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Re: Ten Best Financial Blogs: RGE Global EconoMonitor

doubleeagle — Wed, 04 Feb 2009 20:26:41 -0000

Although it seems out economy remains inextricably linked with global commerce, providing [not one] but back to back government subsidies to failing businesses is the not answer. Although popular agreement among accomplished economists and financiers advocate government subsidy [to arrest the current economic crisis] it is my belief that a financial bailout is not the remedy.
A 700B USD bailout, an 825B USD stimulus package, or otherwise, do little in targeting the root cause of corporate greed. Allowing businesses to fail sets the condition for inherent restructuring. As businesses are allowed to fail, markets and corresponding industries will repair themselves.
Application of government financial assistance to a democratic and entrepreneurial economy tears away the very nature and existence of a democratic society. Risk vice reward is a basic tenet of survival. For years, the companies in question profited without hesitation. Some may have given charitable contributions. However, businesses exist for a reason—profit. My tax-payer dollars should not be used as a safety net—for corporations and their executives [who received unprecedented compensation (i.e. Enron, World Com, GM, Exxon Mobil)] to continue operating. Corporate greed underscores the need for tighter federal regulation (i.e. AIG).

Revised (in summary)
A bailout, stimulus package, or otherwise, do little in targeting the root cause of corporate greed. Allowing businesses to fail sets the condition for inherent restructuring. As businesses fail, markets and industries will repair themselves. Application of govt financial assistance to an entrepreneurial economy tears away the very nature and existence of a democratic society. Risk vice reward is a basic tenet of survival. Tax revenue should not be a safety net for corporate greed.

Re: Ten Best Financial Blogs: RGE Global EconoMonitor

doubleeagle — Wed, 04 Feb 2009 20:25:06 -0000

My Response to the (below) Boomerang article posted on chartingtheeconomy.com.

Summarily, I disagree with the stimulus package

Although un-opposed to 'spending more' to create long-term [10-40 years from now] economic benefit, I believe that our govt must take stock of current programs and then go line-by-line to:

(a) eliminate inefficient programs, (b) redirect funds to bolster or improve working programs or those that are essential (social security),and (c) spend legislative and/or executive energy on arresting those conditions that caused our current crisis.

NPV and saying 'no' to no-bid contracts to mitigate fraud & waste are fundamental aspects of business and macro economics. Having an on-line program that itemizes how, when, & where taxpayer revenue is being spent is a great idea.

Publicly-traded companies chose to venture into projects that actually resulted in negative NPV and now pursue government subsidy. Such projects were abundantly over-pursued in order to make unprecedented profits. A couple of days ago, Exxon Mobile (EM) posted record quarterly-profits (more than $40B)...the company out did itself from a couple of yrs ago...where $30 something billion was a record for EM. This windfall represents a quarterly profit in (I vaguely recall) CY06 & CY08; respectively.

Oh...long-term investment must target several areas. To start, green energy, health care, education, are a must. Its the old adage of...it takes money to make money. Albeit better educated and healthy citizens (young and old) which provide for greater capacity building and ingenuity...while benefiting our workforce and GDP alike--congress must rid the plan of the programs that are part of the pork barrell quid-pro-quo.

Re: Ten Best Financial Blogs: RGE Global EconoMonitor

doubleeagle — Tue, 27 Jan 2009 22:30:36 -0000

Playing Strong Safety for the team of Wall Street Greed

The US government has now become the capitalistic safety-net for major US corporations—this is flat out wrong. Company executives continue maintaining close possession of numerous personal assets (e.g. multiple real properties, extravagant social toys, company jets, season tickets for professional level sports), while pursuing [subsidized] financial aid for their companies. A first in the on-going economic crisis is for Chief Executives to make ‘real’ concessions on behalf of their companies by riding themselves of extravagant perks, benefits, and extraordinary compensation packages.

The old enemy of prosper (better known as greed) has reared its revolting colors once more. Like the infallible Enron, AIG (a proven watershed) is the crux of our economic meltdown. Additionally, over-extended lines of credit in the mortgage lending portfolio of brand name companies play an important role as well. The untenable status of our economy was avoidable. The bailout must cease.

As an American Citizen, the following comments share my views and distaste of subsidizing the US Financial Market. The fundamental tenets of responsibility, accountability, and a highly shared presidential belief that “…the greatest contribution we can make to world prosperity is the continued advocacy of the magic of the marketplace” as then-President Ronald Regan told a UN audience in the fall of 1986. Reportedly, Maurice Greenberg (recent Chairman and CEO of AIG) once said “This is never going to get any better than it is today…we’re so big, we’re never going to swim against the tide. We are the tide.” As eloquently put by former derivative execs of an AIG subsidiary, “We were all kind of artist. The excitement of it wasn’t the money. The money was the scoreboard. The drive behind it was creating something new.”

From a swanky Madison Avenue address to a suburban Connecticut headquarters to a Four Seasons resort in Dallas at a customarily luxurious meeting with lavish meals, open bars, extravagant rooms, rounds of golf and private jets, these execs played the game of profit and now are in a game of softening their losses by pursuing and receiving taxpayer handouts.

Annual profits of the derivative money-making strategy of AIG resulted in hundreds of millions of dollars in profit. Another AIG executive stated “We are the guys there who are going to try to exploit that. We dot our i’s, we cross our t’s, we tell everybody what we’re doing. We’re not hiding anything…However, we’re getting different treatments in different jurisdictions and we’re making money as a result”. He went on to say that AIG received millions in tax credit. Moreover, it was mentioned that AIG had the gumption and that their derivatives executive(s) made a lot of money for the company.

AIG’s organizational leadership and culture is best described as one of greed. Yet again, the underlying cause of the current crisis reminds us that greed continues as a key component of the corporate wheel of fortune. In their endless pursuit of greed, AIG would eventually violate securities laws and commit fraud.

Exacting the conditions that foster immediate change in order to halt the engine of greed operated by US financiers is a critical component of economic reform. It is our solemn duty to ensure American Taxpayers and our way of life are protected. Pursuing an economic bailout contradicts the design of and strips away the fabric of a free-market democratic society.

The realization of the current “handout” gravely concerns me. As I gauge the implications and extenuating circumstances surrounding the current recession and economic meltdown…it appears to me that Wall Street executives continue to thumb their nose at corporate responsibility. Small concessions (such as reducing executive compensation and issuance of preferred stock) do little in arresting the mechanics of greed. Regulatory oversight, government audit, and strict law are a must in order to mitigate the reckless behavior of greedy executives and bankers—primarily on Wall Street.

As I author my comments, CitiGroup is to receive an additional 20B USD (on top of an original 25B USD) to absorb losses born out of the company’s absorption of Merrill Lynch [another avoidable reckless failure].

I remain appalled, embarrassed, and shocked that brand name (revenue producing) corporations are asking for government assistance when their sole reason for existence is to make a profit. When their profits began to fall, corporations felt compelled to seek government support. Support should be rendered in the form of strict reform. Allow these companies to fold; the market will repair itself.

As Exxon Mobile continued to post record profits as a gallon of gas exceeded $4, average citizens couldn’t afford such a high cost for fuel. Ordinary citizens (gladly) made responsible choices to maximize their spending power—reducing gas expenses for food. A hand out from our government to stem this tide was non-existent. Moreover, those companies at the center of the 700B USD subsidy did not offer help to their employees or communities in which they are located. Responsible citizens have paid taxes and managed personal resources; the team of Wall Street Greed failed to manage theirs.

Moreover, when banks [corporations] were collecting revenue as a result of unprecedented lending practices and outrageous interest charges, folks began to default on mortgages loans. Eventually, derivatives conceived by AIG caught up with them as well; resulting in the largest bailout in US corporate history.

In closing, subsidizing Wall Street Greed is a terrible and wasteful use of taxpayer dollars. Strict regulation, oversight, and greater enforcement of securities laws and corporate tax codes must be adhered to. The circumstances surrounding the current economic crisis must be allowed to run its course without government subsidy.

Primary source of reference are a series of Washington Post articles by O’Harrow Jr. and Brady Dennis.