In old world banking circles personal conduct was regulated by a moral code whereby honor and self-interest were joined at the hip. To put client capital at risk was a cardinal sin punishable by dishonor and disgrace and therefore unthinkable.
That was a century ago. Where Greenspan erred was when Wall Street hired physicists and mathematicians to construct financial instruments. These new guys were not steeped in the 100's year old "Bankers Codes of Conduct", nor was their family honor at stake. The financial instruments they designed were so complicated analysts were unable to evaluate them properly or assess their risk.
But when people are making money, and bankers are no exception, they don’t ask why. They just smile and bank the checks. Effectively the morals clause implicit in traditional banking constructs no longer applied to these side bets. Since the banks, their shareholders, traders and brokerage houses were all making “bank” everybody was winning and the future was blindingly bright. That was only 2 years ago.
So we have all learned a valuable lesson again (for the third time). The notion that anything to do with money, actually gigantic money, could be self-regulating and the people involved trusted to do the “right thing” is a concept which has outlived its usefulness. Money corrupts — big Money corrupts completely.
Friday, November 28, 2008
Thursday, October 30, 2008
The Sarah Palin Chronicles
Out of Alaska comes an avenging angel, Sarah Palin, to save the Republican Party from annihilation. Can she save the day? The election? The party? The country's first reaction to her was one of amazement at her choice. Then came the huge post primary bump. When the media finally got face to face with the candidate the gaffs began. After the first several gaffs the country turned dubious. A few more and fellow Republicans up for re-election begin putting some distance between themselves and Sarah Palin's pronouncements. It started beginning to look like choosing her could backfire on the Maverick. Lately she has decided to ride sidesaddle in her own direction to the consternation of the McCain campaign.
When this election is over and Barack Obama is President-elect will Governor Palin fade to white in a flurry of flakes, er snowflakes, back in Alaska? Or is the public in store for more countrified contributions from this most unlikely of places?
P.S. This blog is not meant to criticize the vice presidential candidate in any way. She was thrown into the national spotlight with, let's face it, practically no notice or time to prepare. Under the circumstances, she has risen to the occasion in spectacular fashion. I would expect the next two years to knock the rough edges off candidate Palin and to see a butterfly (floats like a butterfly, stings like a bee) born from this most interesting pupa.
When this election is over and Barack Obama is President-elect will Governor Palin fade to white in a flurry of flakes, er snowflakes, back in Alaska? Or is the public in store for more countrified contributions from this most unlikely of places?
P.S. This blog is not meant to criticize the vice presidential candidate in any way. She was thrown into the national spotlight with, let's face it, practically no notice or time to prepare. Under the circumstances, she has risen to the occasion in spectacular fashion. I would expect the next two years to knock the rough edges off candidate Palin and to see a butterfly (floats like a butterfly, stings like a bee) born from this most interesting pupa.
Wednesday, October 15, 2008
Selective Exposure
The best explanation I can find for a reason why people can hold such vastly different opinions after analyzing the same "facts" is provided by Farhad Manjoo in his book "True enough: Learning to live in a post-fact society". In his book Manjoo cites research which proves people tend to seek out information and interpret it in a way which confirms their beliefs, while avoiding information they find unpleasant or contrary. By looking for information which conforms to our beliefs we automatically bias our own opinions. This tendency of everyone to screen their own input is called selective exposure by today's psychologists.
What selective exposure has led to in the internet age is a splintering of society. Since anyone can now seek out others online who hold similar opinions to their own, it is easy to dismiss all opinions contrary to those we prefer. "Facts" can always be found to support any theory, no matter how far off the beaten path or ridiculous. Smoking is a perfect example. Everybody should be able to agree on the fact that smoking either is or is not bad for our health. However, people still hold opinions and facts which support both sides of this argument.
So far society has been able to find its way between the "proven" positions of its extremists. We all just need to remember that "facts" are in the mind of the holder as beauty is in the eye of the beholder and as such are subject to our own personal bias. In the absence of conclusive proof to support any particular point of view, we must consider all points of view to have some validity. Therefore, we all need to increase our tolerance to ideas contrary to our own. An exercise I use frequently is to watch or read opinions in opposition to those I hold to look for points in common.
What selective exposure has led to in the internet age is a splintering of society. Since anyone can now seek out others online who hold similar opinions to their own, it is easy to dismiss all opinions contrary to those we prefer. "Facts" can always be found to support any theory, no matter how far off the beaten path or ridiculous. Smoking is a perfect example. Everybody should be able to agree on the fact that smoking either is or is not bad for our health. However, people still hold opinions and facts which support both sides of this argument.
So far society has been able to find its way between the "proven" positions of its extremists. We all just need to remember that "facts" are in the mind of the holder as beauty is in the eye of the beholder and as such are subject to our own personal bias. In the absence of conclusive proof to support any particular point of view, we must consider all points of view to have some validity. Therefore, we all need to increase our tolerance to ideas contrary to our own. An exercise I use frequently is to watch or read opinions in opposition to those I hold to look for points in common.
Saturday, September 27, 2008
TODAY'S CARPETBAGGERS
About 140 years ago, following the Civil War, Northern businessmen flocked to the South with carpetbags, prepared (so Southerners thought) to loot and plunder the defeated South -- to the victor belongs the spoils. These carpetbaggers bought up the land at huge discounts to the land's former value, and then expected to reap huge profits in cotton with the help of the former slaves, now free men. Most of these "businessmen" never developed a love for the land, like its previous owners had from birth, and subsequently hung on to the land just long enough to turn a nice profit. They took their quickly gotten gains and headed elsewhere, changing little, but upping the cost of business for everyone else who followed them.
Is this starting to sound familiar?
Today's carpetbaggers have not been trading in land. Today's "land" is now virtual real estate in the sense that what is being traded is not the physical property but the mortgage attached to the property - the financial instrument. Today's carpetbaggers went to Wall Street with bags full of mortgages all bundled together, and generated huge commissions based upon the cash flow assumed to be forthcoming from these mortgages. Where the banking community erred was in assuming that there would be an endless supply of able buyers supplying these cash flows. After all, during the period when all this creative financing was making lots of people millions of dollars, if a buyer had trouble meeting his payments he simply turned the property over to another buyer and more paper was created. This paper took the form of second and third mortgages and balloon payments, and a plethora of new and esoteric financial instruments, all based on a forever upward price spiral in real estate. After each "turnover" everyone involved helped themselves to profits and commissions, and even cash back to the purchaser on closing.
Where this ends up is where we are now. The carpetbaggers have sold their bundles of mortgages and moved on with their millions (billions), and the rest of us get left with their empty bag. It is too bad that the money these financial geniuses and masterminds made isn't as virtual as the financial house of cards they built and are selling to the taxpayer. What sickens me is the fact that all the phony profit these people made is being turned into real money as we speak, by the government. Private profits turned into public losses. For shame, for shame.
Is this starting to sound familiar?
Today's carpetbaggers have not been trading in land. Today's "land" is now virtual real estate in the sense that what is being traded is not the physical property but the mortgage attached to the property - the financial instrument. Today's carpetbaggers went to Wall Street with bags full of mortgages all bundled together, and generated huge commissions based upon the cash flow assumed to be forthcoming from these mortgages. Where the banking community erred was in assuming that there would be an endless supply of able buyers supplying these cash flows. After all, during the period when all this creative financing was making lots of people millions of dollars, if a buyer had trouble meeting his payments he simply turned the property over to another buyer and more paper was created. This paper took the form of second and third mortgages and balloon payments, and a plethora of new and esoteric financial instruments, all based on a forever upward price spiral in real estate. After each "turnover" everyone involved helped themselves to profits and commissions, and even cash back to the purchaser on closing.
Where this ends up is where we are now. The carpetbaggers have sold their bundles of mortgages and moved on with their millions (billions), and the rest of us get left with their empty bag. It is too bad that the money these financial geniuses and masterminds made isn't as virtual as the financial house of cards they built and are selling to the taxpayer. What sickens me is the fact that all the phony profit these people made is being turned into real money as we speak, by the government. Private profits turned into public losses. For shame, for shame.
Saturday, September 20, 2008
Republican Political Savvy At Work
American Political Savvy?
Out from the Alaskan wilderness comes a former beauty queen (runner-up) to the second highest office in the land. Are you kidding me? This stroke of brilliance from the Republican masterminds is a sleight-of-hand worthy of David Copperfield. A party which has recently failed this country in every measure of merit common to industrial nations, and done so in opposition to the wishes of the public it governs, has successfully diverted public attention from the major issues facing our country. This speaks volumes about the public’s political savvy. I am in awe of the fact that a Republican candidate who has voted for the reckless policies of the Bush administration 90% of the time can manage to distance himself from the results of those policies.
While the middle class has seen a drastic erosion of their real incomes, their standard of living, and their net worth and security (most middle-class American wealth is tied to the value of their home) the top 2% of the nation’s wealthiest people and corporations are still receiving bailouts and tax breaks. It further astounds me that the people most negatively affected by the costs of unending wars and unconscionable price manipulations on the part of the oil barons would even consider electing someone closely associated with these disasters.
It is beginning to look like the democrats’ decision to overlook Hillary Clinton for Obama’s running mate might be a fatal one. Americans seem to be more interested in a pretty face at the podium than in the war, the economy, education or health care. So be it. We get the government we deserve.
But wait! Breaking news! The Bush policy of laissez-faire with regard to corporate financial responsibility is actually making news again. As a few more of our oldest, largest, and most respected institutions crumble, Wall Street takes the worst beating since 9/11/01. This, unlike oil prices, won’t have as much impact on the middle class. It is America’s wealthiest who suffer most from collapsing stock market prices. If the current administration’s fiscal policies carry forward to the next administration, more government bailouts of private institutions will undoubtedly be necessary.
Maybe this latest example of the disastrous Bush years will refocus the public on how we got here. In a few short months we will have our answer. Hopefully sanity will prevail and the middle class will have looked past lipstick and rhetoric. Our national focus will move away from the acquisition of obsolete and environmentally harmful energy sources by any means possible, including more war. With a responsible and forward thinking administration we can develop those resources we have an abundance of here in the good old USA; like sunshine, propane, and clean nuclear and coal power.
One final note. It is a real possibility that McCain could have health issues. In spite of the fact that he is in the tightest race in his political career, he has managed to take ample time off and uses weekends to recoup. He is likely to be the last person in politics to accept a 3 a.m. phone call. His age must be considered. If, God forbid, he should succumb to the pressures he inherits from his predecessor, Sarah Palin will step up to the plate. The fate of the free world would then, theoretically, rest in the hands of a prolific soccer mom.
PS: Anyone who thinks a hawk like McCain will back off our military spending to save the economy needs a reality check.
Out from the Alaskan wilderness comes a former beauty queen (runner-up) to the second highest office in the land. Are you kidding me? This stroke of brilliance from the Republican masterminds is a sleight-of-hand worthy of David Copperfield. A party which has recently failed this country in every measure of merit common to industrial nations, and done so in opposition to the wishes of the public it governs, has successfully diverted public attention from the major issues facing our country. This speaks volumes about the public’s political savvy. I am in awe of the fact that a Republican candidate who has voted for the reckless policies of the Bush administration 90% of the time can manage to distance himself from the results of those policies.
While the middle class has seen a drastic erosion of their real incomes, their standard of living, and their net worth and security (most middle-class American wealth is tied to the value of their home) the top 2% of the nation’s wealthiest people and corporations are still receiving bailouts and tax breaks. It further astounds me that the people most negatively affected by the costs of unending wars and unconscionable price manipulations on the part of the oil barons would even consider electing someone closely associated with these disasters.
It is beginning to look like the democrats’ decision to overlook Hillary Clinton for Obama’s running mate might be a fatal one. Americans seem to be more interested in a pretty face at the podium than in the war, the economy, education or health care. So be it. We get the government we deserve.
But wait! Breaking news! The Bush policy of laissez-faire with regard to corporate financial responsibility is actually making news again. As a few more of our oldest, largest, and most respected institutions crumble, Wall Street takes the worst beating since 9/11/01. This, unlike oil prices, won’t have as much impact on the middle class. It is America’s wealthiest who suffer most from collapsing stock market prices. If the current administration’s fiscal policies carry forward to the next administration, more government bailouts of private institutions will undoubtedly be necessary.
Maybe this latest example of the disastrous Bush years will refocus the public on how we got here. In a few short months we will have our answer. Hopefully sanity will prevail and the middle class will have looked past lipstick and rhetoric. Our national focus will move away from the acquisition of obsolete and environmentally harmful energy sources by any means possible, including more war. With a responsible and forward thinking administration we can develop those resources we have an abundance of here in the good old USA; like sunshine, propane, and clean nuclear and coal power.
One final note. It is a real possibility that McCain could have health issues. In spite of the fact that he is in the tightest race in his political career, he has managed to take ample time off and uses weekends to recoup. He is likely to be the last person in politics to accept a 3 a.m. phone call. His age must be considered. If, God forbid, he should succumb to the pressures he inherits from his predecessor, Sarah Palin will step up to the plate. The fate of the free world would then, theoretically, rest in the hands of a prolific soccer mom.
PS: Anyone who thinks a hawk like McCain will back off our military spending to save the economy needs a reality check.
Friday, July 25, 2008
Surprise -- Surprise
Currently C-SPAN is covering a hearing in the House of Representatives on the resolution by Dennis Kucinich to impeach the president. As everyone should be aware of by now, the president has been using the highest office in the land to sanction illegal activities such as torture and phone taps. He has subverted the Constitution and allowed (encouraged perhaps) subordinates in his administration to break the law. He has then provided shelter to the perpetrators through the use of presidential privilege. (Take Karl Rove for example.) He has done this without fear of prosecution since, by law, a sitting president cannot be prosecuted for anything while in office. The only remedy available to the citizens of this country to address malfeasance by our leaders is to impeach them after the fact. It is extremely unlikely we will see anything of this nature take place within the limited time left to George Bush.
Here is the surprise. After listening to the proceedings, I learned that the minute the President is no longer president he can be prosecuted for any crimes committed during his administration. On several occasions in the past (Nixon and Agnew come to mind) officials have been threatened or were prosecuted only to be pardoned by the next administration. The thinking behind the pardons, I guess, is that the satisfaction the public would receive by seeing the crooks convicted is overshadowed by the disgrace to the nation and the blow to our national pride. Can you imagine Bush defending himself on a charge of murder, as some in Congress are suggesting, for the torture deaths of several alleged terrorists while in US custody?
This time might be different. Of course, if McCain were to be elected, any course of action against people in the Bush administration will be squashed. Or if Congress insisted on prosecution, the perps would undoubtedly be pardoned. However, Obama might be inclined to stand back and allow events to take their course. Congress is royally teed off at Bush for his outright lies and policies of secrecy, and seems inclined to blame the executive branch for much of the public's loss of confidence in the legislature. Obama, I believe, would be sensitive to their position and would not be inclined to thwart their effort to restore the public trust. After all, he needs their support if he hopes to accomplish anything during his administration.
It is ironic that the president, while attempting to subvert many of our constitutional safeguards, hides behind them. We need to send a clear and strong message forward that Congress and the public will not tolerate abuses of law by our elected officials. If I were Bush I would be quaking in my boots.
What say you, fellow citizens, to these amazing developments?
Here is the surprise. After listening to the proceedings, I learned that the minute the President is no longer president he can be prosecuted for any crimes committed during his administration. On several occasions in the past (Nixon and Agnew come to mind) officials have been threatened or were prosecuted only to be pardoned by the next administration. The thinking behind the pardons, I guess, is that the satisfaction the public would receive by seeing the crooks convicted is overshadowed by the disgrace to the nation and the blow to our national pride. Can you imagine Bush defending himself on a charge of murder, as some in Congress are suggesting, for the torture deaths of several alleged terrorists while in US custody?
This time might be different. Of course, if McCain were to be elected, any course of action against people in the Bush administration will be squashed. Or if Congress insisted on prosecution, the perps would undoubtedly be pardoned. However, Obama might be inclined to stand back and allow events to take their course. Congress is royally teed off at Bush for his outright lies and policies of secrecy, and seems inclined to blame the executive branch for much of the public's loss of confidence in the legislature. Obama, I believe, would be sensitive to their position and would not be inclined to thwart their effort to restore the public trust. After all, he needs their support if he hopes to accomplish anything during his administration.
It is ironic that the president, while attempting to subvert many of our constitutional safeguards, hides behind them. We need to send a clear and strong message forward that Congress and the public will not tolerate abuses of law by our elected officials. If I were Bush I would be quaking in my boots.
What say you, fellow citizens, to these amazing developments?
Monday, June 2, 2008
Who is the “Root of all Evil”?
Corrupt politicians or corrupt billionaires?
Four decades ago we experienced a huge run up in the price of precious metals, and in particular, the price of silver. Silver futures reached into an unheard of and totally unwarranted $80 price range from a normal $4 price. Based upon normal market factors, like supply and demand, the value of the dollar, and world stability this run up made no sense. What turned out to be behind the extraordinary run up was a pair of oil billionaires, the Hunt brothers. They determined that the float in silver futures was small enough for them to gain a monopoly. They gave it the old “college try”, and nearly succeeded. But the US government stepped in at the last minute to save the day. The treasury released enough stockpiled silver bullion to pop the Hunt’s balloon. Since the Hunts were borrowing money to finance their diabolical plot they nearly caused a major bank failure in the process.
Next we saw a real estate boom financed by greedy bankers and real estate speculators. This has also required a government bail out. Could these scenarios possibly be precursors to today’s commodities manipulations? According to the Saudis they are producing enough oil to satisfy current world demand. Russia has moved into second place among the world’s oil producers and is providing for the large increase in demand in Southeast Asia, by way of a pipeline project similar to the Alaskan pipeline. The decline in the dollar is miniscule, when related to the increase in oil prices. All is quiet on the world stage with the exception of our unwanted intrusion into the Middle East. So absent any fundamental factors which could be responsible for the current price of oil, we are left with market manipulation by commodities billionaires. (The names may change but the irresponsible nature of the greedy remains the same). It appears that without our government stepping in and dumping huge reserves of oil on the market from its strategic stockpiles, manipulators will enrich themselves yet again at the expense of people who can least afford it.
As to corrupt politicians, consider this. Do you suppose this unprecedented run-up in oil prices could have occurred if we didn’t have an “oil ticket” benefiting directly from and facilitating the manipulators? First they stirred up the world’s major oil suppliers like Venezuela and the Middle East. Secondly, they have done nothing from a legislative point of view such as eliminating tax breaks to profiteers and spreading that wealth around, or dumping oil on the markets to depress prices.
For me the answer seems obvious. Big government, together with big business, is acting without a conscience to conspire to hold the world hostage to their will and egos. Corrupt politicians, together with corrupt billionaires, are the root of all evil. And the world’s poor and starving can’t afford to put rice in their bowls or purchase a loaf of bread for their table. For shame, for shame.
Bob Parmelee www.parmsplace.com
Four decades ago we experienced a huge run up in the price of precious metals, and in particular, the price of silver. Silver futures reached into an unheard of and totally unwarranted $80 price range from a normal $4 price. Based upon normal market factors, like supply and demand, the value of the dollar, and world stability this run up made no sense. What turned out to be behind the extraordinary run up was a pair of oil billionaires, the Hunt brothers. They determined that the float in silver futures was small enough for them to gain a monopoly. They gave it the old “college try”, and nearly succeeded. But the US government stepped in at the last minute to save the day. The treasury released enough stockpiled silver bullion to pop the Hunt’s balloon. Since the Hunts were borrowing money to finance their diabolical plot they nearly caused a major bank failure in the process.
Next we saw a real estate boom financed by greedy bankers and real estate speculators. This has also required a government bail out. Could these scenarios possibly be precursors to today’s commodities manipulations? According to the Saudis they are producing enough oil to satisfy current world demand. Russia has moved into second place among the world’s oil producers and is providing for the large increase in demand in Southeast Asia, by way of a pipeline project similar to the Alaskan pipeline. The decline in the dollar is miniscule, when related to the increase in oil prices. All is quiet on the world stage with the exception of our unwanted intrusion into the Middle East. So absent any fundamental factors which could be responsible for the current price of oil, we are left with market manipulation by commodities billionaires. (The names may change but the irresponsible nature of the greedy remains the same). It appears that without our government stepping in and dumping huge reserves of oil on the market from its strategic stockpiles, manipulators will enrich themselves yet again at the expense of people who can least afford it.
As to corrupt politicians, consider this. Do you suppose this unprecedented run-up in oil prices could have occurred if we didn’t have an “oil ticket” benefiting directly from and facilitating the manipulators? First they stirred up the world’s major oil suppliers like Venezuela and the Middle East. Secondly, they have done nothing from a legislative point of view such as eliminating tax breaks to profiteers and spreading that wealth around, or dumping oil on the markets to depress prices.
For me the answer seems obvious. Big government, together with big business, is acting without a conscience to conspire to hold the world hostage to their will and egos. Corrupt politicians, together with corrupt billionaires, are the root of all evil. And the world’s poor and starving can’t afford to put rice in their bowls or purchase a loaf of bread for their table. For shame, for shame.
Bob Parmelee www.parmsplace.com
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