Viva Cuba!

A New York Times article over the weekend caught a nice anecdote from Obama’s ambush, er, attendance at the Summit of the Americas. Our Latin American brothers (and they are mostly brothers) seized the opportunity to press the issue of the Cuban Embargo in their first meeting with the new president - to the point that it became a near diplomatic mugging. The embargo

Always the cool customer, Obama was probably more serious than he let on in praising Canada, which, aside from constructing a workable system of universal healthcare, has always been a friend of Cuba - much to the benefit of both countries. While the United States has nursed a 50 year-old grudge against the island nation just 90 miles off its shores, Canada and the rest of the world have forged valuable trade relationships that will only grow for decades to come.

Since 1962, our leaders have fooled themselves into believing the pain of our anti-Cuban embargo will finally push the Cubans to revolt against Fidel, or now his brother Raul. But they’re dreaming. Like so many failed U.S. policies relying on force rather than diplomacy, the embargo accomplishes nothing except giving the Cuban people a reason to hate the U.S. government. These same people would gladly rise up if they were to see the friendly face of our country, if they believed the U.S. would support them in their cause. But given the hostility they have seen, what assurance do they have that the U.S. wouldn’t treat them like another third world nation and simply insert another dictator, this one even less concerned about their needs than the Bearded One?

The embargo, which the rest of world almost universally opposes, serves as an obvious example of the United States playing World Boss, but fewer people realize the mean, petty little ways our country has taken it even further. The Helms-Burton law, for example, punishes other countries for doing business with Cuba. The law decrees that any ship entering Havana Bay within the last six months is prohibited from berthing in the United States, and that the leaders of foreign companies doing business with Cuba be barred from even setting foot on American soil. In the late 1990s, the U. S. banned a Canadian mining executive and his family from going to Disneyland because he had been the CEO of a nickel mine in Cuba. Free trade for all, except when it prevents us from strangling a tiny island nation.

The embargo kills all sorts of opportunities for U.S. businesses whose presence would help the Cuban people while also helping the American economy. As we speak, countries from all over the world are scoring contracts in Cuban medicine, biotech, technology, and agriculture, industriously planting roots in a country of 11 million. But the United States, the island’s closest neighbor and most logical trading partner, just goes on nursing a grudge like a bratty little school kid.

What’s keeping us from lifting the embargo on Cuba? Are we really supposed to believe that the embargo is the wish of the American people?-that Americans as a whole despise Castro’s communist island nation? If you think that sounds a little bit off the mark, you’re right. The fact is, our national embargo persists thanks largely to an embittered minority of Americans. Approximately two million Cuban exiles-most in South Florida, some in New Jersey-hate Fidel Castro so passionately that they alone ensure that the embargo remains in place. The rest of the American population simply doesn’t care. It’s that simple. If not for these fierce Cuban expates, both Gore and Kerry would have been elected president.

But Obama would have been elected even without Florida.

He has the votes, and more importantly, the public good will. And god knows, there are huge constituencies that would love to see the end of the blockade. As the Times article points out, American businesses are dying to get into Cuba, and both Houses of Congress have drafted legislation calling for an end to the travel restrictions as well as to parts of the embargo. Surveys show the grandkids of Cuban ex-patriots, now just coming of voting age, are much softer of the embargo as well.

So how about it, Mr. President?

What’s it going to take to implement some reasonable, judicious foreign policy regarding Cuba? Why not help out its impoverished people instead of worsening their conditions, and maybe do a little bit of good for America’s global reputation in the meantime?

The End of Excess

“Don’t pretend we didn’t see this coming for a long, long time,” Kurt Andersen wrote in his long, long but otherwise excellent essay in Time Magazine last week.

If you want to see just how long we’ve been talking about this, take a look at the original Captive American, published in 1988. As Mark Twain said, “History doesn’t repeat itself, but it rhymes.”

Andersen begins with a telling collection of historical facts:

What we are talking about here, of course, is the flourishing of a gilded age established by a generation who had never known the sacrifices of the Great Depression or of World War II, and thus had no reason to believe the good times would ever end. And as Andersen writes, “we started living large literally as well as figuratively”:

For too long, we’ve used short-term fixes to try to prevent disaster. But those short terms fixes have only delayed, and worsened, the inevitable.

Perhaps we need to taste hardship now the same way forests need occasional conflagrations. Perhaps these challenges will burn through our selfishness and complacency and allow the seeds of new ideas and a renewed civic spirit to open up and grow.

Summer’s Time (at D.E. Shaw), and the Living was Easy

As President Obama fashions himself as the second coming of FDR, it looks like he’s taking a page straight out of Roosevelt’s playbook by surrounding himself with Wall Streeters to help him solve the economic crisis. Roosevelt, you may recall, appointed Joe Kennedy to head up the Securities and Exchange Commission after the former bootlegger had made millions running stock scams in the Twenties. Roosevelt explained the appointment with, “It takes [a crook] to catch a crook.”

This is not to say that Lawrence Summers, Rahm Emanuel, or campaign economic advisor Richard Rubin are crooks, or even the proverbial  - and cliched - foxes guarding the henhouse. Kennedy actually did a reasonable job cleaning up Wall Street, and so might the three we mention here, who all spun through the revolving door from the Clinton White House to make millions in the banking industry.  It just shows who Obama thinks can get us out of this mess, which is a little scary, considering these guys all cashed in on it.

Sounds like Lawrence Summers had a pretty sweet gig at D.E. Shaw & Co,, a huge hedge fund, for example, before becoming Obama’s chief economic advisor, as The New York Times reports today.

Summers pulled in a cool $5.2 million just last year, and that working only one day a week. And, of course, as we’ve mentioned previously, hedge fund workers like Summers pay a much lower tax rate than most workers in America. The government takes only 15 percent of their profits as opposed to the usual 30 percent or so for the rest of us, which once led Warren Buffett to quip that he paid a lower rate in taxes than his cleaning lady.

Obama’s chief of staff, Rahm Emanuel, probably had to work all five days a week to collect the $16 million he earned as an investment banker in his two years between the Clinton administration and getting elected to Congress.

Kinda makes you wonder what Robert Rubin earned during his time at Citigroup. Rubin would have to open his books, like Summers has, if he had been appointed to an official role in the White House.  Interesting, considering he was so active in Obama’s campaign…

No wonder economist Paul Krugman was so filled with “despair” at Timothy Geithner’s latest bank bailout redux, which Krugman describes as the same trick Geithner tried when he was working for Hank Paulson, just with different bells and whistles. The man in the White House may have changed, but the reverence for Wall Street remains.

Krugman told Newsweek that “these men and women have ‘no venality’…but they are suffering from ‘osmosis,’ from simply spending too much time around investment bankers and the like.”

As a result,  Krugman writes in his column, Obama “has apparently settled on a financial plan, that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing. It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street.”

Who Says Bipartisanship Is Dead? Not The Pentagon

With all the partisan rancor in Washington, it’s easy to overlook one area where the two major parties consistently agree: defense spending. When it comes to tossing tax dollars into the black maw of the Pentagon, Democrats and Republicans get along just fine. Forget the furor over bailouts and bonuses. The Military-Industrial Complex has been enjoying the fruits of a sixty year stimulus plan by now and neither party shows any sign of stopping the fun.

From Reason.com (emphasis added):

Just to repeat that last quote so all those on the antiwar left can hear it over the chants and the protest drums. President Obama, whom you all voted for in overwhelming numbers, is actually going to spend more on weapons of war than George W. Bush.

Of course, the author of the Reason article doesn’t point out that a lot of that increased spending is really just better, or at least more honest, bookkeeping. Bush conveniently pretended like the wars in Iraq and Afghanistan weren’t part of the Pentagon’s budget, funding them with so-called “emergency supplemental” spending bills. So at least now, we’ll have to admit how much money we’re shelling out for those conflicts. But that doesn’t mean we’re going to spend any less on them.

Just how out of whack is our so-called “defense” spending? The Reason piece gives a nice bit of perspective:

Long live the World Boss.

The Next Bailout? Think Pensions

For years, hundreds of our country’s biggest corporations have been underfunding their pension  plans. But not to worry. When the bill comes due and they can’t support their retired workers, they simply dump the costs onto the federal government.

On second thought, maybe it is time to worry after all. From the Boston Globe:

Oops. Talk about bad timing. And they didn’t just buy your grandmother’s boring old blue chips either:

Why in the world would the PBGC, a staid government agency protecting millions of American pensions suddenly start doing its best impersonation of Lehman Brothers, the once mighty Wall Street firm that immolated itself on a raging pyre of high risk financial gambles? Maybe because the guy who was in charge of PBGC until recently, Charles Millard, used to run … Lehman Brothers!

No. We’re not making that up.

How much did the PBGC lose? They’re not saying. But they were kind enough to reveal that, as of last September, they were down about 23%. Of course, the stock market didn’t start tanking in earnest until October, so that number must be a gross underestimation of the real losses. You know things are bad when losing a quarter of your investment looks optimistic!

To make matters worse, the agency was already $13 billion in the hole before it decided to start playing Mad Money. And if corporate behemoths like GM and Chrysler go under, who do you think is going to be expected to pick up all those millions of pensions on their books? You guessed it. The good old Pension Benefit Guaranty Corporation. But where will this bailout agency go for its bailout?

The same place everyone goes these days. To your wallet.

High on the Hog

It makes sense that lobbyist Paul Magliocchetti, the subject of a story in The New York Times on Sunday, spent his formative years as a protege of Rep. John Murtha, chairman of the House defense appropriations subcommittee. The article fails to mention that Murtha won $150 million in earmarks in the 2008 defense spending bill, more than any other legislator in the House.

The article offers another snapshot of how business gets done Washington, D.C., except in this case it seems Magliocchetti of PMA Group pissed someone off enough to embarrass him with these small potatoes, in this case served roasted with rosemary, as Mags likes them.

We can just see him now walking into the Alpine restaurant followed by a few portly Congressmen, already licking their lips.  “Get me some oysters! Get me some steamed crabs! Get me a rack of lamb!” He wouldn’t want his guys waiting for appetizers.

Talk about lacking teeth: the article cites federal ethics laws prohibiting lawmakers or staff “from accepting free meals of gifts worth more than $50 or a total of more than $100 over the course of a year.” A year! A Benjamin in Washington barely covers the tip for lunch.

We like the line: “Mr. Magliochetti acquired his taste for the high life as a Congressional staff member wined and dined by lobbyists in the era before strict ethics rules.”

Obviously, rules like the one cited above has led to the ascetic era in which we’re living today.

It seems that Mags as a young congressional staffer, in addition to Italian cooking, “picked up his taste for gumbo on visits to shipbuilders around New Orleans, and a fondness for cowboy boots from former Representative Charlie Wilson of Texas.”

Of course, now that Mags has swung through the revolving door and become one of the biggest defense lobbyists on K Street, he offers a lot more than crawfish soup and python-skinned boots. Since 1998, the article states, employees of PMA Group and its clients have contributed $7.8 million to members of Murtha’s defense subcommittee, and $2.4 million to Murtha himself.

Fancy lunches are just the tip of the curly tail on this big old hog. Follow the tail, and see where it goes.

Sucking At the Hind Tit of a Dead Cow

We don’t know where this guy came from, but we’re glad to see someone as pissed off as we are. It makes you wonder whatever happened to righteous indignation.

As we contemplate this project, we often wonder, similarly to our man Thomas Paine above, “Have you become a nation of cowards, America?” Of course we are all in this together, and we don’t want to chastise our readers, but far more blunt language often comes to mind when we see such rampant complacency in this country, leading us to want  to say, “You’re idiots, America, and screwed.” Thanks, Mr. Paine, for doing it for us.

We’re not as anti-immigration as this gentlemen seems to be, and some of his arguments are overstated, but he hits so many of our songs, almost note for note:

• Removing the privileges from Congress.
• Repealing Congress’ right to give itself raises.
• Mandating a balanced budget: “Force your legislators to do what you now have to do: live within your means.”
• Make Congress pay into the Social Security System.
• Term limits.
• Amend the laws the allow for such a generous pension after serving just one term. We think he exaggerates the benefits, but his point is spot-on.
• Bring back universal service, two years in the military or two years in community involvement.

We love his line: “Give young people a chance to understand that they’re entitled to nothing they don’t earn.”

Desperate times call for desperate measures. We’re tired of bemoaning executive bonuses and bank bailouts.  Clearly, the country requires the equivalent of open-heart surgery at this point, and whether the Obama administration’s efforts will prove effective remains to be seen. But for the people, there is no better a time to demand accountibility from your Congressional representative. As our man Mr Paine says, “It’s a good time to be a patriot.”

Give Me Party or Give Me Death

Fresh out of the cage fight that was the California budget debate, in which Democrats and Republicans waged an ideological battle that pushed the state to the brink of collapse, comes new hope for the passage of open primaries.

As we’ve mentioned previously, Gov. Arnold Schwarzenegger floated the idea of open primaries after he scored a win in November with a ballot measure designating  an independent body to redraw congressional lines that have been gerrymandered so badly that only a couple seats in the Golden State were even legitimately contested in the last election.

Now comes a sponsor for completely open primaries, in which any voter - regardless of party identification - could vote for any candidate. Instead of Republicans only voting for Republicans and Democrats only voting for Democrats in spring elections, which guaranteed that a Donkey always faced off against an Elephant in the fall, an open primary would put all candidates, regardless of party, on the same ballot.

In this system, the top two vote-getters would proceed to the general election. That means two Democrats could wind up squaring off against each other, or two Republicans. Or, perhaps, one or two Independents could make a strong run and break through.

As both parties are flat-out terrified of this idea, it’s appropriate that the sponsor of the ballot measure, which would go before voters in 2010, is Rep. Abel Maldonado out of Santa Barbara, the deciding vote who crossed his Republican party lines to get the budget deal passed.

Republicans have, of course, now targeted Maldanado as a fink for breaking from the Republican family in the budget talks - no matter that hundreds of thousands of jobs were on the line. He broke the cardinal rule: loyalty to party above everything else.

Reaction was swift. Just hours after the assemblyman cast his vote for the budget, Republican political consultant Matt Cunningham set up a Facebook group: “Never Elect Abel Maldanado to Anything, Ever Again.”

And Tom Del Beccaro, vice chairman of the state GOP, made clear how dearly all the career politicians want to maintain the status quo:  “The two party is as old as politics itself. It’s human nature to have rivalries, politically, in sport, and you can’t legislate around human nature,” he told the San Francisco Chronicle. “That’s called  social experimentation–and it doesn’t work.”

To think this guy could elected dog-catcher saying such completely disingenuous nonsense.

Now it seems Maldanado’s outsider status has emboldened him to actually do the right thing–as he’ll have to depend on more Democrats and Independents to get reelected next time around.

A Pay Cut for Congress?

All the old hacks in Congress make a big show of wringing their hands in agony over the fate of the country, when it’s their continued employment that’s causing the real agony.

They say it’s only fair to cut the salaries of the CEOs who come looking for a bailout after running their companies into the ground. Great! Now what about cutting the salaries of the politicians who have sent our country into debt for generations to come?

Phillip Matier and Andrew Ross of the San Francisco Chronicle ran a piece (second item) earlier this week about 12 of the 80 lawmakers in the California Assembly who have voluntarily cut their $116,000 salaries and/or $400-a-month car allowances.

The sacrifices range from one legislator giving back 10 percent of his salary to others foregoing raises to one who declined his car per diem. It ain’t much, but it’s something. Thanks, guys!

Now about the little issue of our state budget…

As for their brethren in Congress giving a little back of their $165,000 salaries, even just as a symbolic gesture? So far…crickets.

A Sucker Born Every Minute

I still get the calls all the time: “Hello, this is John with a great new 5.1 percent mortgage interest rate,” the recording says. ” Press 1 if you want to lock it in now.”

And thus, the insanity continues.

One day they were pizza delivery guys, now they’re selling mortgages. Or at least they were, before the robots took over.

I heard an interesting radio bit recently on This American Life,  a repeat from last year, that breaks down the sub-prime mortgage crisis in plain language and human stories that sound almost too insane to be true. You hear about guys like Mike, a bartender out of Carson City Nev., who knew nothing about the industry before he began bundling mortgages for the biggest players on Wall Street. Or Glenn, who was making $75,000  - $100,000 a month bundling mortgages straight out of college. Of course, now Mike’s bank has closed and Glenn can’t pay the mortgage on his own house.

The way the show break it down, it all began in the early 2000s when this giant global pool of savings nearly doubled from $36 trillion to about $70 trillion, thanks in large part to third world countries becoming more productive. All this money needed a place to go. For years, managers had invested the savings in safe places like treasury bonds, but this changed when Alan Greenspan, one of our favorites here, declared that he planned to keep the Federal Funds Interest Rate at a paltry 1 percent. Essentially saying, as the show puts it, “Screw you, global pool of money.”

So the financial managers of all this money went out looking for other investments and found mortgage-backed securities, which looked great at the time. What’s not to like about getting a piece of the action from banks charging 9 percent interest from homeowners? As a result, this massive appetite grew for these mortgage-backed securities, putting pressure on the little guys like Mike and Glenn to go out and find new homebuyers, whether or not they had a pot to piss in. It got to the point that a lot of these guys were hocking “NINAs,” no income, no asset loans. In other words, you didn’t need anything more than a credit score and a pulse.

You’d think this would raise red flags for the more seasoned players on Wall Street, who were further packaging the mortgage-backed securities into larger instruments called Collateralized Debt Obligations, or CDOs, but the bankers, it seems, were either blinded by greed, victims of groupthink, or probably both.  One of the reasons they felt so safe was that they were looking at data that showed foreclosure rates of less than 2 percent, but the problem was that the data was historical, collected before the invention of these crazy no-interest or even negative amortization mortgages. Little did they know the foreclosure rates would reach levels of 50 percent in some regions.  Plus housing prices just kept rising, which looked good on paper, but didn’t take into account that household incomes were remaining flat. By 2006, the average house cost four times the average household income, almost twice as high as in decades past.

We all know the rest of the story. How these CDOs were rated AAA when they should have been rated B-. How when the housing prices finally flattened, and then dropped, the system almost instantly went into a freefall from which it has yet to recover. As many as half of those AAA CDOs have dropped 50 percent of their value, many worth virtually nothing.

While those Ivy League brains managing that huge pool of $70 trillion in savings thought they had found the magic bank account, they were actually throwing the funds into a furnace that burned massive amounts of money into thin air.

Now the 1 percent offered in Treasury Bills is looking pretty good. And banks won’t lend to anybody.

Yet I continue to get these calls. Must be more than a few suckers still left out there.

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