The Homer of TARP

There can be no doubt that there is a huge wave of populist outrage over the bailout of the banking system, split between the government and the baffoons on Wall Street. Perhaps the perfect example of this resentment was offered at the start of last night's episode of the Simpsons.

PS: Cursive writing does not mean what I think it does. LOL

30 March 2009

Gov't Pension "Protection"

With the news today that both GM and Chrysler may not be long for this world -- and my grandfather must be rolling over in his grave at this news! -- a lot of focus is on the pension funds for these companies. Will the auto makers be able to fund their retirement obligations as they go under? If not, will the government fund that is supposed to make up the difference be there to do just that? Turns out the answer to the second question is likely a big, fat "no" thanks to yet another Bush administration failure. And by "failure," I mean actual sabotage of the country.

The Boston Globe reports the following:

Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds. ...

No statistics on the fund's subsequent performance were released.

Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.

TPM has more details here.

30 March 2009

Addition: Still more from TPM.

Best Cruises

We are thinking of taking our first cruise with friends sometime in the next year. There are a lot of good deals to be had out there right now. I caught this article this morning on MSNBC.COM by Jeff Koyen of Forbes Traveler. Since I wanted to remember its information, I'm noting it here in full.

If you haven't taken a cruise in 30 years, you're in for a big surprise.

Gone are the days of blue-haired grandmas crowding the bingo hall and creaky-hipped grandfathers struggling to stay upright on shuffleboard courts. These days, every cruise line worth its sea salt features fine dining, Las Vegas-style stage shows and wet-and-wild theme park thrills. If your idea of great cruising is an all-you-can-eat buffet and a dessert bar that stretches from bow to stern, you may be disappointed by the industry's latest developments.

More than ever, choosing the right cruise line — and sometimes even a specific ship — depends as much upon your budget as your expectations. And these days, cruising may be exceptionally kind to your budget: The capsized economy has produced bargains for even the highest-end cruises, especially if you sign up at the last minute.

How, then, to pick the right one?

Knowing that one size does not fit all, the editors of Forbes Traveler convened a panel of cruise experts and asked them to identify the best cruises in 12 different categories. Panelists were pulled from travel agencies, publications and websites that review cruises and from within the cruise industry itself. Some of their answers may surprise you.

Where to go is typically the first question cruisers ask themselves, so it's no surprise that Best Ports of Call drew the most "beauty is in the eye of the beholder" responses from our panelists. One passenger's exotic Caribbean seaside town is another's overcrowded tourist trap. But overall, says Jason Colman, an elite cruise counselor scholar certified by the Cruise Lines Industry Association (CLIA), Oceania Cruises offer "the most intensive look at some of the world's greatest cities — with most sailings including an overnight or two in port." Maria Saenz, senior travel counselor at Montrose Travel, agreed. "Oceania's customer base is well-traveled and they do hit the best ports in any given itinerary. They know when and where to stay overnight."

There are two schools of thought when it comes to choosing your cabin. Some say, spend as little time in your room as possible. There are excursions to be enjoyed (or, lounge chairs to be sat upon). On the other hand, being comfortable during your "off hours" means more rest and relaxation — and a better overall cruise experience. Either way, according to nearly half of our experts, the Best Rooms are found aboard Regent Seven Seas ships. Lori Herzog, a senior cruise consultant at CruiseCenter.com, describes all-suite staterooms that feature "residential-style décor, flat-panel televisions, large living areas for entertaining and in-room dining." And, they average 350 square feet.

Even on the best cruise, you should get off the boat at least once. Every cruise company is eager to arrange shore excursions that range from simple shopping trips in nearby towns to heart-pounding helicopter tours. When it comes to offering the Best Excursions, food and travel writer Janice Wald Henderson, among others, says Crystal Cruises leaves "its competitors in the dust." Before and during the cruise, Crystal's agents can arrange trips for passengers of every persuasion — from sedentary voyagers who want simple walking tours to more adventurous travelers who may want to "overnight on a glacier" or go "windsurfing in Turkey."

Indeed, adventure cruises are gaining in popularity, and may range from highly technical deep-sea diving trips in the Caribbean, to swimming with sharks in South Africa, to retracing Darwin's steps in the Galapagos. According to our panel, the Best Adventure Cruises are offered by Lindblad Special Expeditions. This collection of small expedition ships travels to far-and-away destinations, including Antarctica, the Arctic, Africa and the Indian Ocean — in comfort. Like many other cruise lines, they offer trips to the Galapagos Islands, but theirs are conducted in cooperation with the National Geographic Society — which drew particular praise from Stuart MacDonald, CEO of Tripharbor.com and former CMO of Expedia.com.

There's a reason that cruises are popular among families: It's easy to keep the kids busy, and toddlers can't get lost. (At least not for long.) But which cruise is best for families? The traditional response is Disney Cruise Line, which operates two nearly identical liners, Disney Magic and Disney Wonder. According to Bob Mick, aka Dr. Kruz Nutty, Disney is great for families with younger children because "they really know how to make magical vacations for families" — but they can fall short when it comes to older kids.

In the survey's closest race, Disney Cruise Line actually failed to take the title for Best Family Cruise. Instead, Royal Caribbean International squeaked ahead of the mouse with 45 percent of the vote (compared to Disney's 42 percent). According to CruiseCenter.com's Lori Herzog, "Royal Caribbean offers a fantastic program for families since their ships are large and have multi-faceted venues to entertain kids and families of all ages." She cites an extensive Adventure Youth program for the younger set as well as a “Just For Teens” Center. Other panelists describe kid-oriented ice-skating, full-court basketball, miniature golf, rock-climbing, movie theaters and stage shows.

"Nobody else can touch Royal Caribbean’s world-class and extensive family-based product," says Herzog. What's more, Tom Coiro, vice president of Direct Line Cruises, predicts that Royal Caribbean's new Oasis of the Seas, to be launched in December 2009, will offer "the most astounding array of family activities imaginable."

But the cruise industry is an ever-evolving business. The Avid Cruiser's Ralph Grizzle recommends family cruisers stay tuned for industry developments. "Disney has a trick or two up its sleeves with its two new ships, the first coming in 2010."

30 March 2009

Obama Econ: Another Take

Here is an interesting take on the Obama economic plan and what effect having Senator-elect Al Franken (D-MN) not be able to take his seat might be having on the matter. The whole Franken thing is a scandal on our democracy as it is, but this is additional food for thought.

29 March 2009

Larry Summers: Econ Dinosaur

Arianna Huffington has another good op-ed today about one of the White House's top economic guru's, Larry Summers, and how his out-of-touch thinking is part of the train wreck of the current Obama banking plan.

25 March 2009

Obama's Failure

Arianna Huffington outlines Obama's failures on the banking crisis, dealing with both policy and politics.

23 March 2009

Bank Bailout Reviews

I found a blog that is posting various reviews by economists of the "new" bank bailout plan put forward by the Obama administration. The vast majority are not favorable.

23 March 2009

Geithner Redux

I want to follow up on my post yesterday regarding the path the bank bailout plan seems to be taking. To that end, I'd suggest reading another post by Josh Marshall over at TPM today. It deals with the "why" of choosing this plan in terms of psychology. It's interesting at the very least.

Also, here is another reader response to TPM's coverage of this issue. This one is by an anonymous TPM reader and is given below in full. Check the site for responses and other coverage, as always.

The real problem behind the AIG public relations mess is not the tin ears of all the President's men, or their tone deaf commentary, or their ham-handed approach to decision-making. The real problem is that the AIG situation implies that they, the President's men, don't think like shareholders. They don't act as if their fiduciary duty is to the taxpayers whose money they spend. They don't seem to put the interests of the public first and foremost and ahead of all the interests of private fims. Instead, they seem to think that their job is to have the non-taxpayer, private shareholders and management of various firms return to normalcy -- meaning, doing commerce and making money. This goal is not to be derided, and it is important, but it does not correctly reflect the duties of the government officials who represent the taxpayers in owning or controlling many firms, including AIG. To see the right mirror of those duties, one needs only look to public company boards.

On public company boards, compensation committees do not include any members of management. The members of these committees determine, as a matter of law, the compensation of management in all respects. These committee members, composed exclusively of independent directors, owe their duties exclusively to the shareholders. Ben Bernanke publicly talked about the duty owed by the Fed to the institutions it is helping; when it comes to compensation decisions the duty is owed to shareholders, not to the abstract idea of a corporation.=2 0And when the taxpayers are the shareholders, the duty is owed to them.

The corporation, its management, its shareholders and the directors who represent them, are, of course, closely interrelated. Indeed, the goal of compensation decisions in public companies is to align the interests of top management and shareholders. When the executives do well, the shareholders should do well, and vice-versa. The pursuit of this alignment involves difficult decisions, including but not limited to balancing the notion of doing well in the short-term with doing well over the long-run. But this decision-making starts with a clear understanding of roles. Translating the compensation decisions of public company directors to the decision-making at AIG or any of the many many other companies owned in whole or in large part, directly or indirectly, by the taxpayers, through Treasury or the Fed, at least the following questions arise:

First, who represents the taxpayers in the compensation decisions at government-controlled firms? For example, at AIG, how can it be that the CEO, no matter how fine a fellow he may be, operates without a compensation committee of independent directors who decide executive compensation? There must be such an organization, although it has been conspicuous by its absence in the recent "debate." And on it there must be individuals who represent the shareholders exclusively, even when those shareholders are the taxpayers. There must be a reasoned process and a clear, publi c record of decision-making. If these processes, which are routine in public companies, don't exist it should take less than a few days to put them in place. This is not rocket science or even toxic asset clean-up; it is utterly familiar territory for dozens and hundreds of experts ready and able to take the burden of such decision-making off the desk of the Treasury Secretary, the Fed governors, and certainly the folks in the White House.

Second, if the right sort of compensation committees were created, it would follow inevitably that they would decide and announce their philosophy. For example, are they following the necessary goals of compensation: recruiting, retaining, and motivating? How are they putting these tenets into place? How do they balance the need to pay for performance with the general lack of income and liquidity in the troubled firms that the taxpayers have such large stakes in? These decisions are, again, both difficult and extremely familiar in public companies. It is easy to go to the right place for expertise; it is high time for the government's officials to get that expertise. It is past time to assure America that the Treasury Secretary has delegated this sort of responsibility; compensation needs to be done fairly, but it is not as important as various other crises for Tim Geithner to solve. On the other hand, it is a big problem if Treasury doesn't have the inclination or capability to delegate and assign accountability for many many issues, of which c ompensation in not just AIG, but many other firms, is one.

As another example, it is impossible to believe that the current proposed new bail-out plan for toxic assets does not raise issues of possible wealth allocation as among private parties and taxpayers. These issues will include compensation decisions. Treasury cannot be indifferent, secretive, or wholly responsible for such decisions -- it needs to delegate and obtain outside counsel in open, reasonable ways.

Public companies invariably use outside advice to make compensation decisions. Much of that advice draws scepticism. But no one would suggest that comparables and standards are irrelevant. What comparables and standards for reward and compensation shall Treasury apply to its present bail-out plans, or indeed to any and all of the firms where it now has major or controlling stakes? At public companies, transparency is required; at Treasury it ought to be part of the prevailing ethic.

At bottom, the AIG flap is about fairness: fairness of result and fairness of process. As long as Treasury maintains a rule of secrecy, it is certain to generate more AIG flaps, whether or not the flapping is legitimate. People, whether in the role of voter, taxpayer, citizen, or shareholder, simply want to know what's going on.

22 March 2009

US Economy: Japanese Redux

It would appear that Obama and Geithner have indeed decided on the Zombie Bank scenerio for US banking. If this doesn't scare the shit out of you, it should. It is exactly the wrong way to go. We may be doomed to a mess like that of Japan, which started for them in 1989 and from which they still have not emerged 20 years later. The horror, the horror.

21 March 2009

AIG Financial Products History

Confused about how a respectable insurer such as AIG got into its current mess? TPM Muckraker has a great history of the Financial Products Division of AIG. Two words play key roles: deregulation & greed.

20 March 2009

Man Hunt?

I wonder if it is technically illegal to murder on international land? Probably. Still, it might be worth investigating a business model where big game hunters pay $500,000 to hunt these cretins, with the money going to Conservation International, of course. Regardless, these people deserve nothing but scorn, pain, and death.

20 March 2009

Banking Reform: Who Is In Charge?

The key question when looking at the banking mess and where we go from here is "who is in charge?" We know the pols and business "leaders" who got us into this mess. Are we going to allow these same people to dictate the terms of deals going forward? Are we going to continue to let the foxes guard the henhouse?

I point you to two writings on this issue, neither positive for Obama. The first is by Josh Marshall over at TPM. The second is by Paul Krugman at the New York Times.

I will offer a counterpoint writing, however, in the form of a reader response on TPM. Take it for what you will; quoted in part.

With regards to Geithner, I have been thinking a lot about this whole AIG mess and one of the things I keep coming back to is that Geithner is basically a one man band right now because neither the Dep Secy nor key Asst Secy positions at Treasury have been filled. That is not highly unusual at this point in an Admin and most Secys just struggle along until they can fill the positions. The problem Geithner has is he is dealing with multiple crises while not having a core team in place. At my day job I run large projects for my company and when you get stretched for time and resources you end up prioritizing what seems most important. 90+% of the time you get it right but when you don't it is usually bad. The Obama Admin will never say this publicly but I would not be surprised if what happened here is that Geithner saw the AIG bonuses as a secondary issue and prioritized the bank stress tests, TARP money, the auto bailout, etc. Having no key team members in place he didn't delegate it to the staff in his office or to the careers who are filling in temporarily while the subcabinet positions are confirmed. And now you have a mess.

I know a lot of people are calling for Geithner's head but I think you have to give him a chance to get staffed up and see what he can do. If he is still struggling 9 mos from now, get rid of him.

20 March 2009

Obama's Greatest Folly

Treasury Secretary Timothy Geithner is shaping up to be President Obama's greatest mistake. He -- and the president by extension -- seems to be dithering, rather than taking decisive, far-reaching action on the banking crisis. We as a nation -- and the world at large -- will suffer far more financial blood loss with his "health by 1,000 cuts" than we would with far larger, bolder moves. We are following Japan's 1990's path to nowhere. To see information specific to Geithner, check out these pieces at Bloomberg and HuffingtonPost. For an overview of what needs to be done with the economic woes as a whole, see my previous post for a link.

2 March 2009

Econ 101: Here & Now

Friday night, Bill Moyers had the economist Robert Johnson on his Journal program. It was the second segment of the program and the interview lasted about 15 minutes. In that short time, Johnson gave what may be the best, most concise overview to date of the troubles facing the banking industry, as well as America's financial woes within a fully international economic reality. I believe that watching the interview would be both interesting to and beneficial for anyone regardless of their level of knowledge about these issues. Moyers' questions and Johnson's clear answers helped to distill the issues down to their core problems and illuminate why these should be of deep concern not only to every American, but to every citizen of our planet. I highly recommend watching it. Indeed, I'd make it mandatory for every American to do so.

You can find links to a transcript of the interview as well as to video of the segment itself here.

1 March 2009