Saturday, January 31, 2009

Wall Street having fit over America's outrage on $18 billion exec bonuses

Wall Street having fit over America's outrage on $18 billion exec bonuses

Looks like Wall Street is having a hissy fit over the outrage on their executives' $18 billion dollar bonus. From The New York Times:

Getting between a broker and his bonus is like getting between a schnauzer and his lunch bowl. He may not bite you, but you are going to smell his breath.

“People come here because they want to work hard and get paid a lot for working hard,” one investment banker said Friday as he wended his way, lunch bag in hand, through the World Financial Center. “I think there’s a disconnect between Wall Street and Main Street.”

That certainly was the case this week when Main Street learned that, despite the craters of a down economy, Wall Street bonuses were more than $18 billion last year — roughly what they were in the fatty, solvent days of 2004. The media hollered, the president scolded, and ordinary people checked their wallets. But downtown, in the caverns of finance, the moneymakers shrugged and took it on the chin.

It is a complicated thing, they said, to apportion compensation in a bear market. First of all, profits do not stop; they often ebb. Second of all, losses move unequally, so the law of the jungle should still apply: you eat what you can kill.

“My bonus is ‘shameful’ — but I worked hard to get it,” said John Konstantinidis, a wholesale insurance broker, lunching Friday at Harry’s at Hanover Square.

“I’m a HENRY,” Mr. Konstantinidis added. “High Earner but Not Rich Yet.”

Nonetheless, it was rather remarkable on Friday how many white shirts denied getting a bonus altogether when they were asked. Indeed, if the data obtained by reporters in the district was any measure, there is no telling where that $18 billion really went.

What can be told, however, is that President Obama is substantially less popular on Wall Street this week than he was last week. Words like “outrageous,” “shameful” and “the height of irresponsibility” — especially when applied to a man’s paycheck — tend not to make you many friends.

“I think President Obama painted everyone with a broad stroke,” said Brian McCaffrey, 55, a Wall Street lawyer who was on his way to see a client. “The way we pay our taxes is bonuses. The only way that we’ll get any of our bailout money back is from taxes on bonuses. I think bonuses should be looked at on a case by case basis, or you turn into a socialist.”

That, indeed, was a recurring equation: Broad strokes + bonuses = socialist.

Okay. Let Wall Street executives have their $18 billion bonus. But after that, they are not going to get another single dime of the government bailout money--zero. Let Wall Street fail, due to their outright greed and incompetence. Or better yet, let the federal government nationalize these Wall Street firms, fire these executives, and do not give them any golden parachutes or executive contracts, or any bonuses--and forbid them from working in any other company that is taking federal government bailout money. Wall Street was just as responsible for getting us into this economic mess with the outright greed and speculation. Punish them!

Wall Street executives' $18 billion bonus--and the uproar that followed

I should talk about this $18 billion executive bonus story from The New York Times:

By almost any measure, 2008 was a complete disaster for Wall Street — except, that is, when the bonuses arrived.

Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.

That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.

While the payouts paled next to the riches of recent years, Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high.

Some bankers took home millions last year even as their employers lost billions.

What is disconcerting here is that Wall Street pays out the sixth largest haul in bonuses--which is $18 billion--to its executives, even as the financial market has collapsed due to the gambling on subprime mortgages, and those same Wall Street firms going to Washington, asking for bailout money. It is an incredible hypocrisy on Wall Street's part. Continuing with the NY Times story:

The comptroller’s estimate, a closely watched guidepost of the annual December-January bonus season, is based largely on personal income tax collections. It excludes stock option awards that could push the figures even higher.

The state comptroller, Thomas P. DiNapoli, said it was unclear if banks had used taxpayer money for the bonuses, a possibility that strikes corporate governance experts, and indeed many ordinary Americans, as outrageous. He urged the Obama administration to examine the issue closely.

“The issue of transparency is a significant one, and there needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else,” Mr. DiNapoli said in an interview.

President Barack Obama had some harsh words to say about the $18 billion Wall Street bonuses. From the Los Angeles Times:

Reporting from Washington -- President Obama blasted Wall Street executives on Thursday, calling it the "height of irresponsibility" that they gave employees massive bonuses last year even as the government was forking over billions to bail out ailing financial firms.

[....]

But seated in the Oval Office after a meeting with Treasury Secretary Timothy F. Geithner, Obama said this is not the time for executives to be raking in huge bonuses.

"That is the height of irresponsibility," Obama said. "It is shameful, and part of what we're going to need is for folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility."

"There will be time for them to make profits, and there will be time for them to make bonuses," the president said. "Now is not that time."

In issuing the harsh words, the president reached for the most effective tool at his disposal right now: public shame. Though the bailout passed last fall imposes some limits on executive compensation, for example prohibiting incentives for taking excessive risks as well as excessive severance packages, it doesn't ban bonuses for simply being too generous.

But Obama has had success with the tough talk lately. Earlier in the week, after he questioned Citigroup's decision to buy a new corporate jet even as it takes bailout money, the troubled bank canceled the order. Aides say he called for responsibility when he met with corporate executives this week.

At this point, President Obama is trying to shame these Wall Street executives into giving up their bonuses. I doubt that will work. Wall Street was addicted to the greed and the over-speculation of the housing bubble, the repackaging of the over-valued subprime mortgages into investment securities, the gambling of collateralized debt obligations. These guys wanted to make huge amounts of money on these gambling schemes, and they succeeded. They are not going to give up a penny of these bonuses. Instead, they are expecting Washington to socialize their losses with American taxpayer money because these Wall Street banks are just too big to fail. Privatized profits, socialized losses. That is how Wall Street is working today.

Senator Claire McCaskill, D-Missouri, had even harsher words to say about the Wall Street executives:

WASHINGTON (CNN) -- One day after President Obama ripped Wall Street executives for their "shameful" decision to hand out $18 billion in bonuses in 2008, Congress may finally have had enough.

An angry U.S. senator introduced legislation Friday to cap compensation for employees of any company that accepts federal bailout money.

Under the terms of a bill introduced by Sen. Claire McCaskill, D-Missouri, no employee would be allowed to make more than the president of the United States.

Obama's current annual salary is $400,000.

"We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer," an enraged McCaskill said on the floor of the Senate. "They don't get it. These people are idiots. You can't use taxpayer money to pay out $18 billion in bonuses."

McCaskill's proposed compensation limit would cover salaries, bonuses and stock options.

Here is the video of McCaskill on Wall Street "idiots." From CNN.Com:



I will say that there is an easier way to stop the excessive greed on Wall Street--just take away the bailout money and let these Wall Street firms fail. Washington should agree to give the bailout funds to these Wall Street banks on the condition that these executives and board members should be fired from their posts with no pay, or golden parachutes, or any stock options. They helped send this country into its current financial mess, so they should be canned from their jobs, and should not be hired to any other financial institution that is taking federal bailout money. If these Wall Street idiots object, then let their firms fail, and the government can buy up the assets for pennies on the dollar, and still fire these idiots. The government could then search for competent people to run these firms. Put some serious teeth into re-regulating Wall Street.

Of course, that probably will not happen.

Saturday Morning Cartoons--Cat Fishin'

With the nasty winter weather blowing in all over this country, I thought it would be appropriate to look ahead to those wonderful days of spring--and all the great fishing to waste away on those warm spring days. And what is more fun than going Cat Fishin' with Tom and Jerry. This 1947 cartoon has Tom sneaking into a private fishing hole, guarded by Spike the Bulldog, to go cat fishing by using Jerry as the lure. Hilarity follows. From YouTube:

Friday, January 30, 2009

RNC elects Michael Steele as first African-American chairman

This is from The Washington Post:

The Republican National Committee elected Michael Steele as its first African American chairman today in Washington, a decision that came after an excruciating series of ballots that displayed a level of drama rarely seen in national politics.

On the sixth and final ballot Steele bested South Carolina Republican party Chairman Katon Dawson 91 to 77.

"It's time for something completely different and we are going to bring it to them," Steele said after his victory. "This is our opportunity. I cannot do this by myself." (Watch the full speech.)

In picking Steele, who had previously served as the chairman of the Maryland Republican Party, the state's lieutenant governor, and the GOP nominee in the Maryland Senate race in 2006, the party regulars seem to be acknowledging the need for new -- and different -- faces at the top of its food chain.

"The winds of change are blowing at the RNC," said current chair Mike Duncan who stepped aside after losing votes on each of the first three ballots.

After five ballots, the race came down to Steele and Dawson. Republican party strategists in attendance at the meeting openly fretted about the possibility of electing Dawson, who had acknowledged his membership in a whites-only club, and the signal it would send to a country that had just elected Barack Obama as the nation's first black president.

Interesting that the Republican Party selected an African-American as their chairman--you don't think it had anything to do regarding the election of the first African-American to the Oval Office, do you? Especially when there was a protracted fight between Steele, South Carolina Republican party Chairman Katon Dawson, and even current RNC chairman Mike Duncan?

Nah! It is just a coincidence.

Bush lawyer tells Rove to refuse to talk to Congress

This is from Newsweek.com:

Just four days before he left office, President Bush instructed former White House aide Karl Rove to refuse to cooperate with future congressional inquiries into alleged misconduct during his administration.

On Jan. 16, 2009, then White House Counsel Fred Fieldingsent a letter (.pdf) to Rove's lawyer, Robert Luskin. The message: should his client receive any future subpoenas, Rove "should not appear before Congress" or turn over any documents relating to his time in the White House. The letter told Rove that President Bush was continuing to assert executive privilege over any testimony by Rove—even after he leaves office.

A nearly identical letter (.pdf) was also sent by Fielding the day before to a lawyer for former White House counsel Harriet Miers, instructing her not to appear for a scheduled deposition with the House Judiciary Committee. That letter reasserted the White House position that Miers has "absolute immunity" from testifying before Congress about anything she did while she worked at the White House—a far-reaching claim that is being vigorously disputed by lawyers for the House of Representatives in court.

The letters set the stage for what is likely to be a highly contentious legal and political battle over an unresolved issue: whether a former president can assert "executive privilege"—and therefore prevent his aides from testifying before Congress—even after his term has expired.

"To my knowledge, these [letters] are unprecedented," said Peter Shane, an Ohio State University law professor who specializes in executive-privilege issues. "I'm aware of no sitting president that has tried to give an insurance policy to a former employee in regard to post-administration testimony." Shane likened the letter to Rove as an attempt to give his former aide a 'get-out-of-contempt-free card'."

This is just amazing. Former President George W. Bush is now claiming that he has executive privilege--even after he has left office. The House Judiciary Committee Chairman John Conyers has no intention of backing down now, having issued another subpoena against Karl Rove to testify before the Judiciary Committee next Monday on his role in the firing of the U.S. attorneys and the prosecution of former Democratic governor of Alabama Don Siegelman. Conyers stated in a press release, "After two years of stonewalling, it's time for him [Rove] to talk,"

The big question now is what will the Barack Obama administration do on this issue? Newsweek reports that a copy of Fielding's letter, and the subpoena, have been submitted to President Obama's White House counsel, George Craig, and everyone is waiting for President Obama's position on this issue. In other words, Karl Rove is praying that President Obama will save his ass in allowing former President Bush to exert executive privilege beyond Bush's term in office. And there are still the previous subpoenas that have been issued, by the House Judiciary Committee, against Rove and Harriet Miers. According to Newsweek:


"The Justice Department is due to state its position on executive privilege to the U.S. Court of Appeals in a few weeks in response to the House's attempt to enforce its previous subpoenas for Miers and Bolten, who were subpoenaed to turn over documents relating the U.S. attorneys firings. Both refused to comply, or even show up—relying on the Bush Justice Department's sweeping position on "absolute immunity" from testifying before Congress."

So this entire executive privilege against testifying before Congress is quickly coming to a close. Bush is out of office, and this sweeping declaration of presidential dictatorial power is now being decided by a new president, who was a constitutional law professor. Countdown with Keith Olbermann has a good roundup on this story, including speculation that the Obama administration may deny executive privilege for Rove to avoid testifying before Congress. From Countdown:



So we will know by early February how this circus will turn out.

Exxon posts $45.2 billion profit

It appears that the U.S. recession isn't hitting Exxon Mobile. From MSNBC News:

HOUSTON - Exxon Mobil Corp. on Friday reported a profit of $45.2 billion for 2008, breaking its own record for a U.S. company, even as its fourth-quarter earnings fell 33 percent from a year ago.

The previous record for annual profit was $40.6 billion, which the world's largest publicly traded oil company set in 2007.

The extraordinary full-year profit wasn't a surprise given crude's triple-digit price for much of 2008, peaking near an unheard of $150 a barrel in July. Since then, however, prices have fallen roughly 70 percent amid a deepening global economic crisis.

In the fourth quarter alone crude tumbled 60 percent, prompting spending and job cuts in an industry that was reporting robust, often record, profits as recently as last summer.

With piles of cash and diversified operations, the majors like Exxon Mobil have fared better than many smaller oil and gas companies, but Friday's results show no one is completely insulated from the ongoing malaise.

Irving, Texas-based Exxon said net income slid sharply to $7.8 billion, or $1.55 a share, in the October-December period. That compared to $11.7 billion, or $2.13 a share, in the same period a year ago, when Exxon set a U.S. record for quarterly profit. It has since topped that mark twice, first in last year's second quarter and then with earnings of $14.83 billion in the third quarter.

So, is Exxon going to be redecorating their corporate offices? Buying any new corporate jets?

U.S. economy shrank 3.8 percent in fourth quarter 2008

Graph showing U.S. economy contracted 3.8 percent in the fourth quarter of 2008. From The New York Times.

This is from The New York Times:

The United States economy shrank at its fastest pace in a quarter-century from October through December, the government reported on Friday, as consumer spending and business investment collapsed, signaling more economic contraction in the months ahead.

In the broadest official accounting of the toll of the credit crisis, the government reported that gross domestic product shrank at an annual rate of 3.8 percent in the fourth quarter of 2008. While that was less than economists’ expectations of a 5.5 percent drop, the decline would have been much steeper — more than 5 percent — if shipments of goods had fallen as sharply as orders.

President Obama seized on the figures Friday morning, calling the contraction a “continuing disaster” for working families, and again urged Congress to pass a package of tax cuts and spending. The House, divided on party lines, passed an $819 billion stimulus plan on Wednesday, and Senate is expected to take up the measure next week.

“What we can’t do is drag our feet or delay much longer,” Mr. Obama said. “The American people expect us to act.”

The president also announced the first meeting of a Task Force on Middle-Class Working Families, which will seek to raise living standards of working families. .

Wall Street tumbled after the numbers were released. The Dow Jones industrial average fell more than 100 points in midday trading, and the broader Standard & Poor’s 500-stock index was down 1.5 percent.

The NY Times is reporting that this difference between a 3.8 percent contraction and a possible 5.1 percent decline is due to inventory accumulation. Business have too much inventory, and they are trying to cut back even further to reduce their inventory. The Federal Reserve cannot cut interest rates to stimulate investment--the Fed's interest rates are already at zero percent, and banks are saddled with so much bad debt due to subprime mortgage speculation that they are not providing new loans to consumers and businesses even as they are accepting government bailout money. Companies are laying off workers, and those laid-off workers are cutting back on consumer spending. It is a very severe contraction that we are facing now.

Americans lost more than a quarter of their 401k savings due to stock market collapse

From The Washington Post:

Millions of Americans lost more than a quarter of their 401(k) retirement savings in 2008 because of the stock market's collapse, a setback that could force them to work longer or severely curtail their spending as they grow older.

In an analysis of their participants' accounts, Fidelity Investments, Vanguard and T. Rowe Price -- three of the nation's largest 401(k) plan providers -- also found that some employees were further eroding their savings by taking hardship withdrawals to pay for current financial needs.

Many Americans have seen their wealth evaporate with the drop in home values, the rise in the cost of living and the stagnation of wages. Now, as they tap into nest eggs to pay bills, they face leaner retirements as well. Particularly vulnerable are baby boomers who expected to retire in the next few years.

"With a hardship withdrawal, I'm going to eat my retirement for breakfast, lunch and dinner right now," said Teresa Ghilarducci, a professor of economic policy analysis at the New School for Social Research in New York. "That is worrisome. It shows that the outcome of this crisis is not only that the account balance is down, but that they're taking out part of their principal. . . . It means that it will take longer to retire."

[....]

The stock market's dramatic collapse revealed the vulnerability of a system that requires workers to make investment decisions that professionals once made for them. To make matters worse, many cash-strapped employers have recently been suspending their contributions to employees' accounts.

"The financial collapse just drives home how fragile these plans are," said Alicia Munnell, director of Boston College's Center for Retirement Research.

In a study released yesterday, Fidelity Investments reported that the average 401(k) balance dropped 27 percent, to $50,200, last year from $69,200 in 2007. Fidelity has more than 11 million plan participants.

Vanguard, which has 3.5 million participants, reported the average account balance for 2008 fell 28.5 percent to $56,050 from $78,411 in 2007. T. Rowe Price's 1.7 million participants also had a 27 percent loss on average.

And to think that then-president George W. Bush wanted to privatize Social Security?

The GOP's eternal flame of freedom

I found this CNN story through Americablog, and even I found it just too amazing to be true. Guess what--it is true. From CNN.com:

WASHINGTON (CNN) -- The only bright spot in the nation's capital for Republicans these days seems to be a flame that burns 24 hours a day in the courtyard at the campaign headquarters for Republican senators.

The Eternal Flame of Freedom is near the National Republican Victory Monument, which commemorates the 1994 "Republican Revolution," when the GOP wrested control of Congress out of Democratic hands.

Even in the cold, snowy days of January, the flame blazes as a beacon of hope for some and as a memory of the days when Republicans were in power and called the shots in Washington.

Now, the GOP is taking orders from Democrats and doing a lot of soul-searching as it tries to right itself and return the party to its glory days.

Now the rest of the CNN story is about how the Republicans have been completely stomped out of power in both Congress and the White House, with President Barack Obama racking up a huge public approval rating of 84 percent, according to a CNN poll, and that the House easily passed President Obama's economic stimulus package without a single GOP vote. The story also has a lot of Republican politicians saying how they must rebuild their party for the future, select a new chairman for the Republican National Committee, and regain their voice as an opposition party for the 2010 election. It is a no-brainer story. But what is really interesting is this Eternal Flame of Freedom. I didn't expect it to exist, until I read the CNN story, and did a little research. There is a National Republican Victory Monument with an Eternal Flame of Freedom. What is more, you too, can get your name inscribed on National Republican Victory Monument, and the Eternal Flame of Freedom:

The Patriotic Americans who have achieved recognition as PLATINUM MEMBERS for their leadership in the Republican Party and their loyal service to our Republican Presidents are eligible to have their names inscribed in the granite tablet which is the Republican Victory Monument.

This eloquent monument, which is located just to south of the Eternal Flame of Freedom in the courtyard of the Task Force's national headquarters in the Ronald Reagan Republican Center in Washington, DC, is a permanent and public tribute to the few top members of the Task Force.

How much does it cost to become a Platinum member of the National Republican Senatorial Committee. I couldn't tell how much it would cost to become a Platinum member of the NRSC, however their membership prices varied from $150 for an individual membership to the Republican Presidential Task Force, to $28,500 for individual membership to the Majority Makers. I'm thinking that to get your name inscribed on a monument, next to a flame, you're probably going to have to spend around a million or so. And you get some cool benefits, like "credentials in the form of a membership card handsomely embossed with the members' name and PLATINUM MEMBER status, as well as Certificate of Membership and a platinum lapel pin will be recognized as a symbol of membership in the top echelon of this heralded Republican Party entity," and "a specially commissioned, full size American flag has become one of this organization's central traditions."

I'm surprised they haven't thrown in a Ronco Pocket Diaper Steamer to help clean up the messes made from those whiny Republican congressional crybabies.

Thursday, January 29, 2009

Blagojevich is gone!

It appears that Illinois governor Rod Blagojevich has been impeached and removed from office for his role in attempting to sell incoming President Barack Obama's U.S. Senate seat. From the Chicago Tribune:

SPRINGFIELD, Ill. - The Illinois Senate voted to remove Gov. Rod Blagojevich from office Thursday, marking the first time in the state's long history of political corruption that a chief executive has been impeached and convicted.

The 59-0 vote followed several hours of public deliberation in which senator after senator stood up to blast Blagojevich, whose tenure lasted six years. And it came after a four-day impeachment trial on allegations that Blagojevich abused his power and sold his office for personal and political benefit.

The conviction on a sweeping article of impeachment means the governor was immediately removed from office. The Senate also unanimously voted to impose the "political death penalty" on Blagojevich, banning him from ever again holding office in Illinois.

Lt. Gov. Patrick Quinn, Blagojevich's two-time running mate, has become the state's 41st governor.

[....]

Highlighting the day's serious nature, Blagojevich offered his own sprawling, passionate closing argument after ignoring a Senate impeachment trial all week to take his case to the nation on the talk-show circuit.

I've been keeping half an eye on the Blago circus, amazed at how far Blago has been thumbing his nose at just about everyone--the Senate Democrats for when Blago chose former Illinois Attorney General Roland Burris to fill Obama's Senate seat, or how Blago dismissed the Illinois House vote to impeach him, or even how Blago refused to attend his own impeachment trial--let alone Blago's legal team pulling out of the impeachment trial. And to make matters worst, Blago decided to spend this week in a surreal media tour, before returning to the trial to present his own closing arguments against the impeachment. I don't know what else to say, aside from the fact that Rod Blagojevich was a complete idiot for not only attempting to sell Obama's U.S. Senate seat, but also for digging himself into his own political grave with this "damn you all to hell" attitude against anyone who opposed him over the past month. And that attitude pretty much included the entire Illinois state legislature. The Blago pissy attitude probably made this circus so bad, that the Illinois state legislature decided to kick Blago out for not just being an idiot, but for being a pissy idiot.

I guess we will no longer have to worry about Rod Blagojevich anymore. On to the next circus!

4.8 million Americans on unemployment benefits

Graph showing jobless claims increasing to 588,000 for the fourth week in January. From MSNBC News.

There is not much to say on this MSNBC News story:

WASHINGTON - The number of people receiving unemployment benefits has reached an all-time record, the government said Thursday, and more layoffs are spreading throughout the economy.

The Labor Department reported that the number of Americans continuing to claim unemployment insurance for the week ending Jan. 17 was a seasonally adjusted 4.78 million, the highest on records dating back to 1967. That's an increase of 159,000 from the previous week and worse than economists' expectations of 4.65 million.

As a proportion of the work force, the tally of unemployment benefit recipients is the highest since August 1983, a department analyst said.

The total released by the department doesn't include about 1.7 million people receiving benefits under an extended unemployment compensation program authorized by Congress last summer. That means the total number of recipients is actually closer to 6.5 million people.

Tack on the 1.7 million receiving extended unemployment benefits, and you get a total of 6.5 million Americans unemployed. And you can bet that number is even higher, considering the number of Americans that have stopped looking for a job (and have been dropped from the unemployment rolls), and the number of Americans that are underemployed or are working part time.

It just keeps getting worst.

GOP Economics 101

I found this interesting detail through The Washington Monthly, and even I'm just as incredulous on the GOP's thinking on economic policy. But the source for this little detail is from The New York Times:

Representative Virginia Foxx, Republican of North Carolina, said that former President George Bush’s signature tax cuts in 2001 had created years of growth but that the nation’s problems started when Democrats regained majorities in Congress in the 2006 elections.

To be honest, I even missed this detail in my own posting on the NY Times story.

But getting back to the story, if I'm reading Congresswoman Virginia Foxx correctly, the housing bubble-and-bust, the subprime mortgage mess, the Wall Street financial meltdown due to the gambling on over-valued subprime mortgages, and the deepening U.S. recession as a result of the mortgage and financial problems are to be blamed on the Democrats for taking control of Congress. Had the Democrats not gained control of Congress, then the Bush tax cuts would have created many years of growth--and we wouldn't be in this economic and financial mess that we are currently in.

Is this lady a frickin' moron?

I'm trying to think of anything that the Democrats did, regarding legislation, that could have caused such a downturn in the U.S. economy when they regained control of Congress in 2006. Unfortunately, the Democrats didn't do anything. Whatever legislation they brought up was eventually filibustered by the Republicans, while then-President George W. Bush continued rubber-stamping his political policies down Congress' throat. There is no reasoning here on Representative Foxx's statement. Foxx is continuing this insane blather to continue angering her own, crazed, base with lies and hypocrisy. It is all she knows how to do. Foxx is hoping that she will generate enough GOP anger into votes to remove Democratic control of Congress, and possibly the White House, during the next two election cycles. Foxx is playing election politics here.

Wednesday, January 28, 2009

House passed Obama's stimulus plan

Well, the House of Representatives passed President Barack Obama's economic stimulus plan. In one sense, I'm not surprised by the House passage, since the Democrats control the House with a significant majority. What is really interesting is that Obama's stimulus plan passed without a single Republican vote. From The New York Times:

WASHINGTON — Without a single Republican vote, President Obama won House approval on Thursday for an $819 billion economic recovery plan as Congressional Democrats sought to hold down their own difference over the enormous package of tax cuts and spending.

As a piece of legislation, the two-year package is among the biggest in history, reflecting a broad view in Congress that urgent fiscal help is needed for an economy in crisis, and at a time when the Federal Reserve has already cut interest rates almost to zero.

But the size and substance of an economic stimulus package remain in dispute, as House Republicans blamed Democrats for a package that tilted heavily toward new spending instead of tax cuts

All but 11 Democrats voted for the plan and 177 Republicans voted against it. The 244-188 vote came a day after Mr. Obama traveled to Capitol Hill to seek Republican backing — if not for the package than on future issues.

“This recovery plan will save or create more than three million new jobs over the next few years,” Mr. Obama said in a statement after the vote. “I can also promise that my administration will administer this recovery plan with a level of transparency and accountability never before seen in Washington. Once it is passed, every American will be able to go the Web site recovery.gov and see how and where their money is being spent.”

Of course, it is not surprising at all that the House Republicans voted against this bill. House Minority Leader John Boehner told his GOP colleagues that they should vote against President Obama's stimulus plan in a secret meeting before Obama arrived on Capitol Hill to pitch the stimulus package to the Republicans. The House Republicans have decided that they wanted to play a complete obstructionist game against both the Democrats and President Obama. Their thinking is that if the U.S. economy fails, then the American people will become angry at both the congressional Democrats, and the Obama administration. Such American anger could turn into votes for the GOP in both the 2010 and 2012 elections. In other words, the Republicans were more interested in playing politics, rather than providing policy. I suspect that the GOP will continue this obstructionist game for the next two years, or at least until they can regain political power.

Update: I guess I'm still thinking about this story. This story makes the Republican Party look terrible. President Obama went to Capitol Hill yesterday to make his stimulus pitch to the congressional Republicans. President Obama was willing to compromise on some aspects of the stimulus plan--cutting taxes for small businesses and corporate taxes if the Republicans would close tax loopholes for big businesses. There was probably enough compromise here to allow some Republican support for this package. But the Republicans decided they didn't want to play ball with Obama, even going to the point where Boehner told his GOP colleagues not to vote for this bill before President Obama met with the House Republicans. For the GOP, compromise means rubber-stamp all our demands--even after we were overwhelmingly voted out of power in both Congress and the White House just three months ago. Rubber-stamp all our demands, regardless of whether a majority of Americans support President Obama's economic stimulus package. President Barack Obama made the House Republicans look like completely stupid fools. Obama came to the congressional Republicans, seeking bipartisanship with the stimulus plan. Not only did the congressional Republicans bitch-slap Obama, but not a single Republican voted for the plan. Guess what--that is going to be the big news story for the day! The stimulus plan was going to be passed by a majority of the House Democrats. If there was some token Republican support for the plan, then the Republicans could have claimed some semblance of bipartisanship on this stimulus plan with the Democrats and the Obama administration. However, since Boehner told the House Republicans not to vote for this plan, the GOP now appears to be a party of obstructionism with no intention of allowing bipartisanship in the governing process. In other words, Republicans are not going to play the bipartisanship game. They have shown their true colors to the American people in this huge vote. You do not think that the American people are watching this story, with all the bad economic news and job losses that have been coming out, and are seeing just how whiny, petty, crybabies that Boehner and the House Republicans have become? President Obama and the Democrats were willing to compromise on some smaller aspects of the stimulus bill, not to be rubber-stamped by a minority party's wet dream demands for more Bush-style tax cuts. Publicly, the House Republicans hung themselves with a rope provided by President Obama.

And they don't even realize it.

Starbucks cuts 6,700 jobs

You know that this U.S. recession is going to be devastating when Starbucks starts cutting jobs. From MSNBC News:

Starbucks Corp. said Wednesday that it would cut as many as 6,700 jobs as it closes hundreds more stores and eliminates more positions at its corporate headquarters.

Faced with slowing demand for lattes and cappuccinos because of the recession, Starbucks plans to close 300 stores, including 200 in the United States, and eliminate about 6,000 store jobs. The company also plans to eliminate about 700 corporate jobs, including about 350 at its corporate headquarters in Seattle.

The coffee giant made the announcement as it reported that its profit dropped 69 percent in its fiscal first quarter with sales continuing to slide.

People can't afford $5 lattes when their jobs are being lost, and their homes are being foreclosed. We are nowhere near the end of this recession.

Boeing to lay off 10,000 workers in 2009

This is from The New York Times:

The chief executive of the Boeing Company said on Thursday that the plane maker expected to cut a total of 10,000 jobs this year, about 6 percent of its work force.

The number includes 4,500 layoffs announced earlier this month by Boeing’s commercial plane unit.

Boeing also reported an unexpected fourth-quarter loss Wednesday and forecast 2009 earnings well below Wall Street estimates as it grapples with a dip in demand for its planes while airlines feel the pain of recession.

Boeing’s chief, W. James McNerney Jr., said the cuts were necessary given the uncertainty over the country’s military budget and because the company was expecting more cancellations of plane orders.

But Boeing, which is struggling to recover from a two-month strike by its assembly workers, was also able to calm some investors, who had been braced for a worse outlook amid the aerospace sector’s severe downturn.

Boeing shares, which had fallen about 45 percent in the last 12 months, were essentially unchanged at midday.

“The guidance could have been much lower if Boeing had forecast a more conservative build rate for commercial airplanes in 2009,” an analyst at Macquarie Securities, Rob Stallard, said.

Boeing reported a quarterly loss of $56 million, or 8 cents a share, compared with a profit of $1.03 billion, or $1.36 a share, in the quarter a year ago.

A couple quick comments. I do not think that Boeing's current troubles are to be solely blamed by the strike. According to the NY Times story, the $56 million quarterly loss "was caused by the 58-day strike by Boeing’s machinists union, which straddled the third and fourth quarters, cutting plane deliveries in both, along with extra costs on the delayed 747 and a one-time litigation charge." However, Boeing did report a quarterly profit of 62 cents a share, below Wall Street's average forecast of 78 cents a share. That profit excludes the 747 costs and litigation charge. The NY Times story also reports that a two-year delay of Boeing's new 787 Dreamliner plane has reduced the number of orders to 895 planes from 910 aircraft orders Boeing received in December 2008. The International Air Transport Association (IATA) reported that the U.S. airline industry expects to lose $2.5 billion for 2009. This 2009 loss is a result of higher fuel costs, a decrease in passenger traffic by around 3 percent, and a decrease in cargo traffic by around 5 percent. If the airline industry is feeling the pinch of the U.S. recession, then they are certainly going to attempt to cut back on costs. One area the airlines could cut back on is in the purchase of new aircraft, such as the Boeing 787, or the airlines could shop around for current aircraft on the market. Remember that Boeing's Dreamliner aircraft has been delayed by two years. Airlines that need new aircraft could purchase other Boeing products, or may choose to purchase rival Airbus' aircraft. But then again, Airbus is also seeing a decline in aircraft orders:

Airbus expects aircraft orders to drop sharply in 2009, and suspects that deliveries may have peaked in 2008.

Along the way, the aircraft maker also is scaling back expectations on its flagship A380. Only 18 deliveries are now forecast for the year--down from 21--which was already a revision from an earlier plan for 26.

Airbus has been struggling to catch up with production plans for some time. Airbus missed its A380 order target for 2008, which originally was 30 aircraft and then revised to 20.

[....]

Overall, Airbus CEO Tom Enders indicates A380 issues are gradually being overcome, but are not fully resolved. He would not give a delivery target for 2010, but notes that the plan is to have the program running apace in 2011 after problems with aircraft wiring disrupted the program.

Total order intake for 2009 is estimated at around 300 to 400 units, with Airbus COO for customers, John Leahy, noting that the low end is more likely. "This is clearly going to be a slow year for all aircraft orders," he notes.

In reality, it is the U.S. recession that is causing the Boeing slowdown in aircraft production. I'll admit that the strike exasperated Boeing's quarterly economic pain. But if American consumers are cutting back on spending due to job and housing worries, they are not going to be purchasing airline tickets for travel. If companies are trying to cut costs and inventory, they are not going to be spending money on air freight. Thus, airlines are hurting by the downturn in passenger and freight traffic--they are not going to be spending money on new Boeing, or Airbus, planes. The economic pain of this U.S. recession is hurting all areas of the market and all companies. Boeing is facing a serious economic slowdown, and they are slashing 10,000 jobs in the wake of this slowdown.

You can bet that those 10,000 soon-to-be-unemployed Boeing workers are not going to be taking any airline trips in the future.

Rove subpoenaed by House Judiciary--Again!

This is from The Huffington Post:

WASHINGTON — The House Judiciary Committee chairman subpoenaed former White House adviser Karl Rove on Monday to testify about the Bush administration's firing of nine U.S. attorneys and its prosecution of a former Democratic governor.

Rep. John Conyers, D-Mich., said the ongoing legal battle to get Rove and other former Bush administration aides to testify may have success with a new president in the White House.

Former President George W. Bush upheld Rove and two other senior aides who asserted they did not have to testify before Congress about their actions in the White House.

The legal dispute between the executive and legislative branches of government is before a federal appeals court.

Rove's lawyer, Robert Luskin, said his client was only following Bush's orders and never asserted a personal claim that he could disobey a congressional subpoena. Luskin added that if the Obama administration no longer asserts a legal claim against Rove testifying, "we will do our best to work it out with the new president."

"This is not Mr. Rove's dispute," Luskin said.

The subpoena commanded Rove to appear on Feb. 2 for a deposition on the U.S. attorney firings and the prosecution of former Alabama Gov. Don Siegelman, a Democrat.

Then there is this interesting Countdown story, where Keith Olbermann reports that Karl Rove has forwarded this subpoena to the Obama administration, requesting that President Barack Obama continues to assert former President George W. Bush's executive privilege on Rove in the continuing House investigation in the U.S. attorney scandal:



Now in the Countdown story, Olberman and his guest, former Nixon White House counsel John Dean, speculate that President Obama may enforce the executive privilege to former President Bush for not having to testify before any congressional investigation, but leave Karl Rove out to dry. There is also some talk of a negotiation between Bush, Rove, and the Obama administration on how much executive privilege Rove will have in avoiding the congressional subpoena. And if Karl Rove is forced to testify in the attorney firings, you can bet that former Bush counsel Harriet Miers and former chief of staff Josh Bolten will be subpoenaed into testifying before Congress on these matters as well. So this is a last-ditch effort by Rove and the rest of the former Bush officials to not just avoid testifying before Congress in these scandals, but to conceal their own potential criminal involvement during the Bush administration.

Mother Jones reporter Stephanie Mencimer takes another look at the implications of the Rove subpoena on the Obama administration:

The new Democratic president may not have much sympathy for his predecessor’s expansive view of executive privilege. But while the incoming Obama administration may have a vested interest in facilitating a public airing of what really went down in the Bush Justice Department, getting Rove and the others up to the Hill isn’t a simple task. "Obama doesn't have the authority to just waive the privilege," explains Neil Kinkopf, a Georgia State law professor and a former Justice Department official in the Clinton administration, noting that President Bush will continue to have a say in the matter, however diminished. "The privilege belongs to the president who asserts it," he says, meaning that Bush can continue to assert executive privilege in an attempt to prevent Rove and Miers from testifying.

The subpoenas will put Obama in an awkward position. While he may have opposed Bush's view of presidential power as a candidate, it's not hard to envision a time when Obama himself may see some advantages to shielding Rahm Emmanuel and other of his close advisers from the inquiring minds of Congress. Not only that, but he may fear that refusing to back President Bush could set an unhealthy precedent that he might not want to leave for his successor.

Mencimer reports that President Obama may have no choice but to continue to assert executive privilege on Rove because the executive privilege belongs to former President Bush and that Bush can continue to claim it, even when Bush is out of office. There is also the potentially sticky future situation where President Obama may have to assert the executive privilege to keep his own staff from testifying after Obama leaves the White House. In other words, the Rove subpoena has become a political CYA for future presidential administrations, and President Obama has to make a choice on whether to allow such a CYA, or not.

Talk about a sticky situation here.

Jeb Bush will not run for 2010 Senate seat

Could he be thinking of a higher office? From MSNBC News:

TALLAHASSEE, Fla. - Former Gov. Jeb Bush says he won't run for the U.S. Senate in 2010 to replace the retiring Mel Martinez.

Bush made the announcement Tuesday, saying "now is not the right time to return to elected office."

The president's younger brother served as governor of Florida from 1999-2007 and remains a popular figure in the state. His announcement clears the field for several other potential Republican candidates who had said they wouldn't challenge him.

Bush won bipartisan praise for leading the state through eight hurricanes over a two-year period. He used standardized testing to overhaul the education system, was credited with making government more efficient and lowered taxes.

Martinez announced last month that he wouldn't seek a second six-year term.

I'm sorry, but the last thing we need is another frickin' Bush in office.

Tuesday, January 27, 2009

New York attorney general issues subpoena against Merrill CEO

Okay, this is getting interesting. From CNN.com:

NEW YORK (Reuters) -- New York's attorney general issued a subpoena to former Merrill Lynch Chief Executive John Thain Tuesday in a probe into bonuses paid to the firm's employees just days before its takeover by Bank of America Corp .

"The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America (BAC, Fortune 500) is troubling to say the least and warrants further investigation," Attorney General Andrew Cuomo said in a statement.

Bank of America spokesman Scott Silvestri declined to comment.

Cuomo said his office issued a subpoena seeking testimony from Thain, who was ousted from Bank of America on Jan. 22. Also subpoenaed was Bank of America Chief Administrative Officer J. Steele Alphin, Cuomo said.

Cuomo said his office is conducting its ongoing inquiry into executive compensation practices at companies taking part in the $700 billion financial bailout fund together with the the special inspector general of the federal aid program.

So, I guess that former Merrill Lynch CEO John Thain wanted to hand out big bonuses to his executive cronies before Merrill was taken over by BofA. Bank of America purchased Merrill in an all-stock deal that was worth around $50 billion, and then received another $138 billion in federal bailout money to support Merrill's deteriorating balance sheet. According to the FinancialTimes.com, Merrill Lynch paid out $15 billion for its 2008 compensation, which was 6 percent lower than the total in 2007. The Financial Times also reported that the bulk of the compensation was paid out "as salary and benefits" throughout the year with around $3 to $4 billion paid out in bonuses during December. According to the Financial Times:

Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.

Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later – usually late January or early February, according to company officials.

Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money.

Seems to me that Thain wanted to screw both BofA, and the American taxpayer, out of some serious bailout money to enrich his own pocketbook. Why else do you reschedule your bonus payments just days before a huge merger with Bank of America, even when you knew that Merrill Lynch was going bankrupt? According to an April 30, 2008 Forbes list of CEO compensation, John Thain had an executive compensation of around $15.75 million. I guess that wasn't enough money for John Thain.

And then there was the matter of John Thain spending $1.2 million redecorating his office. From Bloomberg.com:

Jan. 23 (Bloomberg) -- John Thain, the former Merrill Lynch & Co. chief executive officer ousted yesterday, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees, a person familiar with the project said.

Thain hired Los Angeles-based decorator Michael Smith, chosen by President Barack Obama and his wife Michelle to redecorate the White House, CNBC reported. Thain paid Smith $837,000 and his purchases included $87,000 for area rugs, $25,000 for a pedestal table and $68,000 for a 19th-Century credenza, CNBC said.

[....]

“Spending company money on a lavish re-do at a time when Merrill’s finances were rocky sends the wrong message,” said Amy Borrus, deputy director of the Council of Institutional Investors. “Thain was compensated well enough to foot the bill himself if he wanted such an upscale redecoration.”

John Thain just exudes arrogance, corruption, and greed. He is arrogant enough to spend $1.2 million in an office redecoration, just as Merrill Lynch was starting to have financial difficulties. Thain's greed is outright, moving Merrill's compensation timetable to just before the Bank of American merger, so he get that last $3-4 billion compensation--before Bank of America realizes that they just purchased a lemon company. Finally there is the corruption. Thain's merger of Merrill Lynch with Bank of America will have terrible consequences for the American taxpayer, as they will be forced to spend $138 billion to clean up BofA's losses due to the crappy Merrill finances. John Thain screwed both Bank of America and the American taxpayer here. And now New York attorney general Cuomo is going after Thain. Let us hope that Cuomo's investigation will end up with some indictments against John Thain.

Unemployment rose in every state in December 2008

You know you are in a bad recession when this MSNBC News story comes up:

WASHINGTON - Rising unemployment spared no state last month, and 2009 is shaping up as another miserable year for workers from coast to coast.

Jobless rates for December hit double digits in Michigan and Rhode Island, while South Carolina and Indiana notched the biggest gains from the previous month, the Labor Department said Tuesday. A common thread among these states has been manufacturing industry layoffs tied to consumers' shrinking appetite for cars, furniture and other goods.

With tens of thousands of layoffs announced this week by well-known employers such as Pfizer Inc., Caterpillar Inc. and Home Depot Inc., the unemployment picture is bound to get worse in every region of the country, economists say.

"We won't see a light at the end of the tunnel until 2010," said Anthony Sabino, a professor of law and business at St. John's University.

The number of newly laid off Americans filing claims for state unemployment benefits has soared to 589,000, while people continuing to draw claims climbed to 4.6 million, the government said last week. There's been such a crush that resources in New York, California and other states have run dry, forcing them to tap the federal government for money to keep paying unemployment benefits.

Aside from manufacturing, jobs in construction, financial services and retailing are vanishing — casualties of the housing, credit and financial crises.

Here are the states with the highest and lowest unemployment rates for December 2008. California's unemployment rate jumped to 9.3 percent, making it the fourth highest unemployment rate for December.

States with the highest unemployment rates in December 2008:

1. Michigan, 10.6 percent
2. Rhode Island, 10 percent
3. South Carolina, 9.5 percent
4. California, 9.3 percent
5. Nevada, 9.1 percent
6. Oregon, 9 percent
7. District of Columbia, 8.8 percent
8. North Carolina, 8.7 percent
9. Indiana, 8.2 percent
10. Florida, 8.1 percent

States with the lowest unemployment rates in December 2008:

1. Wyoming, 3.4 percent
2. North Dakota, 3.5 percent
3. South Dakota, 3.9 percent
4. Nebraska, 4 percent
5. Utah, 4.3 percent
6. Iowa, 4.6 percent
7. New Hampshire, 4.6 percent
8. New Mexico, 4.9 percent
9. Oklahoma, 4.9 percent
10. West Virginia, 4.9 percent

Tomorrow, the House Democrats will take up President Obama's $825 billion economic stimulus package for debate and possibly a vote.

Sarah Palin puts up a PAC

I guess Alaskan governor, and former Republican vice presidential candidate, Sarah Palin is setting herself up for a 2012 presidential run. From the New York Times:

Gov. Sarah Palin of Alaska continues apace in keeping her name out there as a potential contender for the Republican presidential nomination in 2012.

On Tuesday she unveiled a Web site for her new political action committee, SarahPac, a group that will “make it possible for Gov. Palin to continue to be a strong voice for energy independence and reform.’’

The Web site informs potential supports that their donations will “allow Gov. Palin to help and find creative solutions for America’s most pressing problems.” But, being a PAC, it will also of course support candidates for office.

The PAC is based in Virginia even though its chairman, Ms. Palin, resides in Alaska.

In the “Who is behind SarahPac” section, the Web site reports that the committee’s “supporters are Republicans, Democrats, Independents and those unaffiliated with any political party.”

The site –- first reported by the gossip columnist Cindy Adams of The New York Post — does not have a list of those supporters posted yet, but we’ve got a call in for more details.

Meantime, Ms. Palin’s PAC enters a relatively crowded field, potentially competing for dollars with the “Free and Strong PAC’’ of former Gov. Mitt Romney of Massachusetts and “HuckPac,’’ of former Gov. Mike Huckabee of Arkansas.

So I'm guessing that the GOP presidential primary will be a race between Sarah Palin, Mitt Romney, and Mike Huckabee. At least those three are planning way ahead for their presidential run in creating their PACs, keeping their names in the news, and setting up the fund raising machine for their political causes. I kind of wonder if Jeb Bush will be jumping into the presidential game sometime soon?

President Obama visits with Congressional Republicans to pitch his economic stimulus plan

In his first week in office, President Barack Obama visits Congress to pitch his economic stimulus plan. From The New York Times:

WASHINGTON —President Obama spent more than two hours in closed-door meetings with Congressional Republicans on Tuesday afternoon, outlining his economic stimulus plan and fielding an array of critical questions, before he urged legislators to “put politics aside and do the American people’s business right now.”

“The statistics every day underscore the urgency of the economic situation,” Mr. Obama said, speaking to reporters between separate meetings with House and Senate Republicans. “The American people expect action.”

A week after being sworn into office, Mr. Obama returned to the Capitol for the first of what his advisers said would be frequent visits with members of Congress. Yet it was still a rare event for a president, particularly a Democratic one, to sit down with the entire Republican conference.

Several Republicans said they would like the tax cuts to move more swiftly, according to people in the room, but the president replied that $275 billion was the most he would be willing to negotiate. The session stretched longer than an hour, with both sides conceding at several points that they have unwavable philosophical differences on many of the issues.

And how are Congressional Republicans responding to President Obama's pitch? According to the NY Times, President Obama was "greeted by a moderate burst of applause from the audience of dozens of House Republicans." A second applause occurred in the hallway outside the closed-door session that was taking place in Room HC-5, while a third, loudest, applause took place after Obama decided to continue taking questions from the Republicans for another hour. Congressional Republicans were happy to talk with President Obama, however, the Republican leadership in the House was in complete opposition to Obama's economic stimulus package:

[Even] before the president stepped into the meeting, Republican leaders in the House asked their members during a closed-door meeting on Tuesday to oppose the recovery plan unless significant adjustments are made before the bill comes up for a vote on Wednesday. They said they would ask Mr. Obama to urge House Speaker Nancy Pelosi, Democrat of California, to make changes to legislation that they believe includes wasteful spending.

“The Democrat bill won’t stimulate anything but more government and more debt,” Mr. [Mike] Pence [R-IN] said before meeting with Mr. Obama. “The slow and wasteful spending in the House Democrat bill is a disservice to millions of Americans who want to see this Congress take immediate action to get this economy moving again.”

What we are seeing here is a tap dance between the Obama administration and Congressional Republicans. President Obama extended his hand in compromise to the Congressional Republicans in supporting his economic stimulus package, and the Republicans slapped him. President Obama did not need the Republican support for his economic stimulus bill--he has strong Democratic majorities in both the House and Senate to pass this bill. However, Obama does need to play the political compromise card to show voters that he is reaching out to the opposition party in compromising such legislation, even though he isn't going to cave in on every GOP demand. At the same time, the GOP congressional leadership is also playing the same political game here. Congressional Republicans are willing to sit down and listen to President Obama, but the GOP isn't going to be a party of compromise. The Republican Party will oppose anything that President Obama or the Democrats present as new legislation in Congress. Consider this interesting detail from the Politico.com:

The frank Q & A between a popular new president and a frustrated, out of power minority party was originally set up as a diplomatic outreach by a White House that has promised to be more bipartisan.

But as the week wears on, it’s clear that the GOP is finding its voice as a stout opposition party instead of the party of compromise.

Sen. John McCain started this week's pummeling, declaring Sunday that he would oppose Obama's stimulus package as written. Senate Minority Leader Mitch McConnell (R-Ky.) has kept up a daily din of opposition to the specifics of the package, mocking the inclusion of a mob museum and a water park, and demanding more discussion and transparency. Senate Republicans are also rallying against the Democratic version of a children’s health care bill being debated this week.

The nitpicking took its toll, and Obama on Monday privately urged House Democrats to remove a notable flash point: funds for contraception that had been defended by House Speaker Nancy Pelosi (D-Calif.) on national television just a day before. The Democrats agreed.

Then this morning, House Minority Leader John Boehner (R-Ohio) went for the jugular, urging his members to oppose the economic centerpiece of Obama's first term just hours before the president paid the Republicans the compliment of coming to the Capitol for a private meeting — even before he did the same for House Democrats.

The frank Q & A between a popular new president and a frustrated, out of power minority party was originally set up as a diplomatic outreach by a White House that has promised to be more bipartisan.

But as the week wears on, it’s clear that the GOP is finding its voice as a stout opposition party instead of the party of compromise.

Sen. John McCain started this week's pummeling, declaring Sunday that he would oppose Obama's stimulus package as written. Senate Minority Leader Mitch McConnell (R-Ky.) has kept up a daily din of opposition to the specifics of the package, mocking the inclusion of a mob museum and a water park, and demanding more discussion and transparency. Senate Republicans are also rallying against the Democratic version of a children’s health care bill being debated this week.

The nitpicking took its toll, and Obama on Monday privately urged House Democrats to remove a notable flash point: funds for contraception that had been defended by House Speaker Nancy Pelosi (D-Calif.) on national television just a day before. The Democrats agreed.

Then this morning, House Minority Leader John Boehner (R-Ohio) went for the jugular, urging his members to oppose the economic centerpiece of Obama's first term just hours before the president paid the Republicans the compliment of coming to the Capitol for a private meeting — even before he did the same for House Democrats.

This is really about posturing for the next election by both political parties. President Obama is willing to play the PR game of meeting with the Republican opposition, even though Obama clearly knows that the GOP will oppose his economic stimulus package. In the end, Obama can come out of the meeting, telling the American people that "I've tried." The Republicans, on the other hand, are continuing their opposition against the Democrats, and the new president, with their own economic stimulus plan based on tax cuts. What the GOP doesn't realize is that the American people have already rejected tax cuts as economic stimulus when they kicked the GOP out of the White House and the Congressional leadership last November. President Obama will probably get his economic stimulus package passed without any Republican votes. The GOP is hoping for a long-shot of Obama's stimulus plan failing, thus turning the American voters against the Democrats and sending the Republicans back into the congressional majority in 2010, and hopefully back into the White House in 2012.

The tap dance continues on.

January economic headliners

It has been a somewhat busy couple of weeks. Last week, I've been down at my parent's place in Hollister, building a brand new desktop computer for my father. We went to Fry's Electronics, and picked up a brand new AMD Athalon 64 processor, ASUS motherboard, and a Seagate 500 gig hard drive. Spent the week putting the desktop computer together, loading XP and desktop software, and finally setting up a wireless home network with cable internet. So now my parents are finally in the high-speed internet age. Mom has her computer to surf the internet (had to also pick up a wireless network card to install in her system), Dad has his new desktop system, and his work laptop all wired into the high-speed digital age. No more slow dial-up waiting for my parents.

While I was working on their computer systems for the week, I did keep a casual eye on the news. The big story last week was Barack Obama's inauguration. Barack Obama is now the 44th president of the United States. The Obama administration has now begun. In his inaugural address, Obama is still a very charismatic and powerful speaker. But with the serious economic and foreign policy problems that the U.S. is now facing, I hope that Obama is just as strong of a manager and executive to guide this country through these problems, and bring the U.S. back to prosperity. It is going to be a challenge for this new president.

For this week, I want to look into some of the economic challenges that Barack Obama faces with this Janauary economic headliners. With only a week into his administration, President Obama is facing a continuing downward spiral of the U.S. economy, even as Obama attempts to sell his $800 billion stimulus plan to Congress. So for now, it is time to get into some more January economic headliners:

Consumer confidence sinks to a new low: Americans are watching the economic situation, and they do not like what they see with the plunging home values, more job losses, corporate incompetence, and Wall Street corruption. The U.S. economic news just keeps getting worst each day. It is no wonder that consumer confidence has plunged to its lowest level since 1967. From MSNBC News;

WASHINGTON - Americans' mood about the economy darkened further in January, sending a widely watched barometer of consumer sentiment to a new low, a private research group said Tuesday, as people worry about their jobs and watch their retirement funds dwindle.

The Conference Board said its Consumer Confidence Index edged down to 37.7 from a revised 38.6 in December, lower than the reading of 39 that economists surveyed by Thomson Reuters had expected. In recent months the index has hit its lowest troughs since it began in 1967, and is hovering at less than half its level of January 2007, when it was 87.3.

"It appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. "Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings."

The Present Situation Index, which measures how shoppers feel now about the economy, declined slightly to 29.9 from 30.2 last month. The Expectations Index,which measures shoppers' outlook over the next six months, decreased to 43.0 from 44.2.

Franco added that until she sees considerable improvement in shoppers' outlook for the economy, she can't say that "the worst of times are behind us."

When Americans are this pessimistic about the overall state of the U.S. economy, they are not going to be spending money in shopping. It gets worst if these Americans have lost their jobs due to company layoffs, lost their homes due to foreclosures, or have even seen their 401K retirement savings vanish--they are certainly not going on any shopping sprees in the near future. Consumer spending accounts for two-thirds of the U.S. economic activity. But with the serious problems in the housing market, and the job market, American consumers are not going to be in a mood to spend. This means retailers are seeing slow sales, and are slashing inventory. This means American companies are also seeing slow sales on products, and are cutting back on production and laying off workers. And as more American workers become unemployed, they cut on spending, continuing this downward cycle.

The job layoffs continue: This is from MSNBC News;

A slew of American heavyweight companies, including Caterpillar, Pfizer, Sprint Nextel, Home Depot and General Motors, announced cuts Monday adding up to 45,000 jobs lost. What's more, a group of business economists predicted many more job losses in the year ahead.

Caterpillar had by far the worst news of the group. The world's largest heavy equipment maker announced Monday it was slashing up to 5,000 jobs on top of several earlier actions. The latest cuts of support and management employees will be made globally by the end of March. An additional 2,500 workers already have accepted buyout offers, and ties have been severed with about 8,000 contract workers worldwide. In addition, about 4,000 full-time factory workers already have been let go.

In all, the almost 20,000 jobs being lost equal about 18 percent of the company's work force.

Ailing automaker General Motors Corp. also said it would slash 2,000 jobs at plants in Michigan and Ohio as the recession slams sales of its vehicles.

Sprint Nextel Corp. said it would be eliminating about 8,000 positions in the first quarter as it seeks to cut annual costs by $1.2 billion. Home Depot said it would reduce about two percent of its associates, or about 7,000 jobs. And Pfizer, fresh from agreeing to buy rival Wyeth for $68 billion, announced cost cuts that will include slashing about 8,000 jobs.

According to the National Association for Business Economics, business forecasters were reporting that "Job losses accelerated in the fourth quarter, producing the worst survey result in 17 years. Some 44% of firms cut payrolls, while only 14% added workers. Looking ahead, 39% of companies plan to reduce payrolls over the next six months, while 17% plan to increase employment. Only the services sector continues to create jobs." The services sector are mainly the low-paying retail jobs. Firms are probably cutting out high-wage, high skilled jobs, forcing Americans into the lower-wage, service sector and retail jobs. It is no wonder that Americans are cutting back on spending. And we continue into the downward spiral of Americans cutting back on spending, forcing companies to cut back on production, laying off workers, causing even more Americans to cut back on even more spending. And let us not forget that American consumers are not going to purchase a big-screen HDTV while working in a minimum-wage retail job.

Wall Street's dark side: This MSNBC News story really shows what happens when you gut the regulatory oversight on companies and individuals, allowing greed and criminality into the financial system;

Four men accused of varying degrees of defrauding investors out of millions — or even billions — were either arrested, investigated, surrendered to authorities or sentenced to prison.

It was a stunning refrain of alleged deception while the country struggles with the deepest recession since the Great Depression in a week that has seen major employers announce thousands of job cuts and consumer confidence fall to a record low.

At the top of the list: Bernard Madoff, the former money manager and Wall Street luminary accused of running a $50 billion Ponzi scheme. The regulator in charge of ferreting out fraudulent schemes on Wall Street, the Securities and Exchange Commission, was grilled by Congress Tuesday over its failure to detect Madoff's alleged wrongdoing.

Linda Thomsen, the SEC’s enforcement director, said the agency needs to improve its internal processes for pursuing cases. She said the agency also needs authority to regulate parts of the financial system that escape oversight and needs funding to carry out more investigations.

"While we always do our utmost to do more with less, if we had more resources, we could clearly do more,” Thomsen said in testimony prepared for a Senate Banking Committee hearing. The hearing is Congress’ first opportunity to question federal regulators about the Madoff scandal.

Even as that hearing was going on, federal authorities were accusing the owner of a New York investment firm of running a smaller but still devastating $370 million Ponzi scheme, luring in clients with promises of astronomical returns while secretly blowing tens of millions of dollars on bad trades and conspicuous spending.

Granted, there are certainly going to be some Americans that are willing to fall for these "Ponzi schemes." But with eight years of the Bush administration's deregulation of the financial industry, and the GOP's mantra that the free market will regulate the financial industry itself, has introduced such corruption and greed into the free market. It is not just the Ponzi schemes here--look at the speculation of collateralized debt obligations, based on over-valued subprime housing mortgages, that Wall Street banks were buying and selling, and how the subprime mortgage crash have nearly forced Wall Street to nearly go into bankruptcy. This is a near bankruptcy that the American taxpayer is holding the bag as they bail out Wall Street.

The economic news just keeps getting gloomier. I don't know if Obama's stimulus plan will work, or not, but something has to be done to fix the serious problems this U.S. economy now faces. There are serious problems with the housing market, the increasing number of Americans losing their homes, the high supply of foreclosed homes in the market along with the construction of new homes in a deep freeze. There is the wreak of the financial market, with Wall Street banks getting billions of government bailout money to do as they please, and not to help struggling American homeowners to stay in their homes. There is the huge number of job losses by companies struggling to cut production against falling demand, with those same unemployed Americans cutting back on their own spending and revealing a very pessimistic consumer confidence. We are going to be in for a very rough year.

Saturday, January 17, 2009

More job cuts announced

Apparently Circuit City isn't the only company that has announced job cuts. From MSNBC News:

NEW YORK - This is the point in the recession where one round of job cuts leads to another.

Employers announced a total of nearly 40,000 job cuts Friday, almost all of them related to problems in other parts of the economy.

Circuit City Stores Inc. said it is liquidating, closing all its U.S. stores and cutting 30,000 jobs after being hobbled, in part, by declining consumer spending. Rental car company Hertz Global Holdings Inc. is eliminating 4,000 jobs worldwide as families and business travelers forgo trips. Insurer WellPoint Inc. is cutting about 1,500 jobs, with rising unemployment leading to fewer people with health insurance.

For the moment, every economic action seems to precipitate a negative reaction. Consumers made nervous by job cuts, tumbling home prices and swooning stocks aren't spending. That's hurt retailers and manufacturers, who have closed stores, cutting their employees' jobs or hours, which has made workers more nervous, so they spend less. And the spiral continues.

Even falling gas prices will have hurt some workers. Petroleum company ConocoPhillips said Friday it will cut about 1,300 jobs, or 4 percent of its work force.

"There does seem to be a painful cycle emerging," said Dana Saporta, U.S. economist at investment bank Dresdner Kleinwort in New York. "Halting this cycle will require very aggressive fiscal and monetary policy."

The snowball is growing bigger. President-elect Barack Obama has been making the pitch for the $825 billion stimulus package, even before his inauguration. House Republicans are shocked over the House Democrats' stimulus package, even to the point where House Minority Leader John Boehner stuttered, "Oh my God!" A 56 percent majority of the American public is supporting the Obama stimulus plan. Why? Because as more job cuts are announced, more Americans lose their homes due to foreclosures, and more economic pain is being felt by the American people, they desperately want to see some type of action from their government in Washington, and from their new president. After eight years of the Bush administration's disasters and failures that have wreaked this country, the American people want to see their new president succeed, and pull this country out of the deep hole that it is in. So for the first half of this new year, there are a lot of Americans that are holding their breath over what President-elect Obama, and the Democrats, will do for them.

Saturday Morning Cartoons--Rabbit Hood

Today's Saturday Morning Cartoons is a fun Bugs Bunny cartoon, where our wrascally wrabbit tangles with the Sheriff of Nottingham in Rabbit Hood. Watch for the surprise visit of the real Robin Hood at the end of the picture. From YouTube:



Nah, that's silly. It couldn't be him.

Friday, January 16, 2009

Senate gives Obama $350 billion in bailout funds to financial industry

This is from The New York Times:

WASHINGTON — President-elect Barack Obama’s economic agenda advanced rapidly in Congress on Thursday as the Senate voted to release the second half of the financial industry bailout fund and House Democrats unveiled an $825 billion fiscal recovery plan aimed at putting millions of unemployed Americans back to work.

The Senate action, by a vote of 52 to 42, spares Mr. Obama a messy legislative fight just as he takes office and gives him a $350 billion war chest to further stabilize the financial sector. The vote came amid renewed distress in the banking industry, including further deterioration of Citigroup and a pitch for more government aid by the Bank of America.

Mr. Obama had personally lobbied reluctant senators to release the money. His top economic adviser, Lawrence H. Summers, made three visits to the Capitol and sent two letters to reassure lawmakers that the program would be better managed.

In the most recent letter, delivered shortly before the vote, Mr. Summers promised to use $50 billion to $100 billion for “a sweeping effort to address the foreclosure crisis.” He promised tough oversight and clear tracking of how the money is used, and new restrictions on executive pay at firms that receive help.

The vote was an early test for Mr. Obama, in which 6 Republicans joined 46 Democrats to release the money and keep the new administration’s agenda on track.

After personal entreaties from Mr. Obama, all but one of the seven Democratic freshmen senators voted to release the money, including Senators Mark Udall of Colorado and Tom Udall of New Mexico, who as House members twice voted against the original bailout bill.

In a statement, the president-elect applauded the outcome.

“I know this wasn’t an easy vote because of the frustration so many of us share about how the first half of this plan was implemented,” Mr. Obama said. “Now my pledge is to change the way this plan is implemented and keep faith with the American taxpayer.”

The one item I find interesting about this story is that Obama's economic adviser, Larry Summers, is promising "tough oversight and clear tracking of how the money is used, and new restrictions on executive pay at firms that receive help." We never saw that type of oversight when the Bush administration poured billions in taxpayer dollars into the Wall Street financial institutions, and the banks used that taxpayer money for everything else, except for providing mortgage relief to the nation's struggling homeowners facing foreclosure. I'm not sure if the Obama administration will be able to provide such oversight in this incredible mess that is the financial bailout, but I do hope they succeed.

President Bush gives his farewell address

Goodbye and good riddance.

Circuit City goes bankrupt

The electronics retailer is closing all 576 of its U.S. stores, while laying off its 35,000 employees. From MSNBC News:

Circuit City Stores Inc., the nation’s second-biggest consumer electronics retailer, reached an agreement with liquidators on Friday to sell the merchandise in its 567 U.S. stores after failing to find a buyer or a refinancing deal.

The company said in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators. The company’s move to liquidate, first reported by CNBC Friday morning, means the retailer’s 35,000 employees will likely lose their jobs, the financial news channel said.

Calls to the Richmond, Va.-based company and the liquidators were not immediately returned to the Associated Press.

Circuit City filed for Chapter 11 bankruptcy protection in November as vendors started to restrict the flow of merchandise ahead of the busy holiday shopping season.

It had been exploring strategic alternatives since May, when it opened its books to Blockbuster Inc. The Dallas-based movie-rental chain made a takeover bid of more than $1 billion with plans to create a 9,300-store chain to sell electronic gadgets and rent movies and games. Blockbuster withdrew the bid in July because of market conditions.

Circuit City, which said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31, said in its initial filings that it planned to emerge from court protection in the first half of this year.

Here in the San Jose Bay Area, Circuit City could not compete with Best Buy on the value of consumer electronics, Wal-Mart on the prices of such consumer electronics, or even Fry's for the price and variety of computer products. It is no wonder Circuit City went bankrupt.

And Circuit City will be laying off 35,000 employees. Not only will that increase the U.S. unemployment rate, but you can bet that those 35,000 employees will be cutting whatever spending they may have been planning just to say financially afloat. More economic and unemployment pain for the U.S.

Wednesday, January 14, 2009

Nortel goes bankrupt

There is not much to say here about this New York Times story:

OTTAWA — Nortel Networks, the Canadian telecom equipment maker, filed for bankruptcy protection from creditors Wednesday but analysts said its troubles might be too severe for it to recover and survive.

Unlike other companies, notably airlines, that have used bankruptcy protection to renew their businesses, Nortel, which began this decade as one of the world’s largest makers of telecommunications equipment, is probably headed for liquidation, several analysts said.

“I don’t think it’s going to exist,” said Mark Sue, an analyst with RBC Capital Markets, a unit of the Royal Bank of Canada.

If Mr. Sue and others are correct, the end of Nortel would be one of largest failures in the telecommunications equipment business. During the 1990s, Nortel designed and built much of the fiber optic equipment that now carries most of the Internet’s data.

Along with the company now known as Alcatel Lucent, it computerized the operation of telephone networks during the 1980s. Nortel pioneered the development of equipment and software that brought the world wireless phone networks.

Nortel’s demise would also be among the biggest business failures in Canadian history. During the zenith of the technology boom, Nortel’s market value accounted for about a third of all equity traded on the Toronto Stock Exchange.

Nortel’s shares peaked at 124.50 Canadian dollars in July 2000 in trading on the Toronto Stock Exchange. On Wednesday, Nortel closed at a market price of 12 Canadian cents, or 1.2 cents after adjusting for a stock consolidation. While the current economic slump contributed to Nortel’s decision to file for protection in both Delaware and its hometown, Toronto, the company’s problems began in 2001, when it was hit by the technology stock price collapse and became mired in an accounting scandal that led to criminal charges against three of its former executives.

Nortel’s woes went beyond finances. In the market for Internet-related equipment, Cisco Systems and others proved to be more innovative and successful.

In the heyday of the dotcom boom, Nortel was one of the biggest telecommunications companies, providing equipment and software for the wireless networks, and the internet. They were the pioneers in this field. Now companies like Cisco and Verizon have surpassed Nortel in providing such telecommunications equipment, sending Nortel into bankruptcy. I wonder how many other telecommunications companies will join Nortel as the world economy continues to slow.