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The World Holds Its Breath

January 19th, 2009 Posted in Uncategorized
Jan, 19 2009
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January 19, 2009

All over the world, people are waiting with abated breath as the Obama Presidency begins.  Some thought it would never happen.  I have often wondered whether, at the last minute, the Bush-Cheney junta might decide that it does not want to give up its authority.  Would they contrive some sort of “national security emergency” as a pretext for declaring martial law and suspending the Constitution?  Such a tactic would be entirely consistent with what we have seen for the past eight years.  Surely, there must be some provision buried in the so-called “Patriot Act” allowing the Bush-Cheney regime to continue, despite the expiration of its Constitutionally-prescribed existence.  Constitutional restrictions to unlimited executive power have been ignored by the outgoing administration for the past eight years.  Why should now be any different?  My skepticism on this matter will continue until Barack Obama completes his recitation of the Presidential Oath.

In the mean time, there are those who question whether President Obama will really deliver on his promise of change.  From the liberal side of the political spectrum, plenty of opinions have been published (by reputable commentators) expressing apprehension as to what likely will happen and what actually may not happen during Obama’s tenure in the White House.

On January 18, Salon.com featured an article by David Sirota entitled:  “Obama Sells Out to Wall Street”.  Mr. Sirota expressed his concern over Obama’s accelerated push to have immediate authority to dispense the remaining $350 billion available under the TARP (Troubled Asset Relief Program) bailout:

Somehow, immediately releasing more bailout funds is being portrayed as a self-evident necessity, even though the New York Times reported this week that “the Treasury says there is no urgent need” for additional money.  Somehow, forcing average $40,000-aires to keep giving their tax dollars to Manhattan millionaires is depicted as the only “serious” course of action.  Somehow, few ask whether that money could better help the economy by being spent on healthcare or public infrastructure.  Somehow, the burden of proof is on bailout opponents who make these points, not on those who want to cut another blank check.

Discomfort about another hasty dispersal of the remaining TARP funds was shared by a few prominent Democratic Senators who, on Thursday, voted against authorizing the immediate release of the remaining $350 billion.  They included Senators Russ Feingold (Wisconsin), Jeanne Shaheen (New Hampshire), Evan Bayh (Indiana) and Maria Cantwell (Washington).  The vote actually concerned a “resolution of disapproval” to block distribution of the TARP money, so that those voting in favor of the resolution were actually voting against releasing the funds.  Earlier last week, Obama had threatened to veto this resolution if it passed.  The resolution was defeated with 52 votes (contrasted with 42 votes in favor of it).  At this juncture, Obama is engaged in a game of “trust me”, assuring those in doubt that the next $350 billion will not be squandered in the same undocumented manner as the first $350 billion.  As Jeremy Pelofsky reported for Reuters on January 15:

To win approval, Obama and his team made extensive promises to Democrats and Republicans that the funds would be used to better address the deepening mortgage foreclosure crisis and that tighter accounting standards would be enforced.

“My pledge is to change the way this plan is implemented and keep faith with the American taxpayer by placing strict conditions on CEO pay and providing more loans to small businesses,” Obama said in a statement, adding there would be more transparency and “more sensible regulations.”

Meanwhile, there is worldwide concern about what Obama and Secretary of State Hillary Clinton can accomplish in the foreign relations and anti-terrorism arenas.  As discussed in an editorial from the January 18 Times of London:

Mr Obama’s biggest immediate challenge is in Afghanistan.  The president is hoping a troop surge, which he opposed in Iraq, will work. However, the prospect of a military solution in Afghanistan is remote and he may learn that the hard way.  In the meantime, he has to hope Iraq does not flare up again and that the Iran nuclear question remains one for diplomacy rather than military conflict.  His drive for a Middle East peace deal is not the first by a US president and nor will it be the last.

As the sun finally rises over the Obama Presidency, there are still plenty of clouds in the sky.  Does this mean we are in for more turmoil?  Some people might take this as a sign that it’s about to start raining money.

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A Failure We Won’t Forget

January 15th, 2009 Posted in Uncategorized
Jan, 15 2009
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January 15, 2009

With less than a week before the end of George Bush’s Presidency, we are seeing numerous retrospectives on the successes and failures of the Bush Administration.  Of course, the failures have been plentiful and catastrophic.  Quite a bit of attention has been focused on the inadequate response to Hurricane Katrina.  The use of warrantless wiretaps has become a rallying cry for those calling for the prosecution of Bush Administration officials.  The politicization of the Justice Department is back in the news with the disclosure that a former Justice Department official, Bradley Schlozman, refused to hire attorneys he considered too liberal.  The Administration’s use of torture at Guantanamo is also in the headlines with the revelation by Susan Crawford that Mohammed al-Qahtani (a man alleged to have been the would-be twentieth hijacker from September 11, 2001) was tortured.  Crawford explained that as a result of the treatment of this prisoner, she would be unable to bring him to trial.  Crawford is a former Judge of the U.S. Court of Appeals for the Armed Forces, who in 2007, was appointed to the position of convening authority for military commissions.  In that post, she is the top Bush Administration official overseeing the military trials of suspects held at Guantanamo.

As we reach the end of his second term in office, we cannot help but realize that George W. Bush, as Commander in Chief of our armed forces, never caught America’s worst enemy:  Osama bin Laden.  Despite the cowboy posturing, the “wanted: dead or alive” rhetoric and the numerous assurances to the contrary, George Bush has been unable to capture or kill bin Laden.  Once bin Laden escaped from the battle of Tora Bora, fleeing into the mountainous region between Afghanistan and Pakistan, many observers believed Bush had lost his chance at bringing this villain to justice.  These critics turned out to be right.  Some of my friends believe that Bush never really wanted to catch bin Laden.  Under that theory, bin Laden was more valuable as a “bogeyman”, who could be used to justify the infringements on our liberties and the “harsh interrogation methods” employed by the Bush Administration.  Regardless of whether such theories are true or not, Bush’s pursuit of Osama bin Laden has become yet another abject failure of this administration’s legacy.  If the al-Qaeda attack against the United States had taken place at a later time during Bush’s tenure, he could invoke the excuse that he “didn’t have enough time” to catch bin Laden.  As it turned out, Bush had seven years and four months to capture or kill bin Laden, yet he failed to do either.

In a villa somewhere in western Pakistan, bin Laden is probably watching an American cable newscast and chuckling with delight about his victory over George Bush.  Bush never got him, nor will he ever have a chance at it again.  He must enjoy watching the video clips of Bush doing his little bounce, squinting in attempt to make a tough, cowboy face, cranking up the faux Texas accent, and making some hollow threat to “get bin Laden”.  In his latest audio message, bin Laden taunts President Bush by emphasizing the harsh reality that Bush has been unable to catch him.  As reported by Khaled Wassef and Tucker Reals of CBS News, bin Laden’s newest discourse includes a dig at Bush’s low approval rating:

“Can America keep up the war with us for more decades to come?  All reports and analysis indicate that this is not possible. In fact, 75 percent of American people are happy with the departure of the president who got them into wars they could not possibly win.”

Bin Laden goes on to say President Bush “drowned” the American people in economic woes and “left his successor a difficult legacy, and left him one of two bitter choices … The worst heritage is when a man inherits a long guerrilla warfare with a persevering, patient enemy – a war that is funded by usury.  If he (Obama) withdraws from the war, that would be a military defeat, and if he goes on with it, he’ll drown in economic crisis.”

As President Bush and his minions struggle to re-define the Bush Legacy, we have America’s worst enemy providing an assessment of the Bush years in terms that are painfully close to the truth.  Heckuva’ job, Bushey!

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Obama The Centrist

January 12th, 2009 Posted in Uncategorized
Jan, 12 2009
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January 12, 2009

It was almost one year ago when the conservative National Journal rated Barack Obama as “the most liberal senator in 2007”.  Of course, that was back during the primary season of the 2008 Presidential campaign, when many people believed that the “liberal” moniker should have been enough to sink Obama’s Presidential aspirations.  Now, with the Inaugural just a week away, we are hearing the term “centrist” being used to describe Obama, often with a tone of disappointment.

On Sunday, January 11, David Ignatius wrote an op-ed piece for The Washington Post, entitled:  “Mr. Cool’s Centrist Gamble”.  Mr. Ignatius spelled out how Obama moved toward the political center after his election, beginning with the appointment of Rahm Emanuel as chief of staff, to appointing a Cabinet “which is so centrist it almost resembles a government of national unity”:

Since Election Day, he has taken a series of steps to co-opt his opponents and fashion a new governing majority.  It’s an admirable strategy but also a high-risk one, since the “center,” however attractive it may be in principle, is often a nebulous political never-never land.

Obama’s bet is that at a time of national economic crisis, the country truly wants unity.

The President-elect’s appearance on ABC’s January 11 broadcast of This Week with George Stephanopoulos motivated Glenn Greenwald to write on Salon.com that the interview:

. . .  provides the most compelling — and most alarming — evidence yet that all of the “centrist” and “post-partisan” chatter from Obama’s supporters will mean what it typically means:  devotion, first and foremost, to perpetuating rather than challenging how the Washington establishment functions.

Mr. Greenwald (an attorney with a background in constitutional law and civil rights litigation) began his article by taking issue with the characterization by David Ignatius that Obama’s centrist approach is something “new”.  Greenwald pointed out that for a Democratic President to make a post-election move to the center is nothing new and that Bill Clinton had done the same thing:

The notion that Democrats must spurn their left-wing base and move to the “non-ideological” center is the most conventional of conventional Beltway wisdom (which is why Ignatius, the most conventional of Beltway pundits, is preaching it).  That’s how Democrats earn their Seriousness credentials, and it’s been that way for decades.

Greenwald then focused on a point made by Mr. Obama in response to a question posed by George Stephanopoulos concerning whether the detention facility at Guantanamo will be closed within the first 100 days of the new Presidency.  The President-elect responded that:

It is more difficult than I think a lot of people realize and we are going to get it done but part of the challenge that you have is that you have a bunch of folks that have been detained, many of whom who may be very dangerous who have not been put on trial or have not gone through some adjudication.  And some of the evidence against them may be tainted even though it’s true.  And so how to balance creating a process that adheres to rule of law, habeas corpus, basic principles of Anglo American legal system, by doing it in a way that doesn’t result in releasing people who are intent on blowing us up.

The magic words in Obama’s response that caught Glenn Greenwald’s attention were:  “creating a process”.  Why should due process require creation of a new process outside of our court system?  Mr. Greenwald suspects that this “new process” will be one that allows for the admission of evidence (confessions, etc.) obtained by torture.  If what Mr. Obama has in mind is a process that will protect the secrecy of legitimately-classified information, that is one thing.  Nevertheless, I share Mr. Greenwald’s skepticism about the need for an innovative adjudication system for those detained at Guantanamo.

George Stephanopoulos made a point of directing Mr. Obama’s attention to “the most popular question” on the Change.gov website.  It came from Bob Fertik of New York City, who asked:

Will you appoint a special prosecutor ideally Patrick Fitzgerald to independently investigate the greatest crimes of the Bush administration, including torture and warrantless wiretapping?

The response given by the President-elect involved a little footwork:

We have not made final decisions, but my instinct is for us to focus on how do we make sure that moving forward we are doing the right thing.

Glenn Greenwald’s analysis of Mr. Obama’s performance on This Week, did not overlook that part of the interview:

Obama didn’t categorically rule out prosecutions — he paid passing lip service to the pretty idea that “nobody is above the law,” implied Eric Holder would have some role in making these decisions, and said “we’re going to be looking at past practices” — but he clearly intended to convey his emphatic view that he opposes “past-looking” investigations.  In the U.S., high political officials aren’t investigated, let alone held accountable, for lawbreaking, and that is rather clearly something Obama has no intention of changing.

Obama’s expressed position on whether to prosecute the crimes of the Bush administration is fairly consistent with what he has been saying all along.  Frank Rich covered this subject in his January 10 New York Times editorial:

The biggest question hovering over all this history, however, concerns the future more than the past.  If we get bogged down in adjudicating every Bush White House wrong, how will we have the energy, time or focus to deal with the all-hands-on-deck crises that this administration’s malfeasance and ineptitude have bequeathed us?  The president-elect himself struck this note last spring.  “If crimes have been committed, they should be investigated,” Barack Obama said.  “I would not want my first term consumed by what was perceived on the part of Republicans as a partisan witch hunt, because I think we’ve got too many problems we’ve got to solve.”

Henry Waxman, the California congressman who has been our most tireless inquisitor into Bush scandals, essentially agreed when I spoke to him last week.  Though he remains outraged about both the chicanery used to sell the Iraq war and the administration’s overall abuse of power, he adds:  “I don’t see Congress pursuing it. We’ve got to move on to other issues.”  He would rather see any prosecutions augmented by an independent investigation that fills in the historical record.  “We need to depoliticize it,” he says.  “If a Democratic Congress or administration pursues it, it will be seen as partisan.”

Welcome to Barack Obama’s post-partisan world.  The people at the National Journal are probably not the only ones disappointed by Obama’s apparent move to the political center.  It appears as though we will be hearing criticism about the new administration from all directions.  When he disappoints centrists, you can read about it here.

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Pay Close Attention To This Man

January 11th, 2009 Posted in Uncategorized
Jan, 11 2009
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January 11, 2009

For several years, I have enjoyed following MSN’s Strategy Lab competition.  Strategy Lab is a stock-picking challenge.  They select six contestants: some seasoned professionals, some amateurs and occasionally, one of their own pundits.  Each contestant manages a mock, $100,000 portfolio for a six-month period.  Sometimes, the amateur will out-play the pros.  I always enjoy it when the “conventional wisdom” followed by the investing herd is proven wrong by a winning contestant, who ignores such dogma.

Our current economic situation requires original thinking.  Following the conventional wisdom during an unconventional economic crisis seems like a path to failure.  While checking in on the Strategy Lab website, I noticed an original thinker named Andrew Horowitz.  Mr. Horowitz is a contestant in the current Strategy Lab competition.  He is the only player who has made any money at all with his imaginary $100,000.  Andrew’s portfolio has earned him 13.44 percent as of Wednesday, January 21.  His competitors have been posting dismal results.  One of the regulars, John Reese (nicknamed “Guru Investor”) is down by 41.55 percent.  I think I’ll steer clear of his ashram.  The others currently have losses roughly equivalent to Andrew’s gains.

Andrew Horowitz is the president and founder of Horowitz & Co., an investment advisory firm serving individual and corporate clients since the late 1980’s.  He has written a book, entitled:  The Disciplined Investor.  It is focused on his experiences and what he has learned from twenty years in the investment advisory business.  He has been featured and quoted regularly in the media, including such publications as The Wall Street Journal, The Financial Times, Bloomberg, Barron’s and Reuters.  He also has a blog website with the same name as his book:  The Disciplined Investor.

His recent article for MSN caught my attention.  It is entitled:  “Why invest in this market anyway?” He began this journal entry discussing a “consider the source” approach to evaluating the advice given by those currently encouraging people to buy stocks now, while they are “cheap”.  His “where do we go from here” discussion resonated with my belief about where the stock market is headed:

The fourth-quarter earnings season kicked off with little fanfare last week and a great deal of bad news.  Many have asked if there is a light at the end of this tunnel.  My reply:  Sure there is, but it’s the headlights of a speeding 18-wheeler coming straight for us.  We have the choice of getting run over or stepping aside.

This is not a popular commentary.  I know that many investors would prefer to hear all about opportunities to make money on the “upside,” but until there is one shred of good news, I refuse to throw my hard-earned money into a bonfire just to watch it be incinerated.

Mr. Horowitz also made a point of emphasizing something we don’t hear often enough from those media darlings entrusted to preach the gospel of the brokerage firms:

With all the talk of change coming from our government officials, it is evident that if things continue down this path the only thing that will be left in our pockets is change.  It’s as if investors are waiting for something incredible and magical to be said, but there is only so much that words can accomplish.  Americans need action, assistance and reform in the banking system.

In an era when we are bombarded with investing advice from a multitude of “experts” appearing on television and all over the internet, it becomes difficult to distinguish a good signal from all of the noise.  One’s ability to give good investment advice in a bull market does not necessarily qualify that person to be a reliable advisor in the current milieu.  The performance by Andrew Horowitz in the Strategy Lab competition (so far) underscores the value of that old maxim:  “Money talks and bullshit walks”.  I’ll be paying close attention to what he has to say as we make our way through the treacherous economic times ahead.

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The Haunted Computer

January 8th, 2009 Posted in Uncategorized
Jan, 08 2009
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January 8, 2009

On January 6, Slate featured an interesting report by William Saletan concerning a Defense Department proposal request for a new computer application to help children of deployed service personnel in coping with the lack of parental communication.  The concept is described as a “Virtual Dialogue Application for Families of Deployed Service Members”.  It supposedly would provide an opportunity for children (within the specified age range of 3 and 5 years old) to have a “virtual” conversation with a deployed parent who (for whatever reason) would be unavailable for telephone or on-line contact.  The idea is to have a video image of the parent (possibly high-resolution and 3-D) available to “converse” with the child.  The application is to be either PC-based or web-based.  Here is how it was described on the Defense Department’s TechMatch website:

The Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury recognizes that family outreach and advocacy is pivotal for both the psychological health of the family and the resilience of the Service Member.  Deployments put stress on the entire family, especially small children and communication is key.  The ability to reach out and communicate with loved ones from areas of conflict is better than at any time in history.  Nevertheless, the stresses of deployment might be softened if spouses and especially children could conduct simple conversations with their loved ones in immediate times of stress or prolonged absence.  Historically, families have derived comfort and support from photographs or mementos, but current technology SHOULD allow for more personal interactive messages of support.  Over 80% of American children between the ages of three and five regularly use computers, and 83% of families have a computer in their home.  So, computer-based applications would resonate with children and capture their interest and imagination.  The challenge is to design an application that would allow a child to receive comfort from being able to have simple, virtual conversations with a parent who is not available “in-person”.  We are looking for innovative applications that explore and harness the power of advanced interactive multimedia computer technologies to produce compelling interactive dialogue between a Service member and their families via a pc- or web-based application using video footage or high-resolution 3-D rendering.  The child should be able to have a simulated conversation with a parent about generic, everyday topics.  For instance, a child may get a response from saying “I love you”, or “I miss you”, or “Good night mommy/daddy.”  This is a technologically challenging application because it relies on the ability to have convincing voice-recognition, artificial intelligence, and the ability to easily and inexpensively develop a customized application tailored to a specific parent.  We are seeking development of a tool which can be used to help families (especially, children) cope with deployments by providing a means to have simple verbal interactions with loved ones for re-assurance, support, affection, and generic discussion when phone and internet conversations are not possible.

Upon reading about this, the first question that came to my mind concerned situations where the parent unfortunately is killed in the line of duty.  Is the child to continue using this application to have “virtual conversations” with a deceased parent?  Would that be healthy?  William Saletan voiced a similar concern in his article:

The deployed parent still has a body, of course.  But, being deployed, he’s at risk of becoming disembodied the old-fashioned way.  At that point, real-time video is no longer an option, and the language of the DoD project — to provide verbal interactions “when phone and internet conversations are not possible” — takes on a whole new meaning.

*    *    *

I’m not saying this kind of ghost is for everyone.  Some of us don’t like our parents.  Some of us find the idea of keeping them around bizarre or sacrilegious.  But I dare you to tell a child who has lost her father in Iraq or Afghanistan that she can’t keep a virtual rendition of him to help her go to sleep.  And I dare you to stop the millions of others who will want ghosts of their own when today’s military project becomes, once again, tomorrow’s mass market.

The reaction to this idea from those involved in the mental health field should be interesting.  Whether or not the military ever embraces such a computer application, Saletan’s point about the “mass market” deserves further pondering.  There will be the inevitable pornographic variations on this project’s theme.  Nevertheless, could such an application be configured in other ways to be of use to adults?  How about “Virtual Seance” — a website that allows users to “communicate” with dead historical figures or celebrities?  Will living celebrities (or, should I say, “has beens”) have websites where fee-paying fans can have a “virtual conversation” with that celebrity?  Will politicians use this technology to allow their constituents “virtual face time” with the pol to vent their spleens?

Healthy or not, this computer application seems like an idea that will not quickly go away.

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Clean-Up Time On Wall Street

January 5th, 2009 Posted in Uncategorized
Jan, 05 2009
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January 5, 2009

As we approach the eve of the Obama Administration’s first day, across America the new President’s supporters have visions of “change we can believe in” dancing in their heads.  For some, this change means the long overdue realization of health care reform.  For those active in the Democratic campaigns of 2006, “change” means an end to the Iraq war.  Many Americans are hoping that the new administration will crack down on the unregulated activities on Wall Street that helped bring about the current economic crisis.

On December 15, Stephen Labaton wrote an article for the New York Times, examining the recent failures of the Securities and Exchange Commission as well as the environment at the SEC that facilitates such breakdowns.  Some of the highlights from the piece included these points:

.   .   .    H. David Kotz, the commission’s new inspector general, has documented several major botched investigations.  He has told lawmakers of one case in which the commission’s enforcement chief improperly tipped off a private lawyer about an insider-trading inquiry.
*   *   *
There are other difficulties plaguing the agency.  A recent report to Congress by Mr. Kotz is a catalog of major and minor problems, including an investigation into accusations that several S.E.C. employees have engaged in illegal insider trading and falsified financial disclosure forms.
*   *   *
Some experts said that appointees of the Bush administration had hollowed out the commission, much the way they did various corners of the Justice Department.  The result, they say, is hobbled enforcement and inspection programs.

On December 18, Barack Obama announced his intention to name Mary Schapiro as the Chair of the Securities and Exchange Commission.  Many news outlets, including National Public Radio, presented an enthusiastic look toward the tenure of Ms. Schapiro in this office:

Speaking at the news conference on Thursday, Schapiro said there must be “consistent and robust enforcement” of regulations to protect investors, saying it will be her top priority as SEC chief.

On the other hand, in the December 18 Wall Street Journal, Randall Smith and Kara Scannell provided us with a more informative analysis of the SEC nominee’s track record:

She was credited with beefing up enforcement while at the National Association of Securities Dealers and guiding the creation of the Financial Industry Regulatory Authority, which she now leads.  But some in the industry questioned whether she would be strong enough to get the SEC back on track.
*  *  *
Robert Banks, a director of the Public Investors Arbitration Bar Association, an industry group for plaintiff lawyers  . . .  said that under Ms. Schapiro, “Finra has not put much of a dent in fraud,” and the entire system needs an overhaul. ” The government needs to treat regulation seriously, and for the past eight years we have not had real securities regulation in this country,” Mr. Banks said.

Since Ms. Schapiro took over Finra in 2006, the number of enforcement cases has dropped, in part because actions stemming from the tech-bubble collapse ebbed and the markets rebounded from 2002 to 2007.  The agency has been on the fringe of the major Wall Street blowups, and opted to focus on more bread-and-butter issues such as fraud aimed at senior citizens.

Out of the gate, Ms. Schapiro faces potential controversy.  In 2001 she appointed Mark Madoff, son of disgraced financier Bernard Madoff, to the board of the National Adjudicatory Council, the national committee that reviews initial decisions rendered in Finra disciplinary and membership proceedings.  Both sons of Mr. Madoff have denied any involvement in the massive Ponzi scheme their father has been accused of running.

It appears as though we might see Ms. Schapiro face some grilling about the Madoff appointment, when she faces her confirmation hearing.  Beyond that, the points raised by Randall Smith and Kara Scannell underscore the question of whether Mary Schapiro will really be an agent of change on Wall Street or just another “insider” overseeing “business as usual”.  To assuage such concern, many commentators have emphasized that Ms. Schapiro has never worked for a brokerage firm or investment bank.  Her Wall Street experience has been limited to regulatory activity.  Despite this, one must keep in mind a point made by Michael Lewis and David Einhorn in the January 3 New York Times:

It’s not hard to see why the S.E.C. behaves as it does.  If you work for the enforcement division of the S.E.C. you probably know in the back of your mind, and in the front too, that if you maintain good relations with Wall Street you might soon be paid huge sums of money to be employed by it.

Michael Lewis is the author of Liar’s Poker, a non-fiction book about his own Wall Street experience as a bond salesman.  With David Einhorn, he wrote a two-part op-ed piece for the January 3 New York Times.  The above-quoted passage was from the first part, entitled:  “The End of the Financial World as We Know It”.  The second part is entitled:  “How to Repair a Broken Financial World”.  The first section looked at the Bernie Madoff Ponzi scheme, using it to underscore this often-ignored reality about the Securities and Exchange Commission and its inability to prevent or even cope with the current financial crisis:

Indeed, one of the great social benefits of the Madoff scandal may be to finally reveal the S.E.C. for what it has become.

Created to protect investors from financial predators, the commission has somehow evolved into a mechanism for protecting financial predators with political clout from investors.  (The task it has performed most diligently during this crisis has been to question, intimidate and impose rules on short-sellers — the only market players who have a financial incentive to expose fraud and abuse.)

In the second section of their commentary, Lewis and Einhorn suggest six changes to the financial system “to prevent some version of what has happened from happening all over again”.  Let’s hope our new President, the Congress and others pay serious attention to what Lewis and Einhorn have said.  Cleaning up Wall Street is going to be a dirty job.  Will those responsible for accomplishing this task be up to doing it?

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Jackass Of The Year Award

January 1st, 2009 Posted in Uncategorized
Jan, 01 2009
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January 1, 2009

At year’s end, we see retrospectives of the most important events, numerous top ten lists and recognitions of achievement in one area or another.  2008 brought a record level of cynicism to the American people because of the economic catastrophe, the Bernie Madoff scandal and the cartoon-like escapades from the Presidential campaign.  Accordingly, it seems only appropriate to pay homage to the biggest Jackass of the Year.  Since I advertise this website as a “Blago-free zone”, the current Governor of Illinois is automatically disqualified from the competition.  So, let’s take a look at some of the runners-up and finally, the winner of the Jackass of the Year Award.

Our first contestant is John Ensign.  He is chairman of the National Republican Senatorial Committee, representing the State of Nevada in the United States Senate.  On November 2, 2008 he appeared on the CBS television program, Face The Nation with Bob Schieffer.  Election day was two days away and Ensign found it necessary to blame the likely Republican losses on the economic downturn.  He described the Republicans’ fate in these terms:

“And we were starting to do very, very well, but when the financial crisis hit, that financial crisis really is — has been a — almost a body blow to Republicans.  And unfortunately, it was allowed to be portrayed that this was a result of deregulation, when in fact it was a result of overregulation.”

That’s right.  Ensign Douchebag thought he could convince the public that the economic crisis was the result of over-regulation of the financial system, rather than the deregulation described by everyone else in the world.  That noble statement certainly rates runner-up status for the Jackass of the Year Award.

Our next contestant is Reverend Jeremiah Wright, former pastor of Chicago’s Trinity United Church of Christ and embarrassment to Barack Obama.  Thank God Reverend Wright’s fifteen minutes of fame are finally over.  Although his infamous sermon with the less-than-patriotic remarks about America was given in 2003, by April of 2008, Rev. Wright made a point of resurrecting the controversy concerning his disappointing association with Barack Obama.   At that time Wright hit the road, appearing on Bill Moyers Journal, speaking before the NAACP and giving a grand performance before the National Press Club.  He made a fool of himself all three times and (perhaps to his disappointment) his bad karma never rubbed off on Barack.  The pastor has also been a disgrace to the name of the Right Reverend Carl Wright (comedic sidekick of Chicago blues maven, Pervis Spann).  Although Jeremiah Wright rated recognition, the competition for the Jackass Award was tough this year.

We cannot overlook the valiant efforts of Joe “The Tool” Lieberman to win this honor.  Although the people of Connecticut elected Joe to represent their state in the Senate, The Tool spent most of 2008 looking like a stray dog, following candidate John McCain around the campaign trial.  You can find my prior rants about Senator Lieberman here, here, here and here.

We must also give consideration to Christopher Cox, the chairman of the Securities and Exchange Commission.  John McCain was on to him.  It just wasn’t fair that poor, old Senator McCain took so much heat for pointing out that Cox had to go.  McCain made the mistake of stating that he, as President, would have authority to fire Cox.  Although he was wrong about that, he was right about the notion that Cox had been a problem for the SEC.  On December 16, Jessie Westerbrook of Bloomberg news reported that Cox was blaming his subordinates for the enforcement lapses that allowed the scam, perpetrated by Bernie Madoff, to continue for several years after the SEC should have stopped it.  Cox apparently believes in the doctrine that “the buck stops” several levels below himself on the SEC food chain.  The environment at the SEC, with Cox at the helm, was best summed up in a December 27 article from the Los Angeles Times by Amit Paley and David Hilzenrath.  Here’s what they had to say about the tenure of Chairman Cox and his performance during the economic crisis:

Though Cox speaks of staying calm in the face of financial turmoil, lawmakers across the political spectrum counter that this is actually another way of saying that his agency remained passive during the worst global financial crisis in decades.  And they claim that Cox’s stewardship before this year — focusing on deregulation as the agency’s staff shrank — laid the groundwork for the meltdown.

“The commission in recent years has handcuffed the inspection and enforcement division,” said Arthur Levitt, SEC chairman during the Clinton administration.  “The environment was not conducive to proactive enforcement activity.”

*    *    *

But former officials said enforcement suffered during his tenure.  A pilot program begun last year required enforcement staff to meet with the commissioners before beginning settlement talks in certain cases involving nonfinancial firms.  Some former officials said the change was just one example of new bureaucratic impediments that slowed enforcement work.  The commissioners also made clear that they thought staff members were being too aggressive in some cases, the officials said.

”I think there has been a sentiment communicated to rank-and-file staff, lawyers and accountants that you don’t go after the establishment,” said Ross Albert, a former special counsel in the enforcement division.
*    *    *
An analysis by law firm Morgan, Lewis & Bockius showed that the SEC’s actions against broker-dealers, who serve as intermediaries in financial trades, dropped about 33%, from about 89 cases in fiscal 2007 to 60 cases in fiscal 2008.

Heckuva’ job, Coxey!   Nevertheless, you have been overshadowed in this year’s competition.

The winner of the 2008 Jackass of the Year Award is a professor from Russia, named Igor Panarin.  He is a former member of the KGB, who is apparently so upset over the breakup of the Soviet Union, that for the past ten years, he has been predicting that the United States would also break up.  On December 29, Andrew Osborn reported in The Wall Street Journal that Panarin has been doing two interviews per day, discussing how “an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S.”  The article explained:

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar.  Around the end of June 2010, or early July, he says, the U.S. will break into six pieces — with Alaska reverting to Russian control.

Worse yet, the other five parts of the country will supposedly become republics that will be part of or under the influence of Canada, the European Union, Mexico, China or Japan.  Osborn’s article included a picture of Panarin’s map, showing how the various segments of the country would be apportioned.  Panarin’s ideas have brought him quite a bit of publicity  . . . and TheCenterLane.com’s Jackass of the Year Award for 2008!  Congratulations, Jackass!

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Another Crisis On Obama’s Crowded Front Burner

December 29th, 2008 Posted in Uncategorized
Dec, 29 2008
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December 29, 2008

Barack Obama’s first day as President is still three weeks away.  Nevertheless, on that first day in the Oval Office, he will be expected to focus his attention on a number of crisis situations.  How many are there now?  First, we have the economic crisis and all of its subplots:  infrastructure spending and job creation, stopping the foreclosures, oversight of the TARP giveaway (which should include bringing the TARP thieves to justice), a new economic stimulus package, getting the Securities and Exchange Commission to start doing its job, responding to cries of help from state governments and deciding on what to do about the American automakers.  As if those economic emergencies weren’t enough, the new President will need to multitask his crisis management skills to take on a number of other issues.  These include health care reform, undoing all of Bush’s “midnight” Executive Orders, winding down the Iraq war, building up troop strength in the neglected Afghanistan war and, speaking of neglect, the age-old Israeli-Palestinian conflict, which has again reared its ugly head.

Jeremy Ben-Ami is the Executive Director of J Street, which he describes as “the political arm of the pro-Israel, pro-peace movement”.  On December 27, Mr. Ben-Ami issued the following plea to the Obama administration from the J Street website:

The need for diplomatic engagement goes beyond a short-term ceasefire.  Eight years of American neglect and ineffective diplomacy have led us directly to a moment when the prospects of a two-state solution to the Israeli-Palestinian conflict hang in the balance and with them the prospects for Israel’s long-term survival as a Jewish, democratic state.

We urge the incoming Obama administration to lead an early and serious effort to achieve a comprehensive diplomatic resolution to the Israeli-Palestinian and Arab-Israeli conflicts.

This is a fundamental American interest as we too stand to suffer as the situation spirals, rage in the region is directed at the United States, and our regional allies are further undermined.  Our goals must be a Middle East that moves beyond bloody conflicts, an Israel that is secure and accepted in the region, and an America secured by reducing extremism and enhancing stability.  None of these goals are achieved by further escalation.

The December 27 Israeli air strike on the Gaza Strip was code-named:  “Operation Cast Lead”.  Reaction to the strike from the Israeli media ran the spectrum from support to outrage.  On December 28, The Jerusalem Post ran a favorable editorial approving the attack:

The IDF’s mission is not to bring down the Hamas regime, but to bring quiet to the South.  In a sense we are asking Hamas to stop being Hamas. The Islamists need to decide whether they want to go down in flames or are prepared to take on the responsibilities that come with control over the Strip. T hey may give Israel no choice but to topple their administration.

On the other hand, Gideon Levy wrote a scathing commentary on the incident for the December 29 edition of Haaretz:

Once again the commentators sat in television studios yesterday and hailed the combat jets that bombed police stations, where officers responsible for maintaining order on the streets work.  Once again, they urged against letting up and in favor of continuing the assault.  Once again, the journalists described the pictures of the damaged house in Netivot as “a difficult scene.”  Once again, we had the nerve to complain about how the world was transmitting images from Gaza.  And once again we need to wait a few more days until an alternative voice finally rises from the darkness, the voice of wisdom and morality.

On December 28, Barak Ravid of Haaretz provided an excellent, objective “back-story” on the planning and execution of this air strike.  The article explained that prior to the offensive, Israeli Foreign Minister, Tzipi Livni, went to Cairo to inform Egypt’s president, Hosni Mubarak, of Israel’s decision to strike at Hamas.  Ms. Livni is the candidate from the centrist Kadima party who will oppose Likud party stalwart, Benjamin Netanyahu, in the February 10 election for the office of Prime Minister.  Netanyahu had been ahead in the polls, prior to the execution of Operation Cast Lead.  If Israel can avoid a ground war in Gaza, she may win the support of the more hawkish voters who would have voted for Netanyahu.  A televised broadcast by Haaretz in conjunction with Channel 10 News, reported that   “Palestinians said 180 of those killed were Hamas officials, the rest — civilians.”  As of the present time, the total death toll from the assault is believed to be 280.  If 180 of those individuals really were “Hamas officials”, this could work to Livni’s advantage in the upcoming election.

The Obama administration’s diplomatic initiative on this conflict will redefine America’s role in the Middle East.  A December 28 editorial in The Washington Post concluded that the Gaza incident could prove to be a costly distraction from the effort to curb Iran’s nuclear ambitions.  Nevertheless, if Hillary Clinton were to dispatch an envoy to Syria to engage the al-Assad regime in getting control over Hamas’ activities in Gaza:  Could this undermine Iranian hegemony in the area?  Ultimately, everyone in the world is hoping that the Obama administration will provide the aggressive diplomacy that has been lacking in the Middle East for the past eight years.  The pressure for immediate results will be just one more headache waiting for him on Day One.

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No Jews Allowed In Rick Warren’s Heaven

December 22nd, 2008 Posted in Uncategorized
Dec, 22 2008
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December 22, 2008

There has been quite a bit of attention focused on Barack Obama’s choice of conservative evangelical minister, Rick Warren, to deliver the invocation at the Presidential inauguration ceremony on January 20.  Most of the outrage over that choice stems from the fact that Warren was actively involved in promoting Proposition 8, the controversial California ballot initiative banning same-sex marriages.

A large number of objections to Warren’s participation in this historic ceremony are coming from Hollywood.  As Tina Daunt reported in the December 20 Los Angeles Times, the entertainment community’s reaction to Warren’s role in the inaugural was “swift, angry and bitter”.  Her article quoted Hollywood publicist, Howard Bragman who said the following about Barack Obama:

“What he didn’t realize was how much untapped energy there was in the gay and lesbian community because of the passage of Prop. 8,” said Bragman. “Obama didn’t realize, after all the support he got from the gay and lesbian community, we feel betrayed right now.”

Meanwhile, back at the nation’s capitol, Barney Frank, the openly gay Senator from Massachusetts, had much to say about Warren’s role in the inaugural ceremony.  As Jason Blum reported on December 21 at the Bloomberg website, Senator Frank said this about the inclusion of Warren in the event:

“Giving that kind of mark of approval and honor to someone who has frankly spoken in ways I and many others have found personally very offensive, I thought that was a mistake for the president-elect to do.”

I particularly enjoyed the piece written by Christopher Hitchens for Slate on December 19.  I thought the televangelist lobby would have been run out of Washington in the wake of the 2008 elections.  Chris Hitchens appears to be sharing my disappointment over that group’s enduring presence on Capitol Hill, despite the efforts of many to preserve the separation of church and state.  The most impressive point made in this article concerned Warren’s insistence that there are no Jews allowed in heaven:

It is a fact that Rick Warren, pastor of the Saddleback Church in Orange County, Calif., was present at a meeting of the Aspen Institute not long ago and was asked by Lynda Resnick — she of the pomegranate-juice dynasty — if a Jew like herself could expect to be admitted to paradise.  Warren publicly told her no.

Similarly, Time magazine’s Joe Klein had this to say in his December 16 posting on his Swampland blog at Time.com, concerning Warren’s insistence that Jews can’t go to heaven:

I am not a big fan of Rick Warren’s.  He thinks I’m going to hell.  He said so in mixed company, at an Aspen Institute forum.  He was asked if Jews were going to hell.  He said yes.  He can go ahead and feed every poor child in Africa and I’m still going to think he’s a fool for believing that.  Reverend Rick is also not too big on gay or women’s rights.  (Indeed, if Jews–and all other non born-again Christians–homosexuals, feminists, and anyone who has either had an abortion, performed an abortion or reluctantly agrees that it’s none of our business who has abortions  …  if all those people are going to hell, then heaven’s got to be about as interesting as linoleum.)

Regardless of the controversies over Proposition 8 and same-sex marriage, is it really appropriate to have a man deliver the invocation at the Presidential inauguration ceremony, when that man professes that Jews are not allowed into heaven?  Does Warren believe that there is a big “No Jews Allowed” sign at the pearly gates?  Has heaven been getting away with something that American country clubs have not been able to do, since the 1970s?

There is obviously plenty wrong with having someone of Warren’s ilk speaking at the Presidential inauguration.  Gay weddings constitute just one of many issues these characters have on their list of things to not tolerate.  Chris Hitchens suggested three questions to be asked of the Obama transition team, before the inauguration proceeds:

— Will Warren be invited to the solemn ceremony of inauguration without being asked to repudiate what he has directly said to deny salvation to Jews?

— Will he be giving a national invocation without disowning what his mentor said about civil rights and what his leading supporter says about Mormons?

— Will the American people be prayed into the next administration, which will be confronted by a possible nuclear Iran and an already nuclear Pakistan, by a half-educated pulpit-pounder raised in the belief that the Armageddon solution is one to be anticipated with positive glee?

Remember John McCain’s old expression, “agents of intolerance”?  Who would have thought that one such agent would deliver the invocation when Barack Obama is sworn in as our next President?

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Dirty Rotten Scoundrels

December 18th, 2008 Posted in Uncategorized
Dec, 18 2008
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December 18, 2008

The Ponzi Scheme case involving Bernie Madoff is only the latest example of scumbaggery on Wall Street.  Madoff helped found the NASDAQ Exchange and established a reputation for himself as one of the captains of the financial world.  Now we know that he pilfered over 50 billion dollars from sophisticated investors, colleges, charitable institutions, banks and plain-old, rich people.  Worse yet, when he couldn’t get enough co-signers to back his ten-million dollar bail, he was placed under “house arrest” and confined to his $7,000,000 home.  When a car thief can’t make bail, he sits in jail until his case is tried.  Why is it that when someone is charged with stealing ten million times that much, he gets treated as though he was driving on an expired license?    By the way:  How does somebody hide fifty billion dollars?  Is he going to claim that he lost it or that he blew it all on lottery tickets?

The knaves who held themselves out as financial magicians have made pimps and drug dealers seem like Red Cross volunteers, by comparison.  Beyond that, the government institutions and officials charged with protecting the integrity of our financial system have been out to lunch for several years.  Worse yet, these hacks continue to facilitate the theft of trillions of dollars of taxpayer money and, for this reason, I believe they all belong in prison.  On second thought, they should be placed before a firing squad along with the swindlers whom they enabled.  After the Enron treachery was exposed to the light of day, one would have thought that the Securities and Exchange Commission might have started doing its job.  It didn’t.  People have to start forcing our elected officials to find out why.  I think I know the answer.  I believe it’s because many of the people entrusted to regulate the financial system are crooks themselves.

On December 16, Brent Budowsky posted an important article on The Hill website concerning the bailout bungle.  Mr. Budowsky is a gentleman who earned an LL.M. degree (that’s something you work on after graduating from law school) in International Financial Law from the London School of Economics.  He was a former aide to Senator Lloyd Bentsen and Representative Bill Alexander.  Mr. Budowsky pointed out that:

Government agencies have poured close to $8 trillion into banking bailouts.  The Treasury secretary has promoted massive government support of troubled, failed and corrupted institutions.

This program is a 100 percent top-down exercise involving the largest amount of money in history.

Virtually none of this money directly helps average Americans. Virtually none of it trickles down to the people who suffer the most and pay for the program.

*   *   *

The Securities and Exchange Commission is discredited.  The Federal Reserve has failed in its duty as banking regulator. Congress has failed in its duty of oversight.  The most wise and citizen-friendly regulator, Sheila Bair of the Federal Deposit Insurance Corporation, is treated with contempt by the Treasury secretary.

*   *   *

Today the Federal Reserve Board refuses to disclose information regarding some $2 trillion provided to financial institutions.  Bloomberg business news has filed a historic freedom-of-information case seeking disclosure.  Congress and the president-elect should support it.

Bailout money is not a private account that belongs to Fed Chairman Ben Bernanke, Fed governors, the Treasury secretary or the banks.  It is the people’s money.  It should be used to benefit the people.  It should be monitored through the checks and balances of the democratic process.

Secrecy is the enemy of equity, integrity and common sense. Secrecy is the friend of negligence, misjudgment and corruption.  There are probably selected instances where the Fed should not disclose, but show me $2 trillion of secretly spent money and I will show you trouble.

Do you care to hazard a guess as to what the next Wall Street scandal might be?  I have a pet theory concerning the almost-daily spate of “late-day rallies” in the equities markets.  I’ve discussed it with some knowledgeable investors.  I suspect that some of the bailout money squandered by Treasury Secretary Paulson has found its way into the hands of some miscreants who are using this money to manipulate the stock markets.  I have a hunch that their plan is to run up stock prices at the end of the day before those numbers have a chance to settle back down to the level where the market would normally have them.  The inflated “closing price” for the day is then perceived as the market value of the stock.  This plan would be an effort to con investors into believing that the market has pulled out of its slump.  Eventually the victims would find themselves hosed once again at the next “market correction”.  I don’t believe that SEC Chairman Christopher Cox would likely uncover such a scam, given his track record.  Perhaps we can thank him when “vigilante justice” comes to Wall Street.

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