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SEC Decision Raises the Bar For Corporate (Issuer) Disclosure on Sustainability Risks -- Another Huge Step in Bringing ESG Reporting to Mainstream Investment Management and Financial Analysis�

Mon, 01 Feb 2010 14:13:00 -0500

Friday, January 29 2010 --- An important shoe dropped this week � this one, a size 15 or more � in the rising and accelerating importance of ESG & Sustainability corporate key performance indicators and related factors to investment management and financial analysis, as well as for corporate senior executives, boards, and management specialists (e.g., investor relations officers, legal counsel, corporate secretaries, ESH managers, marketing officers). On January 27, 2010 the SEC Commissioners approved an �Interpretive Release� (guidance) on existing disclosure requirements related to business risk on the issue of climate change. (The vote was 3-2 along political party lines.) Note that despite the scare headlines from some pundits, the SEC did not make statements on, recognize, or endorse positions (pro or con) on climate change. It did not create new legal requirements or modify existing requirements. It did not refine the definitions of materiality to include �climate change� or �global warming.� The SEC decision, says Chair Mary Schapiro, ��will help public companies in determining what does and does not need to be disclosed�will provide clarity and enhance the consistency of disclosure�the discussions, debates and decisions taking place in the USA and elsewhere on this topic have implications under our existing, long-standing disclosure rules�� Four critical areas were addressed by the Commission:

The Impact of Legislation and Regulation (disclosure issue: how will these affect the company? Investors? Stakeholders?)

The Impact of International Accords (the EU already has �carbon� regulations; in the USA �Cap & Trade� legislation is being considered by the federal government and a number of states have regulatory regimes; global accords could soon follow � key disclosure issue: how would/do these affect the company? What should investors know?)

Indirect Consequences of Regulation Business Trends (disclosure: what legal, technological, political and scientific developments may create new risks or opportunities for the company? Remember the Chinese symbol for crisis is also for opportunity � leading-edge companies will move ahead with Sustainability disclosure.)

Physical Impacts of Climate Change (disclosure focus: the company should evaluate the actual or potential material impacts of environmental matters on their business. Note that the SEC has mandated certain environmental disclosure over the past 30 years.) The request to the SEC to consider the guidance for public companies came from investors � Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk (INCR) led the campaign for broadening climate change-related disclosure by public companies (INCR is a network of 80 institutions with USD$8 trillion AUM). Commenting on the SEC decision, she said: �Today�s vote is a clarion call about the vast risks and opportunities climate change poses for US companies � and the urgency for integrating into investment decision-making�� More than a dozen investors managing $1 trillion+ AUM requested the formal guidance along with Ceres and the Environmental Defense Fund in 2007, amplifying the request with supplemental filings in 2008 and again in 2009. (Note: EDF is typical of the �influencers� that we are profiling in INSIGHTS-edge if they are not asset owners or managers or ESG financial researchers or coalitions of investors.) One of the signatory member institutions is CalPers, the largest state pension fund in the USA ($200+ billion AUM). CEO Anne Stausboll said this about the SEC decision: �We�re glad SEC is stepping up to the plate to protect investors�ensuring that investors are getting timely, material information on climate-related impacts, including regulatory and physical impacts, is absolutely essential�investors have a fundamental right to know which companies are well positioned for the future � and which are not�� You can learn more (and watch the Commission meeting) at:
http://www.sec.gov/news/press/2010/2010-15.htm Other shoes dropping � clunk! -- In December 2009 the SEC Commission approved new rules to enhance the information that shareowners receive related to risk, executive compensation and corporate governance matters. �Good governance is a system in which those who manage a company � officers and directors � are effectively accountable for their decisions and performance�but accountability is impossible without transparency,� Chairman Schapiro said. The Commission also beefed up rules related to disclosure and information about present and nominated candidates for the board. Cluck: On September 22, 2009 the US Environmental Protection Agency issued the Final Mandatory Reporting of Greenhouse Gases Rule � this requires annual reporting of GhG emissions by large sources and suppliers in the USA emitting 25,000 metric tons or more per year. ESG and Sustainability aggregators such as Trucost provide these data to analysts, investors, regulators and others. (Gases covered by the Rule include: carbon dioxide, nitrous oxide, hydro fluorocarbons, per fluorocarbons, sulfur hexafluoride, and other gases.) This action followed a US Supreme Court ruling that GhGs are air pollutants covered by the Clean Air Act, which USEPA and the states enforce. Clunk: On December 7, 2009 the USEPA Administrator signed two finding regarding GhGs � six Greenhouse Gases were determined to threaten public health; and, �well-mixed� GhGs from new motor cars and new engines contribute to GhG pollution which threatens the public health. The latter a prerequisite to finalizing the EPA�s proposed emission standards for light-duty vehicles. Connecting the dots for you: There is a large and growing universe of Sustainability and ESG (Environmental � Social � Governance key corporate performance indicators) research and advisory organizations that provide analytics and services to asset owners and managers. These organizations are now influencing literally trillions� of dollars in AUM. A growing number of mainstream investors, including US Public Sector retirement funds, Sovereign Wealth Investors, Sustainable and Responsible Investor (SRI), high-wealth individuals, and others, are adopting ESG and Sustainability investment guidelines. Recent events underscore the importance of the need for senior corporate management and boards � and especially function managers -- to get up-to-speed and ahead of the curve on ESG and Sustainability reporting. The SEC action this week and the previous actions by USEPA will have profound effects on the corporate disclosure � now and in the future. That�s why we developed the Institute�s INSIGHTS-edge as a tool for corporate managers, investment managers, analysts, advocates, and stakeholders. Stay Tuned to ESG and Sustainability � there is much more to come!

THE BIG STORY OF 2010: PUBLIC RAGE AGAINST BANKERS AND WALL STREET

Thu, 14 Jan 2010 15:52:00 -0500

The Big Story � today it�s the terrible loss of life and widespread injuries in Haiti following the earthquake. For much of 2010, as in other years, there will be a number of Big Stories that briefly dominate the news and pass by as the 24/7 news cycle moves on to other stories. But one Big Story that at times dominate the news and [that] will be covered almost continuously will be about Wall Street and the rage that the American People feel towards the investment bankers, commercial bankers, brokers � everyone who did �this� to them (our neighbors), to us, to the nation. Think of RAGE this way: At its root it is about the apparent lack of Responsibility and Accountability [effective Governance] and Ethical behavior on the part of Wall Street leadership brought the economy to the brink of financial disaster. We may have moved back from the edge of that steep cliff � some of us, anyway � but there are still 7 million plus Americans who have lost jobs; millions more are underemployed or have quit looking for a job; 3 million home mortgages have been foreclosed; small business is being starved for capital; and now, commercial real estate is following the disaster that occurred in the resident real estate market�need we go on? And who is to blame? In the minds of many Americans, Wall Street leadership. Government regulators who took their eye off the ball are a close second. If you define the public as voters, constituents, investors, employees, borrowers, homeowners, public officials, entrepreneurs � then all have been impacted by the risky and at times reckless behavior of the leaders of the nation�s largest financial services organizations. The rising public outrage is finally being heard loud and clear in the halls of congress and in the White House. (We have been hearing in conversations with family members and friends and business associates � where is the public outrage? It�s here.) Here are some of the reasons why Wall Street will continue to be the Big Story long into 2010:

The Financial Crisis Inquiry Commission hearings are getting underway. The first chieftains of finance were in Washington today being questioned by members of Congress. There will be much, much more drama to come in these proceedings, which will continue out to year-end when a report is due. C-Span and the financial and news channels will have much content to share through the months of 2010.
Once the commission�s report is out at year-end, as in the case of the September 11 Commission, we will be hearing about the findings for a long time to come. Short term, the answers to questions raised � and the long introductions to the questions by lawmakers (speeches, really) will be the stuff of The Big Story all through 2010.
The public rage will fuel the debate about the appropriate measures needed to effectively regulate Wall Street firms, commercial banks, and other market players (like hedge funds and derivative instruments). There is comprehensive draft legislation moving through the Congress and fierce lobbying by financial firms is underway as well.
President Obama and members of Congress are proposing special taxes on the big banks that received government funds as the crisis deepened (a number of firms have paid the funds back) � the $120 billion number of the starting point (the amount the US government is said to have lost in the rescue effort to date).
The Big Story within this Big Story: 2010 Wall Street bonuses. Buckle your seatbelts � with big banks (those �too big to fail�, and receiving federal funds with almost no strings attached) are about to announce the bonuses paid to their leaders, and to the rank & file. The numbers will be in the tens of billions � because the banks are reporting profits once again. (Thanks to government aid, critics say � but that will be another part of The Big Story.) The President and Congress have talked up a possible 50% tax on the bonuses paid by banks that received federal funds. Wall Street firms will not understand the rage at the grassroots level as struggling families hear about multi-million dollar payouts at banks that were on the brink of failure (or so it was presented as rationale by the Bush Administration for the rushed bailout) now flush with cash for bonuses.
There will be many lawsuits filed (in addition to those working through the system right now) against Wall Street organizations � public employees� pension funds are among the prominent plaintiffs, aided by the state attorneys general. The crisis commission revelations are sure to fuel a number of these legal actions.

That�s a beginning list of why The Big Story of 2010 promises to be a long string of stories about what happened and why in 2007-2009. And who did what to whom. Remember the public rage � RAGE � this is about the failure of Responsibility (to stockholders and stakeholders, as fiduciaries), Accountability (to employees, stockholders, customers, various stakeholders, and to the nation), lack of effective Governance (and oversight) by boards and executives, and un-Ethical behavior by a number of capital market players. (Some large investment bankers now stand accused of marketing Collateralized Debt Obligations to investor-customers while themselves shorting the same instruments � one more element of The Big Story coming to light as emails are surfacing). We�ll stop here with the thought expressed by Sir Winston Churchill as events during WW II seemed to be turning in favor of the western allies in November 1942 �Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.� When we look back, we may see the Big Story of 2010 as the beginning of real changes in the capital markets and in financial services regulation. Again paraphrasing the Great Orator, WC: �Never have so few done so much damage to so many in such a short period of time.� Stay Tuned to The Big Story in 2010 � underlying all, the public outrage at what and how much has been done to the many by the few.

THE CONFESSION � FINALLY, MARK MCGWIRE �FESSES UP� THE NEXT CHAPTER COULD BE REDEMPTION�OF A SORT

Tue, 12 Jan 2010 10:09:00 -0500

�Say it ain�t so, Joe.� Back in the 1919 baseball World Series players on the losing Chicago White Sox team were accused of throwing the game and �fixing� the outcome so that the Cincinnati Reds would win. Among the players accused was �Shoeless� Joe Jackson, who was later said to have admitted taking part in the conspiracy. (He was suspended from Major League Baseball the following season and the incident mars an otherwise admirable lifetime record in baseball.) This may be myth or factual, but media reports at the time said that Jackson testified before a grand jury in 1920 and admitted taking part but in a trial was acquitted with the other accused players. Leaving the court house, a large group of youngsters awaited�one approached Joe Jackson � obviously a fan � and supposedly asked if the accusations were true. (News reports said he asked, �It ain�t true, is it, Joe?� And Jackson answered in the affirmative and then walked by.) Over time this became a favorite of sports writers who would pose the question � �Say it ain�t so, Joe� � whenever a star player was accused in this scandal or that. Now we know it is true � for one baseball star who, over the years was the idol of many youngsters. After years of denying the rumors of charges that he took steroids, Mark McGwire finally stepped forward to admit that he took steroids in the years that he was a major leaguer. �I wanted to tell the truth,� he said. �I decided to take the hit. I�ve been taking hits for five years and it doesn�t feel good�� Appearing before Congress, Mark McGwire denied taking steroids. He said the same thing on CBS �60 Minutes.� He has said he didn�t take the drugs in answer to media inquiries. Now that he is returning to baseball, it was time to come clean. There will always be **** (asterisks) in people�s minds and recollections if not in official records about the fantastic records that player McGwire set, including the shattering of New YorkYankee star Roger Maris�s record for home runs in a single season. We learned that McGwire has apologized to Roger�s widow as part of his taking responsibility for his actions. Among the personal costs to Mark McGwire: He will most likely never receive the votes to enter the Baseball Hall of Fame. There are other costs, for sure, including the self-inflicted wounds on his own fame and reputation. Who knows what other damage has been inflicted on countless young athletes�those who hungered after the same kind of fame and recognition that Mark McGwire achieved�and who may have followed his example to take steroids to boost performance? If the current chapter in the Mark McGwire story conveys the importance of personal accountability to aspiring young players in all sports, centered on the painful confession and owning up to responsibility that will be a huge contribution to amateur and professional sports. It�s painful for all to watch, but better late than never (the confession and acceptance of responsibility). In the same newspaper I read all about the tearful confession, there was a disturbing story of a young (high school) wrestler hospitalized after a near-fatal overdose of an unknown drug. We don�t know yet what caused his collapse...and it�s not fair to speculate. But when we hear of an athlete falling ill�don�t we wonder�and remember the Mark McGwire story? Drug use among our young people is now an epidemic. In addition to the coaching and training in the art of our competitive sports, it is absolutely imperative that the adults in charge stress personal accountability and that young athletes have to avoid the use of drugs to enhance performance. (As well as drugs for recreation and escape from the pressures of everyday life.) For the next chapter in the Mark McGwire story: How about the role of special youth advisor�criss-crossing the country with his new team, visiting high schools, even junior highs, to spread the message: Don�t do drugs � look at what happened to me. It can happen to you. The medals and awards and glory are not worth it in the end. Redemption, forgiveness, overcoming adversity. It used to be the American Way. It can be again � if we all try. Your thoughts?

BEING ACCOUNTABLE � THE WARTIME PRESIDENT, BARACK OBAMA

Sun, 10 Jan 2010 13:02:00 -0500

President Barack Obama (#44) followed the advice of predecessor Harry S Truman (#33) this week; he took responsibility for the screw-ups related to the Flight 253 attack. As President Truman proclaimed � always evident by the plaque on his desk: �The Buck Stops Here.� Plain speaking Harry, from the Show-Me State (Missouri), over the course of his presidency (just about 8 years) made many difficult decisions and stood tall in the face of frequent criticism. President Obama ordered a thorough probe of the mishaps, mistakes, oversights, and system failures that allowed a Nigerian national to climb aboard the Northwest/Delta flight (Amsterdam-Detroit) that he would try to bring down over the territory of the United States of America. Clearly, an act of war in the War on Terror in which this nation has been engaged for several decades (September 11^th; embassy attacks in Africa; embassy bombed in Lebanon; US Marines attacked in Lebanon; USS Cole attacked in Yemen�and on and on�). And President Obama began to acknowledge that we are at war with combatants who are not representing specific nation-states but organized and just as deadly as when armies march under national banners. �We are at war,� reported The Wall Street Journal quoting President Obama, �at war with Al-Qaeda.� We applaud him on standing tall and being a symbol of accountability � so sorely needed in America in these times when other leaders use weasel-words to squirm out of responsibility. Becoming president on the death of the war time president, Franklin Roosevelt, President Truman would write that he remembered��Now the lightning had struck, and events beyond anyone�s control had taken command. America had lost a great leader, and I was faced with a terrible responsibility�� President Truman swung into action, guiding the grieving nation to end WW II; approved the use of two nuclear bombs to end the war in the Pacific; faced down Soviet Russia on many fronts in the early days of the Cold War (including the Berlin Airlift, an act that challenged the Russians directly in Germany); reacted immediately to the North Korean invasion of South Korea with a US � UN military response; fired an insubordinate hero, General Douglas MacArthur; with General George Marshall launched the Marshall Plan to rebuild war-torn Europe�and more. The buck did indeed stop right there at his desk. And so to this war, this wartime president. When the facts are known, and remedies clear, President Obama should make the necessary adjustments and bring homeland security � defense � to the level needed to protect our nation. Some hard choices will have to be made. Fiefdoms overcome; barriers to cooperation broken down; heads knocked together. That�s what you try to do in wartime. You also ask everyone to make sacrifices on behalf of the nation, for the general welfare. President Roosevelt demanded that in WW II. When wartime corporate profiteers were exposed � by Senator Harry Truman and his committee before he became VP � President Roosevelt and the Congress moved to adopt excess profit measures (for a time, income taxes were at 90% for the high earners) and clawed back ill-gained profits once the war was underway (1942).

When the armed forces needed materiel, rationing was introduced at home. Homemakers turned in their pots & pans to be recycled for the Arsenal of Democracy. President Roosevelt frequently took his message to the American People on �Fireside� radio chats. He told the nation as the build up for war was underway (May 1941) that � �Your government has the right to expect that all citizens take part in the common work of our common defense�� Adding, �This is no time for capital to make, or be allowed to retain, excess profits�� Maybe those kinds of measures, realistically adjusted to 21^st Century society, should be considered by the Administration. We could start by taxing the overly-generous (and certainly the most obscene) bonuses of the financial sector organizations that received �war time� financial rescue by the federal government. About those risk-prone financial organizations deemed too big to fail � what sacrifices are they committed to make in this wartime environment? As the WW II wartime president said in 1941 (repeating the words of the signers of the Declaration of Independence): �With a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes, and our sacred honor�� We are all in this together, right? What do you think?

Accountability Does Matter in Getting to the Bottom of the Screwups in the Attempted Attack on the US at Christmas Time -- Who Did What / Or Didn�t Do What / And What Lessons We Can Learn From That

Thu, 07 Jan 2010 11:34:00 -0500

We�re back blogging today � a Happy New Year 2010 to all. We resume this running commentary on matters of accountability (hence, the title of the column) after a break in 2009 when we tended to other business. This diversion included writing/editing the Perspectives & Insights newsletter which you can read on our INSIGHTS-edge platform. My colleagues urge me to be brief � it�s the Web, not a book chapter � and so I will try my best to be on point and to the point�and more Blogger-like than long form essayist. I may wander from this promise with longer pieces when the muse within stirs. * * * * * * * * In Michael Moore�s film on the September 11, 2001 attacks on the United States � �Fahrenheit 9/11� -- then-President George W. Bush is shown sitting in a Florida classroom which he was visiting at the time�staring down as if confused or bewildered on hearing the news of the first planes crashing into the World Trade Center�sitting for a l-o-n-g period (seven minutes, Mr. Moore tells us in the movie). Then the president left the school (to wander the skies, it is portrayed) and very slowly the resources of the federal government began to react to the terrible damage being inflicted on this nation by a gang of terrorists. Over the next decade literally hundreds of billions of dollars would be invested in homeland security, in the intelligence services, the armed conflict in the Middle East � and let�s be clear, the War on Terrorism was clearly described as such by President Bush � and yet very simple things seem to be still going wrong. December 2009: A Nigerian national disappears from his family and shows up in Yemen where he is trained in terror tactics. Strange emails from him compel his father (a brave man) to go to the US Embassy to report his son�s changed behavior and potentially-threatening behavior. The son travels with a US visa (issued by the State Department) with inadequate documentation, buys a one way ticket with cash and checks no luggage. He slips through the security system and after a long journey on approach to the Detroit, Michigan airport he attempts to damage the plane and bring it down. Alert passengers spring into action and the threat is addressed. The current President of the United States was even slower that his predecessor in [publicly] responding to the event. Finally, from his Hawaii vacation, President Barack Obama commented publicly�sounding more like a constitutional law professor (which he once was) than the Commander in Chief (which he most certainly now is) as an armed attack was attempted on US soil, or in US airspace to be more exact. Where was the indignation and call to action? Only later did he begin to sound more like a war-time president � which this writer believes he is � to demand accountability of the leaders of agencies under his supervision. (See The Washington Post story on this � �Obama Addresses Airline Security in Low Key Fashion� � days after the attack -- http://www.washingtonpost.com/wp-dyn/content/article/2009/12/27/AR2009122702070.html Michael Moore owes President Bush an apology, it seems to me, for the movie director�s depiction of the president as diffident, or dis-engaged. Or maybe he�s got another movie planned in which the current president will be accurately depicted in his slow-to-respond mode. Fair is fair, right? A few days ago Federal Reserve Chairman Ben Bernancke made an important speech and admitted that the Fed could have done more to attempt to prevent the capital market crisis which destroyed many personal investment portfolios. Hindsight is 20/20, someone once observed. As the chairman was urging the Congress to grant the central bank more authority to deal with future crises, the question is asked, �If the Fed missed this bubble, how will it see the next one?� We can ask the same question of those in charge of homeland security, right up to the front door of 1600 Pennsylvania Avenue. (We are promised answers to these and many other questions by the Commander in Chief�soon.) In referring to the failure of Fed Chairman Ben Bernanke and his colleagues in not taking action before the market meltdown, The New York Times economics commentator John Leonhardt wrote: �He and his colleagues fell victim to the same weakness that bedeviled the engineers of the Challenger space shuttle, the planners of the Vietnam and Iraq wars, and the airline pilots who have made tragic cockpit errors. They didn�t adequately question their own assumptions. It�s an entirely human mistake�� Mr. Leonhardt could have added the current crisis atmosphere that follows the attempt to down the Detroit-bound airliner. Today, Umar Farouk Abdulmuttalab was indicted for attempted murder (and other charges) for the Christmas Day attack on board Flight 253 (with its 278 souls on board). Having been involved in literally scores of crisis or critical issues over my career, experience has taught me that both President Bush (#43) and President Obama and Chairman Alan Greenspan and his successor were behaving like so many CEOs and leaders of various types of institutions. It is very, very hard to think outside the box and imagine the worse-case scenarios that seem to occur in real life all too frequently in our time. Pick up a copy of the 9/11 Commission report and read the official findings of that terrible day in American history. Reads like something penned by a novelist with over-active imagination who kept dreaming up one impossible literary device after another for his book�except that it is all true life events being described. Failing to comprehend the events that were unfolding, many people in responsible positions were paralyzed and failed to act decisively. What lessons are to be learned from this most recent event�the Christmas Day Flight 253 attack�what went wrong�how�who should be held accountable? Stay tuned. Continuing the comparisons of #43 and #44�where President Bush was long ridiculed for his comment in the wake of the feeble response of FEMA to the events in New Orleans��heck of a job, Brownie�� We now have, The system worked! This from the Secretary of Homeland Security (who was speaking on behalf of the administration). We could ask: on what planet Janet? Partisan politics aside � when serious threats to the nation arise -- accountability does matter � so we must apply the lessons learned in serious situations like the Christmas Day attempted attack on our nation. (end)

They Don�t Get It! They Don�t Get It! Get It? They Don�t... Get It!; Got it? THEY don�t get it!

Wed, 18 Mar 2009 17:11:00 -0400

The headlines and the story lines and the snappy quotes and the overall gist of the stories and drumbeats of stories that we are reading and hearing and seeing these days have a running (and very disturbing) theme: The leaders don�t get it! They�just don�t�get�it! Scary. Scary times we live in. You see, certain of the elites and the privileged and the Masters of the Capital Markets have had it all their way for so long. It�s hard to give that life up. Just ask Bernie Madoff, sleeping tonight on his government-provided bed. Even though throughout this country the villagers are gathering, and their torches are being lit�too many in power still don�t get it. That life? It�s over. Hard to accept. So is the carnage left behind by the Masters of Wall Street for the rest of us. Some developments can be seen in clear light but the effects kick in much later. �This� started a long time ago. This is what we wrote in winter 1993 in our newsletter, advice to clients and colleagues: �Recent events in the board room and the resulting dramatic headlines have sent a wake up call to senior executives and boards of directors throughout America�s corporations. If you company has not yet been involved in internal or external corporate governance issues, it�s time to analyze the current public debate and prepare for your involvement in the latest movement to sweep the corporate world. This is not a short-term phenomenon. �Sooner or later, virtually every publicly-owned corporation in the United States will be involved in the broadening corporate governance debate now underway in earnest; corporate governance issues could eventually affect the careers of countless numbers of senior corporate officers. �Broad-based shareholder activism is a relatively new movement � embryonic, according to a prominent activist � beginning to seriously affect the way that CEOs run their companies and the way boards and CEOs get along. The times are changing.� The signs of change? We wrote about runaway executive pay, the board�s proper role in oversight, growing pension fund activism, the public�s attention being engaged in a variety of corporate issues, an often angry business press zeroing in, the personal attacks on CEOs mounting, the activists shareholder movement going global, and environmental organizations moving into synch with shareholder activists to target companies. All very evident, no crystal ball needed. But the good times rolled on, didn�t they! But the good times were rolling on, as the 1992-93 economic recovery kicked in. Fed Chairman Alan Greenspan wasn�t going to take the punch bowl away from the joyous parties going on. Cheap credit was the key to making everyone happy. Hands-off the brakes. Sometimes that�s the price of being re-nominated for what can be the best job in town�sometimes. Oh, he did bury the �irrational exuberance� warning in a speech to a group of nodding economists in 1996�but who of us really heard that obscure warning? So we rolled on, merrily along�we briefly skirted disaster with the meltdown of the hedge fund Long Term Capital Management, for which the Fed Maestro (as he was lovingly called by Wall Street) rescued in 1999 (a measly $4 or $5 billion was needed from the Fed friends), sending the signal � �it�s still party time!� � throughout the canyons of Lower Manhattan. Total losses were $4.6 billion. Warnings were ignored then�and later. The other watchdogs looking out for our interests? Leaders in the Senate and House � who were supposed to be protecting our interests � conspired with Wall Street Wizards to disassemble the 7-decades long protective barriers between Wall Street brokers and investment bankers and traditional bankers (the Glass-Steagall Act), allowing the thundering herd to crash into the bank vaults to steal away your money. Oh, the language they used � creating powerful, diversified financial services giants to compete with the world�s best�giving the consumer more choice� modernizing the banking system (take that old fogeys!). Well, take a look at the poster child of all this -- Citigroup � does it meet those definitions today? That�s what repeal of Glass-Steagall by Gramm-Leach-Bliley did for us back in 1999. Count your blessings: we did dodge a big bullet. The Wizards and Elites and some of their Capital Hill cronies � and that fellow in the White House -- wanted your Social Security accounts �privatized� so that you could use �your own money� to buy the junk being peddled by Wall Street for your retirement future! More choice for the consumer!
There goes Enron � but not the lessons of bad behaviors At the beginning of this decade Fortune magazine�s 7^th ranked American corporation imploded just about overnight. Poof! There went Enron. And with it, Arthur Anderson, one of the world�s largest accounting firms. This was eight years after my observations�that things were changing for Corporate America and Wall Street�and this was not short-term. Some pretty awful lessons came out of Enron and WorldCom and Global Crossing and other failed firms. That were applied by the Wizards and Elites and Masters of Finance. The heart of Enron�s collapse was the practice of moving the company�s mounting debts and obligations off the balance sheet and into �SPE�s� � arcane accounting devices that, as �special purpose entities,� could hide the bad news so the company could trumpet the good news�all good all the time. Until the music stopped � this was a kind of Corporate Ponzi scheme, and it collapsed. (Enron lenders had strict covenants that were triggered as the share price slid downward.) In the wake of Enron and WorldCom came outrage, fulminating, posturing and then the Sarbanes-Oxley legislation. For the record, this was a very good thing that President George W. Bush got behind � give him some credit. Some good things came out of SOX reforms and renewed White Collar crime enforcement, but as we have seen, SOX didn�t go far enough. And once the walls came down between the bank finances and the Wall Street Wizard�s schemes, all hell was bound to break loose. You see, the Wizards and Elites and Masters saw a big opportunity: move bad stuff on a massive scale out of the balance sheets of large corporations (the bank holding companies and diversified financial firms) and into �packages� of mortgages -- and sell them everywhere to everyone. Once, banks held mortgages in their portfolios and earned profits in the process. Risk was a paramount concern � would the loan be repaid? Could the borrower afford the monthly payment? Was their credit good? After Enron � again, the bad lessons learned � the new diversified financial giants (with everything under one roof) began to move billions of dollars in mortgages in their portfolios into securitized (love that word) packages and then sold them to institutional investors � probably your pension fund holds much of this junk. And the game moved into high gear Enablers such as the big credit risk agencies happily slapped Grade A ratings on the packages � for a fat fee, thank you � how soon do you need the Triple A label? And then the Wizards marketed these to foreign central banks, US pension funds, university endowments, foundations, mutual funds, hedge funds, and more of the eager buyers. This is the junk that has gummed up the world�s financial system. The �securitized� and �collateralized� packages of mortgages, and credit card debt, and student loans, and car loans, now sit gathering dust on the shelves in far too many institutional investor offices� there is no market for same. The auction markets for trading this stuff like baseball cards locked up a year ago. No one can sell the CDOs and CMO sets. See the lessons? Move the bad stuff off your books at the bank or the mortgage company or the car loan company and transfer the risk to someone else. (The problem at Enron was that the company guaranteed and was directly responsible for the debt of their shadowy SPE units � the bad stuff came back) Move enough of this stuff so the whole capital market gets gummed up. Make sure the problems to come are huge � so that we are too big to fail. If we do flirt with failure run to the Protects in Washington to get bailed out (remember that �Get Out of Jail Free� card in Monopoly?). Hey, we have shoveled enough money into their campaigns to ask for the favors needed. I guess it took 15 or even 20 years for the mess that was seeded in the 1990s to blow up on all of us. We are all paying the price for the Wizards� and the Elites� and Masters� arrogance, their disregard for the rest of us (ignoring their fiduciary duties as they did), and their outright stupidity in too many cases. The AIG debacle � the shame of the Wizards who brought us the mess Well, not all of us are paying the price. As we write this, incredibly, unbelievably, American Insurance Group (AIG), the company in many ways right at the center of the scams of the past decades or so, is paying out obscene bonuses to the people in the very unit (at least half of the money, anyway) that brought us, well, what looks very much like some kinds of fraud executed on the most massive scale possible. Things weren�t as advertised. Things that were promised were not possible to deliver. �Securitized� didn�t mean secure. �Collateralized� weren�t backed by real collateral. Things were not as rosy as promised � sounds to me like some kinds of fraud. The federal government � you, me � now own 80% of this failed company. Oops, I mean AIG, this company deemed �too big to fail�. (See the lessons of Enron?) We have invested some $400 billions of taxpayer dollars and Federal Reserve dollars into AIG. To �retain� the Wizards who created and marketed the toxic junk that clogs and paralyzes our domestic and the global financial systems, barrels of cash had to be doled out. (Huh? Yes, to retain the leaders of the failed unit, we must lavish cash on them now. It�s contractual, you know!) So, the first of a total of $450 million in checks were doled recently to AIG managers. New York State Attorney General Andrew Cuomo is demanding answers, including the list of those people receiving checks. Several dozens got millions in payouts. US Senator Charles Schumer is threatening to tax all of the money to claw buck from the 73 employees who got $1 million or more � �if you don�t return it on your own, we will do it for you�� One of the games played in all of this was for insurance firms to issue �insurance� on �credit default swaps,� transactions that really weren�t insurance and weren�t really good for assuring safety�in case the packages of junk failed. Which they did. At least until now. Insurance? Well, we didn�t actually sell insurance (which would come under state insurance regulation)�that�s the kind of game played. Who pays � you and me, pals of mine! There�s more, much more to come. Today�s New York Post full page headline screams it out: �NOT SO FAST YOU GREEDY BASTARDS �Feds plan 100% tax on AIG bonuses�� So how about those lessons out of Enron and WorldCom et al: Much of what went on in leading to the market meltdown sounds like fraud. In so many ways. What forecasts of future profits enticed even sophisticated investors to invest in exotic instruments by the Wizards? Calling state and federal prosecutors: The People are angry and demanding action. The torches are being lit. You have some of the tools, thanks for Sarbanes-Oxley. You have the US Justice Department�s expert White Collar crime unit (formed after Enron, with 700 convictions under their belt now). Solutions � get tough, prosecutors We have a soon-to-be-vacant Caribbean island hideaway on the shores of the azure blue Caribbean waters which the Wizards and Elites and Masters have often flown over in their private jets (usually at shareholder expense) en route to posh hideaways and resorts. It�s a very safe place � guarded by US Marines. It�s US territory. Guantanoma Bay. Wonderful healthcare available, according to �Sicko� filmmaker Michael Moore � better than many of the laid off Americans receive. Great place for white crime fraudsters, right? When we run out of room at Gitmo we can use some of the stimulus money to expand other federal lockups in various states, right? (Put people back to work building these facilities, and later for watching over the Wizards.) Be assured of this: What we have known as �Wall Street� and much of the financial services sector will not be the same as in the party years of the last decade or two. As our president said we are not going back to business as usual and the same old same old on Wall Street in some parts of the corporate sector. And to show you the magninmous response of the Street�s poster boy, AIG: The CEO of AIG has asked the top employees in the troubled division to �give back the bonuses.� Anyone getting $100,000 or more should return �at least half� � some have already returned all. And then this warning to us from AIG: There is at least still $1.6 trillion � that�s �T� � on the AIG books that could blow up the American economy, the world economy, the 2009 stimulus package, and more. Too big to fail � it works! That�s it for now. Gotta calm down after watching the cable news, hearing about the AIG issues, learning more about the Madoff scam, and pondering the thumb-in-the-eye given by Wall Street Wizards to our new president�leave it with this. They Don�t Get It! They Don�t Get It! Get It? THEY Don�t Get It �Yet!

Numbers � They Do Add Up � And The Federal Government�s Treasury Is Still Putting Big Bailout

Wed, 18 Feb 2009 10:56:00 -0500

What ever happened to the fabled free market of these United States of America? What ever is left of it is in free fall these days. What happened to our trumpeting of fiscal conservatism? (Neither political party now has a grip on fiscal restraint.) What happened to the promise of �smaller government,� harking back to the Great Communicator? What is happening right now to our system of governance�of government�of corporations? What does the current financial meltdown say about the state of accountability among our nation�s leaders? Help � we need to escape all this! Every Friday night my wife and I do escape � we settle in and tune to the CBS TV Network show, �Numb3rs,� a neat and lively crime drama with its finely etched and likeable characters --�Charley-the-Numbers-Guru,� his brother Don, the savvy FBI agent in Southern California and a supporting cast portraying brave and bright people. At the program�s opening a slate appears with numbers fading in and out � �4,000 bank robberies, 500 suspects, 50 abandoned get-away cars, 2 prime suspects,� and so on. This sets the viewer up for what is to come and gives you at least a hint of what the writers have in store. Alas, as I watch the TV news programs, read the dailies, scan Web sites, and read the news, commentary and research that is gathered for our Accountability Central Web platform, I have no such reference points for what is to come in the pouring out of cash from the federal treasury or the Federal Reserve. Numbers, numbers, and more numbers � become numbing to watch and to digest. Where does this end? �Information overload,� some experts call the daily onslaught of informative � content, in today�s media world. Waves of information wash over us even when we are tuning out the bad news, chattering heads on cable TV, radio news broadcasts, and more. This is what has been on my mind in recent days: The federal government�s fund for purchasing toxic assets from banks and other financial service firms was approved by the 110^th Congress � in a mad dash to line up support �before the financial system melted down� � at $700 billion. That�s �B,� which looks like this: $700,000,000,000. Think of each billion as one thousand million US dollars. (One million is only $1,000,000.) If the 300 million people in America got a check instead, it would be $2500 (each). So far so good, sounds manageable. But wait�. $380 billion of this was committed (under President George Bush) to the TARP bailout and channeled to a variety of purposes, but mainly to buy �toxic assets� from the banks that granted mortgages. Assets purchased: Well, �0,� as the government mavens changed their minds after Congress responded to the panic and approved the $700B. . $146 billion did immediately go out the Treasury Department�s door to financial services companies (including hundreds of major, regional and local area banks). These are the stuff of the sensational headlines. $320 billion � that is what President Barack Obama technically had left in the TARP as he began his presidency and jump-started his rescue programs. What to do with this remaining money? Stay Tuned � the news is fast in coming. $50 billion � that�s what President Obama will direct to [today�s announced] the Homeowner Stability Initiative, to rescue 4 to 5 million residential mortgages issued by the now-nationalized Freddie Mac and Fannie Mae �government-sponsored entities,� which together account for millions of home mortgages. Nothing for speculators, he said. $1.6 trillion � that is what the Federal Reserve System originally committed as �buyer of last resort� to strengthen the free-falling commercial paper market; the total market sector is valued at about $1.6 trillion � and the Fed has invested $249 billion in these efforts so far. And still the credit markets seem to be seized up � trust is gone for now. Does this mean money to channel to the credit markers? Access to credit is seriously affected, affecting all areas of the American and global economies.. �Zero Dollars� is what many US business owners have received in credit so far. $600 billion for support of the Federal Home Loan Banks � these are independent entities (12 regional banks around the country) created in the 1930s for expanding and assuring access to home ownership, and each is owned by the commercial banks and related entities but operated as quasi-public sector entities. $217 billion has been paid out so far. $600 billion � start with $50 billion, which is what the Treasury Department committed to guarantee money market accounts; the Fed has added its weight to bring the fund to a grand total of $600 billion, of which $14 billion has been disbursed. $53 billion � what the Federal Reserve has designated as a rescue package to buy up toxic securities that the bright lights at the nation�s largest insurance company � AIG � stuffed in their investment portfolios. To back up the claims which might be paid out. So far $43 billion has been paid out. Oh yes, the AIG brass has curtailed those expensive parties � for now. The New York Times has given us excellent recaps of the Federal government�s commitments since the meltdown of the financial markets and banking and financial services sectors in midyear 2008:

$4.6 trillion � committed total of federal support. $1.1 trillion � paid out so far.
$2.4 trillion � government lending commitments - $657 billion � paid out so far.
$1.8 trillion � government as insurer of last resort - $267 billion � paid out so far.
Total: $8.8 trillion (so far!)

Keep in mind: the total value of all goods and services produced in the USA, the Gross Domestic Product, in February is $14.5 trillion (says the Finance Forecast Center data). Moody�s �Economy.com� top economist said recently�America will never again be like it was� What does this mean to us�what do these numbers mean? At the personal level, lots of lost sleep, anxious daytime moments, plenty of worrying about �numbers� � our salaries, mortgage and car payments, college tuition, medical insurance, medical expenses (uncovered like your deductible, which increases every year), energy costs, and more. But like the CBS Network show, the Numbers roll on� Consider: $29 billion � you remember Bear Stearns, once the high-flying investment bank / brokerage that went wild with marketing mortgage-backed securities to eager institutional and other investors? Down it went -- and fast. Well, the Treasury, Federal Reserve and other Wall Street power brokers maneuvered in the wee hours so that JPMorgan Chase could buy the remnants of B-S � with $29 billion committed by the Fed to sweeten the deal. (Chase is a bank; the Fed can help out with guarantees.) A few other numbers for you: The share price of B-S went from $171 per share to $60 and then to $10 or less at then end�in literally the blink of your eye. Hundreds of employees lost their retirement, 401-k, savings, etc. There was $18 billion in cash reserves that disappeared in a blink. Thanks, bosses � you really knew what risk management wasn�t! $11 billion � current deficit of the Pension Benefit Guaranty Corporation (PBGC) for this year, at least right now. This is the government agency that picks up the fallen pension funds of corporations that go bust or can�t pay the pensions of retirees. PBGC says it has $63 billion in money available (owed out to millions of pensioners of defunct corporate employer plans); the agency projects its obligations are $74 billion (in future years, for the plans in house today). 29,000 � the number of corporate plans the PBGC has had to take over since it was created in 1974 � during the serious economic downturn of 1973-1975 � which was nothing like what is being experienced today. $50 billion � estimated missing dollars from Bernard Madoff�s fantastic scheme, lost by at least 14,000 investors. Does this count the millions of dollars in checks for family and friends found in his Third Avenue office? No matter� $40+ billion � the current estimate of the State of California�s deficit for the current fiscal year. This is the world�s 10^th largest economy � when California is in trouble, what can we expect of other states� finances? Think of 20,000 � the number of Golden State (state) workers expected to be laid off now. When California is in such serious trouble, what about the other states? The shortfalls in revenue for the states are estimated to be $250 billion to $300 billion over the next 3 years (according to the National Governors Association). New York State says it will be at least $15 billion short this year; part of the cause is the evaporation of all those big bonuses in Wall Street. What the Money Gods giveth they can taketh away � at least while they are being bailed out by the American People. $3 billion � at least, short-term, in lost wages, expected as General Motors and Chrysler ask the federal government to continue helping them survive. (50,000 jobs will be cut by the Detroit automakers.) GM got $17 billion so far and both companies now are asking for $21 billion more from the government. GM will need at least $30 billion more from the Feds by 2011. At least. 400,000 � not dollars, but jobs recently lost just in the State of Michigan. Poof � gone! Thanks to the merciless hollowing out of American industrial might by too many bosses in this generation of short-sighted corporate leaders, Michigan has the unhappy distinction of being #1 in the unemployed. Ohio, another industrial powerhouse, is not far behind. But while these jobs were steadily disappearing, back in New York City� $18 billion � that was the payout to employees of Wall Street firms in bonuses at year-end. Sadly this was just under half of the prior year�s record payout. For the record some bosses at companies receiving government help have slashed their own salaries and curtailed bonuses. $4 to 5 billion � hey, it was a good year � this is the estimated amount that John Thain, head of Merrill Lynch paid out in bonuses to the staff in December as the organization was failing and being sold to Bank of America. What were they thinking? Well, that was not the end of it � according to Investment News, the top Merrill revenue producers are getting a signing bonus of $1 million (per) to stay with the new owners (BofA), plus up to 75% of the annual revenues they recently generated for their former firm. Well why not � Mr. Thain made a reported $23 million, including his $750,000 salary, a $15 million sign on bonus, and more. (Thain waved his estimated $10 million 2008 bonus after the M-L board got their backs up.) $28 billion � purchase price of Merrill Lynch paid by Bank of America. Losses racked up by M-L under Thain�s brief but personally rewarding stewardship: $24 billion. Hmmm� $1.22 million � hey, this is what it takes if you are a Master of Wall Street and you want your office decorated in a style befitting your position. While he negotiated away the venerable Merrill Lynch organization after it dabbled too much in risky securities like the rest of Wall Street, John Thain hired famed decorator Michael Smith. CNBC�s Charley Gasparino reported this: $800,000 of M-L money o Smith for his talents, which included ordering curtains for $28,000; a �Roman Shade� for $11,000; a $15,000 sofa; six dining room chairs for $37,000; an at least one area rug for $86,000. Poor John Thain � embarrassed by this, he wrote a check out to pay for his gilt-edged office. And you thought you had it rough when you looked at your Bank of America and Merrill-Lynch stock prices in your IRA! Don�t worry about decorator Smith: He�s been hired to decorate the White House digs for the Obama family. So reports Gasparino! Enough! I gotta tune in to Charlie Eppes (played by David Krumholtz) and brother Don (Rob Morrow) � maybe they can help me understand the numbers. Or at least escape the information overload! Notes: To track the federal dollar flow: �Adding Up the Government�s Total Bailout Tab� February 4, 2009 � The New York Times http://www.nytimes.com/interactive/2009/02/04/business/20090205-bailout-totals-graphic.html And, �Tracking the $700 Billion Bailout� (charting the allocations) February 18, 2009 � The New York Times http://projects.nytimes.com/creditcrisis/recipients/table And if you, too, need numbers relief, �Numb3rs� is at: http://www.cbs.com/primetime/numb3rs/ Author�s note: The bewildering array of numbers presented here is, to the best of my ability to count (millions, billions, trillions � I get mixed up at times.) If you have corrections to the above numbers, please send them to me so that I can correct this post for the record.

Today�s Fairy Tales: And With A Wave Of The Prince�s Magic Wand, Poof! The Corporate Jets Turn Into Pumpkins

Fri, 06 Feb 2009 18:23:00 -0500

Once Upon a Time�you remember, don�t you, that timeless and universal fairy tale story opening from your childhood days? In a far-away land�Gathered �round the grown up reader, we kids would look up at the big open book with all the neat color pictures that she or he would show us at a given moment in the reading. And here is the beautiful princess kissing the frog� We�re grown ups now, living in a land and a time far, far away from our childhoods, but from time-to-time we still believe in fairy tales. Or at the least the childhood fairy tales and fables remain so embedded in our consciousness that we can call them up instantly and recall our favorite lines. Let�s hit the instant recall button today, shall we? It�s true that at least some folks among us have been living real fairy tale lives, at least until recently, working and living amidst grand splendor; we could especially find them in plush, well-appointed investment banking offices and brokerage shops and in the fabulous wealthy hedge fund-land. Then one day the Big Bad Ogres stumbled out of the dark forest to take away their bowls of porridge and bags of gold and those splendid silver winged carriages that whisked them hither and yon. And even their precious $86,000 office rugs, can you believe that! Who took what from whom may be open to debate, of course. In the View of Wall Street�s Elite Few, it was a grand party while it lasted, and alas, that party is over, at least for now. For the many in the land who feel that they had their bowl of gruel taken away -- unfairly, by distant unseen forces in moneyland, beyond their control and even their understanding�well, it was the shadowy �they� [that] have taken away their bowls � and a lot more with it. Some day we may look back at these wondrous and magical days of 2009 and the tales we�ll tell of the special times that late 20^th Century and early C-21 folks lived in. They�ll say or write that in a land far, far away from here ��there lived a mighty leader who waved his magical wand and �poof,� he could turn sleek, silver-clad, high-flying corporate jets into pumpkins � and even make them disappear entirely! He could wave the wand and wipe away the fabled corporate names embellishing grand sports stadiums!� His throne, they�ll recall, was called �The Bully Pulpit,� named by an earlier Prince of the People who lived in the same place a century earlier. That earlier prince also renamed the President�s House, calling it �The White House.� A mighty dragon slayer, they both were. (Numbers 26 and 44, some also called them.) This prince #44 was raised up with great enthusiasm and fervor by the people of the land in 2008 and they called him �Prince of the People� and he used his Bully Pulpit wisely and well. And he was a grand speaker, often attacking the greedy Lords of the Land who stood accused of stealing many, many porridge bowls from the people of the land. And of distant lands as well, the lands of Sinbad-the-Sailor and the folks in Hans Christian Andersen tales, and more. Here in 2009 when we think of fairy tales, we are reminded of the most creative artistic genius of the 20^th Century � Walter Elias Disney � who mined the old fairy tales of Europe for his studio�s parade of animated movie hits: Snow White and the Seven Dwarfs; Cinderella; Bambi; Dumbo (and the old Italian tale of Pinocchio with the nose that grew with lies), and more. The images he created are everlasting. Where Uncle Walt cleaned up the telling of the old stories and gave us happy endings in those fairy tales of wondrous and far off lands, in our times the media and popular culture mavens told us tales celebrating the fairy tale lives of the contemporary Great and often, the Greedy: think of our fascination with Lifestyles of the Rich and Famous. Alas, in a sign of the times, this week�s New York Times brought the sad news of the demise of some those tellers-of-tales of the most fortunate -- the company publishing magazine titles Trader Monthly, Dealmaker, Private Air, and Corporate Leader�is no more. No more we will read tales and gossip and news of the fortunate, or follow Trader Monthly magazine�s advice to the Wall Street Elite: See It / Make It / Spend It � on higher end real estate, cars, fashion, liquor, and gadgets. (In the words of the editors, �The ideal reader is 29 years old, making $400,000 a year and spending all of it!� (Doubledown Media�s company Web site is gone � you see, even tellers of fairy tales can vanish overnight.) Postscript to this story: One on-line wag asked: Does this mean that Marie Antoinette�s magazine �CAKE� won�t be published anymore either? �In These Extraordinary Times� The future Uncle Walt creating his 21^st Century fairy tales � about living in these extraordinary times, the Prince of the People early in his rule hath declared -- can tune into this apt metaphor for the early years of the 21^st Century boom and bust: In an internal email to employees, as was the custom leaked to Bloggers, the media Dealmaker�s company CEO allegedly wrote: �These are unprecedented times. The combination of the media depression, the Wall Street implosion and credit slowdown were collectively too much for our company � probably for any company in our shoes � to overcome.� Goodbye. No more fairy tales for now. Maybe the red slippers of Dorothy in the Land of Oz would have helped? In the Emerald City � otherwise known until summer of 2008 as downtown Manhattan � the elites may forever go on telling the tales of the fabulous Emerald City they once knew and cherished�and helped destroy in their narcissism and worship of the lucre. (Remember him gazing at himself in the pond? He fell in and drowned.) �Poof� � things can go away like that in real life, too! And to so to February 2009 and Day 17: Do magic wands actually work? Well�sometimes�and we�ll see. If they are waved energetically from the Bully Pulpit at the Kingdoms of the Elite, high-flying corporate jets have disappeared. Bags of gold � think of these in modern terms as executive compensation � are right now being taken away from the elites at organizations that have received gifts from the bountiful treasuries of the Land of the People. You remember, those who crowned the Prince of The People to save them. Methinks that the rising fury of the people is still underestimated by some in the kingdom, however. Think of the scenes in the 1931 horror move classic, �Frankenstein,� with the villagers at the gates of Dr. Frankenstein�s castle � torches in hand. The metaphoric village crowd with their torches are at the gates of the White House and Congress these days. We should not underestimate the anger and fury of the American people as their 401-k go �poof� and their jobs disappear at a wand�s wave by the employers of the land. Of course, as in fairy tales, life can be hard and magical tricks difficult to pull off. We�re reminded of what then-US Senator Hillary Rodham Clinton said on February 24, 2008 on the campaign trail at Rhode Island College in Providence Rhode Island (speaking of healthcare reform) � as she proclaimed lyrically to great applause� �Let�s get everybody together � let�s get unified The sky will open The light will come down Celestial choirs will be singing Everyone will know we can do the right thing And the world will be perfect�� She had no illusions, she said, about how hard [reform] would be: You will not wave the magic wand�and have the special interests disappear� And as we think of the missing billions in the bags of gold entrusted to Bernard Madoff by thousands of trusting souls, with new lists of the suckered playing out in the media day-by-day, we recall the fable of the child crying out in his wisdom what everyone really knew but were afraid to say. Think back to the fable, �The Emperor�s New Clothes,� by Hans Christian Anderson (1837). In this tale the emperor hires two swindlers to make him a fine suit of clothes, of grand cloth, which will be invisible to anyone too stupid or unfit for his position. The emperor buys this scam, and then goes around naked, and everyone in the kingdom looks on -- believing? Wanting to believe? Because everyone else believed? Because everyone knew someone who they said believed? And then the child cries out. �But he has nothing on!� The crowd knows it � but it still felt right to the emperor who rides on continuing to believe that he is clothed. He wanted to believe! Sound familiar? In our adulthood, we came to understand that the old fairy tales had audiences of both young and old, and were often important lessons to be imparted, usually scary at times, and usually containing life�s brutal lessons. But we wanna believe, and that�s what makes them so powerful to each of us. Which brings to mind Frank Sinatra�s most requested hit song (with slight paraphrasing): �Fairy tales can come true, It can happen to you �if you�re brave at heart!� �For it�s hard, you will find, To be narrow of mind, If you�re brave at heart�� Well, children � and grown ups of all ages: Welcome to February 2009 and the waving-of-the-many-wands quite bravely from the Bully Pulpit in the White House and even the Grand Halls atop The Fabled City on the Hill. Let�s hope some of this magic works � in time to save the kingdom! The question is: When we wake up will we have returned to the splendid colors of the Land of Oz�or to the black and white drabness of Kansas? Do Stay Tuned!

Foot notes:

(You can read more about Doubledown Media at Folio Magazine -- http://www.foliomag.com/2009/breaking-doubledown-media-shuts-down

You can see Senator Hillary Clinton�s campaign video � she was directly addressing her primary competitor�s (Senator Barack Obama) positions on reforming healthcare.

�Now I could stand up here and say, �Let�s just get everybody together. Let�s get unified. The sky will open. The lights will come down. Celestial choirs will be singing and everyone will know we should do the right thing and the world will be perfect.�

�Maybe I�ve just lived a little long, but I have no illusions about how hard this is going to be. You are not going to wave a magic wand and have the special interests disappear,� she said. Read whole blog post at: http://www.swamppolitics.com/news/politics/blog/2008/02/
clinton_raps_obamas_celestial.html

See the video at: See the video at: http://www.youtube.com/watch?v=a1ckrEeHDRY

Thanks to Wikipedia for this: �The Emperor�s New Clothes� � by Hans Christian Anderson (1837) http://en.wikipedia.org/wiki/The_Emperor's_New_Clothes

About Frank Sinatra�s song: �Young at Heart�
The songwriters were Carolyn Leigh and Johnny Richards
Copyright � 1954 by Cherio Corp / Renewed by June�s Tunes All Rights Reserved

Welcome The New Era Of Responsibility! And Accountability�

Tue, 20 Jan 2009 22:52:00 -0500

President Barack Obama�s inaugural pageant was quite something, wasn�t it? The long-awaited official [peaceful] turnover of the reins of government occurred at precisely 12:00 noon, and President George W. Bush, #43 was now a former chief executive officer and commander-in-chief. President Barack Obama is now #44. His inaugural speech was closely watched by everyone, everywhere, it seems to us. Thousands of television, radio and Internet channels carried his words live to far distant corners of the world, including the village in Kenya where his father lived and some of his family now live. But the key audience was here in the United States � he was speaking to American legislators, judges, regulators, social advocates and activists, ordinary citizens, bankers, business owners, corporate executives, corporate board members, heads of social agencies, tens of millions of children watching from school settings, chattering media pundits, journalists, immigrants with legal status and otherwise, and many more of us. We asked this week in a prior column� (From January 18 -- What shall we call this [era]? We had the Square Deal for the Common Man (Teddy Roosevelt), and our grandparents welcomed the New Deal in the depths of the Great Depression (Franklin Roosevelt) and cheered the New Frontier of John Kennedy and the Best and the Brightest (of his generation). Lyndon Johnson brought us the Great Society (at least for a while) and Ronald Reagan brought us Morning in America. The outgoing George W. Bush promised Compassionate Conservatism.) Now we have our answer: Welcome to the New Era of Responsibility! And as we see things through our prism, the Age of Accountability � as in personal and collective and institutional accountability to ourselves, to others and to the common good. We will be parsing the president�s words and phrases and the context of many of his remarks in the days and weeks ahead. Especially so as he issues executive orders, send draft legislation to Capitol Hill, instructs cabinet members on policy, and creates policy on critical issues, in his wonderful style of consensus building, grants media interviews and conducts press briefings. What does he mean � what does he want? What does he want us to do? For now, let�s savor the words that launched this most remarkable of presidencies, with all of its important historical hinge points and �first times ever that�� references that we will hear over and over again. As he challenged us to service to the nation -- Challenges [that the nation faces]�know this, American, they will be met. Whether we face gathering clouds or raging storms (reminiscent of Franklin Roosevelt in the 1930s or Abraham Lincoln in the 1860s.) Our enduring spirit� Greatness must be earned (over and over again, as a people and a nation) We must set out to do the work of remaking America� All are equal, all are free, all are deserving of equal opportunity� It�s not the size of government, but what it does�(It�s not whether government is too big or too small but whether it works�) The ground has shifted beneath us� [Speaking of government] We will be held to account�and must be transparent� American ideals must once again excite the rest of the world� We extend our hand [to foreign leaders] if you will unclench your first� There must be fair plan�embody a spirit of service�be selfless� [On responsibility�accountability] this is the price and promise of citizenship� # # # The above is what we heard extemporaneously today as we listened to words, phrases, and context. This is a serious man � we will now await his actions. After all � January 21^st is Day Two � when the real work begins. Good luck, Mr. President, and to Vice President Joe Biden�and to all of us in the United States of America � � and the nations of the world. Stay Tuned! ### You can read the exact words on line, on the White House Web site, or in the dailies on Wednesday, of course. (Yes, #44 is now in charge of the White House site: http://www.whitehouse.gov/ Go there and read his first official proclamation � January 20^th as a �National Day of Renewal and Reconciliation.� This is a most amazing Web site, in the spirit of the new president�s campaigning, election and inaugural. As the new administration promises� www.WhiteHouse.gov will be a central part of President Obama's pledge to make his the most transparent and accountable administration in American history

The Journey To Washington: The New President And VP; Take The Train To The Start Of A New Era

Sun, 18 Jan 2009 19:31:00 -0500

What shall we call this? We had the Square Deal for the Common Man (Teddy Roosevelt), and our grandparents welcomed the New Deal in the depths of the Great Depression (Franklin Roosevelt) and cheered the New Frontier of John Kennedy and the Best and the Brightest (of his generation). Lyndon Johnson brought us the Great Society (at least for a while) and Ronald Reagan brought us Morning in America. The outgoing George W. Bush promised Compassionate Conservatism. Yesterday we watched the train carrying President-elect Barack Obama and VP-elect Joe Biden and their families, friends, aides, supporters and security personnel as it traveled from Philadelphia through Wilmington and Baltimore to Washington�s Union Station. This was the train ride to glory. The event brought to mind certain train journeys of the past, such as President Harry Truman�s whistle-stop tours across the country to rally his flagging fortunes � and to be re elected by a whisker in 1948. Yesterday�s trip was deliberately cast in the spirit of Abraham Lincoln�s spring 1861 inaugural train ride. Hope Rides the Rails What great hopes ride along the rails this day with our incoming leaders � the economy is in the worst shape its been in for decades; the US Treasury is handing out billions in life support funds for once-mighty financial institutions and manufacturers; we are engaged in two wars in the Middle East, lasting longer than all of WW II for our country; 40 million of us have no medical insurance; 500,000 jobs disappeared just in December, and 2.5 million in all in 2008; there doesn�t seem to be much in the way of �a plan� today to reverse much of this � shall I stop here? The election of November 2008 will be remembered as the start of a movement, or the culmination in the rising of a grassroots movement when Americans from all backgrounds decided on their own and collectively to try to right the course of the nation, to take back the power levers of government from leaders who they believed had largely failed in their responsibilities and accountability to the rest of us, and worked to try to restore a government of, by and for The People. Sure, there were 48 percent or so of the voters who didn�t vote for Barack Obama, and many are still believe that he is under qualified and unprepared to be the nation�s chief executive officer and commander-in-chief. But the Voice of the People has been heard and the new administration is about to begin its work. The capital city was ablaze in red, white and blue lights when the special train arrived, symbolically following part of the route of President-elect Abraham Lincoln�s journey to Washington a century-and-a-half earlier. (President-elect Lincoln�s trip took 12 days. President-elect Obama flew from Ohio to Philadelphia; his train trip was 7 hours.) Tomorrow (Monday) the nation will celebrate the birthday of the Reverend Doctor Martin Luther King, Jr. He would have been 80 years old. Cut down by an assassin when he was but 39, Dr. King is honored for his courageous work in advancing social and economic justice and civil rights for minorities. What would he been thinking today as the nation is about to witness a change of power from an old line traditional WASP family member (President George W. Bush) to Barack Obama, an American of mixed ancestry or middle class means -- and who everyone is calling the first African-American to be elected President of the United States! Great Rhetoric � Now Comes the Hard Work Great phrases were sung out into the air along this ride by the incoming president � promising a government that will be accountable to the people! This a new beginning � Lifting our spirits up � Promises of a better day ahead � we all look forward to a better day! A new Day of Independence is here �we can perfect our Union in the process� We all hope so! The well-known New York newspaper writer and columnist, Jimmy Breslin, started out as a daily sports writer and moved to feature writing, columnist, book author, and more. He regularly brought his readers Big Stories from a different perspective, that of a bystander whose Common Man nature often spoke for the rest of us � for We, the People (looking on at the big story). As the train rolled on along the Atlantic seaboard, through the great historic cities, past small rural towns, through the stations of commuter towns, I thought about Jimmy Breslin�s approach. This was a big story, and there were also big stories there in the background, in plain sight. When I ride the Amtrak lines back and forth between Washington and New York, I am always struck by stretches of abandoned factories alongside the tracks where American workers once proudly turned out goods that other Americans and people around the world then purchased and used. Literally mile-upon-mile there are vacant, boarded up cathedrals of industry that once provided jobs for local people, often located within walking distance of worker housing (city row housing, for example). Jobs that provided entry to the middle class and in a generation or two, beyond. Where Are All the Workers? Where did all the workers go? I wonder about that. What are their children and grandchildren doing now that the work has been outsourced and sent abroad? Their efforts made technologically obsolete? �Too expensive� to be done here? Are they the people we�ll put back to work? From the train you can see the outlines of once-proud neighborhoods of many US towns and cities. The empty factory complex, sprawling across acres of land. Huge parking lots. Rail spurs that brought raw materials in and finished goods out. (Plenty of weeds growing hereabouts.) Rows of worker housing nearby. Small shops abound, or did. Churches everywhere. Parks, playgrounds. America-the-Blighted now, with factories boarded up. Too many abandoned houses are plainly in sight from the train en route to/from the capital cities of New York (money and media) and Washington (government and politics). What do foreign leaders and visitors think of us when they see this evidence of a throw-away society? (Including tossing out our human assets in business.) How many houses with families gone are the result of recent subprime loans and predatory lending practices? How many jobs were sent overseas because the Masters of Wizardry on Wall Street encouraged large publicly-owned corporations to abandon and send away their precious human assets? (Jobs cut = Wall Street cheers/Main Street jeers.) Did You See What I See? As our new president rolled along this route, which his VP knows very well from 36 years of daily commuting between Wilmington, Delaware and Washington�s Union Station just across from Capitol Hill, did he survey the scene as Jimmy Breslin might have�from the perspective of the Common Man who may be feeling abandoned by the elite forces that have changed his or her life and that of the family? Did he see all the abandoned homes? Factories? Neighborhoods in abject states of decay? Crumbling city infrastructure? Schools in bad condition? We hope so. The revival of this great country will depend on putting millions of people back to work � productively. Earning good wages. Promises to keep, as VP-elect Joe Biden told his hometown crowd in Wilmington. There�s more: the schools of the cities and towns passed need help. Too many poor kids do not have access to a quality education as their more affluent suburban neighbors do (in better funded public schools and private schools). After so many advances, we are once again creating a permanent underclass � which has dangerous implications for all of us in the long run. As the whistle blew and the inaugural train rolled on, observation car platform decked out in bunting of red-white-blue, as cheering crowds lined the route, as Obama and Biden cheerily waved back, as fellow passengers peered out of the windows�did they notice these remaining relics of abandoned dreams littering the railroad right-of-way? And I hope they remember those scenes as they grip the metaphoric levers of government power and literally have in their hands the ability to try to reverse the hollowing out of American industrial jobs of the recent decades, and take steps for the relief of the embattled poor and now-struggling middle class -- and start the rebuilding and reinvestments of American cities and towns and rural communities. Good luck, guys! Good luck to all of us. Great train ride, too. Please, President Obama and VP Biden -- remember the joys of the trip as the capital items and operating budget allocations are discussed for what�s left of America�s great rail road systems. One sure answer to the energy crisis is the revival and rebuilding of the great rail network that once criss-crossed the whole of these United States.

Bam! Bam! Birds And Jet Engines Don�t Mix � Hero Pilot Lands Airbus Passengers In New York�s Hudson River

Sat, 17 Jan 2009 19:27:00 -0500

It was a cold winter day in New York when passengers boarded US Airways Flight 1549 bound for Charlotte, North Carolina. Just after takeoff from LaGuardia and flying to the northwest over the Bronx, on a route skirting populous Manhattan Island, the fear of every pilot came true � the two jet engines simply stopped functioning, ending the powerful thrust forward that lifted and propelled the 50+ ton Airbus A-320 jetliner carrying 150+ passengers and crew members and a full load of jet fuel. (As the news media has reported, the plane apparently flew into the path of a flock of birds on climb out.) So where do you go when the engines don�t (go)? Well, down � and quickly! Swiftly diminishing choices faced the cockpit crew: turn back to LaGuardia airport, glide to an alternative airport such as general aviation hub Teterboro in New Jersey, or to more distant Newark Airport; look for a large, flat piece of land � or land on the nearest waterway. And so in the mid-afternoon of Thursday January 15, about where 50th Street intersects Manhattan Island east-west, the pilot and copilot glided their huge airship down to a textbook landing on the broad Hudson River between Manhattan and the New Jersey shoreline. Splash! Now New York City is a go-into-action town, as the world saw on that terrible day in September 2001 when two large jets were used as suicide bombers flying into the World Trade Center towers. The waterway was soon alive with rescue boats steaming toward the now-floating jetliner. Some of the little ferries that carry commuters to and from Manhattan Island from New Jersey were getting ready for the afternoon rush hour, and their crews cast off lines and raced toward the river�s middle. US Coast Guard vessels sprang into action. New York City Police Department helicopters quickly arrived and brave police divers dropped into the frigid waters to rescue passengers. The NYC Fire Department�s Marine Unit raced to the scene. As help arrived, passengers and crew members were standing on the wings and floating tethered in emergency rafts alongside the giant airplane. What a sight! And all of America tuned in to the drama, that afternoon and evening and into Friday and still today, Saturday, the drama is all over the news. This is the story of the day in Gotham Town and on all the cable news channels. And the word �hero� and �heroes� are part of very news segment. Heroes Among Us Those who have led men into combat know that is almost impossible to know who (among their squad or platoon or company or battalion etc.) will be a hero, and who will be the coward who cuts and runs when the action comes. Ordinary men have earned a long list of Congressional Medal of Honor medals, or Silver Stars and Navy Crosses, or at the very least the gratitude of their comrades they served � and served with. We expect certain people to perform as heroes when heroism and especially sacrifice is called for � it�s a given of leadership. We expect them to be accountable and responsible to and for those they lead, especially in difficult or crisis circumstances. Our expectations are larger than life for the captain of the ship, in war and peace, responsible for the lives of many, whether shipborne warriors or cruise ship vacationers. And we have high expectations for the modern day and most ubiquitous of familiar captains, those with four stripes working in the cockpit of passenger liners in the air, responsible for safely ferrying passengers under every kind of weather and circumstance. Doing His Duty � Accepting Responsibility Today we as a nation are celebrating one of these hero-captains who did what he was trained to do, was supposed to do, and what he instantly recognized his fate would require him to do on January 15, 2009. He flew his plane under the most difficult of circumstances, with zero power from the engines, just above the towers and cabling of the George Washington Bridge and on to the south, down the Hudson River�until he glided into the river in a picture perfect landing (at least for a land-based airplane!). And in doing so he saved the people on board � passengers and crew, many �souls� in the words of pilots in command as well as sea captains. Captain Charles B. Sullenberger III (�Sully�) is a veteran airline pilot with almost 40 years� of service. He was graduated from the US Air Force Academy, served his country as a fighter pilot (Phantom F-4s, the same sturdy craft as the Navy�s famed Blue Angels once flew), and is both a much-respected pilot and safety expert as well. After the landing on the surface of the Hudson, the captain twice walked his stricken, sinking airliner to make sure everyone got out safely. Then he headed for shore with all the passengers and crew. We salute him today for doing his duty, for his care and concern for those souls in his charge, and for carrying out his duties as he accepted them. All part of being in command, isn�t it? New York Governor David Patterson calls it �the Miracle on the Hudson,� and indeed it is. The city�s mayor, Michael Bloomberg said Capital Sully was a hero (and indeed he is). The deputy secretary for public safety of the state, former state senator Mike Balboni (a longtime acquaintance and neighbor of ours) spoke to the captain and then told The New York Times: �There was no boasting. No emotions. No nothing�� Captain Sullenberger told Senator Balboni that he did what he was trained to do. That is not quite accurate; for all the flight simulation and rigorous training that goes on in the life of an airline pilot, they don�t simulate a crash landing on the Hudson River at somewhere north of 150 MPH with a full complement of passengers and a full load of jet fuel! His long hours of training paid off; his attention to detail paid off; and his clear acceptance of accountability for the lives of those �souls� in his care surely was a deciding factor. Let�s Celebrate All the Heroes on the Hudson So we join the nation in saluting Captain Sully and his able co-pilot, Jeffrey B. Skiles. And hugs all around for the crew, those unsung men and women who helped save the lives of the passengers entrusted to their care once the plane hit the waters of the Hudson. Thumbs up all around for the quick-thinking captains and crews of the commuter ferries, to tug boat crews, to the Coasties of the New York Harbor who raced in their [Coast Guard] vessels to the scene, and especially to New York�s Finest, the NYPD drivers who dropped into the cold waters to help those in need. They rushed to the aid of their fellow human beings in a town that very frequently gets a bad rap for being �coldhearted� and mercenary to the rest of America. As the news spread, these were cheering moments for folks not directly involved in the drama. The rank and file folks who make US Airways hum had their delicious moment to savor, as their fellow workers demonstrated what being a member of an airline team on the line is all about. In Charlotte, North Carolina the hometown folks awaiting the arrival of Flight 1549 that evening got some really good news, instead of the drumbeat of discouraging news about the hometown goliath, Bank of America, which has been buffeted by bad-news reports of late (including that day!). New Yorkers, while a hardy breed for the most part, got their minds of Bernie Madoff and the missing billions of dollars entrusted to him by individual and institutional investors. They briefly forgot about the now-fallen captains of prominent Wall Street who disregarded their accountabilities and wrecked so many lives. There was a brief respite from the constant waves of news about the failed leadership of Wall Street and American financial service organizations. Leadership and Accountability And that brings to a point we�ve been thinking about. Does it take a courageous airline captain and crew and passengers to show us what personal and collective accountability is all about? What responsibility to our fellow man and woman is all about? The performance of Captain Sully and co-pilot Jeff Skiles are inspirations for all of us. And what a contrast this is to the sorry performance of late of some other leaders � captains of industry and government -- who had many �souls� in their care. Employees, their dependents, retirees, shareowners, communities, charities � many have suffered because a certain few �in command� of mighty business organizations set aside their responsibilities in pursuit of � what? Glory? Unseemly financial reward? Reward without regard for risk? Egotistical self-fulfillment? Too much greed overpowering too little attention to risk? As we await the arrival of the Obama Presidency next week, a spirit of renewal can be felt in the country. There�s a feeling of we�re all in this together that has emerged as the mortgage crisis deepens, the capital markets continue on their nightmarish path, and as half million jobs a month disappear. Thanks to all of the participants in this week�s New York City drama for showing us that most of us are still accountable and responsible for each other, and that when the chips are down, the great American Spirit will rise to meet the challenge. The final word goes to another 30-year veteran of US Airways who speaks for many in her former airline and in the airline industry: Kathryn Keene�s letter today to the editor of The New York Times urges the flying public to look closely at the plight of flight crews, pilots and attendants, and they way their salaries have been pillaged by management and their airlines have been merged mercilessly. For too long flight crews have been overworked and underpaid, and abused, and yet their professionalism comes through when lives depend on them. Gallantry and competence, she wrote, were much in evidence in the Miracle of the Hudson. What a metaphor for the once proud and high-flying airline industry�of which this writer was a proud member for many years. Maybe we can find some heroes once again to man the front offices of the nation�s air carriers. People like CR Smith, the founder and four-decade CEO of American Airlines, who built his human assets until they were the envy of the airline industry, or Juan Trippe, the CEO of Pan Am as it became the world�s best-known airline, planting its flag everywhere. It�s time!

SEC: An Agency in Transition � To What?

Wed, 07 Jan 2009 17:04:00 -0500

As the calendar pages turn quickly toward January 20, 2009, when the reign of the new Obama Administration will begin, many eyes are focused on what happens now at the US Securities & Exchange Commission (SEC). By federal statute the SEC is the official watchdog for the nation�s securities industry, its authority stemming from Great Depression era legislative measures passed by Congress in 1933 and 1934 and enthusiastically signed into law by President Franklin Roosevelt following each annual session of that 73^rd Congress. Obviously much has changed in the capital markets since then � but some events of 2008 and now moving into 2009 that affect investors sounds strikingly familiar to [some] conditions affecting investors after the stock market crash of October 1929. There were no federal regulators of the stock markets then, and only a handful of states had securities laws � notably, New York State, where Governor Franklin Roosevelt had some legal instruments to deal with fraud and stock markets chicanery. The �Martin Act� (1926) was said to be somewhat of a model for the legislation adopted for the national securities laws in �33 and �34. Interesting: The Martin Act was used by Attorney General Eliot Spitzer to pursue Wall Street�s top investment banks and brokerages houses in recent years. And the present AG, Andrew Cuomo, is wielding the Act in pursuing wrongdoing in New York State right now. Given the scope of the wreckage in the domestic capital markets, in equities investing, in the bond markets, in the Madoff Scheme blowup, in banking, in mortgage securitizing, etc. � there are important questions being raised about (1) what to do about strengthening regulation and oversight of the different federal agencies involved in the now very complicated markets under their jurisdictions and (2) who should be the government�s chief securities industry watchdog, in the present or perhaps future regulatory framework. President-Elect Obama is fleshing out his leadership team and has named his choice for head of the SEC: Mary Schapiro, head of FINRA (the Financial Industrial Regulatory Authority � the self-governing oversight board of the American brokerage industry, which oversees 5,000 firms and 680,000 registered securities representatives. The agency has 3,000 employees and mission is ��to protect investors by maintaining the fairness of capital markets.� Schapiro was an SEC commissioner early in her career; for a brief time was temporary chair of SEC; she later headed by the Commodities Future Trading Commission; and has been head of FINRA. We commented on some of this in our November 10, 2008 column � �As We Survey the Carnage in the Capital Markets, the 2009 Burning Question Will Be: What Regulations, and Oversight Are Really Needed Going Forward? (link here: http://www.accountability-central.com/nc/accountability-matters-blog/articles/archive/2008/november/article/as-we-survey-the-carnage-in-the-capital-markets-the-2009-burning-question-will-be-what-regulations/?tx_ttnews%5Bday%5D=10&cHash=1fb27d05db Now commentary regarding the appointment of Mary Schapiro to head SEC is beginning to shape the coming debate about her capabilities (and SEC�s) to be a tough enough watchdog of the capital markets, and about the future of the SEC itself. We share with you these two commentaries � From The Washington Post (January 7^th) Commentator Steve Pearlstein�s views (�Obama�s SEC Pick is No Joe Kennedy�): http://www.washingtonpost.com/wp-dyn/content/article/2009/01/06/AR2009010602938.html And a fast rebuttal from the widely-read The Corporate Counsel.net Blog (edited by Broc Romanek and Dave Lynn): �Incoming SEC Chair Schapiro: A Rebuttal� http://www.thecorporatecounsel.net/blog/archive/001985.html And what about the current head of SEC, Chairman Christopher Cox, as he heads for the exit door? There has been commentary galore about SEC really being asleep at the switch while Wall Street took the American economy off the cliff with it � �Where Was the SEC?� sums up the headlines. And about slumbering through the Madoff scandal. See �Rebuilding the SEC� after Chairman Cox leaves in the January 6^th The New York Times �Breaking Points.com� commentary: http://www.nytimes.com/2009/01/06/business/06views.html?scp=2&sq=Christopher%20Cox&st=cse Read, too the excellent commentary by noted bio author Ron Chernow on the need for a tough capital markets investigator/prosecutor in 2009: http://www.nytimes.com/2009/01/06/opinion/06chernow.html?_r=1&ref=opinion Title: �Where is Our Ferdinand Pecora?� (He was the former New York prosecutor who paraded Wall Street leaders before the Senate after the 1929 Crash, and his landmark investigative work was an important factor in the 1933 and 1934 federal securities oversight debates.) Should be an interesting time in our nation�s capital when the congressional oversight hearings get underway in both houses, and the Senate confirmation hearings begin on Obama Administration nominees. And then when everyone is finally in harness, what measures will come to help relieve everyone�s pain and misery from Capital Markets Overload. The 73^rd Congress passed The Securities Act of 1933, The Exchange Act of 1934, The Glass Steagall Act of 1933 (separating banks and Wall Street firms), The Economy Act of 1933, The Federal Emergency Relief Act, The National Industrial Recovery Act, and many more measures, some lasting into the 21^st Century and 2009. What will we see out of the 111^th Congress and our 44^th President? All this will be coming to you soon in �Living Color,� on cable channels (they used to say on NBC prime time when the �Walt Disney Hour� was announced). Hmmm� The Disney Hour�may be an interesting metaphor for some of what is to come in 2009. Do Stay Tuned!

Madoff Madness: If It�s Too Good To Be True�

Sun, 28 Dec 2008 17:09:00 -0500

If it�s too good to be true�maybe it isn�t. Part of the wholesale abandonment of risk management in the current financial environment includes ignoring risk, whether risk is clearly evident or what should be at least a healthy sense of skepticism, and the growing lust for reward beyond the reasonable or traditional � despite the risks. It once was that bankers followed simpler rules � say, having their own borrowing or capital costs at three percent, such as the bank-to-bank overnight lending rate or the intermediate and longer-term rates and then charging six percent or so to the borrower. A slower way to make money, for sure, but �safer� compared to what�s been going on in this century on Wall Street and in banking circles. Since the 1999 repeal of the Depression-era banking laws separating Wall Street brokerage and Main Street banking, this was looked on as a sort of Fuddy Duddy banking. What was promised through securitizing of home mortgages, credit card outstandings (consumer-owed debt), auto loans, and a variety of commercial real estate loans � hey, that was the new road to riches. The old ways belonged to George Bailey in that 1940 movie shown on Christmas Eve. Or the silly old E.F. Hutton ads � We make money the old-fashioned way � we earn it! And there is now the strange case of Bernard Madoff and his billions of dollars assumed to be held in fiduciary trust � and that has that disappeared. We watch in fascination (and too many in horror) the continuing fallout of the scandal that almost perfectly has been summing up the recent fear-greed equation so prevalent in the 2008 capital markets. (As one expert said, Abandon ye all fear / pursue [we must] those outsized rewards based on personal and institutional greed.) Bernard Madoff was a tower of the securities industry, as they said in the downtown Manhattan canyons, as well as in too many other locations where money was entrusted to Madoff Securities. He was known as a very smart money manager who knew how to create solid returns in good times and bad � you could really count on Mr. Madoff to earn money on your money when all your friends were losing theirs in the market. At heart, it was really the simplest of financial schemes. A Simple System You get people to trust you and then to entrust their money to you to invest on their behalf. The money comes in, and as trust (and referrals) build, you get more money, which you use to pay the early folks who have money in the pot. Those early �winners� tell everyone how smart they are (for investing with you) and how smart you are (bragging rights for entrusting their money to you), and the game goes on. If it goes on long enough, in theory, you will run out of people to bring new money in, but, hey, it�s a great game for a time. In some ways this sounds like the some of the recent events in banking and the capital markets on a grand scale. In some ways / some events, like the great collater-ized mortgage, asset and debt schemes, or the marketing of complex and exotic derivatives based on real or theoretical values from which the value of the derivative is said to be determined. Too much confusion for you? Then focus on one man�s role in all this � Bernard Madoff, the man at the center of the scandalous headlines of today. He�s the go-to Man He is the central figure in a $50 billion (�b,� that is) of an alleged grand investment fraud that involves wealthy individuals, family trusts, foundations, endowments, banks, not-for-profits, charities, hedge funds, the grandkids� inheritances � did we leave anyone out? Oh, he was such a good guy to know, according to those who knew him and some who knew of him. Or people who knew people who knew him. Trust, in tight circle at first that ever broadened. And brought in new money. New money and old money people got caught up the net. The fall out continues � we like the quote from PR man Gary Lewi speaking to Newsday about one of his clients: Much like an atomic detonation off on the horizon, the shock wave takes a bit of time to get to you. But get to you it does, for a growing list of investors. Let�s start with the professionals � those with fiduciary responsibilities to others, who pursued reward with Mr. Madoff: Fairfield Greenwich Advisors, an investment management firm; losses are $7.5 billion. Tremont Capital Management, a fund-of-funds investor; losses $3+ billion. Access International Advisors, a NY investment advisory firm; $1.4 billion. Note the irony: advisors and investment management. Banco Santander, a Spanish bank which own Sovereign Bank here in the New York area; just under $3 billion lost. A private Swiss bank (Union Bancaire Privee), a billion dollars gone. Bankers are a conservative lot, no? Well, yes, when you are asking for a loan or a mortgage, in the past and much more recently. But when chasing rewards in the New Era financial marketplace, maybe not. Ask the professional bankers who gambled and lost: Royal Bank of Scotland. BNP Paribas. Nordea Bank of Sweden. Credit Agricole of France. Banco Populare of Italy. Or other investors (or trustees) who should be taking risk into consideration along with reward: The Korea Teachers Pension fund. RAD Capital, a hedge fund. Man Group of Britain, a hedge fund. And a long roster of social sector organizations. Bloomberg News is reporting now that 400 US-based non-profits lost collective billions in the scheme. These US foundations fund a variety of causes and activities and in 2007 they provided $73 million in funding. With their investments vanished, what will 2009 look like for their recipients? Well the JEHT Foundation, which gave away $24 million last year, to advance criminal justice reform, is going out of business now. So is the Picower Foundation, which has given away $268 million since 1989 and is now forced to close. The list of social sector organizations who entrusted their investments Bernard Madoff fills almost 40 pages now. Another �Ponzi Scheme?� �A Ponzi Scheme,� the journalists trumpet. Well, if the facts are as stated in the torrent of stories that followed the news break � that the $50 billion wasn�t there � it is way beyond the original Ponzi. When all the facts are known and the losses tallied, and the fallout winds down at some point, this may well be the events referred to in the future as the �Madoff Scheme.� Ponzi was a piker in comparison. The original Ponzi was an Italian immigrant (arriving in the US in 1903), Charles Ponzi, who set up the Securities Exchange Company (great name), in downtown Boston to wheel and deal with investors� money. There were few securities regulations in that day, and the Wonderful Era of Nonsense was getting underway. This was what columnist Westbrook Pegler dubbed the speculative financial contagion of the 1920s. The good times did last until October 1929, and the last great crash that the 2008 events are being compared to. Mr. Ponzi�s schemes unraveled well before those October-November 1929 Black Days on Wall Street and on many Main Streets in America. As with the current New Era of Financial Contagion and Epidemics, the mass media helped to fuel the scheme. Consider the headline of the Boston Post, "Doubles the Money Within Three Months" �in a profile of Charles Ponzi�s operation on School Street. After that story appeared $1 million a week of new money flowed into the nondescript offices of his firm (multiply that times 10 for an approximation in today�s dollars, at least while the 2008 dollar is still worth that). The gullible were lined up at the door when Ponzi arrived in his splendid Locomobile auto and strode confidently up the staircase to his lair. At the heart of his scheming was something no one today probably heard of, an International Reply Coupon issued by governments (especially the government of Italy) under the Universal Postal Union for trans-border mail. This was a paper of fixed value that could be redeemed for stamps in other countries. Watching other get-rich-quick operators, Charles Ponzi went to work gathering dollars to build his pot, promising fantastic returns�especially compared to the paltry sums offered by the US Postal Savings Plan, or local banks. This was real money! You know, the kind of real money made in this 21s Century by real men! Also � did we tell you he was charming? Charles Ponzi was charming and dynamic and so smart � he was smart, wasn�t he, making all that money for investors? The dollars flowed in. The press clippings helped. Word of mouth was the clincher for new investors. This was all so complicated no one really asked about �how� � like the way investors poured money into the Madoff coffers in recent years. Money came in buckets, briefcases, pocketbooks, clenched in the hands of hopefuls-to-be-in-the-middle class or those who were really rich. And the early investors made a ton of money when the payments were due; of course, most of them plowed money back in to make more. More, more! For a time. And then the unraveling came. In less than two years the scheme collapsed; he was accused of fraud; he went to jail, and after a few years was deported to his native Italy. The Massachusetts attorney general got him; he was indicted many times over on federal fraud charges; and he had no money at all in the end. He moved to Brazil in the 1930s, but never returned to America. He died in Brazil in 1949. His name had entered the realm of legend � financial legends, especially! � but he was broke and had hidden no money away from prying eyes. (The authorities are trying to figure out as 2008 ends how much money Mr. Madoff and his firm actually have on hand.) A Drama Worth Reading About There�s a marvelous book about all this � a really good read while we await the outcome of the Madoff media drama � by author Michael Zuckoff: �Ponzi�s Scheme � the True Story of a Financial Legend.� As Zuckoff writes, �with a maestros� touch, Ponzi had struck a perfect balance among the forces competing to control the new America identity [in 1920] � altruism and avarice�� (published in paperback by Random House Trade, 2006) Sounds like 2008, doesn�t it? If all that we read is only half true in the Madoff drama, this is (as the famed Yogi Berra was said to say) deja vu all over again! The final word for now of things Madoff is that of actor-commentator-author Ben Stein, in the December 28, 2008 issue of The New York Times: He writes that two years ago a little delegation from a major investment bank came to his house to sell him their �wealth management� services. A large chunk of the money would be invested with a �money manager of stupendous acumen� whose genius was never losing money. Up and down markets didn�t matter. Ben Stein said he didn�t think so; he argued that a perfect hedge fund wouldn�t work the way they described. And the money genius charged 2 percent on the money invested. They went away without Ben�s money. Guess who the investor was? Correct � Bernard Madoff (who Stein had never heard of until then). Oh, did I mention who lost money in the original Ponzi Scheme? Among the little people there were big fish: Hanover Trust, a bank that earlier had turned down the once-broke schemer for financing, in effect swooned and became the de facto Bank of Charles Ponzi (writes Zuckoff), after the executive committee � throwing risk to the winds � elected him a director and sold him new stock for controlling interest. Hmmmm�. This, after all, was a unique time in America � in the 1920s, writes Mitchell Zuckoff, a new ethos was emerging, and a new definition of what it meant to be an American. No more pennies saved and pennies earned, money was best when it arrived fast, easy and in large quantities�if wealth didn�t come knocking, go and get it yourself. Charles Ponzi was the first roar of the 1920s, the author notes, and today his name lives on it infamy. Until this year. We don�t know yet how far the Madoff unraveling will go, who all will be swept up in the drama, how much money was lost, and how many people will really be hurt. But this situation seems to be an apt metaphor for this year�s financial meltdown, abandonment of risk, chasing outsized rewards, and financial gimmickry, as we stumble toward 2009. No doubt we�ll be reading all about it in a few books to come. Hey, the book publishing business needs a lift! # # #

Big 3 Auto Industry Bailout Drama Continues

Sat, 27 Dec 2008 18:01:00 -0500

What the 110^th US Congress could not or would not do in its last days, the good old Bush White House got done, in its own dwindling away and winding-down days. Two of America�s remaining Big 3 auto companies will get almost $14 billion to tide them over to�what? Their spring 2009 mandated reorganization? A dramatic consumer market recovery? An upturn in the troubled financial markets? The return of sensible corporate sector financing by the financial services sector (the original bail out folks)? All of these and more? The Ford Motor folks say they�re all right for now, thanks, but General Motors and Chrysler were in desperate need of cash and other public sector support, so the two companies are getting their first checks in a few days. The Bush Administration used the last bit of money remaining in the much-criticized TARP as approved by the Congress before it adjourned. The money is all gone now � the overwhelming amount to large bank holding companies and financial services organizations with little strings attached in comparison. For the auto guys, it is a different story. There are strict mandates attached to the funding that GM and Chrysler must abide to, or return the money next year. As always, there are a lot of back stories to all this. The auto chiefs made a classic blunder, a huge miscalculation of perceptions and public relations, you�ll remember, by taking separate private jets to Washington to ask for public support. They were all in the hot seat for hours on Capitol Hill. One of the old lions of Corporate Public Relations fame, who ruled in days of yore, and sat at the right hand of the CEO, surely would have counseled their client � The Boss � on how to get to Washington and what to say when you are asked�what do you need? (And they would have primed the pump so that the question asked by House and Senate was, how can we help?)

The good old days for Detroit

There would be this scenario: The best example of a new era auto � high mileage, low emissions, affordable, �green,� etc. -- would have been received at the production plant as it came off the line by the chief executive. Photos and video and a special Webcast would capture the moment as the Heartland auto workers delivered the car, signed by all the local plant workers on the rooftop where it could be seen later from the Capitol windows, and a well organized drive would take place, CEO at the wheel, through America�s hometowns and the key districts (if possible) of the members of congress and senate. Certainly through Ohio, Pennsylvania, West Virginia, and Maryland (through Baltimore and past all those piled up foreign autos at the docks awaiting delivery). Along the way there would be stops at local dealers, maybe a few auto plants and one or two of the company�s Tier One suppliers, and at chambers of commerce rallies organized by local dealer organizations. Message: We are all in this together, folks. Then on Capitol Hill there would be a �spontaneous� rally with hundreds of auto workers and dealers and suppliers welcoming the chief executive to town, and a grand display of The Car (and other examples of Detroit�s best) on the National Mall, or near to it. Congressional staff and even members, along with journalists, and a few advocate leaders thrown in (Sierra Club sounds good), would be welcomed and invited to drive the car around the Capitol Hill neighborhoods. This is Show Time! This is all about the future of American Car Companies and how we can help them! Alas, those well-experienced PR lions of yesteryear are all gone now. We worked with some, such as Willis Player, the brilliant head of PR for Pan American World Airways, and Holmes Brown (my boss and mentor) at American Airlines (before that, he was head communicator at , Ford Motor Company). In recent years the corporate PR staffs have dwindled away � don�t need communications, right? � and an army of eager independent outside PR agencies stand ready to deliver. If asked. Those PR legends of yore would probably have told the auto chief and the staff attorneys that was not a good idea to ask for serious money from the people you have been suing for years. The carmakers have filed lawsuit-after-lawsuit trying to stop or slow down various environmental and fuel economy and other public policy initiatives. I�m surprised that one of the conditions imposed by congress wasn�t a withdrawal of these legal challenges by GM and Chrysler. Probably would be unconstitutional. But hey, isn�t a lot that goes on these days in Washington�a little or a lot unconstitutional? Never mind. The auto companies now have marching orders, or at least strict terms and conditions applied to the paltry sums received. I know, we�re talking about real dollars at stake, especially on America�s Main Streets, but not on Wall Street, in 2008 terms. What�s ahead?

Probably a paring down of the number of models and makes of Detroit-built cars and trucks. (As one American auto exec asked rhetorically, if Toyota can be Number One with only two marques and a handful of models, why do we need so many brands and models? Stay Tuned.)
Wholesale re-alignment of the types of cars manufactured and marketed in the USA. �Green� is the watchword of the day.
A slimming down of dealer outlets, although there are some tough state laws on the books to protect the home turf retailers. But we might see one-third, or even one-half of dealerships eventually disappear.
A restructuring of the basic businesses, closing of factories, laying off even more workers, more aggressive outsourcing key items to suppliers, and more.
Changes in the financing of pension funding and the retiree benefit packages. (In bankruptcy, under existing conditions, the Pension Benefit Guarantee Corporation would have a first-in-line claims on pension shortfalls.)
Maybe a combination or two, with the Big Three becoming Two or even One. Don�t bet against this in some form. More fees for the investment bankers, too.

And therein are the sources of lots of future pain for Main Street, of which the American auto business has been a big factor for a century. Manufacturing jobs have a 4-to-1 or 5-to-1 ripple effect, one auto worker helping to create four or five other jobs -- and as these much-desired industrial jobs disappear from our hometowns, there will be lots of personal pain. Not to mention the potential of hundreds of thousands more foreclosures and falling home prices in the future (these could occur in local markets where banks and home sales are not yet in trouble). It is good that President George W. Bush stepped in to support, at least temporarily, the backbone of American industrial might � Detroit�s Big Three. In the scheme of things, with many hundreds of billions flowing out to the nation�s financial services companies, this was a small amount to invest. (And these are investments, we must note.) Let�s hope the leadership of the auto companies follow through on their plans (plans which were painfully absent at those first Capitol Hill hearings) and that they can revive their companies� fortunes. What would this Car Nation, the America we know and love, be without the Detroit companies? I shudder to think of that possibility. We are all in this together. The good news: This is a really good time to buy an America-made car or small truck � the companies have some terrific products to offer at every price point!

Yankee Money and City Money and Taxpayer Money and Fan Money�

Tue, 23 Dec 2008 17:23:00 -0500

Play Ball! We�ll be hearing that cry at spring training soon, and in April, at America�s great baseballs cathedrals. It seems that building great ball stadiums in our hometowns in turn brings great hopes to the civic interests, and if the home teams playing are good, great hope for the loyal (paying) fans. Baseball is the great American pastime. (So to some degree is football, basketball, hockey, auto racing, etc. � all privately owned and managed free enterprises whose owners also regularly line up for public sector financing and other handouts from the taxpayers.) How about the [new] New York Yankees home stadium, in 2009 set to replace the 1920�s �House that Babe Ruth Built,� in the Bronx near Manhattan Island. The billion-dollar-plus facility is being financed in part by $220 million of New York City government funds�tax free bonds or other benefits or future revenues waived away by the decision-makers at City Hall. In these times of discussion about financial rescues and sector bailouts et al, with rising public comment about the appropriateness of using public sector, taxpayer dollars for private sector beneficiaries, the practice of municipalities and states allocating hundreds of millions� of dollars for private sports facilities is become part of the debate. The headlines in New York newspapers told of the Yankees going on a spending spree and showering just three ballplayers signing contracts with almost a half-billion dollars (in future paychecks). Three players � there are nine on the field; what does this say about the state of at least New York sports? We watch the obviously wealthy New York Yankees organization, which is putting up $1.1 billion of its own funding, getting $220 million from New York City government -- that�s $75 million for parking facilities, $135 million for nearby waterfront parkland, and a few other millions of odds and ends. It could have been more. One of the stars in the political �conservative� movement firmament, former mayor Rudy Giuliani, was set to give the Yankees at least $800 million of taxpayer monies. The former mayor, an unsuccessful candidate for the presidency, was set to issue $1.6 billion in bonding to build the new stadium. Successor Michael Bloomberg, an admired finance and business leader before being elected mayor, has been much more conservative and cut the funding dramatically. It seems that to ball team owners and management interests, New York City and New York State are presumed to be rightful funders of sports venues � consider the projects bandied about just in New York, including hundreds of millions of taxpayer dollars for a new New York Jets football stadium in Manhattan; the new Yankee Stadium; a new Met�s (baseball) Stadium � Citifield � in Queens; maybe a new New York Nets basketball arena in Brooklyn�and more. Fundamental questions are raised: Does government belong in the sports business today? What do you think of such involvement as municipal and state finances continue to deteriorate? Are these �fields of schemes,� as one author asked � assembling public money and benefits destined for making private profit? In addition to taxpayer dollars, there�s another important �free market� aspect of funding for major league ball teams (at least in New York). Hey fans, here�s what the Yankees are offering you for the new season: you can buy tickets for the Chicago Cubs � Yankees exhibition game for (priced from) $40 to $13,350. No, that�s not a typo. That�s for Friday � the Saturday game ranges up to $14,118. The Season Package including all regular season home games runs up to $68,000. Want a bargain? Look at the game with the Cleveland Indians on April 17^th � topping out at only $9999. How will fans afford this? The average fan�well, let�s just see. The large corporations lining up contracts for luxury boxes? This about tax deductible business expenses, you betcha. Although, Associated Press has reported that selling suites may not be a sweet business for the New York Yankees in these tough economic times. There were 51 suites priced from $600,000 to $850,000; 44 have been committed by contract. Still, the team isn�t hurting; almost all of the premium seats are gone (cost: $500 to $2500 per seat per game near home plate). The Yankees� owners are so confident that if you build it they will come � and pay � that they�ve opened their treasury for just three new ball players -- Mark Teixeira signed a $180 million deal; C.C. Sabathia will get $161 million; and A.J. Burnett, $82 million. In the last few days the team�s spending spree totaled $400 million plus. Great argument, it would seem, for the major league interests (especially those in smaller cities) to come together and agree on salary caps before they lose the common fan (and hers or his ticket dollars). And a good time as well for the Great Fathers and Mothers of Government to consider what they are investing in these days. I�m all for people earning all they can, based and ability and merit, and all for sports and especially the great American pastime, baseball. But, hey folks in leadership positions, can we get these things in proportion to life�s real needs? Seems a bit unsightly � poor optics, we could say in business terms � for people who can spending all that they can�while so many Americans are losing jobs, experiencing downsizing, losing their homes to foreclosure (10,000 foreclosures per day now), watching their 401-k�s become 201-k�s, and worse. And a footnote from the financial scandal du jour: Jeff Wilpon, COO of the New York Mets team, also building a new stadium with $600 million in team money and $90 million in New York City public financing, and $75 million in rent credits from New York State -- assures the media that the losses of money entrusted to Bernard Madoff will not affect the team�s finances. His father�s business (Sterling Equities) lost a reported $300 million in the Madoff Scheme of Things. But not to worry, this won�t affect the team�s treasury. New York City is allocating $85 million in FY 2006 capital budget funds and $4.78 million in capital reserve for the new Mets ballpark. A report by the Independent Budget Office says that the ballpark will cost the city taxpayers $177 million over 40 years and the state taxpayers $89 million. The use of tax-exempt bonds will save $300 million for the team. Citigroup is paying the Mets organization $400 million over 20 years for the naming rights to the stadium. (Wags on the City Council said the new name should be �Citi/Taxpayer Stadium.�) At the time it seemed like a stroke of genius in financial services and bank marketing. In the current financial crisis, with 20/20 hindsight, there are some critics questioning the marketing investment. But this is a long-term proposition for Citigroup, and a competitive marketing strategy. Let�s hope no expensive signs have to be changed. Enron Field became Minute Maid Park in Houston. You know why. Bank One Ballpark became Chase Field in Arizona (when JPMorgan Chase absorbed Bank One). Given the shifting sands of business, hey, you never know! Luckily, the ball teams are not as worried as some corporate leaders today. Maybe all those high-priced ballplayers entertaining us in the splendid new taxpayer-supported stadia will help us take our minds off the financial woes of 2009. Sounds like a plan! # # #

Detroit Big 3 Rescue Fails In Congress � Now It�s Up To The White House � Or Are The Bankruptcy Courts The Next Stop? Exactly Who In The Federal Government Is Accountable To The American People?

Fri, 12 Dec 2008 16:58:00 -0500

As CNN anchor Lou Dobbs seems to ask (night after night) � �What in the world is going on with our government?� Many more people of ordinary means as well as those in high places of power are now asking the same question. As we commented in this space on November 26^th -- Is there actually a Plan at work (in the federal government�s financial markets rescue plans)? Doesn�t seem so. More of a mindset. When you have a hammer, it�s said, everything looks like a nail. So right out of the box the folks from Wall Street presiding in the Treasury Department zeroed in on the first to be rescued from the burning buildings in the downtown NYC canyons � Wall Street investment bankers and money center bankers. (It must be noted that not all bankers asked for rescue funding � some had it forced on them by Treasury.) Not that a number of American commercial banks don�t need a helping hand. But it seems that the Treasury Department reacted swiftly and dramatically to the unraveling of the great schemes of Wall Street Masters of Wizardry with a mindset: Save the top management of investment banks and brokerages whose firms were failing (such as Bear Stearns, sold to Chase) or at risk of failure (Merrill Lynch, now part of Bank of America) � headed by the folks who over the past three years set aside risk management (and their fiduciary responsibilities) to plunge into risky and then totally risky and exotic investments, in the process taking all of the national economy over the cliff with them. Not many strings attached; not many demands of the firms receiving federal money. The rescue effort so far totals in the trillions of dollars and the calculator tape is still running. Will we see more money allocated? As US Senator Kay Bailey Hutchinson (R-Texas) said today � I am very disappointed and very reluctant to approve more monies�� More House and Senate members seem to be expressing the sentiment we hear on the streets of Brooklyn, New York: Fugghhaaboutitt! Perspective � all this in the Scheme of Things Some numbers here (promise your eyes won�t glaze over): The US Gross Domestic Product (GDP) is the estimated the sum of the total output of good and services that our nation produces, about $15-$16 trillion range. Maybe a bit more, if you count in certain other items, but let�s go with this number. The federal government fiscal year budget for this year, as originally set out by President George Bush (February 7, 2007) was to run on $2.6 trillion cash plus $239 billion borrowed for a total of $2.9 trillion, projecting a budget with income equivalent to 18% of GDP and federal outlays of 20% of GDP. Pretty big government, yes? And now getting really BIG! (budget summary tables: http://www.whitehouse.gov/omb/budget/fy2008/summarytables.html (The president assumed a balanced budget by 2012; read the rosy message here: http://www.whitehouse.gov/omb/budget/fy2008/message.html Our method of federal government financings isn�t necessarily financially �responsible.� You see, so as not to present us taxpayers with the bad news we don�t want to hear -- or -- the true cost we don�t want to bear, the true cost of running our government, with all the expectations of what Uncle Sam could / should do for us -- our esteemed leaders set up the government to run in the red. If you did this with your household monies, or with your business, or with your P&L responsibilities, how long would you last? Every state government balances its budgets, at least until this year (many are facing shortfalls now). In the budget process, the president proposes and the congress disposes � the White House OMB (Office of Management and Budget) sends the departmental and other budgets up to the Capitol Hill where members of House and Senate haggle and finagle and add and subtract numbers and come up with the final budget for operating the USA. Which has almost always approved with shortfalls since the grand �conservative revolution� of the 1980 elections? You see, just about the last budget to be balanced was for FY 1969. A former client of mine, CEO Charles Zwick, the last head of Southeast Banks, regularly told people that he was the last manager of the OMB during the Lyndon Johnson Administration to send a balanced budget up to the Hill. The Vietnam War was on, and LBJ decided to finance both �guns and butter,� with the financial means to wage war and provide �butter� at home with little sacrifice asked of consumers. (Sound familiar? It does to me.) At the end of the Clinton Administration the budget was balanced for a year or two, and then the events of September 11, 2001 changed everything � quickly back to red ink. When President Ronald Reagan and his conservative managers took over the government power levers in 1981, were they actually financially and fiscally conservative? No! The Great Communicator presided over annual budgets with deficits � growing shortfalls � that eventually amounted on his watch to a sum equal to all of his predecessors. Conservatives don�t talk about this much. So today, our government owes just well north of 9 trillion dollars. That�s $70,000+ for each family in the US. (Did you know you owed that much?) And as we say, the tape is still running up the shortfall. You might find the U.S. National Debt Clock in New York�s Times Square interesting. The Durst real estate organization put this up (in 1989) and it steadily ticks off our growing indebtedness as a nation, which stood at these numbers two years ago:

$20,000 new indebtedness per second
$1.2 million a minute
$1.7 billion a day
$51 billion a day

And this was before all the bail / rescue / nationalization if industry money began to flow! (Check out the May 2006 story at: http://www.theledger.com/apps/pbcs.dll/article?AID=/20060514/NEWS/605140354/1036

Photo By The Editors

And now we come to fantastic events of winter 2008 � and the approval of the US Congress and White House of trillions upon trillions of dollars of relief for troubled financial services firms � in banking, what was investment banking, insurance, and now the US auto industry. The White House is scrambling today to find $15 billion or so to prop up General Motors and Chrysler -- at least until the incoming Obama Administration gets settled. This is obviously a Band-Aid on the critical and long-term issues that the US automakers are facing. What will it take after January to develop (we hope) long-term strategies to assure that there will be futures for what we affectionately know as �Detroit�s Big 3�? Stay Tuned � this is very serious. Did the lack of a plan torpedo the Big 3�s plea for federal help? When asked by congress, the lack of plans to be offered up by the heads of Ford, GM and Chrysler at those first disastrous public appearances didn�t help. But neither did the leaders in government have any plans for the auto industry. This was a group grope in living color on cable TV, little more. What�s important now? Still � a Plan! As the head of the federal bailout panel of monitors, Harvard Law professor Elizabeth Warren, reported last week, the panel still does not see a coherent strategy for easing the financial crisis, and the government seems to be lurching from one tactic to another without clarifying how each step fits into an overall picture (NY Times, December 2). One of the most telling comments from Professor Warren: �You cannot repair this economy if you can�t repair families, and I�m not sure that the people directing the bailout see that as their job�� Help! The pleas for help can be heard on television broadcasts, on radio shows, in the halls of congress, in thousands of emails to congress, from the Main Street advocates struggling with broken dreams�HELP! Back to mindset: When your mindset is on helping �the financial markets� (investment bankers, money managers etc.) the focus is not on Main Street and the woes of the folks who are struggling with household debt, underwater housing values, ARM mortgage triggers to high payment levels, the loss of a job (or fear of same), and more. May be hard to relate to all that stuff when in your previous life on Wall Street the annual bonus was your annual salary (generous by itself by Main Street standards) and way beyond. (And so it�s easy to shovel out money to Wall Street with little strings attached.) But if we don�t address the consumer�s needs � this flow out of taxpayer money will not turn the economy around any time soon. And so, back to the massive and growing federal debt. The debt clock in New York City has to be re-done � to accommodate federal government debt levels above $10 trillion. Waaayyyy beyond $10 trillion will be needed. The estimates now that the federal rescue efforts alone may require up to $7 trillion; then there�s the annual federal budget (with ballooning deficits); the cost of the wars in the Middle East; federal aid to states struggling with shortfall; the rising costs of Social Security and Medicare; President-elect Obama�s awaited health care reform; the cost of the failures of the leaders of the auto industry�.all this and more surely awaits the incoming congress and administration (and cabinet officers). Let�s hope they do a better job than the leaders we�re watching in action today in the nation�s capital. HELP! And so, Lou Dobbs, we will join you in asking: �What in the world is going on with our government?� # # # PS: pick up this month�s The Atlantic Monthly and carefully read the James Fallows interview of the US-educated manager of China�s foreign finances has to say about the United States economy, fiscal irresponsibility, and more. Scary! The Chinese are among our major foreign creditors � and their patience may be running out.

The American Heartland � World Class Manufacturing Center? Or Deserted And Abandoned Resource Lost To The Nation�s Future?

Mon, 08 Dec 2008 11:07:00 -0500

For generations of American workers and business managers, the Heartland states � western Pennsylvania, Ohio, Michigan, Illinois, Indiana, and others � have been the epicenter of American manufacturing know-how. This was the important center of industrial output for the greatest armament build up in history, just before and all through World War II, when the US was the �Arsenal of Democracy� for the major democracies locked in mortal combat with the fascist nations. American industrial output was a deciding factor in defeating the powerful armies of then-enemies Nazi Germany and the Empire of Japan. (Both of which could boast of their own superior manufacturing capabilities and a head start in weapons making.) Innovation was always in evidence throughout the heartland: necessity drove the inventions that hardy pioneers needed, such as Cyrus McCormick�s reaper � from which the McCormick Harvester (manufacturing) Company would rise. JH Patterson would create the cash register giving rise to the great National Cash Register Company (NCR) in Dayton, Ohio. The John Deere Company first created steel plows for prairie farmers and grew to be one of the world�s premier earth moving and heavy equipment manufacturers based in Moline, Illinois, by the Iowa border and along the Mississippi River banks. This region was the essence, once-upon-a-time, of America-the-Abundant: Nearby hills contained the ores necessary for processing into metals, for iron and steelmaking. Rich veins of coal were within easy reach for firing up huge blast furnaces. Immigrant workers pouring into the country were eager workers for the factories. The Great Lakes provided inland seas for transport around the region. Great rivers throughout the region carried finished goods to markets in the US and Western Hemisphere and far beyond � think of the Mississippi as the central river of commerce flowing direct from the Heartland, down from the north through St. Louis and other cities to New Orleans and onto waiting ships bound for markets everywhere. Over the years since World War II the work available in the local factories � especially in the auto business -- grew in importance in many communities as the family farms began to disappear, or at least too much of the money the small farmers needed slowly disappeared. There are many families with three generations at the local plant � men and women. We have been in many small Midwestern towns where the factory workforce had jobs outside the production lines, at home on their farms (working nights and weekends and with family members helping out). These are proud, skilled, experienced American industrial workers, who want to work and to turn out the best products possible. (We�ve had plant hands describe with great enthusiasm and pride how the tractor engines turned out by the local guys and gals are so important to the giant companies they work for and to the end user who buys their products.) The peak of the manufacturing era has passed for too many of America�s manufacturers, their workers, the unions, local civic leaders, tax collectors, railroad workers, hometown retailers, bankers, and on and on... Alas, nothing is forever. As author Kurt Vonnegut often wrote, And so it goes� But does it have to? Can we stop the decline? One important factor in the decline: Wall Street mavens had other ideas for the publicly-traded manufacturing companies that arose from prairie and heartland ambitions and gritty work. Dump those workers � good for stockholders � the headlines of every 10,000 laid off workers in America�s factory towns were often cause for cheers in the narrow canyons of downtown Manhattan. For at least the past 30 years this anti-worker attitude drove some of the financial analysis and investment decision-making that led to a distinct Wall Street vs. Main Street confrontation. Corporate managers were constantly pressured by Masters-of-Financial Wizardry to downsize, outsource, shut the lines, move plants to foreign lands, and otherwise hollow out much of what we once could boast of: dominant American industrial prowess. There is lot left, to be thankful for � but too much gone, too. How many things can you buy today marked �Made in the USA?� Clock radios? Invented here (by GE) now made who-knows-where � but not here. How many color TV sets have the Made in the USA label? (None.) A decade ago I was in a large Pennsylvania warehouse loaded with RCA (remember that name?) color TVs. Wow! Then I looked at the label � Hecho en Mexico � and some ersatz other label purporting this was worked on an Indiana plant. Even that slight-of-hand seems to be gone now. Sure there�s a good amount of manufacturing still going on in the heartland. But how much of the work that should be there now has been moved to foreign shores? Or taken over by foreign manufacturers that come here and get generous tax breaks and looser trade barriers (than in their countries)? And so we come to the critical question of coming to the rescue of the three American auto and truck manufacturers. There�s a lot at stake here. Depending on how you figure things like this, maybe 1-in-6 to 1-in-9 American jobs depend on the Big Three�s survival. We recently shoveled wheelbarrows of federal � taxpayer � money to the banking and financial services (and insurance) sectors, in the form of loans, guarantees, investment, direct support and more. $25 billion of that was directed to the nine big banking firms. So far, 150 financial services sector firms are lined up for federal aid. This country, this congress, this administration, the American People, now have the opportunity to do something important about the tragic loss of American manufacturing over the past three decades: We all can help stop the bleeding. We can extend the requested financial lifeline to the three automobile companies in Detroit. Even if it is temporary until President-elect Obama and his Brain Trust gets to town in January. Millions of jobs hang in the balance, and not just in the heartland � those factory jobs are throughout cities and town and states and many crossroads of rural America. Hey, there in Washington -- don�t we have enough failed mortgages to deal with right now? Kiss off Detroit � and then watch what happens. Yesterday was December 7 � the anniversary of the Pearl Harbor attack on the United States by armed forces of the Empire of Japan. Just a week later Nazi Germany declared war on the United States. The nation plunged into a true world war, one to be fought on all continents by America�s citizen-soldiers. The war was also won on the home front -- It was the American factories, where the heartland workers (and their peers in other states) turned out the endless flow of weapons and materiel that helped to turn the battle. Aircraft carriers, tanks, Jeeps, rifles, cannon, planes, and everything else that was needed. And after defeating the WW II enemies, we as a People turned around and helped to rebuild the industrial base of western Germany, much of democratic Europe, and of Japan. After the Korean War we helped build a mighty industrial base there in South Korea. Can�t we continue to do that at home now? Be aware friends, this can be a dangerous world, and while we are the world�s superpower today, there are no guarantees for tomorrow. Large nations on distant shores are building mighty industrial bases. In the worst case scenarios, would you feel more secure (or less) if many more of our factories disappeared and their skilled workers went into part time retailing or forced retirement? And their factories were closed? The machinery dismantled. No further investment made. And then the materiel we would need in the future was turned out in�who knows where? Stay closely tuned to the critical discussions going on not just this week in Washington about immediate help � but to the longer-term and very strategic public policy discussions about the future of American manufacturing.

Part II: Two Tragic Incidents � What Do They Tell Us ..About Our Society �About Ourselves? And Who Is Accountable For �This? The Wal-Mart Debacle � A Worker�s Death In Shopping Melee

Tue, 02 Dec 2008 15:47:00 -0500

Part II � As we wrote yesterday, in our next of the woods, here in suburban Long Island, New York, two recent tragic incidents have shocked newspaper readers and TV watchers, whether they live in these parts, elsewhere in the country�or in some distant place on the planet. These incidents raise many disturbing questions about the state of the American society in this 21^st Century. �Black Friday,� they call it. It�s traditionally the day after Thanksgiving, when many mass retailers supposedly can see black ink on the ledgers (vs. the red ink of lost sales, especially in these economic times), and the signal that the Christmas season shopping frenzy in on. In our local newspapers, and on television, we saw endless promotions for store sales leading up to Thanksgiving. One of the busiest manufacturers� outlet malls in the nation is in our neck of the woods, and the stores there were open at Midnight on Thanksgiving. The highways and byways were jammed with mall-bound bargain seekers, so much so that auxiliary parking had to be arranged nearby. We should tell you that there are two populous counties on [the physical eastern portion of)] Long Island, Nassau and Suffolk. (Two other counties to the west are part of the 5-county incorporated City of New York � Kings and Queens. You know one by the name �Brooklyn,� and Queens is the home of LaGuardia and Kennedy International airports.) In Part I yesterday we wrote of the tragic death of immigrant from Ecuador, Marcello Lucero, that has put Long Island, New York on the world�s media radars because of the way he died: as police have alleged, and as a grand jury has agreed, at the hands of a gang of local youth on the prowl for immigrants to taunt and attack. Part II is about the tragic death of another man � Jdimytai Damour � who was a temporary maintenance worker for giant retailer Wal-Mart in its Valley Stream store. Valley Stream is a border town, also an incorporated village (equivalent to a small city elsewhere) like Patchogue an hour�s drive to the east. If you landed at Kennedy International surely you have flown over this area, which lies below on your plane�s final approach, and right on the border of Nassau and Queens counties. All roads seem to lead to Valley Stream: there are several major highways and thoroughfares bringing heavy volumes of traffic eastward from the two heavily populated New York City counties on the west end of Long Island. And so it was as Thanksgiving gatherings ended and late night approached that crowds headed for the Wal-Mart store and other retailers for the Black Friday events. And here is where the national and even international news coverage would be centered. The headlines on Saturday, November 29 in Newsday read: LI Mall Stampede Fatal Frenzy Wal-Mart worker killed as crowd rushes door At the Wal-Mart store literally thousands of people gathered through the night to await the opening of the store, scheduled for 5 a.m. on Black Friday. Nassau County Police Department officials estimate that at least 2,000 people were at the doors by that hour. There�s an active post mortem of the day�s events going on now locally, but this is what Newsday is reporting in its extensive coverage. In the early morning hours, police visited the store (which is located in a large regional mall) and found nothing unusual going on (�no criminality�) � the crowd (about 500 at that point) were told to remain orderly over a bullhorn. Wal-Mart had hired its own security guards to keep order. At 5 a.m. the crowd surged � breaking the store�s doors and overwhelming staff inside. According to reports, 34-year old Jdimytai Damour (who was reported as being physically large) was told to help keep order. He was not trained in crowd control or security. As the mob �this is what the eager shoppers became � surged forward, the young man was knocked down, and despite the efforts of his co-workers, was run over by the crowd�and died. Died. In a mad dash to grab bargain-priced items off Wal-Mart shelves, this young man was stomped to death. The recriminations have begun (also a couple of lawsuits with more to follow, you can bet.) Wal-Mart did not hire enough security guards, police say. (The store was visited beforehand and police suggested some steps, they report.) Newsday reported that the company left the decisions on security up to the store managers. (Reading into this, given the Wal-Mart track record in recent years of allegations and lawsuit testimony on employee and contractor abuse, does this mean the cost came out of the store receipts? You want security, they might say in Bentonville � you pay for it!) At Bentonville, Arkansas company spokespeople were saying: they were cooperating with the Nassau County Police Department; the store had hired outside security help; put up barricades; and had consulted with local police before Black Friday. But � we learned that each store decides how much security to hire. Each store is responsible for taking extra precautions on days like Black Friday to make sure that there�s a safe environment for shoppers and employees. (As reported by Newsday, November 30, 2008.) Retailing experts point out that other large chains develop standards to guide local outlets. The store closed for a brief time. You can see the video reports (being played over and over) on cable news shows now, as police and rescue workers try to revive Jdimytai Damour on the floor of Wal-Mart � as a few passersby and employees look on. The broken doors were replaced that morning. Shoppers continued to wheel their goodies to cars. And in the early afternoon two young people set up a prayer vigil, as the good people in Patchogue did two weeks earlier. One of them told the reporters, �Jdimytai was a casualty of consumerism�we have placed such importance on material possessions that we would even trample someone to death�� It�s another week now; the holiday shopping goes on at the Valley Stream Wal-Mart; his family and community mourns the death of the young man � whose family is in New York and Port-au-Prince, Haiti. Jdimytai is described as a good man, always helping friends, who attended the local community college in Nassau County. The tragedy is not only told in the death of this man, but also in the widespread reports that no one would stop in the mob�s run to the counters to help him! And so expect continuing news coverage of this tragedy, and what these stories say about us as a nation and a people. (If you look at Black Friday on Wikipedia, Jdimytai�s death is already part of the definitions offered.) Criminal charges may be filed. The local police department is being criticized for its lack of officers at the scene; the department shot back that security is the job of the stores and the mall operators. The criticism of Wal-Mart will continue � in so many instances, this seems like a company whose management just doesn�t get it. (Jdimytai Damour was a temp hired through a contractor to Wal-Mart.) And we ask ourselves: How could this happen? How could we get to the point as a people that things (in the store) matter much more than people? In a microcosm, the Valley Stream mob stampede tells us a lot about the American obsession with things, shopping, bargain, sales, materialism, consumerism, and more. We seem to have forgotten the reasons why we celebrate Christmas, and we have strayed a very long way from the way the Holy Day was celebrated in early decades and centuries. Is this only about shopping frenzy for many Americans? No matter where you live, chances are you�ll be following the aftermath of these two tragic stories. For those of us who live where the deaths happen, many questions remain � and the answers (and lessons) to come are most important. In Part I, December 1, we commented on the tragic death of Marcelo Lucero, an Ecuadorian immigrant, allegedly killed by a teen gang seeking immigrants to taunt and attack.

PART I: TWO TRAGIC INCIDENTS � WHAT DO THEY TELL US ..ABOUT OUR SOCIETY �ABOUT OURSELVES? AND WHO IS ACCOUNTABLE FOR �THIS?

Mon, 01 Dec 2008 10:09:00 -0500

In our neck of the woods, here in suburban Long Island, New York, two recent tragic incidents have shocked newspaper readers and TV watchers, whether they live in these parts, elsewhere in the country�or in some distant place on the planet. These incidents raise many disturbing questions about the state of the American society in this 21^st Century. The first tragic incident was the slaying of a man because of his ethnicity and Hispanic background, allegedly by a young bully with a knife running with a pack of six other teens the police say were on the prowl in the night hours seeking immigrants. The Suffolk County district attorney said the gang was looking for any immigrant to beat up. The victim they found was a 38 year old man from Ecuador, Marcello Lucero. His �sin� that instigated the murder? His background, color and status as an immigrant. (After the murder, other Hispanic men have been coming forward to describe alleged attacks by these and other teenage suspects.) The �sport� of these youths is called �beaner jumping.� Just before midnight, near the local railroad station, the teens spotted two men walking and gave chase. One man got away. Marcello was encircled by the young bullies and one put a knife in his chest. Evidently the group made off, continued to hang together, and was rounded up by Suffolk County�s finest without a fuss. No big deal, it would appear, to the attackers. This event that made international headlines took place in a village called Patchogue, in eastern Long Island, about 60 miles from Manhattan�s Times Square. (In another state, such as in the Midwest, this would be considered a small city.) Patchogue has long been a retailing center, and is a gateway to the storied pleasure island just offshore, Fire Island. Like a number of neighboring towns, this older village has attracted a number of immigrants, most seeking work and opportunity far from their native countries. Some come and go, and others stay, settle down, build families and pursue the American dream. The government of Ecuador reacted immediately to the New York events and people there poured out into the streets to mourn their countryman and demand justice in the United States. Justice was swift; a grand jury indicted the young men on the prowl. The people of Patchogue Village also poured out onto the streets, to mourn, and to condemn the alleged racist attacks in their hometown. There were rallies attracting hundreds of local residents, decrying the violence and intolerance. But there�s more to this story. You may remember the news stories from several years back, about the nearby hamlet of Farmingville being �overrun� by immigrant workers, most of them Hispanic. One house contained dozens of immigrants squeezed into tiny spaces. The parking lot of the nearby 7-11 convenience store was filled in the early morning hours with day laborers eager for work. Contractors, landscapers, people with money looking for cheap laborers needing a day�s wages picked them up. The neighbors were riled up. The local county legislator took on the issue. His name is Steve Levy. On many days this became the most important issue in his district. Mr. Levy went on to be elected to the New York State Assembly, served with distinction, and in time, was elected County Executive of Suffolk (population 1 million-plus). Steve Levy is a popular official; so much so that he ran unopposed with multiple party endorsements last time around. And in all his official posts he has been outspoken on the issue of illegal immigrants in Suffolk County. The burdens on public finances, on taxpayers, are more than they should bear, and the federal government should help the country address the issues. He most assuredly is not a racist. Mr. Levy is concerned with a number of issues regarding the impact of illegal immigrants, and has called repeatedly on the federal government to deal with the issues. Not all of his press coverage on the issues has been favorable. And his independent positions on issues � and he has his finger on the mainstream pulse � have often put him in hot water with immigrant communities and their advocates. So when this murder occurred, blame was quick in coming � some put blame for an atmosphere of intolerance encouraged by County Executive Levy. Grossly unfair. His reaction to the tragedy is to us an example of a public official standing up, acting responsibly -- and being accountable -- to the residents of his county, whether native born or immigrant, �legal� or �illegal.� He called on houses of worship to ask hard questions about how this happened and asked clergy to preach and pray about tolerance their communities. He suggested: In this weekend of reflection, let us talk frankly and openly � within our churches, synagogues, mosques, and within our schools and community centers, within our homes, and even within our souls � and confront the divisive factors of hate and intolerance� County Executive Levy asked in correspondence to clergy / community leaders these questions:

How can children, raised in a quiet suburban community not unlike the many others across the Island, harbor such twisted thoughts � beliefs that are the very anathema of what our great country represents?
How could the hatred and intolerance that seethed inside these teenagers go unnoticed and unreported, by their friends, siblings, peers, teachers, and families?
How can we all look past our differences to build better, stronger bridges anchored on common ground?

Mr. Levy pointed out that the good people of Patchogue had offered support and assistance to the Lucero family, and that spoke to the innate goodness that lies within the vast majority of our society. The story goes on. There will be trials of the attackers, generating news headlines in the US and in Latin America and beyond. Elected officials in both countries (US and Ecuador) will continue to weigh in. The school that the teens attended has been rocked by these events. School officials and parents wrestle with the issues. The local daily, Newsday (one of the 10 largest papers in the US) has covered this story daily. CNN, Fox and other news outlets have been all over the story. We ask our own questions:

Could it be that the endless bashing of �illegal immigrants� in our midst (tune in to talk radio or certain cable programs to hear this first hand) instigate bad behavior? Encourage intolerance?
Are local officials such as Mr. Levy or the elected mayor of Patchogue, Paul Pontieri, unfairly dealing with more macro issues � border control, determining immigration status, the burdens of providing health care through hospital emergency rooms, overcrowding in schools, etc. � without sufficient concern by federal officials with responsibility for these public policy issues?
How can we as Americans do the right things about / for / with the undocumented immigrants in our midst � if they got here by other than legal means, overstayed their visa, etc? How can we be compassionate and considerate and tolerant. .. without condoning their actions (e.g., moving in front of the line ahead of those waiting in other countries for their legal immigration status)?

Most important, as the county executive asked, are we doing all that we can to tone down the anti-immigrant rhetoric�to create an atmosphere of tolerance? We are a indeed a Nation of Immigrants, some who came early on and some of us coming later. We need solutions now to issues involving immigration, not encouragement of hatred of immigrants in our midst. Tomorrow: The tragic death of a Wal-Mart employee as a mob bent on shopping crushed him in an early morning melee. ###### Disclosure: Steve Levy is a long-time acquaintance and a public official that I have admired over his career for his demonstrated accountability to the public he serves. He is doing the right thing, not ducking any issues, in his handling of the events in his county. We�ve shared work on projects with Mayor Paul Pontieri and admire the way he has rallied his community to help immigrant families in their neighbors.

AND THE BEAT GOES ON � MORE RESCUE MONEY WHEN AND WHERE AND HOW DOES THIS END?

Wed, 26 Nov 2008 15:26:00 -0500

The Hon. Everett McKinley Dirksen was a gravely voiced, avuncular US Senator from Illinois (he served 1951-1969) who helped to pass the Open Housing Act of 1968, a powerful piece of the Civil Rights legislation. We long remember his most famous quote, about federal spending: �A billion here, a billion there, pretty soon, you�re talking real money�� Real money. Yep, senator, that�s about where we are today as the folks up on Capitol Hill, down Pennsylvania Ave at the White House, right next door at Treasury, around the corner at FDIC, and a few blocks away at the Federal Reserve headquarters continue to fill wheelbarrows with cash to hurry on to the �capitalist sector� to steady our financial system. (The flow continues to banks, credit card companies, student loan guarantors, Fannie Mae and Freddie Mac, maybe to the car companies, most certainty to the insurers, and who know where else!) Is there actually a Plan at work? Doesn�t seem so. More of a mindset. When you have a hammer, it�s said, everything looks like a nail. So when you and your crisis team come from Wall Street, and have sat at the catbird seat position of the Street at that (Goldman Sachs), what is the mindset? It seems, after all these weeks and much sturm and drang, it started out as let�s save our guys on the Street. Mindset. It�s what we are most familiar with, and comfortable with, if we come from the mountaintop of Wall Street in New York to tell the na�ve folks in Washington what they need to do. The first request then to the US Congress was for $700 billion or so (hear that, Senator Dirksen?) with little details about how the money would be used. Improvising on the fly, we then got �TARP� (the Troubled Assets Relief Program), sort of like a cash-filled �CARE� package sent on to the biggest banks and investment bankers/brokerages of the United States of America. Those �free market� �capitalistic� organizations that were, well, choking on �troubled assets.� Assets. Meaning�having value? Maybe not in this case. �Asset� is bank-speak for loans. We�ve explained here before, in the reverse-mirror of banking accounting, an asset on the balance sheet is a functioning loan (not in default) that a borrower owes the bank. (You and I might count our assets as a paid off car, or that equity which really do in own in our home, or the cash in the now-reduced 401-k.) A liability for the bank: the cash on hand in the vault that the depositor owns�and could ask for (back) at any moment. So the �assets� that were boasted of in recent years as banks grew the asset base � and on which growth bonuses were awarded�became troubled. Got it? How do assets get in trouble? Well, for home mortgages, any number of reasons. Borrowers over reached and bought more house than they could afford. Happens. Maybe the local Realtor urged the purchase because it will be worth a heck of a lot more next year, won�t it? Maybe it was a re-finance �maybe not the first at that. With houses escalating in price, many homes became ATM machines. Why not �because it will be worth much more money next year, won�t it? Remember the bank and mortgage company ads just a short while ago? They urged us to: Pay off your student loans, car loans, those piled up credit card balances by re-financing your house? Well, a lot of us did! And then there were the predatory loan practices. No one is much talking about this � easier to blame the borrowers, I guess. (We hear those conservative congressmen now � we shouldn�t be bailing out greedy borrowers!) Question: When you closed on your mortgage, did you read every line of every document in the stack they placed before you? (You know, Big Government�s RESPA closing documents for the �protection of the consumer?�) Most of us didn�t. But therein were some traps to ensnare the borrowers and later send their mortgages to the dreaded TARP heap. Loans had hefty pre-penalty agreements � pay off the mortgage and hand over a big check to the lender. If your house is below water (mortgage less than value), you can�t sell, can you? There were all kinds of fees built in � and these got rolled into the mortgages, inflating them. And then there were appraisals � what was the house really worth? Wanna make the loan? Inflate the Loan-to-Value (LTV) � how many appraisers really did that? According to accounts at big mortgage lender Countrywide, MANY did (inflate value). (Read Gretchen Morgenson�s fascinating post-mortem accounts every week in the New York Times). For the past three years or so, a slew of exotic mortgages went sailing forth to borrowers, Adjustable Rate Mortgages (the famous �ARMs� you are hearing more about.) Zero interest and then kickers up, up and up, sometimes doubling the monthly mortgage payment for a family struggling today). In the first years of the 21st Century, half the states passed �predatory lending� statutes in an attempt to protect their citizens. But � the federal banking regulators, members of congress, and other �protectors� looked away. This was a great game, wasn�t it? Even Chairman Greenspan buried the famous �irrational exuberance warning� deep inside a speech to an inside group of financial wizards � you don�t take the punch bowl away too early in the party, do you? And so the very efficient mortgage machines rolled on. Local mortgage brokers sat at kitchen tables and promised� what? Who can remember now? The brokers then sold the mortgages on which they made a great fee to wholesalers, who then peddled them to banks and mortgage companies like Countrywide who then packaged them and sold them to investment banks who then peddled the packages to institutions and individual investors (like your mutual fund, or your pension fund, or even far offshore to central bankers in Europe). Thick stacks of documents accompanied all this commotion � did everyone read these? No more than you read the RESPA stack. And now � we�re talking about trillions, good senator (of course, there�s also inflation since your day). Trillions and trillions of dollars needed for saving the financial system. About those assets. Who owns them? That would take another column this size. Consider that 90 percent plus of mortgage borrowers are making their payments. Good news! The predatory or over inflated or whatever-they-are mortgages sitting in the �packages of assets� that at first were going to be addressed by the rescue money (before the Secretary of Treasury changed his mind) are still there. A mess, yes? Which way is the exit door? There is no door � yet! This will be over when it�s over. How it will be over may well be up to President-elect Obama in 2009. Where it all ends up is anybody�s guess. Including Treasury�s, the Fed bankers, congresspeople, and everyone else in Washington at the levers of power. We�re all in this together � we need to work our way out of the mess and work to make sure this never happens again!

GOING OUT OF USA SEA PORTS � WHAT? AND INTO THE USA PORTS�WHAT?

Thu, 20 Nov 2008 11:13:00 -0500

You can tell a lot about a nation by its trading activities, and what goes on at the international seaports where cargo ships of all kinds come and go � the important ports of call of a nation. Take the United States; today, there are international seaports on all coasts plus those on inland waterways. There used to be lots more shiploads of manufactured goods stamped �Made in the USA� leaving these seaports, loaded in the holds or on the decks in containers. After World War II, with war-torn Europe and Japan in ruins, the USA accounted for 50 percent of all world trade. We helped our former enemies � Germany and most of Western Europe � rebuild through the Marshall Plan, named for former commander of US forces and then secretary of state, (General) George Marshall. It was one of the most magnanimous gestures of this nation, one all Americans can be proud of. We fought in WW II not to conquer, not for land, but to assure the freedom of millions of people � and their descendants. Continued global peace and harmony among nations depends on the free flow of trade � flows of money, hard goods, farm products, intellectual property, science, people, ideas, and more. With world trade greatly expanded in the 63 years since WW II ended, the US still accounts for about a quarter of the total. The US could once boast of dominance in some important areas � think of Detroit�s auto products that rolled out of factories in the US and also in England, Germany, and many other countries, and shipped to many foreign ports. Once upon a time, Ford Motor Company�s products accounted for either one of every two cars on the road everywhere (or, by some accounts, one-in-three). Everywhere in the world! And GM � the largest industrial company in the USA in the postwar years, a titan among even the biggest of the country�s industrial giants, with its dazzling array of popular brands and array of products. Sad to see the CEOs of the auto giants in Congressional hearings, sitting all in a row, seeking billions from Uncle Sam to stay alive. In the same newspaper with the reports on the auto leaders� plight, something caught my eye. This was a report from the west coast of the US � home of those sprawling, automated complexes where countless cargo ships leaving the Far East now end up. Seems many of these foreign made autos are now piling up on the docks. So many, the foreign carmakers are renting space until the cars move off the docks to local dealers. And outbound cargo is not moving as well. American-made goods for foreign markets, right? No � the back up involves American consumption. Waste. Mostly recycled cardboard for Asian manufacturers � to ship their consumer and other goods to the United States. (The cardboard is not needed due to the Chinese factory slowdowns as American consumers tighten their budgets.) The largest volume of �things� moving from the United States to foreign markets in the Pacific Basin via the huge seaport of Long Beach, California are � recycled cardboard and paper products for China�s manufacturing plant. Not American-made cars. Perhaps we need to re-think some of the advantages of having a larger manufacturing base in the United States -- especially as the nation gropes for solutions to our current financial crisis. This is not saying we need to stop buying foreign made goods � that would not work either short or long term. But should we keep shipping jobs to foreign lands? First it was tens of thousands, and then flows of millions of good manufacturing jobs � from the USA to foreign shores. Every American manufacturing job has a positive ripple effect of 4-to-1 or 5-to-1 � one manufacturing job creating four or more jobs at local stores, in banking, at other manufacturing plants, and in services industries of all kind. Manufacturing jobs typically pay higher salaries that permit workers to buy the goods manufactured by other workers. And many � too many � are never coming back. We have been hollowing out American industry. A century ago Henry Ford was hailed a genius in a very important aspect of the still young US manufacturing industry� he figured out how to make products that could be bought by the workers making them, and he made the system work. So well, in fact, that we would say Mr. Ford put Americans in cars and on the roads, and then exported Ford cars to every corner of the globe. And now�as the powers-with-the-federal-purse strings noodle on how � or even whether to � save Detroit jobs, let�s think about the biggest things leaving US seaports. Waste. America�s cast-off waste, recycled and shipped to foreign factories to use to pack still more consumer goods to ship to US retailers. Eventually, one might ask, with fewer and fewer good paying US jobs (and diminishing real disposable income) � could we reach a point where there are too few retail buyers resulting in lost sales taxes for local government? Not enough income taxes for the federal coffers? Far fetched? Maybe. But I would feel better some day seeing more Ford, Chrysler and GM vehicles muscling aside waiting ship containers of � American waste. Cars with far better clean technology features than are on the road today, greener cars, vehicles with highly-desirable motive power that can compete with the hybrids coming from Asia. The Congress has already set aside $25 billion for the Big 3 to tackle such innovative solutions. Let�s fill up those ships returning to Asian markets with US manufacturers� cars and we�ll feel a lot more optimistic about the US economy.

MEMO TO THE PRESIDENT-ELECT: TAKE IT TO THE AMERICAN PEOPLE, LEVEL WITH THEM -- THEY CAN TAKE IT!

Wed, 19 Nov 2008 14:28:00 -0500

Take it to the People, Mr. President. That�s my unsolicited advice for our new president, who takes office January 20, 2009. Considering the complex issues that our new leader will face after he leaves the Capitol steps and the swearing in ceremony, there won�t be much of a honeymoon for his administration. The real work begins on Day Two, as we�ve written here. So my advice is this: As the Storyteller-in-Chief, just as he is Commander-in-Chief, President Obama should use every means of communication possible to tell the American people what we are facing (in this time of multiple national crises), and what he and his team will do about it. And what we can do to help. Tell it straight � we can take it � and tell it simple, so we can process all that is shared with us, and rally around our new leadership to tackle the massive problems that we face as a nation�all together now! The United States is blessed with an amazing assortment of the means of communicating. Newspapers, radio, television, magazines, Web social media, blogs, Web sites, videotaped and DVD recordings, instant messaging, movie house trailers, satellite conferencing -- and more. It�s so easy to tell a story. The way has been paved by past president storytellers, who set the pace. Franklin Delano Roosevelt. Harry S. Truman (�give �em hell, Harry�), John Fitzgerald Kennedy, and the Great Communicator, Ronald Wilson Reagan. (�Tear down this wall, Mr. Gorbachev� � powerful message, and a little story that summed up the 40 years of the Cold War.) Some channels are there for our instant use � our Web sites � and others require the permission of the owners � for example, as when the President of the United States requests broadcast and cable TV time for a major address. Given his personal charm and the media�s fascination with this president-elect, it will be easy to say �yes� to the White house request. The way to direct-talk to the American people -- from coast-to-coast-to-coast and everything in between, in millions of homes, at offices, or in bars and others� homes -- was paved by the president you (Senator Obama) are being increasingly compared to, and the history that is eerily sounding more familiar every day: President Franklin Roosevelt (FDR). Radio was still quite new when he was sworn in (March 1933); commercial radio had been birthed about 10 years earlier. (Sort of like our World Wide Web since 1996 or so), and television in the years 1946 to the mid-1950s, which President John Kennedy mastered as our first television Storyteller-in-Chief. Having made speeches on the radio as governor (of New York), and on the campaign trail, President Roosevelt decided to �use The Radio� as a major means of directly taking his messages and stories to the people. FDR�s inauguration was broadcast to the nation from the Capitol steps on March 4, 1933. His first broadcast to the nation was on March 12th, from the White House. He had requested the air time for an important address and the leading radio networks (including CBS, Mutual, and NBC �Red� and �Blue�) agreed. FDR said he wanted to talk directly to the American people. CBS newsman Robert Trout supposedly dubbed this a �fireside chat,� envisioning the president at his desk and millions of Americans sitting in their homes�beside a crackling fire. The subject was serious � very serious, even dire to the listeners. Hundreds of banks had failed, were failing, with the dominoes never ending�bank after bank and bank�gone. Along with depositors� saving and mortgages. The president�s tone was reassuring � he had to be that � and educational �and informative�and presidential. He announced that every bank � every bank � in the nation would be closed at once. A �bank holiday,� he brilliantly called it. And after government inspection of the books, they would begin to re-open. Deposits would be insured. And if a bank opened (many did not), customers could trust the institution. FDR went on to explain the how / why / who, etc. of the issue. In the end, the American people understood what was at stake and they could count on their new leader. The great climb out of the dark days had begun. FDR told a great story that evening and established an important precedent of talking to the American people whenever a story needed to be told. Like the progress being made to roll back the Bad Times of the Depression years. Why certain legislation was needed (the New Deal laws and regulations). Why this isolationist nation after WWI must prepare for war, what was at stake as fascism swept Europe, and so on. The attack on Pearl Harbor by the Japanese Empire � that address was a comprehensive review of global politics, world history, and more. The people understood; we were going to war and that would be great personal sacrifice needed. For hundreds of thousands of Americans, it would be the ultimate sacrifice. The 125 million American people got the story, straight, the goods, understood the stakes, came together in a common cause�and in the years to follow accomplished the impossible. From 1933 to his passing in spring 1945, through the years of the Great Depression, through a world war fought on all continents, through all kinds of challenges to the nation, President Roosevelt talked to his people, about three dozen times total. (The actual �Fireside Chats� count varies). Millions of homes would tune in. The White House would notify the broadcasters of the president�s request, usually for a Sunday night after all the prime time shows, and FDR would broadcast from his microphone-studded desk, storytelling in earnest. (You can hear some of these today at: http://www.mhric.org/fdr/fdr.html -- listen - be inspired!) FDR�s example was followed by most of the presidents who followed. The intimacy of radio is different from the �hot medium� of television (picture with sound vs. the mind-images conjured up by individuals around the RCA radio set in the night hours). And the proliferating social media, wireless devices, XM car receivers, etc. are different as well. But the storytelling � responding to basic human instincts � is as important as ever. And, President-elect Obama, will be ever more important to the American people given the challenges we face and will be facing in 2009 and beyond. Tell it to us straight � we can take it!

WE�RE ALL IN THIS TOGETHER � THE WORLD IS A GLOBAL VILLAGE WHEN IT COMES TO FINANCE, BANKING, LINKED ECONOMIES, TRADE, MARKETS --AND SHARED FATES � WELCOME TO WASHINGTON, Y�ALL!

Sun, 16 Nov 2008 13:53:00 -0500

Very impressive -- over the weekend the governmental leaders of the world�s largest economies gathered in Washington to exchange ideas and lay the groundwork for greater cooperation in solving the multiple financial crises their nations are experiencing. Or maybe it�s a multi-dimensional crisis (one) with many moving parts affecting many countries... One thing that may be clear is that just as in ancient times, all roads were said to lead to Imperial Rome, the 21^st Century �AppianWay� in financial, economic and capital markets terms are the global electronic networks over which numbers fly (some quite large) representing financial transactions. This Appian Way has been centered in New York (for the most part), with brokers, hedge fund managers, money managers, portfolio managers, and other market players moving millions� and billions� of dollars of financial products�turns out, some of them turned toxic. And those toxic assets are part of the reasons that world leaders traveled to the United States over the weekend. Their nations� central bankers and other investors were eager buyers of the collateralized mortgage obligations (CMOs) and mortgage-backed securities (MBS�s) and other asset-backed securities conceived, assembled and expertly marketed by (primarily) US-based market players. It�s more complicated than that, but it is accurate to say the exotica created by the ever-innovative American Masters of Wall Street in time became the financial instruments that are now clogging the arteries of banking, brokerage, investment management and the world�s capital markets. Now it�s time to un-clog the global financial system and get things going in the right direction. To unravel the complicated financial web weaved as the exotica were marketed, heroic measures are required such as the US Treasury �TARP� program. (Unfortunately, a good many of the investments involved were un-regulated). What is that old expression Grandma used�about closing the barn doors after the horses have all run off? That was sort of the starting point in Washington � the horses are surely thundering away in the markets -- but at least it�s a good beginning to try to do the rights things to protect investors and stakeholders in the years ahead...
The Summit of the Big 20 One thing that was very different about this summit meeting of 20 nations was the makeup of the invitee list � the BRICS were there (that�s what Goldman Sachs identified as the new power players on the global stage: Brazil, Russia, India and China. This was way beyond the usual G-7 meeting plus one (Russia). The current world crisis involves many nations, including the resource-rich players (think oil and gas) that have been recycling some of their revenues through the US and other markets to buy those asset-backed exotica. Most of the nations at the summit have their own Sovereign Wealth Funds (SWFs) and state pension plans�some of these are also investors with stakes in the troubled capital markets. As we said, there�s a lot of inter-connectivity in finance these days. One topic high on the agenda was risk � the means necessary to address risky investments and weak regulatory oversight (hear those horses running away from the barn?) It seemed from press reports that the participants agreed that a new regulatory framework is needed, and there was consensus that work should go forward to update and expand domestic, global and interdependent financial oversight. The details of what, how, when was less clear as the meeting ended, although an ambitious framework was established, with deadlines... The New York Times reported today that the summiteers had agreed on these points:

Financial markets must be made more transparent.
Derivative instruments must be addressed globally.
Regulation must be coordinated [globally].
Executive compensation must be addressed more broadly (the USA�s excessive CEO pay practices are becoming a global issue).
The concept of establishing �Colleges of Regulators� to share information across national borders seemed to find favor among the delegates.

There was a Declaration of the Summit on Financial Markets and the World Economy issued by the Group of 20 nation leaders to stress the consensus reached on at least the possible way forward: �We are committed and determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world�s financial systems.� Goal of the Summit 20: To help ensure that a global crisis (such as this one) does not happen again. The work going forward will be guided by the nations� shared belief that market principles, open trade and investment regimes, and effectively regulated and financial markets foster the dynamism, innovation and entrepreneurship essential for economic growth, employment and reduction of poverty. Deadlines for study and action steps were set at the summit. There will now be serious discussion of capital market and banking reforms: (1) in the United States, certainly a top priority for the Administration and the Congress; (2) inside in other sovereign states; (3) within the European Union system; (4) within cooperative efforts that are ongoing, such as the dialogue between US and international accounting rule setters and banking standard setters. Watch for this action as the research, dialogues and potential action steps reach their deadlines (a number were set for March 31, 2009). These efforts include looking at financial markets regulation; accounting and financial reporting standards; executive compensation; derivative products; hedge funds; securities regulation and oversight; risk management; and banking industry best practices (re: Basel agreements); and more. Stay Tuned � in the United States, and in other major economics, and now among the world�s major sovereign players � to the efforts to bring about greater accountability in the global financial system and capital markets. Before the horses race away again from the wide open barn doors. . Note: The communiqu� issued by participants via the White House is available at: www.white-house.gov/news/releases/2008

WHO WERE THE PROGRESSIVES � WHAT CAUSES DID THEY ADVOCATE? AND, ABOUT THEIR ENDURING POSTIVE IMPACT ON THE AMERICAN WAY OF LIFE�

Fri, 14 Nov 2008 20:12:00 -0500

As we await the arrival of our new president and vice president, cabinet members, and the new members of House and Senate� During the primary campaign season at one point Senator Hillary Clinton was asked about her political leanings (wasn�t she a true liberal as charged by the Right?). Her reply resonated with a number of people: I am a Modern Progressive, she told the interviewer. It got me thinking � what�s wrong with being a progressive�isn�t it the fundamental drive of the American Dream to make �progress� and be all that we can be, to borrow from the great US Army marketing slogan�as a society�and as individuals? As we consider how (liberal) or (left-leaning) or (middle-of the road) the incoming administration and factions of the new congress might be, I�d like to put the question in the context of my belief that we are at the moment of dramatic societal change � this is one of the fundamental, once-in-a-generation shift of American politics and culture-- from the dominance of right-leaning (more conservative) politics of the 1980s (and things cultural) to the center-left � and maybe even more left than that. The perilous state of the economy has a lot to with this � consider the several millions of manufacturing and related industrial jobs lost in the US in recent years; the ongoing chaos in the capital markets; the seizing up of banking and business, government and commercial credit markets; the consequences of our military affairs (wars in Iraq and Afghanistan going on longer than the years this nation fought all of WW II); the erosion of all-white dominance of institutions; the increase in the nation�s non-white populations; the foreclosures that are mounting month-over-month in too many neighborhoods (10,000 US homes a day are foreclosed); the growing wealth and income gaps as the middle and lower economic rungs become ever more slippery for American families �as the wealthy get wealthier-still�and more issues than that to address! Where does Modern Progressivism fit into these issues? The original Progressive Movement came together more than a century ago. Under conditions that include several sounding a bit familiar in 2008. Immigrants were flooding into the US (the late-1800�s waves came from Italy, Eastern Europe, Russia, and other lands) and many of the recent arrivals were living in terrible conditions as they landed and remained in the crowding cities. The era�s �Robber Barons� (wealthy interests and strong men who monopolized and controlled the railroads, Wall Street institutions, banking, large corporate enterprises, and numerous monopolies, a/k/a the �Trusts�) were under fire for their practices and ways of doing business. At many levels of society there was growing displeasure about monopolies, price fixing and other practices of the big businesses of the era. Common factory workplace conditions for many Americans were about the same as [those] social investors today criticize certain US companies for condoning in their overseas supply chain. When one of the Robber Barons� companies took a strike in Homestead, Pennsylvania, owner Andrew Carnegie took a trip to the British Isles while his hired strikebreakers, the Pinkertons (with the looking away of local and state officials), savagely attacked the workers, injuring many and killing nine. Union leaders were charged with murder and treason. The company broke the back of the movement workers to organize and the concept of collective bargaining. Such was the state of labor-management (or owner) relations as the new Progressive Movement began. This was the ending of the �Gilded Age� (said author Mark Twain), delightful times for the elites and the wealthy and super-wealthy (and as he penned, an era full of business and political corruption). For many in big business firms, working conditions were more like those in Charles Dickens� novels, such as Ebenezer Scrooge (the owner) and Bob Cratchit (his employee), in the scene from that Christmas Eve in �A Christmas Carol.� Enter the President as Chief Crusader As the progressive thinkers in the American society reacted to conditions that they believed had to be changed for the nation to fulfill its promise of social and economic equality, in the White House, an [seemingly] unlikely champion took center stage to dramatically change the way things were: Ambitious, young, action-oriented, and very bright, Teddy Roosevelt had been governor of New York, and was elected William McKinley�s VP in 1900, mostly to get him out of the way of the Republican big bosses. (He had too many radical thoughts about upsetting the system that benefit the wealthy ownership class.) Upon the assassination of President McKinley, �TR� became President of the United States (September 14, 1901). Throughout his presidency he was a dogged, committed crusader -- especially against corruption in both the public sector and the private sector. In the era of giant corporate enterprises rapidly (and rapaciously) consolidating power and influence on a scale never seen before, President Roosevelt and the Progressive Movement provided a very effective counterbalance. Seeing threats to the American Democracy and the unique capitalistic system of the USA if things weren�t changed, TR took action and the progressive movement grew to support the concepts advanced. (He was an unlikely leader of reform of the system because he was born into the wealthy class and easily could have been an elitist leader.) He used what he called �the Bully Pulpit� to rally support for change. As though the pressure building � especially from below � had blown the lid off the American Society, the reforms flowed forth over two decades:

Consumer Protection � advocates drove adoption of the landmark Pure Food and Drug Act (resulting in today�s FDA protections; many of today�s food supply protections; regulation of medicines, and more).
Protection of Workers � workers got the right to organize; the 8-hour workday became the norm; there was protection of worker health (such as in the coal industry where many suffered from black lung disease); unsafe factory conditions began to be eliminated.
Child Labor was controlled � eliminating tiny children working alongside adults in industrial facilities.
Urban Residents began to be protected � reforms of the day began eliminating crowded tenement housing, which often led to sickness, including widespread tuberculosis; water supplies were regulated and protected, probably the greatest single factor in health advances in the early 20^th Century.
Education � Progressives encouraged wider access to education for children, especially in the cities, to eliminate crime and the cycle of poverty, and to begin to build a larger, more educated middle class.
Political Corruption Battles � included direct election of member of the US Senate; encouraging closed (secret) ballot elections; addressing the power of political bosses in the big cities; addressing voter fraud.
Progressives addressed the root causes of poverty � especially urban poverty, with millions of immigrants flowing to port cities, and then crowding in to work in the steadily expanding universe of factories. (The plight of immigrants were top-of-mind for progressives, including encouraging immigrants to move out of over-crowded cities, and address their health, job, education, and other social needs.)
Protecting the Nation�s Natural Resources � President Teddy Roosevelt was in the lead here, setting aside about 100,000 acres a day for the future generations throughout his two terms! He created sanctuaries and reserves of various kinds by executive order. (The National Park System would come about a few years after he left office, in one of the Progressive Movement�s finest moments.)
Treatment of the Nation�s Veterans � encouraging health care for veterans, and pensions for military retirees
Fair Taxation � Spreading the Burden � the adoption of a progressive / fair tax system (the personal income tax came during the Progressive Era; before that, the primary means of support the federal government included tariffs on goods.)
Encouraging Social and Economic Justice � addressing the situations of Native Americans, and tens of millions of immigrants pouring into the USA � your ancestors and mine!
Regulating Industry � curbing the runaway power of large corporations; curbing large business monopolies in key sectors; first President Roosevelt and then successor William Howard Taft led the battle to break up large industrial trusts, such as the Sugar Trust, Steel Trust, Beef Trust, and the Oil Trust (the Rockefellers� Standard Oil Empire was broken into individual operating companies.)

Progressivism � A Broad Societal Movement Note that what we�re describing here was in ways a political movement, yes, but the progressives were not necessarily organized as a political party movement (such as �the Democratic Platform�). This was a society-wide, mostly national social movement at many levels of the culture working to make America a better place�a kinder and more caring society�and more inclusive society�yes, a society which encouraged the spreading of wealth beyond the handful of powerful elites who commanded the apportioning of capital, the means of industrial production, and the transport and distribution systems necessary for truly national commerce. A combination of forces brought progressivism to the center of American life: as author A.J. Scopino, Jr. writes: ��Historians agree that in the first two decades of the 20^th Century [reformers] employed a scientific approach when addressing social problems, No longer content to accept and explain the miseries of life through fatalism or sheer luck, progressives were eager to utilize new tools, strategies, methods, and discoveries of new academic disciplines (especially sociology), to correct social maladjustment. �Examining workers� wages, living expenses, housing conditions, family size, working conditions, diets, and other data, progressive reformers studied, analyzed, and then offered measures to correct inequity and insure social justice� �As firm believers in the American democratic process and in American institutions, reformers called on the government to legislate against political, social and economic wrong doing...� And the Progressives wielded mighty clubs � the era�s hot new media such as mass circulation magazines, as well as daily newspapers (New York City had a half dozen or more) were there outlets. This was the time of the muckrakers � whose words were eagerly awaited as the uncovered corruption in business and government. Today�s �60 Minutes� continues the tradition begun a century ago by Ida Tarbell (nemesis of Standard Oil), Upton Sinclair (whose novel about big oil was recently made into the movie, �There Will Be Blood,� starring Daniel Day Lewis), writer Lincoln Steffens, and others. The progressives brought about a better country with their reforms. Their work was instrumental, I believe, in creating the conditions that led to the rise of the middle class � the engine of our GDP (2/3 of the US economy). Millions of Americans were the beneficiaries of the progressive thinking of 100 years ago. Of course, conditions are different in 2008, aren�t they? OK, let�s admit we�ve made tremendous progress as a society since the early 1900s. Thank the progressives for that. The problems and challenges and issues of our age will be addressed in different ways, it appears, after January 20, 2009. The early 20^th Century progressives were united by a number of forces. Based on what I have been seeing in recent months � one example was the Obama campaign fervor � this Millennium Generation, approaching positions of influence and power � may revive the spirit of the early Progressive Movement, especially if they unite to bring about important changes. Stay Tuned to the shift taking place in public opinion, the shift from right to center or even center-left, and the drive for a better quality of life in this great nation. We may be on the verge of something really exciting � with expanding (not contracting) opportunity for most Americans! The best that our nation can be�may be just ahead of us. Your thoughts? (for more details on the Progressive Movement, read �The Progressive Movement, 1900-1917,� by A.J. Scopino, Jr; 1996m Discovery Enterprises Ltd.)

PRESIDENT BUSH COMES TO WALL STREET TO REAFFIRM FAITH IN CAPITAL MARKETS

Thu, 13 Nov 2008 16:46:00 -0500

President George W. Bush came to Wall Street today to meet and greet Wall Street�s power crowd, and to reassure the capitalists that HE still has faith in the capitalist system. The president spoke in what was the first capitol building of the United States, the �sub� Treasury Building opposite those pillars of capitalism, (1) the New York Stock Exchange and (2) the venerable Morgan Bank on the opposite corner T�was a well prepared talk, touching on the all the key points about and surrounding the current capital markets crisis. He talked about cause and effect (lots of both, of course), and the next steps in the repair and rebuilding of the markets. This weekend President Bush will host the leaders of the world�s top 19 economies plus European Union representatives... We�re all in this together! The loudest applause of this, the Street crowd, was when the free markets, capitalism, free trade, less government regulation, and less government involvement in business were mentioned. Hmm�seems like the opposite of the opinions held by people not in downtown Manhattan today�did these folks watch the Election Night results�do they read the daily papers�are they watching the plunging market indicators�the leading economic indicators�hearing about decimated 401-k�s? No matter; the mood in the hall was -we want less regulations and less government in our business! Except�when we need the Big Government safety net spread below our financial high wire acts�when we peddle junk to investors and that flotsam and jetsam floats back to our balance sheets�etc. The president spelled out some moves that he believes Big Government should now take to fix the mess in banking, the capital markets, the economy, and so on. We need to address accounting rules so that investors and all players know the value of underlying assets or securities (a clear call for fair value accounting!). The various financial instruments now wreaking havoc around the world should be regulated (e.g., credit default swaps); and, while we�re at out, let�s set up exchanges where these can trade with transparency (he said that!). The world�s financial market leaders should band together to address fraud and market manipulation. And while they are at it, why don�t they agree on much closer cooperation. And let�s put our heads together to modernize the capital markets infrastructure. Let�s also do the same for the World Bank and International Monetary Fund. Let�s have greater accountability in the markets � he said that! Government intervention is a not a cure-all, he observed. (Let�s see how things work out with the current Big Government safety net being spread under Big Business.) We need smarter government � he said that! The takeaway, the boffo moments in the old sub-Treasury Building (now National Hall Federal Monument) today were this: It�s not about more regulation; it is about addressing the greed, exploitation and failure in the capital markets (no applause); and about the following (to loud applause): Sustained economic growth requires free markets. This was not a failure (we�re seeing) of the free market system. Capitalism is not perfect, but it does offer the greatest choices. the greatest opportunities, and incentive, and chances to innovate, and to create. We must preserve the best of the free market principles, he urged the Wall Streeters. Good speech, upbeat, many good points made. Of course, #44 is warming up in the bullpen now, and President Bush has but a few weeks left to make dramatic changes to fix things, and diminishing political and public opinion capital in the count down. He finished with some plugs of the remaining free trade agreements on the agenda � South Korea, Japan, Hong Kong, Taiwan, Colombia, etc. What will folks on Main Street, far removed from the inner circle on Wall Street this noon, what will they think of this speech? We were encouraged that the president specifically mentioned [that improvements in] social justice and human dignity could come of out of the capital markets reforms that he outlined. We�re reminded that only months ago the wisest heads in the room were calling for Social Security �reforms� and �choices� � just let Wall Street get access these funds! And a year ago there were at least three concerted and connected efforts gearing up to roll back the Sarbanes-Oxley corporate government reforms. (You can read about them in my posted columns on the Accountability Web platform, in the Commentary section by clicking here.) An interesting afternoon in New York for President Bush � let�s see how Main Street and national media play it out. The �reforming� of the capital markets is just beginning. Stay Tuned.

NOT EASY BEING ON THE RECEIVING END OF GOVERNMENT RESCUE? AIG�S CEO IS IN THE HOT SEAT AND MEDIA, GOVERNMENT AND PUBLIC CRITICS KEEPING WATCH

Wed, 12 Nov 2008 13:39:00 -0500

Two months ago when the massive federal government�s bailout of large banks and financial service firms began, the largest flow of cash to a private company went to AIG (American International Group), the nation�s largest insurance organization that had its tentacles spread throughout the capital markets. AIG is an example of a firm too big to fail, in the view of the government officials driving the rescue and resuscitation process. And so $125 to $150 billion in taxpayer money is being directed to flow to AIG. As AIG leaders and proponents of the rescue plan point out, this is not about a �free lunch� -- there were terms (involving loans, preferred equity stakes, interest rates and eventual payback to the taxpayers, with return on the taxpayers� investments). But AIG stuck out as being beyond the pack of commercial banks and brokerage houses gathered together in the massive rescue safety zone � the cordon sanitaire � created by the Federal Reserve, the Treasury Department, Capitol Hill leaders, and the White House. AIG, for example, operates under many state licenses, and so came under the focus of the New York State attorney general, Andrew Cuomo, who has threatened to bring lawsuits. And the company has been thrust into the media spotlight: the pay packages of its leadership were examined � and reported on and editorialized about in the media. Then the party thrown by the company at a plush private resort in California became front page and broadcast headline news: There was the $500,000 cost, with the top brass entertaining themselves and their worthy employees. Critics of all political and economic persuasions gnashed their teeth at the sights (captured in living color on TV)... Apparently this was not good enough warning of the public�s mood, and changes taking place � soon there were reports of a private hunt outing for top brass being scheduled in Jolly Old England � to the hounds, tally ho! (Understandable � gotta motivate the top performance, said the company.)

�Congressman Elijah Cummings, keeping watch on AIG CEO�

Then came another party � beautifully timed, of course, as the feds were ready to dish out more billions in rescue money to AIG. This time, the local ABC-TV affiliate � KNXV-15 in Phoenix � was tipped off and a classic camera team ambush took place as corporate leadership was filmed (lounging at the pool, eating at area top drawer restaurants, etc.). CNN picked it up, as did other cable channels. On MSNBC, Congressman Elijah Cummings (D-Maryland) (Pictured Above) thundered that AIG CEO Edward Liddy should immediately resign (he�s been on the job just seven weeks.). The $350,000 affair was labeled an �Asset Management Conference,� to motivate independent private sector advisors who send AIG business. No AIG signs. (So much for transparency in the rescue effort?) To give the company its due, Chairman/CEO Liddy pointed out that this was an educational and motivational meeting of the company�s top independent producers, financial advisors who brought $200 million in business to AIG last year. And, he explained, the actual cost would be recaptured through sponsorship fees. Last night, CEO Liddy appeared on CNN�s Larry King Live Show, to explain (from his perspective) �the true facts.� The party cost -- $350,000 � was going to be recaptured by AIG as �sponsors� and paying participants who stepped up with their checkbooks. The company has cancelled 150 other parties and outings, the company told CNN�s Larry King. CEO Edward Liddy gets an �A� for his bold move to immediately use the national CNN platform and the Larry King program to air his side of the issues. The rescue was necessary, he said, because AIG �touches many other capital market players.� Every cent will be repaid to the government. The organization will be transformed, costs cut, every �outing� examined. This is the �new AIG,� he declared. Training is normal operating procedure and is very important, he stressed � the men and women who sell the company�s products (such as variable annuities) must be knowledgeable.
The Changed Public Mood What this is signaling as the federal bail out rolls on is that (1) the American public is becoming absolutely outraged at the behavior of some of the private sector recipients of federal aid; (2) they are calling for action by the Congress and the new Administration, to address corporate behavior they don�t like; (3) responding to that, the media is all over the story, and will be doing lots of gotcha stories as the economic and capital markets continue to be all bad news/all the time; (4) public officials at federal, state and local levels will focus on the corporate sector and especially the firms in the rescue plans; expect lively Capitol Hill hearings in 2009(5) activist investors are sure to be on top of the issues as the 2009 proxy season begins; (6) and the activists will attract the support of mainstream institutional investors (mutual funds, pension funds, etc.) who are fed up with examples of the Imperial CEOs and compliant boards of directors of recent years. Talk about 1-2 punches � this is going to be rat-a-tat-tat on Corporate America and the financial industry as the economic chaos grinds on. Expect to hear about accountability many times in the coming week. The laser beams focused by all of the above �watchers� as the government�s rescue programs continue to expand could create lots of political heat � and some of the �watchers� (we�ve identified) will mount vigorous proxy campaigns to change behavior in the private sector, and change players in the corporate suite and board rooms. Oh, and the next round of media outrage (and public sector and voter and investor outrage) is just a few weeks away. That�s when the big Wall Street firms begin preparing to distribute the bonus checks � a very important event for employees of the banking / investment banking industries � for year-end distribution. Wait �till you see the news headlines and public outrage over that! AIG today is the canary in the coal mine, signaling the financial sector, and other sectors that could be rescued, of what may be ahead. What kind of accountability will stakeholders demand of enterprises receiving government support? Stay Tuned!

DOING IT RIGHT � EYES ON MACY�S

Tue, 11 Nov 2008 11:31:00 -0500

Are you seeing the delightful TV commercials currently being placed by Macy�s? A parade of stars from movies and television are being featured in the original settings portrayed by the actors � with scenes from such movies as 1947�s �Miracle on 34th Street (starring little Natalie Wood � and the Macy�s store on 34th ). This brings to mind the great performance of Edmund Gwenn as �Kris Kringle,� the perfect Santa Claus (in my view). Whenever I watch that movie, that is Santa Claus! Macy�s is bringing these memorable images to us�yes, to remind us of the holiday shopping season in interesting and appealing ways. And to spread some good old-fashioned cheer in these increasingly bleak economic times. Sunday�s New York Times carried a two-page advertisement by Macy�s, on one broadsheet was printed the banner of the old New York Sun, and a reprint of the letter from a little girl � 8 year old Virginia O�Hanlon � to the editors back in September 1897�and the editors� heart-warming response. Dear Editor I am 8 years old. Some of my little friends say there is no Santa Claus. Papa says, �If you see it in the Sun, it�s so.� Please tell me the truth, is there a Santa Claus? The editorial printed in reply � Yes, Virginia -- There is a Santa Claus � became a classic that is revived regularly at Christmas Season. Virginia, your little friends are wrong. They have been affected by the skepticism of a skeptical age�. (see the complete letter at: http://beebo.org/smackerels/yes-virginia.html Macy�s then makes this offer for today�s children: Write your own letter to Santa Claus�telling Santa why you are one in a million. (And drop off at Macy�s at a special mailbox for Santa.) For each letter received, Macy�s will donate $1 � up to $1 million total in this effort � to the Make A Wish Foundation�to help ailing little children live their wish. Write your letter to Santa, the retailer says, and help make wishes come true. What a great holiday season gesture. Macy�s ad campaign is true to the company�s origins, a very focused effort to remind all of us what a venerable and remarkable retailing institution Macy�s is�as represented by the well-known brand�and making serious attempts to preserve the 150 year old brand promise. (Contrast that with a now littered field of other well-known brands whose leaders forgot what the brand promise was�what the expectations of their stakeholder base was�including the very familiar brand names on Wall Street and Detroit that come quickly to mind today.) Well done, Macy�s � your campaign demonstrates your effort to remain an accountable company to all stakeholders. Thanks for reminding us how much joy shopping for gifts for others at Christmas season can be. A good example of enlightened self-interest and capturing the best of our capitalist system.

AS WE SURVEY THE CARNAGE IN THE CAPITAL MARKETS, THE 2009 BURNING QUESTION WILL BE: WHAT REGULATIONS, AND OVERSIGHT ARE REALLY NEEDED GOING FORWARD?

Mon, 10 Nov 2008 22:54:00 -0500

The new president and his administration will have lots of issues awaiting them on �Day Two,� after the inaugural balls have ended and the partygoers have flown home. One of the biggest headaches � one that may have President Obama up at 3 a.m. with that fabled phone call, unable to get rest � will be what to do with the financial system�the banking system�the condition of the capital markets�and the regulation needed to prevent a similar meltdown in the future. It�ll be like 1933 and 1934 all over again � except for the notable presence of the legion of lobbyists who will be demanding breaks for their corporate clients. As news of a big event or trend breaks, the cable guys and gals typically slap a logo and catchy headline on the screen � �Wall Street Bailout� is an example of what was trumpeted on broadcast and cable channels all through October (which naturally followed the �Wall Street Crashes� earlier treatment). This morning MSNBC (owned in part by NBC / part of General Electric today) had a new banner up: �Bail � OUTRAGE!� (Get it? Bail � Out Rage) Recognizing the rising public outrage over the Wall Street and banking and insurance industries� bailouts and now the pending auto industry bail out. Next sector or industry up? Stay tuned! We have our own construct, which we�ve shared with correspondents and colleagues. The rising anger, frustration and tragic lack of trust in our leadership in private and public sectors has been building for much more time than just the recent election cycle. Watching this continued abandonment of leader responsibility, our construct is: Americans are enraged by recent events in the capital markets, in the corporate sector, the public sector, and especially banking: It�s all about RAGE � caused by the widespread failure or abandonment of too many leaders in terms of [their individual and collective] Responsibility, Accountability, Governance and Ethics. Simple: People are enraged by the demonstrated lack of leadership in too many sectors of our society. Trust has been broken � and once broken, trust can take forever to rebuild. Which raises the question: Is it the inherent nature of our capitalist system to drive financial success to the point of self-destruction? This is a question a growing number of folks are asking (and asked in 1929, 1987 etc.). One important tenet of democratic capitalism is the belief (hope?) that markets and players can self-regulate � and do the right thing (for investors, stakeholders, employees, customers, etc.). An important part of the major securities industry reforms of the 1930s was the designation in the 1933 Securities Act by statute and regulations [the] for oversight of elements of the financial services industry by industry organizations � by self regulating bodies embedded within those industries, like stock brokerage... Thus in the 1930s the New York Stock Exchange became not only a place and mechanism to facilitate the buying and selling of equities, but also by congressional designation became a very important �Self-Regulating Organization� � a SRO. (Similar mechanisms were established for municipal bond trading and other activities.) The NYSE established myriad rules for listed corporations and brokerage firm members. Today with the NYSE a public company (how�s that for major change?), the successor regulator is �FINRA� -- the Financial Industry Regulatory Authority. (Its self-description is: �FINRA is the largest independent regulator for all securities firms doing business in the United States. We oversee nearly 5,000 brokerage firms, 175,000 branch offices and 680,000 registered securities representatives. Our chief role is to protect investors by maintaining the fairness of the U.S. capital markets.� How well were your investments �protected� and �fairly treated� by those firms and individuals directly under the jurisdiction of this independent regulator? Investors are asking: Where was FINRA while those independent brokerage firms with thousands of offices were peddling all-too-risky products to individual and institutional investors �who trusted them? What happened to fair treatment in the securities marketplace? FINRA is under the direction of Mary Schapiro, an experienced industry hand, who once ran the federal government�s oversight agency for commodities trading (the Commodities Futures Trading Commission / CFTC, appointed in 1994 by President Bill Clinton). She was also acting head of the SEC, and served as NADASQ Chair after leaving government. What FINRA�s view of itself? To quote: �FINRA has approximately 3,000 employees and operates from Washington, DC, and New York City, with 15 District Offices around the country.

"The creation of FINRA is the most significant modernization of the self-regulatory regime in decades," said Mary L. Schapiro, Chief Executive Officer of FINRA. "With investor protection and market integrity as our overarching objectives, FINRA is an investor-focused and more streamlined regulator that is better suited to the complexity and competitiveness of today's global capital markets." Reading this, and looking at the carnage of the US and world securities industries � in the capital markets � we are mindful of the weakness of the argument of relying too heavily on the ability of industry to self-regulate. Perhaps the pull of greed is too much to overcome (evidently the case in sub prime risk taking). It�s becoming very apparent to the American public that self-regulation [by business interests] that (a) business self-regulation can experience quite spectacular failures, such as the 2008 market meltdown, and (2) it is clear that government regulation and oversight is absolutely necessary. The critical questions then center on �what kind of regulations� and �where is the common sense balance of such regulations?� These critical questions are on the table for the new Senate and House of Representatives and the new Obama-Biden Administration as they take office: What kind of regulations are [now] needed to provide investors and market participants (and all of us) with the necessary oversight to maintain a fair, open, transparent, and trustworthy capital marketplace, for all types of investments and all investors? How do we create a regulatory framework that encourages innovation, creativity, intelligent risk taking, and reasonable reward while providing reliable risk management processes and policies for those who put up the capital and take the risk � the investors, central players in democratic capitalism. This will be challenging tasks for legislators, regulators, industry participants and for every one of us as stakeholders in a democracy based on capitalist principles. Watch the catchy logos and catchy headlines of the broadcasters as they focus on the regulatory discussions once the new congress is convened, and Day Two challenges dawn for the Obama-Biden Administration.

NEXT UP FOR A RESCUE: IT�S THE US AUTO INDUSTRY� AS THE BIG THREE APPEAL FOR TAXPAYER RELIEF

Fri, 07 Nov 2008 09:22:00 -0500

The leadership of the US auto industry traveled from Motor City to Capital Hill yesterday to plead for federal government intervention in their business affairs�as the American economic situation worsened. This was an important meeting for Detroit, for both the corporate leaders of the �Big Three� automakers, and for union leadership. Consider that one-out-of-six of those of us employed in the United States derives her and his income from things automotive � building, selling or maintaining cars and trucks; building and repairing road and highways; insuring the 130+ million vehicles on the road; drilling, refining, distributing and marketing the oil and gas for this gigantic fleet � you get the picture. The invention of the motor car is somewhat disputed; undisputed is that [it was] Henry Ford who created the mass production system that put Americans in their cars and on the roads. He created a system so everyone could buy a car � including the men on the production line who built them. Henry put America on wheels. So we can say that the US car industry is 100 years old, and thoroughly integrated into virtually every element of the American society. That�s why the conversations with Congressional leadership are of such importance. Think about the infrastructure of the automobile and truck: Oil refineries, gas stations, repair shops, auto dealers, roads and highways; one, two or more cars in many American driveways; tens of thousands of trucks on our highways, delivering goods overnight to tens of thousands of warehouses and retail outlets� Think of the millions of men and women involved in this commerce; think especially of the men and women who toil in the GM, Ford and Chrysler plants, spread across the breadth of North America. As part of the current nationalization of some American businesses � OK, the semi-nationalization at this point � the Congress has allocated $25 billion for US carmakers, targeted for new initiatives in building new vehicles that get better mileage, reduce GhG emissions, can use alternative fuels and motive power, etc. The carmakers asked, according to news reports, for $25 billion (more), and this would be un-related to them building �greener� vehicles. Detroit is in awful shape these days. General Motors has lost $50 billion (yes, a �b�) in the last three years.. Chrysler, once merged with Daimler Benz of Germany, has been cut loose and is privately owned. Ford has similarly been bleeding billions of dollars and its stock is about $2.00 at this writing. (GM is at $5.00). If the [stock market�s] efficient market theory is applied, what is the smart investor saying about the Big Three � that their stock is worth just above pennies going forward? How did the mighty US auto industry get in this awful situation? The answers are long, varied, complex, and subject to interpretation. But � I recall a conversation with the former director of the Pension Benefit Guaranty Corporation (PBGC), when I asked him why the federal government (which bails out corporate pension funds that fail) is sometimes tough on companies, He explained the theory: Think about, he said to me, the company that we know today is unlikely to be the same company that we knew years ago, and that we will know in the future. In the fast-paced life cycles of companies, sectors, industries, or products, the average company may last 25 or 35 years�but a lot will change in that time, changes that could threaten the existence of that company (and most important to the PBGC, and its pension fund). So the government often has to take a tough line, which is often politically unpopular. The PBCG did just that with GM a decade ago, pressuring General Motors to pony up the billions in shortfall in its pension funding. GM sold off the E business (the former EDS). Lately the company sold off 51% of the GMAC operations. Ford sold off some of the brands it acquired. All three auto companies, under certain conditions, could burden the PBGC pension funding if they fail (e.g., file for bankruptcy). PBGC is usually first in line to claim what�s due � but what will that do to the thousands of companies that are GM, Ford or Chrysler suppliers. This is a very complicated situation. The stakes are high in two cities � Detroit and Washington DC � and in the hundreds of towns and cities across the land when the Big Three does business. Given that the US bankers are now getting hundreds of billions of taxpayer dollars, surely to keep some [banks] afloat and also to attempt to make other institutions stronger, how can the federal government now say �no� to the auto makers? After, we will have lots of time to sort out the �who� as in �who is accountable� ...for the lack of effective leadership in the auto business�in banking�in investment banking�in regulatory oversight�etc etc.�and whatever other businesses we may be nationalizing � oops, �socializing�, as in, �after all, this is all for the common good��.

REACHING BACK TO FDR FOR HISTORY�S LESSONS � WILL THEY BE APPLICABLE IN JANUARY 2009?

Thu, 06 Nov 2008 09:38:00 -0500

We heard today that President-elect Barack Obama�s advisors are scouring the records for examples of the crises events that faced President-elect Franklin Delano Roosevelt 75 years ago, when FDR took the oath of office. Some of the events and conditions of that era, which seems so far away, in fact seem eerily familiar in late-2008. Scary. President Roosevelt had been the governor of New York State, elected in 1928 to his first term (and re-elected two years later). As chief executive of the nation�s most populous state, he had dealt with the spiraling down of the US and state economies following the dramatic October 1929 stock market crash. President-elect Roosevelt brought a portfolio of government service to the White House: He was an assistant secretary of the Navy during WWI; he was elected to the state senate; and then to the governorship. From all the voluminous records compiled about the Roosevelt years, he didn�t come to Washington with a complete, well thought out plan about dealing with the desperate years of the Great Depression. He did bring a cadre of trusted aides � the famed �Brain Trust� � from New York. Following WWI, the American nation embarked an era of good times and plenty (of everything); the Florida land boom created a frenzy of margin buying (of real estate) and speculation, which ended badly with two devastating hurricanes. A series of Republican presidents had the good fortune to serve in what popular columnist Westbrook Pegler called �The Wonderful Era of Nonsense� � created in large part by media hype, mass advertising, movies, and characterized by often irrational exuberance in sports, business, finance, government � sound vaguely familiar yet? It was the misfortune of an esteemed personality � Herbert Hoover, a mining engineer who helped save millions of souls from starvation in war-ravaged Europe and then served as secretary of commerce � to be elected president in November 1928. Speculation in the stock market was nearing its frenzied peak. Millions of Americans from all walks of life were going nuts over stocks, and too many were buying on margin, only 10% down. Shoe shine men were famously giving stock market advice to customers on Wall Street. Thousands of people came to gawk at the New York Stock Exchange and the Morgan Bank across the street. Hundreds of millions of dollars� were wagered by the Common Man (and a good number of women) on stocks. In a burst of collective irresponsibility, Wall Street served up a smorgasbord of financial offerings for unwary, overeager buyers -- including �trusts� (investment pools) similar in ways to the collateralized debt instruments of 2007-2008. And then�it began to seriously unravel. Even heroic measures by Wall Street bankers could not stop the sickening downward spiral of the stock markets. CRASH! � October 29, 1929. Margins were called, customer accounts cashed in by brokers, and fortunes (on paper) wiped out -- and it would take decades for the market to recover. So ended the �New Era of Prosperity.� It would take many years for investor trust to be rebuilt. Enter FDR: We view him as the Accountable President. Elected in November 1932, he offered the American people�Hope! As he said in his inaugural address� �This great nation will endure as it has endured, will revive and will prosper�let me assert my firm belief that the only thing we have to fear is fear itself�� And with these words he began his mission of hope that would lift the United States out of the Great Depression and into the world�s stage as the leader of nations. President-elect Obama could be well-served by some elements of the Roosevelt Model of Governance and National Resuscitation. FDR spoke directly and candidly (well, most of the time) about the conditions in the country, about the economy, about threats the US faced from overseas fascist enemies, and the need for sacrifice, and the common good, and what needed to be done to revive the people�s hopes and finances. While often politically manipulative, he viewed the presidency as an important trust, and himself as a servant of the people. In the beginning, contrary to right-wing claims of his envisioning a socialist agenda, President Roosevelt mostly used existing federal dollars to put people to work. He adopted Keynesian economics (named for economist John Maynard Keynes), which despite being criticized in later decades by opponents, remains part of the financial and monetary framework of this country. (See the federal stimulus checks distributed earlier this year; see the flow of money to leading banks from the Treasury, etc.). A note on the famous �100 days� of 1933: In those years the US Congress was sworn in right after January 1st; the president, in March. The congress had met, diddled around with the financial calamity and went home. FDR called them back, and promised they could go home before the muggy heat of summer engulfed the capital city. So was birthed the 100-day rush to adopt strong measures. It doesn�t look like our new president will be following that example, based on his election night address. This recovery will take some time, he advised. There is much more to say about the heroic (and often controversial) policies of President Franklin Roosevelt. This much we know: He saved capitalism as we know it; he created a much bigger government than the nation had ever known; and later, he led the Allies� effort in WWII to save the world from fascism � and to spread democracy to many nations. The world as we have known it was in large measure created by the forces put in play by President Roosevelt. On balance, a pretty good model. Especially if some of the conditions our 32nd president faced in the grim economy days of the 1930s will be present in 2009. Read on, Obama advisors!

HISTORY WAS MADE YESTERDAY � AND WE CAN CONTINUE

Wed, 05 Nov 2008 09:57:00 -0500

What drama we�ve been witness to, unfolding over the past year-and-a-half, when the first candidacies were announced by aspiring presidential hopefuls in both major political parties � remember Romney and Edwards and Huckabee and Clinton, et al? In the end it came down to the two powerful, tireless campaigners who carried their parties� banner through Election Day 2008. Congratulations to the great Americans, John McCain and his running mate, Governor Sarah Palin; and to Senators Barack Obama and Joseph Biden. The American People are fortunate indeed to have the choice of their dedicated public services. Well done, all! And now we�ve made history � the first person of color in the 200+ years of electing our presidents will now ascend to the Oval Office in January 2009. Good for us! As a People we have now overcome centuries of outright or indirect prejudice and put racial considerations aside in selecting our next Chief Executive Officer and Commander-in-Chief, Barack Obama. What a long, long journey to this moment. All Americans should be very proud of this moment. We have begun, with this election, to put aside personal prejudices of various kinds to address the critical issues we face as a nation. And with Senator Obama�s election, we can begin to regain the prestige we enjoyed in the world before our unilateral military adventures in some parts of the world. This has been a long journey for significant numbers of our people. In 1619 the first slaves from Africa came ashore to work under the whip in the Virginia colony plantations. It would be almost 250 years before the United States eliminated the last of the despised system of enslaving human beings. (And it took a disastrous war between northern and southern states to finally settle the issue of slavery � an awful and permanent stain on the American nation.) Another century would pass before the federal government�s full force was finally put behind equal rights for all � including the precious right to vote (with the 1964 Civil Rights legislation and the 1965 Voting Rights Act). Who could have imagined that in only another four decades a man of African-American descent would be decisively elected president of these United States! It was less than 50 years ago when we were deciding whether a Roman Catholic could serve both the nation and his religion. (We have written here that Senator Obama was a multi-racial candidate, breaking the long list of all-white previous presidential candidates, fitting for the increasingly multi-racial makeup of the US.) Senator Barack Obama�s path to the top was in large measure due to his intellect, his personal character, organizational skills (running one of the best campaigns in modern history), his personal charm, appeal to voters on issues of importance to many, and other factors. The path he traveled was along the footsteps laid down by tens of millions of Americans of color who lived over the past (almost) 400 years, since the first arrivees came across the dreaded Middle Passage. The descendants of African-Americas would serve in the military, work in the manufacturing plants of Motor City (Detroit), work the land as freed farmers, become civil servants, save the lives of others as healers, and some would be elected to the US Senate and House of Representatives. Recently, two people of color would be US Secretaries of State. Senator Obama�s path was made easier by the courageous work of the Rev. Dr. Martin Luther King, Jr. and the work of many heroic white men and women � the Freedom Riders of the 1960s, who worked to bring voting rights to those left out of the electorate in the southern states. Some of those states helped to put President-elect Obama over the top � including Florida and Virginia (Home of the Confederacy!). America itself is a long and continuing journey to being color blind � as well as religious, ethnic, nationality, and gender blind. While we may still have a ways to go, this Election Day 2008 throughout this great land showed the world how far we have come. When the tiny band of the Early Pilgrims came ashore in the early 1600s, they were seeking freedom to worship as they saw fit and pursue a new kind of life in a new land. The leaders reached back to biblical times to characterize the �New Jerusalem.� It would be the Shining City on a Hill. That vision has persisted through all the years of the American Experience. It was validated by tens of millions of American voters yesterday. The America that many of the rest of the world admired for its most appealing characteristics can be again the Shining City on a Hill. This writer is very proud today of this nation and the American People. Now let us come together and live the vision that we can all be proud of.

WHAT WERE THEY THINKING� AS WE NEARED THE EDGE OF THE CLIFF?

Mon, 03 Nov 2008 12:46:00 -0500

Hello again. This commentator�s voice was temporarily �semi-silenced� in early October by a minor stroke. I was in New York City at a luncheon meeting when a tiny blood clot laid me low. Happy to report I expect full recovery�but what a time to be silenced! The biggest story in accountability is steadily unfolding before our eyes � or should we more accurately call this the 21^st Century�s biggest failure of our leaders holding themselves accountable! We keep thinking about the questions we would like to ask those who guided their once-venerable business enterprises to absolute ruin, and those who had the responsibility for oversight of these enterprises. What were the top leaders in banking and finance thinking when they decided to engage in the risky behaviors that led to the collapse of their firms and the capital markets? Where were the boards of directors of these outfits � and what questions were they asking the top executives? Where were the top regulators who were responsible for oversight in commercial banking, investment banking, debt issuance, and related activities as the capital market players� behavior grew ever-more riskier? What were the regulators thinking as risk management was tossed overboard? What were they thinking in the credit risk agencies � the leaders at the top --when investment grade ratings were handed out by their companies (like the little gold stars we used to get in Kindergarten) to mortgage-debt securitizers? Where was their due-diligence? The Big Yellow Bus and the Cliffs That Beckon I have this vivid picture in my mind of a big yellow school bus, and the leaders of (too-many) financial firms packing their people on the bus. �It�ll be a grand ride, you�ll see,� they shout to their followers. �Climb aboard!� Then the big yellow bus � actually too many yellow buses � begins hurtling toward the cliff � �Faster, faster, we�re making great time!� (And besides the buses that got there first, got the biggest bonuses!�) One-by-one the big yellow buses plunge off the cliff � Countrywide, Washington Mutual, Bear Stearns, Lehman Brothers, and others � only trouble is, this mind-picture is not a product of a dream or my imagination -� this is the real world! Too many un-accountable boards and senior executives blew up their own companies � taking everyone aboard the metaphorical buses off the cliff. And in the process dramatically affecting the lives of tens of millions of other people�most of them knew nothing about those grand bus rides�about the big bonuses lavishly handed out on Wall Street in 2007�the outsized CEO comp packages�the very golden parachutes for failed leadership�but it was oh so much fun and oh so rewarding while it lasted! We are happy to be back at the keyboard to comment on the Big Accountability Story of our generation. We close with this piece of wisdom shared by a colleague at the former Daimler-Chrysler. The charismatic former head of the once-combined automaker, Dieter Zetche � who now runs Daimler worldwide � always counseled his managers: �Hope is not a business strategy.� It appears that too-many leaders in banking and in the capital markets were hoping to make the big numbers and now the rest of us will be paying a big price! And as we said�this is all about corporate and individual accountability � or the egregious lack thereof!

ON THE AMERICAN FLAG � HONOR OR DISHONOR? DO POLITICAL PARTIES HANDLE FLAG-THINGS THE RIGHT WAY? WHAT ABOUT FLAG-ACCOUNTABILITY?

Mon, 08 Sep 2008 13:55:00 -0400

September 6, 2008 � It�s a Saturday, slow news day for the most part, and the cable guys and gals are a-chattering! Seems that when the Democrats left their huge love-in for their presidential candidates at Invesco Field in Denver a lot of American flags were left behind. Discarded, some say. Dishonored, the harsher critics are saying. You remember the fantastic display of that coming-together-type gathering when Senators Barack Obama and Joe Biden came on the stage � Old Stars and Stripes were evident everywhere, smaller ones being waved enthusiastically, and the ever-on TV camera eyes picked up the emotion, the building momentum, the tears and smiles, and especially the moment of patriotism so evident in honoring the candidates, our nation � and its symbol, the flag. Fast forward; in Colorado again, different setting, different party, different candidates, different view of Democrats and the flag. It�s Saturday and a huge crowd is gathering at an airport to await the arrival of the Republican presidential candidates, Senator John McCain and Governor Sarah Palin. Slightly different shades of patriotism have been present (and being heralded) in the Republican parade of things politics. John McCain is a war hero, holder of the Silver Star, Bronze Star and Purple Heart and veteran of 22 years in the United States Navy including more than five years imprisonment under cruel and harsh conditions in Hanoi during the Vietnam War. Naval aviator, Annapolis grad; son of an admiral who was son of an admiral (WWII) and descendant of professional warriors. Senator McCain�s son serves in the United States Marine Corps and another is about to; the son has seen service in Iraq Theater Governor Palin�s son is in the military and about to deploy to Iraq. She, as Alaska�s governor, is de facto head of the modern-day militia of the state, the Alaskan National Guard. We�ve seen video clips now of her firing military weapons at the range � with quite good handling at that. For the record, neither of the Democrat candidates has served in the military, but they have served this nation admirably and honorably in other ways, including community organizing and long years (Biden) in the United States Senate, including commuting nightly between Washington and Wilmington to be home with his children after his wife tragically died in an auto accident. Senator Biden�s many years of service on the Foreign Relations Committee has served this nation well as our national interests have been threatened by foreign powers � and declared enemies. He knows the foreign diplomatic and political battlefields well. We admire all of these candidates for their hard work in creating the persons of stature who they now are, and for their public service and commitment to nation. Back to Colorado: Red, white and blue American flags are waving everywhere, inside the hangar and especially outside, as the crowd awaits the Republican candidates. The story is spreading quickly now, around the blog-o-sphere, on email chains, on the wires, all over cable TV etc. After all those beautiful flags were waved � with great enthusiasm � at Invesco Field, and after the fireworks died down, and after all the stadium lights went out�well, things do go awry, or seem to have gone awry, depending on which politico you ask or listen to. The Republicans are trumpeting the discourtesy or neglect or dishonor involved in the fate of the thousands of small American flags waved by the Democrats. Were they thrown away? Discarded in trash cans? (In other words, �trashed� for red-meat diehards!) Or were they collected and bundled up for re � use or proper disposal by vendors? We don�t know � but it looked like 10,000 or more of those Democrat-supplied flags ended up in Republican hands and were waved for Senator McCain and Governor Palin�after being �saved� from the dumpsters etc. And so the culture wars (as Fox Network�s Bill O�Reilly so wonderfully charts for us nightly and in his serial books) continue. Who is more patriotic � a veteran or professional politico? Who is more patriotic � a Dem or Republican? Who is more patriotic � a liberal or conservative? Do those in the west and on the prairies love their country and flag more than the bicoastals? And so it goes� When I was old enough I joined the Boy Scouts of America, and it was one of the best experiences of my life. In my troop � # 165, Hempstead New York � I learned flag etiquette. (I remember also learning some of the same in grade 7 on �flag day� � do we still celebrate Old Glory � or is that no longer politically correct in our public schools? Mark it down teachers and parents and presidential candidates: It is June 14^th of each year.) For a time I was the troop�s keeper-of-colors, our nation�s flag, our troop flag, etc. We all had drilled in us the �American�s Creed,� by William Taylor Page (1917). If you and those in your charge don�t know about this creed, check it out at: http://en.wikipedia.org/wiki/American's_Creed One of the things in the creed is ��it is my duty to my Country�to respect its flag, and to defend it against all enemies�� In that troop and in our seventh grade at Northern Parkway School #2 we learned The Flag Code (adopted by the US Congress in 1942, as the nation plunged into WW II). This covers all kinds of flag-related activities � displaying the flag in many different situations, in all kinds of settings. We learned that you never throw a flag away (when it is badly soiled or worn out or damaged); local posts of the American Legion or Veterans of Foreign Wars (VFW) will help you properly destroy that worn out flag � with honor and the tender care of those who served our country in uniform. So my advice to those who organize flag-waving events of all kinds is this: If you hand out flags for enthusiasts to wave, please do instruct them on the care of Old Glory, no matter if is 3 inches by five inches or five foot wide and on a pole. They should never touch the ground. They never stand higher than any other flag (if more than one flag is being waved). They should be wrapped around the pole and carefully stowed. Give them a rubber band if necessary to hold the flag tight when wrapped. Remind everyone that Old Glory is the symbol of all this is good and right in this nation. Large flags are always properly folded � the Flag Code spells out how to do this; it usually takes more than one person.

Raising the Flag on Iwo Jima, by Joe Rosenthal / The Associated Press.

In my office here I have a little statue of the flag raising on Iwo Jima in World War. You know the picture. Four days after the amphibious landing the 28th Marines were battling their way up Mount Suribachi under terrific fire from the Japanese troops who held the island (dominated by the mount). The battling jarheads took the top and raised a tiny flag. A few hours later a much bigger flag was brought up by a patrol � the commanders wanted everyone on that bloody island to see Old Glory on the mountaintop! Associated Press photographer Joe Rosenthal went along and took that famous photo of the flag raising � a photo that has inspired generations of fighting Marines every since, including our brave troops today in the Middle East. The famous USMC Memorial in Virginia facing our capital city commemorates that moment. The fabulous landmark was built with money raised by volunteers.

The US stamp version of Franklin's famous image (USPS image)

There�s a photo alongside my little replica, showing the three firemen in New York City standing on rubble, that awful September day in 2001 when they brought an American Flag out of the smoking wreckage of the World Trade Center in New York City�60+ years later, they inspired our nation in a similar symbolic gesture � you can attack us, but you cannot defeat us, our flag waves high. Wikipedia tells us that the flag of the United States is one of the nation's widely recognized and used symbols. Throughout the world it is used in public discourse to refer to the U.S., both as a nation state, government, and set of policies, but also as an ideology and set of ideas. (Very important � our nation is the first modern republic based on the idea that ideas are important!) Many understand the flag to represent the freedoms and rights guaranteed in the U.S. Constitution and its Bill of Rights and perhaps most of all to be a symbol of individual and personal liberty as set forth in the Declaration of Independence. The flag is a complex and contentious symbol, around which emotions run high. (You bet � they are running high today!) Apart from the numbers of stars and stripes representing the number of current and original states, respectively, and the union with its stars representing a constellation, there is no legally defined symbolism to the colors and shapes on the flag. However, folk theories and traditions abound; for example, that the stripes refer to rays of sunlight and that the stars refer to the heavens, the highest place that a person could aim to reach.^[4] Tradition holds that George Washington proclaimed: "We take the stars from Heaven, the red from our mother country, separating it by white stripes, thus showing that we have separated from her, and the white stripes shall go down to posterity representing Liberty."See: http://en.wikipedia.org/wiki/Flag_of_the_United_States So, to my friends in both parties, on the left and on the right, and all the great independents in between, please folks observe flag etiquette and teach your young ones about the things we write of here. Maybe if that had been going on in these politically correct years more folks would know more about flag honor � and the potential to dishonor Old Glory, deliberately or accidentally. And finally, another way to honor Old Glory is to stop pasting that symbol all over everything-marketing. It�s our flag, not a sales logo. Again, Wikipedia: �Significantly, the Flag Code proscribes using the flag "for any advertising purpose" and also states that the flag "should not be embroidered, printed, or otherwise impressed on such articles as cushions, handkerchiefs, napkins, boxes, or anything intended to be discarded after temporary use".Both of these prohibitions are widely flouted, almost always without comment.� Which is a shame; if either party wants to be the party of Flag Etiquette I�m sure they will attract cheers and a few more followers! The future party platform could include an embrace of the Flag Code and a condemnation of flag use in advertising. That�s my nickel�s worth today. The good news for everyone is that at least 10,000 more flags will be waving now on more days and in more ways! * * *

THIS AND THAT � NATIONAL PARKS AND TIMBER HARVESTING AND �LAND PRESERVATION � AND EXPLOITATION OF AMERICA�S NATURAL RESOURCES � THE CONTROVERSIES CONTINUE 100 YEARS AFTER �TR�

Fri, 15 Aug 2008 12:21:00 -0400

The Washington Post reports that �secret negotiations� that were going on between the US Forest Service and a publicly-traded company � Plum Creek Timber Company (NYSE: PCL) � would allow the company to use taxpayer-owned land to build roads to gain access to the company�s new private land residential subdivisions. The Government Accountability Office is investigating now, to see whether laws have been broken or the National Environmental Policy Act violated, says the Post. The media have not been kind in recent months to the CEO (who formerly was CFO). Recently the company sold 320,000 acres of its land for $510 million � which brought on an attack by US Senator Max Baucus. In an interview with �New West Development� CEO Rick Holley assured reporter Kellyn Brown of The Flathead Beacon that the company would be more transparent about its plans and operations � and land sales. (Here�s the interview: http://www.newwest.net/topic/article/a_qa_with_plum_creek_ceo_rick_holley/C35/L35/
The roots of these conservation-vs.-exploitation controversies go w-a-a-y-y back � to President Teddy Roosevelt�s time (#26) a century ago. He was the first Conservationist-in-Chief, setting aside millions of acres of land for future generations. Incredibly, Teddy Roosevelt set aside land at the rate of almost 100,000 acres a day -- (today�s) national parks (5), national forests (150), game and bird preserves, monuments, and other reservations, that are in total way beyond 200 million acres. Contrast that with the present leadership in Washington, with charges almost daily of violation of protections that officials swore to uphold as they took office. We have �starved the [government] beast� of money, as trumpeted by conservative leader Grover Norquist, leaving vacant hundreds of inspector positions in USDA, FDA and other agencies. The laws are in place � but the �neutron bomb style of right wing politics� leaves government laws, rules and offices / agencies in place � just all the people are gone (people, that is, who enforce the rules). Oh, that kind of thing happened to dear Teddy � but he was a courageous, sometimes outrageous figure when crossed. A powerful figure with great personal stature (among voters and elected officials) TR often just �simply did it,� with the swipe of his pen. Later Congress created the national park system, but here is the key to the controversy that followed: The reserved land had to serve multiple purposes, and while being preserved forever (say, for your family�s visit) these reserves were also available for economic / commercial exploitation � mining, timbering, oil drilling, carving roads through to get to resources, cattle grazing, etc. Think about the US of A 100 years ago � 75 million population with wide swaths of the Far West vacant of people. Farming, ranching, agriculture and mining of natural resources were the work-of-the-day for the majority of Americans. Clean rivers, free of industrial pollution; abundant forests as far as the eye could see; prairies stretching for miles with waving grain � and more. As our nation industrialized things got more and more complicated. Of course industry pollutes � one benefit of outsourcing and offshoring is that fewer factories emit coal wastes. Waterways return to a more natural state with fewer emissions into streams, rivers, lakes, etc. Today in Montana the controversy rages over whether Plum Creek Timber Company should be allowed � by the US Forest Service, ultimately reporting up to both the Congress and the Bush White House � to build access roads on public land to reach subdivisions they will build. Oh, in a sign of the times here in America the �timber company� is now also a REIT (real estate investment trust) that owns 8 million acres nationwide, including 1.2 million acres in western Montano. Will more logger jobs be going? Not outsourced but perhaps outmoded by various factors? Unless the lumberjacks can get into the trades building McMansions at the end of public roads (that�s the key � parkland roads are needed to lead to secluded elite homes!) they will be out of work. Oh, we should mention the grizzly bears and other animals that could be disturbed by traffic and construction. Interesting little irony: Teddy got his nickname from a little bear that he observed after it was dragged up to him to be shot. The president was an avid hunter and on a trip he didn�t find a bear to shoot; his hosts tied an old bear to a tree and encouraged him to shoot. Teddy didn�t � he ordered the injured bear to be put down. Cliff Berryman, a cartoonist, depicted this event and the public went wild. An enterprising New Yorker, Morris Michtom, set up the Ideal Toy Company to market �Teddy Bears,� and sales shot through the roof! (The president gave his permission to call them �Teddy.�) Ah, the good old days. But this is 2008 and the economy is shuffling along, oil prices are shooting through the roof, the subprime crisis has put banking and real estate down in the dumps, and industrial sales (e.g., timber, paper) have slowed. The Plum Creek Timber Company is going through some challenging financial times; in late-July it reported earnings falling (2Q income was $31 million, down from $60mm on revenues of $376 million in the quarter, vs. $395 the same period a year earlier). Said the CEO: �Overall timber market conditions remained challenging during 2Q. Lower results so far this year reflect the weaker pricing environment for sawlogs, offset by attractive pulpwood markets,� said Rick Holley, CEO in a statement. So cutting that road through reserved land could make a difference in the company�s fortunes. Stockholders will be happier than with results from paper and wood products, yes? The story in The Washington Post today sets things in perspective from the current Washington DC point-of-view: �The Bush Administration is preparing to ease the way for the nation�s largest private landowner to convert hundreds of thousands of acres of mountain forestland to residential subdivisions�� and �The deal was struck behind closed doors�� Hey, if you can�t take care of your big donors, what are you doing running things in Washington these days! (According to �Campaign Money � com,� CEO Rick R. Holley donates regularly through the American Forest & Paper Association PAC -AF&PAPAC, Plum Creek Timber Company Good Government Fund, the Bush-Cheney Primary in 2004, and People for Patty Murray US Senate Campaign. And, befitting new directions in the company�s business, $5,000 to the National Association of Real Estate Investment Trusts.) Politics � it�s about money. Development, building, REITs � it�s about money. Timber, mining, natural resources � it�s about _____ (fill in the blank.) What do you think of all this? What are the accountabilities of � the company to its shareholders, to stakeholders, to society? What are the accountabilities of �the US Forest Service? What are the accountabilities of political parties and elected officials who accept $$$$ from individuals and companies? No easy answers here! # # #

IT�S A COMPLICATED WORLD FOR CORPORATE LEADERS, ISN�T IT?

Wed, 13 Aug 2008 12:19:00 -0400

Each day�s news flow across this commentator�s desk brings a series of news reports that point to the complicated world in which executives and boards make decisions � and which stakeholders and stockholders in some way react to! Globalization has its bright and dark sides. Nike, the Oregon-based sporting goods company, has been working hard to get right with an array of stakeholders who object to certain of the Company�s manufacturing practices. For too many years, Nike was a favorite target of protesting students, NGO leaders, human rights groups, media, and public officials. Beginning in the early 1980s Nike was one of the first companies to extensively use Pacific Basin and Far East factories for the majority of its production. (In the USA the company designed product / marketed the products / developed partnerships / extended the brand, but didn�t �build� the products in the US of A. No domestic American jobs were involved in manufacture.) Today there are literally hundreds of factories around the globe turning out Nike-branded (�Swoosh�) gear. And that brings us to today�s headlines. In Malaysia, the country�s Human Rights Commission (�Suhakam�) just came out in support of suggestions by NGOs and trade unions to allow foreign workers (in the country) to form joins / or join existing unions. This is a big deal; travelers to the Far East and Middle East know that millions of migrant workers travel from country-to-country in search of work.) �Suhakam believes a worker, local or foreign, deserves to be treated the same and enjoy the same privileges [as local workers], said Commissioner Datuk Siva Subramaniam. Recent headlines called attention to a Nike contract t-shirt factor � owned locally � was �abusing its foreign workers (hailing from Vietnam and Bangladesh)�� The International Labor Organization (ILO, a UN body) encourages sovereign nations to treat all workers fairly, and that includes joining a union. Nike responds: We can�t change all local working conditions. Other companies have to join in the effort, as well as NGOs, local governments, and worker rights groups. The real way to address the situation is to develop a core set of standards everyone can agree on and live up to. Nike had moved quickly after an Australian TV station criticized worker conditions in Malaysia. Local NGOs say this: Nike picks plants on the basis lowest cost, so if you drive costs to the basement, working conditions will follow. Don�t hide then behind contractors and plants you don�t own (700 plants / 50+ countries turn out Nike gear). The reward and incentive systems are set up for the lowest common denominator of worker interests. We�ll be reading more about this in the weeks ahead. Before we cluck / cluck about American companies, Asian working conditions, outsourcing, anti-union campaigns, PR snow jobs of media and NGOs�and more�let�s keep in mind the reward and incentive system that we in America as consumers have established. Give me the lowest price you can on the goods I want. If you don�t or won�t or can�t, I�ll find another store that will. Two pair for the half-price of one pair of sneakers sounds good to me. Should I care about the conditions under which these branded footwear are made? That�s a question each of us should be asking�ourselves. What�s your view on this?