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Thursday, October 30, 2008


CNBC reported last night that the average managing director on Wall Street received a bonus of 1.1 million dollars last year. This year he is expected to receive a bonus of 600 thousand dollars. However, had it not been for the bailout, the average director would have gotten only 350 thousand.

The bailout money is going towards bigger bonuses?

If this turns out to be true, expect huge and justifiable outrage from that portion of the country which does not work on Wall Street. I've never heard a better reason for an overthrow of the government -- and the financial powers that be -- in my lifetime.

I'm sure their excuse will be something along the lines of, well, the TARP money didn't go towards the bonus pool, that money was used to shore up our bottom line and to increase liquidity, as it was supposed to.

But does anyone really believe that if the TARP money hadn't been there, some of the moneys used for those purposes might have come from the bonus pool?

How will all the taxpayers who make 50, 60, or 70 thousand dollars a year feel about this?

Don't be surprised if they get their torches and pitchforks and head for Wall Street. I know I'll be rooting them on.

Friday, October 24, 2008

Sympathy for Socialists

The recent bailout of Wall Street has been enough to make even the staunchest believer in free markets reconsider. A free market should mean that a firm is free to survive or fail itself, not free to take down the entire country with it. A firm simply cannot be allowed to make such gigantic, intertwining bets that its failure could possibly take down the entire financial system of the country and lead to another Great Depression. The size and scope of these bets must be regulated.

This is just sane capitalism, not socialism. But the next issue is, should the managers of these Wall Street firms get such outrageous bonuses for making bets at taxpayer expense? If you make huge bets which succeed wildly for two years in a row, and you're paid tens of millions for each of those years, but in the third year your bets sour and the taxpayers must foot the bill, there should be some provision whereby you have to give up at least part of the money you were paid in the first two years. There are currently no such clawback provisions, and changing the rules of any game midstream seems unfair in principle, but the larger principle here is the well-being of the taxpayers.

How did we get to the point where our CEOs are so grossly overpaid? It's not just capitalism; Japan has a capitalist system and their CEOs are generally paid no more than 30 times the lowest-paid employee of their corporation. (In fact, this was true in the U.S. until the last few decades.) But now, corporate chieftains are sometimes paid 500 or even 1000 what their lowest paid employees are; this happens nationwide, not just on Wall Street. Why is this tolerated? Because virtually every CEO of a large corporation stacks his Board of Directors, so that his cronies just rubber stamp whatever salary he decides to pay himself. Sometimes an "independent" compensation firm is consulted, but they are essentially paid by the CEO, so their independence is illusory.

Most large firms don't get bailed out by the government, so it's not the taxpayers who are being stolen from. It's the shareholders. Profits that by all rights should be going to them are instead funneled into the pockets of the CEO and his top management. And what exactly is it that these guys are so skillful at which is worth so much money? Corporate climbing. This means they're good at internal politicking, backstabbing, taking all the credit and none of the blame. These are generally not the qualities which make someone good at the job he was actually hired to do. In fact, such climbers often expend so much energy on climbing that their actual jobs get neglected. After twelve years on Wall Street, I can vouch that the Street attracts more than its share of such narcissistic personalities and even sociopaths.

Note that this suggestion would not prevent a Bill Gates -- or an Edwin Land, or a Henry Ford -- from becoming fabulously wealthy. They were visionaries who formed their own companies, and were thus their own primary shareholders; this is how they got rich. It's telling that such people generally do not pay themselves princely salaries or award themselves huge stock options. (As primary shareholders, why would they want to rip themselves off?)

Here's where the socialism comes in: I heard the suggestion recently that a law be passed preventing any manager of a company from being paid more than thirty times what his lowest-paid employee is paid. As a Libertarian, I dislike unnecessary laws. But with the current situation having spun so totally out of control, such a law seems increasingly necessary.

Wednesday, October 22, 2008


I've always thought Joe Biden a near pathological liar. Here's a link to an editorial in the NY Post detailing his untruths during his debate with Sarah Palin:

Joe Biden is living proof that if you've served 37 years in the Senate, dress nicely, have a cultured accent, and speak with seeming authority, you can say anything and people will believe you. The problem is that instead of his nose growing with every lie he tells, his poll numbers go up instead.

The media tends to dismiss his mistakes as "just Joe being Joe," or as Biden "being gaffe-prone" in the same way that Gerald Ford was stumble-prone. But there's a difference. Ford's physical klutziness said nothing about his character; Biden's willingness to make up "facts" on the spot does.

Let's not forget that this is the same man who during his Presidential run in 1988 gave a speech about his grandfather who worked in the coal mines. The only problem was, Biden never had any ancestors who worked in the coal mines. It turned out that he had plagiarized the entire speech from British Labor leader Neil Kinnock, whose grandfather had been a miner. It's one thing to appropriate someone else's words; it's another to appropriate his entire family history. This type of persona-stealing is usually the province of con artists.

On another occasion in 1988 Biden told an interviewer (this was caught on CSPAN) that he undoubtedly had a higher IQ than the interviewer, as he had graduated in the top third of his law school class and had three undergraduate degrees. More lies. He graduated 76th out of 85 in his class at Syracuse Law School, and had only one undergraduate degree.

To all those who give an effete shudder at the thought of Sarah Palin being only a heartbeat away from the Presidency, think hard about the alternative.

Tuesday, October 21, 2008

Not about race

Colin Powell has always been an eminently respectable figure. He deserves more kudos than he gets for having been the only high-ranking member of the Bush administration who argued against the Iraq invasion. He was overruled, and pretty much directly as a result, resigned shortly thereafter. (Even better.)

Two days ago Powell, a lifelong moderate Republican who had given money to the McCain campaign in 2007, publicly endorsed Obama. He gave McCain, whom he referred to as "a lifelong friend," a lukewarm pat on the back, took the usual jabs at Sarah Palin, and then called Obama a "transformational candidate." He added that his decision was "not about race."

Of course not Colin.

In what way is four year senator Obama "transformational" if not by virtue of his race? Because he's the furthest to the left of any Presidential candidate in history?

How much better it would have been if Powell had simply said, "Yes, to be honest, race did enter into my thinking. As someone who has suffered from various sorts of racism in his life, most of it of the subtle variety, I have to admit it would give me a measure of satisfaction to see a black man as President. Frankly, I also think that it would do this country, with its troubled racial history, some good. It would be a sort of salve on the wounds of the past, and would give black people more of a sense that they are not as disenfranchised as they often feel. And I think it would even elevate our country's standing in the eyes of the world, especially the Third World, if we showed that we were open-minded enough to put a black man at the helm."

I understand this viewpoint, even if I don't see it as a reason to vote for Obama. If Powell had been straightforward enough to voice it, he might have scored even higher on the respectability meter. As it was, he lowered his credibility.

Monday, October 20, 2008

Manna From Heaven

Imagine how happy the Obama campaign is about this financial crisis. The entire country has gone into meltdown mode just one month before the election. They couldn't have asked for better timing.

Of course, if you asked any of their operatives if they were happy about it, they would undoubtedly reply, "Oh, of course not, we don't want to see people suffer this way. I suppose, to the extent that it helps Barack, it's beneficial in a way, but we certainly don't want to see people lose a good part of their 401-K's. No. Not at all."

Translation: "Are you kidding?! This is the best thing that could possibly have happened to us! This is wonderful! We're laughing all the way to the voting booth. Hooray!!"

Enough Villains for Everyone

This financial crisis has a villain to suit every political viewpoint, enough to make pundits of every stripe happy. Republicans are to blame, as are Democrats. Rich people are to blame, as well as poor people.

The most obvious target has been George W. Bush, under whose watch our economy fell apart. Presidents almost always get too much credit or blame for the economy. Economies tend to be huge, independent-minded beasts with cycles of their own, and usually pay scant attention to the machinations of whoever happens to be dwelling at 1600 Pennsylvania at the time. For instance, Clinton was given credit for erasing the deficit, though that was later demonstrated to be pretty much entirely a function of the higher tax receipts occasioned by the tech bubble. I'll go even further out on a limb here and say that the Fed Chairman himself has less to do with economic cycles than usually thought, though he usually has more control than the President. (Speaking of which, Fred Chairman Bernanke was snoring away at the wheel dreaming of inflation well past the point where a dangerous, Depression-era-type deflation was a strong possibility.)

In fact Bush does bear part of the blame for the current mess, if for no other reason than that he appointed Christopher Cox head of the SEC. In 2004, Cox rescinded the uptick rule, which stated that stocks could only be shorted on an uptick (and thus prevented large shorts from driving down the price of a stock via their superior firepower/deep pockets). He also changed the capital ratios so that the investment banks, instead of merely having $12 in equity for every dollar they actually owned to $30. Think about that for a moment. You know how you're constantly warned not to invest on margin, i.e., borrow against your stock to buy even more stock? The most that any of us as individuals can borrow is 99% of our collateral, i.e., have $1.99 of stock for every dollar we own. And having that much is usualll considered playing with fire. But the investment banks could carry thirty times their net worth, meaning, their assets had only to decline roughly three percent before they were totally wiped out. So Bush, through Cox, does bear a substantial portion of the blame.

What kind of person allows his investment bank to get leveraged to the tune of 30 to 1? Someone who is extremely greedy, who is terrified of losing market share, and who worries that his bonus this year may not be as much as the next CEO's. In other words, every CEO on Wall Street. In their thirst for today's profits, virtually every one of them forgot about the lessons of yesterday (ever heard of Long Term Capital?) and the risks of tomorrow. But in the faux-macho culture of Wall Street, taking financial risk -- almost always with other people's money -- is how you prove your masculinity.

Remember all the publicity about redlining, the practice of doling out mortgages in such a way that minorities ended up with fewer of them? The Community Reinvestment Act of 1995 was created in order to put a stop to this. But there was one little hitch. In order to accomplish this, they had to ask the mortgage banks to lower their lending standards, stop paying attention to such pesky details as credit records, job histories, and the like. The CRA had Democratiic fingerprints all over it, but President Bush did not help matters when in 2002 he announced that it was his goal to get 5.5 million more minority families into houses in the next ten years. Thus, the subprime disaster was born. And even worse, once subprime mortgages became accepted practice, plenty of white people horned in on them as well, and plenty of fairly well-to-do white people at that, every last one of them taking on more house than they could afford, completel confident that the housing boom would never end.

Fannie Mae and Freddie Mac did their best to keep the disaster on track by hiring lobbyists to kill any legislation intended to rein them in. Among these lobbyists is the man who is in charge of John McCain's Presidential campaign. And the second largest recipient of campaign contributions from the two agencies is Barack Obama. When McCain tried to introduce legislation calling for stricter oversight in 2005, guess who killed it? Barney Frank, one of the heroes of the bailout, who said at the time that tightening lending standards would just be an excuse to cut lending to minorities.

There's virtually no one who's been in power in the last ten years whose hands are completely clean. Remember "Murder on the Orient Express"? (In Agatha Christie's book, every single passenger on a certain car has a motive for -- and a hand in -- murdering the evil man whose corpse turns up on the train.) This plot is not dissimilar.

Sunday, October 19, 2008

Too Much to Ask?

Is it too much to ask that the Republicans field a candidate who can speak in complete sentences and has a rudimentary knowledge of grammar? After eight years of suffering through George W. Bush's mangled syntax and mispronunciations and runon non-sentences, none of which were ever less than cringe-inducing, we now have John McCain. It is painfully apparent from the last debate that McCain did not ace the verbal SATs himself. Who knows, maybe it was the stress of the debate itself which caused McCain to sound so befuddled, maybe he actually sounds like Shakespeare in the privacy of his own house. But he came across like a deer in the headlights -- and a dumb, inarticulate, repetitive one at that -- next to the eloquent, smooth-talking Obama. McCain's goofy grin, worn mostly at inappropriate times, did not help matters either.

Another point. My statistics teacher in business school told us (back in 1983) that in 21 of the previous 22 Presidential elections, the taller candidate won. (By my count, 4 of the next 6 were as well.) Next to the tall, elegant, youthful Obama, McCain looked like a wizened runt. Now, you say, elections shouldn't be decided on such superficialities. And, of course, you're right. They shouldn't be. But they are.

Tall, handsome, and square-jawed Mitt Romney, who is capable of speaking in complete sentences, would have been a far more formidable candidate. But in the primaries he split the conservative vote with Mike Huckabee, another charismatic conservative, so McCain won by plurality. Obama would even have done Romney the favor of removing the "flip-flop" label from him by having changed so many of his own positions during his headlong rush to the center. But perhaps this was a blessing in disguise for Romney. It would have been a near impossibility for a Republican to be elected this year, after these last eight disastrous years. And four years from now, the electorate will be far better acquainted with the real Obama, the one he has so artfully kept hidden, after his post-inaugural rush back to the far left.

Thursday, October 16, 2008

Male Hormones and Politics

My son pointed something out to me the other day that had never occurred to me before, but rang true. He said, "The liberals at school, the ones who have long hair and wear Che Guevara t-shirts, are always the wimpiest guys." There does seem to be a correlation between hormones and politics. Guys who stick up for their own race do seem likely to have more testosterone.

After my son's comment, I thought of the guys I've known personally from both sides of the aisle and then sorted them by (at least the superficial appearance of) masculinity, and found a near perfect correlation. Guys of any race who stick up for their own are more likely to be muscular, belligerent, and aggressive, with typically male personalities. Think of the guys you've known whom you've thought of as hyper-androgenized (as opposed to androgynous): did any of them have a political viewpoint which favored others over their own group?

This isn't true of just whites. The blacks who most aggressively demand special privileges and reparations -- think Jesse Jackson, or the Fruit of Islam, or the Black Panthers and all their spiritual descendants -- don't seem to be lacking in male hormones. Blacks who make fun of their own, on the other hand -- think Chris Rock, or Dave Chapelle -- tend to be skinny, even scrawny guys who are less bellicose by nature.

The primaries this year gave us some great examples of each type. Let's make the obvious assumption that among whites, those who stick up for their own tend to lean Republican, and those who don't, Democrat. Look at the contestants in the Republican primary: Fred Thompson, the former actor and basketball star. Mitt Romney, who bears a slight resemblance to Clark Kent. John McCain, former top gun who stuck by his fellow POWs while in captivity. Rudy Giulani, not a physical specimen but a tough former DA with a weakness for the ladies. Mike Huckabee, a big guy who recently ran a marathon. Ron Paul, former state champ at track. Duncan Hunter, the square-jawed former Army Ranger who servied with the 173rd Airborne and participated in 24 helicopter assaults. And Tom Tancredo.

Now let's look at the Democratic field: Hillary Clinton. Chris Dodd. John Edwards. Joe Biden. And Dennis Kucinich. Enough said. (I'm guessing Hillary ranked highest in testosterone.) The other two Democrats, Barack Obama and Bill Richardson, who is Hispanic, fall into a different category: by being Democrats, they are essentially sticking up for their own.

Think of it another way. You're a freshman in college and you've been assigned two roommates, both white. One is a burly football player who loves hunting and ATVing. He likes to drink and has been known to get into fights. The other is a 143 pounder who smokes pot, has lots of friends who are women (who truly are just friends), and looks down on athletes as "Neanderthals." Which one is the Democrat?

Yes, there are exceptions to both rules. But by and large the stereotypes hold.

Wednesday, October 15, 2008

Whence Obama's Accent?

Listen carefully to Barack Obama, and what you'll hear is a faint southern (whitish) accent, located roughly midway between a northern white (non)accent and a black accent. It's not quite black enough to scare the white electorate, though it does have a tendency to turn several shades darker when he's speaking to an all black audience. But it's not white enough to make him sound like a Tom or an effete Ivy leaguer.

So the question becomes, just where did he acquire this quasi-Southern accent? Did he get it from his Kenyan father, who disappeared from his life when he was two? From his Kansan mother? From his Kansan grandparents, who raised him while his mother went gallivanting around the world? From his schoolchums in Indonesia? Or is that the way they speak at Punahou, the exclusive Hawaiian prep school he attended?

One can't help but suspect that his accent, like everything else about him, was carefully constructed for maximal electoral value.