Archive for February 2009

Going Off the Deep End

February 19, 2009

CNN reported yesterday that Pope Benedict and House Speaker Nancy Pelosi meet on Wednesday in the Vatican.  According to press releases by Speaker Pelosi and the Pope, there seems to have been two different meetings.  Pelosi said it was a fine meeting where they discussed poverty and global warming (perfectly appropriate subjects).  The Vatican released the following: “His Holiness took the opportunity to speak of the requirements of the natural moral law and the Church’s consistent teaching on the dignity of human life from conception to natural death” . The Pope’s statement leaves little doubt that he is a man of the past and totally out of touch with modernity.

  • This is the same Pope that questioned the teaching of Darwin and gave a qualified ok as long as they did not lead someone to reject the existence of God.  What is he thinking?  Darwin’s view of evolution is either true or it is not, and it’s correctness certainly does not depend on a belief in God.  And if it did, which God should it be based upon?
  • This is the same Pope that reinstated the Latin mass that contains explicit prayers for the conversion of the Jews.  What is he thinking?  Was he asleep during the ecumenical years?  
  • This is the same Pope that rescended the excommunications of four Priests, one of which maintains that the holocaust did not occur.  What is he thinking?  

The Pope probably does not have too much to worry about for now.  Most Catholics have always been Catholic and probably always will be (read will give money to the Church, the only criteria the Church is interested in).  Despite the Church’s anti science views, most educated people consider the threats from poverty and global warming to dwaft the societal concerns around abortion or assisted suicide.  The Church is stuct in the wrong grove, in too many ways, for example, no woman priests, no married priest, too many pedofiles, no openly gay priests (even though the priesthood has an estimated 20-30%), and its huge hang up on woman’s rights.  But that is their problem.  My concern is that the Pope going off the deep end does not influence the US Government.  I hope Speaker Pelosi had her itunes playing and did not hear the Pope.

Why the Center Should Be the Friend of the Right and the Left

February 18, 2009

Since President Obama has taken office, Republicans in Congress have sounded like citizens who have spent the last 8 years on a desert island and simply can not accept that their party is responsible for the mess America faces today, both home and abroad.  Republicans simply return to the failed policies as if they could make them different by just repeating the mantra.   At the same time, the progressive side of the Democratic Party is appalled at the initial performance of the Obama Administration.  Where are all the actions Obama promised (or strongly hinted) he would do once in office.  But for those who think of themselves as centrist or moderate, President Obama is off to a great start.

It is difficult to paint the Republican Party with a single broad brush but I think it fair to say they would claim they were for “fiscal discipline”, laissez faire governance, and a strong proactive military.  If you look at the actual conditions in the US, one must conclude that either the Republicans are in self denial since it was their policies that have lead us into the worst economic messes since the Great Depression, or they simply do not possess the vision for how to extricate the US from the current recession/depression.  On top of this, red, white, and blue Republican rhetoric carries no credibility today.

The Progressives or Left Wingers see things quite differently.  They feel compassionately about the unemployed, the healthcare uninsured, those poorly educated, housed or fed, and those who would take civil and human rights away from anyone.  Everything can be done at once and the world will be safe (for ever) once the Government acts are the thoughts of the left.  

In between lies the vast area of practicality and time to consider future ramifications.  The $787 billion stimulus package is for sure necessary but is no free lunch.  How will this borrowed money be repaid, and by whom?  What will the Government do for an encore?  When the unemployment payment extensions run out again and people are still unemployed, what will Government do?  What will cause people to seek work, any type of work, just to survive, and wait for the “perfect job” to come in time?  And spending $787 billion will involve a lot of people administering this cash deluge and you can bet some of it will be spent poorly or criminally or wastefully.  

The answer is not to do nothing, and the answer is also not to do everything at once.  The answer must lie in a more moderate, somewhat progressive approach.  An approach where data and pragmatism are emphasized.  An approach where if it becomes clear the “king has no clothes”, then a new and different approach must be taken.  That can be be achieved from the center and not at the extremes of right or left.  Over time the heart of Republican and Democrat beliefs can be injected, in moderation, and embraced based upon successful performance.  Only from the center can one get this flexibility.

GM to the Wire

February 17, 2009

General Motors is now feeling the “love” generated with the UAW over the past 20-30 years during which GM screwed the union when ever it could and then agreed to soft, ridiculous contracts and even sillier work rules at various GM plants.  There are few, if any, more dysfunctional relationships than GM and its union (read Ford and Chrysler also).

Now on the verge of bankruptcy, General Motors is seeking additional Federal bail out loans intended to tide GM over until the level of new car purchases pick up.  The deal is that GM must produce a “turn around” plan that convinces Congress that their loans are for a sound reason.  GM’s plan must include sizable changes in its size (read less UAW labor per car) as well as large reduction in the cost of pay and benefits (read less earnings for UAW members, and of course, less dues for the UAW union leaders).  It appears that as usual the negotiations is following the hardball path.

GM, of course, holds the Chapter 11 trump card but is very reluctant to play it.  Under Chapter 11, GM could efficiently recraft its union contract with the protection of a Federal court.  GM could also alter its franchise agreements with its dealers at a bargain cost.  Why would this not be a preferred course of action?

The answer may lie in what would likely happen to stock and bond holders.  Under Chapter 11 there would be a great deal of pressure for GM to restructure its existing debt, possibly forcing bond holders to accept new stock (equity) in exchange for their more secure debt.  For existing GM stock holders, it could mean a “wipe out”.  General Motors management knows that if it screws its debtors, they will have much less favorable terms should they ever try to float bonds or seek credit again.  And for the stock holders, GM could say good-bye to its cozy board of directors.  The union knows this and hence the eye ball to eye ball negotiations.

As I have written before, this is the time for Rick Wagoner to really lead with the full knowledge that he will resign once GM is secure or by the end of this year in any case.  The question before the house is whether he will lead.

State Secrets

February 16, 2009

The Obama Administration invoked the protection of “State Secrets” this past week in their argument to block suits by Guantanamo detainees.  The ACLU was distraught as should any civil rights loving citizen.  The question before the house is whether this indicates a convenient way to delay dealing with the Guantanamo detainees or whether it represents the Obama Administration already drifting to the dark side.

Here is an argument that there is still a chance at “change”.

The collection of Guantanamo detainees represent a variety of sources and grounds for their detention.  Most were not picked up on the battle field or after a “hot pursuit” from combat.  Many were picked up by other Governments and turned over to US authorities who then in turn shipped them deliberately (and foolishly) to Gauntanamo.  Revealing the names of those countries would be embarrassing to those States and could hurt further cooperation.

Many of the detainees have experienced extreme interrogation techniques sometime during their confinement and most at the hands of their initial capturers.  US Authorities knew this but still took the detainees based on information they knew (or should be expected to have known) was obtained by torture.  This is embarrassing to the US and certainly inadmissible in any US court.

The Obama Administration knows that Guantanamo must be closed and the detainees released unless there is compelling reasons to be held for trial.  Should the detainees be convicted in a fair trial (which should be easy if it is just to hold these people over 6 years  without charges), then they could be sent to a prison in the US or another land as part of their sentence.  The timing of this challenge to the detainees’ inprisonment is premature in the eyes of the Obama Justice department.

Time will tell whether this explanation is close to the mark or that the dark side will prevail in Washington.  The stupidity of gathering so many detainees in one spot and co-mingling really bad people with simply worrisome ones is dumbfounding.  The damage is done and the Obama Administration needs a little breathing space to do the right thing.   

The Bi-Partisan Press

February 15, 2009

Over the past three weeks the media has droned on about the Economic Stimulus Package .  Some wondered if it was too big, and others quoted economists that said it was not big enough.  No one seemed to know how big was big enough.  Republicans called it a spending bill and cried out for tax cuts.  President Obama called for a “bi-partisan” approach and agreed to certain compromises.  When the votes were counted it was clear that a Democratic Stimulus Package had passed and bi-partisanship was a ghost.

The Press delighted in detailing what this Senator or that Representative thought.  Each spoke from their own playbook and cleverly skirted the subject of efficacy.  The big story from the Press perspective was to see either the President succeed at getting wide Republican support or to see him crash and burn.  I guess that is news.

In the end the Democratic bill passed and Republicans are now attached to the description  of “not being part of the solution”.   But even greater noteriety was made by the Media and in particular the Press where the focus was on the process and not what the process was about or whether the solution had any chance of success.  It is certainly ok for Republicans to believe what they want.  What is not ok is for either party to posture themselves on principles that do not address the needs of the moment.  So for the press it was form rather than content and that was not partisan.  

Don’t Get Confused

February 13, 2009

The President’s Economic Stimulus Package appears poised to pass the Senate and be signed into law.  The bank bail out plan, presented on Tuesday of this week, has been panned by many pundits and criticized as not sufficiently clear.  These are two separate and basically unrelated issues.  The implosion of the financial services sector was due to causes unrelated to the general economic slow down and must be cured or corrected by entirely different means.  Unfortunately, they both will cost tax payers a lot of money to fix.

No amount of spending by the private sector can fix the banking mess.  And by the same token, a fix for banking will not produce private sector jobs quickly.  In the long run, however, we need both the economy and the financial services sector to be healthy and strong.  

The point of this post is that the economic mess and the financial service sectors have been conflated by political operatives and in either case, the size of the government bail out is either too big or too small, depending upon which political party you accept.  It is, however, simply impossible to know whether efforts now under discussion will be sufficient.  Frankly I would think it more helpful to assume multiple government stimuli will be necessary and this first round is intended to build confidence by pointing the way.

Simply stated we should be looking for President Obama’s Stimulus Package to slow, then stop the net erosion of jobs.  During the 6-12 months that it will take to see this effect, we should expect that Obama’s team will have put in place new regulatory controls that will prevent a reoccurrence of the faulty risk taking that ruined the sector.  We should also expect that the Obama Administration will also have found a way to free up the credit markets.

These set of expectations are most likely far short of the political rhetoric and the candy coated picture the news media likes to present.  Unfortunately when someone has dug as deep a hole as has been dug, one must first stop digging and then climb out before one can expect to begin building.  The “good life” we lived during most of this decade was built on a house of cards foundation.  If our children are to have a brighter future, we need to rebuild our economy (and banking system) on a sound, productive, and much more transparent basis.  

The End in Sight?

February 11, 2009

General Motors and Chrysler are approaching the first “lets see your cards” date with the Federal Government next week.  Both companies are suppose to present “turn around plans” so convincing that the Feds will lend the second half of the promised bail out loans.  The outlook is not promising unless the Government decides it just does not want to be in the card business.

GM has been spending a lot of time with debt holders (bonds) trying to convince them of the great opportunity they would have by converting bonds to equity (stock).  Presumably that would enable GM then to borrow more money (if they can find it) and live to die another day.  The other discussions have been with the UAW seeking concessions on work rules and the basic contract.

During this process, GM Vice Chairman Bob Lutz, has announced his retirement.  Lutz who is 76 has been a force and source of change within the GM calcified organization.  At 76, it should be no surprise that he is leaving but GM has replaced him with a competent “suit”.

None of this represents the necessary change to move GM back to a viable company.  GM is simply too big and too set in its ways to deal with the wants and needs of the market place.  GM needs far more “personality” in its leadership and its cars (quality is now pretty much on par with the best).  Rick Wagoner (and probably Fritz Henderson) is not the person to bring it.

Wagoner was a stabilizer and a nice person to be around.  Bankers liked him and trusted money with him.  The Union liked him and made some changes even though it was clear that they had to.

If it is to be Wagoner’s 15 minutes of fame, he needs to get tough and threaten Chapter 11 if the bankers and the Union do not cooperate much more.  No cooperation and he should take Chapter 11 and following restructure,he should resign.  If there is cooperation, he should resign too.