Tuesday, September 30, 2008

The Public Will Get It in Due Course

Time Machine: As Congress and the Bush administration regroups to package a bailout formula to rescue the financial markets, a trickle down malaise will suffocate the life blood of Joe Six Pack and his bosses. Credit. Consider the following analogy. While living in Oregon I experienced the second largest flooding in recorded history of the mighty Rogue River. The middle channel raged turbulently tossing logs like toothpicks and crushing anything that stood in its path. Liken that to the pressures now placed on the stressed out financial markets gasping for air. On higher ground as the river rose the water inched forward lapping menacingly yet tranquilly forging its onward path. Eventually the flood is a foot deep on high ground. First, the home's flooring is inundated with water and later cars are submerged. The destruction continues until the river crests. Liken that to the effect the market's collapse will make its way on Main Street. Most economists agree the credit crunch already crippling the large financial institutions will creep downstream. Credit will remain available for consumers who pay their bills on time but will find it more expensive and extensions less available. High risk consumers will be denied home, auto, school and other personal loans of which they have become enamored with the past 10 years of easy credit. Small and mid-sized businesses will suffer from the credit crunch, especially those who borrow money to meet payroll in order to maintain adequate cash flow. Layoffs could occur, increasing unemployment prospects. Some companies such as McDonald's franchises in the South already have been unable to borrow on credit to stock inventory. Businesses which borrow for the holiday season could be forced to retrench. Up to now, the public suffering from the market crises are those whose home values have decreased as much as 25% in the past two years and investors holding retirement accounts which dropped by a third in the past two weeks.

Gutless Politicians: The 228-208 House vote rejecting the bailout was absent of profiles in courage. Two-thirds of the Democratic caucuses voted in favor and one-third of the Republican conference voted for it. Only five voted aye against their district's constituency's wishes vehemently against the bailout plan. In all other cases, the House members in tight Congressional races in November voted against it. Instead, they looked at the polls: 73% saying the government is on the wrong track, 65% disapproved of Bush's performance, 73% of the job Congress is doing, while 19% have a "lot of confidence" in the government, 11% in corporate America and 10% in the financial industry. The vote reflects a lack of leadership not only of Bush and Republican leaders but also the presidential candidates Barack Obama and John McCain. Obama, who favors the bailout plan as a necessary evil, has remained on the sidelines. McCain tried to muscle bipartisan support but failed. Democrats are not blameless at the top. House Speaker Nancy Pelosi blabbed partisanship in a speech to House members prior to Monday's vote. Bad timing and dumb strategy. Congress is all politics and the blame game after the House vote was pedantic. Republicans demonstrated a startling lack of leadership. Enough Democrats refused to carry Bush's water bucket. Joe Six Pack will suffer the consequences as the financial meltdown festers. Crafting a new bailout plan will be tricky and, worse, time consuming. Almost as bad as doing nothing, the Democrats have enough votes to carry the bailout on their own terms by overloading too many goodies into the system which could comeback and bite them on the butt.

Monday, September 29, 2008

Public Doesn't Get It

Failure To Communicate: Reading email responses of Americans opposed and fearful of the government's $700 billion bailout plan for the financial markets indicates they don't understand that the alternative of doing nothing is guaranteed calamity. All they understand is the government making them liable to save the ones who created the mess. "I had to pull my 401(k) to make ends meet," said a "pissed off" New Mexico woman who was among 2,000 who responded to an NBC survey. "Because of greed and corruption it has come to this," said a woman, 70, who said she has to continue working to survive. Many questioned whether the bailout plan would help the middle class. Pardon the pun, but Joe Six Pack is forced to cram for a crash course in capitalism. The dynamics of our financial markets are so complex even Nobel Laureate economists are hard pressed to explain them. And that is part of the problem. Treasury Secretary Henry Paulson is a superb negotiator as he has proven in the bailout deliberations with Congress but he has failed to articulate his case to the American public. It has been a flaw in the Bush administration since taking office in 2001. This failure to articulate fed into a credibility gap where little the administration says is believable in the public mindset. You can't blame the public's skepticism in this case. Unfortunately, there's too much evidence that drastic measures must be taken to avoid a worldwide depression. The Paulson plan, now a bill being debated in Congress, is a gamble to restore confidence in the market system and allow resumption of credit for individuals and businesses. Either that or deja vu of the late 1920s.
Lighting the Christmas Tree: The bailout bill has so many protections for taxpayers and oversight conditions on Treasury and the failed bank and money market institutions that one wonders if they don't trip over each other and impede the Treasury from carrying out out its mission. Caps and penalties were placed on executive golden parachutes for those companies participating in the federal bailout. But the plans to help homeowners struggling to make mortgage payments is incredibly iffy. The government will buy only the worst mortgage assets, leaving more valued ones in the pool for banks to worry about. Previous legislation and the White House's Hope Now Alliance aimed towards lenders voluntarily readjusting mortgages to lower rates has failed while mortgage foreclosures increased to 9%. Treasury officials hope they can leverage the recalcitrant lenders into submission. Good luck.
My Take: Approve the bailout plan and keep your fingers crossed. We live in a credit/debit card society. One wonders after the dust settles if it will become more cash and carry. Main Street must remain patient. This is no overnight fix.

Tale of Two Halves: My Chargers are giving me ulcers. Spotting the Oakland Raiders 15 points in the first half, San Diego rallied slowly in the third quarter and scored 25 in the fourth to win going away 28-18. With the season at the quarter pole their record at 2-2 remains both telling and teasing. Telling because they remain inconsistent performing on all cylinders for an entire game. Teasing because each game shows positive adjustments of just how much they can achieve with all that talent and depth chart. It's tough to swallow Buffalo and Tennessee remain undefeated in the American Conference.

Saturday, September 27, 2008

And The Debate Winner Is ...

Point Counterpoint: Presidential debates are viewed in the eye of the beholder and Friday night's first face-to-face scrimmage between Barack Obama and John McCain was just that. Neither won or lost among those both candidates were addressing: The Undecided. The debate's tone was mostly cordial. There were no major gaffes or defining moments. McCain emerged as the cagey bantam rooster scarred but unscathed from years in the political ring. Obama was the young upstart confidently flapping his political feathers. Both candidates were too crafty to be pinned down on whether they supported bailout plans to rescue the financial markets now being negotiated in Congress. Nor would they commit to cutting pet domestic programs they have promoted during this campaign marathon. McCain said he would consider a spending freeze on all programs except national security and entitlements. Obama said he may have to reconsider priorities of his targeted projects. McCain repeatedly described his opponent as naive and inexperienced. Obama argued McCain was an extension of failed domestic and foreign policies he consistently supported the last eight years of the Bush administration. When the debate shifted to its main theme of foreign policy, McCain came out swinging. He was right supporting the surge in Iraq. Obama said he was wrong supporting the Iraq invasion. McCain said political success in Iraq will stabilize relations in the Middle East. Obama said the real fight against terrorism is in Afghanistan and its Pakistan borders. Six times during the debate McCain referred to Obama as too inexperienced to become commander-in-chief. "He just doesn't understand," McCain said four times. On foreign policy questions, Obama said "I agree with John" three times and then added his own nuances. Neither candidate addressed the cost of the two wars in terms of how the next president would pay for it because of the economic strain at home. China now owns $519 billion in U.S. Treasury notes, about 20% of the $2.67 trillion owned by foreign investors.
Post Debate: The three cable networks treated the debate as sportscasters and commentators critiquing the Super Bowl. It was shameful how Fox ballyhooed McCain's performance and MSNBC drooled over Obama's presidential bearing on the commander-in-chief perception. It was left to CNN to provide some clinical insight. During the debate, the bottom of the CNN telecast showed red, blue and green lines how Republicans, Democrats and independents were reacting to the debaters. After the debate, CNN produced a series of polls taken throughout the country. In general, the polls showed Obama even with McCain on foreign policy and dramatically ahead on domestic issues. One poll of 30 undecided voters had six saying they were now committed. The consensus: the debate moved few voters and the race remains as tight as ever although acknowledging events of the past week have given Obama a temporary slight advantage. Here's my take: Obama said nothing that would dissuade me his ability to become a strong, vibrant commander-in-chief; as a Democrat who voted for Obama in the California primary, I subscribe to his basic approach addressing domestic issues. What concerns me is his lack of specifics how to pay for them. I oppose his windfall tax proposal on Big Oil and do not believe more than marginal tax increases would help the economy at this time of economic turmoil. I also oppose Obama's suggestion of taking borrowed money now financing the Iraq and Afghanistan wars and spending it on rebuilding the nation's infrastructure. There must be cuts and savings elsewhere that Obama has yet to convince anyone they are forthcoming.
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Friday, September 26, 2008

A House Divided

Ideological Impasse: Conservative House Republicans are imposing their ideological dogmas to kill the government's plan to rescue the financial markets. With the blessing of Republican Minority Leader John Boehner, House conservatives are proposing an alternative plan in which private investors would receive tax cuts while paying the Treasury to insure loans to purchase the toxic mortgages that have caused the credit freeze. Democrats earlier had won concessions from Treasury Secretary Henry Paulson for more oversight, taxpayer protection, help to homeowners from mortgage foreclosure, capping executive bailout golden parachutes and phasing in of $700 billion to purchase the securities considered worthless by banks. Both plans would sell the mortgages when the housing market stabilized with the hope they could turn profits for the holders whether private or government held. Both plans are designed to thaw the credit freeze and encourage banks to resume lending to businesses and consumers who are the linchpins of growing the economy. There is no guarantee either plan would work although both sides agree fast action is required. At the heart of the House Republican conservatives' approach is a disdain for government essentially nationalizing segments of the financial markets and spreading socialistic policies similar to what France undertook in the 1970s. Their fortitude is backed by a growing Main Street backlash to the Paulson Plan by irate taxpayers.
Political Spin: Republican presidential candidate John McCain suspended his campaign and returned to Washington Thursday with aspirations to broker a deal providing his leadership and country-first ideals. Why it took him six days in a week in which he contradicted himself daily is open to conjecture. Once he entered the stage, Republican leadership gave him a cool reception and the Democrats tried to render him irrelevant. Democratic chief financial negotiators Rep. Barney Frank and Sen. Chris Dodd along with Republican Sen. Bob Bennett announced a tentative agreement with Paulson and Fed Chairman Ben Bernanke. McCain's presence provided cover for the rebelling House conservatives although he sidestepped endorsing either plan publicly. Suddenly, it was clear the Paulson compromise would not pass a House vote and the Republicans would kill their own party administration's rescue efforts. Politically, McCain locked himself in a box. He could oppose his president and support the conservative base of his party or he could approve the Paulson compromise with his own adjustments and face the wrath of his hard core constituency. No deal becomes McCain's executioner. So could a deal in which he was on the losing side. Even if he succeeds in brokering a deal, the outcome unravelling in the markets would not be clear until well after the Nov. 4 election. McCain's POW wounds might prevent him from raising his arms high enough to comb his hair, but he certainly is facile enough to throw the mother of all hail Marys.

Go Beavs: I sat there not believing what I was seeing. Oregon State was systematically demolishing No. 1 ranked USC with a 5-foot-9 freshman running back who darted, squirmed and wiggled his way through the best defense in college football. Jacquizz Rodgers accomplished in one night what David did to the Philistines by slaying Goliath. I commented previously that the only team to beat USC this season was themselves. True enough, penalties, a key fumble turnover and two interceptions contributed to the Trojans loss. But that in no way shortchanges the Beavers for controlling both sides of the line of scrimmage, outplaying and outcoaching the vaunted USC team with the best, deepest and most athletic talent in the NCAA. Rodgers in 26 carries ran for 168 yards and two touchdowns. Hindsight is 20-20 but this upset was always a possibility. Call it a resurrection of ghosts past. In 1967, Oregon State defeated an O.J. Simpson national championship team 3-0 in the Corvallis mud. Two years ago the Beavers knocked off USC at home depriving the Trojans a chance to play in the BCS championship game. In Oregon, fans cling to these rare instances of stardom for national championships in football are beyond reality even they acknowledge. I know. I lived in Oregon for 12 years and suffered the ups and downs of Beaver fortunes as well as their arch rival down state Oregon Ducks. Meanwhile, even if USC runs the table against Pac10 opponents the remainder of the season, their prospects of playing in the BCS finals are slim to none. The top 10 ranked teams are dominated by schools in the toughest of all conferences, the South East Conference and the Midwest's Big 12.
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Wednesday, September 24, 2008

Congress Twiddles While Wall Street Burns

Paulson's Panic: It is unfair but true Treasury Secretary Henry Paulson panicked when he realized the global economy was tanking as a result of the U.S. financial mortgage market bubble burst. His panacea is to use the full faith and credit of the U.S. government to buy the toxic bundled securities in an effort to unlock the credit freeze encouraging banks to lend to corporations and consumers so normal business can resume. The concept is the federal government coming to the rescue like the cavalry does in Western movies. The motive is to instill confidence in our financial systems and confidence at this stage of the crises is an essential psychological player in our complex economic system. Paulson's problem is a roll of the dice with no assurances his plan will work. Through no fault of his own, Paulson represents an administration which lacks credibility that began in 2002 when it told us we faced nuclear attack if we didn't invade Iraq pre-emptively. Despite misgivings, Paulson does have support in Congress to act immediately. It's a drill of working out the kinks in a bipartisan game of one-upmanship in efforts to get it done fast but right. Billionaire investor Warren Buffet added credence to Paulson's plan Wednesday by announcing he would spend $5 billion to purchase preferred stock from Goldman Sachs. For the government and private investors such as himself to do nothing, Buffet said the nation would suffer an economic disaster of "Pearl Harbor consequences."

Cautious Consequences: Newsweek's Robert J. Samuelson points out banks and hedge funds are de-leveraging to sell securities to gain better cash advantage, a symptom of a financial crises. But the heavy selling reduces prices. Lower prices deplete capital and production which in turn prompts more selling and heightens fear. At best, the Paulson plan may stall this spiral by unloading their least attractive securities. But it wouldn't automatically stimulate new lending, revitalize "securitization" or prevent more de-leveraging. The rescue is being constructed so quickly it may include flawed provisions only the passage of time will tell. If Congress continues to dawdle, Paulson's panic would be realized.

Health Coverage Boondoggle: Here's another personal example why health costs escalate unabated. Three years ago my pulmonary doctor authorized Medicare and Medi-Cal to purchase a CPAP, a breathing devise designed for patients suffering from sleep apnea. Coram, the Rancho Bernado, Calif., provider was responsible, helpful and efficient replacing and improving parts attached to the breathing machine. Several months ago the company was acquired by a large provider of pulmonary devises and its equipment distribution service turned over to one of its subsidiaries. In the meantime, I switched coverage to the HMO Health Net as the primary payer. Dialing the new guys on the block, I was told in no uncertain terms the only way I could receive the requested part was to have my primary physician fax them 1) the exact product description, 2) a copy of the original sleep apnea diagnosis, 3) the doctor's reason for the need for the part, 4) pre-authorization from Health Net and 5) the primary care physician's personal updated clinical evaluation of my condition. Fact is, my doctor has none of those records other than my word I use a CPAP. It occurred under my previous health coverage in San Diego before I moved to Temecula. I asked the new provider if I could pay cash for the part. Absolutely not. I needed doctor's approval. This irreplaceable part so crucial and protected by the new provider is none other than a simple air filter, a small swatch of clothe. The provider charges the insurance carrier $15 for a package of two. Having no part of this nonsense, I called my pharmacy and told him my story. He checked his order catalogue, found the filter and sent it to me shipping free. The retail cost: $4.95. There is no doubt the bureaucracy of the health providers contributes to price escalation of the system. In this case triples the retail cost. Multiply that example by the millions of similar cases. It adds up in a hurry.
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Tuesday, September 23, 2008

Bitterness on Main Street

Blank Check: Under the $700 billion bailout plan to save the financial markets and unfreeze credit strangulation, the Bush Administration is granting monarchical powers to one man. Treasury Secretary Henry Paulson in consultation with Fed Chairman Ben Bernanke will decide which companies bad debts will be bought and which not. They both testified Tuesday before a Senate banking committee and demanded Congressional approval by the end of the week. Enactment would restore confidence in a broken system caused by lax regulation and manipulative and corrupt accounting practices. At the moment, that's more important than the cloudy, broad details the administration so far has set forth. Bernanke said failure to act would lead to a recession and plunge more homeowners into foreclosures and unemployment. The plan is drawing bipartisan criticism. Democrats want greater regulatory reform, help to homeowners before they default on mortgage repayment and limits on executive buyout compensation. Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, said he opposed federal bailouts of corporations and individuals and there were no credible assurances the Paulson plan would work and end up costing taxpayers trillions of dollars. "Just because God created the world in seven days doesn't mean we have to pass this bill in seven days," said Rep. Joe Barton, R-Texas. Paulson has argued the plan be accepted now and tinker with its mechanics later.

Campaign Crossroads: Both Obama and McCain have pledged to support the bailout plan and offered their own proposals. Obama said restructuring how the government awards contracts could save $40 billion. McCain proposes a blue-ribbon oversight panel to monitor the Treasury Secretary's carte blanche decisions. Fact is, both presidential candidates are on the outside looking in with the winner of the election inheriting the fiscal mess that will alter their domestic spending agendas advocated on the campaign trails. The mood on Main Street is angry and righteous. The cost of the bailout in its current stage is about $2,500 per taxpayer. They have no say in the process other than taking out their vengeance on all the candidates on the Nov. 4 election ballot.

A Win Is a Win: After two opening season losses, my Chargers manhandled the New York Jets on Monday Night Football to bring their record to 1-2. Of course, the East Coast media focused the pre-game hype on future Hall of Famer Brett Favre still constrained learning his new team's offense. The game reminded them that the San Diego quarterback is a fast rising star in his own right quickly ascending to among the league's elite. Philip Rivers dominated the offense despite malingering toe injuries to two teammate stars in running back LaDamian Tomlinson and tight end Antonio Gates. The defense was more successful and aggressive than the first two games but still allows too many yards and points. In this game, the Charger special teams, usually stingy, was Swiss cheese. It's a long season with 13 games remaining and with all that talent and depth they still should make the playoffs. It's a weird year in that Buffalo, Denver, Baltimore and Tennessee remain undefeated in the American Conference while previous contenders Indianapolis and New England are crippled with injuries.

Sunday, September 21, 2008

Obama vs. White Backlash

Racial Prejudice: The most sophisticated political poll on racial bias indicates Barack Obama could lose the presidency if the race is close because of negative images whites harbor against blacks. The AP/Yahoo poll conducted by Stanford University researchers found one third of white Democrats considered blacks lazy, violent or irresponsible. Ever since Obama won the Iowa caucuses, political observers speculated how deep-rooted white prejudice would effect his chances of winning the Democratic nomination and bid for President of the United States. Now they have empirical data to weigh. The study showed 40% of all white voters expressed some negativity towards blacks although Obama transcends some of that on his own merits. The third of white Democrats and all independents who expressed even modest negativity are the key to winning the election, the researchers determined. The poll attempted to determine why Obama has failed to enjoy a wider lead against his challenger John McCain at a time the Republicans and the Bush administration ratings are in disapproval. Seven in 10 Democrats say they support Obama while 85% Republicans favor McCain.

Survey Methodology: Previous studies on polling were flawed because respondents were reluctant to express their opinions over the telephone to strangers. The Stanford researchers initiated telephone contacts with voters and compiled a representative sample of 2,500 who agreed to participate in the survey by email on the premise their responses by computer were less invasive. The survey provided pictures of blacks and offered a series of negative and positive adjectives to describe their feelings. Among the findings: 20% of all white voters described blacks as "violent," 22% "boastful," 29% "complaining," 13% "lazy" and 11% "irresponsible." On the flip side, 45% of the respondents expressing positive sentiments towards blacks said the candidate's skin color made no difference to them. The data indicates Obama would have a 6% higher polling favor over McCain if racial prejudices were removed from the equation. Racial implications not withstanding, a third of the Democrats said they were unlikely to vote for Obama because of his lack of experience and doubts he can change the way politics are done in Washington. Of those Democrats who harbored even mild negatives towards blacks, 58% said they still would vote for Obama. The vast majority of Republicans said they would never vote for any Democrat.

Real Politics: So, there you have it. We now have a pretty good sampling how the race factor plays in this unprecedented election. It tells us Obama enters the election with a 6% handicap. But there are a full plate of goodies running in his favor to overcome that deficit. He enjoys a nearly 90% approval of blacks and voters under 30. Democrats hold a 3-2 margin over Republicans in party registration. The sick economy usually favors the party out of power. The list goes on and on. But this thought festers: Will the redneck vote prevail? For America's well being, let's hope not.

Friday, September 19, 2008

Greengate in the Golden State

A Bridge Too Far: California always is on the cutting edge of new innovations and sometimes the country's other states follow in lockstep. Proposition 13 in the 1970s brought skyrocketing property taxes under moderate control and other states followed. Several years ago state voters passed a revenue measure funding stem cell research for diabetes, cancer and other cures. California is among the leaders in attacking air pollution in the uphill battle for cleaner air. Now, state government and environmental groups are addressing the energy problem and searching for alternative fuels to power the economy. Two such approaches are on the Nov. 4 election ballot for state voter consideration. They sound terrific but a careful review of their details unveils a devil in the works.

Proposition 10: This is oilman T. Boone Pickens baby to convert gasoline driven vehicles to compressed natural gas filled at service stations he owns throughout the U.S. and Canada. His company has shelled out $3.2 million to promote the proposition which calls for passage of a $5 billion bond to implement the plan and incentive rebates to buy and convert vehicles to alternative fuels. The breakdown: $210 million for demonstration tests, $1.5 billion in research and development, $250 million for renewable energy regeneration and $2.875 billion for rebates. The rebates go to hybrids such as the Toyota Prius in the amount of $2,000 for the first 55,000 purchases. But, $10,000 would be offered for new purchases of vehicles powered by natural gas, electricity or hydrogen of which the latter two are for now non-existent. It gets worse. Rebates of $50,000 would be offered by taxpayers for purchases of new trucks meeting the "clean air" rules. The problem is the proposition fails to account for the likely prospects new truck buyers travel to another state, sell and collect the rebate as pure 100% profit. Finally, when these vehicles hit the scrap heap in 20 years, state taxpayers will still be paying off the bonds.

Proposition 7: This proposition is so bad even most of the major environmental groups oppose it. Among its biggest complaint is the standards it sets down cannot be overturned except by a two-thirds vote of the Legislature or a special ballot initiative by voters. If something unforeseen occurs, fixing the problem would be politically difficult. The measure mandates 20% power from renewable energy sources by 2010, 40% by 2020 and 50% by 2025. The state already requires that from investor-owned utilities such as Southern California Edison but not municipalities such as the Los Angeles Department of Water and Power. Furthermore, small businesses selling excess solar generation less than 30 megawatts to utilities would most likely lose their rebates and be forced to close shop. The larger producers' sales would be sold to consumers at a guaranteed mark up of 10%. Control of the renewable energy transmission lines would be shifted from the Public Utilities Commission to the California Energy Commission without stripping the PUC from its current authority. Now, there's a litigator's dream come true as the turf war in the courts could last for years.

An admission: Granted the above prospective of Propositions 7 and 10 accentuated the negatives. The framers have honorable intentions. Perhaps they propose a path to lessen man's effect on global warming. Any step is a giant step towards that goal. At least Californians are trying to do their part. These two propositions stripped down to the basics are fraught with devilish details too overwhelming to cast their feet in stone.

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Wednesday, September 17, 2008

Where 'Art Thou, Mr. President?

'Fess Up: President George Bush must go on primetime television and use the bully pulpit to inject confidence in the American psyche that the financial skies are not falling and together we can ride out this brutal, painfull tsunami. He should tell the truth and mince no words that his administration shares blame for the mess we find ourselves in. And, he should spell out exactly how to first weather and then make the proper adjustments in the future. After all, the American consumer is as much at fault as the predatory lenders. Consumer confidence is the subtle psychological key needed to forge ahead and avoid total disaster which already has destroyed third world economies. Bush is not an inspirational orator unlike his presidential hero Teddy Roosevelt. But, a speech can be crafted that goes beyond the bromide he offered immediately after the Sept. 11, 2001, terrroist attacks. "Go shopping," won't cut it this time. He must call on Americans to sacrifice, not that most victims of the affected financial sectors aren't doing that already. But, sacrifice by changing the culture of borrowing and spending to within their means and the habit of treating their homes as ATM machines. For a Harvard Business graduate, Bush appears flummoxed by the crises and has shirked the leadership role and the heavy lifting to Treasury Secretary Henry Paulson. We've seen lame duck presidents in the past but Bush is taking it to nose-bleeding heights. Much of the crises is of Bush's and the Republican Party's own making with help from key Democrat banking committee chairmen Rep. Barney Frank and Sen. Chris Dodd (for their paternal protection of Fannie Mae and Freddy Mac). Bush's appointments on financial regulatory agencies were blinded by the idealogy of de-regulation and failed to peform their jobs protecting investors and consumers. If their subordinants raised red flags, the top brass wasn't listening and greed in the corporate world flourished. Meanwhile, Bush spent two minutes in the Rose Garden Thursday reading a statement that the markets are adjusting to "extradordinary measures" the government has taken to stabilize the economy. The infusion of federal funds to bailout the private sector -- a departure from past Bush policies -- is a step to keep taxpayers from facing the potential of even worse problems, White House aides said.

Fundamentally Strong: Bush and John McCain have taken heat from the media and Democrats on pronouncements the economy is "fundamentally sound." In some sectors, there's evidence to support such assertions -- but McCain's fallback reasons placed on the productivity and ingenuity of the American worker is not one of them. After turning negative in the last quarter of 2007 and growing at an anemic 0.9% in the first quarter of 2008, the nation's gross domestic product helped by $165 billion of more borrowed money in government stimulus checks grew 3.3% in the 2008 second quarter. The weak dollar helped U.S. exports while high prices have benefitted food and other commodities, agriculture, energy and mining industries. Even these sectors will suffer "if all this should lead to a tightening of credit, which it very well might," said Hank Cox, spokesman for the National Association of Manufacturers. Back to McCain. If he has such a high regard for the U.S. labor market, why does he support policies that oppose labor unions, oppose equal pay for women and cut net income by $2,000 over the past eight years while rewarding corporations to relocate their workforce to foreign countries?

Bad News Bears: The U.S. economic pratfall has sent world markets into a tailspin. Russia closed its market to avoid panic. The Federal Reserve negotiated as much as $180 billion cash relief from central banks in Europe, Canada and Asia. The move , called swap lines or reciprocal currency arrangements, is designed to encourage tight-fisted banks to spread billions of dollars globally in exchange for foreign currencies. "It seems as though banks are hoarding cash, no matter what rate they could be lending it at," said David Rosenberg, North American economist at Merrill Lynch. The U.S. stock market in the past four days has lost nearly $700 billion in investments -- at least on paper. The nation's five major investment banks -- Bear Stearns, Merrill Lynch and Lehman Brothers -- collapsed or acquired cheaply by other banks. The other two -- Goldman Sachs Group Inc. and Morgan Stanley -- are under seige. While investors demanded to buy super-safe Treasury, yield on the 3-month notes sunk below zero after commission for the first time since 1940. The $85 billion bail out of insurance giant AIG means taxpayers are the majority shareowners, a first in U.S. history. Construction of new homes and apartments fell 6.2% in August, the biggest one-year drop in 17 years. Jobless application claims rose 5,000 to 445,000 last month. Economists consider claims exceeding 400,000 a sign of a struggling economy. Unemployment is 6.1% and rising. The total taxpayer obligation now sits at $100 billion for the banking system bailout, $115 billion more to rescue Bear Stearns and AIG and growing. This is the greatest destruction of financial wealth ever witnessed and measured in trillions of dollars. It stretches to corporate wealth, oil wealth, real estate wealth, bank wealth, private-equity wealth, hedge fund wealth, pension wealth. Stephen Pearlstein, an economist writing an op-ed article for the Washington Post, called it a painful reminder of the trappings of new global infrastructure. "...Finance is still a confidence game -- and once the confidence goes, there's no telling ..." when the crash will end, Pearlstein wrote.

Sobering Thoughts: While there is little doubt the subprime mortgage scandal sending the housing market into freefall chaos triggered the crises, foreign creditors for the past decade were only too happy to provide U.S. households, corporations and governments all the cheap money they wanted. Once the house of cards -- Ponzi scheme in the case of subprime lenders --fell they retrenched and told us to begin living within our means. What they saw, and our regulators didn't, was the price of residential and commercial real estate, corporate takeover targets and the stock of technology companies rose and kept on rising until the markets turned into classic bubbles. While this was going on, many industries expanded to accommodate the demand only to find themselves caught in the net. "What should have happpened at that point," writes Pearlstein, "was that interest rates on those loans should have increased, demand for that kind of borrowing should have decreased, the price of real estate and corporate stocks should have leveled off, takeover activity should have slowed and companies should have cut back on expansion." Instead, Wall Street banks that originally made these loans before selling them off in pieces decided to keep the good times rolling and lucrative underwriting fees pouring in. According to Pearlstein, some used their Triple A credit ratings to borrow more money and keep the loans on their own balance sheets as "structured investment" vehicles in order to hide new liabilities to investors and regulators. Others returned to the foreignors and offered to insure those now-unwanted takeover loans and asset-backed securities against credit losses -- a new kind of derivative contract known as a credit-default swap. As a result, the unsuspecting foreign creditors were burned as was their creators who made the mistake of doubling down on their credit risk at the very moment they should have been cutting back, Pearlstein said.

Two Choices: Since Treasury can borrow from foreign banks and investors at incredibly attractive rates, perhaps the U.S. government can keep the economy and financial system afloat
as long as regulatory and oversight provisions are enforced. One strategy offered by the Democrats is creating a new agency that would use money borrowed by Treasury to recapitalize troubled financial institutions by buying their unwanted loans and securities at discounted prices. This was a successful practice during the Great Depression and the savings and loan crises of the 1980s. "The only other choice is for Americans to finally put their spending in line with their incomes and their need for long-term savings," Pearlstein concludes.

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Bad Marks for Obama Health Plan Rx

Sweeping Changes: The Obama health care plan would extend insurance coverage to individuals and businesses while increasing federal government regulations of the industry. It would create a National Health Plan and a play-or-pay financing choice for employers. The model is based on assumptions for short-term savings but questionable long-term fiscal sustainability, according to a panel of experts writing for the Health Affairs Journal. The plan expands eligibility coverage of Medicaid and mandatory coverage for children but fails to address the economic incentives that drive health care spending now estimated at $12 billion. The National Health Plan would be available through the Health Insurance Exchange to anyone who does not have medical insurance. It must accept all comers despite preconditions and provide subsidies for those who cannot afford the premiums. Obama has described coverage "like the plan available to Congress." The most popular Federal Employees Health Benefits program includes a $600 annual deductible, $15 copayments for doctor visits and a monthly premium of $1,028 with the government contributing $713. Lower paid employees such as postal carriers pay less up front costs but receive fewer benefits. The Obama plan would extend the pool of the federal employees to the nation's uninsured with greater subsidies, a concept, the experts say, tantamount to a fiscal death march.
Play or Pay: Employers offering group insurance to workers have the option of joining the National Health Plan program that includes subsidies for high-risk catastrophic coverage. Or, they can opt out and pay an additional 4% payroll tax for its employees. Premiums employees pay would continue to be tax exempt under the Obama plan. "Even though employers would welcome the subsidy," the report says, "the insurance does not reduce health care use or cost. Instead, the policy just shifts some of the cost to the federal budget and could even increase health care spending." Small businesses would be exempt from the play-or-pay plan.
Not Universal Coverage: Health coverage for children paid by their parents is the only mandated coverage in the Obama Plan. Obama campaign consultants say the average family would save up to $2,500 a year as a result but increase the federal taxpayer burden an additional $50 to $65 billion annually. Savings resulting from full enactment of the Obama Plan include malpractice tort reform, greater use of information technology, improved disease and preventive medicine management and better payment methods. Critics contend there is little proof that implementing the policies would yield net reductions in health spending.
A Second Opinion: Henry Aaron, chief health advisor for the Brookings Institute, warns the Obama Plan could jeopardize the role employers now play in providing group coverage. He fears too many will drop current plans, especially those with low income employees and older, higher risk staffs. He said it is impossible to forecast who wins and who loses from health reorganization reforms. One thing is certain, he concludes: The Obama Plan would create a mammoth redistribution of wealth among providers that would entail political decisions Congress heretofore has failed to challenge. He questions whether a Democratic Congress with an Obama presidency would feature health care reform because of financial demands on the economy and wars in Iraq and Afghanistan. Polls show voters rate health care fourth on their priority lists.

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Tuesday, September 16, 2008

McCain's Plans Defy Record

Double Team: The John McCain camp is bucking traditional strategy of splitting the president and vice president into separate appearances on the campaign trail with the premise it reaches more voters. Instead, McCain and vice presidential candidate Sarah Palin will appear together in most of the remaining stops through the Nov. 4 election. The reason is simple. Palin has star power and her mere presense more than doubles attendance at McCain voter rallies. This deference to the No. 2 person on the ticket is a brilliant strategy as long as Palin's star shines. The polls aready prove that. Since she was tapped out of the unknown, McCain has charged ahead in key battleground states and narrowed the national Electoral College race making the race a toss-up less than two months before election day.

Not So Fast My Friends: The Alaskan governor remains an unproven commodity not much unlike Barack Obama's meteroic rise after winning the Iowa caucuses. Yet, it disguises McCain's policies on two critical issues -- how to address the subprime mortgage collapse and how to repair our health care system. Both issues are today's news. The Wall Street collapse of Lehman Brothers, Merrill Lynch and AIG is well known. A report released today by a group of university health experts deserves more attention than it probably will receive. More on that later. McCain's comment that the economy is fundamentally sound is questionable even for the most optimistic. He advocates tighter government oversight of Wall Street broker and investment houses to fix the problem. Yet, in his 26 years in Congress, he has staunchly supported deregulation. McCain is an advocate of allowing market conditions to freely work out its excesses. Is this empty political campaign promises or has he altered a fundamental, ideological approach to the market place? His record shows not.

Lost Coverage?: The McCain health plan would dismantle employer-based coverage for as many as 20 million families. according to the Health Affairs journal website posted Tuesday. The McCain plan would tax as income benefits employers provide in family health insurance coverage. McCain would offset the increases with credits of $2,500 for single persons and $5,000 for families. The net effect is twofold the report says. It woulld cost families more for health insurance by either seeking comparable insurance in the non-group market or for younger employees dropping coverage all together. With healthy young employees abandoning the group coverage -- perhaps 20 million -- the cost to employers for older and health riskier employees would increase to a point forcing them to abandon the coverage. The report also debunks McCain's plan to strip state health insurance regulations and allow consumers to seek coverage from out-of-state companies. This would prevent states from imposing preventive medicine requirements for patients unless covered by the out-of-state carriers. It also would exempt states from examining the financial resources and medical coverage practices of the outside carriers. We hope Health Affairs digs into Obama's healthcare proposals and report on that in the near future.

Monday, September 15, 2008

Divergent Paths

Sour Grapes: My two favorite football teams played this weekend. The San Diego Chargers lost their second straight thriller, thanks to a referee's errant call. The USC Trojans crushed Ohio State 35-3. Both are favorites to play for all the marbles after the regular season. USC is on tract. It has the easiest remaining schedule among all the ranked teams since it is becoming crystal clear 2008 is a down year in the Pac10. The only team capable of beating this talented, skilled, athletic group of Trojans is USC beating themselves. UCLA? BYU embarrassed them 59-0. Only a healthy Oregon and resurgent Arizona State has a longshot at beating USC. Meanwhile, Missouri may have national title aspirations. So do LSU and Florida. It's too early to tell. Meanwhile, the Chargers need to find a way to stop the run and pass consistently for an entire game. The loss of All-Pro linebacker Shawn Merriman is hurting the pass rush more than expected. Normally, a losing team can blame only themselves but Sunday's one-point loss in Denver wasn't the case. In the first quarter, a Chargers pass completion was ruled a fumble because the stadium's instant replay monitors failed. Yet, television viewers were entitled to see it as a non-fumble. Denver converted the turnover into a touchdown. Late in the game, Broncos quarterback Jay Cutler fumbled before throwing a pass. Referee Ed Hockuli prematurely blew the whistle, erroneously believing it was an incomplete pass. He admited his mistake. Instead of the Chargers regaining possession and killing the clock to win the game, the rule that the whistle blew the play dead prevailed. Denver then scored a touchdown and two-point conversion for the victory. Unlike the colleges, an NFL team still can reach the playoffs and Super Bowl with multiple losses. The Chargers route becomes tougher with a 0-2 start. The NFL is always tweaking the rules in an effort to improve the game. But, there is nothing to be done to prevent a ref from blowing rather than swallowing his whistle. There is a way to make the replay system work. Just look at the national TV replay monitors and bypass the internal stadium feeds when they fail.

A Ponzi Scam by No Other Name

Wall Street: Global stock market sectors dropped dramatically Monday as giants Lehman Brothers filed bankruptcy, Merrill Lynch taken over by Bank of America and American International Group (AIG) restructured. It is the latest of shockwaves in the 14-month-old credit crises caused by subprime mortgage debt. It could get worse if stop-gap measures such as a global consortium providing $70 billion to troubled banks fails. The U.S. Treasury has drawn a line in the sand stipulating no more massive bailouts despite taking that road to salvage Bear Stearns, Freddy Mac and Fannie Mae. Bear Stearns, it turns out, was a test case. It failed to stop the erosion. Taxpayers will foot the bill to keep the twin Macs afloat. There have been 11 major bank failures in recent months. The question arises: Will the federal guarantee of private investors deposits up to $100,000 break the FDIC reserves? It is terrifying to realize the bulk of Treasury Notes are held by China and other Asian banking behemoths. What prevents them from calling them in? Common sense, one would hope. Common sense is not the operative password how the U.S. private banks and mortgage houses got themselves in this mess. It was a failure of up-to-date regulatory enforcement, greed and establishment of a Ponzi scheme run amok. Investors, including prime shareholders, placed blind faith in the money managers who engineered this colossal scam. They took the risk. They enjoyed the fruits. Now they must eat their losses. Naturally, the financial collapse has filtered into the presidential campaigns. Republican John McCain promises reform of the ineffective patchwork quilt of regulatory agencies governing commerce. Democrat Barack Obama blames the failure on the Bush administration. Obama should knock off the blame game and propose reforms of his own. This crises is borderline national security seriousness. If market forces don't correct the problem, the Asians will do it for us in currency un-American as the yen and yuan.

Saturday, September 13, 2008

No Spin Zone

Memo to Bill O'Reilly: Congratulations on your four-installment interview with Barack Obama. Your questions were poignant. You succeeded in finally forcing him to credit the surge in Iraq a success. Your journey required him to answer domestic concerns and explain his associations with William Ayers and the Rev. Jeremiah Wright. The viewer can decide for himself if Obama was straight forward or a phony. But the problem as in most of your interviews with newsmakers is you. The purpose of these media interviews is to elicit information and responses and not your personal opinions. We know them. We heard them before. I have no problem with confrontational interviews as long as they are a clash of facts. The late Tim Russert was the best in his profession at that. I realize that is not your style and you made your bones and a lot of money for you and Fox network by being opinionated. But too often you cross that invisible line because of an inflated ego under the mask of your self-imposed boundaries of a no spin zone. Using your own words, you bloviate too often. It makes for good entertainment. It detracts from good journalism. How often have I seen you at work and shouted at the television set: "Shut up and let the man talk." What is annoying is that after an interview such as Obama you follow with a segment of friendly pundits asking them not so much what they gleened from the interview but how tough you were. Earth to Planet O'Reilly: the interview was not about you but the other guy. Furthermore, you step into self-promotion by posting a poll on your website grading your Obama interview from A to F. I will never issue you an A until you learn to lower the personal rhetoric. In true confession, I do make an effort to watch your show if for no other reason to receive a different perspective on the issues of the day. However, when you go on one of many of your personal crusades, I channel switch to Keith Olbermann's Countdown show. Bill, I think that guy's got your number. Your ego and bluster has earned you "Worst Person in the World" honors so often even Keith has lost count. You shouldn't take it personally. Your antics are similar to those of Los Angeles Dodgers start Manny Ramirez -- you know, Manny being Manny.

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Friday, September 12, 2008

Dumb, good and green

Fairness: John McCain's bridge to distractions doesn't mean the Barack Obama campaign is forever on the high ground of hardball politics. Obama launched a new attack ad Friday claiming McCain is a computer illiterate. The ad showcases unflattering footage of McCain at a hearing in the 1980s wearing giant glasses, an out-of-style suit, intertwined with shots of a disco ball, clunky phone, outdated computer and a Rubik's Cube. "He admits he still doesn't know how to use a computer, can't send an email, still doesn't understand the economy..." the ad voiceover says. Obama spokesman Dan Pfeiffer said the ad was not making issue of the 72-year-old McCain's age but a visual description of Obama's acceptance speech that McCain "just doesn't get it." While the ad is accurate -- which McCain's "lipstick on a pig" wasn't -- it doesn't elevate the discourse on substantive issues. Oh, Obama's younger constituency may be titillated and chuckle over it. But, it doesn't mean anything. Computer literacy does not a president make.

Spanked: The California Department of Insurance has negotiated a $3.6 million settlement with Health Net, Inc., an HMO provider, for maliciously dropping 926 policyholders because they got sick. Health Net also agreed to pay up to $14 million reimbursement to those re-instated clients. Health Net and other HMOs are notorious for asking complicated questions on applications and then fact check only after a claim has been filed. Critics say examiners are awarded bonuses when they find purported omissions of a symptom or condition as an excuse to drop coverage. This is an example of government oversight and regulatory powers at its best. Kudos to the California Department of Insurance and the state Department of Managed Health Care. In full disclosure, I'm a Health Net policyholder only because I cannot afford higher premiums charged by non-HMOs. My personal experience is their providers show more interest in the bottom line than the welfare of patients. In my case, Health Net approved my primary care physician's request to replace batteries in my power wheel chair. Six providers eventually assigned to do the job either refused or placed obstacles in the process, among others, claiming Medi-Cal was the responsible paying party. I fought them each and every step, saying the policy stipulated my share was 15% of the total repair cost. After six weeks, I gave up in frustration and used my federal stimulus check to pay for the total bill -- $315.40. They won that war of attrition. They're good at it, from top to bottom. The system sucks.

Palin Pollution: A day before Alaska Gov. Sarah Palin was tapped for vice president by John McCain, she wrote a letter to California Gov. Arnold Schwarzenegger asking he veto a bill which would charge fees to reduce pollution at the ports of Long Beach and Los Angeles. Palin argued that the fees would hurt the economies of both states. The $60 fee generating about $400 million annually would be assessed for each 40-foot container moved at the two ports and in Oakland which combined move more than 40% of the nation's goods. Palin said in the letter 90% of Alaskan goods are imported in containers. Alaskans already are overburdened with the high costs of goods and the pollution fees would only increase them, she said. Schwarzenegger is signing no new bills until the state budget is approved. While Palin's point is commendable for Alaskans, it shows little concern for the health and welfare of Californians breathing toxic air. This is a cost/benefit ratio issue that will be fought until America becomes energy independent.

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Thursday, September 11, 2008

Shameful "News"

Lipstick: While our nation faces a showdown with Iran and Russia and home mortgage default is the highest since the Great Depression, the John McCain presidential campaign is talking about lipstick. Give us a break! Enough! Cut the crap. For years, the Republicans have used the expression putting "lipstick on a pig" to describe spending programs and policies of which they disagree. A McCain publicist even wrote a book about the expression with that same exact title. A soundbite in Sarah Palin's vice presidential acceptance speech became a U-Tube overnight sensation. "Do you know the difference between a hockey mom and pit bull?" she asked. "Lipstick." Along comes Barack Obama on the campaign trail detailing a litany of Bush policy failures. He described them in terms exactly the way McCain and his fellow Republicans have done against the Democrats. "It's like putting lipstick on a pig," Obama said. "If you wrap fish in a newspaper, it still stinks." His audience laughed. In knee-jerk reaction, the McCain campaign posted a TV attack ad claiming Obama was calling Palin a pig. Say what??? Anyone with a brain with the mental capacity of a rattlesnake knows damn well Obama was talking about Bush policies and not slurring Palin with a sexist remark. Yet, the lipstick charade controlled Wednesday's cable news talking points. Ridiculous. Obama apologists say at worse it was an untimely use of the lipstick analogy. Hey, no need to apologize. The McCain camp must have an unseemly low opinion of American voters. As Obama has said, "they are not stupid." You can say or believe anything you want about the Democrats, but in this case they are right: McCain is serving not his country but the lowest of partisan distractions. He'd rather win an election by subterfuge than stick to substantive issues. And, he's the one who said he plans to run a clean campaign and debate the great issues of the day. No amount of mascara will disguise the bullshit.

Wednesday, September 10, 2008

Star Power

Palin Power: The national news remains dominated by an unknown housewife who stands to be the next vice president of the United States. With shades of the Alaskan gold rush 150 years ago, the media has flocked to the frozen tundra in efforts to discover whom Sarah Palin is. What they are finding is not the crusading soccer mom who slayed the corrupt oil and Republican state dragons but a woman of astute political skills who smiles when she sticks her stiletto into the hearts of her opponents. Sarah Barracuda, a name she earned as a state high school basketball champion, is a politician. What she says on the campaign trail about her record are a series of half truths. Yes, she did place the state plane on EBay but it did not sell. An aviation broker sold it. Yes, she opposed the infamous "Bridge to No Where" after campaigning for it during her run for governor. We don't know if she, like she says, told Congress "thanks but no thanks" to the $330 million the state received for the bridge. She did keep the money and spent it on other projects including a road to the proposed bridge. The Alaska State Transportation Department reports about half of the money remains unspent in the state budget. Palin said she is cooperating fully with the state investigation into what now is known as Troopergate. However her cabinent is not, forcing the legislature to decide Friday issuing subpoenas compelling them to testify. One of the country's best investigative reporters, Michael Hirsch, is following that story for Newsweek. The New York Times reports Palin charged the state per diem costs for living at her home in Wasilia. While that sounds bad, it is acceptable under state ethics law. She also filed claims for travel expenses for her husband and children. In total, they appear legitimate claims and two-thirds cheaper than what her Republican predecessor filed as governor. In her convention acceptance speech, Palin said she will be a friend and advocate to parents like her who have children with disabilities. Here, the record is mixed. Some liberal websites say Palin cut funding for handicapped children as governor. The New York Times reported Wednesday she increased funding. The Republican National Committee has dispatched so called "truth teams" to advise and monitor the Troopergate investigation. The National Inquirer has sent five reporters to pay for dirt on the candidate and her family. What all have learned is small potatoes. It appears Sarah Palin is truly the Teflon candidate for nothing so far has stuck. That could change. The McCain campaign is keeping her away from national media interviews. While she is being served a crash course in national and international politics by the McCain forces, her first step into the real world arena may not be taken until the vice presidential debate with Joe Biden. Meanwhile, she has ignited the social conservatives in the Republican Party with polls showing the ticket is making inroads into electoral pockets where Barack Obama is weak. Some battleground states are now leaning to McCain and the old maverick can only point to Gov. Sarah and thank his lucky stars he took the risk to place her on the ticket. Now, stop, take a deep breath and ask yourself: Why in the world is there so much attention on a job so demeaning one veep called it not worth a bucket of spit? After all, there's only two constitutional duties a vice president needs to perform. One is presiding over the senate to break a tie vote. The other is ... oh, my God ... become president if the big guy dies or is incapcitated in office.

Star Wars: Fox News and MSNBC cables are going mano a mano as to whom can insult the other more. The bickering has escalated in recent weeks into a major food fight over ratings. It's silly season, juvenile and accomplishing nothing for the journalism profession. The NBC stepchild is certainly the upstart because it ranks far behind Fox in most of the demographics. I prefer to view it from an historical perspective. When Fox came on line, its only major cable news competitor was CNN. With a format politically charged to the right with conservative commentators Bill O'Reilly, Sean Hannity, John Gibson and Neil Cavuto, the network clawed its way to the top in a matter of a few years. It was different. It had an attitude. It took sides. It insisted to its viewers it was "Fair and Balanced." Then along came MSNBC. Management chose a liberal road to attract viewers and utilized the resources of its parent NBC News. While Chris Matthews steered the political coverage with interviews captured best in charicature by Saturday Night Live, along came Keith Olbermann who put the needle to what he considers the blowhards at "Fixed News." After several years, Olbermann's "Worst Persons in the World" segment finally got under the skin of Bill O'Reilly since Billo was on the list about four nights out of five. O'Reilly refuses to mention Olbermann's name on air but constantly refers to him as a gutless pinhead and the epitome of the leftwing crackpots. This is amusing fodder depending whether one is a Fox fan or MSNBC disciple. Both cables reflect polarization which may be good for ratings but fails to adequately inform its viewers. Can you imagine Huntley and Brinkley squaring off with Walter Cronkite so personally in the golden years of television news? I don't think so. The difference in today's age is cable network news is less news than entertainment value designed to support or detract from a viewer's pre-conceived notions of how the world spins.

Monday, September 8, 2008

Political Game Changes

Presidential race: When it was clear last May Barack Obama and John McCain were their party's nominees, I concurred with Chuck Todd, political analyst for MSNBC, that either candidate could win by 8 percentage points, an electoral landslide. The thinking was Obama would ride the coattails of his change message seeking a new future with bottom up politics while at the same time taking advantage of a Republican down year because of the unpopular policies of George Bush on the Iraq war and a falling economy. Meanwhile, McCain's chances were based on his maverick image, strong credentials on foreign policy and a reluctance of white voters to vote for a black candidate. Now, less than two months before the Nov. 4 election, it appears the winner won't be declared until the last vote is counted. Why? Obama has failed to deflect negative ads against his policies, has not answered the judgment and commander-in-chief issue satisfactorily and remains sketchy on how to pay for his ambitious domestic agenda. His main strength is an overwhelming lead in voter registration compared to the Republicans. McCain, meanwhile, temporarily has lunged ahead in the national polls as a result of his maverick tendencies, heroic ordeals as a POW, talking tough to Russia and Islamic terrorist leaders and promising no tax increases and reducing government spending. A gambler at heart, McCain shocked the political world by selecting the unknown governor of Alaska his vice presidential running mate and Presto! his conservative base was energized. Sarah Palin is an instant icon and unless she implodes in her one debate with Joe Biden or falters on the campaign trail she is the great equalizer for the McCain campaign. Her attraction is more than a fresh face; it is a connection with white rural voters that Obama has been troubled to touch.

Bail Out: The government is placing mortgage giants Fannie Mae and Freddy Mac in conservatorship and provide quarterly financial infusions to keep them afloat at taxpayers' expense. Bad management and lack of oversight led to this catastrophy but what else can be done? The two quasi-government behomeths hold half the trillion dollars of mortgages in the industry. Bailing out Bear Stearns was a mistake, The other private investment houses now facing financial ruin should not be salvaged by the feds. That's the risk shareholders allowed so they should eat their losses.