______________BP______________ __________Too Big to Fire__________

Government to BP Oil:  “You’re fired!”

It won’t happen.

_________________________________________________________________________________

Let’s play back the tape and see what the recurring theme is:

Investment and Mortgage Banking – Too Big To Fail

Health Care System – Too Big to Fix

American Automobile Industry – Interconnected Industries Too Big to Let Die 

       and, most recently:

Big Oil Blowup –  BP Oil Technology Too Complicated for Federal Takeover – Hence, BP Too Big to Fire

It is not a curious matter that none of the above occurrences represent government that is too big.  Rather, they represent corporate bungling on a scale so immense that government ended up being the controlled and not controlling one.  The very nature of larger and larger corporate size through loosely regulated market consolidation has, with greater frequency, backed the Federal government into a corner.   The government in case after case has essentially been forced  to reactively capitulate to corporate fumbling, incompetence, and other sorts of mishaps;  because to not do so would cause even more harm to its other constituencies.

A corporation’s successful development in America is a race to be the first (or second) to the top.   To be the first (or second) is usually the formula to be the biggest.  Entrepreneurial discovery,  innovation, and product development is a race to the patent office, then to the venture capitalists and banks; and, finally, a race to go public.  If a company can be the first to go public, it can be the first to generate the massive funds to scale up and get its name and product out there first.  This is immensely important because it  provides the means to dominate the market by acquiring its smaller, but potentially dangerous, competitors.  It’s not that competitors products wouldn’t prove to be better, it’s usually that the competitors are smothered by the avalanche when beaten to the punch.  The losing competitors are usually left the scraps of only being able to eat around the edges of the big, new pie.  The slow, chiseling background sounds of competitors are  just a reminder to the winner that it needs to continue its voraciousness to dominate.

An inevitable result is that most industries mature into a couple or maybe a few dominant players.  These dominant players, in effect, end up by virtue of their early success in controlling large parts of societal infrastructure.  The reliance upon this infrastructure is usually so great and so widespread that even minor disruptions, glitches, or upheavals of the dominant players are immediately and widely felt. 

Recall a while back when Twitter had a very brief technical mishap that disrupted its service.  Half of the United States seemed to go aflutter or atwitter over this.  Think of brownouts or temporary power outages by utility companies, cellphone system mishaps, or internet service provider interruptions.  These are relatively small inconveniences that cause palpable public panic attacks.  When e coli or salmonella outbreaks threaten, it causes systemic fear.  Bad milk, tomatoes, apples, lettuce, spinach, or beef cause havoc throughout society because of the reality that big corporations control so much of the food sourcing.   If Tyson Food has gas, the chicken industry burps in disharmony. 

When the scale of problem becomes a notch or so higher on the calamity scale, all hell can (and does) break loose.  I think that it’s time for the United States to take a necessary and healthy step forward and begin to regulate the extent to which a company can gain market share.  We have seen more than enough of the steroidal corporations that dominate to the point of societal damage.  The benefits to society of the economies of scale have a ferocious proportional step-brother – the massive disasters that occur when the incompetent or greedy side of scale reveals itself.  These corporate catastrophes not only paralyze society; they render government virtually impotent.

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Published in: on May 28, 2010 at 6:38 pm  Comments (3)  
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__ The Senate Financial Overhaul Bill __ For Consumers, It’s a FinReg Flop!

 

On April 19 I wrote an article critical of an amendment proposed by Senate Durbin to the Senates’s FinReg bill which would have capped the interest rate ceiling on consumer loans at 36%. Senator Durbin said that he tried to pick an interest rate high enough that even the biggest banks could not object.  Guess what?  They objected.    

Senator Durbin did not get his way with his 36% interest rate cap.  What the American public got instead was a kick below the consumer belt by Senate Republicans.    According to Reuters, the Senate  gave a 35 -60 thumbs-down vote on the Senator Sheldon Winehouse amendment, that could have put the brakes on predatory consumer loan lending.  What the Senate did for consumers was to let the large national banks, which do most of the credit card business in the United States, continue to be allowed to charge basically any rate anywhere that they wanted.  Their rate limitations, to the extent that there will be any, will largely be determined by the laws of corporate friendly Delaware and South Dakota which, essentially, have no interest rate limitations for consumer loans.  States will not be allowed to set their own interest rate caps within their states on lending done by national banks.

I haven’t looked at the analysis of the Senate vote, but I think I can safely stick my neck out and say that the 60 votes were overwhelmingly Republican ones.  If they want to vote their conscience for special big banking interests, then so be it.  But voting against an issue that gives the states more regulatory rights doesn’t quite jibe with the Republican Party line – that is, unless it is convenient to do so.  The Winehouse vote just confirms that the Republicans use state’s rights’ issues only when it is politically expedient (Bush-Gore comes quickly to mind).  I guess that there isn’t a constitutionally based principle in their bodies when it goes against their Wall Street buddy-banks.  It’s sickening. 

 Unless the House of Representatives does something drastic in the reconciliation process (don’t get your hopes up), the die is cast.  Of course, that means that we can look forward to endless TV commercials; mail solicitations will start rolling again; and people will continue to get fleeced.  But according to 60 Senators, that’s OK.  In fact, not was it only OK, they pressed the button that will make it happen.

I wouldn’t count on increased disclosure on credit card statements to do much of anything to alter the consumer loan landscape.  You don’t have to put in capital letters on the front of someone’s credit card statement that they will likely get in financial trouble.  They already know it.

PRISON POPULATION EXPLOSION (Reversing the Trend)

The Round House – Stateville Correctional Center – Joliet, Illinois

  

It is comforting to reflect that the disproportion of things in the world seems to be only arithmetical.                  Franz Kafka

 

The total number of prisoners in the United States is staggering.  

2,304,115 people were in prison in this country as of 12/31/2008 according to the U.S. Bureau of Justice Statistics.   That’s 753 people in prison for every 100,000 of our population –  just an astounding number.  That’s a lot of devastation for a lot of families.  In fact, it represents a lot of devastation, period.  What on earth has happened to produce such a societal disaster?

As  incomprehensible as it may sound, the United States has almost as  many prisoners as China and Russia combined, even though their combined population is almost 5 times larger than ours.   It is difficult to make much detailed comparison, however, because of the difficulty of obtaining accurate information from two countries not known for their openness.    Even allowing for a liberal comparative adjustment because of the lack of transparent statistics, the United States presents an alarming, anomalous case.  Russia is the only large country that has a per person ratio anywhere near ours.  Their ratio is 609 prisoners per 100,000 population.

Perhaps a comparison with our close ally, The United Kingdom, may offer a clue.  Surprisingly, for a country with similar values and a broad diversity of population, we discover an even wider comparative divergence than from that of the Communist totalitarian countries.  The UK at 4/30/2010 had 85,086 prisoners from an estimated population of 55 million, or 154 people in prison for every 100,000 of population.  Alternatively, the densely populated country of Japan at 12/31/2008 had 80,523 prisoners from a population of 128 million, or a mere 63 people in prison for every 100,000 of population.   It’s hard to do anything but speculate about what the huge disparities are between the United States and the rest of the world’s prisoner numbers.  

In spite of the disproportionately large prisoner population of the United States, there is a common trend amongst all the countries.  Prisoner populations have dramatically increased in all of the countries over the past 15 year period.   In the 15-year period beginning in 1992 with the Clinton administration through 2007, the United States prison population increased by about 1 million people, or a whopping 77%.  The UK’s percentage increase over the same period was 79%, Japan’s 85%, and China’s ~50%, with Russia trailing at a 21% increase.   These are large percentage increases by any measure, and there surely are some sociological studies to explain some of this phenomenon, but I want to look at the issue in a different way.  Instead of a hunt to find the best statistical studies, I want to race away from the empirical, and look to a more theoretical approach. Again, I would like to reprise Kafka, who had this to say,

In the fight between you and the world, back the world.

At least over the past 15 year period, it seems that Kafka has it dead right.  Society has gotten the best of the individual.  I don’t think that one could argue that the individual has become less noble or more savage in a mere 15 year period.  Rather,  the balance of power as between the two has shifted.  From this perspective, one would have to conclude that something in the nature of the individual’s attitude toward his or her political obligation to the government has markedly changed. More people have found more reasons to disobey the government, and those reasons have had their consequences.   

Currently, there does not seem to be any political will to do anything about the political trend.  The maintenance of a prisoner costs about $ 25,000 annually.  Quick arithmetic puts the United States cost at 57.5 billion dollars.  Some estimate that the current annual cost is actually a higher amount, approaching as much as $ 70 billion.  Of course, with rapid growth in prison populations, the government has not been able to keep up with prison building to accommodate more and more people.  At 12/31/2008 the occupancy level (based on official capacity) at prisons in the United States ran at 110%. 

The lack of political will to effectively address this issue, in spite of occasional rhetoric, is alarming.  It is unreasonable to believe that there is any citizen in the United States who wants more and more American resources (tax dollars) to be committed to building more prisons to house more prisoners.   I do not believe that this is a national goal.  Yet the societal ills causing these problems are, essentially a political non-starter. 

I would like to challenge the body politic to begin discussing the relationship between the individual and the society such that the trend lines might start going in the opposite direction.  The cost, the pain, and the inevitability of continuing on this current, unsettling path is a fearful notion to contemplate.  The sure and steady increase in the prison population is evidence of a society alarmingly out of kilter.  The solution cannot continue to be more prisons.  That is an insane course, and society cannot afford to continue to get it so wrong with its people.

Note:  Most of the statistics above were taken from or derived from information published by the King’s College of London in their “World Prison Brief.”

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Published in: on May 16, 2010 at 8:49 pm  Comments (12)  
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THE KAGAN CHRONICLES

President Obama has appointed an eminently well-qualified nominee in Elena Kagan to be the next Justice on the United States Supreme Court.  It is a bit odd that she has had aspirations her entire life to become a member of the Supreme Court yet, for some reason, chose a career path where she has never actually been a judge.  One cannot help but wonder why her career has meandered in so many directions, but I am sure we will get an answer during the nomination hearing.  No doubt there will be many questions and musings on the matter.  At this point, I guess it would be better to stay curious and refrain from judgment.

The last 5 failed nominations to the Supreme Court were all made by Republican Presidents. Nixon had failures with Clement Haynsworth and Harold Carswell primarily because of the nominees’ tracks records with respect to civil and women’s rights.  Reagan had a notorious and somewhat unexpected  failure with Robert Bork for two reasons – his advocacy of constitutional originalism and his role as acting Attorney General in the firing of Archibald Cox in the Saturday Night Massacre.  Reagan also had a failure with Douglas Ginsberg, whose name was withdrawn, after he confessed to having smoked some dope back in his student days.  And, finally, George W. Bush had a failure with Harriet Miers when it was widely determined that, in addition to having never been a judge, she was simply unqualified for the position.

With media scrutiny so intense since the days of LBJ, one wonders why the vetting process for High Court nominees has been so poor.  One would naturally think that a Supreme Court nomination is an act that the Office of the President would want to spend some considerable time planning – for example, similar to national disaster relief contingency plans.  On the other hand, maybe that is exactly why it doesn’t work so well.   Judging from the national responses to 9/11, Katrina, New Orleans, and various other calamities, the Executive planning process has not worked so well there either.  On the other hand, maybe a nomination is a different planning animal entirely.  It could be that until the spotlight is truly on someone, you just never know what is going to happen – either from within or from beyond.

The advice and consent process that we have all come to be so familiar with, particularly since the Bork days, could best be described as an iterative and monotonous one and not purely a contentious one.  The process never seems to get re-scripted; it just seems to be re-played over and over.  The Senate Judiciary Committee questioning process itself has been honed to almost a precise formulaic set of questions – many probative, some just plain annoyingly unanswerable.  In the former group we can expect interrogatories on judicial activism, legislative power,  due process, the Establishment Clause, and federalism with respect to the Commerce Clause and the 14th amendment.  In the latter, we will hear probings about gay rights, abortion, campaign financing, and other constitutional issues likely to be confronted by the Court now or in the near-term.  Bottom line is that the nominee needs to be well-prepared in constitutional theory and case-law, show a calm and even judicial temperament, and show some signs of just being oneself  (but not overly so).

Luckily for this nominee, the Senate has been (and continues to be) overwhelmed by financial matters of immense proportion.   Having been through the throes of the financial meltdown, TARP, auto manufacturer bailouts, health care reform, and the synthetic derivative mess with Goldman Sachs and the investment banking bunch, the nomination process might be a welcome relief for the Senate to take a break to do something that it knows how to do.  To say that financial oversight has not been the strong suit of the United States Senate is not an understatement.  That has been fully confirmed during the recent hearings of the Senate Permanent Subcommittee on Investigations.  On the other hand, it could cut the other way for nominee Kagan.  Some of the Senate’s other political problems might roil over to her hearing.  Let’s hope that will not the case.

Just for fun, how about some predictions:

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Illinois State Capitol Photographs WARNING! REAL UGLINESS LURKS.

I have lived in Springfield, Illinois for the past 35 years and, for all its warts, I love it and plan on staying.

Aesthetically, however,  it has its problems – not the least of  which is the area surrounding the Illinois State Capitol Building.  I am not the only one to recognize the visual shortcomings there as well as some adjacent downtown areas.  In the mid-1970’s Springfield’s downtown area went through the same convulsions and dislocations that most all cities experienced when developers started building indoor shopping malls. 

Recognizing the ills that had fallen on central Springfield, there have been an increasing number of merchants, civic leaders, and local governmental people who have made great inroads in revitalizing the heart and soul of downtown.  Their work has not been easy, nor has it necessarily been rewarded.  Nevertheless, a lot of dedicated and stubborn individuals keep trying.  A not-for-profit organization, Downtown Springfield, Incorporated, has also been vitally instrumental in focusing on the central business district of Springfield as the most essential core of our community.  I commend them for their efforts.

Springfield, as the capital city of Illinois, also plays host to much of the State’s government.  As such, the government’s architecture, officials, and employees play an essential part in the day-to-day activities and life of the city.  Its downtown presence and importance cannot be understated.  It is always there, always looming.

The center and seat of State government revolves, of course, around the Capitol Building.  Its stature dwarfs its surroundings, but not overly so.  It represents what it is supposed to represent – the power of the people and their State government.  No problem with that.  Other problems have developed though.

Over time, much of Illinois’ governmental operations have, for political reasons, been shifted away from Springfield.  Much of the work of State government has been transferred to regional offices throughout the State.  Even more work has been permanently relocated to Chicago.  The effect of this decentralization of State government has left much of the infrastructure of the city looking like, in fact being, an abandoned carcass.  This has left the remaindermen of Springfield to clean up the mess.  It’s a pitiful state of affairs, but this is where we are and what we are left with.

I decided to take a half-dozen photographs of the State Capitol Building today to give a sense of what we, as residents, see everyday.  We may not always notice it, or may just overlook it, but there is some big-time ugly surrounding that big-domed building.

I did not try to get artsy with the photos, nor did I try to go overboard to show the worst of things (such as standing aside a dilapidated building or a dumpster and then framing the Capitol building).  However, I have taken the liberty of adding some commentary.  Enjoy!

This picture is from the perspective of the revitalized (?) Capitol promenade, so to speak.  While it may be visually  unappealing because of the overhead railroad structure, it is precisely this overhead track which returns so much affection; it is the only place downtown which enables one to avoid the long waits of Amtrak and other trains rambling through city center.  This underpass is much beloved.

Recently the owner of this track, Union Pacific Railroad, proposed more than doubling the daily number of freight trains rambling through the city  to 45 or so.  It seems that Union Pacific, which is the largest landholder west of the Mississippi River and second largest landholder in the United States (the largest is the United States itself), did not want to be inconvenienced to use its resources to buy new right-of-way landholdings outside of the central city.  Currently, their plan has been shelved while another route through the city is being reviewed by officialdom.

This is on the Illinois State Museum side of the Capitol.  What can I say here that the picture doesn’t?

 Are trees and asphalt mutually exclusive, or do you just have to live with what you get?

Where have all the cars gone?  It’s Monday; it’s a newly surfaced lot; but it’s lonely.

Rough winters require a lot of cold patch, but you do what you have to do.

Even Le Corbusier could not have built an uglier building than the adjacent Stratton Office Building (on right), nicknamed the SOB – the building that is, not the former governor who was nicknamed “Billy the Kid.”

. . .  and the wheels of progress just keeping on spinning.

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WHAT HAPPENED TO THE BOWLERS? The Middle Class Disappeared. That’s What.

According to Bill Abercrombie in a story he calls Number of Sanctioned Bowlers Dropped, the number of registered bowlers in the United States Bowling Congress has fallen from over 9 million in 1979 to about 2.3 million today.   That’s quite a drop by any measure.  Naturally, the bowling industry tracks these statistics quite closely and has tried to adjust its business model to cope with what seems to be a steady decrease in the popularity of bowling leagues.   Mr. Abercrombie cites that the, “reasons for the decline vary from other sporting venues being available, decline of the Baby Boomers, the amount of entertainment money accessible to the middle class, fragmentation of the family and the current economic climate.”  His citation is one that could have been written 30 years ago, however.   Bowling started in its death throes when:

Ronald Wilson Reagan was elected President of the United States in 1980.

I have fond memories of the explosion in the popularity of bowling in the 1950’s and 1960’s.  In about 1960, I recall my father taking me to see the opening of Rosewood Lanes in North Pekin, Illinois.   I remember that the joint was so packed that we could barely squeeze in the front door.  As a part of their grand opening, the proprietors invited  the most famous bowling team in the world (ever) – the Budweiser team from St. Louis.  It was exciting stuff.  In 1958, this team of bowlers, which included Don Carter, Ray Bluth, Pat Patterson, Tom Hennessey, and Dick Weber scored a team record of 3,858 pins, an America Bowling Congress record that stood for over 30 years.  In bowling circles, these guys were considered the equivalent of the 1927 or 1961 New York Yankees.  Don Carter, a member of that team, would later become the first athlete in any sport to receive an endorsement deal of  1 million dollars (from Ebonite Bowling Balls).   All five of these bowlers had long and successful individual bowling careers as well – and all were eventually  inducted into the American Bowling Congress Hall of Fame. 

 I know that it’s hard to believe it now, but bowling in the 1960’s had a big wow factor.  Most people in any walk of life can probably remember having fun at some point their life bowling with friends or family.   But now, a bowling alley is not the first place, nor even the last, that most people think of when contemplating an enjoyable recreational diversion.  I may or may not be typical,  but I have not been in a bowling establishment for at least 15 years.  The fad, if that’s what it was, is basically – just passe.  

Bowling has long  been linked to the blue-collar man.  Construction and factory workers in fact played a huge part in the rise of its popularity.  As the economy boomed with new construction, new automobiles, and almost everything else new after WWII, men earned enough money to not only support new families, but to take part liberally in leisure activities.  Bowling seemed to hit the spot for “a night out with the boys,” and the bowling alley developers and entrepeneurs caught on quickly.  Thousands of new bowling alleys sprang up everywhere, and bowling quickly developed into family fun with organized leagues for women and, also, children.  I recall a weekend bowling league that I joined as a child with my cousin – we all wanted to be pro bowlers.  Then, over a course of years, it just gradually began to peter out.  So what happened?

First, I am not about to completely blame the demise of bowling on former President Reagan.  For all I know, the amiable dunce may have liked to bowl., and may have been a bowling proponent. 

  However, for 8 consecutive years the Reagan administration  did about everything in its power to cripple the middle class blue-collar worker.  Aside from its notorious union-busting, it decimated (with Democratic Congressional approval) the steep progressiveness of the income tax rates, which had worked so well post-war for the middle class; it unnecessarily began systemic de-regulation, which consolidated corporate entities and  power (which continues to kill consumers); and it leveraged up government debt to fund what was a semblance of prosperity.  The middle class paid a dear price for Reagan’s follies, and the chasm between the bowlers and non-bowlers began a process of widening , which has not yet stopped.

It wasn’t and isn’t all about Ronnie though.  Television coverage hurt the business and popularity of bowling as much as anything.  Bowling is not a spectator sport. Somehow, it just doesn’t translate to an exciting viewer format i.e.  bowler picks up ball, walks, rolls ball toward pins, knocks down pins, and then does it again.  The commentary never was very exciting either, such as, “I wonder why he has a five-step approach and not the conventional four-step?”  I believe it all equates to the definition of viewer monotony.  Without successful TV coverage, other recreational sports managed to push bowling further and further into simply a niche activity.  With lousy TV ratings came almost no big advertising money, and then, no new business.  Hence, fewer and fewer bowlers were attracted to the sport.

Another theory about the decline of bowling in the United States involves a strange conspiracy theory about Japan.  In the 1980’s it was difficult to find new maple furniture anywhere in the United States.  The rage in the ’80’s seemed to be country oak or a more formal cherry.  Every piece of furniture that my parents purchased in the 1950’s and 1960’s was hard rock maple.  But when they wanted to add to their repertoire in the 1980’s, they were told that maple was not available. When they asked, “Why?” they were told that the Japanese had cornered the market for maple because of their insatiable appetite for the construction new bowling alleys.  Setting the conspiracy theory aside, it does seem on the face of it that bowling fever raged in Japan concurrently with the rise of their blue-collar workers in the explosion of their auto industry.  This, of course, paralleled America’s decline in the auto industry. 

If I have made any point at all about the relationship between bowling and blue-collar middle class workers, I would like to punctuate it with one last thought.  With the ascendency of Asia, and China in particular, and their determination to create at least some sort of middle class in the near future, I have a recommendation for investors out there.   Buffett, Berkshire, are you listening?  It’s going to be bowling in China.  If not now, then soon.  It might be time to get your money down.

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____CHITTY CHITTY BANG BANG____ SHITTY SHITTY BLANKFEIN

Senator Levin: Boy, that Timberwolf was one shitty deal.              

Senate Permanent Subcommittee on Investigations (2010)

Caractacus Pott: And after that, Vulgaria became a free country.

                                                Chitty Chitty Bang Bang (1968)

I have a weakness for watching special televised hearings conducted by the United States Senate.   I don’t know exactly why.  Maybe it’s because the choreography is so predictable regardless of the dancers.  Maybe it’s because I like feeling in the thick of the great debates in American politics while  just sitting in my robe eating donuts.  Maybe it’s because I truly believe that these shows are the ne plus ultra of caricatured theatrical debate.  Or, maybe, it’s because I continue to have hope that America can work out its problems right in front of my eyes. 

Other than the news media, I don’t really know how many other people share my interest.  After watching a good Senate hearing session, I am usually fired up enough to want to discuss it with somebody – really anybody.  I usually discover, however, that most people I know either didn’t have the time to watch or just plain didn’t care to watch.   Most of my follow-up Socratic dialogues, therefore, are simply my own loud rejoinders directed to the TV commentators.  

The Goldman Sachs hearing was, to my mind, one of the best hearings of all time.  It was delivered in three episodes, all of which occurred in one day (I understand that there is a lot of other work being conducted in the Senate).   For whatever reason, the Senate wanted to get this over in a hurry – a slash, burn, and get out of there sort of thing.  I believe that they had a good reason for this – namely, that the longer they questioned their witnesses, the more that they would show how little they knew about Wall Street and its machinations.  They judged that just about perfect.

One of my favorite portions of the debate was a segment of questioning by Senator McCain.  He went into a dramatic trance, slowed the meter of his voice down to where it just put you on the edge of your chair . . . waiting.   It turned out to be a wait in vain.  While he had some pointed questions that were building suspense about a particular deal, he didn’t have any idea what it was about when the Goldman witness interrupted his line of attack.  McCain, suddenly realizing that he was on the verge of confirming that this line was just a brainless monologue,  awkwardly stopped and yielded back to the Chairman.  It was a pitiful performance from him, but we’ve seen it for years.  Remember when he stopped his presidential campaign just before a scheduled debate to buzz into Washington in the midst of the financial meltdown to intervene in the crisis.  When he arrived at the table, he just sat there like the lightest of the lightweights – without so much as a clue about what was happening and what needed to be done.   

The attention-getting highlights though were provided by the Chairman of the Subcommittee, Carl Levin.  Senate decorum suffered considerably when he repeatedly uttered the “sh” word – over and over again.   I think it was entirely proper for him to use the word once, when he quoted the Goldman email the first time.  But to repeat the word again and again?  I am not sure if there has been a definitive count of the “sh” word that he used in the hearings, but some have said it was 13 times.  I’ve also read 30 to 50.  I listened to most of the hearing and would guess that the count is closer to 13, but it could have been 50.  It was way too many times more than once.

There was another word that was repeated ad nauseum during the hearing.  This one did not come from the Senatorial side but, instead, from the Goldman people.  The word “risk” was used by Goldman so often that it got to the point where I though some smart Senator might call them on it.  Over and over again Goldman interjected the word.  They used it euphemistically in every conceivable way.  None of their clients ever lost money – they just assumed too much risk.  Goldman never made any money – they just reduced the risk of their negative positions.  As a market maker, Goldman matched the risk that one client wanted to assume with the risk of another.  And if one client’s risk could not be matched with another client, then Goldman themselves assumed the risk – that is, until they decided to offload the risk and “get closer to home.”  You got the feeling from Goldman that it was a caretaker of  risk for the world, simply caught as an arbitrageur in the midst of an extremely volatile and risky situation.  One of Goldman’s main witnesses was, in fact, their head of their risk management department.  Wow, did the Senate Committee person responsible for that witness selection get suckered in advance by Goldman’s risk rhetoric, or what? 

All and all, Goldman used the word “risk” hundreds of times.  How could anyone not notice this?  Not one of the Senators did.  They were too wrapped up in the scripts prepared by their staffs.  There was not a thoughtful questioner in the entire bunch of Committee members.  If any of them would have just listened carefully to something other than their own babble, they just might have been able to penetrate the digression and repetitive shield that Goldman had erected.  But, not a chance.  The hearing turned out to be a marathon – but a marathon that was unnecessarily run in circles.

Now – don’t you wish you would have watched?

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_________WIND FARMS_________ Seemed like such a great idea until they showed up near my house

 

Actually, they haven’t shown up near my house — but near enough.  And the place where they have shown up has severely strained my sensibilities.

67 of these monster wind towers have shown up on a beautiful stretch of farmland in Logan County, near Lincoln, Illinois, not far from Springfield, and the view to my eye is sickening.

The best that I can describe them is vexatious to the spirit.

You can see the wind turbines littered along either side of Route I-155 on what has always been a stunning, scenic view.  Ordinarily, there is not much aesthetic value in driving along on the roads of central Illinois.  It is usually so flat and monotonous that  driving any distance at all can be quite tedious.  For example, I have always considered the drive on I-72 from Springfield, Illinois to Champaign, Illinois one of the most boring stretches of land in the Midwest.  The 90 mile trip would put a cup of coffee to sleep.  It is a flat corn-and-soybean-scape that can dull the senses in about 30 minutes. 

The drive from Springfield to Lincoln has always been a little different from the typical road trip around here, and a great deal  more interesting.   For example, there is the fairly dramatic landscape feature of the community of Elkhart, Illinois.   The community is built upon a an unusually large hill that has a distinct visual appeal along with a rich history.  It also sits aside old U.S. Route 66, as most of this section of the newer road does.  The most beautiful part of this 30-mile stretch of road from Springfield to Lincoln, however, is the dramatic fall and rise of the land to a vantage point that is just short of spectacular.  As a child, I always dreamed that someday I would be able to buy a piece of land that would be perched atop this vista and it would enable me to see all the storms and tornadoes approaching for miles.  This description is not to mistake this property for the grandiosity of Yosemite, the Grand Tetons, or Sequoia National Park, but for central Illinois, the horizons don’t get any better than this.

So where is this giant wind farm placed?  It is scattered across the very land that is the most spectacular.  For my money, the sheer number of these wind towers has aesthetically ruined this area.

Surprisingly though, many of the people who actually live in this area, including many that were born and raised on this land, do not share my opinion.  Quite the opposite, it seems that their testimonials are by and large positive.  As described  in a very good February 6, 2010 article http://www.sj-r.com/carousel/x655690726/So-far-so-good-for-people-near-Logan-County-wind-farm by Chris Dettro in the State Journal Register, most people living on or near these wind turbines find them soothing, almost hypnotizing.  They describe them as more quiet than the wind itself.  Stress reduction, problem-free, good for the community, good for the tax base, and on and on . . .  are their narratives.

These land owners are also quite well compensated with payments for use of their land.  I am not sure to what degree the compensation factor influences their opinions, but if they are happy about their compensation, it would be hard to expect them to be negative about the turbines.  After all, so long as the towers are innocuous or so long as they just eventually became part of their almost invisible world, much as a new barn or silo might, it is probably to hard to argue with them.   It is hard to say when you don’t actually experience it like they might actually experience it on a day-to-day basis.

American people are inventive, innovative, and problem-solving people.  Deep down, I believe that most of us want to manage our energy needs in a smarter way that lessens damage to the planet.  I think American people want to embrace new ideas, new technology, and other measures which will continue to sustain the scarce resources that we have.  It’s unclear for our society about what to do next, however.  Should it be solar, wind power, nuclear again, a judicious combination of what we now have, or some other admixture of current resources along with attempting the novel?  The world is definitely at a crossroads now as to what is the next, best development, and how to pay for it?  Perhaps wind power is part of the solution.  Or, perhaps, it is too early to tell.

I continue to wonder, “Are we really thinking these things through, or are we in a frantic, semi-contrived survival mode where, not only now but in the future, we risk looking like a decrepit Siberia?  After all the cellphone towers, mega-watt transmission towers, and giant wind turbines have gone by the wayside for improved power-creating and transmission technology, will we be left with nothing but a horrific landscape?

I hope not.  Green needs to be more than that.

                          Montmartre: the Quarry and Windmills
                                           Oil on board, 1886
                               Van Gogh Museum, Amsterdam

Even through the eyes and brush of Van Gogh, windmills are ugly.

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—– SENATOR RICHARD DURBIN —– JUST CALL ME MR. PERFECT 36

  

Mr. Perfect "36"

 “By a ‘silly’ theory I mean one which may be held at the time when one is talking or writing professionally, but which only an inmate of a lunatic asylum would think of carrying into daily life….It must not be supposed that the men who maintain these theories and beliefs are ‘silly’ people. Only very acute and learned men could have thought of anything so odd or defended anything so preposterous against the continual protests of common sense.”       C.D. Broad

I woke up fresh today, grabbed the early morning newspaper, started sipping my orange juice and nibbling my lightly buttered toast, when I was startled, not by a knock on the door, but by a story about Senator Richard Durbin’s news conference yesterday.  The article  in the Senator’s hometown newspaper, The State Journal Register in Springfield, Illinois, stunned me.  In it, 

 http://www.sj-r.com/top-stories/x1042540416/Durbin-to-introduce-bill-aimed-at-banks                                                                                                                                                                                  

 Senator Durbin said that he has introduced language into an amendment on a financial reform bill that would put a ceiling on interest rates.  He is quoted as saying, “I tried to take a number I considered to be so high that even the biggest banks couldn’t argue with it.  I said we couldn’t have an interest rate over 36 percent. . . . I think we ought to have an absolute limit.” 

Please tell me that I’m dreaming. 

After I caught my breath, I sat down to think about interest rates a bit.  That’s not a fun thing to do on an early Monday morning.  For starters, any discussion of interest rates leads directly into the abyss of laws covering the subject.  And, of course, laws covering interest rates can be complicated state or federal ones, depending.  Suffice it to say that I am not a lawyer and immediately disclaim anything here that might be construed as legal advice.  I neither offer nor suggest any legal advice, and recommend that you consult with a licensed attorney if you need or want such services. 

Now, back to just after my morning orange juice.  On the face of it, I think it fair to say that, in the United States, interest rates can vary from ZERO to, say, (um, Senator Durbin) 36%.  If you toss into the interest rate computations the rates of the pay-day loan outfits, pawn shops, and the title loan gang, you most assuredly have situations where the APY is higher than 36%.   Whatever the Senator’s legislative intent, to offer interest rate ceiling legislation to which no bank would object is, to put it mildly, surely usurping the voices of his constituents.  I mean, who in the world can conceive such a thing other than someone almost incomprehensibly out-of touch.  To me, his premise is just staggering. 

What if one begins the discussion of interest rates with the premise of “fairness” and not the premise that “no bank can to object to a ceiling of 36%”?  How then does the dialogue proceed if reasonable people of all ilk can begin with an attempt to decide what a fair interest rate might mean?  Might that be the place to start a discussion?  Surely that is a better alternative than what the Senate Majority Whip has pulled from his hollow hat? 

So, what is fair?  I doubt that there is an answer to that.  Maybe “fair” is a just place to start a discussion.  Or maybe, it’s just a concept to keep in the background when discussing rate ceilings because, after all, aren’t loan arrangements entered into voluntarily?  Well, of course, they are; but that spirit of volunteerism can lead to bad places. 

When I was a much younger man, I picked up a copy of a personal financial management sort of book.  I do not recall the author.  I seriously doubt that it was a best-seller.  I recall it being a patronizing thing – warning one away from the financial dangers-that-be out there in the cruel world.  At the time, I imagined that this book was written by a very boring person with a very boring life – a classic nerd, if you will.  However, there was one bit of advice he gave which jumped off the page and seemed directly aimed at me.  He wrote, “Don’t ever buy a consumable item with anything other than cash.  That way, you’ll never end up paying for something long after it has been used.”   That made perfect sense to me.   Maybe you, too? 

Don’t we all wish that we all followed that advice?  Well, no.  Life wouldn’t have been nearly as much fun – or dreadful, at times.  Let’s just move on here and admit that we are a consumer-driven society in a consumer-driven world and what makes the wheels of innovation and progress go round is the ability for the consumer to borrow.  Take away credit, the wheels come off, the cart crashes, and we all are trapped under a big immoveable object with total loss of all mass and momentum.  The United States has about 2.5 trillion in outstanding consumer debt.  Consider, too, that Americans charge over 2 trillion dollars per year on the over 180,000,000 million credit cards out there.  Whew! that’s a lot of plastic.  Take that away and I don’t think anyone knows what would happen other than total economic collapse. 

So, we’re all stuck with credit.  Consumers are stuck with the lenders.  The lenders are stuck with the legislators.  And the legislators are stuck with the consumers.   That is, the legislators are supposed to be stuck with the consumers.  Unfortunately, Senator Durbin, it looks like we’re stuck with you instead of the other way around.  Maybe something is amiss here. 

Let’s discuss real interest rate ceilings for a bit.  As a citizen of Illinois, if I were to loan money to a friend or a neighbor, or some other entity, I would be subject to my state’s usury laws.  According to information provided at http://www.usurylaw.com/state/ the interest rate ceiling that I would be permitted to charge is 9%.   If I were to charge more than that, I would be violating the State law.  Further, if I engaged in practices in which I had established a pattern of charging more than twice my State’s limit of 9%, in other words 18%, I might be subject to Federal RICO statutes, and that might very well be a felony.  In street vernacular, I would be considered a loan shark if I charged more than 18% to my neighbor or friend. 

Ah, but Senator Durbin wants a Federal law for financial institutions, apparently of all types, to be subject to an interest rate ceiling of double what would be a Federal felony in his own state for a person or other entity regulated by his own State’s usury laws.  I read that the Illinois usury laws also are applicable to amounts owed in civil judgments.  But the Senator wants to legislate by Federal law an interest rate ceiling for financial institutions that is 4 times the amount permitted by his own state for civil judgments.  Apples and oranges, the Senator might say.  I say not. 

I have my own hollow hat and my idea on what is a fair interest rate ceiling.  I think the big banks might not like my number, and might want to argue with it. 

My number is 12% APY 

What do you think? 

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———— The TRIP to NOWHERE ———— on the TEA PARTY EXPRESS

The Tea Party Movement is neither a political party nor a political movement.  It is essentially a political tool of the Republican Party to run a series of anti-Administration trial balloons to judge each balloon’s political viability.

To-date,  the Tea Party has existed to promote events that have been exclusively, or some combination of:

1)  Anti-TARP

2) Anti-Tax

3) Anti Health Care Reform

                 or, flag-waving, quasi-patriotic celebrations, such as:

4)  July 4th events

5)  Tax Day events

6)  9/11 commemorative events

Protesting and waving flags seem to be the common denominator.  Screaming and outrageous signage is popular, too.

What is quite interesting is that prominent Republican, Sarah Palin, has jumped on the Tea Party Express.  One cannot help but wonder why.  I suspect that it is for one of two reasons.

 The first reason is that she continues to be shunted aside by the formal Republican establishment powers-that-be and is getting a little commupance.   I am quite certain that she is bitter about her treatment.  She has, of course, loudly complained of her rough handling by the Republican Presidential team during the 2008 election.    Quite to the chagrin of the Republican establishment, she continues to maintain considerable popularity among people of similar sentiment in spite of her bumbling, missteps, and lack of perceived political gravitas.  She, like most of the Tea Party people, feels that she has a score to settle with the establishment – Democrats, Republicans, and the corporate media alike.  This battle will probably not fare well.

The second reason, slightly at-odds with the first,  is that Palin wants to rehabilitate herself with the Republican Party by demonstrating that she can be out there in the midst of large groups of unhappy people and convert them to her cause and, thereby, the Republican Party.  In this way, by assisting the Republicans, she can be in-line for some sort of influential position somewhere down road.

I suspect that the Democrats are hoping that the Tea Party matures somewhat and develops its own identity.  If it does develop some sort of mature structure, one of two things will inevitably happen:  either the Party will disintegrate or be absorbed in some fashion by the Republicans.   The history of third parties and third-party movements in the United States has not been a good one.  The two-party system is so deeply politically and financially entrenched in American culture that it would take an unforeseen, almost cataclysmic, event to enable a third-party to take permanent hold.  And if that highly unlikely event or series of events would happen to occur, a more likely result would be the replacement of one party for another – a sort of dramatic substitution, rather than an addition.  A very nice history along with a wonderful little chart showing the disposition of third parties in the United States elaborates on this quite well at:

http://www.thisnation.com/question/042.html

At this point, the best case scenario for Democrats is that by the time of the 2012 elections the Tea Party will have matured; and, that it and Sarah Palin do for the Republican Presidential candidate  what Ralph Nader and the Reform party did to Al Gore in 2000.

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