Don't Be Fooled Again

At present the financial life of the United States in ICU. The patient is in critical condition and not expected to recover. It seems that the patient ignored all of the symptoms of a disease that is difficult to cure, in fact, in most cases it is terminal. The disease can be prevented if the patient refrains from greed, lives a regulated life, and heeds the warnings originating from competent authority. The patient can thrive if it has the guidance of a good doctor – leader.

By way of hindsight we can see where a certain patient did not heed good consult from his physicians(Congress). The patient decided that he was going to, against good counsel, expose his body to financial uncertainties (smoking) by giving away the surplus of money that he had been entrusted with by the previous owner of the body.
He reasoned that since he was in excellent health there was no reason to guard judiciously the health of the body. So, he smoked the money of all the people and spread the ashes around to those who needed money least of all. He exhaled and immediately felt the nicotine course though the body.

The body, excited by the introduction of all of this nicotine (money), began to crave more of the same and the patient sought new ways of giving the body what it desired. The body broke other rules of good financial health by introducing new ways of getting nicotine (the money). It decided that it would smoke unfiltered regulations that allowed more nicotine (money) to enter the body and the body began to do other things that were even more exciting than before. It violates good health rule after good health rule in a quest to get even more nicotine. The body stoped going to the physician and eliminated the constraints that would have told the doctor that it was out of control (in deep debt).

A cancer formed in the body in the shape of what one might call a tumor (debt). The cancer multiplied and became great. Cancers in the form of subprime loans, speculations without oversight, and other cancers formed tumors (debt) where there had never been tumors (debt) before. The body knew that something was not right, but reasoned that it could make adjustments by taking over-the-counter medications (prime rate adjustments) others had told him would make things right, but the cancer continued to spread. First his lungs that provided him with air began to have difficulty in distributing the oxygenated money that would feed him.

Of course, the heart (banking system) was next because without the oxygenated blood (cash flow) it could no longer support the (credit) muscles that were needed to make the body move. The body began to slow down; sometimes going days without oxygenated blood (cash flow). It became hard for other parts (businesses) of the body to function. The kidneys (car loans) that cleared toxicants from the body soon stopped doing so because they were laid off. The liver (retail stores) started to slow down because it could not get the support (money) that it needed from the kidneys. The outer extremities (small business) that depended on the heart, the kidneys, and the liver to keep them pure and strong became weak and dysfunctional (out-of-business). The body took to its bed!

Finally, the physician (Congress) was summoned. He arrived with his black (bailout) bag full of goodies to bring a glow back to the pale (economy) looking body. The physician was shocked at the condition of the body, but immediately went to work to save the body. Realizing that he would need the help of others, the physician called for an ambulance in the form of congressional help to perform the necessary operations that would save the body. Congress, after much complaining and hesitation, came to the aid of the body with medications that it thought would save the body. Congress shook its head and said… this does not look good!

The moral of the story is this… are you better now than you were eight years ago? If you think that you are better off than you were, chose John McCain. If you are not better off, chose Barack Obama!

William Ayers and Obama - McCain and the Keating Five

Senator McCain and Governor Palin have gone on record in their speeches to the public that Senator Obama’s character is in question because of his association with Mr. Ayers whose was a member of the Weatherman, a group of individuals that committed crimes against the government from 1970 through 1974. Mr. Ayers was accused of these crimes during the time that Senator Obama was a child in grade school. Mr. Ayers was never convicted of any crimes and now serves on the faculty of the University of Illinois at Chicago.

Mr. Ayers and Senator Obama live within a few blocks of each other and served on the board of a charity organization - Woods Fund of Chicago between 1999 and 2002. Mr. Ayers, in addition to donating two hundred dollars to Senator Obama’s campaign during Barack Obama’s days as a State Senator, did hold a fund-raiser of sorts at his house for Senator Obama.

If there is a connection to corruption, or some other dastardly deed in the association between Senator Obama and Mr. Ayers, I don’t see it. It seems to me that a valiant attempt to smear Senator Obama is being attempted under that flimsiest of circumstances by the Republican presidential candidate when he himself is far more closely associated with a man that was convicted of crimes that did far more horrendous damage to the country than anything William Ayers is purported to have done.

The fact of the matter is Senator McCain did go to the offices of the regulators for the Savings and Loans financial industry and had conversations with those individuals regarding Keating and others. There is no question that he attended meetings that were focused on requesting changes to the regulations that governed the Savings and Loans. Senator McCain was cleared of any direct wrongdoing in the Keating Affair, but remanded for exercising poor judgment.

The Senate Ethics Committee exonerated John Senator McCain in 1991 from any wrongdoing in the Keating affair; however, he was found to have practiced questionable judgment. Did John Senator McCain learn a lesson from his involvement in the Savings and Loan debacle to become the anti-corruption stalwart that his campaign portrays him to be? Or does John Senator McCain still practice questionable judgment when it comes to his campaign contributors, and, if so, what could this mean for the U.S. economy?

The Savings and Loan debacle of the 1980s was one of the worst economic crises in the country's history; it caused the recession of the early -90s, an enormous deficit in the federal budget, and cost taxpayers an estimated $300 billion. The deregulation of the banking industry in the early 1980s allowed financial institutions to use federally insured deposits for previously prohibited high-risk investments. Loopholes created by deregulation were manipulated by loosely knit networks of industry high-flyers who used their savings and loans as personal piggy banks, and left taxpayers responsible for paying back the depositors. Bank regulators found that the majority of thrift failures in the Savings and Loan debacle, over 1,000 institutions, were the direct result of management misconduct, insider abuse, and outright fraud.

A key factor that contributed to the Savings and Loan debacle was political interference with bank regulators whose recommended actions against troubled institutions were consistently ignored. Corrupt Savings and Loan executives were frequent contributors to political campaigns, and used their political influence to stall the efforts of regulators, and continue their operations despite insolvency, which dramatically increased the cost of the eventual bailout. Charles Keating was a prominent figure in the S and L debacle. His CA based Lincoln Savings and Loan utilized banking techniques that were common throughout thrifts involved in the Savings and Loan debacle. The scandal that was coined the Keating 5 was emblematic of the political pressure that prevented bank examiners from doing their job, and exacerbated the crisis to monumental proportions.

Charles Keating was the founder of the Cincinnati, OH law firm Keating, Muething and Klekamp, which handled security work for Marvin Warner, and Home State Savings, responsible for another costly securities fraud case in the Savings and Loan debacle. In 1972, he left law to work for Carl Linder's conglomerate, American Financial Corporation, and, in 1976, moved to Phoenix, AZ, and bought the homebuilding division of Linder's empire, which he renamed American Continental Corporation. In 1984, he bought the CA based Lincoln Savings and Loan, and within 3 years involved the thrift with large investments in junk bonds, real estate projects, and other high risk ventures that benefited the American Continental Corporation. In 1986, San Francisco bank examiners noticed serious discrepancies in the financial records of Lincoln Savings and Loan. The political strings Charles Keating pulled in an effort to prevent a serious investigation resulted in the Keating 5 scandal.

Charles Keating was a large donor to political campaigns, and supported over 36 state and national candidates in their run for public office. He frequently used his political connections to influence legislation, and to prevent the Bank Board from adopting regulations that would harm his assets. In March 1987, Senators John Senator McCain (R-AZ), Dennis DeConcini (D-AZ), Alan Cranston (D-CA), and John Glenn (D-OH), all benefactors of Keating's campaign contributions, held a highly unusual meeting in DeConcini's office with the Chairman of the Bank Board, Edwin Gray, to inquire about the bank examination of Lincoln Savings and Loan.

There is a difference between Senator Obama and Ayers and Senator McCain and Keating... people lost everything as a result of the Lincoln Savings and Loan crash. The Lincoln Savings and Loan debacle is a precursor to the current bailout/buyout of the Real Estate industry fiasco. Is it possible that Senator McCain’s assertion that deregulation is the answer to saving our jobs and fixing the economy more of the same that we experienced in 1989?

Did Senator McCain learn anything from his previous position to deregulate financial institutions – it sure does not look that way?

McCain was forced to distance himself from his former campaign co-chairman, and chief economic advisor, former Senator Phil Gramm, due to his calloused remarks about the sub-prime mortgage crisis that many claim he had a direct role in creating. The sub-prime market crisis has been linked to the Gramm-Leach-Bliley Act of 1999, legislation sponsored by Gramm, which repealed provisions in the Glass-Steagall Act, enacted in the midst of the Great Depression, that paved the way for the formation of major financial conglomerates of banks, security firms, and insurance companies. Phil Gramm was the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs until he left the Senate in 2002. He has gone on to serve as the Vice Chairman of the Swiss investment bank, UBS, and in 2008 disclosed that he worked as a lobbyist for UBS, and attempted to influence legislation related to the sub-prime mortgage crisis while he simultaneously worked on McCain's campaign.

Gramm formerly resigned from the campaign in July, 2 months after the McCain campaign's public purge of staff with conflicts of interest, however, his economic advice remains influential. In a Sept. 14 Washington Post article with the headline "A Nation of Exaggerators"-, one of McCain's current economic advisers, Donald Luskin, stated that he agreed with Gramm's "mental recession"- comment, and felt that the gloomy outlook even McCain has adopted is uncalled for. Despite McCain's staff shake-up in May, his campaign is still riddled with staff who have lobbied on behalf of financial institutions connected to the sub-prime mortgage crisis. McCain's campaign manager, Rick Davis, responsible for drafting the campaign's conflict of interest policy, made headlines in mid Sept. for the continued monthly fee of $15,000 mortgage giant Freddie Mac paid to his lobbying firm Davis Manafort Inc.Newsweek reported that Davis had personally approached Freddie Mac in 2006 to arrange for a new consulting agreement that would allow payments to his firm to continue. Deputy Campaign Manager, Christian Ferry, is, also, a consultant for Davis Manafort.

In looking at the relationship between Mr. Ayers and Senator Obama, it seems to me that there is nothing that even remotely compares, in terms of criminality, to the association that Senator McCain had with Mr. Keating. Senator McCain seems to surround himself with questionable individuals who have been and still are key factors in the decision-making processes of Senator McCain.You be the judge, is Senator McCain barking up the wrong tree in a vain attempt to distract the voters from the real issues?

Will Bailing Out the Banking Industry Really Help?

The Bush administration continues to put forth a policy that will, in the end, bring down the house of cards surrounding Wall Street. As has been the case before now, Bush continues to protect big business and the rich at the expense of the consumer. Taxpayers are being asked to foot the bill once again; the same taxpayers whose jobs have been out-sourced overseas. Where is the logic in trickledown economics in a global economy?

Previously, I suggested that the way to recover from this dilemma is to simply renegotiate the loans of delinquent customers in such a manner that each of the delinquent consumers will again be able to make the payments on their respective loans. Notice that I didn’t make one reference to shelling out money to achieve this goal. This would improve the liquidity, to some degree, for local loan agencies. If every delinquent homeowner were allowed to keep his home, and if these marginal loans could be bungled for purchase by investors willing to take the risk, then we could see a two pronged attack to resolve the issues facing the banking industry overall.

The Secretary of the Treasury has this brilliant idea to immediately throw billions of dollars onto a fire that can only be put out over time with what I call ‘trickle up’ economics. If the money used to shore up the economy was done by printing more paper money as part of the buyout that will signal the devaluing of the dollar. Once the dollar, used by most of the free world as the currency of choice in trading loses its value, we will began to see the dollar swirl within the confines of the toilet bowl and disappear forever as the currency of choice in trading. China, the Pacific Rim investors, and the Arabs will have a terrific choice to make, one that we will have no say in the makeup of.

Instead of letting investors take the cream off of the top, the policy should be to allow the cream to rise to the top by supporting the consumer base. One can only hope that these educated individuals will began to realize that it has been the consumer that supported the American economy in the past, and only the consumer can return this economy to where it was previous to the mass deregulation instituted by the Bush administration. Yes, I do blame Bush and the Republican dominated Congress because none of the deregulation was done with Democrats in agreement of these new regulations, and you can point your finger at Phil Gramm – thanks for nothing Phil.

This writer and others with no measure of discipline in economics predicted that the Bush doctrine on economics would destroy the delicate balance held by the United States in the global economic arena. I complained to everyone that I could write to that we are about to, with this grand tax cut program that rewards the rich at the expense of the poor deal a death stroke to the United States economy. You simply cannot spend every dime that you have (surplus – from the Clinton administration), ring-up deficits by charging where possible (the selling of bonds) and mismanage your house (taxes received) the way that the Bush administration has done and survive.

I continue to warn that if the Bush administration continues to try to bring this problem under control by buying out every failed bank that we will be involved in the most volatile non-recoverable situation ever. It will surpass the 1929 crash of Wall Street in comparison like an anthill next to Mt. Everest.