Paulson uses Sarbanes-Oxley to grab power for Goldman-Sachs’ Wall Street at the expense of Main Street. The key is mark to market. Rising assets, marked to market, cause euphoria. Falling assets, marked to market, cause panic. Paulson uses this panic to enrich himself. Main Street voted NO. Let banks determine fair market value based on proven accounting methods.
Reinstate up-tick rules and stop hedge funds from bludgeoning stocks by false rumors. Government cannot legislate common sense or morality. These qualities spring from Main Street, not K Street in Washington.
Bush stuck with Defense Secretary Rumsfeld for too long and paid the price. He must fire Paulson and find another Petraeus. Go back to fundamentals.
Tuesday, September 30, 2008
The Democrats' Dilemma/McCain's Opportunity
Eyewitnesses say Thursday’s meeting at the White House featured Obama speaking for the Democrats while McCain was silent. Phones rang off their hooks with both Republican and Democrat all opposing the Paulson bill. McCain deputized Boehner and Blount to block the bill and protect taxpayers. Paulson would protect financial institutions.
Pelosi, with all the votes necessary for passage, did not want to be held accountable for a $700 billion bail-out.
Congressmen of both parties answered their phones. Almost ten-to-one of the callers cried foul—urging a vote of NO.
No one mentioned Mozillo of Countrywide, who bought and paid for Raines and Hoffman who ran Fannie Mae and Freddie Mac. Nor were Chris Dodd and Barney Frank mentioned. Both were elbow-deep in payoffs. All were chin-deep in ego. All were champions of sub-prime lending.
Chris Cox does not understand accounting. Sarbanes-Oxley required posting mark to market. The rating agencies blessed the original false ratings. The Wall Street firms and banks gained from this prolifigacy. They are now punished by the downturn.
The blame lies with the politicians--Obama, Frank, and Cox—and their cohorts who got rich through Fannie Mae and Freddie Mac, along with Tom Reid, Nancy Pelosi, Dick Durbin, Charles Schumer, and the Chicago gang. They bankrolled Obama. The Ivy League which looks down on the man in the street, a President preoccupied with Iraq, and the bit players obscured the real villains—who cashed in on free money from government-based mortgage lenders. Now they will pay!
Pelosi, with all the votes necessary for passage, did not want to be held accountable for a $700 billion bail-out.
Congressmen of both parties answered their phones. Almost ten-to-one of the callers cried foul—urging a vote of NO.
No one mentioned Mozillo of Countrywide, who bought and paid for Raines and Hoffman who ran Fannie Mae and Freddie Mac. Nor were Chris Dodd and Barney Frank mentioned. Both were elbow-deep in payoffs. All were chin-deep in ego. All were champions of sub-prime lending.
Chris Cox does not understand accounting. Sarbanes-Oxley required posting mark to market. The rating agencies blessed the original false ratings. The Wall Street firms and banks gained from this prolifigacy. They are now punished by the downturn.
The blame lies with the politicians--Obama, Frank, and Cox—and their cohorts who got rich through Fannie Mae and Freddie Mac, along with Tom Reid, Nancy Pelosi, Dick Durbin, Charles Schumer, and the Chicago gang. They bankrolled Obama. The Ivy League which looks down on the man in the street, a President preoccupied with Iraq, and the bit players obscured the real villains—who cashed in on free money from government-based mortgage lenders. Now they will pay!
Friday, September 26, 2008
The Ivy League Gets Trumped!
Paulson, Bernanke, and Bush hatched a brilliant plan. It was not a bailout. It did not hook taxpayers. It would have worked. It has the backing of Frank, Schumer, Dodd, Reid, Pelosi, Rangel, Johnson, and Raines, former head of Freddie Mac and Ginnie--all the Democrats who caused this mess! Badly communicated by back door dealing, it was misunderstood by the public, who saw the guilty getting off the hook. It did not address the core problem. Sarbanes Oxley, a complicit SEC, rating agencies, a foolish mark to market rule and others.
With mail running 500-plus to one against Republicans, house members revolted. Senators Shelby and DeMint saw the writing on the wall.
Senator McCain responded. He kept his powder dry at the White House. Now he will get a bill which blows Frank and Dodd (along with their fellow travelers), out of the water. McCain will be our next President.
With mail running 500-plus to one against Republicans, house members revolted. Senators Shelby and DeMint saw the writing on the wall.
Senator McCain responded. He kept his powder dry at the White House. Now he will get a bill which blows Frank and Dodd (along with their fellow travelers), out of the water. McCain will be our next President.
Why We Must Vote for McCain
The Paulson plan is not a bailout. Bailouts get criminals out of jail prior to trial. Neither is it a grab of taxpayer money to rescue Wall Street moguls. Rather, it is a means to reverse the perverse accounting rules which caused the originators of bad loans and face immediate bankruptcy by enticing entrepreneurs to participate in a restructuring of the credit behind these loans. A $700 billion cost to taxpayers is ridiculous.
A simple example: Bank A grants a $100,000 dollar mortgage to client B who has no capital and little income. Bank A books the mortgage as an asset on his balance sheet at fair market value held to maturity. Anticipating interest payments, this asset may be posted at more than $100,000. Suddenly, payments stop. The house stands. Accounting rules change. Bank A must mark this asset to market. There is no market. If the bank forecloses, The fair market value disappears. The value of houses in the neighborhood declines. Bank A’s credit rating is compromised. It is now in violation of equity rules.
Paulson intervenes. The government buys the house for $25,000, close to the fire sale price and sells it for $40,000 to an entrepreneur—establishing a new fair market value. Bank A now has $25,000 where it had nothing. Its balance sheet is marginally repaired. Entrepreneur B sells the house to new owner C for $60,000, who posts collateral and shows income capable of repaying the mortgage.
The government gets its money back. A new mortgagor has made a sound investment. Bank A has survived the credit crunch. The only losers may be the displaced borrowers who do not participate in the refinancing. These former residents must rent or become part of that small group of homeless. Society survives.
How did all this happen?
Wall Street in 1956 was ruled by Perry Hall at Morgan Stanley, Gus Levey at Goldman, and Bill Solomon at Solomon Brothers, who ran very tight ships. Their capital was private. They, with partners, took all the risks. By controlling this risk, they enjoyed handsome incomes.
Research boutiques and specialty underwriters invaded their turf. Merrill Lynch, envious and losing market share, inveighed negotiated commission rates.
Commissions paid by burgeoning mutual funds and asset management groups fell from 1% or more per transactions to one-tenth of a percent. The old partners retired and pulled their capital. Many firms failed. DuPont, Goodbody, Reynolds, Dean Witter, Glore Forgan merged. They were replaced by new publicly financed firms.
These firms raised capital from the newly popular mutual funds and investment advisors plus willing individual investors enjoying the rising markets of the seventies.
The old regulations worked when the few partnership owners feared loss of their capital. The new managers had no such capital at risk—they enjoyed free participation from public investors intoxicated by the rising value of the bull market.
A new political class—egalitarian, environmental, espousing private rights—abetted by courts legislating circumvention of the Constitution.
Rights were assured from abortion to home ownership. The more rights granted, the richer were the politicians. Earmarks for votes. Well intentioned Barney Frank, Dick Durbin, Nancy Pelosi, Boxer, Sanders, Kennedy, and Carey—the list goes on—all wanted goodies for their constituents. These excesses created deficits. Social Security was stuffed with IOUs. Government teetered. When excesses threatened home ownership, the economy hit the fan.
Mortgages are contracts. They generally require an up-front deposit, a stream of payments and evidence of collateral and income. These requirements eventually caught the attention of politicians. What could they do? Fannie Mae and Freddie Mac came to the rescue. The implied or explicit guarantee of government mortgages was granted. Everyone was entitled to a home, regardless of income or capital.
How to sell these mortgages became the art form of a new breed on Wall Street—the hedge funds, the syndicators, the bundlers. Bunching thousands of mortgages into debt packages and then splitting these packages into disparate parts—income, principal, front and back end and selling these parts worldwide, opacity was created sufficient to dumbfound the public, avoid the regulators and confuse the rating agencies. The Dutch tulip mania was reborn.
The public woke up as the ceiling fell in. Paulson and Bernanke got the job of clean-up.
The 2008 election pits the opponents of leveraging versus the advocates of cheap money. Here McCain and Obama are a perfect match.
For McCain, five and a half years tortured and imprisoned in the Hanoi Hilton may have broken his body but strengthened his spirit. He emerged not a politician, but a statesman—perhaps analogous to Winston Churchill who was anything but a popular conservative in the 1930s.
Native intelligence and sense of smell enabled him to see through the miasma of Washington. Home loans to those with little income to repay seemed improper—Barney Frank, Chris Dodd, Fannie Mae and Freddie Mac notwithstanding.
Loans of taxpayer money syndicated to make it impossible to trace ownership were unreal. Syndication meant obfuscation.
Add to this a media 10-to-1 supporting his opposition candidate using the modern internet to tag funds from the least informed of the populace while supported by the brightest of Ivy League intellectuals we realize what a long shot McCain became.
Read Don Luskin’s Trend Macrolytics, LLC from June 2088 to present and discover the lies the Obama machine propagates. We are not in recession or headed for depression! Unemployment is not threatening. Productivity is rising. Business has readjusted to globalism. Protectionism is a fear, not a solution.
Obama on the other hand, with an Ivy League education, is enticed to Chicago by Saul Alinsky, a far left reformer. There he allied with Bill Ayers, founder of the Weathermen and the avowed terrorists of the 1960s, and financed by the Annenberg Foundation. As chairman, he renounced private education, even public, favoring instead courses in social activism and revolt in place of math, English, and science. He recently stated he would save workers but not shareholders! What a disaster for 401K holders. As chairman of the CAC, he claimed education must stoke resistance to the American system!
Obama, the Pericles of the left, is not mid-stream. He’s on the left bank.
McCain will make a lot of mistakes. He was wrong about short selling. He was wrong about drilling for oil. He was wrong about Chris Cox. He should praise George Bush for winning in Iraq and thank Paulson for saving the economy. The list goes on. But, his selection of Sarah Palin trumps all of his mistakes.
Palin captures the soul of America at its best. Love of family. Faith in church. Patriotism without exception. Truth in law rather than ACLU relativism. Belief in the men on the street, not the mob of the street. Absence of coalitions of gender, race or nationality.
If McCain/Palin sometimes fails on specifics, they bond on integrity and common sense. Against the smug self-righteousness of Yale, Harvard, Princeton intellectualism, comes the straight-from-the-shoulder, no nonsense pragmatism of the Teddy Roosevelt era.
McCain/Palin stand for change not to a new and more sophisticated socialism, but back to the democracy of our forebearers.
Let the commentators be damned. Obama is the Huey Long of twenty-first century politics. John McCain is the George Washington.
A simple example: Bank A grants a $100,000 dollar mortgage to client B who has no capital and little income. Bank A books the mortgage as an asset on his balance sheet at fair market value held to maturity. Anticipating interest payments, this asset may be posted at more than $100,000. Suddenly, payments stop. The house stands. Accounting rules change. Bank A must mark this asset to market. There is no market. If the bank forecloses, The fair market value disappears. The value of houses in the neighborhood declines. Bank A’s credit rating is compromised. It is now in violation of equity rules.
Paulson intervenes. The government buys the house for $25,000, close to the fire sale price and sells it for $40,000 to an entrepreneur—establishing a new fair market value. Bank A now has $25,000 where it had nothing. Its balance sheet is marginally repaired. Entrepreneur B sells the house to new owner C for $60,000, who posts collateral and shows income capable of repaying the mortgage.
The government gets its money back. A new mortgagor has made a sound investment. Bank A has survived the credit crunch. The only losers may be the displaced borrowers who do not participate in the refinancing. These former residents must rent or become part of that small group of homeless. Society survives.
How did all this happen?
Wall Street in 1956 was ruled by Perry Hall at Morgan Stanley, Gus Levey at Goldman, and Bill Solomon at Solomon Brothers, who ran very tight ships. Their capital was private. They, with partners, took all the risks. By controlling this risk, they enjoyed handsome incomes.
Research boutiques and specialty underwriters invaded their turf. Merrill Lynch, envious and losing market share, inveighed negotiated commission rates.
Commissions paid by burgeoning mutual funds and asset management groups fell from 1% or more per transactions to one-tenth of a percent. The old partners retired and pulled their capital. Many firms failed. DuPont, Goodbody, Reynolds, Dean Witter, Glore Forgan merged. They were replaced by new publicly financed firms.
These firms raised capital from the newly popular mutual funds and investment advisors plus willing individual investors enjoying the rising markets of the seventies.
The old regulations worked when the few partnership owners feared loss of their capital. The new managers had no such capital at risk—they enjoyed free participation from public investors intoxicated by the rising value of the bull market.
A new political class—egalitarian, environmental, espousing private rights—abetted by courts legislating circumvention of the Constitution.
Rights were assured from abortion to home ownership. The more rights granted, the richer were the politicians. Earmarks for votes. Well intentioned Barney Frank, Dick Durbin, Nancy Pelosi, Boxer, Sanders, Kennedy, and Carey—the list goes on—all wanted goodies for their constituents. These excesses created deficits. Social Security was stuffed with IOUs. Government teetered. When excesses threatened home ownership, the economy hit the fan.
Mortgages are contracts. They generally require an up-front deposit, a stream of payments and evidence of collateral and income. These requirements eventually caught the attention of politicians. What could they do? Fannie Mae and Freddie Mac came to the rescue. The implied or explicit guarantee of government mortgages was granted. Everyone was entitled to a home, regardless of income or capital.
How to sell these mortgages became the art form of a new breed on Wall Street—the hedge funds, the syndicators, the bundlers. Bunching thousands of mortgages into debt packages and then splitting these packages into disparate parts—income, principal, front and back end and selling these parts worldwide, opacity was created sufficient to dumbfound the public, avoid the regulators and confuse the rating agencies. The Dutch tulip mania was reborn.
The public woke up as the ceiling fell in. Paulson and Bernanke got the job of clean-up.
The 2008 election pits the opponents of leveraging versus the advocates of cheap money. Here McCain and Obama are a perfect match.
For McCain, five and a half years tortured and imprisoned in the Hanoi Hilton may have broken his body but strengthened his spirit. He emerged not a politician, but a statesman—perhaps analogous to Winston Churchill who was anything but a popular conservative in the 1930s.
Native intelligence and sense of smell enabled him to see through the miasma of Washington. Home loans to those with little income to repay seemed improper—Barney Frank, Chris Dodd, Fannie Mae and Freddie Mac notwithstanding.
Loans of taxpayer money syndicated to make it impossible to trace ownership were unreal. Syndication meant obfuscation.
Add to this a media 10-to-1 supporting his opposition candidate using the modern internet to tag funds from the least informed of the populace while supported by the brightest of Ivy League intellectuals we realize what a long shot McCain became.
Read Don Luskin’s Trend Macrolytics, LLC from June 2088 to present and discover the lies the Obama machine propagates. We are not in recession or headed for depression! Unemployment is not threatening. Productivity is rising. Business has readjusted to globalism. Protectionism is a fear, not a solution.
Obama on the other hand, with an Ivy League education, is enticed to Chicago by Saul Alinsky, a far left reformer. There he allied with Bill Ayers, founder of the Weathermen and the avowed terrorists of the 1960s, and financed by the Annenberg Foundation. As chairman, he renounced private education, even public, favoring instead courses in social activism and revolt in place of math, English, and science. He recently stated he would save workers but not shareholders! What a disaster for 401K holders. As chairman of the CAC, he claimed education must stoke resistance to the American system!
Obama, the Pericles of the left, is not mid-stream. He’s on the left bank.
McCain will make a lot of mistakes. He was wrong about short selling. He was wrong about drilling for oil. He was wrong about Chris Cox. He should praise George Bush for winning in Iraq and thank Paulson for saving the economy. The list goes on. But, his selection of Sarah Palin trumps all of his mistakes.
Palin captures the soul of America at its best. Love of family. Faith in church. Patriotism without exception. Truth in law rather than ACLU relativism. Belief in the men on the street, not the mob of the street. Absence of coalitions of gender, race or nationality.
If McCain/Palin sometimes fails on specifics, they bond on integrity and common sense. Against the smug self-righteousness of Yale, Harvard, Princeton intellectualism, comes the straight-from-the-shoulder, no nonsense pragmatism of the Teddy Roosevelt era.
McCain/Palin stand for change not to a new and more sophisticated socialism, but back to the democracy of our forebearers.
Let the commentators be damned. Obama is the Huey Long of twenty-first century politics. John McCain is the George Washington.
Monday, September 15, 2008
Oil, Obama & McCain
Obama would commit forces to Afghanistan and Pakistan. The Russians learned that Afghanistan cannot be tamed. Poppies are the cash crop, bought and processed worldwide by various mafia organizations. We should outbid the competition for poppies, and process them to create pain killers for our elderly. No battlefield casualties. If the Pakistani army cannot control its northern provinces, military intervention by the United States is wishful thinking. Would we bomb localities controlled by terrorists? Are we willing to accept the political risk?
Obama likes oil substitutes. Will he open the doors to Brazilian gasahol? The middle east has cheap oil which they sell to intermediaries. The United States should grant offshore drilling rights, claiming ownership of the oil. That ownership is then sold to the drillers and marketers.
Our oil industry grew by generous depletion allowances. Our cattle industry grew by generous depreciation allowances. These tax breaks from a friendly government drew in the capital necessary for these industries to grow.
What is the point of clean energy in the United States when Russia, China, India, and the rest of the world burn oil? To control the price of oil we must be the world's largest source. Ban ethanol--embrace Brazilian gasahol. Let free markets work. Substitutes must compete on a price basis.
Obama, like Stalin who nationalized agriculture, can only create shortages. Free markets will work if the environmentalists can be tamed!
McCain/Palin affirm reality. They deny the dreams and claims of neophytes who ask for our votes so they can speculate on solutions they cannot define. McCain/Palin know that only cheap oil can draw entrepreneurial capital for substitutes. That is the reality--a reality the media cannot accept.
Obama likes oil substitutes. Will he open the doors to Brazilian gasahol? The middle east has cheap oil which they sell to intermediaries. The United States should grant offshore drilling rights, claiming ownership of the oil. That ownership is then sold to the drillers and marketers.
Our oil industry grew by generous depletion allowances. Our cattle industry grew by generous depreciation allowances. These tax breaks from a friendly government drew in the capital necessary for these industries to grow.
What is the point of clean energy in the United States when Russia, China, India, and the rest of the world burn oil? To control the price of oil we must be the world's largest source. Ban ethanol--embrace Brazilian gasahol. Let free markets work. Substitutes must compete on a price basis.
Obama, like Stalin who nationalized agriculture, can only create shortages. Free markets will work if the environmentalists can be tamed!
McCain/Palin affirm reality. They deny the dreams and claims of neophytes who ask for our votes so they can speculate on solutions they cannot define. McCain/Palin know that only cheap oil can draw entrepreneurial capital for substitutes. That is the reality--a reality the media cannot accept.
Wall Street in Perspective
I entered Wall Street in 1956. Banker's Trust, then Ball, Burge & Krause in Cleveland. Reynolds Securities, Oppenheimer, Drexel and Dean Witter. The old Wall Street was privately owned. The top tier of ownership made up to 30% on their equity--the middle group ranged up to 15%. They were risk adverse. Leverage over 3-to-1 was considered speculative. Mike Milken introduced cash flow equity. But, he too was risk adverse.
Merrill Lynch demanded negotiated rates. The old timers cashed in and fled. Public ownership followed. A young breed of business schoolers replaced the old timers. Greenspan made cheap money available. The new group arbitraged the spread between government money and what the market would bear. New and unintelligible products replaced traditional investing.
The youngsters made millions--far beyond the modest profits of prior bankers. Ponzi ruled. The government provided the tulips.
Then, like dancing school, the music stopped and with one chair short, a domino effect crashed the market. Each day another entity caught short. Short sellers ruled. Hedge funds turned to commodities--the riskiest of all investments. That bubble burst. The government called in markers. Bernanke/Paulson faced Greenspan's profligacy. His double speak was revealed. Where will it end?
Perhaps reality has brought us new leadership. The 2008 election may be the most important in our lifetime.
Merrill Lynch demanded negotiated rates. The old timers cashed in and fled. Public ownership followed. A young breed of business schoolers replaced the old timers. Greenspan made cheap money available. The new group arbitraged the spread between government money and what the market would bear. New and unintelligible products replaced traditional investing.
The youngsters made millions--far beyond the modest profits of prior bankers. Ponzi ruled. The government provided the tulips.
Then, like dancing school, the music stopped and with one chair short, a domino effect crashed the market. Each day another entity caught short. Short sellers ruled. Hedge funds turned to commodities--the riskiest of all investments. That bubble burst. The government called in markers. Bernanke/Paulson faced Greenspan's profligacy. His double speak was revealed. Where will it end?
Perhaps reality has brought us new leadership. The 2008 election may be the most important in our lifetime.
Tuesday, September 9, 2008
The Financial Crisis
Twenty years of cheap money by the government benefited not the public, but rather a band of bankers and intermediaries who encouraged the public to borrow by placing unrealistically high valuations on their assets. When these valuations proved false, a credit collapse followed.
Ironically, the message of Fannie May and Freddie Mac was that the government had become a major player in this shill game. Congressmen wooed their constituents risking the capital of coming generations by the profligacy of the current generation. For shame!
Ironically, the message of Fannie May and Freddie Mac was that the government had become a major player in this shill game. Congressmen wooed their constituents risking the capital of coming generations by the profligacy of the current generation. For shame!
Offshore Drilling, Palin & the Deficit: Let's Export Oil!
Drill, drill, drill. Why and for whom? Big oil has no interest in lowering the price of oil. Politicians have their arms in the corn barrel. Only Sarah Palin can twist the arms of big oil to share profits from a huge increase in volume from the lifting of the ban on drilling offshore and in Anwar!
If we produce 50% of our oil consumption (versus the current 3%), any loss in profit will be offset by increase in volume. Big Oil will scramble for that volume. This is because Big Oil owns the lion’s share of our imported oil. The cry for windfall taxes is to support Democrat welfare programs and buy votes for Obama/Biden.
Palin forces big oil to choose. Back massive domestic exploration or face the consequences. Only Palin knows how to play that game. She did it in Alaska.
Share the profits and reduce the national debt. Palin did it in Alaska.
If we produce 50% of our oil consumption (versus the current 3%), any loss in profit will be offset by increase in volume. Big Oil will scramble for that volume. This is because Big Oil owns the lion’s share of our imported oil. The cry for windfall taxes is to support Democrat welfare programs and buy votes for Obama/Biden.
Palin forces big oil to choose. Back massive domestic exploration or face the consequences. Only Palin knows how to play that game. She did it in Alaska.
Share the profits and reduce the national debt. Palin did it in Alaska.
Payroll Taxes
Senator McCain has a unique opportunity to defuse Obama’s tax policy by trading retention of the Bush tax cuts for an expansion of the payroll tax to all employers, subject to the caveat that all payroll tax revenues are trusteed and invested in BAA or better publicly traded bonds. No monies available for government spending. The public would see these monies for Social Security as a miracle.
If passed, a raft of options open up to reform the tax code. Note that Obama talks only about income taxes. Fairness versus inequity. Tax the rich, reward the middle class, spare the poor by tinkering with tax rates! In reality, the rich can avoid taxes, the poor are untaxed and the middle class exploits welfare intended for the poor. Confusing? Yes. Without separating income taxes, payroll taxes, and capital gains, tax avoidance plus offsets of mortgage interest deductions, special deductions for capital investments, corporate taxes and inheritance taxes—state and local taxes—combine to make talk about income taxes meaningless.
Senator McCain can trump all of Senator Obama’s tax proposals by:
1. Extending the Bush tax cuts
2. Expanding the payroll tax to include all income
3. All payroll taxes invested in non-government bonds, BAA rated or higher.
4. Eliminate the inheritance tax as double taxation
5. Eliminate business taxes passed through as a cost of goods (a sales tax).
The increase in payroll taxes on the so-called rich will be accepted if the monies cannot be grabbed and abused by the government.
Our Social Security system with this new funding will gain respectability. Stock options should have a mandatory holding period after which shareholders vote to affirm or deny execution based on the company’s performance.
Transparency should extend from Wall Street, to union elections, to funding of education, even charities. Colleges demonstrating an imbalance of 65% or more domination by any school of political thought should be grounds for re-examination of the institution’s status as a charity.
The tax code should liberate, not enslave.
If passed, a raft of options open up to reform the tax code. Note that Obama talks only about income taxes. Fairness versus inequity. Tax the rich, reward the middle class, spare the poor by tinkering with tax rates! In reality, the rich can avoid taxes, the poor are untaxed and the middle class exploits welfare intended for the poor. Confusing? Yes. Without separating income taxes, payroll taxes, and capital gains, tax avoidance plus offsets of mortgage interest deductions, special deductions for capital investments, corporate taxes and inheritance taxes—state and local taxes—combine to make talk about income taxes meaningless.
Senator McCain can trump all of Senator Obama’s tax proposals by:
1. Extending the Bush tax cuts
2. Expanding the payroll tax to include all income
3. All payroll taxes invested in non-government bonds, BAA rated or higher.
4. Eliminate the inheritance tax as double taxation
5. Eliminate business taxes passed through as a cost of goods (a sales tax).
The increase in payroll taxes on the so-called rich will be accepted if the monies cannot be grabbed and abused by the government.
Our Social Security system with this new funding will gain respectability. Stock options should have a mandatory holding period after which shareholders vote to affirm or deny execution based on the company’s performance.
Transparency should extend from Wall Street, to union elections, to funding of education, even charities. Colleges demonstrating an imbalance of 65% or more domination by any school of political thought should be grounds for re-examination of the institution’s status as a charity.
The tax code should liberate, not enslave.
Palin and Oil
Palin extended the debate over oil versus the environment to cost. She raised the question of oil imports versus oil exports. Worldwide oil discovery shatters the shortage myth. Could American technology develop enough oil at prices of $25-$40 per barrel? Will this bring infra-structure to revive the economy and bring jobs back to the United States. As a net exporter, will budget surpluses create a strong dollar? A return to Reagan’s “city on a hill.”
Can optimism replace pessimism? Can our immigration policy attract the world’s best educated and productive workers while protecting our borders from those who would use our economy to transfer wages back to a mother country. Welfare, medical and education costs fall instead of rising. Our military attains a competency sufficient to dissuade aggression. This is a Reagan-like spirit of can-do rather than “shall not.” Let the greenies compete to drive costs down, not up. Acknowledge that billions of years of a sun, billions of miles away, cannot be influenced by well-meaning reformers.
Can optimism replace pessimism? Can our immigration policy attract the world’s best educated and productive workers while protecting our borders from those who would use our economy to transfer wages back to a mother country. Welfare, medical and education costs fall instead of rising. Our military attains a competency sufficient to dissuade aggression. This is a Reagan-like spirit of can-do rather than “shall not.” Let the greenies compete to drive costs down, not up. Acknowledge that billions of years of a sun, billions of miles away, cannot be influenced by well-meaning reformers.
The Middle East & Russia
A decade after Reagan won the Cold War and sponsored supply side economics, a new voice threatened the free world. Environmentalists attacked dependence on carbon based energy. Saudi Arabia, with Aramco in the lead, created a defacto pro-western alliance. But when Iraq and Iran renewed their age old conflict, Sadaam Hussain ignited a Shia/Shiite conflict that had existed for centuries. Sadaam’s success against Iran caused the United States to suspend support. Saddam then turned on Kuwait with eyes on Saudi Arabia. Meanwhile the Soviet attack on Afghanistan re-ignited a modern version of the Crusades, Moslems against Christians, funded by the Saudi Arabian Wahabis. To make matters worse, the environmentalists’ ban on drilling forced the United States to choose Iraq as the killing field for access to the world’s carbon.
Other factors emerged. China rejected Mao’s agrarianism in favor of western industrialization. India rejected Ghandi’s pacifism for western industrialism. Both rejected environmentalism for low cost carbon.
Putin realized that with the greening of the democracies, gas and oil revenues from the “stans” could rebuild the Russian economy. Not ideological but the raw power of czarist Russia. For Putin, Georgia, the Ukraine, the Baltic states, Poland, Czechoslavakia, Yugoslavia and the middle east became his objective.
Believing environmentalist claims that it will take ten years for American-based carbons to meet the soaring influence of Russian based energy, Putin tested the waters in Georgia.
Will Europe choose Russian oil and gas or the blood, sweat and tears of war? Is NATO a paper tiger? Will Brazil dominate the Americas as the United States currency collapses? The stakes have never been higher. Our allies never more unreliable. Our political will must choose between the sternness of federalism or the excess of liberalism.
The next few years will tell the story. The outlook is not bright. There are nuclear states capable of igniting World War III.
If we reverse political direction and strive to be the largest producer of carbon-based oil, coal and gas at the lowest cost and determined to compete with the middle east and Russia on a cost basis, we will supply Europe and the rest of the world with American carbon—cleaner, safer and cheaper. The middle east will tremble. Russian influence may abate and NATO could find its backbone. India and China will welcome cheap carbon and the United States will re-emerge to our former position as world leader. Realization of Ronald Reagan’s vision of a shining city on a hill.
Other factors emerged. China rejected Mao’s agrarianism in favor of western industrialization. India rejected Ghandi’s pacifism for western industrialism. Both rejected environmentalism for low cost carbon.
Putin realized that with the greening of the democracies, gas and oil revenues from the “stans” could rebuild the Russian economy. Not ideological but the raw power of czarist Russia. For Putin, Georgia, the Ukraine, the Baltic states, Poland, Czechoslavakia, Yugoslavia and the middle east became his objective.
Believing environmentalist claims that it will take ten years for American-based carbons to meet the soaring influence of Russian based energy, Putin tested the waters in Georgia.
Will Europe choose Russian oil and gas or the blood, sweat and tears of war? Is NATO a paper tiger? Will Brazil dominate the Americas as the United States currency collapses? The stakes have never been higher. Our allies never more unreliable. Our political will must choose between the sternness of federalism or the excess of liberalism.
The next few years will tell the story. The outlook is not bright. There are nuclear states capable of igniting World War III.
If we reverse political direction and strive to be the largest producer of carbon-based oil, coal and gas at the lowest cost and determined to compete with the middle east and Russia on a cost basis, we will supply Europe and the rest of the world with American carbon—cleaner, safer and cheaper. The middle east will tremble. Russian influence may abate and NATO could find its backbone. India and China will welcome cheap carbon and the United States will re-emerge to our former position as world leader. Realization of Ronald Reagan’s vision of a shining city on a hill.
Gustav and Palin
Hurricanes have brought into contrast Governors Bush and Jindal who handled Gustav with competency and calm versus the entire political structure of Louisiana which panicked during Katrina with bad decisions frustrating an inexperienced Bush operative. No mandated evacuation. Utilization of a sports arena lacking conveniences as the storm hit the poorest ward in the city, media focused on the ninth ward, humiliating a president who mistakenly relied on the local government.
Gustav finds a government which learned its lesson. A young Republican governor with the president positioned in Texas to supervise and lead government. Private aid before locals could do any harm.
Enter Sarah Palin who demonstrated in an hour-long interview with Maria Bartolome that she knew more about oil and drilling at Anwar than Nancy Pelosi and all her congressional democrats. A two-thousand-acre footprint amid tens of millions of acres. A husband expert about the north slope. She tamed big oil and rewarded her taxpayers. She defined how government can bargain with Big Oil and benefit the taxpayer without new taxes.
The free choicers saw a mother of four choose to carry a Down syndrome baby to birth, accepting the financial and emotional cost for the love of a newborn child. Sending a son to Iraq to fight an unpopular war, stopping the construction of a bridge-to-nowhere, costing her Republican party two senators and a governor to establish her bona fides as a true reformer. Many Republicans and all of K Street tremble.
With her scoped rifle, this NRA supporter shoots caribou to enjoy her favorite stew while proudly showing a record of wildlife preservation vindicating the western population fighting for its right to hunt deer and quail.
Student, athlete, beauty queen—Palin contrasts with feminists who shudder at her reputation as point guard on her college basketball team.
Attacked for trying to fire an incompetent relative makes a Democrat attack on this competent Republicans seem ridiculous.
Against carefully choreographed Democrats, this freestyle Republican with her out-of-date hair-do is a refreshing look at what a McCain presidency stands for.
Perhaps the least qualified in foreign affairs president was Harry Truman. He drew his foreign affairs leadership from his heart. He responded to the needs of his people. His Berlin airlift and stand in Korea stemmed the tide of the Cold War. Palin would do no less.
Palin stands as a warning to unqualified Republicans. Neither Hillary nor the Obamas have such a standard bearer for ethics and reform. In debate, Biden will meet his match.
Gustav finds a government which learned its lesson. A young Republican governor with the president positioned in Texas to supervise and lead government. Private aid before locals could do any harm.
Enter Sarah Palin who demonstrated in an hour-long interview with Maria Bartolome that she knew more about oil and drilling at Anwar than Nancy Pelosi and all her congressional democrats. A two-thousand-acre footprint amid tens of millions of acres. A husband expert about the north slope. She tamed big oil and rewarded her taxpayers. She defined how government can bargain with Big Oil and benefit the taxpayer without new taxes.
The free choicers saw a mother of four choose to carry a Down syndrome baby to birth, accepting the financial and emotional cost for the love of a newborn child. Sending a son to Iraq to fight an unpopular war, stopping the construction of a bridge-to-nowhere, costing her Republican party two senators and a governor to establish her bona fides as a true reformer. Many Republicans and all of K Street tremble.
With her scoped rifle, this NRA supporter shoots caribou to enjoy her favorite stew while proudly showing a record of wildlife preservation vindicating the western population fighting for its right to hunt deer and quail.
Student, athlete, beauty queen—Palin contrasts with feminists who shudder at her reputation as point guard on her college basketball team.
Attacked for trying to fire an incompetent relative makes a Democrat attack on this competent Republicans seem ridiculous.
Against carefully choreographed Democrats, this freestyle Republican with her out-of-date hair-do is a refreshing look at what a McCain presidency stands for.
Perhaps the least qualified in foreign affairs president was Harry Truman. He drew his foreign affairs leadership from his heart. He responded to the needs of his people. His Berlin airlift and stand in Korea stemmed the tide of the Cold War. Palin would do no less.
Palin stands as a warning to unqualified Republicans. Neither Hillary nor the Obamas have such a standard bearer for ethics and reform. In debate, Biden will meet his match.
Why Drill, Drill, Drill Has Not Succeeded
Is our objective self-sufficiency? Should not the United States be the world’s largest oil producer? Environmentalists aside, the greatest opposition comes from international oil companies whose primary interest is to protect the value of their reserves at $100 per barrel.
Everyone seems to agree on natural gas as a substitute for oil. Not mentioned is drilling for natural gas which again accounts for the reticence of big oil.
Only a national demand for increased oil production will succeed. Even disincentives like excess profits taxes—whatever works. The enemies are big oil and the environmentalists—a strange alliance. Only McCain and Palin can square this circle. Supply breaks cartels whether headed by corporate giants or environmentalists.
Who owns the oil at the continental shelf? Any answers? If leases are granted on lands not owned by the United States, who gets the oil? The drillers, the oil marketers, the refiners? Who slices the melon? How big are the slices? Who knows?
My confidence stems from a New York Times editorial written in 1921. It proclaimed that the world would run out of oil in ten years. I believe there are tens of millions of barrels of oil within our grasp. We need a government with a will to find it. Only United States technology can succeed but only with a supportive government.
Everyone seems to agree on natural gas as a substitute for oil. Not mentioned is drilling for natural gas which again accounts for the reticence of big oil.
Only a national demand for increased oil production will succeed. Even disincentives like excess profits taxes—whatever works. The enemies are big oil and the environmentalists—a strange alliance. Only McCain and Palin can square this circle. Supply breaks cartels whether headed by corporate giants or environmentalists.
Who owns the oil at the continental shelf? Any answers? If leases are granted on lands not owned by the United States, who gets the oil? The drillers, the oil marketers, the refiners? Who slices the melon? How big are the slices? Who knows?
My confidence stems from a New York Times editorial written in 1921. It proclaimed that the world would run out of oil in ten years. I believe there are tens of millions of barrels of oil within our grasp. We need a government with a will to find it. Only United States technology can succeed but only with a supportive government.
The Conventions
The two national conventions profiled two totally opposite personalities. Obama’s skin was exposed as paper thin. His demeanor, while earnest, is totally without humor. Biden’s reaction to Palin was respectful and positive.
McCain’s profile in courage was examined and re-examined. There can be no doubt about his ability to lead. Palin proved she can handle big oil. Palin extended the debate over abortion from a matter of law to a matter of conscience.
McCain’s profile in courage was examined and re-examined. There can be no doubt about his ability to lead. Palin proved she can handle big oil. Palin extended the debate over abortion from a matter of law to a matter of conscience.
Monday, September 8, 2008
The Mortgage Mess
Memo to Ric Davis:
The winning economic strategy for John McCain is to emphasize the first Bush administration and Bush 2 including the two terms of Clinton. For twenty years the government pursued a soft money policy. It was dictated by Alan Greenspan. Wall Street was seduced and abetted by dozens of money managers. They borrowed from the Federal Reserve at 2% in order to lend at 6% or higher amid guarantees by the government. The mortgage collapse was only the outward sign of a deep-seated sickness supported by Fed Chair and Treasury go-alongs. Both rejected tough lending standards and tight money in favor of export markets which cost jobs in the United States.
All of Wall Street, most of the banks, and intermediaries benefited from this policy until someone asked, "where are the customer's yachts?" There weren't any! Jack Bogle has been the lonely expert asking this question on behalf of Vanguard investors. But, not even dollar averaging can stem a credit crisis.
Foreclosures will not wipe out our financial markets. The awakening of credit-worthy borrowers repaying their loans might! If money flows into the banking system, cashing out deadbeat loans, it will not create net cash, but shrink capital availability. It makes banks wary of lending--and increases the cost of borrowing. Only the fortitude of John McCain can withstand the pressure of special interests trying to protect their hindquarters. Only a dose of castor oil will solve the problem. Only John McCain and Sarah Palin have the stomaches to administer the remedy.
Give a three-year tax holiday to all credit worthy borrowers who repay their home equity loans which supported a lavish lifestyle unsupported by income. Let’s have a Reagan-like dose of reality. Mistakes: 1. Equitization of mortgages for the elderly. Robs capital from their progeny. 2. Equitization of homes--making non-tax deductible personal debt tax deductible. Credit card debt becomes riskier. Who is responsible?--the government. A disgraceful example of hypocrisy.
The winning economic strategy for John McCain is to emphasize the first Bush administration and Bush 2 including the two terms of Clinton. For twenty years the government pursued a soft money policy. It was dictated by Alan Greenspan. Wall Street was seduced and abetted by dozens of money managers. They borrowed from the Federal Reserve at 2% in order to lend at 6% or higher amid guarantees by the government. The mortgage collapse was only the outward sign of a deep-seated sickness supported by Fed Chair and Treasury go-alongs. Both rejected tough lending standards and tight money in favor of export markets which cost jobs in the United States.
All of Wall Street, most of the banks, and intermediaries benefited from this policy until someone asked, "where are the customer's yachts?" There weren't any! Jack Bogle has been the lonely expert asking this question on behalf of Vanguard investors. But, not even dollar averaging can stem a credit crisis.
Foreclosures will not wipe out our financial markets. The awakening of credit-worthy borrowers repaying their loans might! If money flows into the banking system, cashing out deadbeat loans, it will not create net cash, but shrink capital availability. It makes banks wary of lending--and increases the cost of borrowing. Only the fortitude of John McCain can withstand the pressure of special interests trying to protect their hindquarters. Only a dose of castor oil will solve the problem. Only John McCain and Sarah Palin have the stomaches to administer the remedy.
Give a three-year tax holiday to all credit worthy borrowers who repay their home equity loans which supported a lavish lifestyle unsupported by income. Let’s have a Reagan-like dose of reality. Mistakes: 1. Equitization of mortgages for the elderly. Robs capital from their progeny. 2. Equitization of homes--making non-tax deductible personal debt tax deductible. Credit card debt becomes riskier. Who is responsible?--the government. A disgraceful example of hypocrisy.
Pay Off Your Secondary Mortgage
As the stock market falls and economic news worsens and far-ranging explanations flood the airwaves, ONE explanation is absent—the de-equitization of housing. Clinton’s blessing of Greenspan’s easy money policy did not just encourage banks and financial intermediaries to leverage. It also encouraged middle Americans to leverage.
The elderly were encouraged to take the equity out of their homes to live a little better--equity that was normally reserved for their children.
Worse yet, young wage earners were urged to avoid taxes by hocking their houses for low-interest, tax deductible home loans (second mortgages) instead of paying non-tax deductible, outrageously high interest for credit card debt.
The middle class has learned the evils of debt. They are de-leveraging. That is what causes the stock market to falter as many good mortgages are paid off. As net debt recedes so does purchasing power, at least temporarily. This is a good sign, not a bad sign.
It helps banks absorb their sub-prime losses and shores up balance sheets. It also reduces the inclination to make bad loans. Banks with net cash returning will survive—let the others fail—but cut off bonuses for those responsible for the failures.
The elderly were encouraged to take the equity out of their homes to live a little better--equity that was normally reserved for their children.
Worse yet, young wage earners were urged to avoid taxes by hocking their houses for low-interest, tax deductible home loans (second mortgages) instead of paying non-tax deductible, outrageously high interest for credit card debt.
The middle class has learned the evils of debt. They are de-leveraging. That is what causes the stock market to falter as many good mortgages are paid off. As net debt recedes so does purchasing power, at least temporarily. This is a good sign, not a bad sign.
It helps banks absorb their sub-prime losses and shores up balance sheets. It also reduces the inclination to make bad loans. Banks with net cash returning will survive—let the others fail—but cut off bonuses for those responsible for the failures.
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