Monday, September 29, 2008

Should Congress Approve or Reject a $700 Billion Rescue Plan?

It depends on your current situation how one answers this question. First let me tell you what I recommend. I recommend a rescue plan be approved. I am self employed and can't get fired from my job. But many others will as the market melts down steadily and Retirement plans lose 20% of their current value or more, depending on the investment. Companies will lay off workers, they won't be able to pay off credit card debt, will stop going to their local restaurants, or retail stores and the entire system will go into gridlock. Cash will be King for those with enough. The rest will suffer.

I don't want innocent people to suffer. You are right it isn't fair, you didn't directly create this mess. But it doesn't matter who created it, it needs to be stopped before a Depression ensues. By approving a rescue plan we all equally share in the burden as taxpayers. But we may be able to keep this economy functioning. People need to stop being selfish for a change.

It's too late to undo this problem but leadership is required even if Bush, Cheney and the rest of the Administration got us here. Your belief that no one has been willing to "bail you out" is incorrect. This is YOUR bailout as the consequences of no action is a Dow of 8,000 instead of 11,000. Your job, retirement plans, home values, are hanging in the balance. It doesn't feel good to have a gun to our heads by the Bush Administration, Paulson and Bernake saying we are at the very edge of complete collapse and must pass this rescue/bailout. But let's be clear, they have put the gun right at our heads. Those that oppose the plan on idealogical reasons will be doing self inflicted harm or "cutting off their nose to spite their face." When you are suffering as you most likely will, unless you have wealth or nothing to lose, there will be nobody standing to help you. We must join together and trust we can fix this together. It's up to you now.

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How does Middle America survive the financial crisis? Cut unnecessary expenses and raise cash!

This generation has not had to learn how to survive as many grandparents did during the Great Depression. So their survival skills have not been honed to even know where to begin. Are we headed to another Depression? No one knows but I can see people scared and wondering what they will do. People have time to still do what's necessary to prepare themselves. In the Great Depression that started with the stock market Crash in October of 1929 many people lost their jobs. If you have a lot of debt right now and are living paycheck to paycheck you might ask yourself the question, what will I do if I lose my job? How much time can I go before I have no cash? The wealthy always have plenty to live on but for the rest of society, many were encouraged to consume beyond their means. They were issued a lot of credit cards and credit was the way to buy "stuff". Those days are over. In the very near future, you will only be able to buy things with cash. I saw the very first changes leading this new reality on my last trip to Los Angeles from San Francisco. I normally use my credit card to pay for gasoline for my car but on the last trip I came across 2 gas stations that changed from credit cards to cash.

Credit is the problem today and the solution is an increase in liquidity. Liquidity is CASH! I am not worried that you won't be able to access your cash. But the prudent, conservative ensures that they don't have any more in their bank than is insured by FDIC, $100,000 for single account holders and $200,000 for joint account ownership.

Expect the unemployment rate to reach as high as 8-9% nationally and as much as $10-11% in states like California.

Do what you can to perform at an exceptional level in your job. As companies are forced to cut back, it will be the bottom 10% performers that will be let go. If you don't know what your employer considers exceptional performance, ask them and tell them you want to be in the top 10% of employees in the company. Then do the hard work to get into that select group. Remember, you can't control if your employer is successful as a whole, but you can give them a better chance of survival by doing a great job.

Look at your monthly expenses and get a handle as to where you are currently spending your money. Look at what you are buying habitually and ask yourself whether it is a necessity. Look at how many phone lines and numbers you have and ask if all are truly necessary or could you reduce the number. Look at how to reduce your energy bill each month. Look at how to reduce your driving by using the internet and video conferencing as a way to meet and talk to people or family, instead of driving to them. Look at planned trips or big expenses and ask whether it is prudent to spend the money given the unknown effect of this bailout on the economy.

It isn't going to be a pretty picture for a few years. Get use to thinking about this stuff now while you have time to act and not have to react. I don't want to alarm you but it is a little late for that now given the press over the weekend on the bailout/rescue plan. Ideally you will want to have a minimum of 1 years worth of cash to pay for everything you will need. More is better. GOOD LUCK.

UPDATE: The Dow today dropped 777 points for the largest point drop in history. Coincidentally, this post was my 777th Blog post since I started in May 2005.

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Saturday, September 27, 2008

McCain/Obama first Presidential debate: Who won?

That seemed on everyone's mind last night and this morning. I have received a few emails asking for my opinion and them giving me theirs. What's my analysis? Well, the fact that everyone is asking, including the media, it seems to me that the media is calling it a draw. I was a boxer in my youth and using that metaphor, there was not a knockout punch, nor was there a clear victor on points. I was disappointed in both of them but for different reasons. I'll comment on those disappointments in a moment, and I how would rate the outcome, but first, comments on what was good.

The first thing that was good was that the debate was actually held. Everyone who has been keeping up on my views know I am a Barack Obama supporter in this race, after having initially supported Joe Biden for President in the Primary. McCain had threatened not to debate, as he wanted to go "save the country" by stopping his campaign and going back to Washington to help get something passed with bipartisan support for the governments $700 Billion rescue plan of the Banking industry and ensure that credit was available for business to borrow needed cash. I was angry McCain said he wasn't going to debate, but then I thought, if he could truly do something to help, then he should. I thought he could do both, but who am I to criticize, as I have a hard time just putting on socks in the morning and remembering to take my morning pills. (Multitasking is more difficult as one gets older. :) So I said let's see what McCain actually does. Well I got my answer, NOTHING! Most at the meeting said McCain spoke last at the meeting with the President and when he did speak, they say no one understood what he said, as it was garbled.

So, in retrospect, since the deal was not done, and he had stated he would not debate unless it was done, I am left feeling it was purely political theater by McCain. That is unspeakable during this crisis in our economy. Nevertheless, he did debate and was knowledgeable about facts and his historical recollections were good as well, although his comment about Eisenhower writing 2 letters, one with his resignation, was not true. But he passed the exam by most.

Now for my major disappointment. McCain would not look at Barack Obama the entire debate. His language and body language appeared to disdain Obama and his wise guy comments and humor did nothing but make me angry. In my local San Francisco Chronicle newspaper front page today, there was a picture from the end of the debate with Obama and McCain shaking hands. Guess what? McCain isn't looking at him while shaking his hand, either!

When you treat a Presidential candidate with disrespect, which is what McCain did to Obama, (someone who has earned their Party's nomination after a hard fought Primary race against a very competent candidate as Hillary Clinton,) then you disrespect all Americans. If you are going to disrespect your opponent, who is equally a patriotic American, how can we trust you to talk to the Russians, whom you despise, the Chinese, the Syrians, the North Koreans, the Venezuelan's and other leaders we must engage with. It was contempt of the lowest form and not becoming a Presidential candidate like John McCain. You will notice that I have not made one negative comment on Sarah Palin as a person. I criticized her politic, thought she gave a good speech at the Republican Convention but I did not disrespect her. I did defend her against supposed negative attacks. I would expect McCain to respect Barack Obama not just in words, but in deeds. Let's see if that is possible in the next debate Senator Mccain.

Barack was Presidential, gracious and respectful. Some say he was too respectful, but I don't think so. What disappointed me with Barack was that on several occasions he could have answered McCain with facts that could have made their differences clearer and he chose not to, or forgot the points at the moment. Barack never made the point that, for example, it is the Iraqi's now that want us to leave and that McCain acts like Iraqi's concerns don't matter to him. He could have more clearly stated that it is the Republican Party's mantra for deregulation these past 20 plus years, that got us into this financial mess. And it is the very Lobbyists that are part of McCain's senior staff that had major contracts with Freddie Mac and Fannie Mae.

When I think about the debate, I saw Barack being Presidential, respectful and a clear distinction from the failed policies of the Bush Administration AND McCain. McCain is tied to the failed policies of Bush /Cheney Administration and voted for those policies 90% of the time. The choice is clear with Obama, but the challenge is whether the American people can put their country and their real needs first and vote for him and Joe Biden. Or will they let any Party loyalty or racial prejudice creep into their decision. For the good of the country I hope they can rise to the occasion.

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Friday, September 26, 2008

The Bush Legacy can be summed up in 5 phrases

It only took 8 years, and any one of these events would go down in history as the greatest malfeasance of any President in the history of this Country. And President Bush did it in only 8 short years. Bravo!

1. 911
2. Iraq War, a war of choice
3. Hurricane Katrina response
4. Collapse of Banking and Insurance industry
5. Approval of use of torture, elimination of habeas corpus, and wiretapping of Americans

Of course for us it all it has been an excruciatingly long time, hasn't it? I wonder what he can manage to add to this list. There is still 4 months before he and Cheney are finally gone.

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Thursday, September 25, 2008

Bailout: Wall Street or Main Street? Who to believe

The predicate for this $700 Billion dollar bailout plan is that it isn't to bail out Wall Street, it is needed to bailout the economy. Well let me point to previous calls by the President and Wall Street as to what determines the health of the economy. There are 2 things that determine the health of the economy. It is Corporate spending and Consumer spending. In fact, we have been told around Thanksgiving each year that it is the Consumer which determines nearly 67% of that equation and Corporate spending the other 33%. One could make a very good argument to give the $700 Billion to Consumers instead.

Yes, business needs to be able to borrow to get the goods and equipment necessary for their businesses to function. And our economic system is based upon consumption. However the Government doesn't tax consumption. Maybe it should and we need to reshape the tax code. As more and more of our population retires we won't have enough Income from the rest of the population to tax adequately to get the necessary funds to keep this ship afloat. Maybe indeed it is time to change the tax code to a Consumption Tax and away from an Income Tax. That way everyone pays including illegals and those who cheat on their taxes.

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$700 Billion: What else could we do with it?

Have you asked yourself yet what could be done with $700 Billion dollars today besides this rescue plan that the Fed and the Treasury are asking from Congress? I'll tell you one thing, a sizable amount could have been used to make Social Security more solvent for one thing. We could have repaired many of the bridges and roads across this country. We could have used the money to solve Global Warming and reduced the Green House gases on the planet. We could have given every teacher in America a minimum salary of $100,000/year and still had $500 Billion left over to do some of the other things mentioned here.

But instead, we are going to pony up this incredibly large sum of money and are not going to observe anything for it. It will not be noticed, as life will go on as it did before the crisis except the unemployment rate will be going up, interest rates will be going up, stocks will be going down and many will fell tight when it comes to spending any of their money. We won't see anything that looks positive that we can point to that will be a measurable observable difference for the better. What there will be is the prevention of a total collapse of our system, THEY HOPE! You see there are no guarantees here. It is like going to Vegas and being able to play roulette and betting on red or black and hoping to win. But it is possible that the ball will settle on the zero (0) or double zero (00) number. That's where we are now. There is probably only a 2 in 37 chance that this $700 Billion investment will faIL, but there is still some chance. Southerners may be thinking of that old adage, "Save your Confederate money folks, the South shall rise again." The only problem is that this time we are all in the same barrel, whether we like it or not.

When this is over, I don't want to hear people say we can't afford Healthcare for everyone or that we can't accept Barack Obama's ideas to grow the economy with Green initiatives or that we can't bring home the troops to help save $12 Billion per month! If we can print money to pony up $700 Billion here, we can print some more and do the other things as well. Yes the wealthiest are going to have to pay more taxes. Get used to it as your life is better than the most of the country and we all must bear a more equal share of the burden.

This is what it must have felt like at the Fall of The Roman Empire.

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Wednesday, September 24, 2008

Bush says "Our entire economy is at risk!"

President Bush spoke to the Nation tonight finally, after 10 days have elapsed since the Bear Sterns bailout. This was not something this President wanted to do. The reason is not obvious but it puts the final cap on his tortured legacy. I wrote this post in January 2007 and is prophetic tonight. Here is what I wrote then:

"Title:Bush's experience taught him only one thing- How to be a failure and disappointment!

The only thing this President seems to have learned from his past is how to create bankruptcy conditions.

1) He bankrupt his Oil company. From those painful experiences, unfortunately he started in his Presidency to create the same conditions for the Nation by the following:
2) He is bankrupting our Country with debt
3) He has bankrupt our Military - both equipment wise and manpower strength
4) He has bankrupt our Freedoms with such actions as eavesdropping on phone conversations of any American without FISA Court approval, signing statements which defy laws he has signed into law and other Unconstitutional acts.
5) He has bankrupt our Trust in oversight with a Republican led Congress that turned their head away at his choices, while they held their noses from the stench.
6) He has bankrupt our Trust in a fair Judicial system, by appointing Justices that will approve of his antics and rewrite history as far as settled law.
7) He has bankrupt the Vision for millions of people around the world who thought of the USA as a place of Hope and replaced that Vision as a country of arrogance and spite for our friends as well as our enemies.
8) He has bankrupt the use of Diplomacy, as no country believes him nor trusts him anymore. We are mostly alone in the world now. Colin Powell's speech will go down in history as how the US distorted truth for the self interest of a few of its leaders; the President and the Vice President.
9) He has bankrupt our willingness to be eager for the words of our President, when he gives a speech or an address to the Nation. We are weary of his lies and twisted truth to us.
10) He has bankrupt and shattered the idea of our President being a Statesman. He does not show intellect nor the pursuit of noble causes to help the poor of the world nor in stopping wars and promoting peace in the world.

Need I go on! Shame, shame, shame Mr. President. We need a “Tough Love” intervention called IMPEACHMENT."

Not much has changed has it. Except since I wrote this we are now in peril of economic failure as a Country. In 45 days we get to replace him and his policies, or not. It depends if people have the courage to vote for and elect Barack Obama

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McCain's self-importance view is so archaic

A few minutes ago John McCain said he was suspending his campaign to go work on the financial crisis in Washington and said he wanted to cancel the debate schedules for Friday night. This from the man who said he really wasn't up on economics. The American people deserve to have the debate held as scheduled on Foreign policy this Friday night. It isn't like McCain can really add anything to the debate.

My advice to John McCain: Let the debate go forward and learn to multitask. THIS IS ABOUT YOUR JUDGEMENT SENATOR!

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Tuesday, September 23, 2008

Update on Financial crisis testimony by Treasury Secretary Paulson

As I listen to the testimony of Hank Paulson, Treasury Secretary for the Bush Administration, I am amazed that there is little definition as to the oversight structure that they want to put in place to monitor how the $700 Billion dollars requested from Congress. This money is to be used to deal with the financial crisis caused by the sub Prime Mortgage problems, Based upon everything I have heard so far, there is no real definition as to mechanisms, controls or oversight planned to monitor the distribution of funds. Paulson is basically saying "Trust me" and lawmakers are wary, as they should be.

We got into this mess because there was not oversight, regulations or transparency. I don't hear anything which outlines answers for those concerns. Is there another action which could be taken and what other actions have we considered? We won't know as they are scared that if they take too long, things could get worse very quickly.

One thing I would add is that I am so glad we have Hank Paulson as Treasury Secretary versus previous Treasury Secretary's in the Bush Administration. His experience at Goldman Sachs is invaluable in this crisis. He knows more than any Senator questioning him.

One thing I learned that was new was that the Credit Default Swap market now totals about $62 Trillion dollars. That size of investments in anything is scary indeed!

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Friday, September 19, 2008

Financial turmoil: Has it stopped?

It is almost impossible for our leaders to calculate what their moves interfering in the markets will have on our economy, banks, housing mortgages, stocks, bonds or Global markets. Hank Paulson, Treasury Secretary, along with Ben Bernanke, the Federal Reserve Chairman, are pulling every lever they know and trying to do it without Congressional involvement. But today's action was unbelievable. Because individuals are getting scared, as they should, about the soundness of our financial system, they have recently been withdrawing cash from Money Market Funds as these accounts have started to lose some value. Most folks assume that you can't lose money in a Money Market Fund. That was shown to be false as some have dropped below the threshold $1.00 dollar value, meaning that for every dollar you deposit into these accounts they are worth a few pennies less than $1.00. The Treasury and Fed saw people starting to remove cash and put it under their mattresses and so they now have stepped in to guarantee and insure these accounts to calm fears. It should work, but no one can determine what this will mean as it ripples into another area.

Once a government intervenes by taking actions without debate and understanding where each action will take them, they are tinkering with the entire system and instead of calming fears, they are exacerbating them. When will this stop? It is difficult to say. My guess is that we are in for a mess now for years to come. You see Paulson and our Republican led government officials are playing checkers instead of chess. In checkers you don't need to think as much about future moves as they do in a game of Chess. We need more Chess playing and less Checkers.

Is there any good news in this? Yes, it may ultimately help create a more even playing field for all investors and more transparency. Art Cashin, a regular figure on CNBC, said this morning, that yesterday was a very convincing rally for the first time in the stock market after the lows and he believes we may have bottomed finally. That is good news for a while too. He is still concerned that they have stopped the Shorting of Financial stocks and that isn't good he says as it exaggerated the move up by about 30-40% in today's Futures in pre market. Is it over? My guess is that it is not done yet, but we are closer than we were yesterday.

What has possibly caused this panic? When historians look back they may identify the removal of the "uptick rule" by Christopher Cox, the SEC Chairman, for those shorting the market. When the Rule was in force, traders weren't allowed to short a stock that was declining unless they did so when the stock reversed its trend and actually went up a penny in price. When Cox eliminated that Rule, traders could pile on a drive a stock down further often collapsing the price of the stock. There is a call this morning to reinstate the "uptick Rule."

So, as we sit here in pre-market, just a few minutes before the the market open, we need the break in this emotional roller coaster. I don't mind the break from the drama at all. Keep the faith folks and remember to pay attention to the political dialogue on this topic.

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Wednesday, September 17, 2008

Too big to fail? Ha!

Here's an afterthought about the AIG Insurance company Fed bailout. Maybe we shouldn't allow companies to get that big without spinning off part of their businesses and the profit shared among shareholders? It seems that the expression "the bigger they are the harder they fall" is appropriate here.

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AIG, now what? Republicans still think derregulation is good?

The news today is that the Fed is willing to give a loan to AIG Insurance company to help it with its liquidity problem. AIG had a Balance Sheet of $1 TRILLION dollars. The Fed is going to lend it $85 Billion dollars for a 2 year period. For the loan the Fed will own 80% of AIG. I don't know about you but that essentially would be equal to $800 Billion of the company. It doesn't make sense unless the company really doesn't own assets worth $1 Trillion dollars in the first place.

All my life I have heard that we shouldn't be regulating business as the Free Enterprise system is the best in the world and regulation, they argue, constricts the free flow of capital to markets needing that capital to grow and develop for the benefit of "shareholders". So the American people bought into that line of reasoning, hook, line and sinker. We bought shares of Stock or Bonds thinking that it was a level playing field and that these markets and companies had some regulation to protect us. Little did we know the limited regulation was there not to protect shareholders and the system. With certainty, it has failed us as proven by several examples, AIG, Lehman Bros and Merrill Lynch and the forced mergers of some and the failures and bailouts of others. The same was true back in 1929. As a result of the crash in 1929, the Glass-Steagall Act was implemented by Roosevelt to prohibit the crash from happening ever again. Then with Ronald Reagan, we saw the beginning of the deregulation process that started to unwind that legislation and allowed Insurance companies and banks to merge.

We are now so integrated in a Global economy, that we have gone from a problem affecting just the US to affecting markets worldwide. Now, when a Bank or Insurance company fails, it has the additional concerns of affecting not only those companies and its shareholders, but other non related businesses, as well as Pension Plans that invest in those businesses and now become at-risk.

Let's me make sure there is clarity as to what this means overall. First, there is no level playing field. As an individual investor, you are on your own and the system is gamed against you. As long as we continue to elect Republicans, we will have little or no protection and our economy will be at risk. It is time we are willing to risk the alternative. Social Security, as a system to help retirees, was instituted by Democrats, and thank God it is still there for people. Many of our Nations problems need fresh thinking from the grip of the Republican party. Even though we had President Clinton, a Democrat as President, he had to deal with a Republican led Congress.

When the Healthcare plans formed HMO’S and PPO’S and were allowed to change from non-profit to becoming for-profit corporations, it was the downfall of healthcare. It changed everything. Now we are faced with higher healthcare costs every year, while executives reap millions and millions of dollars squeezed from us under the guise of operational cost increases. Healthcare is the next system to collapse.

We must have the courage to swing the pendulum the other direction while we still have time. Let's hope and pray that the Democrats, under the leadership of Barack Obama and Joe Biden, will seize this moment and positively change the equation which focuses back on the Middle Class and the Poor and reinstitutes policies that benefit most Americans not just the wealthy. If not, you are seeing the early stages of the Fall of the current Roman Empire, the United States of America!

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Monday, September 15, 2008

Who's to blame for the Banking and Insurance near collapse? You would be surprised!

Today the Stock markets are reacting to the bankruptcy of Lehman Bros., the offer to buy Merrill Lynch by Bank of America and the concerns for AIG Insurance company, which has a balance sheet of a Trillion dollars. How did we get here and who do we blame? Here's an article I dug up on the Banking and Insurance company derregulation which was approved back in 1999 under President Clinton and the Republican Congress and pushed by former Senator Phil Gramm, who is John McCain's economic advisor. Here's the article. Leave a comment.

"Clinton, Republicans agree to deregulation of US financial system

By Martin McLaughlin
1 November 1999

An agreement between the Clinton administration and congressional Republicans, reached during all-night negotiations which concluded in the early hours of October 22, sets the stage for passage of the most sweeping banking deregulation bill in American history, lifting virtually all restraints on the operation of the giant monopolies which dominate the financial system.

The proposed Financial Services Modernization Act of 1999 would do away with restrictions on the integration of banking, insurance and stock trading imposed by the Glass-Steagall Act of 1933, one of the central pillars of Roosevelt's New Deal. Under the old law, banks, brokerages and insurance companies were effectively barred from entering each others' industries, and investment banking and commercial banking were separated.

The certain result of repeal of Glass-Steagall will be a wave of mergers surpassing even the colossal combinations of the past several years. The Wall Street Journal wrote, "With the stroke of the president's pen, investment firms like Merrill Lynch & Co. and banks like Bank of America Corp., are expected to be on the prowl for acquisitions." The financial press predicted that the most likely mergers would come from big banks acquiring insurance companies, with John Hancock, Prudential and The Hartford all expected to be targeted.

Kenneth Guenther, executive vice president of Independent Community Bankers of America, an association of small rural banks which opposed the bill, warned, "This is going to begin a wave of major mergers and acquisitions in the financial-services industry. We're moving to an oligopolistic situation."

One such merger was already carried out well before the passage of the legislation, the $72 billion deal which brought together Citibank, the biggest New York bank, and Travelers Group Inc., the huge insurance and financial services conglomerate, which owns Salomon Smith Barney, a major brokerage. That merger was negotiated despite the fact that the merged company, Citigroup, was in violation of the Glass-Steagall Act, because billionaire Travelers boss Sanford Weill and Citibank CEO John Reed were confident of bipartisan support for repeal of the 60-year-old law.

Campaign of influence-buying
They had good reason, to be sure. The banking, insurance and brokerage industry lobbyists have combined their forces over the last five years to mount the best-financed campaign of influence-buying ever seen in Washington. In 1997 and 1998 alone, the three industries spent over $300 million on the effort: $58 million in campaign contributions to Democratic and Republican candidates, $87 million in "soft money" contributions to the Democratic and Republican parties, and $163 million on lobbying of elected officials.

The chairman of the Senate Banking Committee, Texas Republican Phil Gramm, himself collected more than $1.5 million in cash from the three industries during the last five years: $496,610 from the insurance industry, $760,404 from the securities industry and $407,956 from banks.

During the final hours of negotiations between the House-Senate conference committee and White House and Treasury officials, dozens of well-heeled lobbyists crowded the corridors outside the room where the final deal-making was going on. Edward Yingling, chief lobbyist for the American Bankers Association, told the New York Times, "If I had to guess, I would say it's probably the most heavily lobbied, most expensive issue" in a generation.

While Democratic and Republican congressmen and industry lobbyists claimed that deregulation would spark competition and improve services to consumers, the same claims have proven bogus in the case of telecommunications, airlines and other industries freed from federal regulations. Consumer groups noted that since the passage of a 1994 banking deregulation bill which permitted bank holding companies to operate in more than one state, both checking fees and ATM fees have risen sharply.

Differing versions of financial services deregulation passed the House and Senate earlier this year, and the conference committee was called to work out a consensus bill and avert a White House veto. The principal bone of contention in the last few days before the agreement had nothing to do with the central thrust of the bill, on which there was near-unanimous bipartisan support.

The sticking point was the effort by Gramm to gut the Community Reinvestment Act, a 1977 anti-redlining law which requires that banks make a certain proportion of their loans in minority and poor neighborhoods. Gramm blocked passage of a similar deregulation bill last year over demands to cripple the CRA, and bank lobbyists were in a panic, during the week before the deal was made, that the dispute would once again prevent any bill from being adopted.

Gramm and other extreme-right Republicans saw the opportunity to damage their political opponents among minority businessmen and community groups, who generally support the Democratic Party. Gramm succeeded in inserting two provisions to weaken the CRA, one reducing the frequency of examinations for CRA compliance to once every five years for smaller banks, the other compelling public disclosure of loans made under the program.

The latter provision was particularly offensive to black and other minority business and community groups, who have used the CRA provisions as a lever by threatening to challenge mergers and other bank operations which require government approval. In most such cases, the banks have offered loans to businessmen or outright grants to community groups in return for dropping their legal actions. These petty-bourgeois elements have been able to posture as defenders of the black or Hispanic community, while pocketing what are essentially payoffs from finance capital and concealing from the public the details of this relationship.

The banks and other financial institutions did not themselves oppose continuation of the CRA, which they have treated as nothing more than a cost of doing a highly profitable business in minority areas. Loans tied to the CRA average a 20 percent rate of return. Financial industry lobbyists complained that they were being caught in a crossfire between the Republicans and Democrats which was unrelated to the main purpose of the bill.

The Clinton White House threatened to veto the bill if CRA provisions were substantially weakened, in response to heavy pressure from the Congressional Black Caucus and the Reverend Jesse Jackson, whose Operation PUSH has made extensive use of CRA in its campaigns to pressure corporations and banks for more opportunities for black businessmen. But eventually the White House caved in to Gramm, accepting his amendments so long as the program remained formally in place.

The White House similarly retreated on pledges that consumer privacy would be protected in the legislation. Consumer groups pointed to the potential for abuse of financial information once giant conglomerates were created which would handle loans, investments and insurance at the same time. For example: a bank could refuse to give a 30-year mortgage to a customer whose medical records, filed with the bank's insurance subsidiary, revealed a fatal disease.

The final draft of the bill contains a consumer privacy protection clause, but it is extremely weak, applying only to the transfer of information outside of a financial conglomerate, not within it. Thus Citigroup will be able to pass on financial information about its bank depositors to Travelers Insurance, but not to an outside company like Prudential. Even that limitation would be breached if there was a contractual relationship with the outside company, as in the case of a telemarketer which did work for Citigroup and was given private information about Citigroup depositors to aid in its telephone solicitations.

Threat to financial stability
The proposed deregulation will increase the degree of monopolization in finance and worsen the position of consumers in relation to creditors. Even more significant is its impact on the overall stability of US and world capitalism. The bill ties the banking system and the insurance industry even more directly to the volatile US stock market, virtually guaranteeing that any significant plunge on Wall Street will have an immediate and catastrophic impact throughout the US financial system.

The Glass-Steagall Act of 1933, which the deregulation bill would repeal, was not adopted to protect consumers, although one of its most celebrated provisions was the establishment of the Federal Deposit Insurance Corporation, which guarantees bank deposits of up to $100,000. The law was enacted during the first 100 days of the Roosevelt administration to rescue a banking system which had collapsed, wiping out the life savings of millions of working people, and threatening to bring the profit system to a complete standstill.

As a recent history of that era notes: "The more than five thousand bank failures between the Crash and the New Deal's rescue operation in March 1933 wiped out some $7 billion in depositors' money. Accelerating foreclosures on defaulted home mortgages—150,000 homeowners lost their property in 1930, 200,000 in 1931, 250,000 in 1932—stripped millions of people of both shelter and life savings at a single stroke and menaced the balance sheets of thousands of surviving banks" (David Kennedy, Freedom from Fear, Oxford University Press, 1999, pp. 162-63).

The separation of banking and the stock exchange was ordered in response to revelations of the gross corruption and manipulation of the market by giant banking houses, above all the House of Morgan, which organized huge corporate mergers for its own profit and awarded preferential access to share issues to favored politicians and businessmen. Such insider trading played a major role in the speculative boom which preceded the 1929 crash.

Over the past 20 years the restrictions imposed by Glass-Steagall have been gradually relaxed under pressure from the banks, which sought more profitable outlets for their capital, especially in the booming stock market, and which complained that foreign competitors suffered no such limitations to their financial operations. In 1990 the Federal Reserve Board first permitted a bank (J.P. Morgan) to sell stock through a subsidiary, although stock market operations were limited to 10 percent of the company's total revenue. In 1996 this ceiling was lifted to 25 percent. Now it will be abolished.

The Wall Street Journal celebrated the agreement to end such restrictions with an editorial declaring that the banks had been unfairly scapegoated for the Great Depression. The headline of one Journal article detailing the impact of the proposed law declared, "Finally, 1929 Begins to Fade."

This comment underscores the greatest irony in the banking deregulation bill. Legislation first adopted to save American capitalism from the consequences of the 1929 Wall Street Crash is being abolished just at the point where the conditions are emerging for an even greater speculative financial collapse. The enormous volatility in the stock exchange in recent months has been accompanied by repeated warnings that stocks are grossly overvalued, with some computer and Internet stocks selling at prices 100 times earnings or even greater.

And there is a much more recent experience than 1929 to serve as a cautionary tale. A financial deregulation bill was passed in the early 1980s under the Reagan administration, lifting many restrictions on the activities of savings and loan associations, which had previously been limited primarily to the home-loan market. The result was an orgy of speculation, profiteering and outright plundering of assets, culminating in collapse and the biggest financial bailout in US history, costing the federal government more than $500 billion. The repetition of such events in the much larger banking and securities markets would be beyond the scope of any federal bailout."

Does this give you pause? Yes, Clinton approved it. However, had he not, his veto would have been overridden by the Republican Congress. Deregulation means the foxes are watching the hen house. Allow the Democrats to institute proper regulations so this doesn't happen again. I am concerned not only insurance companies may be at risk but also company retirement plans that are heavily invested in banking and Insurance. Nothing is truly safe except cash and even the dollar has been deteriorated in value. YOU SEE, THIS IS NOW A GLOBAL ECONOMY AND EVERYTHING IS CONNECTED, SO THERE ARE NO SAFE HARBORS! It's connected now to the World Bank, NAFTA, WTO and other well meaning capitalist societies. I don't know what is going to be the action or event that stops this. Possibly the election of a Democratic President. You had better pray it does unless you are set for life. Life is going to change in ways never imagined. Sorry to be the bearer of bad news. I hope and pray Obama gets elected. McCain will signal more of the same Republican approach that initiated deregulation. It is NOT the solution here. It is regulation that may get us back on a new course.

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Friday, September 12, 2008

Will we get the President we want or the President we deserve?

It is an interesting question. The basis for the question is founded in the belief that many Americans are just too ignorant to take the time to learn the facts, get the candidates to focus on the issues instead of the distractions and taking their civic responsibility seriously. How many of us engage in political dialogue with friends, family, neighbors, the news media and other Americans on issues, or use the Internet as a means of extended conversations? Most of what is discussed are the quips and digs like "lipstick on a pig".

I believe we get the President we deserve. We are all responsible in some way or another. If we are disengaged when we could be engaged, we contribute to the problem. It is easy to talk to people who agree with us, and it is difficult to talk with those who disagree with us. But that is where it must start.

Last night I watched an exchange on "Service to our Country" where both McCain and Obama were asked questions as to how they would get the American people more involved in volunteerism. It was a thought provoking conversation where we got treated to more than quips and digs. It was an enlightening conversation where I wanted more. Ideally it would have been better if both candidates were asked the questions at the same time and given the opportunity not to explore differences but where they agree. It is what our country needs right now.

Did they get 38 million viewers? No, far, far fewer people watched it and that is the pity. I want to publicly thank the sponsors of the event, Time Magazine Editor, Richard Stengel, and Judy Woodruff of PBS, who were asking the questions, as well as their Corporate sponsors. We need more of this. Get involved and if you haven't seen it, read about it or check to see if it can be seen again. Contact sponsors to find out how more of these can be held.

Remember, when we get what we want or what we don't want, we get what we deserve. It's called Accountability!

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Wednesday, September 10, 2008

McCain says he will cut government spending. See how he's penny wise and dollar foolish!

Let's face it, McCain has a good line for the part of the population that doesn't think much. He says he's going to cut the millions in Pork Barrel spending and make their supporters names public. Sounds good but what's the truth. The truth is the largest government spending going on is the war in Iraq, which is costing us about $12 Billion a month. Talk about wasteful spending. McCain wants to continue to spend this indefinitely, as he has said he wouldn't mind it if we stayed in Iraq for 100 years. How does he expect to pay for the war? It won't be by cutting back on what he calls "pork". One man's pork is another's important local project. The true cost cutter will be Barack Obama as he will get us out of Iraq responsibly and as soon as possible. That's savings you can count on!

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Monday, September 08, 2008

Capitalism has failed and so should the Republican's mantra

With the bailouts of Freddie Mac and Fannie Mae yesterday, and the recent bailout of Bear Sterns, there is no Free Enterprise system. We are slowly becoming a socialist state without the benefits of socialism for the general public such as healthcare for all. Discussions this morning on CNBC focused on whether the next sector to get bailed out would be the Auto sector or the Airlines. The guests said that the Government has already partially bailed out the auto industry giving about $40 billion to bring it back to life.

Do you know what a bailout really is? It is when the Federal Reserve prints more paper money. They have the printing presses and all they have to do is start them up and run the machines as long as they need to generate cash. What the effect of doing this is, that our real net worth as a country drops, our currency can't buy what it use to, and we are poorer as a nation. It may look as though you still have so many dollars in the Bank. But the result of printing more money is that outsiders want more dollars for their goods and that causes inflation to rise.

All this is a result of the last 8 years of the Bush/Cheney Administration and the Republican brand of government. What ever happened to letting bad investments fail? Oh, I know as long as those investments belong to the middle and lower class, it's OK if they fail. But if those investments belong to the wealthiest of Americans and Corporate leaders, we have a duty to bail them out using our tax money to pay for the bailout.

Shame, shame, shame!

The Free Enterprise system isn’t so free as the Republicans claim, is it?

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See story on "Why John McCain Really Wasn't Tortured" as claimed

This is a must read at Kiko's House, by Shaun Mullen. Thanks Shaun for making the issue so clear and why the Republicans, John McCain, Bush and Cheney can't have it both ways. Everyone should read this.

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Saturday, September 06, 2008

Why are we in this mess with Freddie Mac and Fannie Mae? Deregulation by the Republicans and pushed by Bush!

Given the impending bailout and takeover of Freddie Mac and Fannie Mae, I thought it was appropriate to repost something about President Bush and bankruptcy. Remember it was John McCain's current economic advisor, former Sen. Phil Gramm, who pushed the deregulation bill in the middle of the night when the Republicans were in charge in Congress and there was a threat of shutting own the government unless the bill was passed.

I wrote this first in 2007 and then again in Jan. 2008.

A year has passed since I wrote a post on President Bush that seems to best fit the day today, given the stock market crashes around the world. However, Bush has taken his experience with personal bankruptcy to a whole new level. He now has figured out how to bankrupt the entire world. Here is what I wrote one year ago on January 13th, 2007:

“The only thing this President seems to have learned from his past is how to create bankruptcy conditions.

1) He bankrupt his Oil company. From the lessons learned he started in his Presidency to create the same for the Nation by the following:

2) His is bankrupting our Country with debt

3) He has bankrupt our Military - both equipment wise and manpower strength

4) He has bankrupt our Freedoms with such actions as eavesdropping on phone conversations of any American without FISA Court approval, signing statements which defy laws he has signed into law and other Unconstitutional acts.

5) He has bankrupt our Trust in oversight with a Republican led Congress that turned their head away at his choices, while they held their noses from the stench.

6) He has bankrupt our Trust in a fair Judicial system, by appointing Justices that will approve of his antics and rewrite history as far as settled law.

7) He has bankrupt the Vision for millions of people around the world who thought of the USA as a place of Hope and replaced that Vision as a country of arrogance and spite for our friends as well as our enemies.

8) He has bankrupt the use of Diplomacy, as no country believes him nor trusts him anymore. We are mostly alone in the world now. Colin Powell's speech will go down in history as how the US distorted truth for the self interest of a few of its leaders; the President and the Vice President.

9) He has bankrupt our willingness to be eager for the words of our President, when he gives a speech or an address, to the Nation. We are weary of his lies and twisted truth to us.

10) He has bankrupt and shattered the idea of our President being a Statesman because of his intellect and pursuit of noble causes to help the poor of the world and in stopping wars and promoting peace in the world.

Today, January 22, 2008, I add this. He has now started the biggest stock market crash in world history in his quest to bankrupt every living thing and government.

Well, unfortunately, I was right. Have you seen the latest stock market numbers? Wait till the full effects of the bailout of Freddie Mac and Fannie Mae over the months of September and October.

Need I go on about Bush? Shame, shame, shame Mr. President. We should have had the courage as a country for a “Tough Love” intervention called IMPEACHMENT, but no one had the courage. Still want to vote for Republicans this time? I think not!

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Apathy of the American voter: Will this time be different?

Only 55% of the eligible voters in the U.S, actually vote. Can you believe that something as important as who will be our next President and the person who decides whether we are allowed to exercise our Constitutional freedoms (or not, as in the case of Bush/Cheney) and only 55% go vote. You see the problem my friends isn't just the Republicans or the Democrats. It's the people who could care less to vote and it turns out they represent almost half of us. This means that about 26-27% of the entire voting age public (52% of actual voters for one Party to win vs 48% of the other Party) will be the "deciders". We promote democracy everywhere around the world, except here at home. Some countries make it mandatory to vote. I'm not sure that is any better than not voting. Must things get far worse to wake these people up? How could they get any worse? Oh, I forgot, Bush and Cheney still have almost 5 months to do more damage, if that's possible. God help us all.

You think I am kidding? The Bush/Cheney duo almost decided the Pakistani Presidency today in favor of our enemies, by sending U.S. forces by using helicopters into the rugged region of Pakistan adjoining Afghanistan. It seems Bush wants to capture Osama Bin Laden in his final months and most likely knows where he has been hiding all along. It almost worked, but while the Pakistani people were very angry at our intrusion to their sovereign country they also seem pretty smart and still voted for Bhutto's husband, a friend of the U.S. But Bush almost turned the whole country against us by this latest unannounced move into the rugged mountains of Pakistan. Why would he do that? Bush wants to have an October surprise so that the Republicans, under John McCain can get re-elected in November. If that is true, think about how many waisted lives he has lost in Iraq and the cost to our treasury of Trillions of dollars. Then ask yourself should the Republican Party be rewarded this November. I think not! If he knew where Osama was and didn't even pursue him these last 7 years, shame on him for using him as a political trophy to capture at the most convenient time, while many of our soldiers are fighting an elective war of choice that should be stopped.

So this election period, let's have "New Rules" as Bill Maher would say. If you don't vote, you can't complain after the election or you will be thrown into jail and the key thrown away, with the only possibility of parole if more than 75% of the public votes in any election.

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Thursday, September 04, 2008

Did Palin do the job? It depends on your choice of politic

Sarah Palin did what she was supposed to do last night and she did it well: She read the teleprompter and was able to unite the base. But not for one second of the speech did she inspire me like Obama had with his speech of change last week. Her speech was aimed at camouflaging the accusations against the Bush/Cheney Administration and their failed policies of the past 8 years and to get the listener forget it was the Republican Party that brought this failed policy to us all. We are supposed to forget that John McCain supported the policies of the Bush/Cheney Administration over 90% of the time. And when it counted most, on the issue of torture, John McCain let the nation down, and caved in to the Bush/Cheney Administration requests to squash his opposition to the Bill the Senate was trying to pass which would clearly have stopped torture. I remember McCain's initial rebuttal of the Bush Administrations policy of torture when Gonzales and company redefined what torture was. But as the Bill got a bipartisan support in favor of rebuking Bush, McCain caved.

The speeches by Palin, Giuliani, Romney and others were not inspiring but more of the divisive rhetoric we have had for the past 8 years. It is time for a change in the politics as usual, as Barack Obama has asked for. But the tack the Republicans have decided to take, clear Karl Rove politics, are tiring at best. I really tried to be unbiased last night. I was looking to be inspired and instead I walked away feeling disgusted. I even watched C-Span so I wouldn't be influenced by the media, one way or another. How disappointing to see that about half the country relishes the politics of the past. It's so Neanderthal. I want a real change. I want Barack Obama and Joe Biden to win in November!

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Wednesday, September 03, 2008

Lieberman's speech for McCain and against Obama

Whatever your politic, Republican guests on CNBC's Chris Matthews segment today claim that Sen. Lieberman is as maverick as John McCain and that both put Country over Party and politic. I think that statement is true in part for John McCain but not Joe Lieberman. Joe puts the State of Israel above the United States every time there is a choice. That is Lieberman's reason for supporting McCain and the only reason.

You want to read more? Read this.

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The McCain/Sarah Palin strategy:Outrage in the absence of attacks

I have been listening to as many different opinions in the media about McCain's choice of his VP, Sarah Palin. And today I have heard mostly from Republican politicians and strategists that the media and Democrats are unfairly attacking Gov. Palin being a Mom and also VP. As far as I can tell, no one on the main St. media nor any Democrats interviewed ever said such a line. But it seems in the absence of attacks on those topics the Republicans have coordinated their talking points to pretend there are attacks and attack back. What a waste of time at a time when we need to be deadly serious about the future of our country. It is more important to talk about the real issues! Who is going to get our economy back on track and create jobs? Who is going to get us out of Iraq responsibly? Who is going to help us stop Global warming and protect the planet with alternative energy? Who is going to get the debt paid off and make Social Security whole again Who is going to make sure everyone is insured in America? Who is going to protect a woman's right to choose what she wants to do with her own body?

So let's not hear the outcry of the Republicans and preach to us this week their piety about issues we could care less about.

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