Archive for the 'Rants' Category

Jul 30 2008

The Savings and Loan Crisis All Over Again?

Published by under Rants

I have to wonder whether the Fed’s current plan to prop up Fannie Mae and Freddie Mac is the Savings and Loan crisis from the 1980’s coming back for a reprise. Here we are with both Fannie Mae and Freddie Mac suffering huge loses. So huge that the Federal Reserve (along with both the Bush administration and Congress) wringing their hands over how to help the two mortgage giants remain alive so that their collapse will not trigger a financial system meltdown. But it’s not just Fannie Mae and Freddie Mac that the government is bailing out, there are other financial institutions that the government is offering to prop up and save at the cost of the tax payers. An interesting article on MSN Money by Bill Fleckenstein does an excellent job of summarizing how there seems to be very little outcry from the public at large for the government’s bailing out of these financial institutions which have pretty much brought our economy to a grinding halt. How did this happen? Pretty easily. While banks, typically, are supposed to be tightly regulated, a whole bunch of unregulated financial players entered the scene in the late 90s in early part of this decade. These players were not of a concern to Alan Greenspan, then chairman of the Federal Reserve Board. In his opinion, “the market would enforce disciplened risk-taking” (Krugman, Paul, “Another Temporary Fix“, The New York Times, July 28, 2008 ) As Paul Krugman notes in his op-ed in the New York Times:

Far from being disciplined in their risk-taking, lenders went wild. Concerns about the ability of borrowers to repay were waved aside; so were questions about whether soaring house prices made sense.

Lenders ignored the warning signs because they were part of a system built around the principle of heads I win, tails someone else loses. Mortgage originators didn’t worry about the solvency of borrowers, because they quickly sold off the loans they made, generally to investors who had no idea what they were buying. Throughout the financial industry, executives received huge bonuses when they seemed to be earning big profits, but didn’t have to give the money back when those profits turned into even bigger losses

(Krugman, Paul “Another Temporary Fix“, The New York Times, July 28, 2008 )

Well, those losses are now coming out more and more. Every day when we think that we’ve seen the worst and we’ve turned a corner we get another round of announcements by the financial institutions. Just last night, after the market closed, Merrill-Lynch announced another $6 billion (that’s a ‘b’, yes) in write-downs — i.e. losses that they’ll just have to take) Citigroup is indicating that it may announce another $8 billion in write-downs and two more banks have been taken over by the FDIC. How did all this happen? It’s quite complicated but James Grant of the Wall Street Journal does a good effort in trying to explain some of it in his article “Why no outrage?”

Why is there no outrage from the public that our government is doing all it can to bail out these financial institutions and very little to help the average homeowner? Perhaps because, as John McCain believes, the government feels that the homeowners got themselves into this mess as if the institutions bear no blame? That would be typical of this administration and this Congress. I’m not sure myself as to why there isn’t more of a public outcry. I’m of the opinion that these Wall Street institutions should bear more of their pain rather than put it onto the average tax payer. To me this sounds alot like the old Savings and Loan Crisis from the mid to late 80s. During the time period from 1986 to 1995 about 50% of all federally insured Savings and Loans were wiped out by…you guessed it…unsound real estate lending (Savings and Loan Crisis“, Wikipedia, July 21, 2008, http://en.wikipedia.org/wiki/Saving_and_Loans_Scandal) — sound familiar? And who got to foot the bill in the end? The taxpayer — to the tune of approximately $160 billion dollars and severe budget deficits and an economic recession in the early 90s. (Savings and Loan Crisis“, Wikipedia, July 21, 2008, http://en.wikipedia.org/wiki/Saving_and_Loans_Scandal) And the outlook from this mess doesn’t look any better. Thanks Wall Street.

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Jul 18 2008

A Sad Day for Israel

Published by under Israel,Rants

Yesterday the bodies of Ehud Goldwasser and Eldad Regev were returned to Israel in exchange for the remains of 199 Lebanese and Arab guerilla fighters and five others including Samir Qantar. Today, Ehud Goldwasser was buried and the pictures of the weeping widow and family breaks my heart. The Israeli government gave away too much. Now the enemies of Israel will feel that all they need to do is kidnap and kill Israeli soldiers to get what their prisoners released. Prime Minister Olmert has shown terrible judgement in this matter by releasing the murderer Qantar along with the others. Here is a man who murdered a 31-year old father in front of his four year old daughter before smashing her skull against a rock with the butt of his rifle. And now he is being paraded by Hezbollah as a “hero.” And if you doubt the connection between these terrorist murderes and the philosophy of Adolph Hitler…just look at the pictures here. He truly is Adolph Qantar. May his name and his memory be blotted out.

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Jul 16 2008

Who Needs Laws When You're Karl Rove?

Published by under Rants

So it seems that Karl Rove has decided to continue defying a congressional subpoena claiming that he’s offered lawmakers “other ways to question him about allegations of political pressure at the Justice Department” (“Rove Defends Defiance of Congressional Subpoena,” Examiner.com, July 14th 2008, http://www.examiner.com/a-1487448~Rove_defends_defiance_of_congressional_subpoena.html). It seems that Mr. Rove see the issue centering on whether the senior advisors to the president can be at the beck and call of Congress to answer questions on advice they gave to the President. Somehow I don’t buy that. This is an investigation of potential violations of the law (or at the very least the use of political pressure to pursue legal action against individuals based on their political affiliations and removing Federal prosecutors who were considered “disloyal” to the President). It’s an investigation. Mr. Rove lays out some pretty amazing pre-conditions for his “testimony” — No Transcripts and No Oath. Very nice. If anything is discovered then it’s his word against someone elses. On top of that, if he lies, he hasn’t committed perjury since he wouldn’t be sworn in. This guy is amazing. Sounds to me like he’s got something to hide and he knows it.

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Jun 16 2008

The Senate and H.R. 6049 – Shame on the Republicans!

Published by under Energy Policy,Rants

H.R. 6049 is a bill that would extend the current tax credits consumers and businesses would receive for the installation of renewable energy generation systems (i.e. solar and wind generation systems) on their properties. It would do more but that’s the crux of the bill. The bill passed the House and went to the Senate for debate. It got all the way to the Senate floor where it is now languishing because the Republicans can’t seem to stomach the way the bill pays for these tax credit extensions. Originally, additional taxes on oil companies was proposed as a way to pay for the credits. But the Republicans balked at that and defeated the cloture motion to bring the bill to a vote.

The bill was then revised to draw its revenue by closing offshore loopholes that benefits hedge fund managers. And again, the Republicans couldn’t stomach it and blocked the cloture motion. It seems that the idea of “Pay as you go” government isn’t something the Republicans can accept. The New York Times hit the nail square on the head with their editorial on this one. I only hope the Republicans get their head hit just as hard in the ballot box in November.

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Jun 16 2008

Another WSSC Gaffe!

Published by under Rants

Once again there is a problem with the water pressure on my block, Hermleigh Rd. As to the source — there could be several (update: turns out that WSSC has identified this as a major break in the “Montgomery High Zone”. It’s so bad that they’ve issued a “Boil Water Advisory” and have instituted mandatory water restrictions for the county). There could be another break on Stonington Place (I feel even more sympathetic for them since a water break on their street seems almost like a seasonal occurance) or it could be due to the sink hole that is developing in the street in front my neighbor’s house directly across the street from me!

See, WSSC didn’t get their $20/month fee they wanted to tack onto Montgomery County and Prince George’s County residents’ water bill for the next 10 years. They did, however, get a 10% rate hike. However, it seems that WSSC maintains it’s infrastructure much like PEPCO does — through fire drills. Who would think that we live right next to the nation’s capital with a crumbling infrastructure like this. Now, I’m all for doing the right thing and beginning a replacement of the water mains, but this was something that WSSC should have anticipated over the years — rather than just doing “deferred” maintenance and then expecting to shift the costs to the end consumer as though we were their piggy bank.

I’d be curious to compare our water rates versus other places in the country. I suspect that our water rates are among the highest in the nation even though the service we get is pathetic.

When I used to live in a condominium we had to set aside money every year into a capital account to anticipate upcoming large maintenance projects. We even considered the amount to commit to that account based on estimates of inflation and other costs. Most years we were able to pay for the capital projects that were slated — roof replacement, parking lot reseal, etc. What I fail to understand is how WSSC could have failed so miserably at maintaining their infrastructure so that they needed to go to the Montgomery County Council and ask for a $20 per month infrastructure fee per WSSC customer for the next 10 years. Of course, had the council given them the approval of that fee, what do you think the chances are that they would have rescinded it after the 10 year infrastructure replacement program was complete? Just like Virginia promised to rescind the tolls on the VA-267 once it had paid for itself…right? If you believe they would have rescinded it…I have some land in Libya I’d like to sell you.

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May 22 2008

Another Excellent Tom Friedman Opinion Piece

Published by under Rants

Tom Friedman definitely sees through to the facts. His latest opinion piece details some of the many power shifts are occuring today and how so few of them are in America’s favor. This will definitely be the legacy of the Bush/Cheney kleptocracy and how the middle class in America will pay the price of their mistakes and incompetencies for many years to come.

Mind you, this is not just the Bush administration’s fault alone. Congress has gone along quite well with this inability to address the real needs of this country and we will be facing many threats tomorrow because the politicians in this country did not have the foresight to see this coming yesterday nor do they have the backbone to do something about these trends today. It’s time for Americans to make their voice known in the ballot box and find a true leader who can bring about responsibility and accountability in our nation’s government and in our country’s direction into the future.

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May 22 2008

The Shame of the Oil Companies

Published by under Energy Policy,Rants

I was reading the news this morning when this particular headline caught my eye:

“Big Oil’s big ‘Problem'”

Intrigued I decided to read the article. It never ceases to amaze me how short sighted and greedy people (and companies) can be. The article focuses on the fact that ConocoPhillips and ExxonMobil are spending the big windfall that their companies are making in two ways: dividends to stockholders and buybacks of the stock from the open market. This, of course, leads to the obvious question: what about capital spending — like research into alternate energy technologies or searching for new energy sources? Nope…they’re apparently not interested in this. In this day and age it’s unbelievable that companies can be so insensitive to the situation in the world around them that all they can think about is enriching themselves rather than helping to solve one of the major problems being faced in the world today. I have no problem with the idea that they should reward their shareholders with some of the money they earn…but to spend 0% (in the case of ExxonMobil) and 0.5% (in the case of ConocoPhillips) on capital items like finding and developing new sources of energy is reprehensible and unconscionable. These companies are making money hand over fist and they see no reason why they should look for other sources of energy. I would hope that when the day comes and the oil finally runs out that they will be ones scrambling for things to sell and find that the market has moved beyond these dinosaurs. I only hope that I will live long enough to see that day.

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May 05 2008

Another Great Article from Tom Friedman

Published by under Rants

Once again New York Times columnist Tom Freidman has written a great piece. Take a look here. It’s time that we stop “nation-building” in Iraq and Afghanistan and start “nation-building” here at home!

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May 01 2008

A Gas-Tax Holiday — or how to send more money to China and Saudi Arabia

Published by under Energy Policy,Rants

I just finished reading Tom Friedman’s column in the New York Times for today. This guy is spot on when it comes to many of his opinions. He should run for President — but, then again, I guess he’s smart enough to stay out of politics — unlike some of our candidates. I’ll summarize what he says in his column and then add my feelings.

So one of the latest ideas conjured up by Senators McCain and Clinton is the idea of a gas tax holiday. It seems that the good senators are concerned that Americans won’t drive enough or have enough vacations this summer to the point that they’re both willing to float the idea of a Federal gas tax holiday. I can’t imagine a more ridiculous and bass-ackwards idea than this. The Federal excise tax on gas is 18.4 cents per gallon. If we get rid of this how are we going to pay for the maintenance and repair of our crumbling infrastructure? Clearly Senator McCain and Senator Clinton haven’t factored the fact that the Federal tax on gas is a prime contributor to the trust fund that the US government has to keep up with the maintenance of our interstate highway system. Maybe we need a few more bridge collapses as happened in Minneapolis to remind the two candidates that we need to focus more on higher priority items — like repairing and maintaining the infrastructure of this nation and developing a sane energy policy rather than worrying about whether the Smiths or the Jones’s will be able to go to the Grand Canyon or to Hawaii this year.

If we cut the excise tax then we’ll have to borrow more money from other countries…particularly China in order to pay for the repairs to our nations highways and bridges. And we will be encouraging, rather than discouraging, Americans to drive more (not so good for global warming) and use more gas — which will send more of our wealth to the Saudis and the other OPEC countries where they can use it to pay for things like, oh, terrorism. It’s a lose-lose proposition and shows how much the candidates are willing to do to curry the favor of the oil industry as well as to buy votes.

This proposal is nothing more than election year politicking — nothing less. Rather than encourage more gas usage this summer the government should raise the Federal excise tax to encourage Americans to buy smaller cars, conserve more, drive less and do what we need to do to get through this crisis — innovate. If more Americans would choose to buy hybrid vehicles (and I’m not talking about an SUV hybrid — I’m talking about cars like the Honda Civic hybrid or the Toyota Prius) then we would improve the overall gas mileage of the US fleet. On top of that, if we use the money to help fund credits for alternative energy and fuels, we would be able to eventually (and when I say eventually, I mean something in the neighborhood of 10 or 20 years) get off the OPEC needle and we would have a sound, and, this is most important, clean energy policy that will help keep us independent of the whims of the outside world. If anything I believe that what we should do is eventually share our innovations with other countries to break OPEC’s grip on the rest of the world and to make serious inroads into the current global warming crisis. It is imperative that we see this as our “Manhattan Project” of our day…the problem is neither the government nor the candidates vying for our votes in the current election see it that way. Perhaps Senator Obama does…at least I can applaud his decision not to endorse this ridiculous idea of a holiday on the Federal excise tax on gas in the summer.

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Apr 28 2008

The Butcher Was Wrong

Published by under Rants

In Henry the Sixth Part 2 Shakespeare created a fictional account wherin the agent provocateur, Jack Cade, working for the Duke of York, is trying to foment civil unrest behind the Duke of Lancaster’s lines during the War of the Roses. During a speech Jack Cade stirs the crowd and says:

CADE: Be brave, for your captain [himself] is brave and vows reformation. There shall be in England seven halfpenny loaves sold for a penny, the three-hooped pot shall have ten hoops, and I will make it felony to drink small beer. All the realm shall be in common, and in Cheapside shall my palfrey go to grass. And when I am king, as king I will be—
CADE’S FOLLOWERS: God save your majesty!
CADE: I thank you good people!—there shall be no money. All shall eat and drink on my score, and I will apparel them all in one livery that they may agree like brothers and worship me their lord.
DICK THE BUTCHER: The first thing we do let’s kill all the lawyers.
CADE: Nay, that I mean to do. Is this not a lamentable thing that the skin of an innocent lamb should be made parchment? That parchment, being scribbled o’er, should undo a man? Some say the bee stings, but I say ’tis the bee’s wax. For I did but seal once to a thing, and I was never mine own man since.

—Henry VI, Part 2, Act 4, Scene 2

As I sit today and watch the stock market I get frustrated. I have a lot of stock in Microsoft (goes hand in hand with working for the company) and I’ve watched the stock drop from $31.80 at the end of trading on Thursday to $29.80 at the end of trading on Friday and now, with a few hours left in the day today we’ve dropped another $0.71. Why? Sure our income last quarter decreased on a year-over-year basis by 11%…but our revenue was up slightly. Of course there was that pesky EU fine of $1.42 billion (yes, that billion with a ‘b’) — seems like the EU sees Microsoft as a piggy bank that they can fine whenever they want to when they need some cash. And to top that, we announced guidance for the coming quarter of $0.45 to $0.48 per share on revenue of $15.5 to $15.8 billion and the first thing the analysts do is pummel us. Why? Personally I think that most analysts are just full of it. But the fact is they probably all have an axe to grind. Whatever it is I’ve been in two companies (Cisco and Microsoft) in which I’ve seen our stock esentially go nowhere because the analysts, who think they know our business better than we know it ourselves, decide that they don’t think our business is as good as it could be. If we were to apply the butcher’s statement to today’s environment it wouldn’t be “kill all the lawyers” but rather “kill all the lawyers and the stock analysts!”

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