Monthly Archives: February 2009

The First 20+ Days

Well the first 20+ Days of Barack Obama’s Presidency have certainly been eventful to say the least. He’s keeping the Blackberry, put together a “team of rivals” like Lincoln, set up his economic advisory panel, and signed orders closing Gauntanamo, reversing Bush’s abortion-fund policy, and directing the EPA to set stricter auto emissions and fuel efficiency standards. More recently, he’s answered main street’s call for blood on Wall Street by imposing restrictions on executive pay for banks accepting funds funds from the TARP, has gotten the Economic Stimulus and Recovery Plan through a round each of House and Senate votes, is continually working on his plan to deal with our financial system with the Treasury Secretary and the Federal Reserve, and has his sights set on plans to deal with Housing and Foreclosure Mitigation, and the ailing auto industry, who’s Big Three executives are due to have a viability plan together for Congressional review next week. No matter who you voted for in November, you’ve gotta admit there’s something refreshing about having a leader in place that’s doing his job 24/7. Even President Obama’s meals and social events are targeted at inviting his political opposition so that he can continue to work to get what we, the American people, need done to pursue our dreams, and live up to our full potential.

On the Economic front, there appears to be some closed-door meetings going on between our feuding political parties, and it’s looking more likely that this Stimulus bill gets passed sooner rather than later. We are getting more and more details on Treasury Sec. Geithner’s plan to deal with the ailing banks, as the top 8 CEO’s addressing Congress today certainly took a note from the second round of Senate hearings for the Auto Company CEO’s, and showed some signs humility and responsibility for their actions that have led us into these dark days. I’m sure the next huge wave of news stories is waiting for whatever is going to happen on the regulatory front for our financial services industry, and it’s coming soon. But at the end of day, I don’t think anyone can deny that sentiment now is much more positive in terms of the stability and durability of our American economic system, than it was even a month ago.

For the next few months, people will continue to lose their jobs and their homes. Businesses will continue to struggle and fold into bankruptcy, and some of those will still be big name brands that have been around for years, even decades. However, the progress President Barack Obama and his Administration have made in the face of staunch opposition from the right, has already begun to have a positive impact on the future of this country. If things keep going the way they have over the last 22 days, Republicans will have only dug themselves a deeper hole in fighting the Administration’s policies, and will find themselves in an even worse position come 2010 and 2012. Trickle-down economics does not beat equality-of-opportunity based economics. The 3 republican Senators that supported the Stimulus bill at least seem to understand that. My sense is that the rest of the republicans better get in line and re-evaluate their values if they hope to remain as representatives of the people. Do you really want to continue complaining about how funding for Medicare, Medicaid and other State assistance programs doesn’t create jobs? With more and more criticism of our battered health care system, do you really want to keep fighting to keep spending out of this bill that would go towards increasing efficiency within the system itself, thereby reducing costs for all involved including the government? Do you want to keep selling the lie that you represent “America” when you argue for tax breaks for the top 1% of this nation, and zero dollars to assist the “safety net” programs that help the other 99%? (Check out this article on the huffingtonpost.com and watch the video of Rachel Maddow debate the defenition of “stimulus” with Republican Senator Ben Nelson.)

 These are the questions that have to do with core values that many conservative republicans claim to hold near and dear to their hearts, and these are the issues they will need to reconcile when the recovery comes, which almost every economist now sees on the horizon for the end of 2009, beginning of 2010. You don’t have to renounce yourself as a Republican altogether, but I would strongly suggest adopting more of a willingness to compromise, and get rid of that “us vs. them” mentality you guys have, if you hope to get elected to anything over the next few years. If you come out of a negotiation with 50% of what you wanted, at least you got something!

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“I Know Grimace, and Hamburglar…”

A friend of mine sent this link to me, and I was laughing so hard, I literally couldn’t breathe.

Poor Rick Ross, but he should have known not to go at 50 Cent. This is what 50 came into the game doing, and it’s what has allowed him to last so long. Hate him or love him, you can’t say he ain’t funny.

Manipulation of Law Over Morals and Ethics

In his Senate hearing on his decade long quest for justice, Harry Markopolos seized the opportunity to reveal himself as a true patriot, populist, and Authentic American Hero in his sweeping indictment of the joke of a financial regulatory system that has exposed itself in the wake of this economic crisis. In a modern day “David vs. Goliath,” tale, Mr. Markopolos told Congress how he and a handful of industry executives and insiders were in affect committing career (and possibly literal) suicide in attempting to go after not just the monster now known today as Bernard Madoff, but the entire financial regulatory Gestapo that controls the wealth of our great nation

If nothing else is apparent from the findings of Harry Markopolos and his league of extraordinary gentleman, it should be that the “Wild West” nature by which the SEC, the NASD, and FINRA (“Regulators! Mount up!”) operates, in collusion with the very organizations they are charged with regulating, is by far the greatest factor in the systemic risk chained to the ankle of our economy as our society sinks deeper into these uncharted waters. Rep. Alan Grayson of the 8th District of Florida, has an excellent exchange with Mr. Markopolos during the Senate hearing, when he essentially poses to Harry to explain the concept of “capture.” “It’s basically when the regulator is in bed with the industry they proport to regulate and do not regulate the industry. In fact, they consider the industry the clients, not the public citizens,” Markopolos explains.

There it is ladies and gentleman. All the complicated mathmatical calculations, financial products, swaps, CDO’s, derivatives trading and analysis, risk models, connections between housing, banking, and insurance industries, and Main Street companies like Robin’s Book Store in Philadelphia, and The Republic Windows and Doors Company out in Chicago…forget about all of that, it’s just the details. Too many Americans, and too much of society is not educated enough to even wrap their heads around the bare bones of how these devastating events shape our current stance, let alone the details. However, the current season of 24 on Fox makes at least the concept of capture easy to understand and easy to explain. If you’ve been watching, you know Jack Bauer (Markopolos) and the old CTU team is working “Palin”/”rogue” right now, because they know that the current threat to America(fraud) goes all the way up to those with power(the regulators) in the President’s Cabinet(SEC,NASD,FINRA, etc.). Even the bad guys at the top don’t know the identities of the other bad guys on their level or above, so that the entire atmosphere is steeped in suspicion of everyone’s intents and a “cover-your-own-ass” mentality. Now, applying this to our Regulatory situation, Markopolos, like Bauer and Tony, had been “whisteblowing” and shedding light on the threat, the fruad, for years. But after being ignored time after time, it’s no surprise that he figured the very process set up for handling the threat, the regulatory system, was clogged and cluttered with individuals who were either too stupid, young, and naive to see a threat themselves, or so caught up in the status quo – that Markopolos himself attributes to a “code of silence” among industry insiders and regulators alike – that being charged with the responsibility of making sure this type of fraud doesn’t happen, although it might feel nice for the soul, does not amount to a good enough paycheck for them to take that responsibility seriously.

When asked what other organizations could be charged with participating in “capture,” Markopolos is quick to name the FDA along with the SEC. He suggests incentivizing the compensation structure of the regulatory bodies, and making it similar to that of the financial industry. With this type of structure, the philosophy is that anyone working for the regulators will not allow themselves to be stopped or hindered, and will run over people that present themselves as barriers in their investigations of fraud like a “bulldozer,” if they knew their paychecks might get a nice boost. Regulators like Meaghan Cheung, the New York Division SEC Branch Chief, might have paid attention to the chief executive of midsize, Boston based, Equity-Derivatives trading business when he walked through her door in 2000, with volumes of provocative information revealing what has become the largest and longest fraud scheme in American History…so far.

Markopolos also offered his insight in the arena of human intelligence gathering, which the workers at the regulators sorely lacked. “When they [the regulators] come in to inspect a firm, they are led to conference room, they meet the compliance staff, and they are fed controlled pieces of paper. That’s what they do, they inspect pieces of paper, because they’re too untrained to realize what to look for on the financial end. All they’re looking for is the pieces of paper.” He goes on to say that if they actually probed the company’s, and spoke with the various workers, traders, executives, and salesmen, and asked them, “Do you see anything fraudulent going on? Is there anything going on here I should know about?” then that would have, and still would go a long way towards accomplishing what the SEC was created to accomplish. As far as Markopolis is concerned, the SEC did not ask these questions nor make any real attempt at gathering any information on questionable companies, “because they were afraid the answer[s] would be ‘Yes.'” That would have meant more mountains of work for the regulators, which brings us back to their incentive and motivation…not enough. Combine that with the fact that Bernard Madoff, as a former chairman of the entire NASDAQ Stock exchange and the amount of respect and power gleamed in the “white swan” public view by holding that powerful a position within the industry, and there is almost no incentive for any one regulator to investigate anything other than how they themselves can capitalize somehow, and join the club. It’s that same view of power that “sophisticated investors” scammed by Madoff allowed to lull them into such a sense of safety in the very idea of having their money managed by a man with such financial clout, that they didn’t feel they had to pay attention to or investigate how they were making such high returns, so consistently, even though the investments they were making were labelled as “high risk” investments.  This obliviousness and drunken greed is an attitude that pervades American society, and it is the “systemic risk” that we as a society must fully recognize and deal with if we are going to have any chance of passing this planet on to future generations.

Harry Markopolos, and others like him (Pat Tillman, Dalton Fury, Robert Baer –  real men that have put their lives on the line to defend the fabric of this nation’s security and safety, so that we can rise and sleep soundly “under the blanket of the very freedom that [they] provide,”) represents what is best in the Spirit of America. It is not only that they, and countless others who remain nameless, have put themselves in harms for us, but that they have excercised their own freedom in informing us what happened, and been through serious ordeals just in trying to do that. They are the real John McClain’s, Jack Bauer’s, and Solid Snake’s, that have worked within the system and gotten so fed up with the amount of “friendly fire” they’ve received in the form of inaction and outright stonewalling by the very agencies and governments for which they’ve worked, that they’ve realized they can’t trust anyone, and have to “go rogue” on their quests to safeguard us, the American public, from real terror.

And that very real terror that we are currently experiencing is coming from within. It is being perpetrated on us by the very leaders that are sworn to protect us. It is “capture” at the highest order, and it is the embrace of greed based politics and principles that is the only thing that has trickled down to the public like a cancerous disease. We have to wake up and let our government know, the way we did this November, that enough is enough. We have to maintain the interest, and continue to grow the amount of involvement we have, in simply knowing exactly what our elected officials are doing and how they are “representing” us. Remember, just because a guy gets elected, it doesn’t automatically make him a good leader. Let’s make sure we are electing proven leaders, and not admitted sex offenders, like some of our current officials, who shall remain nameless and should stay out of controversy if they don’t want people bringing up their previous sexual indiscretions.

 

Lastly, let’s wake up and realize the reality that taxes are extremely difficult for even tax professionals to get right all of the time. The media is spending too much time talking about the current Administration Appointees and their tax records from 2001. Who cares? Taxes are like parking tickets. There are those who deliberately take advantage of the fact that it’s a parking ticket, therefore a minor infraction, doesn’t have to be paid immediately, and so they don’t mind getting them and therefore keep getting them. Then it spirals out of control as they “forget” to pay the tickets, and before they know it, they’re getting their car towed and they owe the local government a lot of money. Now, the tax equivalent of a person or a public official that exhibits this behavior would probably be Senator Ted Stevens. He was indicted for using his position and accepting bribes among other things, but basically, had he reported these “gifts” he received from these “questionable” people or organizations on his taxes – either as personal spending or what have you – things could have been totally different for this now tarnished elder of the Senate. (Not saying that would have been the moral thing to do, but if you’re gonna accept bribes, wouldn’t you at least try to cover your tracks as best as possible, or slow down the process of your capture in any way?)

Then there are those who when they get parking tickets, it’s few and far between, so since it’s not as routine for them as for the previous example, it’s understandable that they might forget to make a payment for that ticket. To round it all out, there are of course those people that pay a parking ticket as soon as they get it, no matter how frequent an occurrence, but the group in the middle, the understandably forgetful group, is the group I would place most people in with parking tickets and taxes. We screw up on our own taxes from time to time, forget this rule and that, (or more likely don’t know it in the first place) and sometimes it’s in our favor, and sometimes not, but there’s no deliberate manipulation of any tax code involved in how we go about doing our taxes. It’s unfortunate that Tom Daschle had to withdraw from the position of Secretary of Health and Human Services, although I think it was the noble thing to do to take one for Team Obama. I place him in this group of understandably forgetful tax infraction holders. I myself owed New York City taxes after I thought I was done for 2008, but my accountant screwed up on the city taxes. Does that make me any more or less trustworthy that I chose to go to the same accountant I have for 3 years with no problems to get my taxes done? I think not. I have a friend that found out, also in last year’s tax season, that he was owed about $10,000 more in deductible income. Does that make him or his tax professional business or tax guru’s that have a leg up on the entire franchise? I think not. More likely, it means that single tax professional he went to on that very day was a more focused, harder worker than average. But it means nothing about the character or the integrity of my friend, the person that went to that professional for a service. Wake up people, please!