September 18, 2008
I’m sorry. What is happening in the financial markets right now, should have happened at this time, last year. I put my money where my mouth was, in the belief that a laissez-faire Republican government would have let market conditions run their course. That strategy caused me to lose money for the past year. When precious metals should have been going up, they were going down. Something “stinky” was happening. At this time, last year, Jon Markman of msn.com was discussing the “duct tape and pixie dust” being used to hold the economy together. In hindsight, I suspect that there may have been an effort to keep the ca-ca from hitting the fan until after Election Day (November 4). Time will tell whether there was some skullduggery involved in such an effort. Do you think that the “oil speculators” realized, at some point, that they could manipulate the prices of the small handful of stocks (30) that comprise the Dow Jones Industrials, by manipulating the price of oil? Are these same “oil speculators” on “good behavior” right now, out of fear that the “Enron Loophole” could be doomed?
I apologize because I have been making (back) lots of money this week, while many people have seen their retirement plans crash and burn. I stuck to my belief that the emperor was not really wearing any clothes. It cost me money to adhere to that opinion, although it is now “payback time”. To no surprise, the Carly Fiorinas of this nosedive will walk away with their golden parachutes intact. However, will AIG still be free to make crucial decisions about which lawsuits to litigate? Do they have a right to make those (and other) decisions as they used to, now that you and I own eighty percent of that company?
Meanwhile, John “Keating Five” McCain claims that he will champion the interests of those suckers who vote for him, by bringing “The Good Old Boys of Wall Street” to Alaskan frontier justice. Why would anyone believe this? Based on his record, McCain could not expect the voters to consider him as the advocate of the downtrodden. For some reason, the Obama campaign has expressed an unwillingness to use the “Keating Five” episode of McCain’s life, as fodder for negative ads. (They may find themselves thinking more clearly in late October.)
Let’s take a look back at the “glory days” of The Keating Five, from what is available on Wikipedia.org:
The Keating Five scandal was prompted by the activities of one particular savings and loan: Lincoln Savings and Loan Association of Irvine, California. Lincoln’s chairman was Charles Keating, who ultimately served five years in prison for his corrupt mismanagement of Lincoln. In the four years since Keating’s American Continental Corporation (ACC) had purchased Lincoln in 1984, Lincoln’s assets had increased from $1.1 billion to $5.5 billion. Such savings and loan associations had been deregulated in the early 1980s, allowing them to make highly risky investments with their depositors’ money, a change of which Keating took advantage. Lincoln’s investments took the form of buying land, taking equity positions in real estate development projects, and buying high-yield junk bonds.
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The core allegation of the Keating Five affair is that Keating had made contributions of about $1.3 million to various U.S. Senators, and he called on those Senators to help him resist regulators. The regulators backed off, to later disastrous consequences.
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(f)ive senators, Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), John McCain (R-AZ), and Donald W. Riegle (D-MI), were accused of improperly aiding Charles H. Keating, Jr., chairman of the failed Lincoln Savings and Loan Association, which was the target of an investigation by the Federal Home Loan Bank Board (FHLBB).
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After a lengthy investigation, the Senate Ethics Committee determined in 1991 that Alan Cranston, Dennis DeConcini, and Donald Riegle had substantially and improperly interfered with the FHLBB in its investigation of Lincoln Savings. Senators John Glenn and John McCain were cleared of having acted improperly but were criticized for having exercised “poor judgment”. All five of the senators involved served out their terms. Only Glenn and McCain ran for re-election, and they were both re-elected.
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McCain and Keating had become personal friends following their initial contacts in 1981, and McCain was the closest socially to Keating of the five senators. Like DeConcini, McCain considered Keating a constituent as he lived in Arizona. Between 1982 and 1987, McCain had received $112,000 in political contributions from Keating and his associates. In addition, McCain’s wife Cindy McCain and her father Jim Hensley had invested $359,100 in a Keating shopping center in April 1986, a year before McCain met with the regulators. McCain, his family, and their baby-sitter had made nine trips at Keating’s expense, sometimes aboard Keating’s jet. Three of the trips were made during vacations to Keating’s opulent Bahamas retreat at Cat Cay. McCain did not pay Keating (in the amount of $13,433) for some of the trips until years after they were taken, when he learned that Keating was in trouble over Lincoln. On his Keating Five experience, McCain has said: “The appearance of it was wrong. It’s a wrong appearance when a group of senators appear in a meeting with a group of regulators, because it conveys the impression of undue and improper influence. And it was the wrong thing to do.”
So where is the Obama ad using “Poor Judgment” as its theme? Wouldn’t it be nice to see that phrase repeated under a picture of Sarah Palin?
Here We Go Again
September 22, 2008
Exactly one year ago, we saw the release of Naomi Klein’s book, The Shock Doctrine: The Rise of Disaster Capitalism. Klein’s book explained how unpopular laws were enacted in a number of countries around the world, as a result of shock from disasters or upheavals. She went on to suggest that some of these events were deliberately orchestrated with the intent of passing repugnant laws in the wake of crisis. She made an analogy to shock therapy, wherein the patient’s mind is electrically reformatted to become a “blank slate”. Klein described how advocates of “the shock doctrine” seek a cataclysmic destruction of economic order to create their own “blank slate” upon which to create their vision of a “free market economy”. She described the 2003 Iraq war as the most thorough utilization of the shock doctrine in history. Remember that this book was released a year before the crisis we are going through now.
You may recall former Senator Phil Gramm’s recent appearance in the news for calling the United States a “nation of whiners” and positing that the only recession going on in the United States these days is a “mental recession”. Gramm is a longtime buddy and mentor to a certain individual named John McCain. Gramm is the architect of the so called “Enron Loophole” allowing speculators to drive the price of oil to absurd heights. (Gramm’s wife, Wendy, was a former member of Enron’s Board of Directors.) Gramm was most notorious for his successes in the deregulation of Wall Street (with the help of McCain) that facilitated the “mortgage crisis” as well as the current economic meltdown. He sponsored the 1999 bill that repealed the Glass-Steagall Act. The repeal of that law allowed “commercial” and “investment” banks to consolidate. Gramm’s face appears in many campaign videos with McCain, taken earlier this year. As a result of the outrage generated by Gramm’s remarks, McCain formally dismissed Gramm as his campaign’s economic advisor. Despite the fact that Gramm no longer has a formal role in the McCain campaign, many believe that he would be McCain’s choice for Secretary of the Treasury in the event that McCain should win the Presidential election. On September 21, MSNBC’s David Shuster grilled McCain campaign spokesman, Tucker Bounds, about the possibility that McCain is planning to appoint Phil Gramm as his Secretary of the Treasury, should McCain win. Tucker Bounds squirmed all over the place, employing his usual tactic of deflecting the subject of the current economic crisis back to the Obama campaign. Most noticeably, Mr. Bounds never made any attempt to deny that McCain plans to put Gramm in charge of the Treasury.
Our current Treasury Secretary, Henry Paulson, is on the covers of this week’s newsmagazines, pushing for uncritical acceptance of his (and hence, the Bush Administration’s) solution to the current economic crisis. This basically amounts to a three-page “bailout” plan for banks and other financial intuitions holding mortgages of questionable value, at a price to the taxpayers of anywhere from $700 billion to One Trillion Dollars. The Democrats are providing some “pushback” to this plan. Barack Obama was quoted by Carrie Brown of Politico.com as saying that the Bush Administration has “offered a concept with a staggering price tag, not a plan”. Obama went on to insist that the “American people must be assured that the deal reflects the basic principles of transparency, fairness and reform”.
As reported by Stephen Labaton in the September 21 New York Times, House Speaker Nancy Pelosi complained that:
Senator Chris Dodd of Connecticut was quoted in that article as saying: “We need to offer some assurance to the American taxpayer that Congress is watching.” Dodd went on to explain:
The Times article then focused on the point emphasized by Republican Senator Arlen Specter:
Nevertheless, Treasury Secretary Paulson made the rounds of the Sunday talk shows to advocate pushing this bailout through quickly, without the safeguards and deliberation suggested by the Democrats and Senator Specter. As Zachary Goldfarb reported in the September 21 Washington Post:
“Clean and quick” . . . Is that anything like “Shock and Awe”? As usual, there is concern about whether Congressional Democrats will have the spine to resist the “full court press” by the Bush Administration to get this plan approved by Congress and on the President’s desk for signature. As Robert Kuttner reported in The Huffington Post:
Here we go again. Will the Democrats “grow a pair” in time to prevent “the shock doctrine” from being implemented once again? If not, will we eventually see the day when Treasury Secretary Phil Gramm basks in glory, while presiding over his own manifestation of economic utopia?