Bill Stacey and Julian Morris of the International Policy Network have written an instructive document about the history of the current financial crisis. While much of the information in "How Not to Solve a Crisis" is already well-known to those of us who have been following the economic turmoil closely, some of the authors' thoughts on "deficiencies in recent policy making" are interesting and important:
• Better mechanisms are needed to manage the failure of large financial institutions, some of which may now be both too big to fail and also too big to rescue.
• Open ended guarantees to depositors and other counterparties are expensive and unsustainable in the longer term.
• The rights and hierarchy of investors across the capital structure should be clear and honored – not subject to arbitrary alteration by government.
• Closer attention to the rights of collateral providers and custodians in the case of failures can limit systemic risks.
• Hedge fund failures have not created systemic risks in this crisis and they should not be a target of policy action.
• Ad-hoc bailouts should be avoided, since they create ever expanding demands for further intervention.
• Much more thought needs to be given to the unintended consequences of over strict capital rules, rating agency privileges and rating based limits on pension investments.
CNBC is reporting that Mark Cuban, the bad boy owner of the Dallas Mavericks basketball team, has been charged with insider trading for a sale of shares in a company which was formerly called momma.com, a sale which apparently saved Mr. Cuban about $700,000.
The story seems to be that the company asked Mr. Cuban to participate in a round of financing which would dilute the then-current shareholders, including Cuban. Instead, armed with that inside information, Cuban simply sold his stock.
CNBC reports that Cuban intends to fight the charges.
This couldn't happen to a more deserving SOB, in my opinion. Cuban has been fined multiple times by the NBA (totaling over $1 million!) for such antics as going on to the playing floor to yell at a referee, then swearing during a press session after an NBA finals game.
Worse than that, from my point of view, is Cuban's role in producing the movie "Redacted", my review of which is entitled "'Redacted' is Repulsive", explaining how this film is some of the most profoundly "repugnant, repulsive, anti-American propaganda" I've ever run across.
I always give credit to people who got rich without inheriting money, but if there's anyone who epitomizes low-class nouveau riche, it's the juvenile braggart Mark Cuban.
If he is guilty of the charges, I hope he gets a substantial smack-down; he certainly deserves one.
Last week, the Republican National Committee filed two federal lawsuits challenging aspects of the Bipartisan Campaign Reform Act ("BCRA"), also known as McCain-Feingold, also known by many as an unforgivable assault on the First Amendment, the signing of which was probably the low point of George Bush's presidency. (He signed it while saying he believed much of it to be unconstitutional, a clear violation of his oath of office.)
For the full story on the lawsuits, please read my article at the Human Events web site:
I can't explain why, but I really enjoyed this video despite, or maybe because of its irrepressible goofiness.
Maybe it's my love of travel (having been to quite a few of the places in the video, including some of the most remote) and maybe it's just seeing something other than the farcical tragedy of our elections and the pain of recent months' financial markets.
And maybe it's because it reminds me of my brother, who traveled to Brazil to learn to Samba in Carnival shortly before his untimely departure from our lives.
In any case, thanks to "Where the Hell is Matt" for bringing a smile, even if a goofy one, to an otherwise trying time.
In my view, and apparently in the view of the Investors Business Daily editorial board, one of the greatest threats to America is the acceptance of the barely-capitalist model of western Europe...something that Obama's campaign rhetoric would lead us to believe he also supports in his desire to "spread the wealth around."
This IBD editorial makes a good argument as to why American must resist the push to be more like Europe no matter how sophisticated it might seem to economically illiterate liberals in Manhattan and San Francisco.
For today's primary reading assignment, I encourage you all (in the strongest way) to read this truly fantastic speech by the Rev. Robert Sirico, President of the Acton Institute, which he gave at Acton's annual dinner in October.
Despite Acton's overtly religious overtones, and despite the speech being given by a Catholic priest, this non-religious Jewish blogger found Sirico's speech to be something which would have made James Madison proud and which recharged my batteries to continue the quintessential American fight for liberty.
Thanks to FreedomWorks for posting this (once again) revealing article and video:
In a press conference Wednesday, Treasury Secretary Hank Paulson announced a change in the federal “Troubled Asset Relief Program” (“TARP”), saying that the plan would now center around capital injections into banks rather than the purchase of distressed assets.
While the change in focus may or may not be an improvement (I think not, actually), the fact that these big changes are happening and the handling of the TARP seems so chaotic gives very little confidence in our nation’s – indeed the world’s – short term financial future.
It was that apparent confusion at the highest levels of government, more than the particulars of what the TARP will be used for, which I blame for the market’s more than 400 point drop on Wednesday.
A process which seemed somewhat insulated from political pressures for its first few days became more politicized since then – and how could it not when Congress puts a $750 billion pot of money – starting with an early emphasis on forestalling foreclosures, despite the fact that the long-term success of capitalism requires financial punishment of people who make bad decisions.
The TARP’s purchase of preferred stock in financial institutions is a double-edged sword at best. We’ve already seen, with Fannie Mae and Freddie Mac, what can happen when government is given both motive and opportunity to influence the behavior of a corporation. The motive and opportunity for political shenanigans such as legislation favoring one company or group of companies (such as those in which the government owns stock) over other companies (such as those who either didn’t qualify for the preferred stock plan or who ran their businesses well enough that they didn’t need it) will dwarf the Fannie and Freddie conflicts of interest.
I don’t want to sound like a conspiracy theorist, but what is one to make of a government which has been dominated in financial positions by Goldman Sachs for years allowing their competitor, Lehman Brothers, to fail when Paulson and friends were bailing out everyone else in sight? From the most powerful financial position on earth, the former head of Goldman allowed a possibly-preventable rescue of Lehman, something which might even have been accomplished without putting taxpayers on the hook if Treasury had been more helpful in negotiations with suitors or offered a shred of financial support which would have been unnoticeable within the scale of the Fannie Mae, Freddie Mac, AIG, and even Bear Stearns rescues.
Separately, if a company feels that an investment by the government will then make it fall automatically “too big to fail”, the company would likely lose much of the discipline that fear of (corporate) death would impart. And why should they not feel that way? Look at the ever-increasing numbers being pumped into AIG. Look at the auto makers: Given a $25 billion loan, they just came back for another $25 billion…and the Democrats are giving them every reason to believe the money is coming.
The automaker bailout is an obvious sop to unions for their support of Democrats, just like the participation of the clearly unqualified Michigan Governor Jennifer Granholm on President-Elect Barack Obama’s economic advisory team.
But won’t that be as good an excuse as any once the precedent has been set that it’s OK for the government to bail out – or own – private companies?
At least, for the moment, Hank Paulson made clear that the TARP would only be used for financial companies and that automakers would not be participating. It must have occurred to the auto companies within the first 30 seconds of the announcement of the TARP that they all have their own struggling finance divisions. Indeed, GMAC, which is 49 percent owned by General Motors and 51 percent owned by Cerberus (they must be kicking themselves after doubling down by buying 80% of Chrysler 18 months ago, just a year after buying 51% of GMAC), is (or was) a very large player in the mortgage business, as if the car loan business wasn’t bad enough. So I presume the auto companies are looking for a way to claim qualification under the TARP if Barney Frank can send them $25 billion of taxpayer money some other way.
It’s no surprise to me that the stock market has been tanking for the past few days. I’ve predicted as much among friends and family. The TARP is getting holes poked in it. It might be incompetence or politics. But to be fair, it might also be that the situation is so chaotic and complicated that even the best minds in finance have to adapt quickly to changing circumstances and new information. Even if it is that best-case scenario, the prospect of a never-ending bailout combined with our having just elected a far-left government which will do everything possible to support unions even at great peril to taxpayers leaves no reason to expect the market to have any significant recovery for months. Add to that the deep recession we’re likely to have, and I expect the stock market (DJIA) to remain under 11,000 for at least two years, and probably under 10,000 for most of that time.
Maybe they can come bail out us shareholders. After all, we’re suffering losses that aren’t our fault. Isn’t that reason enough these days?
Beginning with exactly the sort of back-stabbing and double-dealing that anyone with a clue would expect from Rahm Emanuel, it's being reported by Drudge that Obama aides leaked details of a conversation between President Bush and Barack Obama.
Other web sites believe it was Emanuel himself who was the leaker.
I've written before about how the press is going to be destroyed by their fawning over Obama. It seemed like they were getting a little courage just before the election, calling Obama on his impossible math regarding his tax-and-spending plans.
And in a sense I don't blame them for running the story in that it didn't risk national security (something the NY Times has done far too readily in recent years). No, the fault here is with the utterly Machiavellian Obama team which is acting as if they're still in a campaign.
It is behavior like this which makes people like me, who want the best for our nation even if it's being run by someone whom we don't think is likely to bring out the best, to root for an administration's failure.
Rahm Emanuel is reprehensible...either because he leaked this or because he didn't prevent the leak. Unfortunately, I'm sure that's exactly the sort of boundary-free behavior for which Obama selected his new hatchet man. I predict that for all the cries about excessive partisanship during the past couple of years, the next two years will make that look like child's play...and the effect will be ugly for Democratic election prospects in 2010. At least, I hope that's the case.