Archive for October, 2008

Breeders’ Cup betting: another day of uncashed tickets; is there a “winning system” for the horse races?

October 26, 2008

Before I launch into my idea for a new “winning system,” a few comments about the races are in order.  On Friday, Zenyatta stayed undefeated in nine races when she won the Breeders’ Cup Ladies’ Classic by 1-1/2 lengths over Cocoa Beach.  The filly’s impressive win may result in her being named horse of the year.   The race may be viewed here: http://www.youtube.com/watch?v=o-W7WrdDgg0

ZENYATTA WINS!

ZENYATTA WINS!

On Saturday, Midnight Lute won the Breeders’ Cup Sprint for the second year in a row as jockey Garrett Gomez won his third race of the day.  (Mr. Gomez also won while riding Albertus Maximus and Midshipman.  He was third on Whatsthescript (IRE) in the Mile.)   In the Breeders’ Cup Classic on Saturday, Curlin was unable to defend his title and may have lost his chance for horse of the year honors.  Raven’s Pass led a 1-2 British sweep of the Classic with Henrythenavigator placing second. 

It should be noted that horse racing guru Andrew Beyer tipped off the racing public of the potential for Raven’s Pass to win the Classic.

“Besides Curlin, the most talented horses in the field are the three European invaders — Duke of Marmalade, Henrythenavigator and Raven’s Pass — who have accounted for 10 Grade I wins against the  best competition on the continent,” Mr. Beyer wrote in his column that appeared Friday morning in the Washington Post.  Raven’s Pass is the only one of the three who appears to be coming into the Classic in peak form, and I will gamble that he takes to the Pro-Ride and pulls an upset.”

My “winning system”

Now to my winning system: pick the same three horses (i.e., 1-2-3, or 3-6-9, or 4-5-6, or any three numbers you want) in each and every race to win.  Using 3-6-9, here is how my winning system would have worked on Saturday’s Breeders’ Cup if $6 to win was bet on each horse.

FIRST RACE (MARATHON) — $18 bet for no return.  (The winner, Muhannak (IRE), was No. 5.)

SECOND RACE (TURF SPRINT) — No. 9 Desert Code paid $75.  Betting $6 to win, the take was $225. 

THIRD RACE (DIRT MILE) — $18 bet for no return.  (The winner, Albertus Maximus, was No. 7.)

FOURTH RACE (MILE) — $18 bet for no return.  (The winner, Goldikova (IRE), was No. 4.)

FIFTH RACE (JUVENILE) — $18 bet for no return.  (The winner, Midshipman, was No. 11.)

SIXTH RACE (JUVENILE TURF) — $18 bet for no return.  (The winner, Donativum (GB), was No. 4.)

SEVENTH RACE (SPRINT) — $18 bet for no return.  (The winner, Midnight Lute, was No. 4.)  (Horse racing writer Billy Witz of The New York Times wrote that “Midnight Lute was the nickname given years ago to the University of Arizona men’s basketball coach Lute Olson by Jerry Tarkanian, his counterpart at Nevada-Las Vegas, after Olson swooped in to steal a prize recruit from him.)

EIGHTH RACE (TURF) — No. 9 Conduit (IRE) paid $13.60.  Betting $6 to win, the take was $40.80.

NINTH RACE (CLASSIC) — $18 bet for no return.  (The winner, Raven’s Pass, was No. 8.)

Now for the net gain or net loss.  Amount wagered: $18 x 9 = $162.  Amount collected: $265.80.  Net gain: $103.80.

A “winning system” remains elusive

While the result looks impressive, the nice take depended on winning the biggest longshot of the day: Desert Code’s surprising win in the Turf Sprint.  The longshot colt had to pass eight horses in the final 150 yards to edge past Diabolical by a half-length.   Without Desert Code’s longshot win, it would have been just another losing day at the race track by the user of my alleged winning system.

My conclusion: I still have not found a “winning system.”

Photo Credit:

Zenyatta in the Ladies’ Classic (photo by Bob Mayberger; copyright @ Storm Watch Photo 2008)

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Childhood baseball cards and obituaries in the sports pages

October 19, 2008
TOM TRESH OF THE YANKEES

TOM TRESH OF THE YANKEES

     During the summer of 1962, I was 10-years-old.  I was also crazy about playing baseball and collecting baseball cards.  I had one of the best baseball card collections in the neighborhood.  At my Dad’s drug store, packages of baseball cards sold for 5 cents each or five packs for 19 cents.

     Of my many years of collecting baseball cards, the 1962 season resulted in one of my biggest and best collections.  I collected almost a full set.  The cards were organized by team.  Each team was kept together with a rubber band.  Rubber bands were easy to come by because I had a paper route.  I was given rubber bands by the box-full by the newspaper in order to “roll my papers.”  A rolled and rubber banded newspaper could be thrown onto customer porches as I sped down the sidewalk on my bicycle.

     I was familiar with every player on every baseball card.  I became even more familiar with the teams that made it to the World Series.  In 1962, the New York Yankees played the San Francisco Giants.  San Francisco was my favorite team in all of baseball.

     The outfield of the Yankees included Mickey Mantle and Roger Maris.  (Maris had broken Babe Ruth’s record of 60 home runs during the 1961 season.) The infield of the Yankees included Bobby Richardson and Tom Tresh.  When Clete Boyer got out of the Army in August, Boyer took the shortstop position and Tresh moved to left field.  Elston Howard was the catcher.  And the Yankees’ pitchers included Jim Bouton, Whitey Ford and Ralph Terry.

     Many of the veterans players on the two teams have now died.  And now some of the youngest players on the two teams are starting to die.

     This past week, Tom Tresh, 71, the Yankees’ shortstop and left fielder in 1962, died at his home in Venice, Florida.  Tresh actually broke into the major leagues near the end of the 1961 season.  But 1962 was considered his rookie season, and he was named the 1962 Rookie of the Year.  He was also a hero during the 1962 series when he hit a three run home run in the eighth inning of the fifth game to spark the Yankees to a 5-3 win.  The Yankees won the series, four games to three. 

     Although I don’t really remember it, I am sure that I was upset when, as The New York Timesdescribed in Mr. Tresh’s obituary, “he made a spectacular one-handed running catch in the left-field corner off a drive by Willie Mays in the Yankees’ 1-0 victory.”  I must have yelled out: “Darn it!”  After all, Willie Mays was my favorite player on my favorite team.

     I heard the news of Tresh’s death from a report on the radio.   I then read about his death and his career in the sports sections of the newspapers that I read.  With the report of the death of each baseball player whose face appeared on my cherished baseball cards, I pause to think of those carefree days.  I am also reminded of my own mortality.  After all, Mr. Tresh was only about 15 years older than me when I carefully stacked his baseball card in a pile with the rest of his Yankees teammates.

     It is sad to hear about the death of a baseball star from my youth.  But it is also comforting to think back — nearly 50 years — and remember the days when I became acquainted with the player through my baseball card collection.

TOM.TRESH.CATCH

TOM TRESH’S CLUTCH CATCH OF THE FLY BALL HIT BY WILLIE MAYS IN THE SEVENTH INNING OF GAME 7 AT CANDELSTICK PARK IN SAN FRANCISCO; THE INSERT IS A PHOTO OF RALPH TERRY, THE MVP OF THE SERIES (PHOTOS COURTESY OF SPORTS ILLUSTRATED)

Iceland’s financial crisis is due to a criminal class of bankers that privatized the banking system

October 18, 2008

  

GEIR H. HAARDE
GEIR H. HAARDE

During a live address to the nation of Iceland, Prime Minister Geir H. Haarde tried to calm the population.

“Dear citizens, both in politics and elsewhere it will be important to sheathe our swords,” he said.  “It is very important that we do not lose courage and  support each other as well as we can. . . . Thus with Icelandic optimism, fortitude and solidarity as weapons, we will ride out the storm.”
And a violent storm it is. 
Kaupthing, Glitnir and Landsbanki are seized
Iceland’s three biggest banks — Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf — were seized because they were no longer able to finance about $61 billion in debt.  And $61 billion in debt is a mighty amount for a small island country of about 300,000 persons and a $20 billion economy.
“A few years ago, I used to joke with my foreign friends that the Icelandic economy was built on a house of cards,” wrote Eliza Reid, a columnist for Iceland Review Online.  “No one could have predicted how quickly and how dramatically that house of cards would collapse.”
Iceland’s problems were summarized in an Oct. 10 article in The Wall Street Journal:

Tiny and remote, Iceland  has become a showcase for the worst potential effects of the global credit crunch.  The country’s banks, though not necessarily more leveraged than other troubled banks around the world, had lent aggressively abroad during recent years of cheap money,  growing rapidly until their assets were some 10 times the nation’s gross domestic product.  When the credit crunch hit, markets didn’t believe Iceland’s government had sufficient resources to rescue the banks if they got into trouble — and punished them.

The effect of that lack of confidence, not just in the solvency of the banks but of the country, has been a near-total collapse in the financial system and flight from Iceland’s currency.  The Icelandic krona has plummeted in value, stoking inflation and crippling trade in a country that depends heavily on imports.

“Government, companies, households and people have seldom faced such difficulties,” Mr. Haarde said.
Trouble for the country of 300,000
Iceland’s problems began to attract attention during early October when the government took a 75 percent stake in Glitnir Bank hf, the country’s third largest bank, by making a 600 million euros ($827 million) infusion of capital.  [NOTE — Nobel prize winning economist Paul Krugman noted in The New York Times that the 600 million euros bailout was “the equivalent of an $850 billion bailout” in the United States because Iceland’s population of “only a bit more than 300,000 people [is] about 1/1000th the population of the United States.”] The move was intended to calm the financial markets.  Instead, it caused concern that the government might also need to prop up the country’s other large banks.
The krona, which already lost more than half its value during 2008, dropped another 8 percent against the euro.
But Iceland’s difficulties were just beginning.
“There is a very real danger, fellow citizens, that the Icelandic economy, in the worst case, could be sucked with the banks  into the whirlpool and the result could be national bankruptcy,” Mr. Haarde said after Glitnir Bank was effectively nationalized.  He explained that Iceland was having difficulty in obtaining loans from other countries.
Every man for himself, every country for itself
“It’s turning out that it is every man for himself, every country for itself,” he said.
Iceland sought an emergency loan from Russia.  After it was announced that the Icelandic central bank had secured a 4.0 billion euros ($5.4 billion) loan from Russia, the announcement was retracted.
About this same time, Iceland loaned 500 million krona to Kaupthing Bank hf, the country’s biggest bank.  Only a few days earlier, Sigurdur Einarsson, the chairman of Kaupthing, said its liquidity position remained strong and that “[w]e’ve got good asset quality and a highly diversified loan portfolio.”
Sweden then announced that it would lend the Swedish branch of Kaupthing Bank hf up to 5.0 billion kronor ($703 million).  Landsbanki Islands hf went into receivership.  Depositors were prevented from making withdrawals from Landsbanki’s internet savings bank, IceSave, which had about 300,000 British and about 110,000 Dutch depositors.  The U.K. and the Netherlands began trying to assist their citizens in getting their money out of frozen Icelandic bank accounts.
The Icelandic government, which had only recently tried to prop up Glitnir by injecting 600 million euros into the bank, seized Glitnir and put it into receivership.   A few days later, the government seized Kaupthing Bank hf, the country’s largest bank.
“Iceland’s swollen banks are ruined”
“Today, Iceland’s swollen banks are ruined,” wrote Charles Forelle in the October 10 edition of The Wall Street Journal.  “In a space of a few days, practically the entire banking system has been seized by the government. . . . The krona has ceased functioning as a currency outside Iceland.”
It was not many years before that Iceland’s banks were first privatized.
“Icelanders . . . didn’t much mind [the privatization of their banks],” Mr. Forelle wrote.  “To their surprise, they became some of the wealthiest individuals on the planet.  Many became millionaires, a few billionaires.  The standard of living was high and foreign luxuries could be imported cheaply.  They bought expensive cars with loans in yen and Swiss francs with attractively low interest rates, racking up debts exposed to the vagaries of currency exchange.”
Mr. Forelle further explained:

For the banks, growing was easy.  They could borrow at low cost from all over the globe, then turn around and with little oversight lend that money to businesses and entrepreneurs wherever they wanted — in the U.K., Denmark and the U.S.  Over time, the banks’ assets — largely these loans they made — grew and grew.

The money rode a carousel: Iceland banks borrowed, made loans, borrowed some more.  They had to pay their own lenders, of course,  but that wasn’t a problem — there was always someplace to borrow more money with which to make the payments.

Then, last winter, the credit crunch struck.  By this summer,  no one wanted to lend to anyone, really, least of all Icelandic banks.  That was because they had gotten so large. While investors figure the U.S. and large European countries could come up with cash to bail out their banks if need be, what could tiny Iceland, with 2 billion krona in foreign-exchange reserves, do if its banks with 100 billion krona in assets got in trouble?

Just printing more money — something the U.S. can do — wouldn’t help the Iceland banks much, since their debts were largely in foreign currencies.  The creation of more Icelandic krona would just push down the exchange rate.  Fearing this, investors began shunning the krona. . . .

A Kafka novel with everyone guilty by default
“Icelanders have woken up in a new novel by Franz Kafka, where everybody is guilty by default,” wrote Gauti Kristmannsson in an op-ed article in The New York Times.  “One by one, the mighty banks have been seized by the government, and Icelanders, aghast, have been told that each and every one of us owes millions of dollars — to whom, we don’t know.”
The first mistake was privatizing the banks
“When the time comes we will recognize where mistakes were made and make sure they do not happen again,” wrote Eyglo Svala Arnarsdottir, a columist for Iceland Review Online.  “The way I see it, the first mistake was made when the banks were privatized in the beginning of the millennium without any ground rules being laid.  The happy bankers were given a free rein and they took loans and grew out of proportion with merely numbers on paper to support their conglomerates.”
After seizing the country’s three largest bank, the Icelandic government is creating a new state-owned bank called New Landsbanki.  The new bank is build upon the operations of Landsbanki Islands hf, which is in receivership with Glitnir Bank hr.
The government’s Financial Services Authority (FSA) has attempted to prevent panic by reminding Icelanders that Kaupthing and Landsbanki are open for business and that the government will guarantee domestic deposits of the banks. 
British Prime Minister Gordon Brown announced that the U.K. would sue Iceland to recover the investments of British citizens with deposits in the IceSave accounts of Landsbanki.
“We will take further action against the Icelandic authorities wherever that is necessary to recover the money,” Mr. Brown said.  “This is a responsibility of the Icelandic government.  They’ve got to take responsibility.” 
Iceland’s stock exchange, OMX Group Inc., operated by Nasdaq, was closed on an emergency basis for three days.  Trading continues to be suspended in the shares of Kaupthing Bank hf, Landsbanki Islands hf and Glitnir Bank hf, and in three other Icelandic financial institutions.  The krona currency dropped 80 percent against the euro during the past week.
“By this time next month, it is betting odds that the Icelandic Kronur will be an historical relic, the IMF [International Monetary Fund] will have bailed them out, and the adoption of the Euro near inevitable,” wrote the Rev. Jose M. Tirado, a Shin Buddhist priest, in Dissident Voice. “Not to mention all those typical bailout conditions the IMF levels to the Third World like stringent ‘austerity measures’ and other cheerful sounding destructors of formerly independent people around the world.”
The crisis was caused by a “criminal class” of bankers
Iceland’s poor financial condition was blamed conditions on a “criminal class” of bankers.  The Rev. Tirado wrote:

It is now becoming clear that Iceland . . . is no more independent in almost any but the most perfunctory ways.  This is because the criminal class who privatized the banking system, creating for the first  time since the Middle Ages a class of ultra-rich who could afford to buy soccer clubs in England, and get Elton John to sing at their birthday parties, are now begging Russia to lend them 4 billion Euros (5.8 billion dollars) to help them weather a crisis they caused. . . .

(Emphasis added.)
“In many ways, we uncritically accepted the capitalist system, which now appears to have been a gigantic casino without an owner,” Mr. Kristmannsson wrote in his op-ed article.  “We did in the end believe that we could get ‘money for nothing’ and now we face the fact that we will get nothing for our money.”
So far, none of the bankers who caused the crisis have been prosecuted.
“So now we watch as the entire economy collapses and, in typical Icelandic fashion, barely a whisper is heard about how their version of neo-liberal IMF Republicans have driven them into uncharacteristic submssion before the financiers of the world,” the Rev. Tirado wrote.  “It’s a sad time to be in Iceland, and my guess is things will only get worse.”
“Icelanders are simply speechless after what has happened to our country in the global financial storms,” wrote Bjarni Brynjolfsson, a columnist for Iceland Review Online.  “Yesterday we had it all.  Now it seems we have been wiped out in a major way and have to call on the International Monetary Fund or even the Russians to help us out of the mess.”
Why Icelanders are angry
Mr. Bjarni discussed why Icelanders are now so angry.

We are angry because we were told that everything was in order in the banks.  More than 50,000 small shareholders had stakes in the banks and their savings were simply wiped out.  These were ordinary people like you and me who had decided to stick with the banks through the financial meltdown and had been assured that everything would be all right in the long run.
We are angry because the banks seem to have organized programs to trick people in Iceland into placing their savings in bond accounts which were claimed to be 99 percent safe instead of keeping them in normal deposit accounts.
. . .
We are angry with the politicians who obviously knew of the difficulties the banks were facing after many warnings from abroad and from skeptics of the Icelandic economic boom who said that the banks had become too large and greedy.
We are angry with the billionaire owners who ran the banks and pretty much everything else in this country and have now disappeared in times of trouble.
. . .
We are angry with ourselves for being foolish and for not having listened to the voices that warned us about the recklessness of the banks.

Rural Icelanders who were not granted easy credit by the country’s three large banks are not as affected by Iceland’s financial problems as the city dwellers of Reykjavik, according to Bjorn Ingimarsson, head of Langanesbyggd municipality in northeast Iceland.  Mr.  Ingimarsson said that a small savings bank, Sparisjodurinn, “has served the economy here well and supported it and it is booming now.”
The bishop of Iceland, the Rev. Karl Sigurbjornsson, leader of the state-sponsored Lutheran Church, said that Icelanders were “led to believe that it was unlimited growth forever,” reported Eric Pfanner in The New York Times.  “What will happen when the dust settles?” he asked.  “A lot of people will be very angry.  It will be a challenge for our society.”
Photo Credit:
Photograph of Prime Minister Haarde by NATO.

ICELAND.CITY

REYKJAVIK IS THE CAPITAL AND LARGEST CITY OF ICELAND; IT IS LOCATED ON THE SOUTHERN SHORE OF FAXAFLOI BAY HAS HAS A POPULATION OF ABOUT 120,O00

What some are saying about the $250 billion infusion of cash into America’s banks

October 16, 2008

  UNITED.STATES.TREASURY.VINTAGE.POSTCARD

VINTAGE POSTCARD OF THE UNITED STATES TREASURY BUILDING IN WASHINGTON, D.C.  

Some thoughts by various writers (and one cartoonist) about the United States Treasury’s $250 billion plan to prop up the biggest banks in America:

     Andy Kessler in The Wall Street Journal:” Is this the right thing to do?  Probably not.  Despite some limits on compensation, bad management stays in charge.  Government investment in financial institutions will raise a gazillion temptations and conflicts of interest.  Politicians won’t be able to help themselves and will inevitably meddle. . . . But it’s the only thing to do at this stage.  Next stop is full nationalization and no one wants that.”

     Robert Weissman in Counterpunch: “But the Treasury proposal specifies that the government shares in the banks shall be non-voting.  And there appear to only the most minimal requirements imposed on participating banks.  So, the government may be obtaining a modest ownership stake in the banks, but no control over their operations.”

     Nicholas Von Hoffman in The Nation: “The terms of the deal are generous to the banks and good for Wall Street.  How good they are for everybody else is debatable, but at this point the government has now committed to in actual expenditures or guarantees $2.25 trillion to save these men, their firms, and by extension, it is to be hoped, the rest of the nation.”

     Chris Isidore in CNNMoney.com: “Still, not all critics of the bailout are satisfied with the new plan for direct investment in banks.  Some economists argue the move only encourages more risky behavior down the road and that the free markets should be allowed to work: i.e. more banks should be left to fail and credit should be tight.”

     Editorial in The Washington Post: “The program needs firmer assurances that the government’s cash will not be diverted to shareholders.  At a minimum, for the duration of the program, participating banks should not be permitted to increase dividends, with or without Treasury approval.”

     David Lindorff in Counterpunch: “To avoid this government investment in the U.S. banking industry being labeled ‘socialist,’ Paulson and his fellow conspirator, Fed Chairman Ben Bernanke, are only buying non-voting shares of the banks.  Get it?  They’re giving hundreds of billions of our dollars to bankers in the form of ownership shares of these companies, but they aren’t asking for any say in the banks’ policies in return.”

     Editorial in the Los Angeles Times: “Still, the plan seems to have been thrown together just as hastily as previous efforts, leaving gaping loopholes.  There are no safeguards against banks frittering away the cash provided by the Treasury to pay dividends to shareholders (including, in many cases, their own executives).  The government is rushing to make the investments before it knows the true health of these institutions, meaning it may be throwing good money after bad and encouraging desperate executives to make unacceptably risky bets.”

     News article in Economist.com:“The plan is undoubtedly bold: it marks perhaps the largest foray by the American government into ownership of private enterprise since the second world war.  But it would have looked much bolder a month ago. . . . To a great extent, Hank Paulson, the treasury secretary, and Ben Bernanke, the Federal Reserve chairman, are making up for what were, in retrospect, miscalculations in their earlier efforts.”

Art Credit:

[Hurwitt from www.blackcommentator.com]bankstertheftscartoon

Harper’s party wins more seats than in 2006 election but remains a minority government in Canada

October 15, 2008

STEPHEN.HARPER.PRIME.MINISTER.CANADA

STEPHEN HARPER, PRIME MINISTER OF CANADA

The Conservative party of Stephen Harper failed in its goal of becoming the majority party in Canada’s election on October 14.  The Conservatives slightly increased its 2006 total of 36.3 percent to about 37 percent.  But for the third straight election, the Tories were unable to win the support of a majority of Canadians.

The number of seats won in the election was Conservatives (143), Liberals (76), Bloc Quebecois (50) and New Democratic Party (37).  There were also two independents who won seats.  The Canadian Press called the Tories the “muscular minority.”

The Liberals received 26 percent of the vote — the lowest level of popular support since the election of 1867.  The NDP received 18 percent of the vote while Bloc Quebecois received 10 percent and the Greens received seven percent.

The Tories were hoping to become a majority government by making gains in Quebec.  However, they did not increase the 10 seats in Quebec that they won in the 2006 election.  

Jack Layton’s NDP gained eight seats  

The Bloc Quebecois of Gilles Duceppe had 50 seats by the end of the vote count, which was one less than the 2006 election.  The Liberal Party of Stephane Dion lost 19 seats while Jack Layton’s NDP gained eight seats.  For the Liberals, its 26.2 percent share of the popular vote was the lowest share of the vote that the party ever received.  It was even below the 28 percent under John Turner in 1984.  For the NDP, it was the second best result in the party’s history.

“Without the Bloc Quebecois, Stephen Harper would be forming a majority government,” said Mr. Duceppe.

“The Canadian people have spoken and chosen a very conservative government,” Mr.  Dion said.  “We Liberals will do our part to make sure that this parliament works.”

“I  believe that our message, that it’s time for a prime minister and a government that actually stands up for working families, really got through,” Mr. Layton told reporters Tuesday morning.

Less than 60 percent of eligible voters took part in the election, which was the lowest percentage in federal election history.

Mr. Harper called the election on Sept. 7, when the held seats were Conservatives (127), Liberals (95), Bloc Quebecois (45) and NDP (30).  There were four independents and four vacant seats.

The Conservatives made their best showing in Ontario, where they won 51 of the province’s 106 seats, and in British Columbia, where the Tories picked up four additional seats.  The Tories won no seats in Newfoundland and had poor results in Quebec.

The loss of 19 seats by the Liberals puts Mr. Dion’s position with the party in jeopardy.

“Many senior Grits are privately predicting Liberal Leader Dion will be forced to quit within the next few weeks if he doesn’t voluntarily resign first,” reported Joan Bryden of The Canadian Press.

Photo Credit:

Government of Canada

PRIME MINISTER STEPHEN HARPER WITH CHILDREN RACHEL AND BENJAMIN AND WIFE LAUREEN

PRIME MINISTER STEPHEN HARPER WITH CHILDREN RACHEL AND BENJAMIN AND WIFE LAUREEN

Why is the United States treasury propping up shaky banks?

October 15, 2008
GOLDMAN SACHS TOWER -- NEW YORK CITY

GOLDMAN SACHS TOWER -- NEW YORK CITY

Last Monday, U.S. Treasury Secretary Henry “Hank” Paulson called a meeting in Washington of the CEOs of banks that Mr. Paulson wants the American taxpayer to prop up.  Attending the meeting were Kenneth D. Lewis, CEO of Bank of America; Jamie Dimon, CEO of J. P. Morgan Chase; Lloyd C. Blankfein, CEO of Goldman Sachs Group; John J. Mack, CEO of Morgan Stanley; Vikram S. Pandit, CEO of Citigroup; Robert P. Kelly, CEO of Bank of New York Mellon; John A. Thain, CEO of Merrill Lynch & Co.; and Richard M. Kovacevich, CEO of Wells Fargo.

It is expected that the U.S. Treasury will buy $25 billion in preferred stock in Bank of America, J. P. Morgan and Citigroup; between $20 billion and $25 billion in Wells Fargo; $10 billion in Goldman Sachs and Morgan Stanley; and between $2 billion and $3 billion in Bank of New York Mellon Corp. and State Street Corp.  The “Bush’s bank bailout” rescue program will make the United States the biggest owner of banking shares in the country.

University of Missouri, Kansas City (UMKC) economist Michael Hudson referred to the stock purchase plan as “Plan B.”

“Bailout ‘Plan A’ (buy the junk mortgages) has failed” and Plan B is to to “buy ersatz stocks in the banks to recapitalize them without wiping out current mismanagers,” Mr. Hudson wrote in Counterpunch.

Paulson makes an abrupt about-face

“The latest show of government firepower is an abrupt about-face for Mr. Paulson, who just days earlier was discouraging the idea of capital injections for banks,” reported The New York Times.  Mr. Paulson recently told Congress that “the right way to do this is not going around using guarantees or injecting capital,” arguing that Japan had limited success with similar solutions in the 1990s.

“The new plan is designed to bolster bank balance sheets by providing  new capital, removing rotten assets and taking new steps to make sure they have access to the funds they use to operate,” said a front page article in The Wall Street Journal.  “All told, the moves are designed to get money flowing through the system so that banks will lend to companies, consumers and each other.”

Plan B provides for the U.S. Treasury to be granted preferred shares without voting rights or the right to be involved in day-to-day management decisions.  The shares will have a five percent dividend increasing to nine percent after five years.  The participating banks will be prohibited from raising dividends for ordinary investors for three years.

Reporting on his meeting with the bank CEOs, Mr. Paulson stated: “I don’t think there was any banker in that room who was going to look us in the eye and say they had too much capital.”

A retreat from the first rescue plan

According to The New York Times, Plan B “is the largest government intervention in the American banking system since the Depression” and amounts to “retreating from the rescue plan [Plan A] that Mr. Paulson had fought so hard to get through Congress only two weeks earlier.”

Sen. Charles Schumer (D-N.Y.), a cheerleader for Plan A, is now a cheerleader for Plan B.

“The administration’s initial approach to the crisis was to propose buying troubled assets from banks,” Mr. Schumer wrote in an op-ed piece in The Wall Street Journal.  “But direct capital injections into financial institutions . . . always offered a far better prospect of success.”

Mr. Schumer claimed that he along with Democratic leaders Sen. Chris Dodd and Rep. Barney Frank were in favor of Plan B before they were in favor of Plan A.  He claimed that the three of them “made explicit our desire to make direct infusions of capital a part of the approach to solving the crisis during negotiations with the Treasury” before Plan A was passed.

Plan B is prudent even though “[t]here is little question that making the government a major investor in American banks raises thorny questions, especially about the role of the public sector in private markets,” Mr. Schumer wrote.  “So let me be clear — this is a temporary solution to an unprecedented crisis, and the government’s role must be limited.”

Schumer’s claim of being “clear”

Even though Mr. Schumer said that he was being “clear” with Americans, Mr. Schumer did not give any indication of what he considered to be “temporary.”  However, he apparently believes that for the Treasury to take approximately $250 billion in equity stakes in potentially thousands of banks is a “limited” role.

“The only clarity we have is that the crisis is resulting in financial concentration and that the bailout constitutes a massive raid by financial crooks on both taxpayers and central bank reserves in the U.S. and Europe,” wrote a former Assistant Secretary of the Treasury in the Reagan administration, Paul Craig Roberts. 

Mr. Paulson said Tuesday that “we regret having to take these actions [i.e., Plan B].”  He called Plan B “objectionable” but apparently unavoidable.

“In addition to the capital infusions, which will be made this week, the government said it would temporarily guarantee $1.5 trillion in new senior debt issued by banks, as well as insure $500 billion in deposits in non-interest bearing accounts, mainly used by businesses,” The New York Times reported.  “All told, the potential costs to the government of the latest bailout package comes to $2.25 trillion, triple the size of the original $700 billion rescue package, which centered on buying distressed assets from banks.”

No meaningful job creation

Neither Plan A or Plan B provide for any meaningful job creation, which is vital to any effective recovery effort.  The proposed solution to the financial crisis “is a Keynesian policy for banks and big businesses, and the Mellon plan for everyone else,” wrote James Ridgeway, the senior Washington correspondent for Mother Jones.  “This is consistent with the longtime Republican approach, which offers government support to corporations and the rich in the name of stimulating the economy but denies it to the working people who actually create the wealth.”

The preferred equity financing “provides financing on very favorable terms — much more so than those  exacted by [Warren] Buffett’s Berkshire Hathaway . . . when it provided infusions of preferred equity recently to Goldman Sachs or General Electric,” wrote Randall W. Forsyth of Barron’s.  “Good thing for major banks issuing huge chunks of preferred that the master investor has opted to stay in Omaha rather than move to Washington [to become Secretary of the U.S. Treasury].”

“We’re providing large sums of money to financial institutions without receiving anything in return — no job creation, no investment in the country’s infrastructure, no reduction of foreclosures — just plenty of money to buy stock in banks which probably would have failed otherwise,” wrote Ron Shimshock, founder of Freeople, a website that supports pro-freedom candidates for public office.

“Leaving the issue of fraud aside, the bail out scam is also doomed to fail because it avoids diagnosis and dodges the heart of the problem: the inability of more than five million homeowners to pay their fraudulently ballooned mortgage obligations,” wrote Drake University economist Ismael Hossein-zadeh in Counterpunch.  “Instead of trying to salvage the threatened real assets or homes and save their owners from becoming homeless, the bailout scheme is trying to salvage the phony or fictitious assets of the Wall Street gambler and reward their sins by sending taxpayers’ good money after gamblers’ bad money.  It focuses on the wrong end of the problem.” 

Not enough good money to redeem all the bad money

Mr. Hossein-zadeh added: “The second major problem with the bailout scheme is simply that it is unfeasible and ineffectual because there is just not enough good money to redeem all the bad money that has ballooned or bubbled to a multiple of the good money and/or real assets.”

The risk of Plan A and Plan B is on the American taxpayer. 

“Should banks fail despite the capital injection, the Treasury would be likely to lose most, if not all, of its investment,” wrote Floyd Norris of The New York Times.  “The government would be treated the same as other preferred stockholders, who generally suffer major losses in bank failures.”

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xxx

Corporations should not have the rights of humans

October 10, 2008
RALPH NADER HAS DEVOTED HIS LIFE TO CORPORATE ACCOUNTABILITY

RALPH NADER HAS DEVOTED HIS LIFE TO CORPORATE ACCOUNTABILITY

Perhaps the most important law that could be passed to ensure justice for Americans would be a law that made it clear that corporations do not have the rights of human beings.

The most widely recognized personality to hold this position is Ralph Nader.  He has written extensively on the subject.  In Mr. Nader’s 2004 book titled The Good Fight, Mr. Nader wrote:

Whether we think in terms of justice under law or equal protection of the laws, it is untenable that artificial entities called corporations are given most of the constitutional rights of real humans while aggregating powers, privileges, and immunities that individuals, no matter how weathy, could never come close to attaining. 

Two thirds of corporations paid no income taxes

Two thirds of corporations paid no federal income taxes between 1998 and 2005, according to a report released this summr by the Government Accountability Office (GAO).  The report said that 1.2 million corporations (66.7 percent) paid no income tax.  The corporations had combined sales of $2.5 trillion, the report said.  The report also noted that about 25 percent of large corporations — those with at least $250 million in assets or $50 million in receipts — paid no corporate income taxes.

In Mr. Nader’s 2000 book titled Cutting Corporate Welfare, Mr. Nader explained the widespread practice of corporate welfare.

Corporate welfare — the enormous and myriad subsidies, bailouts, giveaways, tax loopholes, debt revocations, loan guarantees, discounted insurance and other benefits conferred by government on business — is a function of political corruption.  Corporate welfare programs siphon funds from appropriate public investments, subsidize companies ripping minerals from federal lands, enable pharmaceutical companies to gouge consumers, perpetuate anti-competitive oligopolistic markets, injure our national security, and weaken our democracy.

Political corruption and corporate welfare

Treating corporations as having the rights of living people contributes to political corruption and corporate welfare.  Mr. Nader reasons that the doctrine of corporation as person must be reversed.

“A national debate is needed regarding the necessity to reverse the dicta in the 1886 Supreme Court case of Santa Clara County v. Southern Pacific Railroad that first awarded the corporation constitutional status as a person and in subsequent decisions,” Mr. Nader wrote.  “Corporations are not human beings, they don’t vote; they are artificial entities which should be subordinated to the rights of human beings.”

Mr. Nader argues that “there can be no equal justice under the law if . . . Exxon has all the rights of humans plus all the privileges and immunities to concentrate enormous power and escape responsibility in ways unavailable to the wealthiest real people.”

As an example of the legal fiction of a corporation being a person with substantial rights but without corresponding responsibilities, consider these fact patterns: (1) A human being selling office supplies to the government is caught short changing the government (i.e., delivering 140 legal pads when he was supposed to deliver a full gross of legal pads).  After being caught, the human being is convicted of theft and is banned from doing future business with the government.  (2) Boeing Aircraft Co. is caught conspiring with Pentagon officials to inflate the cost of aircraft being sold to the government.  The Boeing employees implicated in the conspiracy are fired but Boeing is not banned from doing future business with the government.

Looted and drained trillions of dollars

“The U.S. needs to crack down on corporate crime, fraud and abuse that have just in the last four years looted and drained trillions of dollars from workers, investors, pension holders and consumers,” Mr. Nader wrote.  “Among the reforms needed are resources to prosecute and convict the corporate executive crooks and to democratize corporate governance so shareholders have real power; pay back ill-gotten gains; rein in executive pay; and enact corporate sunshine law, among others.” 

Mr. Nader has been warning of Wall Street and other corporate criminals for years.  The current financial crisis should make it apparent that Mr. Nader has been right all along.

“[B]ailouts, of course, are generally doled out to large corporations and industries,” Mr. Nader wrote in Cutting Corporate Welfare.  “When a family-owned restaurant fails, no government intervenes to stop it from going up.  If a small factory can’t pay its bills, it goes out of business.  The bailout, a premier form of corporate welfare, is typically yet another market distortion against the interests of small and medium-sized businesses.”

Corporate corruption will continue so long as corporations are given the rights of people and Americans do not educate themselves about corporate abuse.

“Successfully ending corporate welfare as we know it will turn on a sustained campaign to educate, organize and mobilize citizens,” Mr. Nader wrote.  “Merely documenting abuse is not sufficient to spark the national movement needed to trump corporate power.”

Barack Obama states during his campaign for president that the United States is “in the worst financial crisis since the Great Depression”

October 9, 2008

OBAMA.GREAT.DEPRESSION

CANDIDATE OBAMA, DURING HIS CAMPAIGN, STATING THAT AMERICA WAS FACING THE “WORST ECONOMIC CRISIS SINCE THE GREAT DEPRESSION” AND HE PLEDGED TO INTRODUCE A “RESCUE PLAN FOR THE MIDDLE CLASSES” WHICH WILL SEE THE TAX BILL FOR EVERYONE EARNING LESS THAN $20O,0O0 REDUCED (PHOTO: EPA — APPEARING IN THE TELEGRAPH, LONDON)

The headlines throughout the world on October 8, 2008:

Tokyo: “Aso likens U.S. ills to ’29 crash.”— The Japan Times Online.

London: “Global markets in turmoil following interest rate cut.”  — The Telegraph.

Berlin — “THE WIDENING CRISIS: Central banks cut interest rates, Britain bails out banks.”— Spiegel Online International.

Paris — “Central banks unleash rate cut offensive against finance turmoil.”— Agence France-Presse.

New York — “Central banks cut rates world-wide in emergency move.”— The Wall Street Journal.

Emergency interest rate cuts

“The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden’s Riksbank cut interest rates in an emergency coordinated bid to ease the economic effects of the financial crisis,” according to Bloomberg News.

The Dow Jones Industrial Average lost 13 percent in the past five trading days.  In fact, the Dow lost one third of its value this year after ending Tuesday down another 5.1 percent.  The Dow dropped below the 10,000 mark that it first reached in 1999.

Even after the $700 billion bailout rescue plan, the chairman of the U.S. Federal Reserve, Benjamin Bernanke, admitted that the risk has increased for economic troubles.  This is understandable since even the proponents of the bailout have no idea whether it will work as intended.

“We don’t have a choice now of debating whether it is a good or bad thing,” said Rep. Barney Frank (D-Mass.) at the start of the bailout negotiations.

“Three days after the [bailout] plan was approved, it looks like a pebble turned into a churning sea,” wrote Mark Landler, European economic consultant, in the New York Times on Oct. 6, 2008.

Too many loans to persons who could not afford to pay

It is known, however, what caused the need for some kind of government intervention.  Most economists are in agreement that the primary reason for the current financial crisis is that banks made too many loans to persons who could not afford to repay if there was the slightest downturn in asset values.

“The present crisis, which has its roots in the unsupervised expansion of credit in the United States, has spread from subprime mortgages to toxic securities, to the entire global financial system, where it has savaged equities markets and is now threatening to do incalculable damage to the US and European banking systems,” wrote Mike Whitney, financial columnist.

In the presidential debate in Nashville the night before the headlines quoted above, neither Sen. McCain or Sen. Obama appeared to have any real plan for stabilizing the economy.  Consider, for example, the responses of the candidates to the first question of the debate: “With the economy on the downturn and retired and older citizens and workers losing their incomes, what’s the fastest, most positive solution to bail these people out of the economic ruin?”

Sen. Obama’s most substantive response:

I think everybody knows now we are in the worst financial crisis since the Great Depression. . . . Now, step one was a rescue package that was passed last week.  We’ve got to make sure that works properly.  And that means strong oversight, making sure that investors, taxpayers are getting their money back and treated as investors. . . . It means help for homeowners so that they can stay in their homes.  It means that we are helping state and local governments set up road projects and bridge projects that keep people in their jobs.  And then long-term we’ve got to fix our health care system, we’ve got to fix our energy system that is putting such an enormous burden on families. . . .  (Emphasis added.)

Sen. McCain’s most substantive response:

Americans are angry, they’re upset, and they’re a little fearful.  It’s our job to fix the problem.  Now, I have a plan to fix this problem and it has got to do with energy independence.  We’ve got to stop sending $700 billion a year to countries that don’t want us very — like us very much.  We have to keep Americans’ taxes low.  All Americans’ taxes low.  Let’s not raise taxes on anybody today.  We obviously have to stop this spending spree that’s going on in Washington. . . . We’ve got to have a package of reforms and it has got to lead to reform prosperity and peace in the world.  And I think that this problem has become so severe, as you know, that we’re going to have to do something about home values.  You know that home values of retirees continues to decline and people are no longer able to afford their mortgage payments.  As president of the United States, . . . I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes — at the diminished value of those homes and let people be able to make those . . . payments and stay in their homes. . . . [U]ntil we stabilize home values in America, we’re never going to start turnign around and creating jobs and fixing our economy.

Sen. McCain may be right about the need to stabilize home values.  According to the Federal Reserve, housing is one third of all U.S. wealth.  The Federal Reserve reported that during the second quarter of 2008, housing was valued at $19.4 trillion.

Sen. McCain understated the mood of Americans when he stated that Americans are “a little fearful.”  A CNN/Opinion Research Corp. poll conducted during the past week revealed that a majority of Americans “believe that another economic depression is likely” and that the United States will experience a “25 percent unemployment rate, widespread bank failures and millions of Americans homeless and unable to feed their families.”

Sen. Obama’s ideas on tackling the problem are also subject to criticism.

“Obama’s tax and redistribution policies will not resurrect jobs, wages or the price of stocks in American retirement accounts,” wrote Peter Morici, former chief economist of the U.S. International Trade Commission.  “Ordinary Americans who have to earn their livings outside the cosseted confines of Wall Street will not be much better off two years from now. . . . If Obama wants to make Americans better off, he would serve them better by straightening out the banks and taking substantive action on the trade deficit with China.”

Both Sen. McCain and Sen. Obama acknowledged that the financial crisis threatens to ruin America’s image of being a military power.

“There’s no doubt, and history shows us, that nations that are strong militarily over time have to have a strong economy, as well,” Sen. McCain said.  “And that is one of the challenges that America faces.”

“There has never been a nation in the history of the world that saw its economy decline and maintained its military superiority,” Sen. Obama said.

Opposition to the “rescue” plan

America’s primary plan to prevent economic decline is the $700 billion bailout rescue.  But there is significant voter angst over the bailout.  According to a new CNN/Money poll, 40 percent of Americans viewed the plan as an attempt to rescue the overall economy.  However, “53 % saw the bill as mostly a bailout for Wall Street.”

Most Americans are not aware of another government bailout effort that is underway.  Chairman Bernanke recently doubled the so-called Term Auction Facility lending program for banks to $900 billion, which is about the same size as the Fed’s entire balance sheet.  The Fed on Tuesday loaned $138 billion to 71 banks.  The Fed previously loaned $150 billion and plans to lend $150 billion in one-month and three-month loans in six auctions through December.  There is a sense of urgency and desperation as the economy heads toward deeper recession and perhaps depression.

Photo Credit:

Encyclopedia Brittania

A BREADLINE IN NEW YORK CITY DURING THE GREAT DEPRESSION

A BREADLINE IN NEW YORK CITY DURING THE GREAT DEPRESSION

Time to exit Afghanistan

October 8, 2008
AMERICAN FORCES IN JALOKHEYL, KAPISA PROVINCE, AFGHANISTAN

AMERICAN FORCES IN JALOKHEYL, KAPISA PROVINCE, AFGHANISTAN

MAP OF AFGHANISTAN
MAP OF AFGHANISTAN
FLAG OF AFGHANISTAN

FLAG OF AFGHANISTAN

     The March 2003 United States invasion and occupation of Iraq was a colossal mistake.  The October 2001 U.S. led invasion of Afghanistan was also a huge blunder.

     Secretary of Defense Robert Gates recently told the Senate Armed Services Committee that the next president of the United States will need to carefully consider the extent of troop buildup in the spring because the Afghan population does not readily welcome foreign occupiers.  (Up to three more combat brigades are being considered for deployment in Afghanistan this spring.)

     “I think we need to think about how heavy a military footprint the United States ought to have in Afghanistan,” Mr. Gates said.  He asked: “Are we better off channeling resources into building and expanding the size of the Afghan National Army as quickly as possible?”

     With about 151,000 United States troops in Iraq, the U.S. has not had the available troops to send to Afghanistan.

     In Afghanistan “we do what we can, in Iraq we do what we must,” said Adm. Mike Mullen, chairman of the Joint Chiefs of Staff.

     Gen. David McKiernan, the top American military commander in Afghanistan, said recently that more troops and other aid are needed “as quickly as possible”

     During October 2001 — seven years ago — the United States led the invasion of Afghanistan.  Later during the year, the United States overthrew the Taliban.  The Taliban is making a comeback and has taken control of much of the Pashtun south.  The Taliban is involved in guerilla warfare against U.S. and NATO forces.  More than 130 American soldiers have been killed this year, which is more than in any previous year.

     U.N. Secretary-General Ban Ki-moon issued a recent report that stated that attacks against aid workers have increased in 2008.  The report said that at least 30 aid workers have been killed and 92 abduced so far this year.  At least 59 schools and 22 World Food Program convoys have also been attacked.

     “Regardless of the progress made in certain areas, my overall impression is that the situation in the country has deteriorated over the past six months,” Mr. Ban said in the report. 

     In an article recently published in the New York Times, newly appointed CENTCOM Commander Gen. David H. Petraus said: “Obviously the trends in Afghanistan have been in the wrong direction, and I think everyone is rightly concerned about them. . . . Certainly in Afghanistan, wrestling control of certain areas from the Taliban will be difficult.”

     “It is generally accepted now across all [U.S.] agencies that the situation in Afghanistan has significantly worsened and has become quite dire,” said RAND analyst Seth Jones.

     British General Mark Carleton-Smith recently admitted: “We’re not going to win this war.”

     The “puppet presidency” of Hamid Karzai is losing support due to corruption and the lack of improvement in the safety and living standard of Afghan citizens.  It is said that Karzai’s authority hardly extends beyond the city limits of Kabul.  Meanwhile, the Taliban has considerable popular support.

     “The important point is that the people support the Taliban,” said Afghan Senator Abdul Wali Ahmadzal.  “This is the main problem: now the people do not like the government and they support the Taliban.”

     The support for the Taliban is in part due to “collateral damage” caused by air strikes.  The United Nations reported that 1,455 civilians were killed between January and August of this year.  This was an increase of nearly 40 percent from 2007.  Moreover, at least 577 of the 1,455 civilian deaths were due to the military action of pro-government forces.  During August an American air strike in Herat killed 90 Afghans, predominantly women and children.

     There are currently about 53,000 foreign forces (including 31,000 U.S. troops) in Afghanistan.  American troops have increased from 21,000 two years ago.   The Afghan National Army has about 76,000 well-equipped troops.  Still, the modern military units have been unable to defeat guerilla  warfare.

     The U.S. and NATO occupation and the Karzai regime have done little to make life better for Afghans.  In 2000, 58 percent of males and 87 percent of females were illiterate.  A 2005 report stated that 50 percent of males and 82 percent of females remained illiterate.  Opium production — banned under the Taliban — has increased to the point where 90 percent of the world’s illegal opinium is produced in Afghanistan.

     According to a CIA Factbook:

Despite the progress of the  past few years, Afghanistan is extremely poor, landlocked, and highly dependent on foreign aid, agriculture, and trade with neighboring countries.  Much of the population continues to suffer from shortages of housing, clean water, electricity, medical care, and jobs.  Criminality, insecurity, and the Afghan Government’s inability to extend rule of law to all parts of the country pose challenges to future economic growth.  It will probably take the remainder of the decade and continuing  donor aid and  attention to significantly raise Afghanistan’s living standards from its current level, among the lowest in the world.

     The Taliban was not the founder of al-Qaeda and the Taliban did not invite al-Qaeda to move into Afghanistan.  The United States’ primary goal for its invasion of Afghanistan was to capture or kill Osama bin Laden.  The overthrow of the Taliban was only a secondary goal.  Osama bin Laden has apparently  been able to escape.  And now the Taliban is making a comeback.  If life is not made better for Afghans then the Taliban will remain a political force in Afghanistan.  A military occupation is not the way to make life better for Afghans.