Archive for December 2008

All Over But The Shouting

December 31, 2008

The last day of 2008 is like the last day of most years.  There is always that strange mixture of pessimism and optimism.  Everywhere you look there are situations that defy explanation.  But if you try, you can find a surprising number of reasons to be optimistic.

  • First and foremost this is the last Christmas that George W Bush will be President.  Both the embarrassment, the wrong headed policies, and the total incompetence of his Administration will end shortly.  
  • Second, President-elect Obama represents the hopes and aspirations of so many.  His picks for his Cabinet and key advisors all appear “center leaning” and come with a history of inclusion and competence.  Only time will tell but at this point there is much to be optimistic about.
  • Much of the worlds problems (Pakistan, Afghanistan, Iraq, Iran, Palestine, and Israel as starters) have been waiting for a new US Administration.  These problem spots are so bad that you can expect a willingness by the involved parties to try again.  While there is no certainty and of these problems will be resolved, there is hope that a fresh start may make them less severe and move the overall process forward.
  • The financial situation has stabilized and could be ready for some recovery.  The important message is “stabilized”.  This sick patient needs some new controls and time for a thorough investigation and criminal trials if appropriate.  A robust recovery of the markets is not likely for some time.
  • The weak economy should respond to the proposed Obama stimulus package.  During his campaign, Obama indicated that there was a broad need for new jobs in America and that his Government could help with its focus on science.  This is something to be optimistic about.

More than anything, it just feels already like fresh air blowing.  No modern President has been so wrong on so many issues than “W”.  His rubber stamp of Dick Cheney’s advice or parroting of neoconservative and evangelical speak masked his own lack of direction and well of wisdom.  While the world has a number of serious problem areas, the US still remains the strongest and the nation with the most potential.  Righting the ship, setting the course, and steering it wisely is all that is needed. 

Standing at the center, I am confident America has “regained the center”

The Captain’s At The Helm

December 30, 2008

The killings are underway in Gaza.  There would appear to be no good reason even though there are hundreds of explanations. It seems somewhat fitting that this situation has arisen just after the “holy” days, or what ever they are called.  The new year has only the prospects of improvement ahead of it and that is one consolation.

During these times of an International crisis, it is reassuring to all Americans to know their President has his hand securely on the reigns of government.  I wonder how many people know the word “autopilot”?  Not too long ago we had an example when Israel invaded Lebanon.  Our Ostrich in chief, secure in his bunker in Crawford,  showed his colors and cheered Israel on (of course like all good chicken hawks, from the side lines).  It appears this situation is no different.

We might actually be justified in letting out a sigh of relief.  The Israelis are using our money and our armaments to fight this battle so I would think everyone is well off if “W” just keeps his mouth shut.  And with less than 1 month to go, I think we have all heard enough from the “great decider”.

Respect, Cooperation, Negotiation, and Accommodation

December 29, 2008

How will President-elect Obama and Secretary of State Clinton make sense of the Middle East?  There are so many “one-offs” that the temptation will exist to make one quick resolution and hope that the others will follow.  Should they try that, they may regret it and wished they had opted for a more comprehensive approach.  Here is my recommendation.

Respect.  The first objective would wisely be a totally new approach to the world community and in particular to the Middle East countries.  Under this idea, the US government would begin to display respect for all countries and show no special favoritism towards any.  The State Department would treat the governments of Iran and Israel with the same degree of cordiality and frequency of communications.  The US would also speak to undesirable behavior by any country with objective and unemotional words.

Cooperation.  The next objective would be to find common areas where joint cooperation could be undertaken.  For examples, education, road/water/sewer construction, friendly sports matches, and cultural exchanges could be started.  Governments often mirror their behaviors after what they think their citizens would like to see, and a citizenry predisposed to cooperation with the US might cause less reasons for Governments to act hostilely. 

Negotiation.  With a good foundation of respect and cooperation, the atmosphere would be ready for tough (but respectful) negotiations.  There is no way that Syria, Iran, or Saudi Arabia are going to be helpful in stabilizing Iraq out of their good nature or their respect of Obama or Clinton.  The grand compromises will come only through deals that result from negotiations.  There must be “gain a little, lose a little”.  These negotiations will be also complex considering that the US would like Iran to not go nuclear, and to be a good neighbor to Iraq, and to help facilitate an Israeli-Palestinian peace.  That’s a tall order.

Accommodation.  For all the parties involved (including the US), negotiations will most likely lead to agreements that are politically difficult for one or both parties.  You can be sure that right wingers (in any country) will reject any agreements arrived at by negotiators they feel are left of them.  For these agreements to work and last, all parties must find the capacity to accommodate settlements that are not 100% perfect in all respects.  The 80/20 rule must be employed.  

Of course this approach will not succeed in every case.  Some countries will still have national interests that preclude the desired agreements.  But rather than suddenly referring to those countries as part of the “axis of evil”, it would be far more productive to simply look for more areas of cooperation while still conducting negotiations.  Even when some countries engages in totally unacceptable activities (like hosting terrorist training), respect and cooperation should still be held firm even though there may need to be a specific response to eliminate the unacceptable activity.  This will require great skill and resolve. 

They Deserve What They Get

December 28, 2008

It has been tit for tat for too many years.  Today it is impossible to point a finger and say one side or the other is at fault.  It is just as difficult to explain why either side does what they do.  Of course I am speaking of the Israeli-Arab conflict and most specifically the current Israeli-Hamas relationship.

 

This situation will be handed over to President-elect Obama and soon to be Secretary of State Hillary Clinton by the do nothing team of Bush/Cheney.  It is hard to believe that any amount of study will reveal the crux of this problem and therefore a straight forward solution. 

 

  • Hamas can not be fighting for the rights of ordinary Palestinians since it uses tactics that have caused so much collateral damage to the Palestinians themselves, unless of course they believe Israel will never compromise in a fair manner.

 

  • Israel does not believe in an eye for an eye but much prefers disproportionate retaliation for alleged Hamas transgressions.  Why would Israel do this unless it assumes it has the freedom to continue and in the process will in fact achieve a pro-Israel (read Palestinian disadvantage) share of the spoils, like land, water, and control of religious locations.

 

In effect today Hamas has little to loose.  They know Israel will not deal fairly with them and that the West supports Israel.  They know that as long as the conflict continues, the Hamas leadership is assured of money, power, and in a sick way, prestige.  They claim they are opposing clear aggression, and for some reason, they can not see their own provocations.

 

Israel is much more difficult to understand because in effect the Israeli position is the distillation of a lot of political parties’ wants and ravings.  It ranges from extreme orthodox view that the entire region is God’s gift to Israel, to the liberal’s view that peace can be bartered.  Judging by its behaviors, Israel seems more interested in preserving its political party peace than trying to find a fair basis for peace with the Palestinians.

 

The human tragedy that is intermixed with the deadly foolish behaviors of Hamas and Israel can not be overlooked.  Direct talks with both the Israeli government and the Hamas leadership must be undertaken although these talks are by themselves unlikely to lead to anything.  In parallel, however, I wonder whether indictments for crimes against humanity leveled against the top Israeli leaders and the top Hamas leaders might speed things up.  There is no provocation that can justify the slaughter that is going on in Gaza, and there can be no God who would so order.

 

What Is She Thinking?

December 27, 2008

As Hillary Clinton awaits confirmation as the next Secretary of State, I would expect she will have no trouble producing a better record of accomplishments than her predecessors.  Colin Powel and Condi Rice, admittedly, were operating under faulty Bush/Cheney thinking and may have accomplished more if left to their own wishes.  The record, however, for the last 8 years is bleak.

 

Hillary, however, is not assured of a smooth ride.  She has urgent situations all around the globe and one has to question what type of a State Department she is inheriting.  With the Bush Administration’s practice of putting in place only people who were loyal at all cost to the President, you must wonder whether there are people “big enough” to now think in a more complex manner.

 

·        Iraq.  Once the invasion and occupation is ended, how will the US deal with a country that can not reliably be trusted to remain secular and at a minimum, neutral to the West.  The most likely outcome will be a Shiite dominated, Iran friendly country that may find again that painting Israel as the enemy is politically useful.

·        Iran.  The potential emergence of Iran as a nuclear weapons possessing country is a huge concern.  There appears no direct method, short of war, to stop this outcome.  All methods, other than war, will involve rebuilding a world consensus, and that in turn will require the US to repair relations with Russia and China.

·        Syria.  Modern day Syria claims its power from its strategic location and ability to balance anti-Shiite and anti-Israeli interests for other Middle East players (read Iran and Saudi Arabia).  Given Syria’s location, establishing a pragmatic relationship could be key to achieving overall Middle East stability.

·        Israel and the Palestinians.  This is a problem that does not need to exist but cruelly continues to serve the needs of political factions on both the Israeli and Palestinian sides.  The behavior of both sides has been and continues to be atrocious and child-like in their endeavors to avoid seeking peace.  There is no victim here nor is there only one aggressor.

·        Saudi Arabia.  There are no problems involved in continuing the current charade.  The US pretends the Saudis are peace loving and without any pretensions, and the Saudis pretend to not support all sorts of Islamic extremists around the world.  There needs to be a better way.

·        Afghanistan.  Somewhat like in Iraq, when the US lead NATO forces caused a regime change in Karbul, the US inherited the moral responsibility as well as the practical need to rebuild the Afghanistan Government.  To date, we have spent lots of money and have little to show for it.  If we are not careful, Afghanistan can return to a terrorist training ground in a heart beat.  Again stability will require help from others such as Iran, Russia, China, Pakistan, India, and Saudi Arabia.

·        Pakistan.  This nuclear weapons possessing country represents a constant threat to world stability.  The US can not “fix” Pakistan’s fundamental problems of unequal wealth and education, nor its tendency to experience religious extremism.  We must, however, find ways to help (quietly) to promote stability between the Pakistani military and its civil government, and trust that in time Pakistan will mature.  Once more, others must help.  Russia, China, India, and yes, even Saudi Arabia are key.

·        India.  This large, highly populated, developing country has a full time challenge to manage for its own country.  Once you add in the either real, or imagined, politically advantageous conflicts with Pakistan, this nuclear weapon possessing country (that allows cows to roam unrestrained), you have a prescription for real danger.  The US can not fix this problem and should with its allies seek to focus India on developing as an economic power.

·        China.  The current global recession may provide insight into what lies ahead for China.  It has been growing economically at far too rapid a rate (over 10% per year) for far too long.  China’s population has prospered and is used to seeing a better life each year.  As the economic growth slows, the Chinese will blame their government and ferment change.  Any competent government faced with that type of problem will create an external threat to China and focus its citizen’s attention elsewhere.  Hence, China may consider anti-western foreign policies.  Dealing with China now but with a long term strategic view may be Hillary’s greatest challenge and most important contributions since China has the potential to be a great world leader.

·        Russia.  Most of the problems with Russia today are the results of a totally misguided and wrong headed Bush/Cheney/Neoconservative policy.  Never the less, Hillary must be weary of Russia for this is a country that has only known dictatorships and has little in common with western values.  Russians are pragmatists and Hillary must steer the US relationship to a point where we do not lecture nor express value based opinions about the Russian government. 

 

There are plenty more delicate situations such as Japan, Venezuela, Cuba, Brazil, and Mexico.  While these are important, they will not play a direct role in the power vacuum stretching from Israel to India.  As one can see, one off diplomacy will not be appropriate nor will grandiose ideological initiatives like seeking human rights, democracy, and religious freedom. Hillary must muster all her powers as a complex thinker in order to formulate a comprehensive approach while all the other special interests try to shape American foreign policy.

Class Actions?

December 26, 2008

It is not often that I can see value in “trial lawyers”.  I think I now can see where these bottom feeders can do both themselves and many, many other people some good.  They might even accomplish what our elected officials should be doing were it not that they had already accepted so much money from banks and investment houses.  It is time to hold the leaders of failed financial services firms accountable for their malfeasances and potentially outright transgressions. 

 

It is understandable that a few banks might fail following the “housing bubble” since with fewer houses being built, more people would suddenly be without income and therefore, without the means to pay their mortgage.  It is also understandable if an investment firm had invested heavily in the auto industry or some developing nation, and suddenly there was a global economic slow down and the auto companies or certain nations were unable to repay their loans.  

 

What is not understandable is when banks throw money at borrowers and in many cases did not care whether these borrowers had any income or means to repay the mortgages.  You might ask why would anyone do that?  The answer is that as soon as those banks made the questionable loan, they packaged the mortgage note and sold it to someone else who did the same.   Soon the mortgage from the person with no means to pay was invisible because it was sliced and diced and mixed in with other mortgages.  This was not prudent banking or lending.  This was “pass the hot potato”.  In the process everyone involved made money and smiled.

 

In parallel with this fraud, a risk mitigating practice that had existed for many years suddenly became the fad of the day.  These instruments are called “credit default swaps” and were intended to hedge investments against rare loss.  Some reports indicate that about $ 1 trillion worth of these CDS were transacted in normal years up to 2006.  At that point CDS contracts suddenly jumped to an estimated $ 50 trillion contracts in 2008.  Why?

 

A number of investors figured out that these unregulated (and unmonitored) instruments could be used in a casino-like manner.  You could bet on anything, with anyone and the subject of the bet might never know it.   In a just world, life might have gone on with anyone getting burned.  In the real world, greed took over and when the mortgage based house of cards collapsed, suddenly some unimagined events took place.  Suddenly many large financial services companies had to look again at their balance sheet and revalue their CDS given the new liability information.  Others went to collect on their “CDS gamble” only to find the issuer of the CDS had gone out of business.

 

In the case of mortgages where the borrower has no means to pay and ultimately defaults, there are straight forward regulatory means to bring this industry back into line with sound practices.  We already know how to do that.

 

In the case of CDS and collateralized debt obligations (the securitization of mortgages) there is a clear difference in the extreme use of these instruments.  If rated properly, CDOs should be perfectly safe instruments.  The same can be said for CDSs.  Where the wheels come off the track is when institutions do not exercise sufficient due diligence or worse, knowingly take the gamble and recklessly look the other way on the risk.

 

Government investigation and new rule making may lead us to a safer position for the future.  I think this is a necessary step.  I also think that the Wall Street types will heed the consequences of class action law suits even more.   Civil suits targeting their personal wealth will send the strongest message.     

The Smell of Unfairness

December 25, 2008

Today is a quiet news day as it should be.  On days like this you have the chance to step back and see life in perspective.  For the past 8 years there has been something missing.  The missing item has been “fairness”.  Maybe that is because, as some would like us to believe, the “country has been at war” and “fairness” is simply a casualty. 

 

The Bush Administration has been amazing in seeing so many different issues through dark glasses. 

 

  • Screw the environment, science does not count
  • Up yours, Russia, we don’t need the ABM Treaty anymore
  • Values first, gays, lesbians, and undocumented workers don’t count
  • Pro-life, but you must pull yourself up even if you have no boots
  • Terri Shaivo, no issue is too private to not be worn on the President’s sleeve
  • WMD or not, here we come, we invading and occupying anyways
  • Abu Ghraib and no one other than the “bad apples” to blame
  • Habeas corpus, due process, and Geneva Convention are out of date
  • Science out, “intelligent design” in

In the final hours of this failed presidency, you might think we have seen it all.  But wait, there’s more.  Two hallmarks of past American greatness are the automotive industry and the financial muscle that resides on Wall Street.  Both of these are currently sick institutions.  The auto industry is saddles with too much weight from past reckless and unwise decisions (uncompetitive union contracts and work rules, too rich executive compensation packages, and too many and a weak dealer network).  The financial services industry is also weighted down with a decade of abuse.  It has become the poster child for unbounded greed and arrogance. 

 

So as an outgoing statement, the Bush Administration has offered life lines to both.  However, the life line for the auto industry could be best described as a “break the union” deal, and while the union must give back a lot if the auto industry is to survive, the union’s give backs should be part of a total package.  For the financial services industry, it is difficult to know what is being asked other than to accept 10 times as much money.  There has not even been talk of criminal charges with so much money missing.

 

I am hopeful that the next Administration will find the rule of “fairness” superior to the rule of “ends justify means”.