Cold Turkey for Spendaholics
I had lunch with a couple executives from one of the top five banks in the country last week. Needless to say, the conversation was about as sunny as our winter weather. They predicted 500 banks would close this year, so at least they were feeling somewhat optimistic. I’ve heard possibly a thousand are headed down the toilet.
As Obama signs the big stimulus bill into law today, the hope is that Americans will go out and spend as frivolously as they have in the past to get our economy moving again, which, of course, is exactly the wrong thing to do. Spending beyond our means is what got us into this mess. The hard truth of the matter is that Americans have become accustomed to an unsustainable standard of living, and now consider it an entitlement.
I don’t see anything patriotic about spending at the moment. As I see it, family comes first, and that means saving every last penny for whatever the future holds. Our checkbooks and bank accounts are the only things we can control in this mess, but if we can clean them up, we help ourselves as well as the country. One less family in debt. One more solid credit score to encourage the banks to lend.
I saw an article in The New York Times last week by David Leonhardt who had similar views, pointing out that economists have long observed that people have a terrible time saving money. They eat too much, spend too much. And they want it all right now. As Leonhardt says, “Again and again, [Americans] choose a bird in the hand - be it dessert, convenience or a little extra cash - over three or four in the bush.”
The good news is that people finally do seem to be waking up. American saved 3.6 percent of their incomes in December, often one of the highest spending months, up from about 1 percent in recent years.
This saving not only eases the consumer debt crisis, but tangibly helps our financial institutions. “The government is pouring hundreds of billions of dollars into banks,” Richard Thaler, a University of Chicago economist says in the article. “What’s so bad about households pouring some money into banks?”
Captive American Blog on Hiatus
We’re still mad as hell but are occupied with other projects for the moment. We will be returning soon. Stay tuned. — Editor
How Do You Say “Accountability” In Icelandic?
This tiny country could teach us a thing or two--and not just about eating rotten shark or writing great pop songs.
A few weeks ago, we posted on a dramatic New Year’s Eve revolt by enraged citizens in Iceland. The people of that island nation stormed a television station and demanded that their political leaders take responsibility for bringing on the economic collapse. And today, they got results:
Iceland’s coalition government collapsed Monday, the latest fallout from a global financial crisis that has sparked angry demonstrations against governments across Europe.
…
The demonstrations in Iceland, which have also demanded the resignation of governor of the nation’s central bank, have been mirrored elsewhere in Europe.
Wow. Negligent politicians actually paying a price–even (gasp!) losing their offices–for their failures of leadership. What a concept. While Iceland’s ruling coalition got the boot it so richly deserved this week, and while our own ruling party was voted out of the White House recently, it’s worth recalling that more than 90% of our career politicians in Congress won reelection this past November, most of them by sizable margins. That’s not exactly holding our leaders’ feet to the fire, is it?
PS: Today seems to be the day for video reruns here at Captive American. But what the heck. Here’s some footage we posted previously of the New Year’s Eve demonstration in Iceland (note: this video is more than 5 minutes long, but you only need to check out 30 seconds or so to get the idea):
That building the protesters are trying to enter is a national network’s television station. The country’s prime minister and several other prominent officials were inside. By comparison, here again is some footage of how some leading politicians in America rang in 2009:
A Crazy Idea: Listen To The People Who Got It Right
Peter Schiff has an editorial in the Wall Street Journal today. If you don’t know who Peter Schiff is, or even if you do, check out this video compilation we posted several months ago. Oh heck, let’s just repost it, shall we? It never gets old:
As you can see from this footage, Schiff predicted our economic collapse years ago, when just about every other “expert” in the political, business and pundit worlds thought things were peachy. Now, in today’s editorial, he’s again warning us of trouble ahead. Our government can’t just spend its way out of this problem, he says. Why not? Because we’re broke, that’s why, and the magic Mao Zedong Visa card we’ve been charging everything on for years is maxed out:
… creditor nations [like China, Japan, and Saudi Arabia], who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.
These nations, in other words, must never use the money to buy other assets or fund domestic spending initiatives for their own people
… it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.
But just because the game has lasted thus far does not mean that they will continue playing it indefinitely. Thanks to projected huge deficits, the U.S. government is severely raising the stakes. At the same time, the global economic contraction will make larger Treasury purchases by foreign central banks both economically and politically more difficult.
The sections we put in bold above called to mind another editorial in today’s editions, this one by John Lee in the Times Online. Today is the first day of the Year of the Ox in China, but as we’ve written about ourselves in the past, Lee points out that China’s economy has already been badly gored by the financial crisis. In other words, the very people we are expecting to fund our grand stimulus plan could use some serious financial stimulation themselves:
Even before the global financial crisis, those in absolute poverty (earning less than US$1 a day) doubled in China over the past decade. More than 400 million had seen their net incomes decline over the same period despite record GDP growth. It is no wonder that domestic consumption growth has been slow and will not be able to take up the slack as the export sector suffers. Instead China must rely on state-led fixed investment to keep growth at 8 per cent, despite acknowledging that this strategy is becoming more inefficient and wasteful, and therefore increasingly unsustainable.
China’s government has already been stimulating its economy with massive government spending, and even keeping its people intentionally poor during the boom years. And yet, we’re counting on them to suck up another couple hundred billion–at least–in Treasury bonds to pay for our recovery? Hmm. Is it just us or, on the face of it, does that seem incredibly … well … iffy?
How long until the Chinese start spending on their own recovery? How long until they put what they have left towards their own stimulus plan? Even more frightening still, how long until they start dumping the hundreds of billions in bad Uncle Sam I.O.U.s they already own on the global market?
On a separate, but related topic, how long until we here in America get ourselves some new “experts“? Peter Schiff was one of the few figures on the national scene who predicted our current problems. At the time, most of the establishment on the left and the right literally laughed at him. (See the video above.) Wouldn’t it be wise to heed Schiff now?
Sadly, that is not what’s happening in Washington. Instead, Bailout Hank Paulson, one of the main people who caused the economic collapse in the first place, has handed the economic reins to the likes of Tim Geithner and Lawrence Summers, two men with equally dubious track records. And, true to form, they’re pulling out the government AMEX again for another trillion dollar cash advance.
The Inauguration: Was It Live Or Was It … Memorex
We’ve already written about President Obama’s strict new rules against lobbyists in his administration that, upon closer inspection, aren’t really very strict at all. Now … this. From the NY Times:
The somber, elegiac tones before President Obama’s oath of office at the inauguration on Tuesday came from the instruments of Yo-Yo Ma, Itzhak Perlman and two colleagues. But what the millions on the Mall and watching on television heard was in fact a recording
But inauguration organizers want everyone to know–this was not as bad as it sounds:
Carole Florman, a spokeswoman for the Joint Congressional Committee on Inaugural Ceremonies, said on Thursday. “No one’s trying to fool anybody. This isn’t a matter of Milli Vanilli,” … referring to the pop band that was stripped of a 1989 Grammy because the duo did not sing on their album and lip-synched in concerts.
So they hired four of the country’s most accomplished musicians to appear before millions of people and pretend to play. But “no one’s trying to fool anybody”?
All we can say is, thank goodness this didn’t happen (warning: the first couple seconds of this are in Spanish):
Free & Equal: Independents For Congress In 2010!
An exciting new group started up yesterday in Illinois. Calling itself Free & Equal, the organization says its goal is to put an independent or third party candidate on the ballot in all 435 congressional districts in the country for the 2010 elections. Right on!
From their website:
“While engaging in lobbying and litigation for improved ballot access laws as this year goes forward, Free & Equal will be fundraising to issue grants to prospective 2010 candidates to pay for the petitioning necessary to achieve a ballot line,” said Founder and Chairman of the Board Christina Tobin. “We must make sure that people all across America are able to have their voices heard, and that they are able to cast their vote for a candidate of principle, not a just candidate of the two party duopoly.”
We like the sound of that. A lot!
Head on over to the site and check it out. If you can, you might want to open up your wallet a little bit, too. Lord knows it’s a worthy cause.
The Bailout Bonanza Continues …
One man's taxes, another man's bonus.
We’ve already heard about numerous banks spending their bailout billions on executive bonuses. But this has got to be a new low. From the Financial Times:
Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.
The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.
We know what you’re thinking. More greedy bankers grabbing fistfuls of dollars while their company implodes–and sticking taxpayers with the bill. Yawn. But this is a truly audacious heist, even in this day and age.
Merrill Lynch lost more than $21 billion in ONE QUARTER last year according to the article. Yet it made sure to pay out up to $4 billion in bonuses before being swallowed up by Bank of America (with the generous help of the U.S. treasury). Now B of A says it needs more of your money because Merrill was in even worse shape than it thought. Gee, that $4 billion it gave out in bonuses could sure come in handy right about now. But because it’s gone, and it’s never coming back, the rest of us out here on “Main Street” will have to pony up. Again.
It gets worse, folks. Unbelievably, Merrill’s CEO John Thain reportedly wanted a $10 million gratuity for himself alone last year, but backed off his demands after some bad press. And that’s not the only extravagance Thain thought he was entitled to. While the firm he ran hemorrhaged billions and lurched to the brink of ruin, he thought it was a perfect time to do some redecorating. From The Daily Beast:
… just as Merrill Lynch CEO John Thain was preparing to slash expenses, cut thousands of jobs and exit businesses to fix the ailing securities firm … Thain spent $1.22 million of company money to refurbish his office at Merrill Lynch headquarters in lower Manhattan.
Stuff like this would be truly scandalous if it weren’t so damned commonplace these days. What’s really mortifying is watching the business press profess shock and indignation over these new revelations about Thain’s titanic (and we use that word in every sense) greed. Until recently, they were lauding him as one of the few good guys left on Wall Street and cheering his sale of Merrill to Bank of America as a win-win for the company and the financial system. Wrong again, guys! Now Thain and that sale have been exposed for what they really are: another well dressed grifter and another high stakes scam.
Lobbying For Lobbyists
Yesterday, we posted on President Obama’s rather toothless new rules that purport to prevent ex-lobbyists from working in his administration. The rules don’t cover people like new secretary of health and human services Tom Daschle. Daschle did just about everything a lobbyist does, but he called himself “an adviser” to the firm he worked for, so he’s in the clear.
But the rules do, apparently, apply to another Obama appointee we’ve written about several times now, William Lynn. As recently as last year, Lynn lobbied for the giant defense contractor Raytheon. Now Obama wants him to become the number two man at the Pentagon. But because Lynn called himself a lobbyist while he was, you now, lobbying instead of some euphemistic title like “adviser” or “consultant,” he would now seem to be ineligible to join Team Obama. Right? Wrong. From CQ Politics:
The White House has indicated it will pursue a waiver for Lynn
So, the new rules against ex-lobbyists in the administration are not only porous and inadequate, they’re also optional.
And what about Senator Claire McCaskill? As we wrote about last week, she raised questions about Lynn’s ties to Raytheon in hearings, prompting us to feel a small smidge of hope that she might actually stand up to her party and vote against Lynn’s confirmation. You’d think these new rules barring people like Lynn from serving would give her some cover for such a bold move.
Alas, no. Party still comes first:
Sen. Claire McCaskill , D-Mo., who questioned Lynn on the lobbying issue at his Jan. 15 confirmation hearing, said Thursday she would vote for Lynn’s confirmation and support a waiver if it materialized.
“I think he deserves the benefit of the doubt. I just want to keep pushing him towards that reformer role,” said McCaskill
So she’s going to push this ex-Pentagon comptroller and defense contractor lobbyist to be a “reformer” of the very system he’s spent his career in and out of government not only perpetuating but profiting from? Right! You might as well hire, say, the former chief of Goldman Sachs to come in and “rescue” the very financial markets he helped ruin. Oh wait … Never mind. Lynn will fit right in.
Corporate Shill Tim Kaine In At DNC
Virginia Governor Tim "Glad-handing" Kaine: Against leading Dems before he was for it.
It’s official. Today, the Democratic Party formally elected Virginia Governor Tim Kaine–a man who sells “glad-handing” time to the highest corporate bidder–to lead the Democratic National Committee.
We wrote about Kaine and his unapologetic pay-to-play shilling for the Southern Governors Association a few weeks ago. The short version is this: as head of the SGA, Kaine woos corporations from sectors like the tobacco industry to pay fees in exchange for access to himself and other governors. And he sees nothing, absolutely nothing wrong with this activity. His spokesman said all that corporate money paid for “glad-handing” time, nothing more.
And that little jet ride that Kaine took on an energy company’s private plane? It had nothing to do with the Governor–who says global warming is one of his top priorities–supporting a new coal-fired power plant the company was building. Nah.
… Sigh.
Why was this man, who only six years ago was a mere Richmond city councilman, chosen to lead the most powerful party in the country? Because our new president wanted it so, even against Kaine’s own wishes. From a story on WTOP (h/t MyDD) back in November entitled, “Va. governor rules out post as DNC chief”:
Kaine said at a news conference Obama’s transition team asked him if he was interested in the position. He said his response was that he’d rather be governor and won’t do both jobs.
“That’s not something I’m going to do. I don’t view that, frankly, as consistent with being governor, so I’m going to be governor,” Kaine said. “I would view it as taking my eye too much off the ball about things that need to happen here.”
So, to recap: Kaine swaps money for access. Supports controversial projects from big donors. And goes back on his word to the voters. Yep. Ought to make a fine leader of one of the major parties.
“Change” On Obama’s First Day
Barack Obama banned lobbyists from his administration. But don't let the smile or the phony title fool you. Tom Daschle was a lobbyist.
This is something we can get behind. From Politico:
… in a nod toward the difficult economic times many in the country are facing, Obama said his senior White House staff would be subject to a pay freeze. Aides said the freeze would kick in for senior staff making $100,000 or more.
Of course, if someone’s already making six figures, we can’t feel terribly sorry for them. But nonetheless, an encouraging, if symbolic sign. Now if we could only get another bunch of government lifers making well over $100,000 to take a pay freeze, or even a cut. You know, those 535 people up the street from the White House?
Oh, that’s right. It’s too late for that. Members of Congress already got their raises for the year.
Our new president also appeared to take on lobbying reform in his first full day in office:
Obama announced that no lobbyist will be allowed to take a job in an area where they lobbied. Nor would former lobbyists who come to work for him be allowed to lobby the administration after leaving government service.
Again, very hopeful signs. But hold on. There’s a bit of a catch:
[The new rules] don’t seem to bar former consultants, who often function in ways similar to lobbyists, from working on their pre-White House portfolios, nor do they limit officials from working on issues on which their spouses lobby.
A lot of ex-politicians and government officials simply call themselves “consultants” or “advisers.” Take former Senator Tom Daschle, the new secretary of health and human services. We posted on his lobbying career a few weeks ago. He was a “special policy adviser” for a major lobbying firm that specialized in, you guessed it, healthcare issues. And don’t kid yourself. Just because he didn’t call himself a lobbyist or register as one doesn’t mean he didn’t do what lobbyists do.
If anything, these rules discriminate against people who are at least honest enough to admit to being lobbyists instead of hiding behind semantics and euphemisms.
