Tuesday, September 30, 2008

Third time is the charm - revised bailout bill more likely to squeak by on Thursday

The third time is the charm. The Senate will take a shot at revising The Big Bailout Bill with an increase in the FDIC insurance limit and some other goodies and the bill is quite likely to pass when voted on tomorrow night. Then on Thursday the angst-ridden House will vote on the revised bill, maybe with even more gimmicks to soothe the holdouts, and that third vote on the same basic bill will then probably pass by a modest margin. There is a general feeling that a fair number of House members are feeling deep remorse for the mistake they made on Monday. But from my perspective, this is a classic Washington ploy, with the first vote basically being a show to give members an opportunity to vent and grandstand for the people back home, and then later they can vote on a revised bill and change their minds and then simply make up some lame excuse about how they tried to fight the bill, as evidenced by their first vote, but they had little choice but to eventually go along. And this time they have The One's blessing and even insistence that it is the right thing to do.

If the House does decide to festoon the revised bill with goodies, that would mean that a conference commitee would have to resolve the differences between the House and Senate versions of the bill, but such a committee is hand-picked by the leadership and is unlikely to do anything to slow the bill down.

In short, there is now a high probability that A Big Bailout Bill will in fact be passed this week and maybe even signed into law by Pesident Bush on the weekend.

-- Jack Krupansky

Obama: There will be time to punish those who set this fire, but now is the moment for us to come together and put the fire out

Hey, maybe Barack Obama's flowery style of speech does have some benefits. He actually argued a credible case for why Congress needs to pass The Big Bailout Bill. A Washington Post blog post by Perry Bacon Jr. entitled "Obama Pushes Passage of Wall Steet Rescue Bill" calls out some of his best points and tells us that Obama "has shifted to aggressively pushing passage of the bill." Good move. Barack's line that I thought was most cogent and dirt-easy for any damn fool to make any sense out of was:

There will be time to punish those who set this fire. But now is the moment for us to come together and put the fire out.

I could not agree more with that sentiment, but I am sure there are still plenty of left-wing activists from MoveOn and other Progressive organizations that organized a "Vote No" campaign for Monday's vote who are probably chanting "Burn Baby Burn!" rather than even wanting to see the fire put out. Scumbags.

He also had a great point that nobody could make before the vote on Monday:

Over one trillion dollars of wealth was lost by the time the markets closed on Monday. And it wasn't just the wealth of a few CEOs on Wall Street. The 401Ks and retirement accounts that millions count on for their family's futures are now smaller. The state pension funds of teachers and government employees lost billions and billions of dollars. Hardworking Americans who invested their nest egg to watch it grow are now watching it disappear.

I agree 100% with that, but it is also true that there are plenty of Americans without either 401Ks or pension plans or retirement accounts who are really struggling and resent having to struggle even more to protect somebody else's "nestegg."

Of course we should applaud Barack for stating the challenge that should be (but wasn't) apparent to all parties:

To the Democrats and Republicans who opposed this plan yesterday, I say -- step up to the plate and do what's right for this country.

But of course there is in fact plenty of ideological difference on exactly what is "right for this country."

In any case, I am thrilled to see one of the presidential candidates actually "step up" and speak up for taking some action rather than simply engaging in ideological sniping and self-serving butt-covering.

-- Jack Krupansky

Should the FDIC insurance limit be raised?

I have written before that I believe that the FDIC insurance limit should be raised to $1 million so that small businesses and people with a lifetime of savings or the proceeds from a home sale do not have to worry about bank safety and getting themselves involved in these bank "runs" that we are actually encountering now. Obama suggested a rise to $250,000, but to me that is too half-hearted a bandaid. I suspect that the motivation for the magic $250,000 number is the same as his upper limit for who should get tax relief, an artificial boundary to separate the middle class from the supposedly "rich." McCain is proposing the same change, but seems like a little bit of monkey-see/monkey-do. It makes no sense that McCain would abandon small businesses and responsible savers, but maybe that is simply a populist election ploy.

Actually, my most recent thoughts are to raise the FDIC limit to even $10 million so that essentially all small businesses will be covered. Even for a relatively small business with 100 employees, there may be periods during the year where income and expenses are not coincident and there could be several million dollars sitting in the bank for a short period of time, especially for businesses with seasonal peaks, as well as cash that accumulates for quarterly payments and in advance of major capital expenditures.

The other key change needed for the FDIC is to explicitly state that it is simply a "reserve" fund and that the U.S. Treasury will ultimately backstop all valid claims even if they exceed the reserve fund. The point of the reserve fund is that institutions are contributing so that it will generally cover most losses and so that they are reminded of the need to behave responsibly. This change will eliminate the need to infuse a large pile of capital. Maybe the insurance fee should be raised as well, but I am not convinced since a higher limit may attract money back to banks from money market mutual funds and cause an increase in the total amount of insurance paid.

-- Jack Krupansky

Monday, September 29, 2008

Not a lot of gloating by Democrats over Bush's sinking economy

I do have to give a lot of Democrats credit for not publicly gloating about the current economic turmoil being the result of President Bush's "failed" economic policies. Sure, Nancy Pelosi was unable to refrain from gloating this afternoon and really sticking it to Bush and the Republicans, but there were a lot of Democrates, moderates and centrists who took a much more productive and responsible public attitude. Besides, Nancy has done precious little to support the economy over the past two years of her "reign" as Speaker of the House. The word "leadership", let alone "bipartisan leadership" does not come to mind in her case, while it does seem quite appropriate for the efforts of Barney Frank.

-- Jack Krupansky

Electoral college poll shifts further towards Obama, 301 to 237

As most of us know, the popular vote does not determine who becomes president and the overall national polls map to the popular vote, not the electoral college votes. But RealCearPolitics does have a map of the comparable electoral college vote based on the state-by-state polls. Currently, the map shows Obama with 171 solid electoral college votes and McCain with 158. Obama has 78 leaning votes to McCain's 5. The remaining 126 electoral votes are toss-ups. Excluding tossups, Obama has 249, McCain 163. Including toss-ups, Obama has 301 and McCain 237. That is the bottom line, Obama has a moderate lead in the total electoral college vote tally.

Some people say that Ohio represents the entire country. The map shows Ohio as a toss-up, with McCain slightly ahead by 1.6%.

The real clear bottom line is that although this election is not a slam-dunk for either candidate, Obama is now quite clearly in the lead. But, it is too early to claim a win based on toss-ups.

Obama has a potential advantage in that his team is really good at registering new voters and reaching out to young voters, many of whom do not have traditional phones so they would not show up in traditional polling. He may in fact currently have a 2% to 5% advantage that the polls cannot see. Obama also has the advantage of opposing the war in Iraq (and planning to get out ASAP) and a crummy economy and poor financial regulatory oversight. McCain's primary advantage is simply that most sane people do not trust non-centrist Democrats with either defense or the economy. Obama may have plans, but they do not have credibility with many people.

-- Jack Krupansky

Is The Big Bailout Bill really dead?

Yes, The Big Bailout Bill really is dead. It is dead, dead dead. Having said that, the $640 billion question is how dead is it? For sure, it is dead in its current form, but with some changes, it really could be brought back to life. I listened to the last hour of the House debate, and there were a bunch of changes suggested which might be enough to get a revised bill passed. Not everybody can be readily satisfied, especially in an election year, but some threads of opportunities were obvious:

  1. People just need more time. One week just won't cut it.
  2. People need more time to study the proposal.
  3. People need more time to ask questions about the proposal.
  4. The rank and file, not just the congressional leadership and designated negotiators need to feel that they are part of the process.
  5. There has to be great clarity about the degree of relief that homeowners will get, including reduction in principal, reduced rates, and better protection from foreclosure.
  6. There has to be some clarity that responsible howeowners are not subsidizing irresponsible homeowners and speculators. There has to be a sense of fairness.
  7. Congressional representatives and senators need time to travel throughout their states and districts to present the proposal and discuss it with their constituents. And then there has to be time to incorporate some of that feedback into fine tuning of the bill. People need to feel that their concerns are being addressed.
  8. Citizens need enough information to see that it is they, the people, and not Wall Street that are likely to reap a windfall.
  9. People need more information about enforcement to understand that enough people will be tried and sent to jail for causing this crisis.
  10. President Bush needs to be much more deeply involved in give-and-take discussions with individual members and groups within Congress so that they can feel that they are getting a fair hearing.
  11. There has to be at least fairly detailed preliminary discussions of a new regulatory regime which makes the point that we actually did learn from our mistakes.
  12. Do a better job of phasing the outlays so that people do not reject the proposal simply based on sticker shock.
  13. Drop the threat of a Great Depression. Yes, the failure to have a bail-out results in A Big Mess or even A Bigger Mess, but nothing on the order of a Great Depression. I would also note that Benanke got overly worried about deflation back in 2005, so people need to discount his worries at least a little bit.

There are probably more changes needed, but that is a start. In truth, it is really more about process than the actual details of the bill. Put simply, too many people felt that they were being railroaded. Oddly, it was the Republicans who felt most railroaded.

Ultimately, the vote was very close, so even a modest degree of change to the bill coupled with some elapsed time for people to work through it may do the trick.

I suspect that we will have a revised bill and process proposal within a couple of days, maybe the end of the week or next Monday.

Meanwhile, Treasury, the Federal Reserve, and the FDIC will continue to do a great job of coping with the crisis on an ad hoc daily basis. And, I would add that the private sector itself is actually doing a semi-decent job of working through the mess. With WaMu and Wachovia now out of the picture, the number of looming disasters is incrementally shrinking.

-- Jack Krupansky

The Big Bailout Bill dies in the House

The voting just finished up and The Big Bailout Bill has died, 205 for passage and 228 against with a simple majority needed. As I have said before, this will not mean the end of the world. All it means is that the Federal Reserve and Treasury will simply be doing a lot more ad hoc, one-off interventions, as well as some ad hoc congressional bills tailored to narrow proposals.

I personally am not terribly surprised or disappointed that the bill failed, although I would have preferred that it had passed.

Back in 1999, I wished that the Fed had not intervened and that we had gone "cold turkey" and really cleaned up a lot of the lingering mess that may in fact have come back to haunt us. On the other hand, there are a lot of normal people who might not like the level of pain that can follow a full-blown "turkey freeze."

I am sure that we will muddle through the current crisis, but it is unfortunate that we do it with an unnecessary level of pain and "chaos."

Maybe the joint strategies are that the Democrats will be able to claim that they acted responsibly and the Republicans will be able to say that they voted against Bush.

-- Jack Krupansky

The Big Bailout Bill voting time has expired, but the vote continues

The 15 minute voting period for the House vote on The Big Bailout Bill has expired, but the vote remains open. It is currently 207 for passage and 226 against, meaning it has failed to gain enough support for passage. It is not unusual for the voting period to be extended as last minute horse-trading goes on. Maybe there is some hope that some votes can be changed in the next few minutes. But for now, the bill looks dead.

And, it is the Republicans who are killing it, with only 66 voting for it and twice as many, 132, voting against it. 141 Democrats have voted for it and only 94 against it.

Maybe the joint strategies are that the Democrats will be able to claim that they acted responsibly and the Republicans will be able to say that they voted against Bush.

-- Jack Krupansky

The Big Bailout Bill looks headed for failure

It looks like the votes are simply not there for passage of The Big Bailout Bill. It will not be the end of the world, but it will be rather messy.

-- Jack Krupansky

Mud sandwich

The House Republican Minority Leader John Boehner just admitted that The Big Bailout Bill is a "mud sandwich" but that passage of the bill is essential and is "in the best interests of our country."

The vote should begin shortly. It may take a half hour or more for the voting process.

Watch (or listen to) the House debate The Bill Bail-Out bill on C-SPAN online.

-- Jack Krupansky

Moment of truth coming up...

The House is almost done debating The Big Bailout, so The Big Vote will be coming up shortly. It will not be the end of the world if the bill fails to pass, but a lot of innocent people will be hurt if it does not passes. Sure, eventually the economy will bounce back even without the bill, but the bill really is the best of a bunch of lousy options.

Watch (or listen to) the House debate The Bill Bail-Out bill on C-SPAN online.

-- Jack Krupansky

Watch or listen to the House debate and vote on The Big Bailout

Watch (or listen to) the House debate The Bill Bail-Out bill on C-SPAN online, with the final vote scheduled for 12:30 p.m. ET. The vote is expected to be close. Then, the bill has to be debated by the Senate.

I remain optimistic that it will pass, but in a tight election year nothing is guaranteed.

Either Rep. Barney Frank will be seen as a true hero or the ultimate villain, or probably both. I give him a huge amount of credit for his leadership and bipartisanship. He makes the presidential candidates look like political midgets.

Maybe our national motto should be "Divided We Squander."

-- Jack Krupansky

Sunday, September 28, 2008

First debate was a wash, but that gives Obama an advantage

I watched the first presidential debate online and felt that it was a wash. McCain scored a lot of points for experience and judgment and Barack Obama scores a lot of points for the need for change. They both made a lot of really good points. I did feel that McCain came across a little weaker than his actual record would have argued for, but I also felt that a lot of Barack's claims for what he would accomplish seemed somewhat exaggerated and not completely credible. Overall, a wash, but since defense and foreign policy is supposed to be McCan's forte, a wash on this stuff means that Obama actually did quite well.

One interesting point: For all of the supposed anxiety and anger over Iraq, why wasn't Barack able to bury McCain? I think the answer is that so much of the intensity of anti-Iraq sentiment comes from the far-left wing Progressives who had a lot of power in the Democratic primary, but are far less representative in the general election.

I remain likely to vote for Barack because he seems to be a little closer to being a centrist than McCain, but I am by no means comfortable with the majority of his positions and proposed policies. One can only hope that many of his public statements are merely posturing and "campaign promises" and that he in fact will revert to a Clinton-esque centrism when actually in office. That is my current belief. If if does that, he could do quite well over the next eight years, but if he sticks to scatter-brained left-wing Progressive dogma in his first term, he will not be likely to get a second term. Yes, people want change, but it has to work for them. If Barack Obama does not deliver significant change to the vast majority of Americans (including a fair number of conservatives) over the next four years, his goose will be cooked.

One last thing... I find that although Barack has the best intentions, I do not think he has a credible plan for dealing with either Afghanistan or Pakistan. But then, neither does McCain. My plan: wind down the whole "war" on terror and deal with terrorism as more of a international law enforcement issue and use only limited military strikes when it actually makes a lot of sense.

And one other thing... I find Barack's get-tough with Iran attitude completely unacceptable. I hope and believe that he is simply posturing to get pro-Israel votes, but his talk sounded a lot like he was saying that he had a boatload of "preconditions" in mind. Sure, McCain is just as bad if not worse on this front, but Barack's position is so bad that it is one of the reasons I cannot get excited about supporting him.

-- Jack Krupansky

Thursday, September 25, 2008

The Big Bailout: Example of why I do not support The Progressives

Even Barack Obama and Democratic leaders in Congress recognize the need to address the current financial crisis. They may not agree on all of the details, and there may be a fair amount of pontificating on all sides since this is an election year, but there does seem to be some consensus emerging on the overall shape of a bailout and that despite widespreadh misgivings on all sides, approval of a modified plan is very likely very soon. The administration has already agreed in principle with some of the "demands" of Congress. Meanwhile, what are The Progressives doing? They are staging rallies to "say 'NO' to the Bush Bailout plan." Do they at least acknowledge that there is a problem that needs to be resolved immediately? Nope. Do they acknowledge that with congressional modifications it is no longer "Bush's" plan? Nope. Do they acknowledge that the plan was not created or put forward by President Bush, but by Treasury Secretary Paulsen and Federal Reserve Chairman Bernanke? Nope. Do they offer an alternative plan for the immediate crisis? Nope. Their only goal seems to be to exploit the crisis for partisan political gain.

Here is the email letter I received this morning from Democracy for America (a Progressive group):

Supporter -

Since Monday, progressives around the country have been calling their Senators and Representatives to say "NO" to the Bush Bailout plan. Congress is starting to get the message.

We can't stop now.

Today at 5pm, America will say NO to the Bush Bailout -- and we need you to be there.


The Bush Bailout is still a new tax on every American that would amount to a $700,000,000,000 check to bail out Wall Street. The Bush Bailout would be the largest giveaway of public money in American history.

Our friends at True Majority are leading the way for over 20 different groups including MoveOn, USaction, and ACORN to name just a few. They organized the events, now we need to turn out and help make the events a success.

Rallies held over the last two days in cities across the country have received a lot of coverage already. These events have helped back up the phone calls, emails, and letters against the Bush Bailout that Congress has been receiving all week.

Now, with a nationwide coordinated action with hundreds of rallies on the same day, we will amp up the pressure and make sure Congress hears the message loud and clear: America says NO to the Bush Bailout.


I signed up for the rally near me. I hope you will sign up too.

Thank you for everything you do,


Jim Dean, Chair
Democracy for America

Literally, there was no mention of an alternative plan or any effort to improve the current proposed plan.

Truth be told, it appears that The Progressives would prefer that the U.S. economy fall into a deep recession so that they can then blame Bush and then blame McCain using guilt by association.

Lucky for us, there are still quite a few sensible centrists and even sensible moderate liberals in Congress who understand that by working with Paulson and Bernanke they can jointly craft a very sensible bailout plan that actually does advance the aims of centrist and moderate Democratic liberal principles.

In any case, this useless and counterproductive "Just say 'NO' to the Bush Bailout" campaign illustrates perfectly why I oppose the left-wing Progressives and why even though I will probably vote for Barack Obama, I cannot give him or his Progressive supporters any of my support.

But, by all means feel free to let your elected representatives know specifically which terms of the bailout you do object to and which terms you do support, and how you would like to see the plan changed. But hurry, because the rough details are likely to be put in place very soon.

My own personal biggest concern is to make sure that we buy mortgage assets at a steep enough discount that we have a good shot at being able to re-sell mortgages or defaulted properties at a modest profit. That may be a 10% to 25% discount to "full list price". The banks might object, which is fine, but I doubt that any financial institution will really have any serious problem if they escape from this mess and "only" get 80 cents on the dollar. Bernanke wants to buy assets at full price rather than "fire-sale" prices to assure that the banks are well-capitalized and healthy, but I would argue that true fire-sale prices would be down under 50 cents on the dollor or even 20 cents on the dollar, so offering 75 to 85 cents on the dollar would seem quite fair to the banks. Besides, if they really can argue that assets are worth more than 90 cents on the dollar, why would they need a big government bailout?

-- Jack Krupansky

Monday, September 22, 2008

Who can be a better steward for the economy, the Republicans or the Democrats?

Given the current anxiety over the economy and financial system, it is to be expected that the Republicans will be blamed for all the bad things that have happened "on their watch" (ignoring the fact that the Democrats have "controlled" Congress for the past two years), but that begs the question of who can really be a better steward for the economy. After all, does anybody really have a credible, non-partisan accounting of the past eight years that can tell us whether the dot-com hangover, the impact of 9/11, and low interest rates were not at least partially responsible for the mess we are in? Did the Democrats ever complain that interest rates were too low? Did the Democrats ever complain that too many lower-income families were getting mortgages beyond their means? Actually, there were a few, but very, very few who did in fact complain that subprime mortgages were "abusive", but mostly almost everybody, regardless of party, was thrilled that housing was booming. Now, the Democrats blame the Republicans for the housing boom. Still, all of this continues to beg the question of who can credibly claim to be the better stewards of the economy.

In my book, Bill Clinton can claim credit for being a great steward of the economy. But, he was a centrist, and as Barack Obama (with Hillary's "assistance") has shown us, the Centrists are now out of favor in the Democratic Party. The Progressives are ascendant. Yes, they are gunning for power, but they actually do not have any economic track record to speak of.

What the Democrats can credibly claim is that they are better at building and deploying economic and financial safety nets, including Social Security and FDIC back on FDR's watch. Wall Street just showed us that they were a high-wire act performing without a safety net. Sure, the U.S. Treasury is now "rescuing" Wall Street, but that is more like arriving at a train wreck and helping the survivors rather than using a net to prevent a disaster. Besides, many millions of Americans have now been negatively impacted by Wall Street's death spiral, so it is rather difficult for the Republicans to claim that they protected any of us from Wall Street. Sure, the belated Treasury money market fund guaranty program is reasonably "progressive", but I believe that is an exception to the Republican M.O. rather than something we can expect from Republicans on a regular basis.

OTOH, the non-Centrist Democrats cannot even begin to credibly claim that they have they faintest clue as to how to rebuild the economy and create new jobs. Sure, the Republicans are struggling right now too, but that is mostly because that is the way things are when an economy is in or near a recession. Once the contractionary forces have dissipated, the outlook will change and change dramatically.

The key is of course to have the right mix of regulation and safety nets. The centrists understand this, but the Republicans overall have a misguided loyalty to under-regulation while the Democrats overall have a misguided loyalty to over-regulation.

In short, both parties are mediocre stewards of the economy and the economy actually survives in spite of Washington rather than because of what happens in Washington.

So, where we are right now is that McCain is talking tough but seems likely to want less regulation overall and Barack Obama is outraged that the Republicans have somehow mismanaged the economy and Wall Street and seems likely to introduce an excess of regulation.

Where are the Centrists when you need them? Bill and Hillary are exiled off to left field to smile and say a lot of nice words about Barack Obama, but otherwise not do anything to actually help the economy. Others have retired from Congress because being non-partisan is disdained these days.

Personally I think both McCain and Obama are a bit more centrist they their political chatter suggests. A lot of what they say is designed to inspire "the chorus" rather than appeal to the center majority of America.

From where I sit now, I think that Barack is a bit smarter and more sensitive to changing trends so that he is better positioned to sense the direction that the economy and Wall Street should head in the future. I also know that a number of heavy-hitters at the New American Foundation, a centrist think tank in Washington, D.C., are involved with advising the Obama campaign, so I have at least some reason to suspect that economic and financial policy in an Obama administration has at least a plausible chance of having a centrist tone.

In short, I think Barack will be a somewhat better steward of the economy than McCain, but that is in spite of his being a Democrat rather than because of his party affiliation. OTOH, I think McCain can handle the job as well, but I do worry that he is being a little too much of a conventional Republican these days to be a first choice.

Contribution from Biden and Palin? Ummm... how about "none of the above."

-- Jack Krupansky

Why don't Barack Obama's supporters have more confidence in him?

One recurring theme that has been repeated endlessly for Barack Obama's campaign for the presidency is his own supporters complaining that he needs to do this or that or not do this or that or do more of this or that or less of this or that be more whatever or less whatever. I never cease to be amazed at how little confidence his own supporters have in him and his ability to figure out the right path for him to the Oval Office. His campaign really is all about "hope" and "change"... his supporters hoping that he will change. Just today, Professor Drew Westen over on The Huffington Post had a column entitled "The Day the Momentum Changed: And What Obama Needs to Do in the Debates to Keep It" in which he opined that "what he needs to do in the debates is precisely what he has not done thus far in that format, and what no Democrat other than Bill Clinton has done effectively in decades: to connect with voters in a way that makes them feel like they know and share his values, feel confident that he will keep them and their families safe, and will do right by people like them." So, basically we are being told that Barack does not know how to debate, that he does not know how to connect to voters, that he does not share their values, and that he does not have the experience to convince voters that he can keep them safe. Here we are less than two months from the election and Barack Obama is that deep in the hole? What is wrong with this picture?! Is Barack inexperienced and incompetent or not? If not, why are so many of his supporters treating him as if he were? There is a disconnect here somewhere.

The kernel of the disconnect is that Barack really is less than his supporters are claiming him to be. They have made false claims about his experience and ability and know that are struggling furiously to "bulk up" their over-hyped "fighter." OTOH, no candidate ever does meet the claims being made about them. Still, it does seem that Barack's supporters are working overtime to help him be something that he is not.

-- Jack Krupansky

Electoral college poll leaning slightly towards Obama, 273 to 265

As most of us know, the popular vote does not determine who becomes president and the overall national polls map to the popular vote, not the electoral college votes. But RealCearPolitics does have a map of the comparable electoral college vote based on the state-by-state polls. Currently, the map shows Obama with 164 solid electoral college votes and McCain with 163. Obama has 38 leaning votes to McCain's 26. The remaining 147 electoral votes are toss-ups. Excluding tossups, Obama has 202, McCain 189. Including toss-ups, Obama has 273 and McCain 265. That is the bottom line, Obama has a very slim lead in the total tally.

Some people say that Ohio represents the entire country. The map shows Ohio as a toss-up, with McCain slightly ahead by 1.6%.

The real clear bottom line is that this election is not a slam-dunk for either candidate.

Obama has a potential advantage in that his team is really good at registering new voters and reaching out to young voters, many of whom do not have traditional phones so they would not show up in traditional polling. He may in fact currently have a 2% to 5% advantage that the polls cannot see. Obama also has the advantage of opposing the war in Iraq (and planning to get out ASAP) and a crummy economy and poor financial regulatory oversight. McCain's primary advantage is simply that most sane people do not trust non-centrist Democrats with either defense or the economy. Obama may have plans, but they do not have credibility with many people.

-- Jack Krupansky

Thursday, September 18, 2008

Ban the automatic loaning of customer long positions to short sellers

I despise short selling as much as any bullish investor, but I think the optimal solution to short-selling abuses (e.g., naked short selling) is for the SEC to ban mutual funds and pension funds and insurance companies from loaning stock to short-sellers and to ban brokerage firms from automatically loaning customer long stock positions to short sellers without their explicit permission. How many mutual fund shareholders or employees represented by pension funds or customers keeping stock in their brokerage accounts are even aware that it is they who are the suppliers of stock that short sellers are selling short??!! Brokerage firms, mutual funds, and pension funds are supposed to be operating with a fiduciary duty to protect the interests of their customers but they are failing to do so. Fix this fiduciary duty problem and short sellers will instantly become a very minor force in the market rather than the tail wagging the dog that they currently are. It really is this simple.

One pragmatic logistical change which would help correct a lot of short selling abuses would be to go to T+0.0 settlement rather than the current T+3 settlement. Rather than giving short sellers a 3-day free ride to come up with borrowed shares, force them to cough up the borrowed shared up-front before the short-sale transaction can even be requested to be executed. T+3 is not needed these days and is a dog's age in today's computerized stock market. Even T+0 settlement (by the end of the trading day) is insufficient to deal with naked short-selling. T+0.0 settlement is needed and it is needed... yesterday.

These two changes would literally solve the current systemic problem with short-selling without preventing short-sellers or the beneficiary owners of long stock positions from engaging in stock loaning and short-selling if they so choose.

I find is horrifying and reprehensible that a brokerage firm is permitted to loan a customer's stock without the customer's explicit, up-front, opt-in permission to short sellers, and without any notice to the customer that it may or has been done. Opt-out would not be sufficient. It needs to be opt-in and without any onerous penalty for refusing to opt in.

Why the silly Democrats are not jumping up and down and loudly proclaiming this need  to get rid of this automatic opt-in and irresponsibly loaning by mutual funds and pension funds and insurance companies is rather baffling, other than simply that, as the saying goes, "they don't get it."

-- Jack Krupansky

Electoral college poll: dead-even toss-up

As most of us know, the popular vote does not determine who becomes president and the overall national polls map to the popular vote, not the electoral college votes. But RealCearPolitics does have a map of the comparable electoral college vote based on the state-by-state polls. Currently, the map shows that both Obama and McCain have 157 solid electoral college votes, while McCain is ahead with another 70 leaning votes to Obama's 50 leaning votes, and 104 toss-up votes.

Some people say that Ohio represents the entire country. The map shows Ohio as a toss-up, with McCain slightly ahead by 1.9%.

The real clear bottom line is that this election is not a slam-dunk for either candidate.

Obama has a potential advantage in that his team is really good at registering new voters and reaching out to young voters, many of whom do not have traditional phones so they would not show up in traditional polling. He may in fact currently have a 2% to 5% advantage that the polls cannot see. Obama also has the advantage of opposing the war in Iraq (and planning to get out ASAP) and a crummy economy and poor financial regulatory oversight. McCain's primary advantage is simply that most sane people do not trust non-centrist Democrats with either defense or the economy. Obama may have plans, but they do not have credibility with many people.

-- Jack Krupansky

Wednesday, September 17, 2008

Taking the Democratic Party too far to the left

Although I am still very likely to vote for Barack Obama in November, I do agree with the general sentiment expressed by Lynn Forester de Rothschild, whose defection from supporting the Democratic Party is chronicled in a blog post on The New York Times Web site by Michael Falcone entitled "A Democratic Baroness Endorses McCain-Palin Ticket":

"I believe that Barack Obama with MoveOn.org, and Nancy Pelosi and Howard Dean have taken the Democratic Party too far to the left," she said. "I'm not comfortable there."

I just happen to be even more uncomfortable with the too-far right wing posture of the Republicans.

Actually, although I completely agree that MoveOn and Nancy Pelosi (and The Progressives in general) are too-far left, I am not completely convinced that either Howard Dean or Barack "The One" Obama are so left-wing so much as simply riding on the waves being made by the "angry" Progressives who happen to get a lot of their energy and enthusiasm from rebelling against The Centrists (e.g., The Clintons) who they feel have sold out the Democratic Party.

To me, the only real question is when the center-left and center-right will either voluntarily leave their respective parties or in fact get booted out and then form a true Centrist Party. A year ago I would not have said that such a prospect was imminent, but now it does feel as if we have at least inched closer.

In my model, the 20% of the far-right would remain hard-core Republicans, the 20% of the far-left would remain hard-core Democrats, and then the middle 60% would become Centrists. The 40% at the "fringes" can then condemn compromise all they want, while the majority in the middle can take a more relaxed view of what cannot be tolerated.

-- Jack Krupansky

Monday, September 15, 2008

Gasoline prices headed much lower - after the "Ike panic" fades

Although there has been some panic about Hurricane Ike causing a spike in the retail price of gasoline, much of that is grossly overblown and retail gasoline prices are actually headed much lower in the near future. I see a  frightening headline in The Washington Post on an article entitled "Gas Prices Continue to Rise as Hurricane Destroys Oil Facilities." Yes, according to AAA, prices have spiked by about 15 cents or so, but what is this about "Destroys Oil Facilities"? Have the majority of oil refineries, ship terminals, and pipelines really been "destroyed"??!! After all, I read elsewhere that Wall Street was relieved that so little damage was done. The Post says "federal officials said a preliminary survey of damage found that a number of production platforms in the Gulf of Mexico had been destroyed by Hurricane Ike." But later this same article says that "It was unclear yesterday how badly the storm had crippled the Gulf oil infrastructure. Eileen Angelico, a spokeswoman for the Interior Department's Minerals Management Service, said flyovers Saturday and yesterday showed 10 destroyed oil platforms. There are 717 manned platforms in the Gulf, and as of yesterday 591 of them had been evacuated in anticipation of the storm." 10 out of 717 does not sound like the kind of major disaster that the headline seems to be proclaiming. And then, finally, the article closes with the truth:

... only four of 17 oil refineries on the Texas coast from Corpus Christi to Beaumont remained closed, six were ramping up and the rest were operational, Kolevar said.

Operators of two major pipelines that serve the Eastern Seaboard, the Plantation and Colonial pipelines, said they were able to resume operations yesterday carrying diesel, heating oil, jet fuel and gasoline from the Gulf Coast at reduced rates.

Exxon Mobil said power was restored to its Baytown facility and that a start-up plan was being developed. Its Beaumont facility remained without power. Bill Day, a spokesman for Valero Energy, the nation's largest refiner, said it would take several days for power to be restored to its Houston, Texas City and Port Arthur refineries. Shell said last night that two of its refineries had not resumed operations while two others were operating on a limited basis.

Nonetheless, assessment crews found no significant structural damage to the Valero facilities. Exxon Mobil said damage appeared to be limited at its Baytown complex. Shell, too, had only moderate damage to some of its facilities, including its Pasadena terminal, which it reopened. Its Houston terminal, however, did sustain some damage and was being assessed further, the company said.

In other words, there is no major disaster at all for "oil facilities"! Yes, some offshore rigs may have been "destroyed", but all of the important facilities seem to be in decent shape.

In fact, Wall Street agrees with my assessment, with October wholesale gasoline futures down over 16 cents to $2.6034 per gallon. That will translate into a retail price of $3.20 to $3.25 a gallon, which would be 60 cents below the price of $3.842 reported by AAA today. A big part of that price gap is good old-fashioned price gauging, some actual short-term regional supply disruptions, and a good measure of outright uncertainty, but the overall tone of the Post article did little to enlighten consumers or businesses or policymakers.

And Wall Street has the price of October crude oil futures down $4.76 to $96.42 a barrel.

Neither the facts on the ground nor the view of the markets justify the very negative tone of the Post article.

My conclusion: It is an election year and The Post is improperly engaging in fearmongering to promote its own political interests.

The article is in fact filled with a lot of useful facts, but the overall tone and style of presentation is decidedly not enlightening to the casual reader or browser of headlines.

-- Jack Krupansky

Saturday, September 13, 2008

New York Times gets it right: the Republicans are "regularly stretching the truth"... as do ALL politicians

I will most likely vote for Barack Obama, but I am unable to "support" him due to the unacceptable behavior of his supporters and even his campaign itself. I do believe that Barack has a lot of good qualities and potential, so there is no good excuse for a campaign that should be focused on positives and potential to be so focused now on playing the helpless victim of Republican "lies and smears." Every half-truth uttered by the Republicans automatically gets labeled by the Obama camp as a "lie" and every criticism gets labeled as a "smear." However much the Republicans may be "distorting the truth", the Obama camp is distorting the truth about the truth in equal measure. Barack claims that he will fight lies with truth, but the Obama camp is really fighting half-truths with half-truths. I read through all of the "fact checks" and there are indeed many legitimate criticisms of Republican claims, but there is absolutely no justification for considering them en masse "naked lies" and "smears". The most common valid criticisms are that a lot of claims are incomplete and out of context. But that is not the same as a lie. An article in The New York Times by Michael Cooper and Jim Rutenberg entitled "McCain Barbs Stirring Outcry as Distortions" perfectly characterizes the nature of the Republican claims as "regularly stretching the truth." The Republicans are in fact generally quite careful to base their claims on some basis of fact, however small it might be. Barack is not correct when he suggests that the Republicans "just make stuff up." Yes, they do spin, stretch, mislead, and otherwise distort the truth, but almost always from some documented fact. But, guess what... the Democrats do the same thing!

The other statement by The Times that I found right on the mark was that "Disputed characterizations are not uncommon on the trail." That is what so much of the discussions are almost wholly about, each camp starting with some core truth and spinning it in its own favor. One side spins the core truth one direction and the other camp spins the core truth in the opposite direction. The distance between those two endpoints certainly seems great enough to constitute a "lie", but we should really be focused on the starting point in the middle.

In any case, it was good to see The Times 100% accurately label what the Republicans are actually doing. Now, I wish the Democrats would accept that and move on and finally try to convince the 50% of America that does not consider Barack to be "The One" why he really should be considered "the one" to become the next occupant of The Oval Office.

I do sincerely wish that Barack would start "fighting back" with "the truth", but let it be the truth about what Barack would do in office rather than engage in mud wrestling with his opponents.

Alas, the really ugly truth is that a lot of Democrats actually enjoy taking part in a good old-fashioned  mud-slinging campaign. A lot of them thrill to hard-core "red meat" one-liners at rallies, regardless of how distant from the truth they may be. The simple truth is that a lot of people would be horribly bored and inattentive if this were to shift to a purely positive campaign. Some people need a continuous diet of juicy "lies and smears" just to keep their hearts beating (and their wallets open and flowing into the campaign.)

-- Jack Krupansky

Tuesday, September 09, 2008

Barack's big lie

Now he's done it... Barack has gone and told his first big lie, and it is a whopper:

The American people aren't stupid.

Anybody with half a brain knows how false that statement is and how easy it is to prove it. Who elected George Bush to be president? And did it TWICE? And did it AFTER he invaded Iraq and the deal had already gone sour? And now polls tell us that roughly HALF "the American people" support McCain/Palin?

Who is Barack trying to fool? Does he really believe that his drones are that gullible? Scary thought: maybe he really does! Maybe he really is just another politician... even if he may be "smarter."

And, maybe here is the scariest possibility: He actually does believe that "The American people aren't stupid." Even if only half are "stupid", it is very dangerous for a politician to presume otherwise.

The rest of the context for that quote:

"A bunch of heat started generating because people were thinking, `Why are we building a bridge to nowhere?'" Obama said to laughter from a packed gymnasium of supporters in the Detroit suburb of Farmington Hills. Some booed at the mention of her name.

"So a deal was cut where Alaska still got the money. They just didn't build a bridge with it, and now she's out there acting like she was fighting this thing the whole time," he said, jabbing his fist in the air like a boxer. He released his own ad in response to the GOP spot that says McCain and Palin are "politicians lying about their records."

At an earlier stop Monday in Flint, Obama said of the bridge claim: "I mean, you can't just make stuff up. You can't just re-create yourself. You can't just reinvent yourself. The American people aren't stupid. What they are looking for is someone who has consistently been calling for change."

See: http://ap.google.com/article/ALeqM5g-UQSWkkXyD_Javq_3RKXGziFB4gD9338MH00

Barack says "you can't just make stuff up." What planet/country has he been living on/in??!! Politicians of every stripe "make stuff up" ALL the time.

Barack says "You can't just re-create yourself. You can't just reinvent yourself." Now he is challenging and mocking a key part of The American Dream! Besides, doesn't he believe in the Christian concept of redemption?

Earlier he said that words have to mean something. I agree that they should, but the reality in America is that meaning is malleable and in politics words mean whatever anybody wants them to mean. Barack may in fact have a vision for a better world, but he will have to do a better job convincing people that: a) it really will be a better world for ALL Americans (and not just left-wing Progressives), and b) that he really does know how to get there and have the skills to follow through. Right now, he is struggling to convince even Democratic supporters that he can take on Palin, and has yet to make a good case to the rest of America.

He is doing quite a poor job of responding to Palin and missing the boat when he should be focusing on leadership and vision rather than mere damage control. Let Biden and the PR staff "correct the record" and do any negative mud-slinging. What he is doing now is simply playing the victim. Maybe that is what the choir wants to hear about, but that is not election-winning leadership.

And where is Hillary... AWOL... she knows better than to say even one negative word about Palin. Hillary is smart enough to deeply comprehend that McCain is the target. They probably both sense that unless they maintain strict neutrality, any conflict between them will escalate rapidly to thermonuclear proportions and that neither of them would survive. Besides, they both understand the meaning of the term "baggage."

Maybe the real point is that Barack Obama is taking Sarah Palin personally, and that is a huge mistake. Palin got all of the attention because Barack was coasting on "style" and not providing the media with enough substance to overcome the media fascination with whichever style-setter happens to come along on any given day.

Barack's biggest problem may simply be that his only experience of great value is as an outsider and community organizer, and it is not at all clear that this is what most Americans are seeking the most. Ronald Reagan ("The Great Cimmunicator") at least had a clear message of two goals: cut taxes and spend more money on defense. Barack's message is that he will change the way Washington does business, which is all fine and dandy, but that doesn't tell most people what they will get out of the deal. The Progressives are excited because they believe that Barack will pursue the Progressive agenda, but where does that leave the rest of America?

So, the great question remains: Are most Americans stupid? Or is it simply that most Americans deeply disagree with the agenda of "the other side"? Are we in fact simply a "nation at war"... with itself?

-- Jack Krupansky