27 October 2008

Update no.358

Update from the Heartland
No.358
20.10.08 – 26.10.08
Blog version:
http://heartlandupdate.blogspot.com/
To all,
As we enter the last week of the longest silly season we have yet endured, the day of decision approaches. As I have done with other national elections, I shall offer a special edition of the Update that lays out my decision and rationale. I will not distribute that special edition Update as most folks could care less whom I vote for. However, I will make it available to any individual who wishes to receive a copy – just send me a simple message requesting Update no.359A. May God bless this Grand Republic.

The follow-up news items:
-- The New York City Council voted 29-22 to remove term limits for the position mayor, thus permitting Michael Rubens Bloomberg to run for a third or more terms as mayor – a terrible mistake in my humble opinion [355].

Der Deutscher Bundestag – the Federal Parliament of Germany – sought to pass a unanimous resolution remembering the 70th anniversary of Kristallnacht – the Night of Broken Glass [9.November.1938] – the night Nazi goons rampaged through Germany on the biggest demonstration of their fascist anti-Semitism. Political bickering over foolish issues has foiled the honorable initiative, however we shall not forget what happened on that dreadful Fall night.

Now, onto the economic news . . .
-- Citic Pacific of Hong Kong – a diversified infrastructure company – acknowledged losses of nearly US$2B by a company executive who violated procedures and made massive hedge investments against the U.S. dollar and other currencies.
-- Federal Reserve Chairman Ben Bernanke asked Congress to consider a new economic stimulus package
-- The United States will host a global financial summit, 15.November, in Washington, DC. Some in the Press have dubbed the summit Bretton Woods II, in recognition of the original conference – the United Nations Monetary and Financial Conference, meeting at Bretton Woods, New Hampshire (1-22.July.1944), 730 representatives from 44 different countries. The contemporary version will involve the leaders of 20 nations.
-- The International Monetary Fund, along with a group of Nordic countries and Russia, plan to invest US$6B in the financial system of Iceland to avoid a collapse.
-- Argentine President Cristina Kirchner announced plans to nationalize the country’s private pension funds. Speculation surrounding the move is not the most positive.
-- Federal Deposit Insurance Corporation (FDIC) Chairman Sheila C. Bair testified before a congressional committee, suggesting the government can use its new emergency authority under the Emergency Economic Stabilization Act of 2008 [PL 110-343] [355] to help struggling homeowners overhaul mortgages. Also on the Hill, former Fed Chairman Alan Greenspan testified that the “once-in-a-century credit tsunami” will take many months for recovery. He also seriously over-estimated the profit motive to regulate the credit market, and the financial crisis “has turned out to be much broader than anything I could have imagined.”
-- Now, we hear the Treasury of the United States is considering taking equity stakes in various insurance companies in addition to banks. I am sure everyone can envision on the Federal government to become the national piggyback for bad management. I suspect this is going to get more strange before we see improvement.

So much of the finger pointing is parochial partisanship, as it is with every damn issue we face. We just cannot seem to rise above Party politics. Did these law changes contribute . . . yes, absolutely! They pulled out the stops and checks & balances in the system; it allowed greedy men to get greedier. What is missing from so much of the blame rhetoric is the contribution of politicians who pressured mortgage lenders into sub-prime mortgages to people who could not handle the burden and ignored the consequences of grossly inflated real estate prices. We have not focused on the real, genuine, root cause . . . those among us who thought they could get something for nothing and signed those insane mortgage loan papers. There is plenty of blame to go around. An interesting punctuation mark on the evolving economic crisis came from CNN. They identified their 10 Most Wanted – Culprits of the Collapse. They chose:
10. Joseph J. ‘Joe’ Cassano (AIG)
9. Richard Severin Fuld, Jr. (Lehman) [356]
8. Charles Christopher ‘Chris’ Cox (SEC)
7. William Philip ‘Phil’ Gramm (Senate)
6. Alan Greenspan (Federal Reserve) [203, et al]
5. Ian J. McCarthy (Beazer Homes USA)
4. Angelo R. Mozilo (Countrywide)
3. James E. ‘Jimmy’ Cayne (Bear Stearns)
2. Franklin Delano Raines (Fannie Mae)
1. You! (We, the People)
We could add hundreds of others, but I find it a bit odd that Barnett ‘Barney’ Frank, Christopher John ‘Chris’ Dodd, or the myriad of other politicians, bankers, and unrepentant, gambler scoundrels are not listed, yet then, the list would be too long to publish. Regardless, I am glad to see they pegged the number ONE culprit . . . We, the People, or at least those among us who failed their due diligence, who believed they could get something for nothing, and who signed those mortgage papers on a wing and a prayer. There were several laws passed by Congress and signed into law by Presidents that set the stage for the current crisis. The housing bubble began to grow in the aftermath of the Savings & Loan crisis of 1987. Shiploads of kerosene were thrown on the fire by the Commodity Futures Modernization Act of 2000 [PL 106–554, §1(a)(5); H.R. 5660 & S.3283; then became part of Consolidated Appropriations Act of 2001 (H.R. 4577); Senate: 52-43-0-5(0); House: 292-60-0-80(3); 12/21/2000] that legalized the financial gambling that ultimately brought down the ridiculous house of cards last month.

As noted in Update no.357, a federal judge ordered the release and transport of 17 ethic-Uighur, Muslim, Chinese detainees from Guantánamo Bay to the United States, in the continuation of Parhat v. Gates [DC CCA 532 F.3d 834; no. 06-1397 (2008)] [342-3]. The DC Appeals Court blocked the order pending the government’s appeal. United States District Judge Ricardo M. Urbina for the District of Columbia issued the order In Re: Guantánamo Bay Detainee Litigation [USDC DC 05-1509 (RMU) (2008)]. The opening two sentences of Urbina’s ruling read, “There comes a time when delayed action prompted by judicial deference to the executive branch’s function yields inaction not consistent with the constitutional imperative. Such a time has come in the case of the 17 Uighurs in Guantanamo Bay, Cuba (“Guantanamo”) whom the government has detained for 7 years without an opportunity for judicial redress until recently.” Judge Urbina went on to recount the history and law of Huzaifa Parhat’s case (and added 16 other Uighur detainees). As noted by the judge, the U.S. Government has apparently struggled with finding a country to take them. The Government claims over 100 countries have rejected requests for repatriation of the Uighurs, including their home country, China, and Afghanistan and Pakistan, where they were captured. An odd dilemma, it seems to me – shades of “The Man without a Country” (1863). Judge Urbina noted, “Liberty finds its liberator in the great writ [of habeas corpus], and the great writ, in turn, finds protection under the Constitution,” and went on to admonish the government that “To accede to such manipulation would grant the political branches “the power to switch the Constitution on or off at will . . .” I eagerly await the wisdom of the Appeals Court and perhaps even the Supreme Court in this case. While Parhat is a strange one, my opinion regarding the detainees has not changed. I also note in parallel that the President has decided not to close the Guantánamo Bay detention facility, leaving the issue for his successor, presumably for similar reasons as Judge Urbina illuminated.

California’s Proposition 8 presents the voting residents of the state an intriguing challenge on whether they can overcome their personal biases, fears, worries and concerns to affirm equal rights and equal treatment under the law for all citizens, not just those who conform to the majority’s definition of normal. Another interesting proposition appears on the ballot for the City and County of San Francisco – Proposition K. The ballot measure intends to decriminalize prostitution, meaning the police will be prohibited from enforcing prostitution laws – a very odd choice. While I have long advocated for legalization of prostitution, I think Proposition K is ill-advised and will have detrimental, unintended consequences. Proposition K is a half or quarter measure that may cause more injury than the repressive, morality laws banning prostitution in the first place. I will laud San Francisco’s effort. I shall hope this is the beginning of a serious, bona fide effort to legalize prostitution – to allow sunlight to disinfect the criminal sub-culture, to protect the practitioners as well as the customers, and to regulate and tax the enterprise for those so inclined to utilize such services. Legalization is not about our personal moral values, but rather about protecting those citizens involved. I continue to hope we shall one day rise about the temptation to dictate our moral values into the private lives of other citizens. Someday!

Comments and contributions from Update no.357:
Touché.
“Actually, I wrote that in response to a partisan Republican friend's email on the Dem's hearings on Fannie and Freddie where they totally dropped the ball in 2004.
“However, I must point out that the government regulators cannot force a lender to make a bad loan. Those who figured out how to make bad loans with insane terms and then pass them on in these incomprehensible investment vehicles were making money hand over fist. So there is a need to understand the root causes of the problem (be they perpetrated by Dems or Reps, the greedy or the stupid) in order to make corrections.
“But it is the partisan season. I don't know if you saw clips from the Alfred E. Smith benefit dinner where both McCain and Obama poked fun at themselves and each other, but it was uplifting to see the two of them show humor and humility face to face. Made one remember that the election will be over soon and it will take us all working together to deal with the challenges we face.”
My response:
Well said, and agreed.
The investment banks appear to have been sucked into ever larger, bundled mortgage-based instruments that made it impossible for practical due-diligence, regarding the true value and risk associated with the ‘investments,’ thus masking dramatically conflated risk. The root cause, it seems to me, remains at the individual borrower and lender level, compounded by the grotesquely inflated home prices and the bundling process, along with a rather silly notion of taking out insurance against hidden risk – a classic house of cards destined to failure. You are, of course, spot on! Just as no one forced that individual borrower to sign insanely foolish mortgage papers, betting on ever-inflating, fictitious home values, so to, no one forced lenders to offer mortgages they could have easily determined were very high risk. The fact that they were allowed to bundle them and pass that risk seems like a clear point of regulatory focus. I fear the inevitable over-reaction to what was largely an individual, fundamental flaw.
Yes, I did see both the McCain and Obama speeches at the annual Alfred E. Smith Memorial Foundation Dinner. I agree . . . very nice to see humor and humility. Unfortunately, we do not get enough humility from any politician. Yes, indeedie, these times demand non-partisan, collective action. Again unfortunately, I suspect this crop of politicians appear incapable of doing what is best for this Grand Republic, so we must endure being dragged through the muck, filth and insanity of party politics. I wonder if we will ever grow up enough to reject the parochialism of party politics?

Another contribution:
“That's always been my problem with Obama. He talks wonderfully, but says nothing of substance . . . at least not until he met Joe the Plumber and mentioned how he plans to redistribute our money like a good little Socialist. Plus, the guy has no leadership experience whatsoever. Even McCain, at least, has a background as a Navy officer. Plus he knows how to act in a crisis, and I consider sitting in an A-4 Skyhawk being shot at a crisis. More of a personal one, but still it's a big crisis.”
My reply:
His response to Samuel Joseph ‘Joe’ Wurzelbacher, AKA Joe the Plumber, was an Obama faux pas of the first order during this hyper-charged period of the silly season. I do not believe Barack is a Socialist, and even if he was, the President is not a regent or dictator. Further, if We, the People, elect him as well as a solid Democratic majority in Congress to include a filibuster-proof Senate, then socialism will be coming to a town near each of us. I have and will never be an advocate for socialism, which is halfway to communism, and both being seductive, ideological, Utopian philosophies that are ultimately counter-productive. Yet, on the flip-side, we currently bear witness to the negative of rampant capitalism – the very forces that gave rise to pure Marxian communism. Neither extreme is stable. I suspect we are headed toward a leftward correction.
I truly hope General Powell is correct. I am not as convinced as he is. I see qualities of leadership in Barack, and if he is elected, I shall give him the benefit of the doubt, until or if he proves himself otherwise. I have never doubted John’s leadership; we have seen it repeatedly over the years; but, his move to the Right to garner as much support as he could from the Republican uber-Right scares me. I have never been comfortable with political extremes, and Supreme Court nominations represent a far greater threat in my mind that al-Qaeda or even Wall Street. We need a Court evenly balanced between Federalists and individualists (there must be a better choice of descriptors, but I have not latched onto it yet); we teeter on a delicate balance point today; one more Clarence Thomas or Antonin Scalia, and we will see a dramatic shift in the Court and further erosion of our freedom in deference to the Federal government.

A contribution with permission from a different thread:
“In many respects our political philosophies run in the same direction. If my leanings were to be summed up in quick terms, I am very much into personal freedoms. I believe that is what the country was founded on and in the last few years, we have seen a degradation of those freedoms. The PATRIOT Act is a joke and most people seem ready to trade in their rights as an individual for ‘safety.’ When I need Big Brother to tuck me in at night, is the time to shoot me and get it over with. George Orwell was so right, he just had the year wrong. In my opinion, if I am not hurting anyone, but myself, what right does the government have to stop me. That is why I am pro choice, pro gay, pro gun (with a waiting period), and pro earth and pro most stuff. It is when someone crosses that line and may endanger me, then I believe that the line has been crossed and laws need to be enacted. So when the Rep[ublicans] talk about small government (small as long as it is the way they want it) but forget about the separating of church and state, it just pisses me off.
“I am against the war and was before it even started. I was in my front yard talking to my neighbor (20-year Marine and Mesa PD, staunch Rep.) while the Iraq buildup was occurring. I said that we will win in 2 weeks, but spend a lifetime trying to get out. How anyone can compare Iraq to WW2 and not Viet Nam is beyond me. I know enough to know that these people hate each other (especially since the minority had been in charge for so long) and only people that they dislike more than each other is us. Now if a dumb-ass pharmacist in the middle of desert can figure that out, why do we have such idiots in office all these years.
“I don't have a problem discussing issues with someone who is informed and/or who have reasons (like a ‘born-again’) to believe what they do. I have a friend who has an arsenal in his house and the only reason that he is Rep is because he thinks the Dem are going to take away his guns but all his other political leanings tend to be left.
“I try to avoid political discussions, it just sets me off and blogging to me is just a monologue. I never listen to talk radio (of either side) because I just don't care what Joe Six Pack thinks. Not to sound elitist but I find that most people do not take the time to understand an issue, so you tend to be listening to ‘how the earth is flat.’ The cliché about a little knowledge is dangerous comes true.”
My reply:
I agree. I am also driven by recovery of our freedom of choice – our personal freedoms, as you say. The encroachment upon our private lives, our most basic freedoms, has been relentless, corrosive and largely ignored by John Q. Citizen. Far too many people think or feel that as long as laws don’t directly touch their lives, why worry about them. As with George Orwell’s Oceania, the seduction by Big Brother is death by a thousand cuts. By the time we figure it out, it is far too late. Point is, we are a long way from the freedom and Liberty envisioned by the Founders of this Grand Republic.
I have tried for along time to define the boundary between public and private. I call it the ‘front door criterion.’ The State has a responsibility to define proper or tolerable conduct in the public domain, as part of the process that allows a very diverse population to live peacefully. When the State goes beyond the front door, they have overstepped the place of government established by the Constitution. I am ‘pro’ all those things you listed, and more. I think we should legalize, regulate and tax psychotropic substance use for those so inclined, prostitution, and all those ‘sinful’ pursuits.
I could not agree more about the ‘Rep talk’ as you say. I call it ‘moral projection.’ There are far too many people in this country who seek to validate their moral values (or at least the public perception of their moral values) by dictating those values to every single citizen. Like you, I react quite strongly when anyone tells me how I should live my life and especially my private life. The only reason the State has for penetrating the boundary of my front door is the injury of another citizen – injury being physical, mental or emotional. The Republican Party once stood for small, non-intrusive government at least that is what I believed and understood back in Barry Goldwater’s day. Nixon perpetrated perhaps the greatest compromise of our individual rights in the history of this Grand Republic. And, W. has endeavored mightily to exceed Nixon’s achievement.
We can discuss the war from genesis to prosecution. Let it suffice to say, I had a good friend assassinated by Saddam’s Iraqi operatives in Santiago, Chile. To think Saddam was harmless was not appropriate to my experience & knowledge. I would have no problem leaving the Muslims to slog it out among themselves. My problem comes when they export their violence, which they have been doing at least since the 1960’s. It is that exportation that I call Islamic fascism, and that is what I think we are or should be fighting against. I’ll leave it there for the moment; your choice.
They say proper social conversation should never involve religion, politics or sex. The problem for me is those topics are such important elements of life, and I’ve reached an age where I’m not so concerned with ‘proper,’ and more interested in the humanity enveloped by those topics. I also take a different path to discussion of any topic including the sensitive ones. I want to hear everyone’s opinion . . . uber-Right to uber-Left, so I can measure what the extremes are thinking. It also helps me find the balanced, moderate, stable middle.
. . . round two:
“Since we seem to be speaking to the same congregation from the same pulpit, maybe having someone who agrees with your ‘off the wall’ ideas will help reinforce them.
“As for as the ‘pros’ go, I am for just about everything. Soft drugs are legal in Holland, yet we don't see an increase in hard drug use there. Prostitution is legal is Nevada and Holland but we don't see a mass degradation of the population there. VD is not wild in the streets. As with anything in life, moderation is the key. Prohibition proved that you can't regulate morality. By the end of prohibition, even it's advocates had realized it was wrong. The U.S. has one of the highest major crime rates in the world, but I believe it because we have too easy access to hand guns. But that said, I believe in the bumper sticker ‘When guns are outlawed, only outlaws will have guns.’
“You have taken a personal reason to support the removal of Saddam and I find that interesting. My question to you is, how was Saddam unique? What made him special that we felt the need to invade his country? First off, I agree 100% that we need to fight terrorism. I rather fight them over there and not here but how we fight is the key to the equation. I know that this sounds like hindsight but it was my opinion before the war started.
“Did we take Saddam out because he was a bad guy? At any given moment there are 10-12 men who are as bad or worse that Saddam. Men who have ran their country to the ground. Who have killed millions. We always put this off as a ‘civil war’ happening in some particular country. Since the 1960's when countries in Africa started to declared their independence, on a regular basis someone would take charge and in the process kill off millions of the other side. Yet we did not intervene anywhere (maybe covertly) and when we did in Somalia, the public was against it. I am not saying that we should intervene, just that Saddam is no different than 20 others before him.
“Did we take Saddam out because of WMD? For two years we looked and nothing could be found. Yet we know that N Korea has weapons, should we invade them. Our ally Pakistan, which you won't find a more unstable government, has them. What happens when ally Pakistan bombs ally India? Sure, we know that Saddam had poison gas, he used it on the Iranians during their 10-year war, which we supported. The old adage of ‘any enemy of my enemy is my friend’ seems to be our motto in the State Dept for the last 30 years.
“Did we take Saddam out because he supported terrorism? He was a minority in his own country. It does not make sense for him to allow too much training in his country for fear of an overthrow. Of the 9/11 bombers, the vast majority were Saudis. Now if any country were fueling the terror organizations with fresh recruits it is Saudi Arabia. Terrorism will always exist has long as you have a wide spread between the have and the have nots and SA is a prime breeding ground. There are major training camps in many countries, but that does not give us the right to invade. Actually Saddam was keeping a balance in the region, which does not exist now and the area will become the wild west when we leave.
“How do we fight terrorism? Boost the budget of the CIA, and let small groups do the work. As always we are fighting this year's war with last year's war conception. It is impossible to stop all the 9/11's of the world but I think that a better funded covert operation is the way to go. When you think about it, that is how the other side is working. Let’s broadcast to the Middle East that we are going after them, wherever they are, we just don't need an army to do it. Save the big guns for when some actually invades us (or our ally, as in Kuwait). Tho I am not a fan of Daddy Bush, he at least knew enough to quit when he had the chance. I am sorry about your friend but I feel more grief for the relatives of the soldiers who are fighting in Iraq. Fight dirty like they do, we put up so many targets we are easy to take down. I think that we needed to go to Afghanistan but we screwed that one also. Now it is going the other way also.
“Why do we call people who are fighting us, in their own country, terrorists or insurgents? If a foreign soldier came into my house, I would call him the terrorists. I would be joining any group that fought them. Would that make me a terrorist because I was fighting a foreign power in my home? Nazi's considered the Resistance a terrorist group.”
. . . my reply to round two:
We agree in the main regarding the foolish, sanctimonious, morality laws. The damnable war on drugs has burgeoned a massive criminal sub-culture from local to international along with a cancerous smuggling network that has seriously compromised our national security. And, so many American citizens choose to blindly embrace their belief that dictation of moral values not only validates their beliefs but also is ‘good for the nation,’ as if they are the salvation. I do not agree that our high crime rate is due to guns. I think it is sociological with a goodly portion of that directly attributable to the drug criminal sub-culture. A similar argument can be made with prostitution; one of many reasons the practitioners are abused is because they are hidden and directly exposed without any protection from the exploiters. Making the sinful pursuits legal, so they are open, regulated and taxed, does not compromise my moral values in the slightest, or anyone else’s. All this damnable fear in folks about what someone else’s morals will do to their beliefs and their children’s beliefs is so far off the page of rational as to be truly mind-boggling. I have far more confidence in my moral values and our children’s values than I guess a good many fellow citizens have in themselves and their children.
Saddam’s Iraq has been among the top five state-sponsors of terrorism and Islamic fascism, consistently from circa 1975 until 2003 . . . that was my point. The others on that list include the Islamic Republic of Iran, Syria, Libya, and elements within Saudi Arabia, Pakistan, Egypt, Algerian, and Yemen. Iraqi and Iranian operatives have killed more folks (some of them not so innocent) outside their borders than the KGB. As I’ve said, if they confined their killing within their borders, I would have a vastly diminished argument, but such was not the case.
I was not a party to the decision-making process in 2001 & 2002. However, my argument in favor of the Battle for Iraq rests on several key factors:
1. Saddam’s Iraq was consistently a major state-sponsor of Islamic fascism and terrorism for his nationalistic purposes.
2. We needed a battleground outside ConUS and outside the sovereign territory of our allies for the fight . . . to focus the violence.
3. Iraq was perhaps the best possible choice for a host of reasons:
A. Saddam consistently defied UN sanctions
B. Iraq had multiple exposed borders
C. Iraq was smack-dab in the middle of the Gulf Region . . . equi-distant from numerous other potential targets.
4. Saddam developed, deployed and used both chemical and biological weapons on his own people, and was absolutely capable of providing those weapons to anyone he thought might benefit him. Did he have WMDs at the time of Operation IRAQI FREEDOM? I don’t really care. He had demonstrated (not theoretical) capability over many years and that was good enough for me.
5. Saddam was a corrupt, vicious, secular dictator, not particularly well-liked even among other Arabs and Muslims.
I could go on, but those are the high points. I have been and remain a staunch critic of W. & Rummie for their foolish, naïve, and ill-conceived execution of the battle. They wasted a terrible number of precious lives, an incredible amount of treasure, and whatever goodwill we might have enjoyed after 9/11. But, I still believe it was the correct choice of battleground, just the wrong battle plan, made even worse by Rummie’s defiance, marginalization and diminishment of the professional military.
Somalia was another example. Bush 41 actually pulled the trigger on Operation RESTORE HOPE, but Clinton was not convinced and looked for a quick way out. That was a poorly run operation without the support necessary for the mission. Again, correct objective; poor battle plan. War or military action is and must be the choice of last resort, but if a president pulls the trigger, it should be an all-out affair – no quarter shown or given. That did not happen, and good men paid with their lives. Another sad endeavor to add to an infamous list of extraordinarily foolish operations.
Pakistan has been and will remain a very worrisome entity. Yet, the government and military infrastructure are far more closely aligned with the West . . . UK & U.S., primarily. Pakistan has never been a state-sponsor of terrorism to my knowledge. Elements within Pakistan have been consistent providers of willing believers to strap explosive vests to their chests. Pakistan is a prime example of rampant procreation vastly exceeding the capacity of the land to support them . . . thus the profound poverty and fertile ground for mad mullahs, the madrassas, and Islamic fascism.
The Wahhabist movement in Saudi Arabia is an equally appropriate target, just as al-Qaeda, the Taliban, the Islamic Brotherhood, and all the others. The Saudi government, like the Pakistanis, walks a fine line in their efforts to control the extremists. We have known of these characters for a long time, but chose to ignore them, until they started exporting their violence.
Whether we have the right to invade any country depends upon the specific circumstances. Pakistan was precariously near the edge, but has now undertaken aggressive action (for them) in the tribal regions, to reassert government control. If they hadn’t done it, I am convinced we would have.
I see the War on Islamic Fascism as a far larger, global endeavor that will most likely last generations. I am glad to see many of the restrictions foolishly imposed on the intelligence and special operations services by the Foreign Intelligence Surveillance Act of 1978 (FISA) [PL 95-511] were finally removed. I think we can rest assured there is much more going on beyond our sight and awareness in this War. The covert services have grown substantially from their pre-9/11 days, and yet I think they are still significantly under-resourced.
I share your grief for all those who have lost loved ones over the last nearly 40 years of this damnable war. We can honor those who have sacrificed so much, by making the world a safer, more peaceful place. Maybe Barack will do a better job than George. I know John would, but I’m afraid he is not going to get the opportunity. So, we shall soon see what Barack will do.
Good questions on how we define terrorist. I would like to discuss that point, but this is already too long, so that topic shall have to wait for another day.

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)

20 October 2008

Update no.357

Update from the Heartland
No.357
13.10.08 – 19.10.08
Blog version: http://heartlandupdate.blogspot.com/
To all,
The follow-up news items:
-- A federal judge ordered the release and transport of 17 ethic-Uighur, Muslim, Chinese detainees from Guantánamo Bay to the United States, in the continuation of Parhat v. Gates [DC CCA no. 06-1397 (2008)] [342-3]. The DC Appeals Court blocked the order pending the government’s appeal. (I have not yet reviewed the rulings; see Update 358.)
-- Russian forces withdrew from the buffer zone between Georgia and its two breakaway provinces – South Ossetia and Abkhazia – and were replaced by 200 EU monitors, ending part of the invasion that began two months prior [348].

The last presidential debate between Barack Obama and John McCain was actually closer to a real debate than the others. The rhetorical skills of Obama contrasted sharply with McCain’s rather jerky, halting, disjointed delivery, and gave John an aura of uncertainty, un-confidence, and inconsistency. John gave it a good shot. The Democratic mantra of McCain being Bush III is really getting old and actually a bit nauseating. Although Barack’s delivery displayed polish, the words of meaning fell flat; he is playing this too safely. Running for President by itself is a hugely daunting task. John has stood up the challenge admirably despite the myriad of Bush failures and missteps, a fractious and lukewarm Republican Party, the continuing War on Islamic Fascism, and the tanking economy. Everyone must respect McCain’s scrappy spirit, and he is closer to the non-parochial leader we need. Barack seemed quite comfortable with party dogma and definitely stuck to the party line, which makes me quite suspicious of his ability to be a true leader, rather than simple the leader of the Democratic Party. This campaign is not over. I have seen John surprise folks. Do not count him out, just yet. It ain’t over ‘til it’s over!

I listened to the endorsement of Senator Obama by former Secretary of State General Colin Luther Powell, USA (Ret.) – a very logical, balanced, thoughtful statement. I hope he is correct about Senator Obama – the junior senator from Illinois leads all the popular vote polls plus several Electoral College vote estimates.

The continuing economic saga:
-- Mitsubishi UFJ Financial Group closed the deal for a stake in Morgan Stanley (US$9B for a 21% stake).
-- The Royal Swedish Academy of Sciences awarded Paul Robin Krugman the Nobel Prize for Economics.
-- The USG strong-armed nine, major, American banks to accept temporary, partial nationalization. The government plans to investment up to US$250B of the US$700B authorized by Congress. The initial amounts and shares reported so far are:
Bank of America (BAC): US$25B for +9.7%
Citigroup (C): US$25B for +14.9%
JPMorgan Chase (JPM): US$25B for +5%
Wells Fargo (WFC): US$25B for +6%
Goldman Sachs (GS): US$10B for +10%
Morgan Stanley (MS): US$10B for +18.5%
Bank of New York Mellon (BK): US$2B for +6.5%
State Street (STT): US$2B for +5.5%
and Merrill Lynch (ML), soon to be acquired by Bank of America [353], an as yet unspecified amount.
-- French bank Groupe Caisse d’Épargne lost US$807M in unauthorized derivatives trading by a team using the bank’s own account.
-- The Swiss government acquired a stake in UBS (US$5.36B for 9% of the bank).

The latest addition to the list of marriage cases came from Connecticut – Kerrigan v. Commissioner of Public Health [CT SC 17716 (2008)]. Connecticut Supreme Court Associate Justice Richard N. Palmer delivered the court’s decision. “The judgment [of the lower court] is reversed and the case is remanded with direction to grant the plaintiffs’ motion for summary judgment and application for injunctive relief.” As with the California Supreme Court, the Connecticut court decided residents could not be denied the benefits of marriage based on their sexual orientation. Palmer noted a critical factor, “The fact that the governing majority in a [s]tate has traditionally viewed a particular practice as immoral is not a sufficient reason for upholding a law prohibiting the practice.” There are two key perspectives: what is the State’s interest in marriage, and what is the individual’s interest in marriage? We have yet to resolve those questions. Kerrigan adds to the body of law, but does not answer the essential issue. Associate Justice David M. Borden wrote the dissenting opinion and advocates for the slow, deliberate, legislative path for social reconciliation, which most of us would strongly endorse and support. If we take that path . . . when it comes to individual rights, how long are offended citizens to wait for legislative reconciliation of the wrongs they have suffered? When does “separate but equal” or “equal protection under the law” become threshold principles when applied to individual freedom of choice in matters predominantly, if not totally, private? Justice Borden believes ‘marriage’ and ‘civil union’ are equal under the law. Looking from the exterior, as the law did for 100 years regarding racism, it is easy to see why he feels as he does. Prima facie, the two conditions appear equal. Certainly, to those not involved, they are at least essentially equal. When viewed from within, the appearance is dramatically different, in that each public declaration triggers a near code-word reaction by those so inclined; the use of disparate terms publicly illuminates an otherwise private matter – not exactly a reassuring point for citizens who wish to preserve their privacy. Justice Borden claimed, “[M]arriage is a fundamental institution in our state, as well as our nation, and recognizing it to include same sex marriage would be to change its nature.” David assumes we can all see his observation as fact, and that we inherently agree, because he offers no rationale as to why he believes his observation to be correct. Using Borden’s logic, what if we used ‘citizen’ to mean citizen when light skin pigmentation and ‘kinda citizen’ for those with dark skin pigmentation? When I apply for a job as a ‘kinda citizen,’ I may never be considered, as discrimination occurs beyond public scrutiny. As a ‘kinda citizen,’ I am oppressed by silence, ignorance, and criteria devoid of performance. Is this really the kind of equality, freedom, and Liberty we wish this Grand Republic to stand for?

To offer a contrarian view, James Taranto commented on the Connecticut judicial ruling and the impending California Proposition 8 vote.
“Defeatist Double Standard”
by James Taranto
Wall Street Journal – Best of the Web Today
October 15, 2008 -- 3:30 p.m. EDT
http://online.wsj.com/article/SB122409149021536945.html
He was commenting on:
“California polls shock gay marriage supporters”
by Kevin Allison in San Francisco
Financial Times
Published: October 14 2008; 19:03
http://www.ft.com/cms/s/0/c8da527e-9a17-11dd-960e-000077b07658.html?nclick_check=1
Rendering his opinion, Taranto said, “The push for same-sex marriage, as distinct from civil unions, is not about tolerance or overcoming discrimination. It is about imposing a view of the ‘transcendent’ on an unwilling public (‘whether you like it or not’). If Proposition 8 passes, even supporters of same-sex marriage ought to take heart in a vote against this sort of arrogance.” Taranto’s opinion appears to be fairly typical for those so inclined – anything to distract the public from the essential question. I respectfully disagree with Taranto.

Some additional thoughts for your consideration and rumination. The interpretation of constitutional law depends upon a clear understanding of the English language. Further, perspective toward the law appears to play a major role in the conclusions of any given judge or group of justices, thus the continuing debate regarding strict constructionist, fundamentalist, and activist judges legislating from the bench by judicial fiat. If a judge looks upon the law as a Federalist, for example, he tends to see the law enforcing the power of the State as inherently just, sound, rational and good. However, if a judge views the Constitution as a delegation of certain, delineated authority from We, the People, to the Federal government, or state and local governments for that matter, then the law sometimes looks quite different. The classic, relevant and salient case in our era remains Roe v. Wade [410 U.S. 113 (1973)] [319]. As Antonin the Impaler consistently and reliably illuminates at every opportunity, he sees Roe as judicial fiat. He points out that the Constitution makes no mention of abortion, or privacy for that matter, and thus should not be a matter before the Supreme Court. The opposing view based on Griswold v. Connecticut [381 U.S. 479 (1965)] [166, 189, 323] saw the law as an inherent violation of a citizen’s fundamental right to privacy, thus exceeding the authority delegated to government by the Constitution and established a reasonable, reasoned and logical limit to a citizen’s privacy and the proper extension of the legitimate interests of the State. Of course, as is so often the case, depending upon each of our views, we tend to identify with the camp that supports our beliefs. We can argue that the majority of citizens have the right, through their representatives, to pass any law they wish. The Federalist will see such a law as the will of the people. An individualist will see laws that intrude upon a citizen’s fundamental right to privacy as a violation of the most fundamental of human rights and thus unconstitutional. If the majority can deny equal rights to any minority, then taken to its logical extreme, the majority can enslave any minority – subjugate, persecute and segregate any minority. What is Liberty? What is freedom? I know what the dictionary says, but clearly, We, the People, subscribe to a fundamentally different definition. Do we mean that Liberty and freedom for each of us is what remains after the majority establishes what it believes is acceptable to it, regardless of venue, condition, circumstance or time? Is freedom only what the majority says it is? Are there limits to the dicta of Congress, the President, and even We, the People? Is freedom all sunlight, glory and exultation? No, absolutely not. The dark side of freedom means we must endure the choices of bad people. We experience higher injury crimes that most, if not all, other civilized free countries. This Grand Republic is not about majority rule. The United States of America was born in the crucible of revolution and the core, most fundamental, principle was and remains individual freedom of choice; Life, Liberty and the pursuit of Happiness; and, protection from violation by others or imposition of the State.

I recognize and acknowledge that most subscribers to this humble journal have little interest in pronouncements from the Supremes. In that light, I seek your indulgence and forgiveness. A rare event occurred this week. The U.S. Supreme Court decided not to hear the appeal of the State of Pennsylvania in a 4th Amendment case – Pennsylvania v. Dunlap [555 U. S. ____ (2008); no. 07–1486]. The Chief Justice objected to the denial and felt strongly enough about the Court’s action that he wrote a solo dissenting opinion. Even more interesting . . . he chose to use a novelist’s style of prose rather than the staid language of judges. Roberts began his dissent, “North Philly, May 4, 2001. Officer Sean Devlin, Narcotics Strike Force, was working the morning shift. Undercover surveillance. The neighborhood? Tough as a three-dollar steak. Devlin knew. Five years on the beat, nine months with the Strike Force. He’d made fifteen, twenty drug busts in the neighborhood.
“Devlin spotted him: a lone man on the corner. Another approached. Quick exchange of words. Cash handed over; small objects handed back. Each man then quickly on his own way. Devlin knew the guy wasn’t buying bus tokens. He radioed a description and Officer Stein picked up the buyer. Sure enough: three bags of crack in the guy’s pocket. Head downtown and book him. Just another day at the office.”
El Jefe went on to note, “That was not good enough for the Pennsylvania Supreme Court, which held in a divided decision that the police lacked probable cause to arrest the defendant. The [Pennsylvania court] concluded that a ‘single, isolated transaction’ in a high-crime area was insufficient to justify the arrest, given that the officer did not actually see the drugs, there was no tip from an informant, and the defendant did not attempt to flee. I disagree with that conclusion, and dissent from the denial of certiorari. A drug purchase was not the only possible explanation for the defendant’s conduct, but it was certainly likely enough to give rise to probable cause.”
Beyond the rarity of a stand-alone, solo dissenting opinion, Chief Justice Roberts presented a compelling rationale to support Officer Devlin’s probable cause search and subsequent arrest of Nathan Dunlap. In this case, I can even set aside my strong objections to the folly of the so-called war on drugs and say, spot on, el Jefe!

Comments and contributions from Update no.356:
“I guess one could say history will judge and maybe in 25 years we could look back and say the engagements in the Afghan and Iraqi theatres (Persian-Iran's next?) crushed America's enemies and de-trended the course of growing radical jihadist-Islam. Then one could look at the human and economic losses and say not only did we succeed but that action prevented more 9/11s. However, WHAT IF the opposite occurs? And in that process, Russia succeeds (or China) at our cost, a slow patient waiting game of letting us drain. The toll in American military, contractors, innocent civilians in Afghanistan and Iraq, lost geopolitical prestige and economic consequences, is too high a price to pay if our objectives were not achieved.
“Around 2005 (so 4 years after October 2001 – Operation Enduring Freedom – Afghanistan; and 2 years post March 2003 for Operation Iraqi Freedom or Iraq War II), I was driving in my town and came up on a car ahead of me, the bumper sticker on that vehicle said: ‘GWB, creating more terrorists than he can kill.’ While the slogan on that sticker may have been more simplistic than the matrix of our world and why we are engaged, it summarized very succinctly why I had great concerns about going to war(s) without realistic and laser-clear objectives and timetables. And then there needed to be plan B, plan C, and every letter of the alphabet indicating our ability to adapt so as to achieve the final objectives.
“Once this big of a fight is started (loosely referring to what the terrorists initiated the day they carried out the hijackings and flights into American structures and symbols), one does not pull back, because that would be defeat. But also, we don't do anything whether through war or non-war events, that will strengthen the enemies.
“The economic crisis that has fallen upon us as it has the globe, will influence if not bring to a head, another ticker-tape, and that is whether our progress in our theatres of war, are achieving the results various parties expected. When trillions of dollars have been wiped out, the costs of war will be highlighted in fluorescent yellow from now on.”
My response:
I can offer no solace to the dilemma of apprehension surrounding us. Perhaps a moment of history might be appropriate. After the evacuation of Dunkirk, with the Dutch & Belgians vanquished and the French teetering on defeat, Winston Churchill, PM for just over a month, stood before his colleagues and the nation to defiantly state, “We shall never surrender.” Three months hence, with RAF Fighter Command within days of utter collapse, Churchill used his magnificent rhetoric to inspire a vastly outnumbered, outgunned and surrounded nation to “fight on.” I dare say, those moments in history were far more dark, ominous and threatening than our little economic woes. Let us keep things in perspective.
I would disagree with you in the sense that market value is only wiped out if you cash out, thus solidifying one’s losses, or if all the institutions holding our money fail, which none of mine have or are about to. I fully expect to recover from this crash; recovery may be painful, most are, but we will recover.
Panic never helped a situation . . . not in the cockpit, not on the battlefield, and likewise not in the market. But, panic is what we have. So few alive today remember the 1930’s; most managers have only known good times.

Another contribution:
“This Update no. 356 is and exhilarating essay if you will: good work. Fox news (ch.48 here) is doing a great job the last few days of documenting Barack Obama's background from birth thru the present: His school years, and lack of any exposure of his grades or scholastic content, and response to his years and actions promoting ACORN are, I think, should SCARE THE HELL out of any thinking citizen. I believe his Promotion and ENABLING of ACORN's goals is the single MOST culpable and criminal cause of our current Market (Economic) Crisis. His Muslim schooling and Rearing in a totally dysfunctional home that he received during his youth followed by his Tutorship under Ayers (ACORN), in my mind, sets the stage for total disaster with him as president. (When and what does it take to classify a citizens actions and words as TREASON?)”
My reply:
I look for the good as well as the bad in every candidate. I seek balance. We are all flawed people, just as Barack, John, Bob and Ralph are. We shall soon decide which one shall lead us for the next four years. I believe William Charles ‘Bill’ Ayers is an unrepentant domestic terrorist, who got away with his crimes because the government abused the Constitution. Ayers’ crimes could be classified as treason as they occurred in wartime, but the crimes of Lady Jayne Seymour ‘Jane’ Fonda were clearly aiding and abetting the enemy during wartime. Barack is not Ayers or Fonda. While I disagree with Barack in more than a few ways, I think John was correct to defend Barack with a hostile partisan audience. But hey . . .
“That’s just my opinion, but I could be wrong.”

Another contribution:
“Concur on your being tired of both candidates talking about tax cuts. We are in two wars, and can't cut taxes. You can't have both – tax cuts and a war – much less two wars. I think McCain hit a new low of absurdity when he suggested a cut in capital gains taxes – as if many are going to have cap gains for a while!!!”
My response:
Amen. Only a simple quibble . . . on war – the War on Islamic Fascism. Two battles: Afghanistan and Iraq. This war is far bigger than just Afghanistan and Iraq. I would have far more respect for these guys if they put as much detail into reduction of expenses as they have reduction of revenue.

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)

13 October 2008

Update no.356

Update from the Heartland
No.356
6.10.08 – 12.10.08
Blog version: http://heartlandupdate.blogspot.com/
To all,
The follow-up news items:
-- The United States Government removed the Democratic Peoples Republic of Korea from the terrorism blacklist, and the DPRK agreed to re-allow IAEA inspectors back into the country for inspection and monitoring to nuclear sites. [354] This does not appear to be the strongest or best negotiating technique, but hey, if it works, then perhaps all’s well that ends well.

The McCain-Obama townhall meeting – the second of the so-called presidential debates – was not a particularly impressive event. Sadly, to me at least, John projected an air of desperation that did not serve him or us well. Barack came across as a steady hand with a calm, cool delivery. We need reassurance and focus. We got all this gibberish about tax cuts. I am so tired of listening to both these guys harping on tax cuts. Whether we like it or not, taxes are the revenue of government. Probably the most relevant, contemporary question of the lot “What sacrifices would you propose for the American People to contribute?” Neither candidate answered the question; and, it was a perfect opportunity to raise the issue of taxes as a necessary sacrifice for the greater good on this Grand Republic. All the presidential candidates are at distinct disadvantage; they do not have access to the apparatus of State, the information of the Executive, or any authority to do anything. Further, none of them will decide; neither of them is the oracle of solutions. One of them will be the leader that will gather the best thinkers and do’ers we have. They will evaluate the root causes of any situation and determine the best course of action from a variety of options presented to them. They will negotiate and compromise with Congress to establish the necessary laws to carry out the decided actions. They will not decide law by themselves.

The World economic news became overwhelming this week. Please pardon my filtration process. This is my take of what may become a perpetual chronicle of economic history.
-- BNP Paribas agreed to buy the Belgian & Luxembourg operations of Fortis for €14.5B (US$19.7B), relieving the governments of that intervention. The Dutch government nationalized their branch of the company.
-- Lehman Brothers Chief Executive Richard Severin Fuld, Jr. testified before a House banking committee. Watching him squirm provided some satisfaction in an otherwise dreary week. Even better would be watching his conviction and sentencing to forfeiture of his worldly goods and remand to an all-expenses paid, long duration incarceration as our guest, and his cohorts in crime should receive the same invitation.
-- Secretary Paulson appointed Neel T. Kashkari, currently Assistant Secretary of International Affairs, as the Interim Assistant Secretary for Financial Stability. Kashkari was a former Goldman Sachs executive with Paulson. He will presumably be nominated by the President and confirmed by the Senate. Kashkari reportedly contributed to the drafting the Paulson Plan, and apparently, he has begun to execute the plan.
-- Germany’s central bank (Bundesbank) and the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht AKA BaFin) agreed to a €50B+ rescue plan for the mortgage lender Hypo Real Estate Holding AG – the contagion continues to spread.
-- In the spirit of the day, the British government ponied up £50B (US$88B) to buy preferred shares of eight banks -- Abbey, Barclays, HBOS plc, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered. The Bank of England further made available ‘at least’ £200B for a Special Liquidity Scheme.
-- The U.S. Federal Reserve cut a key, short-term, interest by 0.5%, to 1.5%, in conjunction with the European Central Bank, the Bank of England, the Bank of Canada, the Swiss National Bank, and Sveriges Riksbank – the central bank of Sweden.
-- The G-7 finance ministers (I guess Russia has been un-invited) along with leaders of global banking apparati met in the White House with President Bush on Saturday, to coordinate the global governmental actions.
-- Prime Minister Gordon Brown is considering legal action against the government of Iceland over their alleged mishandling of the credit-liquidity-bad-debt crisis.
Despite the extraordinary and unprecedented, coordinated, governmental action to restore stability to the international banking system, the stock markets across the globe tanked – a measure of corroded confidence within the banking system. In the last year, the Dow Jones Industrial Average (DJIA) has lost 40% of its value. The last eight trading days, the stock market lost 2,400 points (22%). So far, for those of us who have not sold, these are all paper losses that can and will be recovered. We had ‘irrational exuberance’ 10 years ago. Today, we see ‘irrational fear.’ This is NOT 1929. And, Franklin Roosevelt’s words of encouragement remain valid, applicable and relevant: “The only thing we have to fear is fear itself.”

I strongly recommend the FOX News, David Asman exposé on the genesis of the current bad-debt, credit crisis, which offered the best assessment I have seen so far.
“Saving Our Economy: What'$ Next?”
FOX News program hosted by David Asman
Broadcast: 11.October.2008; 21:00 EDT
Once more . . . yes, absolutely, the bailout is wrong! The market can and will sort this out . . . in time. The salient question today remains, how much pain are We, the People, willing to tolerate as the market sorts this mess out? . . . a deep recession, a short, sharp depression, or a long, enduring depression? Where is our pain threshold? And, lest we forget, we have been and still are engaged with an enemy bent upon killing as many American citizens as they can. The economy is the engine that sustains the War on Islamic Fascism. In addition to losing jobs, savings, homes, and our very standard of living, are we willing to diminish or sacrifice our national security while the market sorts out the credit crisis?

Shortly after Congress passed and President Clinton signed into law the Financial Services Modernization Act of 1999 [PL 106-102; AKA Gramm-Leach-Bliley Act], and under pressure from congressional leaders, Fannie Mae eased credit standards ostensibly to enhance mortgage lending and bring more first-time homeowners into the market. Some experts claim the genesis of the sub-prime debacle originated with the Community Reinvestment Act (CRA) [PL 95-128], signed into law by President Carter. Just these facts alone should be sufficient to recognize the broad, across party lines culpability of politicians, and places ‘San Fran Nan’ Pelosi’s vulgar, politically biased, public, floor-debate remarks during a time of crisis all the more disgusting. To me, the truly sad part of this particular election will be the reelection of parochial politicians who put party over nation, and even worse criminal politicians who literally spit on the law and the Constitution for their personal gain and aggrandizement.

We appear to be headed toward an undisputed dominance of Democratic Party to include the White House and Congress including a possible filibuster-proof Senate. If anyone ever wondered what total domination of the instruments of State looked and acted like, we may soon see another, at least, two-year demonstration. Just a remember, from 2001 to 2007, we had a near domination of the Legislative and Executive branches of the Federal government by the Republican Party (they did not have a filibuster-proof, Senate majority), and that did not work out so well, in my humble opinion. The Democrats regained majority control of both chambers of Congress in 2006, but total domination by any political faction will never be a good thing for this Grand Republic or We, the People, no matter who it is. We seem to be on the verge of an extreme shift. Think about it!

Comments and contributions from Update no.355:
. . . my belated reply to a thread from last week:
I suspect we are headed toward a repeal of the Financial Services Modernization Act of 1999 [PL 106-102; AKA Gramm-Leach-Bliley Act], or at least a serious amendment to it. I truly hope we do not overreact as we did with intelligence reform in the Foreign Intelligence Surveillance Act of 1978 (FISA) [PL 95-511]; we still have not regain a proper footing after that debacle. We need checks & balances in the financial system as well as health metrics that would allow gradual throttling rather than force us to such drastic action as the Emergency Economic Stabilization Act of 2008 [PL 110-343] sure is.
Part of the reason for my earlier query rest in my novice status, regarding banking and finance. You are far closer to the front lines than me. A rural, Ag bank is not going to see the same trauma as Wall Street is experiencing. And, I highly doubt y’all are involved with ‘default credit swaps,’ ‘derivates,’ and such. I do not know how much y’all do in basic residential mortgages and the like. I surmise from your earlier remarks that y’all do not see the liquidity or bad debt crisis, which would be a good sign to me. But, I worry that even local, rural, Ag banks might be seeing increased resistance to the acquisition of short-term funds to fill gaps or deal with a panic run induced by outside forces. If your bank does not feel any increased stress, then perhaps we are better off than we think.

Another contribution:
“Which pain do I choose: being beheaded by terrorists, or being broke? Perhaps the money mess has taken our eye off the primary threat. It is hard for me to put Wall Street ahead of beheading. But, one thing is certain. The folly of rewarding A, while hoping for B is an old formula for disaster written about long ago. Our economy is worse off for bailing out with money, without going back and fixing the root problems as well as imprisoning the thieves. The bailout may prove to be a monumental mistake or a brilliant move. I would rather let the market fail the losers out of business and government punish the thieves. Time will tell on some things, but not on killing terrorists before they kill us.”
My response:
Indeed! Choose our poison. I would rather let the market sort it out and punish the bad men, as well. But, my problem, are we willing to give up our jobs, our savings, our homes, to let the market sort it out? That is what I worry about . . . collateral damage to punish the bad guys. As I wrote, I believe, or perhaps more appropriately, I trust, the Paulson Plan is simply dropping the gear or flaps to change the center of pressure to erect the spin and allow proper anti-spin controls to work – the tourniquet to stop the bleeding – and then, we shall have the laws to apply proper regulation of the market and truly punish the guilty bastards who have taken us to the abyss. Those Wall Street greed-merchants have done far more damage than al-Qaeda; the only thing they haven’t done yet is kill innocent people, yet.
. . . a follow-up:
“To continue your aviation analogy (non-aviators bear with us), the futility of flaps making any real difference in a flat spin is real not to mention the rare possibility of split flaps (a worse condition). In other words, letting it take its course may be the only way to end the mess. Regardless, like you I am concerned about the collateral damage to the regular folks while it happens. The market will recover. Let's hope the innocent people hurt the most do as well.”
. . . my follow-up response:
First, of course, the market will indeed handle this situation, just as it eventually did in the late 1930’s. My question remains the same . . . at what cost? If we are prepared for 25% unemployment, 20% business failure, and a 10-year depression, then I’m good with letting the market handle it. Unfortunately for me, I am not wealthy enough to insulate my family from a full-on depression.
Second, I see economic threat in much more personal terms than I do military threat. Thus, the shenanigans of the mortgage lenders like Fannie Mae, Countrywide, and all the others, along with this insane nonsense of ‘credit default swaps’ and all these other foolish derivatives of the banks and now-defunct investment houses, represent far more direct threat to our well-being than al-Qaeda ever did or ever will.
Third, our ability to prosecute the War on Islamic Fascism depends directly upon the strength of the economic engine that supplies and supports the war. I shudder to think of what might happen if we enter a depression with the magnitude of national debt already racked up by this administration, and field the force necessary to win the War on Islamic Fascism.
Fourth, I still believe the underlying economic fundamentals are strong – unemployment remains comparative low, people are still building houses and buying airplanes. By my simple, direct measures, we’re not doing too bad. However, there are signs that business is not getting access to the funds they need for growth. The longer this period of credit uncertainty lasts, the more damage will be done.
Now, to the technical point of my analogy . . . Depending on the aircraft and configuration at entry, a flat spin blanks all control surfaces, thus traditional anti-spin inputs are ineffective. My point was, when in a bad situation, where traditional controls do not work, we must ‘invent’ other means to regain control. I do not advocate dropping the gear or flaps in a spin for the reasons you gave and more, but doing nothing in such a situation has only one, inevitable, rapidly approaching outcome. I would not just wait to see if higher density air might change the physics equation sufficiently to allow proper spin recovery; doing nothing won’t work. The bottom line is, there are times when we do have time to study the situation and properly evaluate correction actions. Sometimes, we have to react, to do the best we can, and sometimes to do the illogical to get out of an otherwise fatal event. Whether the current credit crisis is as serious as I think it is, remains a viable point of debate. Concomitantly, my opinion remains that the downside consequences justify aggressive, immediate response. I do not know if the Paulson Plan is sufficient, proper or adequate, but I do know it is an action to do something for stimulation of the credit markets.

A different contribution:
“Very good piece this week. I enjoyed your thoughts on the VP debate. Pretty much my own. Also liked your analogy of the flat spin to our economic situation now. Guess we shall see what we shall see.”
My reply:
Indeed. As General Julius Caesar said upon crossing the River Rubicon, “Iacta alea est” = the die is cast. I heard on 60 Minutes last night that the size of the root cause (‘credit default swaps’) may be as large at US$60T, far in excess of the paltry US$700B in the bad-debt package. The best we can hope for is surgical application for the greatest good. Time will tell the tale.

Another contribution:
“As a naval aviator, you might appreciate this.
http://www.rollingstone.com/news/coverstory/make_believe_maverick_the_real_john_mccain
“And this LA Times article ‘Mishaps mark John McCain's record as naval aviator’”
http://www.latimes.com/news/politics/la-na-aviator6-2008oct06,0,7633315.story
My response:
I’m certain there more than a few folks among us who could muster up some pretty bad things to say about me. Lord knows I have an ample supply of mistakes, missteps, sins and gaffs.
The, at least implied, presumption that McCain is bad, therefore Obama is good, seems a bit jaundiced to me. As with most things human, we choose to see that which we wish to see and to view any given condition in a half-full, half-empty parlance. I simply refuse to view any of the candidates including Barr & Nader through any political party lens. I can level a fair amount of criticism at any political candidate of our current variety as well as George Washington, Thomas Jefferson, Abraham Lincoln, Woodrow Wilson, Franklin Roosevelt, and even Sir Winston himself. They were all flawed men, as we all are. So, such clearly biased journalism does little but confirm the political bias of the author, and certainly does not further our inquisitive, intellectual inquiry.
One of the many axioms I have learned over the years is . . . if folks believe I am going to fail, there is nothing I can do to succeed; but, if they believe I can succeed, then I cannot fail – a question of confidence, trust, perception and loyalty. The parochial, political lens ensures an artificial and significant skewing of my confidence axiom.
You probably did not seek this political diatribe, for that I apologize; but alas, I am a flawed man as well.
. . . a follow-up:
“I consider myself an Independent, and want to get the facts. These stories provide balance and insight into the public persona that surrounds McCain. To a degree, he has gotten a free ride on his military record (and he won't release more than a few pages of his official record, at that). He has also gotten a free ride on his supposed support for military personnel and veterans, notably on the new GI Bill, which he tried to pre-empt and then took credit for passage. The DAV gives him a ‘D’ grade.
“I also thought you would appreciate the stories about his flying...had he not been the son/grandson of a four-start, he likely would have been sent packing.
“Anytime we pick a President, we are making a calculated gamble-- we really don't know how anybody will be in the office, but have to make an educated guess from a host of sources-- past record, how they run their campaigns, and what their platforms are, etc.
“You are right about Winston being flawed-- he smoked too many cigars. You have been to the Churchill Museum near 10 Downing, I would assume. It is adjacent to the Cabinet War Room. Great stuff.”
. . . and my follow-up response:
Likewise, I have been and remain as independent and non-partisan as I possibly can, from our earliest days as lieutenants of Marines. And, I see no reason to change now.
I always appreciate flying stories. And yeah, he probably got some breaks cuz of his daddy, just like W, Teddy, and all the other ‘monied’ or ‘connected’ folks do. As a side note, so much of the publishing biz seems to be name recognition or connection; the exceptions are very rare . . . probably just enuf to keep wannabes like me jousting at windmills.
Indeed, there are no guarantees with elections . . . W being the best example in our lifetime.
Yes, while I was in England, I absorbed as much as I possibly could of Sir Winston’s history & legacy. I’ve been to Blenheim, Bladon, Duxford, and the various sites in & around London. He was flawed far beyond the cigars. He was racist, sexist, colonialist, and otherwise a rather bigoted cantankerous man, who was more than a little impressed with himself. I have never been a fan of arrogant people, no matter who they think they are. But, despite his flaws, you have but to listen to his words, place them in the context to the history that boiled around them, and then, I see him in a different light. Perhaps it takes an egocentric man like Churchill, Patton or T. Boone Pickens to do what they do, but that has never my style, which is perhaps one of many reasons I am not a CEO or a general.

A different contribution:
“I saw the tail end of the Palin Biden debate ... and saw clips of recent interviews between Katie Couric and Palin (ouch on those) ... I do hope Palin steps up her game to become more credible with the American public. Her folksy appeal is not what we need right now from a woman candidate ... or any candidate for that matter. We need them all to exhibit brains and good plans for America's future.
My reply:
Based on last night’s debate, unless some miracle should happen, I think the election is a done deal. I also think Palin is far more savvy and smart than she is given credit for, but I don’t think it really matters now.
[N]one of the candidates give us anything substantive. All we get is hot air, platitudes and y’re-going-to-enjoy-this smiles. I’m not sure it really matters who the is president . . . they all just love to spend money on nonsense. I believe it was Ben Franklin who said something about democracy failing once Congress figured out how to access the Treasury. We shall see.
. . . round two:
“Hmmmm ... I can't tell from what you say [above], whether you think Obama or McCain did best last night ... ? Who is the ‘done deal?’ I think Obama could very well be the biblical ‘Anti-Christ’ .... not a joke.”
. . . my reply to round two:
I am still tweaking my opinion of this last debate, but McCain projected an air of desperation. I have been a McCain fan for a long time. He is a flawed man, as we all are, but he’s got the right idea. But, I cannot imagine his performance gave folks the confidence they need. There are also other factors that give me pause. One thing I know, I cannot tolerate another 4 years of social conservative agenda, as we have endured for 8 long yrs. And, the thot of more federalist on the Supreme Court is simply not acceptable.
I would like to hear why you think Barack is the biblical ‘anti-Christ?’
. . . round three:
“The Bible is interesting to me ... in Revelations I believe, it does talk of an appearance of an Anti-Christ that everyone will adore ... who will ultimately be the ruin of us. If he ever actually said he would forever support the Muslims over anyone else, we might be in trouble. And so will the Israeli Nation. I just worry about his ability to do the right thing in a time of crisis. Bush may have not done exactly what he should have after 911, but there has been plenty of good resulted from the moves he made. At least the world knows we can not tolerate terrorism. I like how McCain critiqued Obama on his 'big talk' . I think there will be some social conservative agendas continuing (forever perhaps) after the election, no matter WHO gets elected. Because there are alot of socially conservative people in this country that will always push for change.”
. . . my reply to round three:
As with all religious books, especially for the revealed religions, we must evaluate, assess, and place into the context of our lives. I suppose, either you believe or you do not; at least that is what clerics wish us to do. But, there is goodness in the books, even if you do not believe.
I do not believe Barack Obama is or even could be the anti-Christ of Revelations. I do believe he is a good man, trying to do the best he can to inspire the Nation . . . exactly what a President should be doing. I am far more worried about his indebtedness to the Democratic Party machine & dogma, which is too far Left for me. Then again, I think John McCain has compromised far too many of his core principles to play to the Republican Party machine & dogma, which is too far Right for me.
Yes, W. did the right things initially. I still believe going into Afghanistan had to be done. And, I also believe Iraq was the best choice to thwart state-sponsored terrorism. My biggest criticism is levied at W. and his cronies, namely Rummie, who chose to fight war on the cheap. Instead of asking us to ‘shop’ after 9/11, the President should have asked us to prepare for sacrifice, to place us on a truly war-footing, and to focus this Grand Republic on waging war successfully on Islamic fascism in all its dimensions.
I have never been and never will be socially conservative, and I will do what little I can to resist the imposition of socially conservative values on all of us. I have absolutely no problem whatsoever with the choices anyone makes for their private lives and families. Where I get my back up comes when they try to impose their choices on me or anyone else.

This exchange centered upon an un-attributed, highly critical, assessment of Barack Obama:
“This is an interesting compilation of information forwarded to me from an unknown original source ... some I've heard, and some not ... what do you all think ??”
[Essay not included.]
My response:
You asked what I thought, so here goes.
First, one rule, almost like a filter gate, I use in situations or topics like these is . . . balance. When an essay, article or message focuses only on the bad, alarms go off for me.
Second, one of the key elements of any propaganda campaign is having sufficient corroborate-able facts mixed in with the desired political slant.
Third, with virtually any human relationship, endeavor, activity or conduct, we can find good and bad. We can choose to see the positive or the negative.
In conclusion, I think the essay is just what it seems . . . a biased political hack job.
. . . round two:
“Possibly biased ... but is it true ??”
. . . my reply to round two:
Yes, absolutely. Barack’s mother was Caucasian and from Kansas; his father was Kenyan.
They do have an expensive house in Chicago that they purchased as a ‘sweetheart’ deal. BTW, no mention of where he lives when he’s in DC.
Numerous foreign leaders have publicly made their preferences known – yes!
His campaign has raised a record war chest of funds.
As I said, there are facts sprinkled throughout. As a negative example, I could argue that Adolf Hitler did great things – he built the Autobahn, expanded the rail system, made the trains run on time, and unified the German people. Those are all facts. Yet, when those facts are placed into a larger context, he massacred 11 million innocent people, and contributed to the deaths of millions more. We have every right and responsibility to be suspicious and skeptical. Yet, as with all propaganda, we must find the facts, confirm their authenticity, seek disparate views of those facts, and render our opinion. My point was, when you read the facts placed into the context of questions of doubt, it is easy to see how a sinister image begins to emerge.
As counterpoint, listen to the image the uber-Left creates of John McCain and Sarah Palin – a dunderhead, old-fart, ignorant, war veteran and his airhead, country, hockey-mom side-kick. Is the uber-Left’s image of McCain any more correct than the uber-Right’s portrait of Obama? Something I think the two major political parties and the system they vigorously defend is the essential cancer deteriorating the very fabric of this Grand Republic; but, they are our heritage.
So, is the essay true? No. I do not think it is accurate or true. I think Barack Obama is a far better man than is implied in that piece, just as I think John McCain is a far better man that he is portrayed.
I have not made my voting decision as yet. I like parts of both, and I am troubled by parts of both. I will do my evaluation matrix before Election Day, as I have often done. I do know one thing precisely, I am beyond ready to have anyone in the White House, even Aunt Gladys, cuz that means W. will no longer be there. For all the good he has done, the destruction far outweighs the good . . . certainly not as grievous as Adolf, but of a similar balance.
. . . round three:
“Honestly I don't trust my facts or opinions much. Good analogy you made with Hitler. How can someone so forward thinking have been such a cold blooded killer ? Always gets to me about that guy. Don't think anyone would get away with that kind of mass human destruction again with the presence of today's massive amount of media. Gotta say there IS good in having media for that purpose anyway.
“I do agree with you on the images of McCain and Palin ... she is a lot of the time embarrassing, as a representative of women, the Republican party and as McCain's running mate. He could have done MUCH better choosing Governor Kathleen Sebelius (sp?). THAT would have been impressive I think. Or a numerous other women politicians out there (actually I think Sebelius is Democrat?). Did you see the interviews of Palin with Katie Couric ? Cringe... Makes you seriously wonder ... ‘WHAT WAS HE THINKING’ when McCain chose her. Guess he didn't want anyone that might appear smarter than him....... did I say that ? ;o))) ... I do say I can tell both McCain AND Obama are able to speak in public well enough ... unlike poor W (although he's gotten better over 8 years).
“I haven't decided yet either on who gets my precious little vote ... of course I am leaning most heavy on McCain, but I can always change my mind ... sure wish there was a good THIRD candidate we could choose from ! Still waiting for the day when they will let more people run for President and not base it on campaign funds. And then it could be narrowed down from say 20 people, a bit like American Idol does, so that by election day we truly had our best two or even three choices to vote for !!”
. . . my reply to round three:
I did not see the whole Couric-Palin interview, only snippets. The worst I can say is, Sarah is not a seasoned politician, adept at the art of interview dynamics. She is certainly not addle-minded as she is portrayed. She is a bit young and under-experienced for national / international politics, but the same can be said for Barack. Yet, I find attraction to Barack’s rhetoric, and I see similar genius in Sarah. I think we would have a fundamentally different opinion of Sarah, if she had been in a position to be an RNC keynote speaker four years ago, and taken progressively more prominent roles on national issues. Alas, that is not the case. So, hear we are.

Lastly, this contribution from the blog:
“(A) I see ‘subtle’ as an incorrect adjective for the bigotry you discuss in the California referendum. ‘Blatant’ would fit better.
“(B) I didn't think Sarah Palin came across all that well. She looked like a non-political person who had been coached for a couple of days but had no background to understand what she talked about.
“(C) I applaud your effort at balance in discussing the economic mess. One thing I haven't seen mentioned is that the rank-and-file House of Representatives revolt came from an outpouring of email and phone calls from ordinary people, including me, who did not want to see any human being (in this case, Paulson) entrusted with sole control of hundreds of billions of dollars. If you read the bill, it went through with no appeal or oversight of his decisions in distributing the money. Oops.
“I believe that the additional $110 billion in pork came from highly targeted pressure on specific representatives via the contributors who effectively own them.
“Finally, allowing Wal-Mart to operate any kind of bank would embody the abdication of duty by government that allowed us to reach this point. Business is about making money; the bankers and investment people have gone about their business. Government’s job, as you pointed out, is protecting the people. They gave that up. Here we are.”
My response:
A. Yes, I agree, but I try to respect the difference of opinion, and there is not direct mention of discrimination against homosexuals . . . or rather non-heterosexual, non-monogamous, non-family-oriented individuals.
B. Agreed. She has had her novice missteps. But, I can also see flashes of brilliance. Unfortunately, she was thrust into the national spotlight a little too early. I think she will learn quickly, if given the opportunity, and will become an effective political leader.
C. Thx. I try to find balance in often broadly diverse opinions. It appears the Pelosi floor speech was the catalytic event during the first House debate that politicized the congressional action. I am not so worried about Paulson having direct control of the US$700B recovery effort. We entrust the lives of thousands of citizens to the leadership of generals. I don’t see this as any different. And, there will be accountability in a form, one way or another.
Sure, that was what the pork was for . . . buy votes. And, the President did what he has always done, signed the pork-laden bill. If he had been vetoing and exposing pork-barrel spending since he had become President, he could have threatened Congress to avoid it on such a prominent bill . . . another failure on his part . . . but, at the end of the day, he had little choice, given the circumstances.
I have no problem with anyone opening a bank, including ‘Joe Six-Pack,’ as long as they ascribe to proper banking regulation. So, the Wal-Mart trial-balloon does not bother me; but, a bank is a bank, or at least should be.
. . . a follow-up off-line:
“Actually, I agree about anyone being allowed to operate a bank under ‘a proper banking regulation.’ The problem is that proper banking regulation has essentially vanished. Therefore, even traditionally cautious bankers find themselves with no standard or obligation beyond naked competition to improve this quarter's or this year's (at most) bottom line, leading to today's headlines. Putting traditionally aggressive Wal-Mart personnel in that position would invite further disasters, not just for Wal-Mart but for their retail customers and whatever businesses would be dragged into that vortex.”
. . . and my follow-up response:
A good deal of the traditional regulation was removed on 12.November.1999, when President Clinton signed into law the Financial Services Modernization Act of 1999 [PL 106-102; AKA Gramm-Leach-Bliley Act]. I suspect some or all of that deregulation will be repealed or seriously amended. You may well be correct regarding a Wal-Mart bank, but under current law, there is far more regulation of banks than there was the capital investment houses. But, the root cause of this crisis remains individual citizens who signed legal paperwork on mortgages they knew or should have know they could not afford. The crisis would be no where near what it is today, if citizens had not taken on more than they could pay for – revenue minus expenses.

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)

06 October 2008

Update no.355

Update from the Heartland
No.355
29.9.08 – 5.10.08
Blog version: http://heartlandupdate.blogspot.com/
To all,
The follow-up news items:
-- You may recall the suspicious fire aboard RMS Cutty Sark, 16 months ago [285]. The Metropolitan Police and London Fire Brigade completed their investigation of the fire and concluded there was no evidence of arson or nefarious activity. The cause was an industrial vacuum cleaner that had been left switched on all weekend, overheated, and burst into flame. Fortunately, the restoration will repair the damage and return the magnificent ship to full glory. The process will just take a little longer and cost more than planned.
-- Hikers near Mammoth Lakes, California, discovered the wreckage of a small plane, near the 10,000 foot level of steep, jagged peaks. Recovered evidence indicates the crash site was that of famous adventurer James Stephen ‘Steve’ Fossett [169, 300], who went missing on a personal reconnaissance flight a year ago. A limited amount of human remains were reportedly recovered as well, and will be analyzed to determine identity. The NTSB has deployed an investigation team to determine the cause of the event.

While we were in California this week, advertisements both for and against Proposition 8 [345] ran in various local Media. For those who may not know, California Proposition 8 is a state constitutional amendment initiative placed before the voting residents this coming November.
The ballot description reads:
ELIMINATES RIGHT OF SAME-SEX COUPLES TO MARRY. INITIATIVE CONSTITUTIONAL AMENDMENT.
“Changes the California Constitution to eliminate the right of same-sex couples to marry in California. Provides that only marriage between a man and a woman is valid or recognized in California. Fiscal Impact: Over next few years, potential revenue loss, mainly sales taxes, totaling in the several tens of millions of dollars, to state and local governments. In the long run, likely little fiscal impact on state and local governments.”
Proposition 8 reads:
Only marriage between a man and a woman is valid or recognized in California.”
The television advertisement against Proposition 8 features an older couple who say they treated all their children equally and want their lesbian daughter treated equally under the law. Then, on the other side, we have a male spokesman claiming that if Proposition 8 is not passed by the residents of California, churches will be sued, religion attacked, and the moral fiber of the community will disintegrate. The contrast between the two approaches in the light of reality gives us a stark example of deflecting, fear-mongering, distracting, subtle bigotry at its finest. The argument offered is not about the proper state interests that a constitutional amendment discriminating against and segregating a small portion of our society is warranted. Rather, the argument in favor of such an extreme action hangs upon playing to the emotions of personal preference when making constitutional law – an extraordinarily dangerous precedent. This proposition is not about marriage; it is about legalizing discrimination. I trust California residents will do the correct thing.

We arrived home from our California journey, just in time to watch the Biden-Palin debate live, as it happened. First, I have a hard time calling the event a debate. It was more like a joint press conference with only one journalist. I winced an equal number of times; by that measure, I suppose they both did about the same. I was not impressed with either candidate’s responses on policy issues. I was impressed with Joe’s restraint in dealing with Sarah. And, I was also impressed by Sarah’s folksy, charismatic style; she does have a way of connecting with folks. There is no question Joe has more Washington experience than Sarah, but that is not necessarily a good thing these days. Leadership at that level is about picking the best lieutenants and communicating. Neither stumbled; they both passed.

Reuters-London reported, “British commander says war in Afghanistan cannot be won.” Brigadier Mark Carleton-Smith, commander of 16 Air Assault Brigade and Task Force Helmand in southern Afghanistan, said in an interview, “We're not going to win this war. It’s about reducing it to a manageable level of insurgency that’s not a strategic threat and can be managed by the Afghan army.” The headline title does not quite match Brigadier Carleton-Smith’s statement, but that is the sensationalism of journalism, I suppose. I am disappointed that a British Army brigadier general would state things quite that way, but I certainly understand.

Economic history continued:
-- At the urging of the USG, Wachovia Bank was acquired by Citigroup. We are headed toward fewer and even more massive banks – Bank of America, Citigroup, and J.P. Morgan Chase – closer to a centralized bank. Wait, wait! Before this week’s Update could be released, Wells Fargo made a better offer (US$15B) with their money rather than the USG guarantee Citigroup was relying upon.
-- The contagion of financial panic is spreading. The British government nationalized Bradford & Bingley – one of the UK’s biggest mortgage lenders. The Belgium, Luxembourg, and Dutch governments took over Fortis Group – a 200-year-old, Dutch-Belgian bank – to save it from collapse.
-- Japanese conglomerate Mitsubishi bought a 21% stake in Morgan Stanley for US$9B.
-- The House rejected the first pass at the Emergency Economic Stabilization Act of 2008 [H.R. 3997; House: 205-228-0-1(1)]. There was just not enough pork attached to the bill to buy the votes of enough members, I suppose.
-- The big sell off! Monday, the Dow Jones Industrial Average dropped -778 points (-7%) [US$1.2T in market value, and the largest point drop in history], after the news of the House vote failure spread. For the record, we have not sold. The market will recover, just as it has after 9/11, 17.9.2001 [-685 pts (-7%)]; 19.10.1987 [-508 pts (-23%)]; 29.10.1929 [-38 pts (-13%)]; and all the other weak moments in U.S. financial history. Let us keep things in perspective. This too shall pass. -- The big surge followed the big plunge. Tuesday, the Dow Jones Industrial Average rose +485 points (+4.7%); then, another big drop again on Thursday [-348.22 points (-3.2%)] as well as an additional -157 points on Friday, after the bad-debt absorption plan was passed by Congress.
-- It seems Warren Buffet remains in high demand in these troubled times. Less than a week after his deal with Goldman Sachs [354], Berkshire Hathaway bought US$3B in General Electric, three-year callable, preferred stock with a 10% dividend and a 10% premium if called after three years. GE also intends to sell US$12B in common stock to the public.
-- The Senate figured they would do better than the House by adding unrelated attachments and pork barrel spending to a quickly revised older bill. In the Senate’s version, the Paul Wellstone Mental Health and Addiction Equity Act of 2007 [H.R. 1424; Senate: 74-25-0-1(0)] indeed did much better. So, now the House will try to sufficiently pork-up the Senate bill to buy enough votes for passage. This is such a disgusting process.
-- President Sarkozy proposed a €300B ((£237B, US$414B) European Union fund to rescue troubled banks in Europe.
-- California Governor Arnold Schwarzenegger fired a warning shot across the bow of the Federal government with a letter to the Treasury Secretary that his state will need an emergency US$7B loan, if the credit market is not freed up soon.
-- The USG announced 159,000 jobs lost in September – the 9th straight month of employment constriction. The unemployment rate remained at 6.1% -- not good, but not bad either. How many more signs do we need?
-- Citigroup executives are reportedly considering legal action against Wells Fargo and Wachovia for allegedly reneging on the sale of Wachovia – shades of the 1984 Texaco-Getty Oil-Pennzoil contract dispute, decided by the Supreme Court in 1987; Pennzoil Co. v. Texaco Inc., [481 U.S. 1 (1987)].
-- Then, to top another historic week, on Friday, after 90 minutes of floor debate, the House passed H.R. 1424 that includes:
Emergency Economic Stabilization Act of 2008
Energy Improvement and Extension Act of 2008
Heartland Disaster Tax Relief Act of 2008
Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 [the bill that became the skeleton for the bad-debt absorption plan, upon which the rescue plan plus all the myriad of pork-barrel projects were hung to get the plan passed, began 18 months earlier – the piranhas at the public trough.]
Tax Extenders and Alternative Minimum Tax Relief Act of 2008
[H.R. 1424; House: 263-171-0-0(1)]
The President signed the bill less than two hours after the new law was passed by the House. Apparently, the President was not particularly embarrassed by the US$110B (that is a ‘B’ for billion, not an ‘M’ or a ‘K’ – a ‘B’) in add-on pork that had absolutely nothing to do with the current bad-debt, credit crisis. We are talking about trauma surgery to stop the bleeding, and we have a bunch of bloody politicians picking the patient’s pockets while he’s on the surgery table in the operating room. Can anyone think of a more disgusting analogy for these pork-mad politicians, in this latest example of how mutated our Federal government has become? I wonder if these bozos think we are not paying attention to their largesse with public treasury. My apologies . . . I get all riled up with this stuff.

OK. Now, the USG has taken an unprecedented step authorizing the Executive to intercede in the financial market to absorb the mountain of bad-debt that has choked off credit between banks, for business, for citizens, for the economy. The Executive must now transform the authority into direct action. Plenty of folks predict this scheme will not work. Some even suggest it will make the situation worse. The current crisis began decades ago, not three weeks ago. The Press, talking heads, political pundits, and numerous networks, journals, blogs and eMail threads pressed the debate of whether the USG’s action plan is the correct thing to do, or even needed at all, or even whether the crisis is real. I am an ordinary, common citizen who knows very little about the world of national and international capital markets and finance, so my opinion and judgment must be questioned. However, the collateral damage done to the U.S. and World economies by these out-of-control, greed-manic, money launders remains my greatest worry. These money men have done far more damage than al-Qaeda, Islamo-fascist terrorists, jihadistanis, and even the domestic crazies we endure from time to time. I can only hope the perpetrators suffer an appropriate punishment for the destruction they have wrought.

The best analogy I can muster up for our present predicament is a aviation one. The object of flying fixed wing aircraft is to balance all of the various performance variables: weight, thrust, airspeed, altitude and direction. Many bad things can happen to upset the balance. The pilot responds to the imbalance with the controls he has available. One of the worst conditions for an airplane is a flat spin. We do not need to analyze the physics of a flat spin. Let it suffice to say, it is not good. The object of flying is to avoid conditions necessary for the aircraft to enter a spin. Yet, if you find yourself in a spin, you do not have time to read the Aircraft Flight Manual or Pilot’s Operating Manual. You have to do what you were taught. And, when the correct actions do not work, you have to try the wrong things or the illogical actions . . . anything to shift the aircraft just enough for the control surfaces to find a bite of air, allowing proper anti-spin control inputs to work. So it is today with the credit crisis. The time to avoid the crisis was four to ten years ago. We chose not to respond. We are in an economic flat spin, and we do not have time to read the book or study the root cause. We must react. Whether the Paulson Plan is the proper, correct action, history shall tell the tale. The new law gives extraordinary latitude to the Secretary of the Treasury, which means it can be adjusted and tweaked as necessary. A truly free market is a seductive philosophical and ideological, utopian concept and the ultimate in capitalist objectives, just as much as the opposite end of the spectrum – true, Marxian communism – is a utopian ideal. Neither extreme serves us common folk very well. We, the People, created and maintain a republican governance system ostensibly to protect our freedom to live our lives as we choose, without interference from others, either individually, in groups or via the instruments of State. A genuinely free market does not serve that purpose any more than communism, or dictatorship, or Papal or Crown dicta serve us. Conversely, rules for proper behavior – to respect the equal rights of fellow citizens – must regulate the market to a sufficient level to prevent or minimum harm to innocent, uninvolved citizens. If I choose to take risks in the marketplace, then I benefit from the rewards and suffer the consequences. If I choose not to take those risks, I should not suffer the downside as I have no opportunity for the upside. Today, we have a grotesque imbalance in that equation. In 1929, the Federal government took a laissez-faire approach to the loss of market confidence, and virtually every citizen suffered. Fortunately, the USG did not stand idly by in 1987 or 2008. History shall judge those who hold the reins today. Lastly, just as every one of the last five presidential administrations should feel genuine and profound remorse for allowing Islamic Fascism to become the threat it is today, so too at least, the last four administrations should feel bone-shaking embarrassment that proper intervention was not taken when the price of such action would have been substantially less.

New York City Mayor Michael Rubens Bloomberg wants to repeal the two-term limit law that stands in his way for a third, or perhaps in perpetuity, term as mayor. I trust the voting residents of New York City will see this for what it is and do the correct thing. In my most humble opinion, every single elected political office from local to Federal, from legislative to judicial and executive office, should have term limits and preferably only two, period. I eagerly include all leaders – great or weak, important or inconsequential – Abraham Lincoln to Sir Winston Churchill – ALL! I am quite attracted to the model set for us by Lucius Quinctius Cincinnatus, nearly 2.500 years ago. The audacity, arrogance and egocentrism of guys like Bloomberg worry me more than a little. If Mike wants to remain a politician, let him find another position from which to serve. Better yet, he should return to private business and let someone else have at public service as mayor.

Comments and contributions from Update no.354:
“Unfortunately, today my warning came true (i.e., "if we can find someone smart and wise enough to know what to do), given the bill failed. The players would rather have a food fight instead of act like adults and solve the nation’s ills. Seems others are confused as well. It is hard to accept the donkey blaming the elephant when the donkey owns most of the votes. On the other hand, the elephant is stuck in the morass of complexity along with everyone else. If reports are true, 400 economists including 3 nobel prize winners advised to wait and find the causes first. Like you, we know the causes came decade or more ago. What to do now is the question. I'm still looking for someone smart and wise enough to solve it.
“I keep hearing the words of Adam Smith ‘...the invisible hand...’ We need it or something now.”
My response:
What we witnessed in Washington yesterday was disgusting – a collective Nero fiddling as the Nation burned.
I do not agree with the economists including Nobel laureates. When you are in a spin, it is not time to get the checklist out and consider what to do. Intellectually, determination of root cause is always the best choice to arrive at the proper corrective action. Unfortunately, the time to determine root cause and take proper corrective action was four years ago.
‘Invisible hand’ indeed!

Another contribution:
“I know I can be very opinionated (and a bit emotional) in some of my posts. I realize I’ve been that way on this bailout. I suppose many folks are allowing their emotions to run very high, even much higher than mine. I appreciate you tempering your opinions as you do continued research. This toxic debt problem is serious, and I’m afraid it appears to be spreading to other global markets, and I do fear the systemic loss of both liquidity and velocity could continue to present greater problems. Troubling too was our own governor, Arnold, saying our state will be out of money by the end of October and we need $7 billion. I am nervous this is starting a trend. I would love to be positive about it all, but right now it seems like we are just now getting into the storm and there is tremendous uncertainty whether the bailout will be effective, and where the bottom (flight out of the thunderstorm) is going to be. Last week I read that FDIC may be running low on cash and need more money, if that word were to spread we might have a serious loss of confidence leading to withdrawal of deposits. Some have told me there has been a silent run at Wachovia, and the same may have happened at Washington Mutual. I would imagine this should soon be verifiable. Late Saturday, I heard a judge blocked the sale of Wachovia to Wells Fargo. I believe Citi must have hired good counsel and got the representation because they were calling fowl Friday, about Wells Fargo.”
My reply:
I continued to be enormously thankful that I have been able to connect with folks like you, who have the confidence, knowledge, and energy to express their opinions on common as well as highly sensitive topics. I hope you will continue to express yourself as freely as you feel comfortable. The broader, vigorous, public debate is absolutely vital to this Grand Republic and our vision of a free and open democracy.
The Paulson Plan approved Friday is an embarrassment and potentially ‘too little too late.’ The Powers That Be saw this coming years ago, just as they did the generic attacks of 12/7 and 9/11, and chose to hope the threat would go away. Well, it didn’t. Wishful thinking rare works. I do not know if the Paulson Plan is going to work, but I do believe it is a bona fide attempt to ‘unclog’ the capital and credit markets. We shall see.

This is part of a thread with a friend and contributor in the banking business regarding the current credit crisis that began with an article titled:
“Let Risk-Taking Financial Institutions Fail”
To which I replied:
Every business takes risks. Can we let all businesses fail?
. . . round two:
“Rest assured they won't all fail... just the ones that need to as with Wachovia, the customers won't see a change but for the sign on the front.
“The market works just as well on the downside as on the upside.”
. . . my replied to round two:
True. No debate. I truly believe the marketplace can sort this mess out. The only question is, how much pain are you and me willing to endure to as the marketplace works it out? A lot of innocent people are being harmed, and the longer this recovery takes the more innocent people will be harmed. If only the guilty were harmed, I'd say let 'em suffer. Alas, that is not the case.
. . . round three:
“Agreed, we must respond to this problem. I just don't think the answer is to buy illiquid assets from reckless investors who can't even say what their assets are.”
. . . my replied to round three:
1. What would [the] bank do if demands absorbed the bank's liquid assets and there was no money available from other banks?
2. Where does a local bank turn for bridge funds to weather a demand storm?
3. How [does the bank] loan funds to farmers, builders, small businesses when the bank's liquid assets drop below thresholds?
4. Hopefully, the local banks did not get sucked up in the sub-prime mortgage mess. How does the bank adjust its liquid asset threshold as bad-debt quantities increase?
It is the collateral impact I worry about. When capital markets start to dry up, dominoes begin to fall. If it's too much, just say so.
. . . round four:
“Well, it's all academic now that the bill has been signed. I would have preferred a different approach, but in the end, we had to do something. Let's hope this is effective.
“Rural Ag banks are odd ducks compared to most. We loan locally deposited money primarily to farmers. This time of year we are in a borrow position and have to go outside for money. But the farmers have started selling grain and paying down their operating loans, so we will be under-loaned again before year end. It’s an annual cycle that we plan for.
“Regarding getting money outside, we've not had any trouble. First we are well capitalized. When we run worst case scenarios, we have commitments for about 3 times the money we might need. One of the reasons that banks don't want to loan money to other banks is that they don't trust them (they don't trust the investments they've made). The banks that have made commitments to us know we have zero investments in sub-prime mortgage backed securities, a conservative portfolio, and a readily identifiable and loyal customer base. The fall back position is selling securities. We maintain a diverse portfolio of conservative investments, so that would help.
“I think that when they blurred the lines between commercial banks and investment companies or ‘banks’ (Gramm-Leach-Bliley Act of 1999), we let that aggressive, risk-taking mentality into banks when the two institutions serve different purposes in the financial system. I also don't think the banks that got involved with the more exotic instruments, credit default swaps, derivatives, etc. understood them at all. I'm not sure anyone does. They certainly are having trouble identifying them and determining their value.
“Interestingly, Wal-Mart has been lobbying Congress to allow them to form a bank to put in their stores. Hopefully the odds of Congress allowing retail and banking to mix are reduced after what we've learned here.
“Really, I think the answer for banking is keeping it simple. That almost sounds regressive when I type it, but in an overly complex environment one can convince oneself of about anything. That might have a place in the wild and woolly world of venture capital and investments, but not in core banking where we need to pay the school teacher's salary.”

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)