees.”  McDonald’s has issued a press release stating that this was not the case.  What is really happening is that the banks are acting like spoiled children, holding their breath until the government gives them what they want, using the threat of unavailable credit as a gun to the head of Congress.

Public opposition to this bailout was best summed up by Peggy Noonan, when she appeared on The Daily Show with Jon Stewart on October 1:

But we are in a real economic crisis and the American political establishment said we must do A, B and C to deal with it and the American people  …  said:  “No.  We don’t trust you to handle this.  We don’t trust you to do the right thing.”

John McCain had the opportunity to stand with those people, as well as the 133 House Republicans and 15 Senate Republicans, to do “the right thing”.  He decided to forego that opportunity.  Barack Obama said, on the Senate floor Wednesday, that it was not worth risking the American economy and the world economy by challenging this bill.  John McCain decided that it was not worth risking his Presidential campaign on such a challenge.  That’s too bad for him.  The gamble probably would have paid off.

A McCain – Edwards Ticket

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August 11, 2008

As mid-August approaches, the Hillarologists are preparing to descend upon Denver to vent their spleens at the Democratic Convention.  We’ve seen videos of them at backyard parties, cheering for their fallen hero, and shouting out for … uhh … catharsis?  As their hearts filled with rage, visions of sexists danced in their heads:  the usual big-mouths who weren’t used to restraining themselves while making on-air comments.  Most of the liberally-inclined men I know, couldn’t understand the charges of sexism in media coverage of the Presidential campaign, as alleged by Clinton’s supporters.  That’s because these men don’t watch Fox News or the likes of Glenn Beck.  Had they watched Keith Olbermann’s Countdown program a while back, they would have been treated to a sampling of some ugly, sexist remarks, as rebroadcast to an audience who, for the most part, tended to avoid the White House echo chamber.

Suddenly, Hillary’s female activists have a big distraction.  John Edwards (age 55) has now admitted to having an affair with a dilettante filmmaker named Rielle Hunter (age 44).  Edwards has admitted to having the affair that began after his wife, Elizabeth (now age 58), had been diagnosed with cancer.  To the Hillarologists, the Edwards caper sounded all too familiar.  It was yet another case of “throw your first wife under the bus” syndrome, with the added feature of doing so while she is in the throes of a medical crisis.  The Clinton supporters must have been reminded of a similar situation involving another candidate in the 2008 Presidential campaign:  John McCain.

Sharon Churcher provided an informative history of McCain’s first marriage in the June 8 issue of Britain’s Daily Mail.  Her article described how McCain (who turns 72 at the end of this month) married the sexy swimwear model named Carol Shepp in 1965.  Carol is only two years younger than John.  Carol had been previously married to one of McCain’s Annapolis classmates, by whom she had two sons: Douglas and Andrew.  When McCain married Carol, he adopted her sons.  During the Christmas season of 1969, while McCain was a prisoner in Viet Nam, Carol was driving to a friend’s house and experienced a horrible automobile accident.  A few hours after the accident, she was found next to the wreckage of her car, having been thrown through the windshield.  Churcher’s article went on to point out that after McCain’s release from the “Hanoi Hilton” and upon his reunion with Carol in 1973, he first learned of Carol’s injuries.  She was no longer the tall model he remembered.  Her doctors “had been forced to cut away huge sections of shattered bone in her legs, taking with it her tall, willowy figure” as Churcher explained.

The Daily Mail article mentioned a man named Ted Sampley, who fought with the Special Forces in Viet Nam.  Mr Sampley was quoted as saying:

“When he came home and saw that Carol was not the beauty he left behind, he started running around on her almost right away. Everybody around him knew it.”

“Eventually he met Cindy and she was young and beautiful and very wealthy. At that point McCain just dumped Carol for something he thought was better.”

The article included the following quote from Carol about McCain’s reason for leaving her:

My marriage ended because John McCain didn’t want to be 40, he wanted to be 25. You know that happens … it just does.

The disgruntled Hillarologists must be aware of the pattern here: opportunistic male politician strays from his first wife after she sustains a physical setback.  The 2008 Presidential campaign brought us two candidates with the same modus operandi.  The fact that they are from different parties shouldn’t exclude John Edwards as a running mate for John McCain.  After all, non-Republican Joe “The Tool” Lieberman has been vying for that spot for over a year.

“My Oath Is To The Constitution, Not To The President”

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July 3, 2008

David Iglesias is making the talk show circuit, promoting his recent book: In Justice.  The book provides an insider’s account of the scandal involving the politicization of the Justice Department under the Administration of non-attorneys George W. Bush and Dick Cheney.  As I have said before, these two men have little regard for our Constitution because they know little about it and they have contempt for our courts because they know almost nothing about the law or the concepts of justice and due process.  Bush/Cheney made a point of having culls run Justice:  John Ashcroft, who (surprisingly) to his credit, was not trusted by them to authorize their FISA bypass, so they tried to have him authorize it while he was in the hospital, under sedation.  Once Alberto Gonzalez became Attorney General, we had someone in charge of the Justice Department, who was even more subservient to the whims of non-attorneys Bush and Cheney.  This resulted in what history will view as the most disgraceful abuse of the Justice Department as Soviet-style enforcers of political allegiance to the party-in-charge.  David Iglesias and at least six other important federal prosecutors, who had devoted their careers to fighting organized crime, terrorism and (oops!) corporate fraud, were summarily terminated by Bush-Cheney for failure to align their missions with the political vendettas of this administration.  The title Iglesias chose for his book was an obvious reference to the widespread opinion that the Bush Administration had changed the Justice Department to the Injustice Department.

David Iglesias explained to Tavis Smiley that an underlying theme throughout his book was that as a federal prosecutor, he understood his oath of office as to support the Constitution of the United States, despite the Bush Administration’s mandate that a prosecutor’s highest obligation was to support the President.

This theme is particularly timely in light of the recent dispute arising from the appearance of retired General Wesley Clark on the CBS News program, “Face The Nation” on June 29.  During that conversation, Wesley Clark, in his vanity, forgot that it was actually Barack Obama running as the Democratic Party’s candidate for President, rather than himself.  Clark expressed a rationale that only Commanding Officers, such as himself, had the type of military experience to qualify one for the Presidency.  He tactlessly contrasted this with the experience of John McCain, who was shot down as a fighter pilot and was held for years as a POW in the Hanoi Hilton.  When asked by Dan Abrams on MSNBC’s “The Verdict”, to explain his minimization of McCain’s sacrifice, Clark again reinforced his position that only Commanding Officers, such as himself, had the type of military experience to be qualified for the Presidency.  The McCain camp made the most they could of this denigration of the Republican candidate’s service.  Barack Obama found it necessary to distance himself from Clark’s comments on this subject.

The McCain camp then targeted Virginia Senator Jim Webb, for his remarks to Keith Olbermann on MSNBC’s “Countdown” show of June 30.  During that interview, Webb pointed out that:

We need to make sure that we take politics out of service.  People don’t serve their country for political issues and John McCain is my longtime friend and if there is one area I would ask him to calm down on it is: don’t be standing up and uttering your political views and implying that all the people in the military support them because they don’t, any more than when the Democrats had political issues during the Vietnam war.  Let’s get politics out of the military, take care of our military people and have our political arguments in other areas.

McCain’s claim was that this was another attack on his service in the Vietnam War.  Nevertheless, we can see that Webb was attempting to distinguish a soldier’s obligation to the President (or in this case, a Presidential candidate) from a soldier’s obligation to defend our Constitution.  The oath of enlistment for people serving in the military is as follows:

I, _____, do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; and that I will obey the orders of the President of the United States and the orders of the officers appointed over me, according to regulations and the Uniform Code of Military Justice. (So help me God.)

Although military personnel are bound by their oath to follow the orders of the President, in accordance with regulations and the Uniform Code of Military Justice, their primary duty is to support and defend the Constitution.  When McCain takes for granted that those serving in the military will support his entire political agenda, he is mistaken.  Their oath does not require it, nor could he enforce such compliance if elected President.

What is actually going on with all of this is that the Obama camp is out to “level the playing field” with respect to Obama’s lack of military experience.  McCain’s delusion that he can speak for all the troops and that they are aligned with his entire political agenda is the “Achilles heel” where the Democrats are directing their fire to achieve their goal.  “McCain doesn’t speak for all the troops” is the argument that will pay off when the pollsters focus on the Presidential choices of those in uniform.

As an aside, it’s only fitting that at a time so close to the day we celebrate our Independence, we can celebrate the rescue of former Colombian presidential candidate Ingrid Betancourt from the FARC rebels.  My Colombian friends and I thought she had been killed several years ago.  Let’s all make a toast to Ingrid when we think about freedom this year!