Archives for October 2008

At his blog Politics Is a Blood Sport, Aneurin notices an idea put forth by locally well known Camas investor David Nierenberg, whose investing skills are frequently covered by Motley Fool, which last month referred to him as a “master small cap investor.” Aneurin excerpts comments Nierenberg made to The Oregonian in a Sept. 23 article:

David Nierenberg, a Camas, Wash., investor, went further, calling for “clawbacks” that would allow the government to recover compensation paid to former executives and directors who were in charge when companies moved into subprime mortgages and other high-risk securities that put them in harm’s way.

“It’s harsh, it’s blunt, it’s bloody,” Nierenberg said. “But that’s the way it should be.”

Nierenberg also urged the government to take equity positions in the companies receiving federal aid, as it did when it bailed out Chrysler in 1979. The government ended up making money on its investment in Chrysler.

“If the government is going to put all this money of ours at risk, it should get equity, warrants and options to get repaid first,” he said.

Aneurin goes on to write:

The notion of “clawbacks”, where CEO’s give up their golden parachutes, is exactly what’s needed to sway detractors of the bailout plan. No one wants to hear about CEOs making $20 million for 17 days worth of work. In order to sell this thing politically, taxpayers need to know that they’re not the only ones taking it in the shorts.

What doesn’t seem to be happening with the bailout is serious consultation with business and economic realists. While Nierenberg was a supporter of Mitt Romney and now John McCain, and once worked for Romney, Nierenberg is quite the heavy hitter in state political circles, contributing large sums to candidates and committees of both parties. He also serves on the Governor’s Economic Council and the Washington State Investment Board.

So if a tough-as-nails, realistic capitalist like Nierenberg thinks “clawbacks” are a good idea, then why isn’t that part of the discussion? The people know they’re getting ripped off big-time, and there’s no reason that executives who ran companies aground should escape with millions of golden parachute dollars.

Full Disclosure: I volunteered on a campaign committee headed by Nierenberg called Evergreen Citizens for Schools from about 1998 or to about 2001, so I know him. I haven’t had the pleasure of speaking with him for about a year, so the point is he’s not pushing his “clawback” idea with me. I just thought it was an interesting idea.

So… does Sarah Palin really believe we’re living in the “End Times”?  And if so, can we trust her to have her finger on the button?

Don’t you think that those are legitimate questions to be asked of a Vice Presidential candidate?

U.S. Rep. Jay Inslee (D-Bainbridge Island) was one of just 95 Democrats who broke ranks and voted against Monday’s $700 billion Wall Street bailout.  

Inslee was the only member of the Washington State Democratic delegation to vote against the bill. Indeed, one of his Democratic colleagues, Rep. Adam Smith (D-Tacoma), said: “Failure to act by Congress could turn a severe economic slowdown into a panic—a run on banks and all financial institutions that could plunge us into a deep and lasting recession.”

I spoke with Rep. Inslee on Tuesday to ask him about his rebellious vote. For starters, given that he voted ‘No,’ I asked him if he thought Rep. Smith was wrong? Did Inslee think it wasn’t really 1929? (His aide jumped in to let me know the stock market was up 485 points.)

Inslee said, “There is a risk that is real. We could have a substantial reduction in availability of credit. I think that risk exists. But that doesn’t mean any bill will do.” 

So, what was wrong with the bill, and did he have an alternative plan?

More important: If the Democrats couldn’t even pass a tempered Democratic rewrite of Bush’s original bailout, did Inslee really think they’d be able to pass something that a diehard liberal like himself could eventually support?

Inslee laid out three problems with the bill. 

1. He said it was “based on deficit spending,” and he could not support any more of Bush’s “exploding” deficit.

“It’s strike three,” Inslee said, adding it to a list that included Bush’s war in Iraq ($600 billion) and the Bush tax cuts.  

2. He said the bill was missing any “hard provisions” to guarantee that the public would get a return on the $700 billion loan. “We’re increasing the value of these corporations,” he said. “When we do that we should have defined shares, a defined X number of dollars in equity. This bill does not do that. And knowing the history of the Bush administration, they’re not going to be aggressive about ensuring [we get a return].” 

3. Finally, he said the bill didn’t address the real losers in 2008, not Wall Street , but middle class homeowners who were facing foreclosures. “The only way to do that is through bankruptcy courts,” Inslee said.  “We have to change the rules,” so borrowers, in concert with lenders, are able to rearrange the terms of loans. 

And is there the will or the votes on the Democratic side to do any of this?

Inslee said: “We get more Democratic votes if we do that.”

Monday’s vote was 228 to 205. 133 out of 198 Republicans voted against the bill. 95 out of 235 Democrats voted against it. One Republican didn’t vote. So, technically Inslee is right: The Democrats have numbers. 

Chastising Democratic leadership, Inslee said:  “A decision was made to get 100 or 80 Republicans to vote for it [65 Republicans voted for the bill]. That eliminates the necessity to do a good bill.” Inslee asks rhetorically: “And did we have a good bill?”

Inslee went on to say, in fact, that the Democrats had the leverage at the moment because “the President has to sign” a bill. “We have the power to negotiate with the White House.” 

Asked to distinguish his ‘No’ vote from the 133 Republicans who voted against the bill, including all three Washington State Republicans—Reps. Dave Reichert (R-Auburn), Doc Hastings (R-Pasco), and Cathy McMorris-Rodgers (R-Spokane), Inslee said he couldn’t speak for his GOP counterparts. 

However, a consistent theme on the GOP side was an aversion to big government. In a statement to the press, Doc Hastings, for example, said: “On the question of increased government intervention in the marketplace, I am just plain opposed to such a massive intrusion into the economy and the marketplace.” 

Inslee wants more regulation, not less.  

Later in the day, I asked Inslee if the idea being pushed by presidential candidates Barack Obama and John McCain—higher limits for insured bank deposits—an idea that’s breathed life into a Senate version (and that’s intended to make the House reconsider)—would win him over.   

His aide gave me this response: “That would be a step in the right direction, but he says he will make final decisions on his vote only after he sees the whole package. Higher FDIC credits could be an element of the new deal, but the Congressman and his colleagues are wrestling with a lot of other promising suggestions out there right now, too. His vote will depend on what the final package includes.” 

•••

Rep. Inslee’s webcasting bill (a bill that clears the deck so Internet radio sites can re-negotiate royalty rates with the recording industry) passed the Senate today. It passed the House last Saturday. It’s off to President Bush’s desk for a signature.  

Once again there is this irritating “off the hook” tone emanating from somewhere around my house. It’s not coming from inside my house, rather I think from the vicinity of the telephone pole right outside my back door.  I’ve noticed this tone periodically over the past couple months, and while perhaps it’s only a coincidence, it only seems to occur a couple minutes after I hang up my phone, usually after talking to one of my many terrorist comrades.  Weird.

Also, damn annoying.  So since I figure if somebody is tapping my phone they must also be reading my blog… could you please send a technician by to fix this damn thing?  It’s giving me a headache.

UPDATE:
The tone has stopped.  Thanks for the prompt service.

Politico’s Daniel W. Reilly, in an article speculating about which twelve Congress-critters might be persuaded to change their minds and vote for the Wall Street bailout, mentions a member from Washington state:

Rep. Doc Hastings(R-Wash.)

A moderate Republican, Hastings told the Yakima Herald that he was undecided until Sunday night. In the end, he said he voted no because there were still “too many concepts” and not enough details about taxpayer exposure.

Why, Hastings is not only moderate, I’d say he’s downright mavericky. From a quick interest group ratings search at Project Vote Smart:

2007 Representative Hastings supported the interests of the Business-Industry Political Action Committee 92 percent in 2007.

2007 Representative Hastings supported the interests of the U.S. Chamber of Commerce 74 percent in 2007.

2006 Representative Hastings supported the interests of the Business-Industry Political Action Committee 100 percent in 2006.

2006 Representative Hastings supported the interests of the Consumer Action 0 percent in 2006.

2006 Representative Hastings supported the interests of the National Stone, Sand & Gravel Association 100 percent in 2006.

2006 Representative Hastings supported the interests of the U.S. Chamber of Commerce 100 percent in 2006.

2005-2006 Representative Hastings supported the interests of the American Forest and Paper Association 100 percent in 2005-2006.

2005-2006 Representative Hastings supported the interests of the Associated General Contractors of America 90 percent in 2005-2006.

2005-2006 Representative Hastings supported the interests of the International Warehouse Logistics Association 100 percent in 2005-2006.

2005-2006 Representative Hastings supported the interests of the National Association of Manufacturers 100 percent in 2005-2006. The following ratings indicate the degree that each elected official supported the interests of the organization in that year.

2005-2006 Representative Hastings supported the interests of the National Electrical Contractors Association 88 percent in 2005-2006.

Yep, that’s pretty darn moderate. If he gets any more moderate he’ll be duty bound to support mandatory $18 million golden parachutes for all executives of failed companies. The New Bi-Partisan American Capitalist-Communism has its own internal imperatives, after all.

Essential truthiness requires that “moderate” Republicans be identified to get this thing passed (NOW!!!!) on behalf of our “moderate” masters on Wall Street, at NAM and the Chamber, et al. Any delay will result in the threat of unreceived paychecks and the inability to satisfy consumer lust for luxury automobiles through 72-month loans. The latter is a prospect so terrifying that the only proper course is to curl into a fetal ball and start screaming “9-11” at the top of one’s lungs.

You know the drill by now. Duck and curl, as it were.

Don’t worry about the voters, most races for the House of People’s Deputies Congress are not truly competitive anyhow. Despite economic uncertainty please note the price of Victory Gin has remained unchanged for two weeks, and credit cards charging as little as 21% APR are now accepted at liquor control outlets.

Long live the Glorious People’s Bank of the Republic, where our friendly but oddly familiar-sounding motto is “You pay, we decide.”