Barack Obama does Hillary Clinton's act

America Wants To Know just watched Barack Obama's thirty-minute political message, televised on three broadcast networks and four cable networks.

We barely recognized him.

Gone was the Obama we saw in the primaries, the candidate of optimism and can-do American exceptionalism. In his place was a national welfare caseworker, canvassing the country for hard-luck stories and offering promises that the government will help.

Even worse was a soundtrack with unbearably whiny, poignant, tearjerking, chick-flick music.

It made The Grapes of Wrath look like a Mel Brooks movie.

Lightening the mood, though, was the selection of soon-to-be welfare cases on display for the voters' empathy, or pity. The show began with the story of a white family that bought a house in the suburbs to keep the kids out of the city schools. Now they're sad and surprised to find that their expenses are higher.

Then there was the African-American woman whose husband decided to retire ten years ago, leaving her without any health insurance to cover the cost of the twelve prescription drugs she takes every day. "Five of those years he had to go back to work," she complained.

Imagine having to work to support your family. That shouldn't happen in America. Music up!

Then there was the white woman who worked with at-risk youth and special-needs children, probably on a salary paid by the taxpayers. She was feeling put-upon because food and electricity and other living expenses were taking a big bite out of her paycheck.

Now we're getting to it.

In Barack Obama's America, you have the right to spend your money on fun stuff.

Then, when you run out of money, all you have to do is look sad and move to a swing state, and Barack Obama will jam legislation through the Democratic Congress to pay for all those dull-but-necessary things like housing, food, utilities and health care.

What a depressing finish to a depressing presidential campaign.

Barack Obama has adopted Hillary Clinton's world view. "I've met families in this state and all over our country who've lost their homes to foreclosures," Senator Clinton said in her New Hampshire election night speech, "Men and women who work day and night but can't pay the bills, and hope they don't get sick, because they can't afford health insurance. Young people who can't afford to go to college to pursue their dreams."

This is what Barack Obama said that night:

"No matter what obstacles stand in our way, nothing can stand in the way of the power of millions of voices calling for change. We have been told we cannot do this by a chorus of cynics. They will only grow louder and more dissonant in the weeks and months to come. We've been asked to pause for a reality check. We've been warned against offering the people of this nation false hope. But in the unlikely story that is America, there has never been anything false about hope. For when we have faced down impossible odds, when we've been told we're not ready or that we shouldn't try or that we can't, generations of Americans have responded with a simple creed that sums up the spirit of a people: Yes we can."

That's all gone now. Tonight his message was: Abandon hope, sign here for welfare.

Depressing.

America Wants To Know just can't believe that's a winning message in this country.

We can't believe Americans think "the rich" can or should be taxed at a high enough rate to guarantee that "the middle class" can move to nicer neighborhoods, retire early, and have extra spending money for fun stuff.

We can't believe Americans will vote for a candidate who tells them they're the beaten-down victims of an unfair fate.

We can't believe Barack Obama teased Rudy Giuliani about cross-dressing, and then turned up on seven television networks disguised as Hillary Clinton.

Does Sportsbook.com still have McCain at 4-1?


Copyright 2008

Editor's note: You might be interested in the earlier posts, "The Romantic Appeal of Barack Obama," "Hillary Clinton and the basic bargain," "Michelle Obama is good," "Barack Obama explains socialism," and "Barack Obama: 'We don't mind....'"

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The strange defense of Sarah Palin's wardrobe

"This is just an unfortunate misunderstanding," Sarah Palin didn't say. "When Senator McCain chose me to be his running mate, it didn't just catch the country by surprise, it caught me by surprise. There I was in Arizona with just a few things in a suitcase and suddenly I'm on the schedule for ten appearances a day and all my clothes are in Alaska."

Sarah Palin didn't say that.

"Even worse," Governor Palin didn't say, "and I know a lot of women can empathize with this, I just had a baby and a lot of my clothes, um, well, they don't fit the way they once did. Not at the moment, I hope that will change! I'm trying to find time for jogging, it's really hard."

Sarah Palin didn't say that, either.

"So in all the rushing around before the Republican National Convention in Minneapolis," Governor Palin continued not to say, "Some well-intentioned people ran out and bought me some jackets and blouses and skirts. They have very good taste, and they bought some very lovely things at some wonderful stores. And I'm grateful for their help, but of course I'm not accepting clothes or any other kinds of gifts paid for by campaign donations to the Republican Party. It was always intended that these clothes would be donated to charity, and it's my understanding that this is completely in compliance with the law. If that turns out to be incorrect, of course I'll pay for every single item out of my own personal funds."

That concludes the statement Sarah Palin did not make.

Here's what Governor Palin actually said, in an interview Thursday with Jill Zuckman of the Chicago Tribune:

"But I'm glad you brought up the wardrobe. That whole thing is just, bad! Oh, if people only knew how frugal we are. The clothes that were loaned to us during the convention. And I don't think it was anywhere near...What did they say, Tracey? $150 grand? It wasn't anywhere near that. Those are not ours. We give those back, those go to charity or they'll be auctioned off or whatever. That's not even my property. So to be criticized for that, that is not who we are."

So that's her story. The critics are bad, the critics are wrong, the critics are painting a false picture of her.

Try again, Governor.


Copyright 2008

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Barack Obama: "We don't mind..."

Senator Barack Obama held a press conference in Richmond, Virginia, on Wednesday and tried to explain what he meant when he told a Toledo plumber named Joe that he wants to spread the wealth around. The Democratic presidential candidate was defending his plan to raise taxes on people who make more than $250,000 in order to send checks to people who make less.

"The simple point I was making," Obama said, "was that even assuming he's at a point that he wants to buy a business that he hopes will generate more than $250,000, the point I was making was that ten years ago or five years ago or even a year ago when he was making a lot less than that, he was having a tough time."

Then the senator accidentally explained more than he intended.

"We don't mind people getting enormously wealthy because of their skills and their talents and their drive," he said.

Is that right.

He doesn't mind.

How generous of him.

In that one sentence, Senator Barack Obama unintentionally put his finger on the very thing that infuriates so many voters about politicians in general and liberal, or if you prefer, progressive, politicians in particular.

It's not their money.

If you go to school, and get a job, and put in a lot of hard hours at work when you could be home watching Oprah, the money you earn belongs to you.

Not to them.

Even if you inherit wealth, that money belongs to you.

Not to them.

That's why the story of 'Joe the Plumber' has such resonance.

It's flat-out alarming to watch an American politician blithely dividing the country into people who have more than they need and people who need more than they have.

In a free country, it's none of the government's business whether you need what you have.

Senator Obama's views are a perfectly logical extension of the progressive tax code and the social safety net. People who have more should pay more, the reasoning goes, and people who are in trouble should get a little help.

It's not a long walk to the view that government should set a ceiling on how much people can earn, or inherit, before their money starts to become everybody else's property.

It's just a short step.

For Senator Obama, it may be a short step right out the window.


Copyright 2008

Editor's note: You might be interested in the earlier post, "Barack Obama explains socialism," and in "The Tyranny of the Children" and "Defending Capitalism" at www.SusanShelley.com.

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Tabloid update: "Laura Gets $15M Divorce Pay Off!"

If you don't do your own grocery shopping, you are missing out on a lot of entertainment.

Yesterday, for example, America Wants To Know was unloading a grocery cart in the checkout lane at a local supermarket when suddenly the Globe tabloid jumped right out of the rack and into our hands.

"Laura Gets $15M Divorce Pay Off!" the cover shouted in big yellow letters, "Bush buys wife Dallas mansion where she'll live ALONE."

Naturally we tossed the Globe onto the conveyor belt, where it rolled with the tomatoes toward the cash register.

We noticed the customer in line ahead of us tilting her head as if she was trying to read the cover sideways.

"Are you buying that magazine?" she asked.

"Yes," we answered without apology, "Gotta read all about the big divorce."

"Who's getting divorced?" she asked.

"George and Laura Bush."

The woman nodded. "She's probably sick of him," she said, "like the rest of us."

On to the story.

The Globe reports that President and Mrs. Bush have reached a "super-secret pact" to end their marriage in all but name. Mr. Bush has agreed to buy his wife "a palatial Dallas-area estate" and pay her $35,000 a month for living expenses. Mrs. Bush has agreed to drop her plans to file for divorce.

"The deal is done and finished," the Globe's source said. "She gets the home. She gets the money. She gets rid of him."

He gets the right to say he's still married to her, with the side benefit that he won't have to marry whoever's been giving him side benefits.

The Globe hints that it's Condoleezza Rice but will only say the president has a "close relationship" with his Secretary of State which "reportedly" was a "key bone of contention" in the marital split.

The First Lady, insiders tell the Globe, was absent from the White House for almost two months until aides "lured Laura back" by promising to negotiate a divorce settlement.

The Globe says the agreement calls for Mrs. Bush to appear by the president's side at "selected public events" after he leaves office.

The public will be told that George and Laura Bush are living in their new house in Dallas while he writes his memoirs and "acts as an elder statesman," the Globe's source says, "But they will NEVER, EVER live under the same roof again."

America Wants To Know suspects there's a little bit more to that non-divorce deal than the Globe thinks.

We don't believe that a house and $35,000 a month are nearly enough to persuade Laura Bush to stay married and quiet. We think she has plans to run for the U.S. Senate. Given a choice between being Mrs. George W. Bush and writing a tell-all book for millions of dollars, she'd rather be Mrs. George W. Bush.

And, we're betting, so would Condoleezza Rice.


Copyright 2008

Editor's note: Catch up on your tabloid reading with the 2006 post, "All right, let's dish," the 2007 post, "'Laura's Secret Divorce Diary,'" and the 2008 post, "'Laura Claws Boozing Bush.'"

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Hank Paulson's casting call

Just when you thought the financial crisis couldn't get any more melodramatic, Treasury Secretary Henry Paulson called the CEOs of the nation's nine largest banks to Washington last Monday for a meeting.

America Wants To Know has obtained an exclusive account of what went on in that room. Please don't ask us for our sources, you know we'll go to jail rather than reveal them.

It was Monday, October 13, 2008, Day 26 of Treasury Secretary Henry M. Paulson Jr.'s death-defying attempt to break David Blaine's record for running the global financial system without sleep or food. Secretary Paulson entered his ornate conference room, followed by Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.



Waiting for him in the conference room, seated in alphabetical order along one side of the dark wood table, were the CEOs of the nation's nine largest banks.

Secretary Paulson smiled cheerfully at the bankers. "Thank you for coming, gentlemen," he said. "Let's get right to it. You've got the pages on the table in front of you. You'll be reading the part of Mr. Cribbs, the evil man who holds the mortgage on the widow Wilson's home. Chairman Bair will read the part of the widow Wilson." He consulted a list in front of him. "Richard Kovacevich, why don't you start."

The Wells Fargo CEO picked up the pages from the table and looked them over in confusion. "I'm sorry," he said, "What are we doing?"

"We're casting the part of Silas Cribbs," the Treasury Secretary said. "Just read the script, okay?"

Richard Kovacevich leafed through the pages, then placed them back on the table. "Look here," he said, "I represent a well-capitalized financial institution. I don't audition for second leads in schlocky melodramas."

"You'll audition like everybody else," the Treasury Secretary said grimly, "or you'll never work in show business again."

The Wells Fargo CEO jumped to his feet and looked like he was ready to throw a punch.

Fed Chairman Ben Bernanke held his hands out in front of him and patted the air. "Now, now, don't be upset," he said soothingly. "This is for the collective good. Just sit down."

"While I still can," the Wells Fargo CEO snapped.

"Gentlemen," the Treasury Secretary said, "Let me explain why I've called you here. As you know, my initial plan to have the government buy up non-performing mortgages ran into an unforeseen problem. As it turns out, somebody is going to have to foreclose on those people, and certain members of Congress were not happy to find out that they were the ones who would be expected to do it."

There was a general harumphing on the other side of the table.

"Therefore," the Treasury Secretary continued, "what the government has decided to do is force you to take a capital infusion you don't want in order to pressure you to make loans you wouldn't otherwise make in order to prop up the economy so people will keep making their mortgage payments on the houses they shouldn't have bought in the first place."

"For the collective good," the Fed chairman chimed in.

"Yes," the Treasury Secretary agreed. "I'm against this kind of thing, you understand."

There was another harumphing around the table.

"But after an extensive analysis," Secretary Paulson continued, "it has emerged that the entire global financial system is a three-card monte game played on the roof of a tract house in Riverside, California. And it has become necessary to keep it going until I can get a train out of town."

"I happen to have a train schedule with me," the Wells Fargo CEO volunteered.

"I'll get that from you later," Secretary Paulson said, "but right now, I'd like to hear you read. Sheila, do you have the script?"

FDIC Chairman Sheila Bair nodded.

"Very good. Richard, whenever you're ready."

"I'm not doing this," the Wells Fargo CEO said again.

"Fine, we'll come back to you," the Treasury Secretary said, consulting his list. "Vikram Pandit of Citigroup, you're next."

"I don't really...." the Citigroup CEO began.

"It's for the collective good," the Fed Chairman said.

"Let's go," the Treasury Secretary said. "Chairman Bair will read the part of the widow Wilson. From the top of page three, Sheila."

FDIC Chairman Sheila Bair sat up in her chair and stared plaintively at an imaginary horizon. "No, no, Mr. Cribbs!" she cried out. "Please don't foreclose on me! I just need more time! I'll find the money somewhere!"

There was a long silence.

The Treasury Secretary cleared his throat. "Vikram, it's your line."

Citigroup CEO Vikram Pandit stared at the pages in his hand. "Um," he said, "I really haven't done any acting since high school."

"Don't be nervous!" the Fed Chairman said warmly. "You'll do fine!"

"Let's start again," the Treasury Secretary said. "Chairman Bair?"

"No, no, Mr. Cribbs!" Sheila Bair read, more passionately this time, "Please don't foreclose on me! I just need more time! I'll find the money somewhere!"

Vikram Pandit shrugged and looked at the script. "You don't have the money, you'll never have the money, there's no more time," he read.

"Please, sir, please!" Sheila Bair read.

"What is this?" the Citigroup CEO asked the Treasury Secretary.

"Don't stop in the middle of the scene," Secretary Paulson snapped. "It's your line."

Vikram Pandit looked at the pages in his hand. "Where's your lovely daughter, Mary?" he read. He blinked. "What IS this?" he asked again.

Hank Paulson slammed his hand on the desk. "Now look, do you want to save capitalism or don't you?" he demanded. "All right, let's move on. Kenneth Lewis, you're next. From the top."

The Bank of America CEO shifted uncomfortably in his chair and picked up the pages of the script.

"No, no, Mr. Cribbs!" Sheila Bair read, "Please don't foreclose on me! I just need more time! I'll find the money somewhere!"

"You don't have the money, you'll never have the money, there's no more time," the Bank of America CEO read in a flat voice.

"Good, that's good," the Fed Chairman said.

"Please, sir, please!" Sheila Bair read.

"Where's your lovely daughter, Mary?" Ken Lewis read.

"Why, she's out back, feeding the chickens," Sheila Bair read, touching the back of her fingers to her forehead dramatically.

"Pull it back a little," the Treasury Secretary murmured to her.

"I want to marry your daughter," Bank of America's chief executive read, "or else I will foreclose on your property."

"No, Mr. Cribbs! Please! She's so young!"

There was a pause.

"Ha, ha, ha, ha, ha," Ken Lewis read flatly.

"No, no," the Treasury Secretary interrupted. "That's supposed to be an evil laugh. You see, it says, 'Cribbs gives an evil laugh.' Try it again."

Ken Lewis stared at him.

"That's all right, it's your first time through it, no problem, just try it again," the Treasury Secretary said.

"Ha, ha, HA!" Ken Lewis read, "Ha, HA!!"

"Oh, that was wonderful," the Fed Chairman said, "Much better!"

Ken Lewis threw the pages down on the table. "What the f***!!" he said. "What IS this?"

"This is a casting call," Secretary Paulson said. "Didn't your agent tell you?"

"Nobody told me anything," Ken Lewis said. He looked up and down the table at the other bankers. "Did any of you know about this?" he asked. The bankers shook their heads.

"It's all very confidential at this stage," Chairman Bernanke said. "We're casting for the role of villain. It all came up very suddenly."

"That's right," Secretary Paulson nodded. "The original script called for the government to buy up the bad mortgages. But when Barney Frank read the scene where he had to foreclose on Democratic constituents, well, he fired all the writers. So we decided to remake the 1940 Elbert Franklin script, "The Villain Still Pursued Her."



"It's much, much better," Chairman Bernanke said.

"Secretary Paulson is wonderful in it," Sheila Bair gushed.

"Thank you, Sheila," Secretary Paulson said, and a faint tinge of pink crept over his cheeks.

Ken Lewis looked at Vikram Pandit, and Vikram Pandit looked at Jamie Dimon, and Jamie Dimon looked at Lloyd Blankfein, and Lloyd Blankfein looked at John Thain, and nobody said anything. John Mack leafed through the pages of the script, reading in silence.

"Let's read your scene next, Hank," Chairman Bernanke suggested. "It starts on page seven. Jamie, why don't you read it with Sheila and Hank."

JP Morgan Chase CEO Jamie Dimon picked up the script from the table in front of him. "Page seven?" he asked uneasily, leafing through the pages.

"Yes, the top of page seven," the Fed Chairman said. "This is such a great scene!"

Jamie Dimon rested his chin on his left hand. "If Mary will not marry me," he read, "I will throw you off this land and sell it at auction."

"Oh, no!" Sheila Bair read. "Will no one come to my rescue?"

"I'll save you!" Secretary Paulson read in a deep, booming voice, "and Mary, too!"

"Oh, Mr. Secretary! Thank heaven you've arrived at last! I'd almost given up hope!"

"You must never give up hope!" Secretary Paulson read. "Your government is here to help! Unhand that woman!" he shouted.

The JP Morgan executive stared at him.

"It's your line," Secretary Paulson whispered.

Jamie Dimon continued to stare at him.

"What's the problem, are you missing a page?" Paulson asked. "Ben, give him your script."

Chairman Bernanke handed Jamie Dimon the loose pages.

The JP Morgan executive looked at the Treasury Secretary, then at the Fed Chairman, then at his watch, then at the script. "I hold the mortgage on this property," he read quietly. "She will do as I say or I will foreclose on her."

"Silas Cribbs, you black-hearted villain!" the Treasury Secretary read. "You will lose your golden parachute for this! Your name will be cursed in the halls of Congress and in the storefronts of Main Street! You'll be known forever in the annals of history as a greedy, heartless, corrupt, selfish, Wall Street fat cat! Why, you might even be investigated by the FBI, ruined, indicted, maybe jailed!"

"I don't want the part," Jamie Dimon said.

"Don't be an idiot," Secretary Paulson yelled. "It pays twenty-five billion dollars."

Chairman Bernanke tapped Secretary Paulson on the shoulder. "Should I get the wheelbarrows now?" he asked.

"Yes," the Secretary answered. "And bring one for me. I have to stop at the supermarket on the way home to pick up bread and milk."


Copyright 2008

Editor's note: You might be interested in the earlier posts, "Train wrecks," "Hank Paulson's pre-emptive war," and "The hilarious point of the bailout." (If you think this writer has inexplicably gotten it exactly right, you'll like her novel, "The 37th Amendment.")

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Are capitalists on strike?

Investors Business Daily editorialized Friday that buyers have fled the stock market because they fear a "socialist tsunami" if Barack Obama is elected president and the Democrats have overwhelming majorities in Congress.

"A tax system right out of Marx," the paper predicts, and "a call for a new world order that turns its back on free trade, has no problem with government controlling the means of production, imposes global taxes to support continents where our interests are negligible, signs on to climate treaties that will sap billions more in U.S. productivity and wealth, and institutes an authoritarian health care system that will strip Americans' freedoms and run up costs."

America Wants To Know thinks that may be a little overheated. It has been our observation that James Madison and George Gallup have a pretty good track record of blocking that kind of thing.

You might not remember this, but it was a Democratic House and a Democratic Senate that cut the throat of Hillary Clinton's health care reform plan.

Or, as comedian Argus Hamilton put it, "By the time it gets through Congress it will be a dam in Idaho."

Yet there is evidence that investors who would ordinarily be expected to buy assets when prices drop sharply are just refusing to do so.

Are they tucked away in the sunlit valley of Ayn Rand's Atlas Shrugged, waiting for the lights to go out in New York City so they can rebuild the world the way it ought to be?

Probably not.

But they're waiting for something. David Caruso of the Associated Press reported last week that tens of billions of dollars are on the sidelines, ready to buy:

Dow Jones Private Equity Analyst said Tuesday that 18 distress funds have raised $37.9 billion so far this year. One big player, Oaktree Capital Management, has set aside a whopping $10.6 billion to invest in distressed debt. Goldman Sachs announced last fall that it had raised $4.5 billion to invest in distress opportunities in the credit markets. Even Lehman Brothers had been preparing a $1.25 billion fund for distressed mortgage-backed securities before filing for bankruptcy last month.

"There is much more money raised for these distressed assets than there are distressed assets themselves," said Tomasz Piskorski, assistant professor of finance at Columbia University.

The Dallas Morning News similarly reports:

Some $300 billion or $400 billion in investment dollars could become available worldwide, said Mike Bryant, a Dallas-based executive with Capmark Financial Group Inc., a California real estate finance company.

"There's about 300 to 400 different funds being put together that are ranging in size from $25 million to $1.5 billion, and even up, who are going to get in there and bid on these assets," Mr. Bryant said.

So what are they waiting for?

"A large part of our banking community is probably sitting back and saying, 'Let's see what the government does,'" Phil Dixon, president of the investment firm Treadstone Partners LLC, told the Dallas Morning News.

So far, what the government has done is create tremendous uncertainty by declaring emergencies, seizing new powers, choosing winners and losers in the financial industry, offering to overpay for securities of unknown value, panicking consumers with predictions of massive layoffs, and vowing to prevent lenders from foreclosing on people who have defaulted on their loans.

No wonder capital is on the sidelines.

It may not be a strike, exactly, but it does look a lot like Atlas Shrugged.

It looks like the scene near the end when the thugs who run the collectivist government put thinker-on-strike John Galt in front of a camera at gunpoint and tell him to reassure the nation that he has a plan to save them.

And he says this:

"Get the hell out of my way!"


Copyright 2008

Editor's note: You might be interested in the earlier posts, "President Bush's Frontier Justice," "Train Wrecks," and "Atlas Shrugged: Now playing in Zimbabwe."

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Hold everything

Since March, the U.S. government has been selectively bailing out financial firms in order to calm the markets and prevent a financial meltdown.

Yet with every federal action, things get a little bit worse.

They are achieving the opposite of what they intended.

Why?

"Check your premises," Ayn Rand often said, because when you are on the wrong premise you will always achieve the opposite of what you intend.

Okay, let's check.

"Uncertainty and a lack of confidence have clogged our basic financial plumbing," Treasury Secretary Henry Paulson said Wednesday. "While our actions have been aimed at restoring financial markets and institutions, our purpose is to prevent financial market difficulties from further impacting businesses and families across the country."

So the premise is this: By intervening here and there, the federal government can maintain stability in the financial markets and the free flow of credit through the economy.

What if that's wrong?

What if the continuing possibility of government action, selective and unpredictable, is actually creating fear and uncertainty, freezing the credit markets?

Well, if that was the case, every government action to alleviate the crisis would gradually make things a little worse.

Today there are reports that the credit markets have not unfrozen in response to the latest global rate cuts, as they did not respond to the $700 billion bailout, or the bailout of AIG, or the takeover of Fannie Mae and Freddie Mac, or the various actions taken by the Federal Reserve.

Today there are reports that the U.S. Treasury is about to start "taking part ownership in a number of U.S. banks."

"One thing we must recognize," Secretary Paulson said Wednesday, "even with the new Treasury authorities, some financial institutions will fail. The EESA [Emergency Economic Stabilization Act] doesn't exist to save every financial institution for its own sake."

So some banks will be saved, and some will be allowed to fail.

But which are which?

Who knows?

How will the Treasury decide which banks to save?

Who knows?

If you do business with the wrong bank, do you risk unknown liquidity problems or total loss?

Who knows?

That's a lot of uncertainty the government has just created, and there's no end in sight. The Treasury Department is apparently taking it day by day, standing ready to wipe out selected investors with the stroke of a pen on an as-needed basis.

The more everybody panics and freezes, the more they'll do.

The more they do, the more everybody panics and freezes.

It doesn't help that the Bush administration has publicly issued dire and terrifying economic forecasts in order to get these bailout proposals through Congress. They have frightened Americans into panic-selling their investments and halting all spending. If the bailout is exactly the opposite of what's needed, the political tactics employed to pass the bailout are economic suicide.

America Wants To Know calls on House Republicans to come off the campaign trail and back to Washington. Stand in front of a microphone, educate the country about the devastating effects of socialism, and propose a coherent plan to restore regulation of the financial services industry without having the government take ownership of it.

If this train is on the wrong track, we'd better hit the brakes before we wake up in Zimbabwe.


Copyright 2008

Editor's note: You might be interested in the earlier post, "Another way to restore confidence."

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John McCain's revolting plan

Senator John McCain vowed Tuesday night that as president he would "order the secretary of the Treasury to immediately buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes -- at the diminished values of those homes -- and let people be able to make those payments and stay in their homes."

If you weren't already nauseous from the gyrating stock market, that statement ought to do it.

So go and get a bucket while we explain to Senator McCain why this is not a good idea.

Senator, it is un-American and dishonorable to take the tax dollars of people who acted responsibly and use them to reduce the debts of people who acted like jackasses.

America Wants To Know would like to interrupt the national weep-fest for struggling homeowners to point out that an awful lot of people intentionally and knowingly bought houses they couldn't afford, drained the equity out of their homes and spent the money on bullshit, refinanced multiple times into stupid loans that were too good to be true, and generally acted like, well, jackasses.

America Wants To Know lives in California, can you tell?

If the government steps in and just relieves these irresponsible, grandiose people of their debts, penalty-free, there will be a national riot.

Here's a better idea. Instead of absorbing a home's loss in market value with your tax dollars, the government should extend the term of the mortgage for as many years as it takes to get the payments down to a level the homeowner can pay.

Even if it's a hundred years.

That will allow homeowners to stay in their homes and out of foreclosure, without using tax dollars to relieve them of their obligations in a way that's unfair and demoralizing to everyone else in the country.

Or we could just have the riot.

Looting is fast becoming the new national pastime.


Copyright 2008

Editor's note: You might be interested in the earlier post, "Bush to Little Red Hen: 'Pay up.'"

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President Bush's frontier justice

Former Lehman Brothers CEO Richard Fuld was on Capitol Hill today taking abuse from the House Oversight and Government Reform Committee.

He said federal regulators were fully aware of everything that was going on in the investment bank. He said he does not understand why Lehman Brothers was "the only one" that was not rescued with a federal bailout. "Until the day they put me in the ground I will wonder," Fuld said.

Hmmm.

Let's see if we can figure it out.

On March 15, 2008, the day the Treasury Department orchestrated a bailout of Bear Stearns and Company by JP Morgan and the New York Federal Reserve, the president of the United States gave an interview to CNBC's Larry Kudlow.

"You have said time and again that you oppose government bailouts, that you oppose the use of taxpayer money to bail out," Kudlow said, "I want to ask you if that opposition applies to these large banks."

This was President Bush's answer:

"Well, these are unusual times. These are times that -- where there's a confluence of housing market risks and financial risks that require unusual action. And it's very important for the American people to know that the Fed and the Treasury carefully weigh the -- necessary to bring some order and stability versus moral hazard. And I think they've struck the right balance in this case, particularly when people look at the details of the transaction."

Then he explained his Treasury Secretary's role.

"I think the Treasury was just part of making sure that the transaction was done in such a way as to balance stability and moral hazard," the president said.

What did he mean, exactly?

It sounds like he wanted to use the power of the U.S. government to save the financial markets from a nasty downturn, but he didn't want to protect certain individuals who took risks that should not be rewarded, for fear that other people would take similar risks and expect the same cushioned landing.

The bailout of Bear Stearns and Company was carefully engineered to wipe out the value of the shares of stock held by the company's executives, or as they're known this close to an election, Wall Street fat cats.

Wiping out the value of the stock wiped out the investment of a lot of innocent bystanders, like pension funds, widows and orphans, and small investors who held the company's stock in their portfolios after socking away hard-earned money for years and years.

Frontier justice can be rough.

That's what the CEO of Lehman Brothers discovered on Friday night, September 12, when New York Federal Reserve President Timothy Geithner called the executives of Wall Street's top firms to the Fed's headquarters for a weekend of secretive meetings about the future of Lehman Brothers.

In the end, potential buyers of Lehman, once the top underwriter of mortgage-backed securities, were not offered the government backing that JP Morgan had received to take over Bear Stearns.

This time, the government decided, the knife's edge separating stability and moral hazard would cut the other way.

Lehman Brothers was liquidated.

If you were one of the innocent bystanders holding Lehman Brothers stock, your investment was wiped out by the government's decision.

During the weekend of September 27-28, the government suddenly decided that Wachovia Bank should be seized by regulators and forced into a sale to Citigroup. The complex deal required taxpayers to shell out as much as $270 billion to cover potential losses stemming from sub-prime mortgage loans.

Wells Fargo said it would happily acquire Wachovia for six or seven times as much as Citigroup agreed to pay, and without a dime in taxpayer money. Yet right now, the government is doing everything in its power to block Wells Fargo from offering Wachovia shareholders a better deal than the officially sanctioned Citigroup offer.

Why?

Let's see if we can figure it out.

Wachovia bought Golden West Financial in May, 2006, making the bank the nation's leading provider of payment-option adjustable-rate mortgages.

Those are the kind of loans that start out affordable, then reset at higher rates and higher monthly payments a few years down the road, chewing up your home equity in the meantime by adding the unpaid interest and principal to the loan balance.

If home prices have appreciated during that time, homeowners can refinance or sell when the loan resets. If home prices have declined, homeowners can put the key in the lock, call the bank and say, "Come get your house."

Which is what a lot of them have now done.

What makes this market decline different from previous ones is that in recent years, investment bankers invented a market for "collateralized debt obligations," which means mortgages were bought up from the banks that made the loans and turned into financial meatloaf, cut into slices and sold to investors. "You'll make ten percent on your money by buying this security," investors were told. They may not have been told that as soon as the underlying mortgages reset to ten percent, vast numbers of those loans could become, in industry parlance, "non-performing."

By then, the loosey-goosey glad-handing that passed for regulation of investment banks had allowed financial institutions to use the shaky mortgage-backed securities as collateral for loans.

The crisis began when house prices declined, mortgages reset, some homeowners defaulted, and the mish-mashed mortgage-backed securities were feared worthless. The loans that had been secured with mortgage-backed securities as collateral were feared to be on the verge of default. Suddenly no one in the financial world knew if an institution would be alive tomorrow to pay back an overnight loan. Banks held onto their cash and refused to loan money to other banks that might be seized by regulators or forced into bankruptcy without warning, as Wachovia and Lehman had been. The credit markets froze, putting pressure on businesses across the U.S. economy and threatening to cause massive layoffs, six weeks before an election.

It's not hard to imagine President Bush sitting at his desk in the Oval Office between bike rides, squinting at his Treasury Secretary and muttering, "Git a rope."

Maybe that's why Richard Fuld and Lehman Brothers didn't get a bailout.

Maybe that's why the government forced the unfavorable Citigroup buyout on Wachovia and is now battling to stop Wells Fargo from offering Wachovia shareholders a better deal.

Moral hazard, meet frontier justice.

Then again, maybe it's not frontier justice.

Maybe it's what Johnny Carson said after Ed Ames famously threw a tomahawk at the painted outline of a man and hit it right in the crotch.

"Welcome to Frontier Bris!"


Copyright 2008

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Well, Cubs fans....

We heard from a lifelong friend in Chicago on Thursday night during Game 2 of the National League Division Series, as the Cubs infield made an astounding series of errors to hand the Los Angeles Dodgers the victory.

"Some people brought a billy goat to the game," she said, "in a limousine."

"Did they sacrifice it on Waveland Avenue so the Cubs would start hitting?" we asked.

"No," she said, sounding kind of angry. "That must be what's wrong. They didn't sacrifice the goat."

This is what it's like to be a Cubs fan.

The Cubs had such a great season, they teased us to a frenzy, and then for the second straight year they got to the NLDS and... and... and it happened again. They couldn't throw strikes. They couldn't field ground balls. They couldn't score runs. At the end, they couldn't even check their swing in time.

Look on the bright side, Cubs fans. Who in their right mind would ever buy naming rights to Wrigley Field?

Tradition is safe in Wrigleyville.

There's the understatement of the season.


Copyright 2008

Editor's note: How 'bout those Dodgers?

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Insanity

"Tucked into the Wall Street bailout bill," the Boston Globe reports today, "was a breakthrough for the estimated 113 million Americans suffering from mental illness - a provision making it illegal for health insurance companies to discriminate against patients suffering from psychological or behavioral disorders."

One hundred and thirteen million Americans?

More than a third of the population?

The Wall Street bailout bill was sweetened with a provision that will force health insurance companies to pay for treatments they're not currently required to cover, and one hundred and thirteen million Americans could potentially take advantage of that coverage and seek that treatment.

This is why health insurance is unaffordable.

Whatever the merits of mental health treatment, there is a price to be paid for it, and that cost is about to be laid off on the people who pay premiums for health insurance.

If you're not currently one of those people, get ready to be.

Because companies will be dropping health insurance policies for their employees like a hot rock.

Every time Congress mandates health insurance coverage for a particular situation (remember the extra night in the hospital for new mothers?) rates go up.

Coverage becomes less affordable.

More people go without coverage.

More people go to the emergency room for their health care needs and pay nothing for their care.

Cost-shifting in the medical business recovers those expenses from the patients with insurance.

Insurance companies raise rates.

More people go without coverage.

The Boston Globe reports that mental health parity is a "big win" for the Kennedy family. Senator Ted Kennedy and his son Patrick have sought for a decade to make it illegal for health insurers to "discriminate" against patients suffering from "psychological or behavioral disorders."

Some victory.

This careless and hurried legislation will result in cancer and heart patients losing their health coverage because insurers have raised rates high enough to cover the potential cost of a third of the country seeking treatment for "psychological or behavioral disorders."

Exactly what is a behavioral disorder?

How many thousands of dollars does it cost to find out if you have one?

Next year, when health insurance premiums rise by twenty percent, we can all act out together. Maybe somebody will give us free drugs.


Copyright 2008

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Wachovia's burned bridges

America Wants To Know picked up a telephone message last Wednesday from a polite man identifying himself as representing Wachovia Securities in Los Angeles.

"Ms. Shelley, we have a limited number of CDs put out by Capital One that pay 4% interest," he said politely, "we thought this is something that might interest you."

He politely left his phone number and politely wished us a great day.

What's this?

Times are tough in the securities industry if brokers are cold-calling us to sell CDs.

Why is Wachovia selling Capital One's CDs, anyway? Is Capital One paying brokers to go out into the wild and drag money back to the company balance sheet before Ben Bernanke and the cops show up?

And why do Wachovia employees have to cold-call people in the phone book to sell these wonderful CDs, limited in number?

We'll take a wild guess.

Either they don't want to burn their regular customers by selling them something that no one should buy, or they already did.

Wachovia Securities is one of the companies that burned its customers with enticing pitches for auction-rate securities, which were allegedly sold to investors with a promise that they would be as liquid as cash. What a rude surprise it was in February when the weekly auctions for the things ended with no buyers, and then no one could unload them at any price.

In July, the Missouri Secretary of State's securities division raided Wachovia Securities' headquarters in St. Louis, grabbing documents and records related to the sale of auction-rate securities.

Wachovia also profited from the merry business of selling creative home loans to people who couldn't afford the homes they were buying. On September 27, a Bloomberg News story about the forced sale of Washington Mutual reported that WaMu was "the second-biggest provider of payment-option adjustable-rate mortgages, behind Wachovia Corp."

One week ago, the FDIC, the Federal Reserve and the Treasury Secretary used an obscure authority under a 1991 law to force Wachovia into a highly unfavorable sale to Citigroup. Regulators said they observed a "silent run" on the bank last Friday as large depositors withdrew their money to bring their accounts under the $100,000 FDIC insurance limit. The Charlotte Observer reported that officials feared Wachovia would not be able to obtain loans from other banks to cover more withdrawals on Monday. Wall Street analysts had reassessed Wachovia's losses after JPMorgan got a look inside Washington Mutual's books.

Maybe that's all unrelated to the phone call on Wednesday.

We don't understand much about the securities business, or banking.

We don't understand why federal regulators are trying to block Wells Fargo from using its own money to pay more for Wachovia than the forced-sale price Citigroup agreed to pay last weekend in a complicated deal that requires taxpayers to cover $270 billion in prospective losses.

We don't even understand why the banks spent all that money on bulletproof glass. The robbers are always on the payroll.


Copyright 2008

Editor's note: You might be interested in the earlier post, "Train Wrecks".

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