Sunday, July 29, 2012

Random Thoughts

What could possibly the reason for the commercial with the green tree walking around the Olympic venues? Especially since it was paid for by Dow, the maker of napahm and the greatest defoliator in world history. Obama keeps going on with his message that the rich need to pay more. He actually said “to help pay down our debt”. Yet he knows that if you confiscated 100 percent of the income of those over $350,000, it would pay for government spending for about 1 month. I have a better idea. Why not have Obama lead by example and give up 90 percent of his salary? He doesn’t even need a salary anyway since taxpayers pick up virtually 100 percent of his expenses. So the mayors of Boston and Chicago say that Chick-fil-a is not welcomed in their cities because its CEO favors traditional marriage. Then there were the scenes of protestors outside of Chick-fil-a stores with signs about hate. I doubt if the CEO hates gays. He probably employs them. But it brings to mind what a Knoxville legislator said when gays tried to get his high school in New York to remove him from its wall of fame for his views on gays and AIDS. He said that the gays have become the biggest bullies on the political scene. No argument here. Mitt Romney has a horse in the Olympics. He has done his best to seem uninterested perhaps fearing that his image as a rich guy will be thrown in his face. He has said it is "Ann's horse" and "I am not even sure what day the sport goes on. She will get the chance to see it. I will not be watching the event. I hope her horse does well.” I would have taken another tack (pun) and would be acting as if a family member were participating. I bet the horse feels slighted.

Thursday, July 19, 2012

Obama's foreign policy: A new definition of "success"

The president has used several tactics in his re-election run. Once he was blaming the congress for his lack of success in the economy. I guess someone told him that running against the congress would mean running against incumbent democrats so he toned it down. However some vestiges remain. I have had Obama-apologists say that the republicans are at fault for thwarting his initiatives. No matter if you point out that for two years the dems had control of both houses of congress and the White House, the response will be “two years is not enough time.” All this reinforces the simple truism that facts cannot change people’s opinions. This is particularly true when it comes to foreign policy. It would seem that since much of foreign policy is done unilaterally, that Obama’s failures would be more stark. However, the opposite is the case. Consistently, Obama gets higher marks on foreign policy than on domestic policy. More importantly, he also consistently outpolls Romney by double-digits on foreign policy. Indeed, with regard to foreign policy, Karen Finney a former Democratic spokeswoman told the Huffington Post, "Look at the progress the president can make when he doesn't have Republicans obstructing him." To some of us this is a head scratcher. What are those successes? Here are the ones that they crow about • Ending the war in Iraq • Killing bin Laden • Killing al-Qaeda’s leadership with the drones • Being part of the coalition in the no-fly zone over Libya • The new US base in Australia There may be others but I can’t find them. It is ironic that Iraq may currently be the most stable country in the Arab world – other than Turkey – largely in part to George Bush. Yet pulling out all our troops may undermine all the progress earned by American sacrifice. We still have troops in Japan and in Germany and we should keep the troops in Iran. Killing the al-Qaeda leadership is directly tied to Bust. The Libyan no-fly zone is interesting given the juxtaposition of hand-sitting in Iran and Syria. The new forward base in Australia is an accomplishment however poking a finger in the eye of the Chinese. Let’s look at the failures. I am not going to list trying to close Guantanamo or the attempt to try Khalid Sheikh Mohammed in New York since there was strong political opposition. But what about • The failure to support the protests in Iran • The failure to support the protests in Syria • The increased threat from North Korea • The characterization of the Muslim Brotherhood as “secular” • The deterioration in relations with Pakistan • What about the lauded “reset” with Russia • The leak of the covert operation against Iran’s nuclear facilities • The apologetic Cairo speech • America’s popularity in the Middle East at levels below those in Bush’s last year • Our impotence in Egypt • Hanging the Poles out to dry by canceling the defense missile shield • Offending our closest allies – Canada with the Keystone Pipeline and the Brits over the Falklands and don’t get me started on Israel • The overt sympathetic appearance to Hugo Chavez • All the bowing, scraping and apologies projecting the image of decline and impotence So apparently, bin-Laden trumps all. The American public is continuing to give the president high marks on foreign policy despite what looks to me like a dismal record.

Wednesday, July 18, 2012

More random thoughts

1. I know I am not alone in getting political solicitations. Somehow all of them are for republicans. How does anyone know? Are the registrations public record? Or maybe since contributions are public, its no secret that in most cases I have contributed to republicans. I did support a conservative democrat for governor of Tennessee and voted for him twice – his republican opponents can charitably called “idiots”. Well I got a solicitation for Mia Love who is running for the congressional seat in the 4th congressional district in Utah. Love is a black woman who is a republican, a mormon and mayor of Saratoga Springs, Utah. The mailing called her an African-American. But is she? Her parents are Haitian immigrants. Are Haitians African-Americans? Regardless, she may constitute the first real threat to Jim Matheson who is a rare entrenched democrat in Utah. Go to and be impressed. 2. Who is that woman standing next to NASCAR winners? No I don’t watch NASCAR but I do watch Sportscenter and the same woman is always there with the different winners so she can’t be in the pit crew. 3. Don’t you think the Progressive insurance snapshot is a bit spooky? Leave it to a company whose chairman and ex-CEO is second to only George Soros as one of the most prominent leftists (“progressive insurance") to have a device that is in your car monitoring your driving. I am surprised Obama didn’t put it in the health care bill. 4. Obama referred to the Ryan budget as “social Darwinism” and said that since Romney endorsed that budget then by inference, Obama was calling Ryan, the house republicans and Romney racists. Of course, the vast majority of Obama supporters had the reference go over their heads. Obama said that the Ryan budget proposed "more than a trillion dollars in tax giveaways for people making more than $250,000 a year" while cutting aid to millions of college students, the slashing of medical and scientific research grants and over 200,000 children losing early places in school. The department of justice would have less money to combat violent and financial crimes. Two million mothers and young children would be cut from a program that gives them access to healthy food," he said. "We wouldn't have the capacity to enforce the laws that protect the air we breathe, the water we drink or the food that we eat.” Of course, this is BS but it plays to his base. Thus, he is saying that while Darwinism is survival of the fittest, social Darwinism is shifting funds to the wealthy (read white) and let the poor (read black) fend for themselves. This is consistent with Obama's view of capitalism which he envisions as dog eat dog and competition over a fixed pie.

Tuesday, July 17, 2012

The Olympics: Born in the USA?

Harry Reid – of all people – says that we should burn the Ralph Lauren designed Olympic uniforms because they were made in China. Then we had the Chinese state news agency lecturing us on the “narrow nationalism and ignorance” displayed by U.S. politicians who oppose the Chinese-made uniforms and citing the importance of “the Olympic Spirit, which has nothing to do with politics” but is instead about “mutual understanding and fair play.” Then there is the poll conducted by the Wall Street Journal where the results are split 50/50. I don’t know about you, but I think the uniforms should be burned – not because they are made in China but because they are butt
ugly. Berets? Give me a break. These are Americans not French painters. The skirts make the women look like little Orphan Annie and are dowdy at best. Another question, is where is the other stuff made? Are the speedos, basketball uniforms, track spikes and the rest made in the USA? What about the other paraphernalia? Should everything be burned that doesn’t say “Made in the USA”? What about the athletes themselves. American athletes have performed for other countries in the Olympics. Al Horford is on the Dominican basketball team -I wonder if he speaks the language – and there are three Americans on the British team. In 2008 the US flag bearer was born in the Sudan and there were 33 foreign born nationals on that team. The US is not the only country. There is currently a firestorm in Britain, host of the summer games, over the number of “plastic Brits” on that team. Regardless, Harry Reid saying burn the uniforms because they were made in China amounts to sheer sophistry unless he wants to burn everything in the US lockers and equipment that is not US made and also expel from the team everyone not born in the USA.

Obama's comments on the successful: how Rush Limbaugh got it wrong

Last year I was on a local radio talk show along with the “progressive” editor of a weekly newspaper. As I have previously written, the editor said what I characterized as “one of the dumbest things I have ever heard.” What he said was that Obama and Biden were correct in advocating “spreading the wealth” because everyone contributes to the success of the successful. One of the sources of the editor’s remark was made back in September 2011 by Elizabeth Warren who is running for the senate in Massachussetts against Scott Brown. Warren rebuts the notion that raising taxes on the wealthy amounts to "class warfare," (see my April 2012 blog) contending that "there is nobody in this country who got rich on his own. Nobody." CBA News reports “Warren rejects the concept that it is possible for Americans to become wealthy in isolation.” "You built a factory out there? Good for you," she says. "But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did." She continues: "Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along." Now the president has made essentially the same speech – with no attributing to Warren. Obama said I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there. If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.” Rush Limbaugh has gone ballistic, devoting much of two shows on this bit of the speech, claiming that Obama is insulting the successful and the private sector economy. He contends that Obama is saying that if you are successful, you have done nothing and that the government is justified in taking away all that you have earned. My interpretation is somewhat different. As I said on the radio show, the reason that this is stupid is because the left is forgetting (or rejecting) the fact that entrepreneurship is a factor of production (the others are land, labor and capital). Yes it is true that all of society contributes to the foundation of success, it is also true that the ones who put it all together are rewarded – or not if it fails. Profits are the reward to entrepreneurs, like wages go to labor, rent goes to land and interest goes to capital.So yes it is true that the society contributes to the success of the successful. My parents were college educated and teachers. I inherited human capital from them. Yet my success came from my fully exploiting that inherited capital. I know other wildly successful people who lacked the advantage that I had, yet succeed nonetheless. However, we all have given back, educating others, hiring others, paying wages, dividends and rents. Milton Friedman once said that the responsibility of business was to earn profits for without that we all would suffer. Even though that should be obvious especially now, the "progressives" somehow reject the obvious and would have less profits which would make us all worse off. So although Obama’s remarks are an attack on successful people, it shows yet again that this president and the “progressives” are ignorant of basic economic principles.

Callling San Bernardino's proposed use of eminent domain stupid may be kind

California’s San Bernardino County is considering imposing eminent domain to seize underwater homes. The county has a foreclosure rate four times the national average. The objective county would purchase underwater mortgages then offer the homeowners the restructured mortgages. However, instead of seizing mortgages that are in foreclosure or those in danger of foreclosure due to missed payments, the plan would seize only those homes whose homeowners are current on their mortgage. Huh? I presume that this is because investors would be leery of purchasing mortgage whose homeowners have demonstrated either the inability or unwillingness to pay. The Heritage Foundation, which is usually on top of such issues has a curious discussion that only concentrates on the legal aspect. Its analysis concentrates on the Takings clause which is invoked where the property is seized over the opposition of the owner. Running afoul of the Takings clause could be easily avoided if the County only acquired the property of just those homeowners who agreed to have their property “seized”. Many of the news reports have concentrated on other issues. Some of the newspapers and blogs have questioned the use of San Francisco’s Mortgage Resolution Partners which would make a (gasp) profit from their role in the scheme. The company would handle the transactions and would market the mortgages to investors for resale. Some accounts have talked about the city of San Bernardino filing for bankruptcy because the decrease in property values on average from $370,000 to $150,000 has reduced the amount of taxes flowing to the city’s coffers raising the question of how the mortgages seized would be paid for under eminent domain. However, an issue left mostly unreported will be the impact on the county’s housing market. If the county somehow figured out how to seize the property it would have to pay off the mortgage holder the current value of the house. Presumably since the county is broke, it would have to borrow the money. What investor would lend the county the money if one of its major cities is in bankruptcy? Second, even if it found a source to fund the county’s purchases, what investors would buy them? Any investor would insist on a fairly hefty haircut because the value of the mortgages could still fall from their current value, evoking the possibility of another seizure. This would leave the county on the hook for the difference in what was paid for the mortgages and the price at which they could be sold. Lastly, the impact on the mortgage market in the county would be devastating. Originators would not be able to get the homes underwritten because who would finance them? Mortgage holders would have been forced to take losses on homes whose occupants were current on their payments. The sale of homes would crash, further reducing home prices. Mortgage investors would abandon the market leaving only Fannie Mae and Freddie Mac to buy the mortgages. Yet given the losses being incurred by those GSEs, even their willing participation in this loony scheme would be questionable.

Sunday, July 15, 2012

Another government junket? Fox News' Curious Reporting

Fox interviewed Florida congresswoman Sandy Adams who was calling for an investigation of a government agency spending on a conference at Disneyworld. The agency that I bet you have never heard of was the National Institute of Standards and Technology’s Manufacturing Extension Partnership. Adams stated “The information I have obtained is astounding,” Adams said. “According to the documents that I am in possession of, the NIST MEP most recently spent anywhere between $3 to $5 million dollars on an annual conference at a resort near Walt Disney World in Florida. It appears that taxpayer dollars are recklessly being spent on lavish resorts, expensive meals, and golf outings around the country. At a time when our nation is saddled with nearly $16 trillion in debt and people are struggling to put food on the table, this gross mismanagement of taxpayer funds should be investigated.” In the Fox interview, it was pointed out that the agency said that it “only” spent $600,000 and the rest was paid by “private partners”. Adams responded that the money should have been used to fund the purpose of the agency (whatever that is) instead and that she considers that money donated by “private resources” to be federal government money once it is contributed. Two things come to mind. First, if the congresswoman is interested in fiscal responsibility she should have said that instead of spending it, the money should be used in deficit reduction. Second, Adams is to be commended. Her district includes part of the Orlando suburbs but apparently not the convention site which is in Orlando proper. Very few congresspeople would have condemned government spending that affects their district. Fox did not mention this. Moreover, why didn’t Fox interview Daniel Webster (R-Fl) who is the congressman representing the district? I bet you that in an election year, he would not have said “I agree with Adams. That $3-5 million should not have been spent in my district. It is outrageous.”

Saturday, July 14, 2012

Texas Voter ID: Part II

The dustup over the Texas voter ID law got me thinking when I was at the checkout at the grocery store buying one of my favorite microbrews. Eric Holder said that 8 percent of voting age white citizens and 25 percent of voting age black citizens lacked a government-issued ID. So does that mean that 25 percent of adult blacks do not drink, do not drive, have not applied for a job, did not get a marriage license, never traveled abroad, don’t buy over the counter medicine, don’t go to the doctor, don’t rent a hotel room, bought a home, have a bank account, used a credit card, sent a FedEX package, applied for social security, camped in a state or national park, flown on an airplane, taken an Amtrak train, applied for section 8 housing, tried to visit Eric Holder at DOJ, entered any government building, attended Michele Obama’s book signing, tried to purchase industrial strength cleaners in Illinois, smoke cigarettes or redeemed a lottery ticket? There are probably more cases than these that require a picture ID but someone needs to do a study of these folks (that’s the academic in me speaking). As to Texas, while DOJ has not contested similar laws in Georgia and South Carolina and cannot contest a law on the Minnesota ballot if approved (it can only contest laws in states covered by the Voters Rights Act of 1964), Texas of all states really needs such a law. Remember, this is the state whose most famous politician – Lyndon Johnson – was first elected by 200 disputed votes. It is a state where its attorney general has cited numerous instances of voter fraud including over 19,000 missing voter ID cards in Corpus Christi alone, where at least 200 dead people are known to have voted in 2010, where six Texas House of Representatives races have been decided by a margin of fewer than 50 votes in the last decade. Texas courts have overturned at least four different elections in recent years after finding that improper conduct affected the outcome of the election. In 2012, alone, five local elections in Texas reportedly resulted in a tie and were ultimately resolved by a coin toss or a second runoff election. Also a city council member registered ineligible foreign nationals to vote, a man voted twice on Election Day, a man used his deceased father's voter registration card to vote in an election, an election worker pleaded guilty for attempting to vote twice and a person used another voter's registration card. Of course the wag might say that Holder is just reflecting the wishes of the president who comes from a city where voting fraud is a cherished tradition. Chicago is famous for voting dead people, for registering dogs and cats and fictitious persons. It is the place where “vote early and vote often” was coined. Remember the 1960 election where the Kennedy/Johnson ticket won Illinois by 8,000 votes out of 4.75 million cast? The democrats’ margin of victory came from Chicago where Cook County’s margin was an astounding 450,000. Evidence of voter fraud was abundant and reported by the press. Even in Lyndon Johnson’s Texas there were cases of fraud. In several counties where the democrats received more votes than there were registered voters. So on general principle, Texas’ voter ID law should be upheld because it apparently needs it more than most states.

Texas' voter ID law: Is it discriminatory?

I voted early in Tennessee and had to show a voter ID. Somehow, the state has escaped the wrath of the Department of Justice. Eric Holder in his speech to the NAACP in Houston said regarding Texas’ voter ID law “Under the proposed law, concealed handgun licenses would be acceptable forms of photo ID, but student IDs would not. Many of those without IDs would have to travel great distances to get them, and some would struggle to pay for the documents they might need to obtain them. We call those poll taxes.” Holder also said that nationally “only 8 percent of white voting age citizens, while 25 percent of African-American voting age citizens” lack a government-issued photo identification card. However, he did not mention the Texas statistics that more than three times as many whites are without a government ID than minorities, meaning that the law would have a greater impact on whites than blacks or Hispanics. Two things come to mind: first the handgun licenses are issued by the state while the student IDs are not and second, is the law really a poll tax? Tennessee, just like Texas will not accept a university issued ID while other states – including my home state of Georgia will accept a student ID as valid identification for a voter ID but it is up to the state. As to a poll tax, Texas senator John Cronyn took issue saying “By invoking the specter of Jim Crow racism, the attorney general is playing the lowest form of identity politics. Mr. Holder knows better. This rhetoric is irresponsible and a disgrace to the office of the attorney general. Shame on him.” Immediately, a Justice department spokesman retorted “Under the Texas law, many of those people without IDs would have to travel great distances to obtain them - and some would struggle to pay for the documents they might need to secure them.” However, it is interesting to note that in the DC Federal court hearing on the case, one of the witnesses for DOJ who that traveling to obtain a voter ID was too costly was somehow able to travel to Washington, DC and stay for the three day hearing. But is such a law discriminatory? The evidence is to the contrary. In Georgia, the usual suspects – the ACLU and the NAACP – filed suit to block the law as being discriminatory. Yet once the voter ID law was passed voter participation by minorities increased sharply! According to official figures from the Georgia Secretary of State, in the 2008 election, Hispanic voter turnout increased 140 percent over 2004 (when there was no photo ID law in place), while the turnout of black voters went up 42 percent. In the 2010 midterm election, the turnout of Hispanic voters went up 66.5 percent over 2006, while the turnout of black voters increased 44.7 percent. By contrast, the turnout of white voters only increased 8 percent in 2008 and 11.7 percent in 2010. My modest suggestion is that the same groups that show up on election day to bus voters to the polls, bus them to obtain a voter ID.

Friday, July 13, 2012

Negative rates? Take my money please!

In case you missed it, the Danish central bank has posted negative rates on deposits. Denmark now joins Switzerland where yields on Swiss issued debt became negative last August. These two European countries opted not to join the euro and find that their currencies have become a safe haven given the shakiness of the euro. The currency flight to Switzerland and to Denmark is driving up the value of their currencies and is becoming a concern. Given their dependence on exports, their strong currencies mean that their goods are becoming more expensive relative to the euro. Switzerland is seriously considering restricting inflows of capital. However, similar actions in the 1970s fail to stem the capital inflows. Of course the US is also benefiting from the problems in the eurozone despite its own fiscal irresponsibility. Indeed, unlike Denmark and Switzerland, the US welcomes the inflows since exports constitute a relatively small portion of its GDP. But doesn't it tell you something that investors would rather park their money in krone and Swiss francs at negative rates than hold cash in euros?

Wednesday, July 11, 2012

Romney's NAACP Speech

None of the coverage of Romney's speech to the NAACP was about the speech itself but the reaction of the crowd to Romney's saying he would repeal Obamacare. I was wondering about the speech itself. Here is what was released by the campaign. Note that it does not say anything about Obamacare. So the question is whether Romney added it at the last moment. If he did, then shouldn't someone talk about his courage? Also I was wondering what Romney said after the crowd recovered its manners. I would have taken the opportunity to say "So you support it, eh? Let me tell you about the consequences on employment which makes the scandalous level of black unemployment even worse. Do you know that Obamacare is not free? Here is what it will cost you in new taxes. Etc." Here is the speech: Team Romney releases excerpts from NAACP speech Posted by CNN Political Unit (CNN) - Mitt Romney's campaign released excerpts from the presumptive GOP presidential nominee's speech at the NAACP convention in Houston on Wednesday. See the remarks after the jump: You all know something of my background, and maybe you’ve wondered how any Republican ever becomes governor of Massachusetts in the first place. Well, in a state with 11 percent Republican registration, you don’t get there by just talking to Republicans. We have to make our case to every voter. We don’t count anybody out, and we sure don’t make a habit of presuming anyone’s support. Support is asked for and earned – and that’s why I’m here today. … … I believe that if you understood who I truly am in my heart, and if it were possible to fully communicate what I believe is in the real, enduring best interest of African American families, you would vote for me for president. I want you to know that if I did not believe that my policies and my leadership would help families of color - and families of any color - more than the policies and leadership of President Obama, I would not be running for president. … … I am running for president because I know that my policies and vision will help hundreds of millions of middle class Americans of all races, will lift people from poverty, and will help prevent people from becoming poor. My campaign is about helping the people who need help. The course the President has set has not done that – and will not do that. My course will. When President Obama called to congratulate me on becoming the presumptive Republican nominee, he said that he, quote, “looked forward to an important and healthy debate about America’s future.” To date, I’m afraid that his campaign has taken a different course than that. … If someone had told us in the 1950s or 60s that a black citizen would serve as the forty-fourth president, we would have been proud and many would have been surprised. Picturing that day, we might have assumed that the American presidency would be the very last door of opportunity to be opened. Before that came to pass, every other barrier on the path to equal opportunity would surely have to come down. Of course, it hasn’t happened quite that way. Many barriers remain. Old inequities persist. In some ways, the challenges are even more complicated than before. And across America - and even within your own ranks - there are serious, honest debates about the way forward. If equal opportunity in America were an accomplished fact, then a chronically bad economy would be equally bad for everyone. Instead, it’s worse for African Americans in almost every way. The unemployment rate, the duration of unemployment, average income, and median family wealth are all worse for the black community. In June, while the overall unemployment rate remained stuck at 8.2 percent, the unemployment rate for African Americans actually went up, from 13.6 percent to 14.4 percent. Americans of every background are asking when this economy will finally recover – and you, in particular, are entitled to an answer. If equal opportunity in America were an accomplished fact, black families could send their sons and daughters to public schools that truly offer the hope of a better life. Instead, for generations, the African-American community has been waiting and waiting for that promise to be kept. Today, black children are 17 percent of students nationwide – but they are 42 percent of the students in our worst-performing schools. … When it comes to education reform, candidates cannot have it both ways – talking up education reform, while indulging the same groups that are blocking reform. You can be the voice of disadvantaged public-school students, or you can be the protector of special interests like the teachers unions, but you can’t be both. I have made my choice: As president, I will be a champion of real education reform in America, and I won’t let any special interest get in the way. I will give the parents of every low-income and special needs student the chance to choose where their child goes to school. For the first time in history, federal education funds will be linked to a student, so that parents can send their child to any public or charter school, or to a private school, where permitted. And I will make that a true choice by ensuring there are good options available to all. Should I be elected President, I’ll lead as I did when governor. I will look for support wherever there is good will and shared conviction. I will work with you to help our children attend better schools and help our economy create good jobs with better wages. Now here is Romney's response: Instead of moving on to his next point, Romney went off-script to back up his claim. Romney mentioned, as the boos began to fade, a survey of 1,500 members of the Chamber of Commerce, in which three-quarters said President Barack Obama's health care plan made them "less likely to hire people." "So I say again," Romney continued. "If our priority is jobs, and that's my priority, that's something I'd change and I'd replace with something that provides to people something they need in health care, which is lower costs, good quality, a capacity to deal with people who have pre-existing conditions and I'll put that in place." You know, maybe I am starting to warm to the guy. I would bet if this had aired, so would many of his detractors on the right.

Wednesday, July 4, 2012

Investigate Microsoft!

Remember all the dustup over the $2b loss at Chase? The media had a feeding frenzy. Congress investigated with Jaime Dimon genuflecting and making the appropriate mea culpas. Congress called for more legislation and stricter enforcement of Dodd-Frank. Of course, it was much ado about nothing. The loss was in the investment bank and did not imperil the commercial bank. But hey, who cares about the facts? Now Microsoft has announced that it is booking a $6.2 billion charge for losing money on its Bing search engine and a $6.3b loss on its aQuantive acquisition. That's $12.5b or 6 times the loss at Chase. So where is the media frenzy? Where are the calls for Steve Ballmer's head? Where is the congressional call for an investigation? Instead what do we get? Silence.

Sunday, July 1, 2012

Auditing the Federal Reserve a good idea? Well I don't write the headlines

Knoxville News Sentinel Auditing the Federal Reserve a good idea By Dr. Harold Black Sunday, July 1, 2012 One of the failings of Ben Bernanke is that he has probably tarnished the Fed's reputation more than any other chairman. The tarnishing is well deserved. However, my opinion as to why is different from the public at large. Bernanke's Fed has purchased both government assets and private assets. I have less of a problem with the purchase of private asset backed securities than with the Treasury component of the government purchases. Indeed, the Fed should be banned from buying Treasuries directly from the Treasury. It should only repurchase them from the private sector. Direct purchases have enabled the Federal government to essentially operate without a budget constraint. If the Treasury cannot sell its bills and bonds to the public, then the Fed can buy them. This sets the stage for an increase in the money supply and inflation. This monetizing the national debt should be the focus of Congress' concern rather than seeking to audit the Fed. However the audit is popular. Ron Paul's new bill has 225 sponsors in the House but only 20 in the Senate. All of Tennessee's Republican representatives support the bill but neither of its senators do. Indeed, it its hard to argue with Sen. Lamar Alexander's opposition when he says "The audit? It's a bad idea. It's a sorry day when the Congress superimposes itself on the Fed, nosing around in monetary policy. It's bad enough we are nosing around with the car companies." What Paul wants to do is to expose the Fed's unprecedented exercise of Section 13(3) of the Federal Reserve Act. That section enables the fed to create special discounted lending programs and lending facilities during "unusual and exigent circumstances." This resulted in the Fed increasing its balance sheet to over $3 trillion through the purchase of asset backed securities and Treasuries. I do not have a problem with the purchase of asset-backed securities through the creation of special lending facilities. The Fed's commercial paper facility kept that market operating when it teetered on failure. Collapse of the commercial paper market would have prevented the financing of most consumer durables and might have led to an even deeper recession. In purchasing asset-backs, the Fed's loans were collateralized and when repaid, the Fed ended the facilities. Such a response was an appropriate one even though it was controversial. When it was revealed, during the audit under the Dodd-Frank bill of the Fed's actions during the financial crisis, that the Fed had lent over $16 billion to many of the world's largest financial enterprises, many cried foul. However, these proved to be short term loans that were mostly repaid with little loss to the Fed. Yet, the mortgage backed securities purchased by the Fed from Fannie Mae and Freddie Mac have suffered significant losses. Ironically, these purchases have generated less discussion and outrage than the better collaterized private asset-backs. I guess the public would rather the Fed make bad loans to the government than good loans to the private sector. Paul's current bill calls for a full and complete audit of the Fed with the results being publicized. While I have no issue with the audit I do not think they should be publicized. Many of the Fed's actions can be crucial in the rare instances of deep financial panic. However, those actions may be less than optimal if they are to be publicized creating severe market reactions to a temporary decrease in balance sheet values. I propose instead that periodically the Fed be audited thoroughly with the results given to the House and Senate banking committees in a closed-door session. Scripps Lighthouse © 2012 Scripps Newspaper Group — Online