Monthly Archives: September 2008

Financial plans — words do matter

Gee, I guess when it comes to financial bailout — oops, I mean rescue — plans words do matter. And I don’t just mean when you look at your 401k or other savings statements and say, “Holy shit!”

Brian Stelter wrote about that yesterday in The New York Times, “President Bush Calls It a Rescue, but Others Are Sticking With Bailout.”

The government’s purchase of troubled assets may amount to a $700 billion bailout of financial institutions. But “bailout” is a word President Bush did not utter last week.

In a stark example of the way language is used as a public relations tactic, Mr. Bush and other government officials have characterized the measure in positive terms — “rescue plan” and “asset relief program” — thereby carefully avoiding more loaded words like “bailout.”

The media, by and large, did not follow Mr. Bush’s lead. On Sunday, a Google News search conjured more than 157,000 results for “bailout,” and only 42,000 for “rescue plan.” Sunday’s newspaper headlines reflected the preferred descriptive, from the Arkansas Democrat-Gazette (“Tentative Bailout Deal Reached”) to The Richmond Times-Dispatch (“Bailout: Deal or No Deal?”) to The Wichita Eagle (“Americans Frustrated by Bailout”).

The terminology of the financial crisis is particularly important because of the emotions the words can stir in readers and listeners. The Hill, a Capitol Hill newspaper, suggested that the bailout label was a “major reason why constituents flooded Capitol Hill offices with phone calls and e-mails, overwhelmingly urging lawmakers to reject it.”

Then there is the story, confirmed in a Washington Post editorial today “Congressional Neroes: Republicans and Democrats fiddle as the economy burns,” that many House Republicans reacted so negatively to remarks by House Speaker Nancy Pelosi that they voted against the bailout/rescue plan.

It was quite a spectacle. House Speaker Nancy Pelosi delivered a bitter floor speech in which she expressed astonishment at the bill’s price tag even as she weakly urged its adoption, and in which she blamed the entire situation on President Bush and the Republicans even as she was depending on Republican votes. Rather than stifling their own reactive impulses, a dozen or so wavering Republicans, according to Minority Whip Roy Blunt (R-Mo.), used Ms. Pelosi’s speech as an excuse to vote no, simultaneously scapegoating Ms. Pelosi and taking revenge on her — at the country’s expense. Democrats, in turn, denounced the Republican leadership’s failure to discipline its troops. And then Congress marched out to a scheduled recess, with no clear plan for taking the bill up again.

And speaking of spectacles, W. is scheduled to talk to the nation today about the rescue plan/bailout. Here’s a case where words mean nothing at all. With no credibility and trust, the Prez can huff and puff but he can’t even blow the Republican House members down. Better that he stay focused on the baseball playoffs.

On NPR this morning a commentator said Congress will now take a few days to consider a bailout (not rescue) plan and to assess blame. They are good at that — and talking to themselves.

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Akron Marathon: Well, I made it

Well, I was only about 25 minutes off world-record pace for the marathon. Unfortunately, I was running the half marathon in Akron today. Still, finishing in 2:29 and change is good. I’m thrilled I finished — and that I can still run a fairly easy half marathon after all these years.

As a footnote — I’ve included this photo by Mike Cardew of the Akron Beacon Journal. I wonder why the Beacon Journal doesn’t have a story about the race on its website even several hours after most of the marathon competitors finished? I digress.

I still enjoy running. I look forward to getting up every morning and hitting the streets at 5 a.m. For those of you who read this blog, you know I’ve been doing that most days for the past 25 years or so. And I have no plans to stop.

But when you are running with a crowd but essentially by yourself for two and a half hours, it does give you some time to think and to reflect. And here’s what I was thinking about.

  • Well-regarded author Haruki Murakami shared his thoughts about running in his book, “What I Talk About When I Talk About Running.” We’re about the same age; we’ve been at this about the same number of years. Yet he is a competitor in these events — still able to run a marathon in about four hours. Those days are over for me. And I’m accepting those limitations now, in running and in other areas of life. Folks, the clock doesn’t lie — and it doesn’t stop.
  • Saying that, running a marathon or half marathon as you get older really does represent a challenge. Physically. Sure. But also mentally. Can’t risk going too fast. But going too slow — for someone like me — presents a risk as well. The leg muscles contract and stiffen. In part because of years of use and abuse. I noticed that this morning at around mile 11, a nastly uphill grade on Akron’s interbelt that went on and on and on.
  • But the mental part of running is one of the reasons I keep at it. I don’t think there is a better time to think. To sort our problems. To make decisions without the intrusions of cell phones, e-mail, TV, whatever. I can still organize in my mind what I want to write — whether it is a blog post, a magazine article, a press release, etc. — during the time that I’m running each morning. I’m not a great writer certainly. But I don’t think I would be even an average one without that time each day that I give as a gift to myself.
  • I’d still like to have the opportunity to run with some of my friends — those of us who forged such strong friendships over the duration of 20-some years and thousands of miles. We’re going to have a reunion of sorts this coming July 4 at the Peachtree 10K in Atlanta. But essentially those days are over now for a host of reasons. So I take joy in the accomplishments of my new friends like Gina Prodan. Gina ran her first marathon today. I’ll check on Facebook when I’m done here to see how she did.
  • The Akron Marathon is really a big event for the city of Akron. It’s well-managed and it’s gaining big numbers of runners. Now — if someone could just find a way to avoid that long stretch on the interbelt beginning at mile 11.

Between miles seven and 11 this morning I was feeling good enough that the thoughts of another marathon actually crept into my mind. Nah. Don’t think so. The clock doesn’t lie.

Marathons and economic bailouts

I’m pretty much taking it easy today. I’m going to run a half marathon in Akron tomorrow morning. So I didn’t even run this morning despite the fact that the weather is absolutely perfect: cool, clear and a light breeze. Maybe all the hot air is in Washington these days.

Looks like the members of Congress and the administration are in for another marathon session today trying to save Wall Street and nationalize the economy. Good luck with the House Republicans. They are all up for reelection in November — and something tells me the free-market conservatives are going to have some explaining to do when they leave the Beltway for Main Street.

And according to an article in Politico — “House GOP stands firm — for now” — they may not go for a deal at all. Here’s from the article:

According to one GOP lawmaker, some House Republicans are saying privately that they’d rather “let the markets crash” than sign on to a massive bailout.

“For the sake of the altar of the free market system, do you accept a Great Depression?” the member asked.

President Bush’s lame duck status, and his heavy hand in dealing with lawmakers in his own party for the last seven-plus years, is also coming back to haunt the White House, as House Republicans grumble that Bush is “trying to tear up the Constitution” by committing the federal government to such a massive intervention in the U.S. financial markets.

Oh boy. Something tells me I’m going to have an easier time with the half marathon.

But E.J.Dionne Jr., writing in The Washington Post this morning, says there will be a bailout. Why? Fear.

The simple truth is that Washington is petrified about this crisis and will pass something. There are dark fears floating through the city that foreign investors, particularly the Chinese, might begin to pull their billions out of our system.

Scarier than the bad mortgages are those unregulated credit default swaps that financier George Soros has been warning about. There are $45 trillion of those esoteric instruments sloshing around the global financial system. They were invented as a hedge against debt defaults, but even the financial smart guys don’t fully understand their impact or how to price their real value.

Fear is a terrible motivator for careful legislating, but it’s a heck of a way to bring about a lot of bipartisanship. McCain jumped into this game in the fourth quarter. Many of the players on the field, caked in mud and exhausted but determined as they approach the goal line, wonder why this new would-be quarterback has suddenly appeared in their midst.

And I’m afraid I won’t be able to stay up late enough tonight to watch the presidential debate. That’s if McCain shows up. Who knows. He may still be running in place with the House Republicans in Washington.

President Bush, Congress, confidence and trust

Who woke President Bush up last night? I know he scared the crap out of me. I was restfully snoozing through the end of Dancing With The Stars when I was jarred awake by someone mumbling that our entire economy was in danger. Say what?

Was this the same W. who a few months ago assured us that we weren’t in a recession? That the economy was strong? That the $600 rebate checks would usher in a new era of prosperity? That the Cleveland Browns would make the playoffs? Well, you know.

Oh, my. Mama don’t let your babies grow up to be lame duck presidents.

Particularly one with a job approval rating only slightly better than Congress.

We’re in deep doo-doo. Why? The people on Main Street no longer have any confidence or trust that the guys and gals in Washington can get just about anything right — let alone the nationalization of Wall Street. That by the way is not just the rant of a quasi-retired PR guy and teacher in Ohio. Here’s David Broder, dean of the Washington mainstream media, writing in The Washington Post this morning, “Credibility Test for Congress.”

We know why George Bush has not attempted to play that role in this crisis. The past 44 months, since his second term began, have so depleted Bush’s personal credibility and political influence that he is crippled as a national leader. His own party, at its nominating convention, could barely bring itself to acknowledge him. Attaching his name to almost any proposition costs it public backing rather than attracting support.

Paulson and Bernanke are not charismatic figures, but it clearly is better to have their names attached to the rescue plan than Bush’s.

But how do you explain the transfer of authority from Pelosi and Reid to Dodd and Frank, the chairmen of two congressional committees that supervise the operations of financial markets?

The reason, I have to believe, is that public disdain for Congress and its top leaders is as great as the disillusionment with the president.

Well it should be an interesting meeting at the White House today as members of the administration and elected officials come together to figure out what to do. And I expect they will reach an agreement. Members of Congress want to adjourn and head home to campaign. W. wants to go back to whatever he does these days.

I have no idea what the final bailout plan will look like. But here are two things I do know.

If Bush interrupts Grey’s Anatomy tonight I fret for the future of our Democracy.

And while Misty May is on Dancing With The Stars, Brooke Burke could make you forget about beach volleyball.

Education, the economy and how the U.S. became France

Wow. There’s a lot to opine about these days. I finally talked to my financial adviser at Merrill Lynch yesterday. As usual, I had to call him. His phone apparently doesn’t make outgoing calls during stock market downturns — to say nothing of Wall Street meltdowns. But he was in a cheery mood. Apparently the Merrill Lynch deal with Bank of America is going to save his portfolio and retirement savings.

Well, we should all be so lucky. But probably not.

Yet I was thinking while running this morning that we have almost overnight entered a new era in this country. We’ve abandoned the ruse of a small-government, free-market economy. We’re providing welfare to the captains of industry on Wall Street. We’re heading down the road to bail out the automobile industry. And maybe someday we’ll get around to doing the right thing and providing everyone with this country health care and access to a quality education. We’re, ah, becoming France.

Actually, I have to give credit for this idea to Bill Saporito. Before I left for my run I read his article on Time.com, “How We Became the United States of France.” He writes:

This is the state of our great republic: We’ve nationalized the financial system, taking control from Wall Street bankers we no longer trust. We’re about to quasi-nationalize the Detroit auto companies via massive loans because they’re a source of American pride, and too many jobs — and votes — are at stake. Our Social Security system is going broke as we head for a future in which too many retirees will be supported by too few workers. How long before we have national health care? Put it all together, and the America that emerges is a cartoonish version of the country most despised by red-meat red-state patriots: France. Only with worse food.

Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by half a dozen short sellers in Greenwich, Conn., and FedExed to Washington, D.C., to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We’re now no different from any of those Western European semi-socialist welfare states that we love to deride. Italy? Sure, it’s had four governments since last Thursday, but none of them would have allowed this to go on; the Italians know how to rig an economy.

You just know the Frogs have only increased their disdain for us, if that is indeed possible. And why shouldn’t they? The average American is working two and a half jobs, gets two weeks off and has all the employment security of a one-armed trapeze artist. The Bush Administration has preached the “ownership society” to America: own your house, own your retirement account; you don’t need the government in your way. So Americans mortgaged themselves to the hilt to buy overpriced houses they can no longer afford and signed up for 401(k) programs that put money — where, exactly? In the stock market! Where rich Republicans fleeced them.

Ouch. Freedom fries anyone?

Well, when I was at Kent State last week attending the media ethics workshop, one of the panelists, a reporter with The Plain Dealer, said that he believed people were tiring of reading blogs where the writer was only commenting on news stories. He said people were interested in new information.

So in that spirit, here’s something that was new to me at least. The Heritage Foundation, a conservative think tank in Washington, released a study that looked at education and academic success. One of the points is that American taxpayers spend about $553 billion a year on public K-12 education.

Let’s see. Public education: $553 billion. Wall Street bailout: $1 trillion — maybe more.

Hmm. Wonder what the high school dropout rate is like in France?

Marathons and congressional bailouts

Well, this should be an exciting week. I’m going to run the half marathon in Akron Saturday. And members of Congress will be racing all week to enact the Bush administration’s Wall Street rescue plan before adjourning Friday. Both should be interesting.

There are stories galore today and over the weekend about the actions now under way to prevent Great Depression Two. And the amount of taxpayer money involved — billions and maybe trillions of dollars — represents such a sweeping intervention in our economy that I certainly don’t understand all of it. Probably nobody does.

So here are a few of the things I was thinking about while running this morning: trust, confidence and communication.

Clearly something has to be done to prevent a financial meltdown. But do we really have the confidence — and trust — in the members of the Bush team? Remember. These are the guys and gals who brought us the Iraq debacle by running around yelling “weapons of mass destruction.” Not! By the way. That’s another $700 billion expense and still growing. If anyone is still counting.

Here’s from a post this morning by Glenn Thrush on Politico, “Dems say they won’t get fooled again.”

But the current generation of Democratic congressional leaders feels burned — and not a little humiliated — by the Bush administration’s use of the 2001 attacks to justify both the speedy enactment of the controversial and complex USA Patriot Act and congressional authorization of the resolution authorizing the use of force in Iraq.

“They can’t get away with what they did in 2001,” Leahy [Sen. Patrick Leahy, D-VT] said. “This will be ‘trust but verify.’ The biggest mistake they can make is holding a press conference while we’re negotiating to say there’s going to be a worldwide depression if Congress doesn’t do exactly what we want them to.”

I’m not convinced that it takes all that much to fool the current group of Democrats in Congress. But that’s a post for another day. So let’s hope they do pay attention — and let’s hope they stick to their positions on a key point that many members want included in the rescue package: reduce executive salaries and severance payments to the captains of industry who caused this debacle. Here’s from a Washington Post article:

Democratic leaders have broadly embraced the administration’s proposal to spend up to $700 billion to take troubled assets off the books of faltering firms and are not questioning the need to give the Treasury Department expansive authority to halt the meltdown in world markets. But by attempting to limit executive pay, they risk alienating key Republicans who object to such restrictions and delaying passage of the rescue plan, which in turn may stir renewed fear in the markets.

“They risk alienating key Republicans who object to such restrictions…” If that statement is true, then this country is in deep doo-doo. A Republican administration — closely aligned with Wall Street — has presided over the greatest economic meltdown since the Great Depression. And they have completely moved away from the idea of small-government, free-market conservatism. Yet Republicans are going to argue that the executives of the firms responsible have no risk or responsibility. Give me a break.

Even Lanny Davis, one of Bill Clinton’s chief apologists during an administration that was — thankfully it turns out — more preoccupied with sex than greed, has it correct — writing in the Wall Street Journal online today: “The GOP Leads a ‘Socialist’ Bailout.”

If a liberal Democratic administration had put hundreds of billions of dollars of taxpayer money at risk by bailing out Bear Stearns and nationalizing American International Group (AIG), Fannie Mae and Freddie Mac, wouldn’t conservatives accuse Democrats of “socialism”? Can Mr. McCain now square a circle by calling himself a conservative while favoring increased regulation?

In fact, Mr. McCain championed financial deregulation for years. In 1999, he supported legislation crafted by Phil Gramm, then a senator from Texas, that removed Depression-era walls between banking, investment and insurance companies — allegedly to make the country’s financial institutions more competitive and free to take entrepreneurial risks in the marketplace. (Many Democrats, including Sen. Joe Biden, the party’s vice presidential nominee, supported this ill-considered legislation as well.)

The result was the creation of a free-market free-for-all of banks approving home mortgages to people who clearly couldn’t afford to repay them if real-estate values stopped rising. It also spurred investment banks to buy and sell packages of mortgages after they had convinced themselves that by “spreading the risk,” bad loans could become less-bad loans. Then they bought insurance contracts from gargantuan insurance companies like AIG to spread the risk even further. Investors banked on the fact that if real-estate values stopped rising (impossible!), and more and more people defaulted on their mortgages, Fannie and Freddie would pick up the tab. And, if Fannie and Freddie went down, there would be — The-Ultimate-Bearer-Of-All-Risks — the lowly taxpayers.

And at some point, both McCain and Obama are going to have to communicate honestly with the American public about what all this means to us in terms of higher taxes — and reduced expectations for solving the problems facing us in education, health care and a host of other areas.

Something tells me the half marathon Saturday is going to be a lot easier and a lot more pleasant than that discussion.

Depression economics and politics

I wonder how close we were this past week to Great Depression Two? Joe Nocera in his New York Times blog wrote that it was the worst week for financial markets since 1929. Clearly. And that will give me something to think about when I hit the streets this morning for my five-mile run.

It’s something we should all think about. The financial crisis — and the federal government’s response — changes fundamentally our economy and the relationship between the public and private sectors. Also, we have managed to shift the burden of risk from those who caused this debacle on Wall Street to those on Main Street who ultimately will pay for it.

Nocera’s post is titled “A Hail Mary Pass, but No Receiver in the End Zone.” He writes:

Will this latest round of proposals end the crisis? I know the stock market reacted joyously on Friday, but I’m not hopeful. One solution being promoted by the Securities and Exchange Commission — to make life more difficult for short sellers — is a shameful sideshow. A second solution, which Mr. Paulson announced Friday morning, requires money market funds to create an insurance pool to cover themselves against losses.

That may provide comfort to investors who equate money funds with savings accounts, but it is fraught with moral hazard.

And the third solution — the big megillah — is Mr. Paulson’s plan to create a new government mechanism to buy mortgage-backed securities from big banks and investment houses. Once they are off those companies’ books, life can return to normal — or so Mr. Paulson hopes.

He acknowledged that it would likely cost taxpayers “hundreds of billions of dollars.” I think it will cost more than $1 trillion.

It is a weird tribute to the scale of this crisis that Mr. Paulson felt he had no choice but to rush this proposal out, because as the day progressed it became increasingly clear that the Treasury Department didn’t yet know how this mechanism was going to work. It is an idea of a plan more than an actual plan. In football, they would call it a Hail Mary pass. Sometimes, of course, a Hail Mary pass is completed for a touchdown. But most of the time they fail.

I think it is also a weird tribute to George Bush and the Republicans that they have managed to kill any lingering notion that our economy was based on free-market capitalism. And their argument that we need less government not more is now about as bankrupt as Lehman Brothers, et al. It will be an absolute hoot to hear the captains of industry lament the growing involvement of government in the economy and elsewhere. Get over it guys and gals. You’re going to have to come up with something new to opine about at all those conferences where the unbridled capitalists used to congregate.

The financial crisis — like most issues — involves to a large degree confidence and trust. We saw little of either last week — in the stock market, in our financial institutions and in our government. So a lot depends on whether we can restore confidence and trust.

Given that the public has little confidence in both the Bush administration and Congress these days it looks like we’re going to have a tough go of it. Now Congress, which really hasn’t done anything of substance in two years, is being asked to pull together a financial rescue plan that could ultimately cost us $1 trillion. And they are going to push it through quickly (maybe) — while trying to rush out of Washington to campaign. Here’s from an article in The New York Times:

Then the other shoe dropped. Treasury Secretary Henry M. Paulson Jr. told top members of both parties — about to leave Washington to assail one another in a bitter election season — that they had no choice but to pull together and quickly pass legislation providing billions of public dollars to take bad assets off the hands of the nation’s financial institutions.

“Do you know what you are asking me to do?” said Senator Harry Reid, the Democratic majority leader who has struggled all year against concerted Republican opposition, according to multiple participants at the Thursday night session. “It takes me 48 hours to get the Republicans to agree to flush the toilets around here.”

Well, they pretty much flushed the economy down the drain — and John McCain’s presidential hopes with it.

Hillary Clinton summed it up correctly in a statement she released on the financial crisis and federal government response. It’s worth reading — so I’m going to copy the whole statement from Ben Smith’s blog in Politico. Here’s the Clinton statement:

When the American people, facing a foreclosure crisis and struggling economy, turned to this administration for help, the answer was no. Now, the administration is turning to the American people for help, to rescue the credit markets and take on hundreds of billions in debt and financial obligations as a consequence of that same foreclosure crisis. The truth is, Main Street came to Washington and got little. Now Washington is coming to Main Street and asking for a lot. The American people deserve to know that this isn’t a blank check. While the need to address the current crisis is clear, I will only support steps that will prevent a widening crisis, tackle the worst kinds of abuse tolerated for too long by the Bush administration, and address the root problems at work.

The proposed intervention outlined today by Treasury Secretary Henry Paulson would be a watershed moment for our economy. I believe that such an intervention demands that we fundamentally alter the priorities and policies of our nation under the Bush administration that allowed this crisis to take place and escalate. Corporations that will benefit must be held accountable not only to large shareholders but also to the American people. And American taxpayers deserve to know that their money will not allow for a continuation of the status quo: short-term profit at the expense of long-term viability; obscene bonuses and golden parachutes regardless of performance; reckless risk taking that have placed the markets in so much jeopardy; rewards for those who foreclose on middle-class families and sell mortgages designed to fail to turn a profit; and outsourcing of good jobs to serve short-term stock prices instead of America’s long-term economic health. The prevailing dynamic of corporate America, where the sole priority was the dividend, the inflated bonus and the quarterly earnings report, must give way to a new respect for the long-term prosperity of the American worker and the well-being of the middle class.

After eight years of failed policies — and two years of an absentee administration — our only option left may be an unprecedented government intervention into the private markets. The markets must be stabilized to stave off wider turmoil. Nevertheless, the urgency of this crisis does not mean that we should offer a blank check to financial institutions or the privileged few. Nor can we simply allow the administration to use the taxpayers like a “reset button.” We cannot allow Wall Street to act without oversight by a vigilant SEC and administration — and without regard for the American people, who will now have paid twice: in falling prey to a widening credit crisis, and in paying the bill to hopefully bring it to an end.

I will be examining the administration’s proposal very closely to ensure that we do not approve a policy that may stabilize the markets in the short term without addressing the root problems facing middle-class families or the kinds of reckless gambling that was permitted for far too long by the administration. The Bush administration may have changed its tune once the crisis facing Main Street hit Wall Street. But we need to be sure that the American taxpayers — asked to shoulder yet more risk and responsibility — have a voice.

I expect people on Main Street will be doing their talking at the polls in November.

“It’s the economy, stupid.”

Well, time to run.