Goldman Sachs Black Magic

They should have seen it coming. In this world and especially in this economy when a company with an annual revenue of $22 billion produces a profit of $3 billion in just one quarter you know people will come out of the woodwork to see how they did it. Hence this interesting report by Dylan Ratigan on Goldman Sachs latest earnings report:

However what his critique fails to mention is the ‘what if’ or the ‘what would’ve happen’ had the government NOT provided tax payers money to these institutions. Clearly the market would have tanked even more and as confidence in the market goes down so does the overall confidence in the economy. In some ways given the sacrilegious view of so many in this country to have government buying financial assets like stocks or bonds – this was about the only way for the government to be able to bring some calmness to the financial markets.

That said he does bring up a valid point about companies like GS and other TARP receivers not paying any interest on the money that was lent to them or another valid criticism posed by others regarding how these TARP receivers are not lending out more of these money.

Unity Flag

In another sign of lack of unity among Iranian expatriate community these days an old issue has resurfaced again; that is easily playing into the hands of those who believe in the theory of ‘divide and conquer’. The issue which is pretty much exclusive to diasporas is about the ever important subject of which flag if any should be shown in the various rallies outside of Iran. The famous ‘shir-o-khorshid’ flag that used to be Iran’s flag during the Pahlavi era with a lion, sun and sword emblem, or the current Islamic Republic State of Iran flag that has the four crescents and sword.

Usually the supporters of the two groups advocating displaying the ‘shir-o-khorshid’ flag tend to be aligned either with the monarchist opposition movement led by Reza Pahlavi or the Islamist Socialist group Mujahedeen Khalq (MKO) led by Maryam Rajavi. They base their firm belief on a series of factual historic claims that shows how the embelm had evolved throught time until it was finally taken off after the revolution.

Here for whatever is worth (not much) I should add that personally I prefer the ‘shir-o-khorshid’ flag, however what adament defenders of this symbol seem to miss is exactly what other adament defenders of those who cling to other symbols from the past like for example those who still carrry the Confederate or Southern Cross flag in the South is that symbols matter as they have different meaning for different folks. To some folks in the South the flag represents bigotry while to some it is reflective of their feeling of pride toward their ancestors.

As far as Iran and its current struggle the point that adament defenders of the flag seem to miss is that symbols be it a flag or a simple green ribbon or the words used in various chants all are intended to first unite a movement in its base and then grow it in numbers. The more inclusive these symbols and then the rhetorics and agendas the more chance of growing the base.

The question is who comprises the base and what is their agenda. Since there are no legitimate scientific polling of those involved in the green movement – both the large masses in support of Mousavi pre 22nd khordad coup and those wearing green post 22nd khordad coup we can then only rely on anectodal evidences to base our opinions. That said in my opinion based on these anectodal evidences the goal of majority of those involved in the green movement ‘inside’ Iran was not a complete overthrow of Islamic Republic. Not that probably many of them didn’t want a secular republic, but rather because they realize given the hard core idealogical stance of those on the opposite side the road toward that goal would’ve been much costlier in blood than a peaceful reform within the laws of the existing flawed system.

Of course there are some supporters of Pahlavi and Rajavi who live in Iran and although pre 22nd Khordad coup were against voting even for Mousavi, but used this opportunity to jump on the green wave to push their groups agendas along those that truly felt betrayed because their vote had been stolen. Again it is tough to say if they outnumber supporters of Mousavi and Karoubi but again using ancetodal evidences like how given their continuous effort in the past decades to have ordinary Iranians rebel against the regime and none doing so, more than likely the number of their supporters getting a free ride on this green wave is very low. So ‘for now’ it is my opinion that most of those wearing the symbolic greens are there to support Mousavi’s agendas.

So the issue for the expat community who more than likely for majority of them will not be moving back to Iran to demonstrate in the streets is how to show their support for those that are risking their bodies and lives for a better Iran. A good start would be by looking at Iran's streets. Clearly Iranians inside Iran are not carrying the ‘shir-o-khorshid’ flag! The question is it because they are scared?! If they are scared then how come they aren’t worried when they are shouting out the death chants?! And if they are brave enough to shout death to dictator then how come there hasn’t been any death or deragotary chants toward the founder of revolution Khomeini?!? Again this is why I think they are not after another bloody revolution or even some type of civil war. This is why for the sake of ‘unity’ the expat community abroad should try to mimic those inside Iran instead of trying to be different. The day they start carrying the ‘shir-o-khorshid’ flag or the day they start wearing another color is the day those of us who believe in their bravery and their noble path should do the same when we are trying to show our support for them.

درسی از انقلاب آخر

آيت‌الله خميني در ابتداي‌ پيروزي‌ انقلاب‌ اعلام‌ كرد: اين‌ انقلاب‌ با بيش‌ از شصت‌ هزار شهيد به‌ ثمر نشسته‌ است

این آمار کشته شدگان زمان شاه از کتاب بررسی انقلاب ایران نوشته عمادالدین باقی

عداد قربانيان‌ انقلاب‌ در سال‌های‌ 42 تا 57 بالغ‌ بر 3164 تن‌ مي‌گردد. از اين‌ تعداد 2781 نفر شهداي‌ انقلاب‌ در سال‌ 57 ـ 1356 در تمام‌ كشور است

در فاصله‌ سال‌هاي‌ ميان‌ ‌ سياهكل «در بهمن‌ 1349» تا مهرماه‌ 1356 كه‌ راهپيمايي‌هاي‌ خياباني‌ آغاز شد 341 چريك‌ و اعضاي‌ مسلح‌ گروه‌هاي‌ سياسي‌ جان‌ خود را از دست‌ دادند. در بين‌ 341 چريك‌ كشته‌ شده‌، 172 نفر از چریکهای فدائي خلق (50 درصد) ، 73 نفر از مجاهدين‌ خلق (21 درصد پيش‌ از تغيير دادن‌ ايدئولوژي)‌ و 38 نفر (11 درصد) از گروه‌هاي‌ كوچك‌ ماركسيست‌، 30 نفر (9 درصد از مجاهدين‌ ماركسيست‌ بعد از تغيير ايدئولوژي)‌ و 28 نفر ديگر (8 درصد) از گروه‌هاي‌ كوچك‌

سالها هست سازمان مجاهدین خلق در رابطه با کشتار سال های 62-1360 ادعای رقمهای چند هزار نفری می‌کنن. با بعضی‌ از هواداران فعلی‌ یا قبلی‌ که حرف میزنیم رقمهای گوناگون مثل 7000، 10000 و حتی 30000 نفری میشنویم! این رقمها تازگی پس از اعلام وارد شدن موسوی و مخصوصا بس از کودتا 22 خرداد و موقعیت وی در موج سبزی که ایران را فرا گرفته بیشتر شده

البته بیان کردن این ارقام اغراق امیز چه 60000 خمینی یا 30000 مجاهدین بر این مبنا نیست که رژیم‌های حاکم زمان هیچ آدم بیگناه را نکشتن. بلکه برای اینکه نباید بار دیگر ملتی فریب عده ای موج سوار و عوامفریب و بعضا تروریست را بخورد که وقتی خودشان به قدرت رسیدند آدمها را با محاکمات یکساعته به آن دنیا بفرستند. در ضمن هم بدانیم بخاطر اینکه خامنه ای مثل شاه نیست به احتمال زیاد هر حرکتی در مقابل این حکومت اسلامی از جانب تلفات با هزینهای بیشتری خواهد بود. و از شروع این جنبش آزادی خواه تا آخرش میبایست سعی کنیم نه بر اساس عواطف و احساسات بلکه براساس مطالعه تاریخ فارغ از جهت گیری های عاطفی، پدیده های اجتماعی-سیاسی دوران انقلاب و نیز اوضاع کنونی را مورد سنجش و داوری قرار دهیم

What is a Just Reaction to an Unjust Action?

Blaming Obama

After January 20, 2001 when George W. Bush was sworn in the S&P 500 closed at 1342. By the end of his 50th day in office the market was down over 8% to 1233. This was after Bush had of course introduced his plans and agendas for the country. Of course the 8% selloff was during the continuing bursting of the Nasdaq tech bubble that had started a year earlier.

Now fast forward to 2009. When Barack Obama was sworn in on January 20th the S&P 500 closed at 805. After 50 days in office the S&P closed at 719 down 10.68%. Of course the selloff during his presidency has occurred during a GLOBAL stock and real estate market selloff. A negative investing environment all around the world that is only second to the one that was experienced during the Great Depression.

The Republicans who idealogically have a major difference with Obama are using the market selloff to not only get their base roused up, but also to create doubt in the mind of those who supported Obama. A simplistic but seemingly good way to get people turned off on him spending money on education or healtcare to giving tax breaks to majority of Americans who through their consumer spending are an integral part of the economy, while raising the tax rate for the top earners to what it was 10 years ago.

Seeing this work on some Americans folks in U.K. who have also seen their stock market selloff by over 9% in the FTSE Index are using the GOP excuses and blaming the selloff in their market on Obama as well. In fact others are also using the Republicans rational -- the Germans having seen the DAX Index fallen by over 8%, the Japanese that have seen Nikkei Index fall by over 12% since January are also claiming that the reason why they are selling stocks in the companies that operate in their countries are all due to Obama’s socialist agendas. In fact these days pretty much citizens of every country that has seen loses in their stock markets are doing the same.

Republicans simplistic explaination basically suggest that the only or main reason why capitalists not just in U.S. but also all around the world are not investing their cash in various investments in their ‘own’ countries even though they see their values has dropped significantly is all because of Obama’s plan to raise the top tax rate for U.S. taxpayers or his budget plans. Basically suggesting that folks who are making $100K a year will never accept jobs or take risks in investments that could potentially pay them $1M simply because they will end up paying more in taxes.

You get the point now. Having said that no denying that U.S. economy and its financial markets has a large influence in the economy and financial markets of other countries. No doubt that in the long run (meaning several quarters) fiscal and regulatory policies set by the administration and congress can have a major impact on the economy and then the markets. However to fall for simplistic explanation that short term trends in the markets are mainly as a result of Obama’s policies in just 50 days or for that matter even 100 days is foolish. Now a year from now will be a fair time frame.


On a side but related note:


After the Election, Fox News Widens Lead

The first weeks of the Obama presidency were remarkably popular ones for the Fox News Channel.

Fox News ranked No. 3 among all cable networks in prime time for the month of February, according to Nielsen Media Research. The network averaged 2.4 million viewers in prime time, up 28 percent from the same month last year.

http://tvdecoder.blogs.nytimes.com/2009/02/26/after-the-election-fox-news-widens-lead/


CNBC Thrives as Hosts Deliver News With Attitude

... CNBC is now a place for politics, to borrow a phrase from its sister channel MSNBC. The network’s journalists have been encouraged to speak their minds, making the line between reporter and commentator almost indistinguishable at times.

Three CNBC employees, who insisted on anonymity to discuss internal deliberations, said that the role of opinion on the channel had been a subject of frequent discussion.

With economic attention focused on Washington, the network is spending less time on bullish stock picks and more time assessing the government’s actions. In recent weeks some have perceived the network to be leading the campaign against President Obama’s economic agenda.

http://www.nytimes.com/2009/03/09/business/media/09cnbc.html

All Financial Crisis End!

Just about a week ago on November 20th the S&P 500 Index closed at 752 down 22% for the month, but in just five days in yet another sign of these days extreme volatility the index rallied 19% from the lows to close at 896 down 7% (vs. 22%) for the month. A five day rally that the market hadn’t seen since 1933 in yet another eerie (but no where close) comparison with that time frame.

The extreme volatility as reflected by the VIX index which reached the intraday and historic high of 89 on November 20th and then has fallen to 55 could be attributed to two broad factors. First being the uncertainty with economic slowdown and its effects on corporate earnings, and secondly the continuing tangential effects of having several bubbles bursting at the same time. Whenever a bubble is created just as the moves that push prices above the real intrinsic value or as statisticians like to refer to as the mean average returns are extremes and irrational -- so are the moves down when the bubble eventually bursts.

One of the after effects of the heavy and at time indiscriminate selling has been that pretty much all asset classes except for cash and Treasury bonds have lost value so far this year. Be it precious metals which used to be a safe haven during market downturns, of course real estate, commodities, and needless to say pretty much all sectors and styles of equity and fixed income investments.

That said with a market that has been down from its peak last year to its trough last week 51% --and year to date is down 39% it does seem as that if not there yet now, at least with each passing day the capitulation and/or despair stage is nearing, a hallmark sign of a market bottom. Worth noting that of the 8 bear markets for the S&P 500 since 1960 (i.e., a peak to trough drop of at least 20%), the average length of time from the index's bull market closing high to its bear market closing low has been 13 ½ months. The index's most recent bull market closing high (set on 10/09/07) occurred 14 months ago (source: BTN Research).

Since many in the general media attributed the first day of the sharp 19% rally that we just had to the selection of President-elect Obama’s economic team it is only befitting to share the viewpoints of one of his top economic advisor’s Larry Summers. In a speech on October 28th Summers suggested that since markets tend to ‘overreact’ policy makers need to do the same, as it’s a lot easier to correct the errors of overreaction than the errors of underreaction.

Clearly given the lessons of previous financial crisis especially the 1929 Great Depression the odds of policy makers repeating the ‘same’ mistakes is low and thus should be encouraging for long term investors (not necessarily short-term traders that trade only long positions). This past week we had the Treasury department and the Federal Reserve (more than likely with coordination and approval with the coming administration) make two major announcements.

First the Treasury stepped in to inject $40 billion into Citigroup as well as guarantee $306 billion of their assets. We then had the Federal Reserve effectively getting into what some refer to as ‘quantitative easing’ mode which in simple terms means printing money. They announced an $800 billion package to buy various financial instruments to unclog the credit market. $600 billion of that package was to buy mortgage back securities and $200 billion worth of asset-backed securities that are collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration.

All pointing again that the policy makers are not going to sit idly by as they did in 1929 in U.S., or in the case of Japan in 1990’s be slow to react. When so much money is injected to the economy an amount that more than likely when it’s all done will be near $2 trillion then eventually there should be some type of a turnaround sooner or later. Now of course printing money does come with its own risks – meaning inflation. However with the deflationary pressures in the global economy this is one risk that policy makers can deal with for time being.

Finally as Larry Summers also mentioned in the end of his speech it is worth remembering: “all financial crises end – and when they end, they end in ways that create spectacular opportunity.” To take advantage of these opportunities first goal is to weather the storm, and then at some point (preferably earlier than later) risk new capital to take advantage of opportunities that will begin to prop up when the crisis is over.

Yes We Can - Still Dissent

The 2008 election is now over. Over 125 million American citizens ended up voting this month – 66.8 million or 53% for Obama and 58.3 million or 46% for McCain.

To me one of the most important take aways of this election was first seeing the creation and eventually the sheer power of a well organized and well funded grassroots movement headed by an intelligent and rhetorically skilled leader.

As been suggested by many others I firmly believe that now that Obama has won the election, those who voted for him and especially those involved in his grassroots movement should adopt a new mission and that would be to hold him accountable to the promises he made during his campaign.

A common critic we heard during both the primaries as well as the general election from the opposing campaigns was most Obama supporters are irrational and through their naiveté had fallen for the hype surrounding his campaign. This is why now that the election is over it is important for the movement that helped Obama to get to where he is now to not remain silent and give him a free pass if he sways of course from most of the promises he made during his campaign for presidency. If they do then they will in fact be proven to have been irrational and naiveté - read stupid.

The job of a lay citizen in a civil democratic society is not to have a crystal ball and predict what their elected officials will do once elected. Their job is to exercise their democratic right and vote for whoever that is on the ballot and is well qualified in their view, and then like everything else in life allow the chips fall where they may.

In fact it is naïve to expect that in the rough and tumble world of politics an elected official especially a president will do every single proposal and promise he made before getting elected - right down to the nitty-gritty. Or for that matter to not have our elected officials change their opinion on a particular matter should the ‘real’ facts on that issue ends up changing.

That said though, history has shown that whether by some planned ill will or by the sheer compromising nature of politics some politicians do in fact go way off course from the promises they made. This is why the civic duty of voters’ doesn’t stop by simply casting a vote. If every individual voter that voted for that candidate continues to make an effort in holding that elected official accountable based on the core principal reasons or policies that was important to them, then through the collective efforts of all voters the elected officials will know if they don’t stay true to most of their promises and principles then comes the next fundraising or next election there will be repercussions.

In the past 8 years especially during the 04 general election many on the left kept pointing to the failed promises made by George Bush during his 2000 campaign. How he wasn’t for nation building, how he was going to bring 'change' to Washington or how he was for less government spending etc ... Many republican activists who are now done with Bush are putting all the blame on these off course messages on him without owning up to the fact that part of the blame was on them for staying silent throughout those broken promises.

So don’t stay silent – don’t give anyone a free pass – and remember that we can still dissent!

Labels

Yesterday I got another one of the typical emails from a Republican friend. It read:

“Are you sure you want to continue to support the candidacy of a Socialist, Anti-American, Racist, Gun Grabbing, Child Killer with no experience doing anything but campaigning?”

I quickly wrote back to him suggesting that he left out the Anti-Christ label that indirectly McCain's campaign and directly far fringe groups have been labeling him to be. Now to many Americans such a label may seem ridiculous, but not to the McCain & Palin supporters who still believe that Adam & Eve lived right along with the dinosaurs some 230 million years ago.

Anyways I then went to regretfully let him know that I am still among the un-American citizens who have been fooled by him and on November 4th I am going to cast my vote for Barack Obama or as they prefer to label him Hussein Obama.

That said since last time I had heard from him was before the meltdown in the financial markets I found it ironic albeit not surprising that he was still labeling Obama as a ‘socialist’. Even in light of the FACT that this administration is going to spend $700 billion to not only rescue many financial institutions (perhaps eventually GM or Chrysler as well), but more importantly take an ownership stake in many of the banks in this country. Not to mention John McCain’s own proposal - not George Bush proposal to use $300 billion to just pay off the mortgage of the homeowners who are over their head. I assume in his mind the facts cited are examples of ‘capitalism’.

The problem with folks influenced by any label like that of a ‘socialists’ is that for many of them they don’t even have a clue in what they mean. If you ask them about the differences between the theories of Keynes, Hayek, Galbraith or Friedman, or capitalism, socialism, Marxism or any ism for that matter, they more than likely either give you a blank stare or resort to giving a typical McCain & Palin like robotic meaningless ramble.

Through the garbage being pushed through various media outlets many of these folks are being influenced by all of these labels. So on this socialist label the strategist on the Republican side are trying to tie Obama to a left leaning activist Saul Alinsky who by the way died in 1972 when Obama was 11 years old.

They mention Alinsky without ever saying that in 1930’s during the Great Depression he was just a successful community activist and organize and although his book did have the word ‘radical’ in the title what he basically pushed was a productive method for grassroots movements. Granted his beliefs in the 1930’s like many others in that time frame including one of GOP’s forbearers Ronald Reagan was more to the left of political spectrum -- or as some may like to label it socialist, but given that time frame it was very normal. After all if you were a New Dealer like Reagan admittedly was then you must have believed in socialism. However the tie between Obama and Alinksy isn’t because Obama has ever suggested that he ascribes to his economic viewpoints (not that if he did it would be sacrilegious) rather than because he had cited and admitted to using some of Alinksy’s successful grassroots and community organizing techniques during his time as a community organizer in the 1990’s.

Yet since the Republicans and McCain's campaign are absent of a coherent message they are once again using the old scare tactic to scare folks into thinking that Alinksy was somehow a bad person and thus Obama is some type of radical figure or as they label a socialist!

The Anti-American label which is based on Obama’s ties with attending a church that was led by an outspoken, provocative and fallible preacher, and his association through the board of two prominent charities with a 1960’s radical anti-war activist who was involved in some bombings when Obama was 8 years old is another poor and failed attempt at scaring and persuading those who can in fact think for themselves. But admittedly and unfortunately successful endeavor for those who rely on others to think on their behalf.

The gun grabbing label is another interesting one. In order for Obama to grab people’s gun(s) as some are suggesting first he has to deal with a minor obstacle called the 2nd Amendment. An amendment based on the long standing policy started I guess in the Middle Ages to have an armed militia to help protect the nation.

Now in light of the fact that US military is comprised of 1.4 million active personnel and 850,000 in reserves and US law enforcement employees (FBI, police, sheriff) are about 600,000 in number. Even if we “assume” given the sheer size of these numbers which are clearly way higher than what they were in 1776 - Obama comes to the conclusion that no longer he sees the logic behind having a “regulated militia” that is armed, the whole process of overturning it will be as cumbersome and laborious. Just as it has been for the conservative Republicans who have been trying to overturn Roe vs. Wade, and that was just a Supreme Court decision and not an actual amendment in the constitution. Now I’m not a constitutional lawyer but my guess is that overturning an amendment in the U.S. Constitution will be much tougher than many Republican strategists are making it to be. More importantly given everything else going on in this country my ‘opinion’ is that, the astute politician Obama is he would knows better how to pick his battles and will focus on other important matters. That doesn’t mean I don’t think he won’t suggest sensible gun regulations that will allow the hunters to hunt, while allowing those who need a weapon for home protection to be allowed to continue owning one to do that, but I can't see the logical rational behind the idea of him trying to take everyone’s gun(s) away.

As far as labeling him a Child Killer – what can anyone say to that way of thinking? As if Obama personally performed the actual procedure on all the abortion cases in this country! My only comment is what Obama has said many times and that is for ‘most’ women this decision is a tough decision and for many of them it isn’t just another form of birth control. Since there are so many women who are performing this procedure we need to respect their rights as a citizen and their rights as it comes with what they want to do with their body. However, there also has to be a sensible way of dealing with this where there is a gross and malice attempt to take advantage of this right. What is ironic is that many of the pro life Republican advocates are also against allowing the government to help the poor single mothers who can’t afford to raise that child. If I’m not mistaken they label it as socialism, welfare or something to that effect. To them destroying the 1 inch blastocyst they call a baby is more sacrilegious than giving it 9 months to be grown into a baby and delivered into a world where the odds of having any chance of true happiness is very low given the parent(s) poor socio-economic status and/or being born with a physical/mental deformity.

But that is the beauty of labels. They are easily spewed out and for the uneducated fools easily absorbed.

Related Previous Post: Bullshit Is Most Important Issue For 2008

Credit Bubble Bust

After 9/11 some Republicans began pushing the idea that the core blame for the attack had to be placed on none other than Bill Clinton. Suggesting it was his inactions during the planning stage that caused the event. In light of the fact that George Bush and his team had over 9 months to not only get fully disclosed on threats from that terrorist group - as they did, but more importantly do whatever they had hoped Clinton should’ve done when he was the president. And they didn't so instead they blamed Clinton.

These days they are again passing the buck on yet another major failure during the Bush presidency. That would be the creation and subsequent bursting of the credit market bubble and all of its tangential effects in the financial markets. Many 'partisan' Republicans are always quick to demand accountability and responsibility – usually from others especially poor folks and Democrats, but never from themselves. It is time for them to do so.

Instead of accepting responsibility for having these events not only happen under their watch but also its high correlation with their core principals of deregulated / less government oversight policies that came into vogue during Reagan presidency and has continued until now; they blame a whole slew of others including Bill Clinton, Democratic members of Congress, Fannie Mae and Freddie Mac and of course in the end tying it in all to Barack Obama.

As I had mentioned 4 years ago in one of my earlier post here a large complicated economy like U.S. is not solely moved by one president's policies, but at the same time you can't ignore the underlying effects of ideological shifts in policies that are implemented by our policymakers as we saw from FDR's presidency to Reagan's and then from Reagan to Bush II.

This is why I will try to show in this admittedly lengthy post several facts often not mentioned that will support the logical belief that the creation of this credit "bubble", and the major growth phase of the unregulated derivative market really began under this Republican administration and congress and by the help of an ardent free market central banker Alan Greenspan. My writing is not to completely vindicate the Clinton administration and its policy makers like Robert Rubin or Lawrence Summers and/or the executives of all companies on Wall Street or on Main Street that took advantage of these policies. Rather just from a factual standpoint just show how with it's policies this administration ended up allowing banks, hedge funds, and individuals to borrow excess amount of money.

Before doing so I should go over another tactic of the right. These days now that both the GOP and especially McCain's campaign are done with George Bush, they are trying to differentiate McCain's economic policies from that of Bush. They suggest that Bush's policies were not grounded in traditional Republican beliefs. Part of this statement is correct. After 8 years it has become clear to pretty much all those on the right that George Bush wasn't your typical Republican that was in favor of controlled spending. However what this failed attempt in differentiating or I should say not owning up is missing is that throughout his presidency -- at least until this month, George Bush was true to the two core economic philosophy of Republican party. The first philosophy of supple side economics which suggests tax cuts regardless of we are in peace time with a surplus or at war with a large deficit, and the second philosophy of allowing the free markets to operate free willy with little or no regulations.

Since partisan Republicans know this differentiation between Bush and McCain may not get through too well, instead they try to pass the buck by going back to Clinton years - the previous evil Democrat. They circulate a NY Times article published in September of 1999 to show that under pressure from Clinton's administration Fannie Mae was pushed to began easing the credit requirements on loans they were buying from banks and other lenders all to allow low income and minorities to own homes Fannie Mae. Also suggesting that the Community Reinvestment Act or CRA program that was started in 1970’s also played a role in the mess we are in now. They then mention the repealing of Glass Steagall Act or signing of the Republican led Gramm Leach Bliley Bill in 1999, or how Republicans had tried 6 years later in 2005 to revamp Fannie Mae and Freddie Mac, but were somehow road blocked by Democrats who were in the sack with these GSE’s.

One minor factoid that they don’t mention in these emails that are circulating (most likely by the likes of people like Andy Martin) is that since the trouncing in 1994 mid-term election where the Republicans badly beat the Democrats in both the Senate and House of Representative it has been the Republicans who have been in full control of Congress until 2006! All those legislation were created by the lawmakers in Congress and the president only signed it! Not to mention since 2001 the have had a Republican president. Which begs the questions why did they wait so late until 2005 to start such reforms, and why they couldn't muster up enough majority on their own party to get the deal done?

Skipping over these facts they then point out the top recipients of political contributions by these two organization from 1989-2008. Pointing Democrats have received 57% of the contributions with remaining 43% going to Republicans (opensecrets). They also highlight the $126,349 that was contributed to Barack Obama since coming to Washington in 2004 which was second in line.

However, one important caveat they don’t include (as usual) that only $6000 was from Political Action Committees (PAC) money and the rest were from individual donors that were happen to be working for these firms. Now I agree that some of them were bundlers but it would be unrealistic to assume all of that money was from bundlers and none from everyday folks that happened to work at Fannie or Freddie. More importantly let’s not forget that so far Obama has raised over $400 million for his presidential campaign and at last count over $160 million of it has been from small donors, so to suggest that he was overly influenced by these contributions is stretching the bounds of logic.

Also what they don’t mention (I know a common theme) is that the general tactic for these firms was to make strategic contributions. Up until 2006 when the Republicans were in control of Congress approximately 56% of contributions were being directed to their members of Congress on the Republican side, but when they lost the Congress in 2006 and as Obama gained grounds in the primaries it was natural for them to switch their contributions.

Yet the Republicans and McCain’s campaign keeps on mentioning these partial facts and at every chance throwing in the names of Fannie Mae and Freddie Mac all to somehow suggest that it was because of them that the financial markets are where we are and since for the last 2 years the Democrats and more specifically Obama has gotten some money from them they are to blame.

So let’s review again what these GSE’s did and still do. Fannie Mae and Freddie Mac didn’t make loans to individuals. No one could call Fannie and Freddie (unless they were calling their aunt Fannie or uncle Freddie) to get a mortgage for their house. These institutions were created with one goal in mind and that was to provide liquidity to the mortgage market. This meant that they had to buy mortgages from banks and other lenders so those banks and lenders can go out again and make more loans.

For many years before 2004, Fannie and Freddie had followed relatively prudent investment strategies, even with respect to affordable housing initiatives that had started under Clinton, but they suddenly changed their approach in 2005 which if you are interested in know why they changed course you can read this article.

So again let’s go back to the claim that Clinton’s initiative in 1999 had contributed to this chaos. First it is important to reiterate the fact according to Federal housing data it was the private sector, not the GSE’s that was behind the soaring subprime lending at the core of the crisis. As it was cited in this McClatchy article Federal Reserve data showed that: “more than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions and that these private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers in 2006. While only one of the top 25 subprime lenders in 2006 was directly subject to the housing law”.

This doesn't mean that somehow Fannie or Freddie or for that matter the committees that were in charge of overseeing them were some innocent bystanders. But what it does mean that they weren't the cause or even the main cause of this house of card falling.

Another fact in blaming Clinton and the Democrats that is often skipped over is that real estate prices or for that matter speculative real estate buying didn't start in 1999. After all as you recall back then Americans were busy speculating in internet stocks. The move into real estate as an asset class of choice really began in late 2000 as the stock market entered into what became a three year bear market, and it began increasing a year or so later in 2002 full after the Federal Reserve under Greenspan had pushed interest rates to extreme low levels. All events that took place full into the Bush presidency years.

The frenzy where we had lines forming on Open Houses and multiple offers with escalation clauses with increments for some houses in $10K, some in $50K and others by $100K didn’t start until late in 2003, and the rush to own real estate really kicked in high gear by 2004. Right around when we had so many different mortgage products hit the market. Products like no doc loans to adjustable rate loans like MTA and COFI loans and not to mention the subprime loans that allowed everyone to own million dollar homes or multiple investment properties.

It was the wild wild West in the mortgage industry; needless to say an industry that was NOT regulated. You can recall the euphoria because that was all you probably heard from your family members during holiday gatherings. Everyone had a story in how they just made $100K in one month flipping a condo.

So what is not mentioned is when this real estate bubble really started. Moreover they don't mention that on June 17th, 2004 George Bush offered his own housing initiative. He referred to it as the "Ownership Society". Suggesting that: "...if you own something, you have a vital stake in the future of our country. The more ownership there is in America, the more vitality there is in America, and the more people have a vital stake in the future of this country." He too then challenged both the real estate and mortgage industry to increase home ownership rate by 5.5 million families. Worth repeating that this was in 2004 and not 1999.

Perhaps the most important one they don't mention is that on April of 2004 the Securities and Exchange Commission SEC cave in to pleas from the five major and largest US investment banks to allow them to take on more debt. The banks were Goldman Sachs, Merrill Lynch, Morgan Stanley, Bears Stearns, and Lehman Brothers. Prior to the ruling these 5 banks were only able to borrow as much as 15 times their net capital. The new exemption which was called the "net capital rule" allowed these five investment banks to borrow as much as $40 or $30 for every $1 they had in capital!

Needless to say by allowing banks to take such gamble with not only their shareholders capital and eventually at a cost to taxpayers is why Lehman and Bear Stearns failed and why Merrill Lynch was rescued by Bank of American and the remaining two have changed their charter to be a bank holding company. This is one of the reasons why American taxpayers were forced to inject over $250 billion into the banking system by taking partial ownership in some of the 9 major banks.

Finally given the role of various unregulated alphabet jargon derivative instruments like C.D.O.'s or C.D.S.'s in the 2008 financial market meltdown it is also look back to see when they were created. The first derivative instrument a C.D.S. was created in 1991 by Bankers Trust. The C.D.O. instrument was created by JP Morgan in 1997 to hedge events such as the Asian market financial crisis. Although they were created in early and late 90's but their real growth didn't happen until we entered the new century. Which is why in mid 2003 Warren Buffet referred to them as "financial weapons of mass distructions. It is said that in 2001 the size of the C.D.S. market was about $900 billion, and by 2007 it had gotten to estimated $62 trillion. All with no regulations!

Now after dishing it out to the Bush administration it is only fair and appropriate to give them credit (really to Sec. Paulson and Fed Chairman Bernanake) for at least not holding on to their ideological dogmas, and not doing what Hoover had initially done in 1929 and that was to let the free market operate on their own. However even with all the new reactionary policies we have been having, albeit some of them little late, there are still areas that we are not hearing any proactive plans to regulate another trillion dollar industry the hedge fund industry, or for that pushing the idea of moving these derivatives like C.D.S. and C.D.O.’s to exchanges like CME or CBOT. Regulated exchanges that provide liquidity, and transparency.

I realize this was a pretty long essay, but I thought it was vital to point out the flaws in the arguments made by our friends on the right. That said we are where we are. This doesn't mean it is an end to core positive principles of capitalism, free markets, and individual liberty. However just as Naomi Klein suggested in a speech couple of weeks ago were in that just as the fall of Berlin Wall was equivalent to the demise of Communism, the recent events in the financial markets should also be an indictment on the extreme beliefs of capitalism especially as she suggested those professed by the likes of Milton Friedman.

The belief free markets will have its own checks and balances, an idea that frankly I used to subscribe to sounds good on paper and in theory but as evident by what we’ve seen in 1929 in U.S. and in the past 20 years in various emerging markets and again here in U.S. is just good on paper. The unfortunate consequences with these theories in the event of some type of random highly unlikely events or what is commonly referred to as a Black Swan event thanks to one of my favorite authors/thinkers Nassim Taleb, has the consequence of creating moral hazards and costs to the society that are so high that it is best to have some government oversight.

Depending on the outcome of the election we could either have a scenario where a McCain administration may do some piecemeal reforms but given his continuing belief in deregulated markets we will only have some piecemeal reforms. Or a scenario of gradual and moderate shift to the middle under an Obama administration by instituting policies that will include proper government intervention and regulation to create an optimal setting for the 21st century economy.

A valid critic that some on the right are making is that given the havoc we’ve seen the natural reaction of some policymakers could be to shift the pendulum to the extreme opposite. This is why regardless of the outcome on November 4th it is important for both sides to work together to continue making their side's logical rational. Hoping that with these exchanges in the free and democratic marketplace of idea American can once again unite to rebuild the economy.

Financial Dilemma

I’m having a dilemma in showing the fierce urgency in persuading this family to change the financial course that they are taking their whole family on.

The household income for this family is roughly $256,000 yet they are spending $273,000 a year! This trend in spending more than what they are making and living on credit is one that has been going on for quite awhile but has really gotten worse in the past 7 years.

To further make it complicated they already have a $950,000 in debt which is as a result of both big purchases they've made by borrowing as well as the ongoing yearly deficit.

The household which consists of a large and extended family is currently headed by an older man, and a younger woman. When discussing their situation I’ve gotten a sense that they think or try to persuade their children and grandchildren that if they just cut spending in small discretionary expenses areas like eating out once a week or cancelling their cable they will be able to improve their situation so that in 5 or so year the $950,000 debt (and growing) will be gone.

When I recommended to this person that he should not only cut both discretionary as well as non-discretionary expenses but more importantly find an 'immediate' way of increasing his income right now, rather than later on he and about 50% of the household felt uncomfortable with making such a sacrifice. They wanted to take the chance that if the economy grows their income will grow at a much faster rate were it could reduce their debt in 5 or 10 years.

Clearly complicated situation -- especially since in actuality there are several more zeros in front of the figures mentioned above.

So what do you suggest they should do?

To help you understand their situation here is an in-depth slide show (click here) explaining everything in detail (be sure to click next on the bottom to view all slide) – also here is what their former advisor has told them about their plans (click here), and a more common sense approach (click here). In fact the family’s situation has gotten so famous a new documentary has been made about them (click here).

Country First?

Since in my last post here I was quick to criticize McCain for his VP selection, it is only right to also admit that from a purely political sense his strategy has worked-- at least 'so far'. .

I say so far because we still have ~60 days to go to see if he would become another George H. Bush that overcame and won in light of a poor VP selection or will he have the same faith as George McGovern.

What is certain is for now his pick has clearly galvanized the Christian right (albeit as well as the Dems -- Obama raised $8 million in the day after Palin's speech vs. McCain at $1 million), it has given another reason to get the vote of those who elect their presidents based on the pure fantasy of which person they like to hang out and have a beer with -- the supposed blue collar independent voters, as well helping him to be able to play the gender card to get more of the women vote, and I also assume by having discussion about Palin's experience highlight Obama's at the same time.

Weeks prior to the convention and even after Palin's pick during the RNC his campaign continued their theme were he always puts country first -- while suggesting that Obama puts politics and winning election first. A silly argument which tends to work on some voters even though Palin's pick clearly should show that her selection had more to do with winning the election and politics rather than what is good for the country.

After all if she was good enough to be second in line to the presidency then how come no one outside of Alaska had heard about her, and more importantly how come she never ran as a presidential candidate during the 08 primaries. To think that the Republican Party was so drained of talent to pick her is an insult to all the prominent republicans out there. I may have disagreement with some of their positions but he surely could have find more experience nominee than a 44 year old person with a year and half in big time political experience.

So the move was purely based on politics were the priority of getting elected was more important than the hypothetical of her one day becoming commander in chief.

Of course whenever the subject of questioning Palin's experience comes up one of the counter arguments republicans make is that she has both more years of experience (counting her time as city councilwoman) as well as more years of executive experience than the Democratic nominee for the number one spot. What this silly comparison forgets is that Obama was able to garner the support of 18 million people during a year and half presidential primaries for his nomination, and most likely an additional 43 million more on Nov. Whereas up to now the only vote she has gotten for becoming the nominee has been one and that was by John McCain.

They also ridicule Obama's community organizing effort while at the same time preaching about McCain's motto of 'serving a cause greater than yourself' but also skipping over the fact that the volunteerism he did was over 20 years ago and since then he has many years of experience in a legislative position. When they do mention his legislative experience in Illinois senate they do point to many times he voted present vs. a yes or no on certain bills -- a valid critic of his politicking tactic which is not uncommon among many legislators but a critic that is unrealistic as he can not and would not act the same way in an executive role. Another narrative that they conveniently skip is given Obama’s educational legal background and his time teaching constitutional law, which should make him more familiar to the real duty of each President which would be upholding the constitution.

John McCain's VP choice: Sarah Palin

What was John McCain thinking … or I should say what were his strategists thinking?

I remember when I was asked about Joe Biden VP selection a week ago, my reply was that given how well run Obama’s campaign has been; it certainly is not my place to question his and his advisors analysis behind his decision. Which undoubtedly was and will be the most important decision any presidential candidate has to make before taking office, and one with obvious future implications if elected.

However given McCain’s up and down campaign during primaries I’m not sure if the same benefit of doubt can be given to his selection of Sarah Palin. I’m saying this because setting aside her attractive look which even Rush Limbaugh was quick to point out -- her resume is not only light from an educational and big time decision making experience standpoint and world affairs knowledge (she has admitted she doesn't know much about Iraq), but also apparently during her vetting process McCain had only met with her once or twice!

Looking at Palin’s resume it is obvious that she has done a lot with the card that she had been dealt. She has only a bachelor degree in journalism albeit and thank god if she is elected with at least a minor in Political Science. After a brief stint as a sport reporter she became a city councilwoman in 1992 were she had to deal with issues such as dealing with the town’s library and hiring and firing the police chief. In 1996 she ran for and became the mayor of her small town (9000 people) and in 2006 she ran for and became the governor of Alaska, and now only a year and half into that term she has been selected by McCain to be a VP candidate for USA.

She makes Obama’s ascension from his state senatorial position in 1997 and US senate post in 2004 look average at best. Moreover her selection will make any critic of Obama’s “years” of experience invalid because the number one criteria for selecting any VP is or at least should be that s/he is capable of being a President from day one.

Ironically I had learned about her about 4 weeks ago when I was learning about Down syndrome. It is now well publicized and even touted by many evangelicals her decision to give birth to a son who has Down syndrome.

Although I personally commend the sacrifice a parent is willing to make for deciding to give birth to a child with a life altering disease like Down’s but at the same time I can't help but question their judgment given the hardship they are willing that child to go through not only when they are there for their child but also when they themseleves are dead and are no longer to support their adult child.

Now in her case I’m sure her personal sacrifice was a bit easier given she is married to apparently a supportive husband and they more than likely are doing well financially to pay for any medical bills. However I wonder given her role as a VP of USA and not Governor of Alaska is she really able to devote the same time and same care for that child?

Giving birth is the easy part – raising a special kid which I’m sure all parents who have raised such kids can vouch for requires a lot of time. Which is why I personally not only question her judgment for giving life to a child with such a disease, but now that she has done it I can't help but to question her judgment for accepting such a daunting job that only a fool would think that it wouldn’t conflict with her family time.

Moreover I also question her decision to seemingly use this 4 month old infant as a political tool given her decision to bring him on today into a gathering of 15000 roaring people with music blasting all to show I guess how faithful she is to Jesus.

Maybe this was her and John McCain’s way of letting Americans and more importantly all women know that if they are elected they will make sure our laws recognize that life truly starts when a sperm and egg are met – and if you do anything with this combination you will be charged with murder and will not only be prosecuted to the fullest extent of the law but will also be punished by god by being burned in hell over and over.

Georgia & Russian Conflict

George Bush and many American politicians who did vote for authorizing invasion of Iraq, as well as stayed silent during Israeli bombardment of Lebanon are now calling Russia’s reaction to Georgian’s incursion in South Ossetia as “unacceptable in the 21st century”, or “disproportionate use of force”.

If it wasn’t that innocent civilians are dying the irony/hypocrisy of these remarks would be laughable.

This is what happens when you go around invading a country that is not a real threat, while also staying silent when an ally country bombards innocent civilians. When you do your criticisms of actions of others will go on deaf ears even though what is being said may make 'some' sense.

I said some sense because clearly Russia’s response is over the top (Russian's version of Shock & Awe) but at the same time Georgian’s had no business trying to invade South Ossetia. I understand that the region was once part of Georgia but so was once California or Texas part of Mexico.

Unfortunately America under the leadership of this president has lost its moral legitimacy to lead the world on these issues.

Obama at AIPAC

As I was watching his speech in front of AIPAC (video) I was very disappointed to hear him give such an 'extreme' conciliatory and Israel-centric (vs. US centric) Middle East policy speech. Perhaps given the audience and how he was booed by some members during his last years speech at the same conference it was to be expected that he would have a different tone. But as a supporter I had hoped the pandering wouldn't have at least been to this degree.

Now I am not idealistic enough to expect that in this day and age a legitimate mainstream American politician can go head to head against one of the most powerful lobbying forces in the country and still expect to be elected. However it is one thing to be confrontational or go head to head and it is another matter to bend over backward and pander so much especially to an organization representing the interests of a foreign country that has not register as such under the terms of the Foreign Agent Registration Act -- even if it is an ally.

Ironically as it was reported on MoJo blog even with this speech Obama wasn't as successful as he had hoped. As apparently two days before his speech McCain got a much better reception. The blog reported that the applause on Obama's Iran comments was very lackluster - and the cheers seemed to largely come from the student delegation there.

Anyways here are just some of what was disappointing to hear:

The question is how to move forward. There are those who would continue and intensify this failed status quo, ignoring eight years of accumulated evidence that our foreign policy is dangerously flawed. And then there are those who would lay all of the problems of the Middle East at the doorstep of Israel and its supporters, as if the Israeli-Palestinian conflict is the root of all trouble in the region. These voices blame the Middle East’s only democracy for the region’s extremism. They offer the false promise that abandoning a stalwart ally is somehow the path to strength. It is not, it never has been, and it never will be.

As President, I will work to help Israel achieve the goal of two states, a Jewish state of Israel and a Palestinian state, living side by side in peace and security. Israel can also advance the cause of peace by taking appropriate steps – consistent with its security – to ease the freedom of movement for Palestinians, improve economic conditions in the West Bank, and to refrain from building new settlements

Jerusalem will remain the capital of Israel, and it must remain undivided

As president I will use all elements of American power to pressure Iran. I will do everything in my power to prevent Iran from obtaining a nuclear weapon. Everything in my power to prevent Iran from obtaining a nuclear weapon. Everything.

... Iranian Revolutionary Guard, which has rightly been labeled a terrorist organization.

Let me start by what was really surprising to hear and that was to hear him say that he is now going along with the suggestion made in the Kyl-Lieberman bill labeling a branch of Iranian army the IRGC as a terrorist organization. A bill that was pushed by both Bush administration and of course Pro-Israeli lobbying firms like AIPAC to give this administration ability to initiate a war with Iran on the grounds of fighting terrorism. Initially he had voted absent on this bill which I was willing to let him slide on it, but to now do a 180 degree turn is pretty awful. I don't know if it was just bad advice or if this was an intentional change of mind on his own part but whatever it was I know both the McCain campaign and even some remaining hardcore Clinton supporters will call him out on this flip flop.

It was unfortunate to see him break down the situation and solution in Middle East the way he did as I copied in the first excerpt. I do agree that not ALL the problems in Middle East is rooted in the actions of Israeli government but to dismiss and not address any one of the many numerous human rights violations as well as UN resolution violations by the Israeli government is not the type of 'change' we were promised by him - it is status quo US policy. It is what he referred to as doing the same thing over and over expecting a new result!!

His recommendation on the two state solution seems to put most of the onerous on everybody but the occupying country Israel. By suggesting that Jerusalem will remain the capital of Israel, and remain undivided is he really presenting himself as an honest broker? What he is suggesting is not change - it is status quo US policy. You can't have a viable country if your citizens have to each day go through various checkpoint just to go to work, school or shop.

Finally in as far as his 'everything' comment. It is no news that he is OK with a military strike on Iran, as he had been open to such an attack back in 2004. But to repeat the word 'everything' three times - especially the way he did it, did come across as a desperate attempt to show he too is willing to be as forceful as even Hillary Clinton by obliterating Iran.

Now for those who know me to be an active supporter of his presidential campaign this critic may come as a surprise. But as I had mentioned in my post last night after his speech in Minnesota, we as supporters have a responsibility in not only supporting him but also holding him accountable for what he promised. Of course he will make mistake and may veer away as I think he has done in this case but it is our responsibility to at least voice our opinion and exert our pressure.

In this case I 'think' this is part political posturing to show the Jewish-American voters that he won't actually stop supporting Israel, and part preparation for any future diplomatic talks with Iranian regime to show that he is not a pushover. But what was unsettling was his openness to start another preemptive war with a country that at best even if assuming they develop bunch of nuclear weapons will be just a minor strategic threat to US vs. a real one in a military sense or as some refer to it as existential threats.

Related Article: Obama vs. The Lobby

WE DID IT

Although I for one didn't do nearly as much as many other volunteers for this campaign but still as a very small contributor it sure was great to see the work of this grassroots movement actually paying off.

Of course getting the nomination is great, but there is still much work to be done. Not only on making sure Barack Obama wins the general election, but also and more importantly making sure that he does not veer away from the principles that he touted, and holding him accountable to what he promised everyone.

In the interim much work needs to be done starting with trying to bring on board Hillary Clinton supporters to unify the party and register new voters. In my opinion based on the exit polls from the primaries in March it does seem as the 20-30% of Hillary Clinton's supporters may not 'at this time' be open to supporting Obama. This amounts to roughly 5 million voters. Ideally you would want to unify the party by having these disheartened voters on board, and given Obama's speech tonight and the way he has been running the campaign it is clear he is trying his best to unify the party.

Of course realistically short of including Hillary Clinton as a VP, no matter what he and others will do and say some of those voters will either stay home or vote for either McCain or Barr. Which is why I am sure David Plouffe (campaign's number cruncher) is at work guessing in which states these voters are residing. Whether they are mostly in battleground states or states that the electoral outcome will not be dependent on their support.

Embracing or Appeasing w/ Ahmadinejad

Two important points that are not being mentioned in all of the rhetorics about Obama embracing and now appeasing with the 'Hitler du jour' Ahmadinejad is that first he is not the commander in chief or as the Iranian regime refers to it as the Supreme Leader (title held by Khamenei). More importantly even if he does have a significant role in Iranian foreign policies then if in fact Obama is elected and takes office, only 4 months later Iran will have its own presidential (s)election. Where given all the economic and social turmoils there and more importantly the strife among the insiders the odds of Ahmadinejad getting re-elected is very low. Thus he may not even be around for this supposed embracement!

My guess would be that in 2009 Iranians will not only not be boycotting but instead may turnout heavily for the presidential (s)elections as both they and the insiders running the show will be motivated by the possibility of improving relations with a U.S. administration that is led by someone who is not so fixated in attacking them -- like Obama. So when it is all said and done if Obama is elected his visit with an Iranian president in mid to late 2009 will be with a more pragmatic person like Larijani.