Texonomy

"Once it had Washington by the horns," writes Bryan Burrough in today's Washington Post. "But now the Lone Star State is done." Gushing with money from oil discovered there during the Great Depression, Texas has taken America on a wild political ride for the past 80 years or so. Until now. "The Bush administration's bonfire of the inanities has made being a Texan something you don't brag about," Burrough concludes, even though he's sure Texas will rise again. "I don't know when, and I don't know who, but it will." We'll see. Maybe Wall Street will be driven there next.

Doubleyood

After all the angst – not to mention acid reflux – George W. Bush has inflicted on many of us over the past eight years, as we tried to figure out what in the hell he thought he was doing, a pretty canny explanation comes from Adam McKay, former head writer for Saturday Night Live:

"He’s so clearly a neglected 13-year-old that there’s something really kind of heartbreaking about him," McKay said, calling him "a good-time Charlie" who was "just used his whole life to front questionable business endeavors, and in a way that’s what his presidency was.

"He doesn’t have Cheney’s cartoonish need for power and greed that’s so off the charts you don’t even understand how Cheney got that way. W. may have some awareness, deep down inside, sort of like a petulant teenager who just flunked the trig quiz and knows he screwed up. I think Cheney not only knows but is delighted with everything he did, as is Rumsfeld."

This is what McKay told Maureen Dowd when she went to see Will Ferrell in “You’re Welcome America,” co-written and directed by McKay and now playing on Broadway. In the end, Bush may be kind of sad, perhaps, but all the more exacerbating for his clueless self-indulgence, not to mention genetic gangrene and the senseless consequences of his reign of error.

Titanic?

Once Madoff made off with all that moola, the regulators seem to have sobered up and noticed other players out there who have run off with other peoples’ money into never-never land.

"A Texas billionaire and two associates are in regulators’ cross hairs, alongside Houston-based companies and an affiliated offshore bank, accused of perpetuating a multibillion-dollar fraud that could sting investors worldwide," the Houston Chronicle reports today.

"'We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,' said Rose Romero, regional director of the Securities and Exchange Commission’s Fort Worth office, which filed civil charges Tuesday against R. Allen Stanford, the bank, two Houston companies and two company executives, James Davis and Laura Pendergest-Holt," the Chronicle continues.

"Indeed, Mr. Stanford and his firm have emerged as recent contributors to various American lawmakers, focusing particularly on legislators considering bills that could change offshore banking rules," the New York Times reports. "The Chronicle's blog offers a list of the many Texas lawmakers who took campaign contributions from him."

"We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors,” said Linda Chatman Thomsen, director of the SEC’s enforcement division.

Let's hope they find him. If all this is just the tip, how big is that iceberg?

Drained

Talk abour "brain drain," do you know what your bank or lender has done with your promissory note? "During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors," the Associated Press reports today. "In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed."

Now, homeowners in foreclsorue are calling their bank's bluff and forestalling repossession by insisting they produce the note.

"April Charney, head of foreclosure defense for Jacksonville Area Legal Aid in Florida, said the strategy has been so successful for her that she now travels around the country to train other lawyers in how to use it," the AP continues. "She said she has gotten cases delayed for years by demanding that lenders produce paperwork they cannot find."

Drain

The latest criticism of limiting bankers' salaries and bonuses is that it will create a "brain drain." Are you kidding? First of all, what brains? Considering the fine mess we're in now, wouldn't you say those brains have been drained already, for some time now, bone dry? But if not, then they ought to be drained as soon as possible, and then flushed thoroughly to clean out any telltale residue. As for those "brains" complaining about this, perhaps an IQ test for them is in order now.

Obtuse

As our banks are pleading for more help than ever now, even the revered financial seer Alan Greenspan, former chairman of the Federal Reserve, now admits he was confused, if not bamboozled himself, by Wall Street’s inventive greed when they concocted mortgage-backed securities, a scheme basically designed to bundle home loans into investment funds that had little foundation in reality. Subprime loans also disappeared into this black hole, and now the global economy is teetering on the edge.

Obtuse may be a more accurate term to characterize this misadventure, although speculation is what they call it. But think about it; other people have (like homeowners). How can you make a viable investment vehicle by scrambling loans on people’s homes into cheesy omelets? Traditionally, a mortgage has been a partnership between a homeowner and a bank to own a piece of real property, not a factory or service that produces anything. Once the homeowner pays off the loan, the bank turns over full ownership to the mortgagor and walks away with their profit from the interest they charged.

“So everybody in retrospect now knows that that boom was developing under the markets for quite a period of time, but nobody knew it,” Mr. Greenspan told CNBC’s David Faber. “In 2004, there was just no credible information on that. It wasn’t until we got well into 2005 that the first inklings that that was developing was emerging,” he said.

“If we tried to suppress the expansion of the subprime market, do you think that would have gone over very well with the Congress?” Mr. Greenspan continued. “When it looked as though we were dealing with a major increase in home ownership, which is of unquestioned value to this society — would we have been able to do that? I doubt it.” Good point; although, listen to them now.

“We could have basically clamped down on the American economy, generated a 10 percent unemployment rate. And I will guarantee we would not have had a housing boom, a stock market boom or indeed a particularly good economy either," he concluded.

The way these guys talk often sounds obtuse, too. Who says a boom is what we really wanted or should have had in the first place? Boom implies an explosion, after which there is usually a lot of devastation and shrapnel flying around. In finance, they call it a bust. But who was watching, if not for guys like Greenspan?

“What we have created in this world is an aura around the credit rating agencies about certification from them is the Good Housekeeping Seal of Approval,” Mr. Greenspan admitted. “I will tell you the record of a lot of the forecasters of ratings have not been distinguished. They never were.”

Obama and Geithner now have their hands full trying to clean all this up. The lesson is pretty basic, though. Make sure you know who’s minding the store before you drift off into never-never land; and whoever it is, make sure they know what’s for sale and what isn’t, or shouldn't be. Otherwise, you’re likely to come in one morning and find your store is empty with no money in the till.

(Source: New York Times DealBook, February 12, 2009)

Stimuli

As President Obama acknowledged our "perfect storm of financial problems," Congress finally agreed on a $789 billion stimulus bill this afternoon. "'The differences between the House and Senate versions, we’ve resolved,' Senator Harry Reid of Nevada, the Democratic majority leader, said in a Capitol news conference," the New York Times reports. "'The differences were resolved by a lot of intense 'give and take,' Mr. Reid said, 'and if you don’t mind my saying so, that’s an understatement.'"

Meanwhile, Secretary of the Treasury Timothy F. Geithner appeared again before the Senate Budget Committee and stressed, “We believe the policy response has to be comprehensive and forceful and that there is more risk and greater cost in being gradualist and tentative than there is in aggressive action.”

And up in Boston, regulators revealed that Bernie Madoff's wife withdrew $15.5 million from two brokerage accounts just before he was arrested last December 11.

Obamanesque

A lot of people are trying to second guess Obama now, already, and many scribes (not necessarily pundits) are already criticizing him with the obvious and perhaps expected barbs. You know, he’s not doing what he said he’d do, he’s too partisan or he’s not partisan enough, he’s letting the other side get away with their lame excuses, he’s pandering to the political establishment, and so on. Well, for one thing, that establishment has been around for a long time and is very deeply entrenched (see Webster’s). You can’t tear it down overnight (or even blow it up). You have to work with it, work with what you’ve got, or you have nothing. Recall G. W. Bush on that one, too, and then check Webster’s again for petulance, pissant and hubris, as in Dick, Don and Rush

Barack Obama is an intelligent man, and he knows what he has to do to make each step in the right (or would that be positive) direction. The bottom line in Washington, or any democratic process crowded with human self-interest, is negotiation. And if your grandfather didn’t tell you what negotiation is all about, go and ask him now, because he’ll probably tell you, “Let the other guy do the talking, and just listen.” And then when he’s done, you’ll know what to say next to capitalize on what the other guy has just divulged. You will have the advantage, most likely, because the other guy will have shot his wad first.

So, now these wads are piled up all over the place, all around Washington and all around Obama. You can be sure he will know where to leave them as he takes out the trash and tries to clean up the mess. We could all listen and learn something for a change, as in his nationally-televised press conference this evening.

Madoff

Once upon a time, everybody who was anybody wanted to be on Bernie Madoff's list of inside investors. "Today that list is an exhibit in Federal Bankruptcy Court in Manhattan, part of the paperwork documenting the annihilation of Mr. Madoff’s magic and his customers’ money. The boldfaced names have become red-faced, angry and perhaps embarrassed to find themselves caught in what prosecutors say is by far the largest Ponzi scheme in modern history," the New York Times reports.

Lemonaid

What do you call the new administration's plan to fix our financial meltdown? "Just to be clear, I’m not talking about the Obama administration’s plan to support jobs and output with a large, temporary rise in federal spending, which is very much the right thing to do," writes Paul Krugman in today's New York Times. "I’m talking, instead, about the administration’s plans for a banking system rescue — plans that are shaping up as a classic exercise in 'lemon socialism': taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right."

Reaganism

"The myth of Ronald Reagan was already looming in the spring of 1997 — when a highly popular President Bill Clinton was launching his second-term, pre-Monica Lewinsky, and the Republican brand seemed at low ebb. But what neoconservative activist Grover Norquist and his allies proposed that spring was virtually unheard of — an active, mapped-out, audacious campaign to spread a distorted vision of Reagan's legacy across America," writes Will Bunch in an excerpt from his book on Reaganism published today in Salon. Read more here and gnash your teeth.

Greed

This is really turning out to be the winter of our discontent. Wall Street crashes and burns with mortgage-backed securities, hedge funds and exotic credit-default swaps (CDSs) that defy common sense. It’s all gambling with other people’s money behind smoke and mirrors. You’d probably do better in Vegas. Bernie Madoff made off with a lot of moola, not to mention Marc Dreier and other swindlers, under totally false pretenses. Then, there’s John Thain at Merrill Lynch and the other clowns at the banks and large corporations who continue to insult our intelligence by acting as though they are due their bonuses and inflated salaries while they embrace socialism to bail them out as they suck the rest us underwater. Just this past week, President Obama nailed these guys as “outrageous” and “shameful.” It’s a fine mess we’re in, and who really knows what it’s going to take to dig ourselves out. Whatever it is, it'll be on our backs. When will the Republicans figure out that private free enterprise is not free? The markets do not regulate themselves, and privatizing government is an oxymoron. Maureen Dowd got it right this morning when she urged that they all be disgorged.