Monday, March 30, 2009

White House “Fires” GM CEO, That’s OK By Me

The news media is all abuzz with commentary about the White House asking the CEO of General Motors to resign if the company wanted more bailout money. Many people seem appalled that President Obama – and the US Government – would dare to mess with a business in such a manner. While I understand why people may initially be concerned at what they see as government interference, I think that many of these people may be a little na├»ve on what goes on in the real business world.

First, let’s go back a bit. I wrote last November ("The Frequent Critic – Should the Auto Companies Be Saved?”) that I was leaning towards letting one of the car companies go bankrupt. Of course, the job loss, plus the effects that this would have on other business who rely on GM to sustain them would have a huge negative effect on the economy. I still think this would have been the best way to go, and it would have forced a reorganization of one of these car companies. If that company was GM, then more than likely the CEO would be on the outs anyway.

Headlines like the one written on the CNN web site today - ”Obama To Detroit: Restructure Or Else” - makes it sound like the government is just throwing their weight around. I do not see it that way at all. I see it as the White House just asking for what any person would be asking if they were asked to invest a huge amount of capital in any business. It’s no different than someone who buys enough stock in a company in order to get a say in how it’s run, or what happens when one company acquires another. Executives sometimes find they are quickly out the door once big money comes in and makes an investment. I worked for a company that was purchased by various companies and/or investment groups over a period of 25 years, and almost every time big money came in, a big executive or two got walked out, in many cases because that executive just wasn’t doing the job or wasn’t helping the company to grow. Sometimes there didn’t even seem to be a good reason.

I think that it’s about time that the US Government demands some action for all the money it is putting into these companies. My only regret is that they didn’t do the same thing with the investment banks when they bailed them out. I don’t blame Obama for that issue because the bank bailouts were already well in motion by the time he took office.

I am sure that the US Government does not want GM to go bankrupt. But I also don’t think the US Government wants to continue to throw good money after bad. The car companies need to change, and they need to change fast. The demands made by the White House means that things are not business as usual. If the car companies want money, and they want to be saved, it can’t be business as usual any more.

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Wednesday, March 25, 2009

Bad Politics As Usual: Republicans Want Failure For Obama

Despite the fact that the majority of the American people voted for change, I find it’s still politics as usual. I wrote in here in the beginning of March about talk show host Rush Limbaugh’s hopes that President Obama would fail. Now, I read today that former politician and Law & Order alum Fred D. Thompson also wishes failure for Barack Obama. Of course, he qualifies it with the disclaimer that "I want his policies that I believe take us in the wrong direction to fail" (see article and video below).

But let’s put Thompson’s comments into perspective. Here’s a guy who quit politics and went into acting, then quit acting and went back into politics to run for the presidency. He ran a lifeless campaign and was a lifeless candidate. The American people – including fellow Republicans – turned away from Thompson and he quickly fell away from the pack and was out of the race. (Now he’s a radio talk show host.) I suspect that Thompson’s comments mean even less to people now, especially to the large number of Americans who do support President Obama.

Thompson’s commentary on the matter was triggered as part of an interview on CNN (below) where he was asked about comments made by Louisiana Governor Bobby Jindal, who says it’s OK that people want Obama to fail.

I am sorry, but I just don’t get the whole wishing for failure thing. The economy is in a mess and the American people voted for change. They wanted action, not endless quibbling, backstabbing, and ill-will wishers. While the current economic mess flourished and came to a head under the Bush administration, the root of the problem goes father back from that. Politicians let this whole mess get away from them, and now they all want a say - their say - in how to fix things. The problem is, there isn’t a unified plan put forth by the Republicans to counter what the Obama administration has put forward. It’s easy to sit back and nit pick the budget and the economic crisis piece by piece, but it is a very complex thing to create a plan that tries to fix it all. And as President Obama said in his press conference last night, this is not quick fix. The Republicans had 8 years to try to identify, prevent, or fix the economic problems of the country and they didn’t do it. The people voted for change, and that’s enough for me to support the president’s plan. I may not be thrilled with every single line of it, but in the grand scheme of things, I don’t see anything better.

I look at it this way: Failure is not an option. Any politician, Republican or Democrat, who wishes for failure doesn’t belong in the job. If they don’t agree with a certain part of the budget or the economic plan, then they need to take the appropriate steps to make changes, through the political system that they were elected to navigate. But if they lose their argument, then I expect them to support whatever gets approved or passed, and if they can’t, then they need to get out of the way for someone who wants to work for the success of the American people, not for their failure.

Fred Thompson on CNN’s American Morning

Thompson: I don't want Obama's policies to succeed
From CNN Associate Producer Martina Stewart

WASHINGTON (CNN) - Count former GOP presidential candidate Fred Thompson among the growing chorus of prominent Republicans who want President Obama's policies to fail.

Tuesday evening Louisiana Gov. Bobby Jindal called pressure to support Obama's policies "political correctness run amok."

Thompson told CNN's John Roberts Wednesday that he agreed with some of his fellow Republicans who have said publicly they do not want the president's policies to be successful.

"I want his policies that I believe take us in the wrong direction to fail," Thompson told Roberts on CNN's American Morning.

"If he takes us down the road of tripling our national debt in ten years and making us vulnerable to higher interest rates and higher inflation, and things of that nature, I want all those policies not to succeed," he said.

Thompson, who made the rising cost of entitlement spending a focus of his 2008 presidential run, said he'd be happy to help Obama overhaul those programs.

"If he wants to do that, I will join with him. I'll do everything I can to make him succeed with regard to that because that's the whole ball game in terms of our fiscal future in this country," said the former Tennessee senator.

Thompson criticized Obama's ambitious health care agenda, telling Roberts the president's plans would cost the government more than they would save.

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Wednesday, March 18, 2009

AIG Outrage A Smokescreen?

It’s hard to miss the outrage that the American people have with the financial institution AIG. Once it became public that bailout money was going to be used to pay hefty bonuses to some of the same people that got AIG in their financial mess, you could almost hear the yelling coming from every household in America. And the shouting is getting pretty loud from Washington D.C. But some of the same politicians and government agencies who are crying foul with AIG also allowed the situation to happen by not properly designing and controlling the way bailout money was used, or monitoring our financial institutions before the crisis. In my opinion, these people allowed the whole situation to happen. I primarily blame the SEC, The Fed, and the Treasury, but our elected officials also had blinders on as well. Now, are these same people trying to deflect the American people away from their own incompetence by focusing on the issue with the bonuses? Here is an excellent editorial on the matter from the Wall Street Journal that will make you think.

The Real AIG Outrage

MARCH 17, 2009

President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout.

Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government's AIG "rescue." This federal takeover, never approved by AIG shareholders, uses the firm as a conduit to bail out other institutions. After months of government stonewalling, on Sunday night AIG officially acknowledged where most of the taxpayer funds have been going.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no "bailout." Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.

Given that the government has never defined "systemic risk," we're also starting to wonder exactly which system American taxpayers are paying to protect. It's not capitalism, in which risk-takers suffer the consequences of bad decisions. And in some cases it's not even American. The U.S. government is now in the business of distributing foreign aid to offshore financiers, laundered through a once-great American company.

The politicians also prefer to talk about AIG's latest bonus payments because they deflect attention from Washington's failure to supervise AIG. The Beltway crowd has been selling the story that AIG failed because it operated in a shadowy unregulated world and cleverly exploited gaps among Washington overseers. Said President Obama yesterday, "This is a corporation that finds itself in financial distress due to recklessness and greed." That's true, but Washington doesn't want you to know that various arms of government approved, enabled and encouraged AIG's disastrous bet on the U.S. housing market.

Scott Polakoff, acting director of the Office of Thrift Supervision, told the Senate Banking Committee this month that, contrary to media myth, AIG's infamous Financial Products unit did not slip through the regulatory cracks. Mr. Polakoff said that the whole of AIG, including this unit, was regulated by his agency and by a "college" of global bureaucrats.

But what about that supposedly rogue AIG operation in London? Wasn't that outside the reach of federal regulators? Mr. Polakoff called it "a false statement" to say that his agency couldn't regulate the London office.

And his agency wasn't the only federal regulator. AIG's Financial Products unit has been overseen for years by an SEC-approved monitor. And AIG didn't just make disastrous bets on housing using those infamous credit default swaps. AIG made the same stupid bets on housing using money in its securities lending program, which was heavily regulated at the state level. State, foreign and various U.S. federal regulators were all looking over AIG's shoulder and approving the bad housing bets. Americans always pay their mortgages, right? Mr. Polakoff said his agency "should have taken an entirely different approach" in regulating the contracts written by AIG's Financial Products unit.

That's for sure, especially after March of 2005. The housing trouble began -- as most of AIG's troubles did -- when the company's board buckled under pressure from then New York Attorney General Eliot Spitzer when it fired longtime CEO Hank Greenberg. Almost immediately, Fitch took away the company's triple-A credit rating, which allowed it to borrow at cheaper rates. AIG subsequently announced an earnings restatement. The restatement addressed alleged accounting sins that Mr. Spitzer trumpeted initially but later dropped from his civil complaint.

Other elements of the restatement were later reversed by AIG itself. But the damage had been done. The restatement triggered more credit ratings downgrades. Mr. Greenberg's successors seemed to understand that the game had changed, warning in a 2005 SEC filing that a lower credit rating meant the firm would likely have to post more collateral to trading counterparties. But rather than managing risks even more carefully, they went in the opposite direction. Tragically, they did what Mr. Greenberg's AIG never did -- bet big on housing.

Current AIG CEO Ed Liddy was picked by the government in 2008 and didn't create the mess, and he shouldn't be blamed for honoring the firm's lawful bonus contracts. However, it is on Mr. Liddy's watch that AIG has lately been conducting a campaign to stoke fears of "systemic risk." To mute Congressional objections to taxpayer cash infusions, AIG's lobbying materials suggest that taxpayers need to continue subsidizing the insurance giant to avoid economic ruin.

Among the more dubious claims is that AIG policyholders won't be able to purchase the coverage they need. The sweeteners AIG has been offering to retain customers tell a different story. Moreover, getting back to those infamous bonuses, AIG can argue that it needs to pay top dollar to survive in an ultra-competitive business, or it can argue that it offers services not otherwise available in the market, but not both.

The Washington crowd wants to focus on bonuses because it aims public anger on private actors, not the political class. But our politicians and regulators should direct some of their anger back on themselves -- for kicking off AIG's demise by ousting Mr. Greenberg, for failing to supervise its bets, and then for blowing a mountain of taxpayer cash on their AIG nationalization.

Whether or not these funds ever come back to the Treasury, regulators should now focus on getting AIG back into private hands as soon as possible. And if Treasury and the Fed want to continue bailing out foreign banks, let them make that case, honestly and directly, to American taxpayers.

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Friday, March 13, 2009

The Cramer Vs Stewart Feud Wraps Up?

I wrote about the Jon Stewart and his panning of CNBC
the other day, and I thought I would bring you all up to speed on the saga. Jim Cramer was brave enough to appear on Stewart’s Daily Show and take his lumps in person, which Stewart happily dished out. I have the unedited videos below from this show (caution, there are a few colorful words used) and you can see and hear for yourself. My general opinion is that both Cramer and Stewart have benefited by this on-air disagreement, as it could mean a ratings bump for both of them.

Stewart, though, may have been a little hard on Cramer by singling him out. I have been watching Cramer's show off and on for years, I first picked up on him in the mid-90s when he started up He has made some good calls and some bad ones. There isn't any financial analyst who gets everything right. I always take what he says – and all the rest of the financial talking heads - with a grain of salt. I think Stewart did an excellent job of bringing out Cramer's past misdeeds, and I think Cramer handled his responses calmly.

I do take Stewart to task, though, for not highlighting the other financial networks like Bloomberg and Fox that also failed to uncover the impending collapse. If you have ever watched the business shows on Fox News on Saturday morning for example, you would know that those people have said a lot worse than Cramer. I also wonder about the Fox’s talking heads own motivations for what they say on air. Case in point, Brenda Buttner, who didn't disclose that she frequently had her real estate husband on her show (Tom Adkins) and all he did was pump up real estate, even early on when it looked like the bubble was going to burst. (While I haven’t seen him on her show for a while, I understand he still shows up on the Fox Business channel, still pumping up real estate.) That was a clear case of a conflict, I thought. Fox also does a good job of making projections that don't come true. In fact, CNBC does a much better job of reporting the news than Fox, whereas Fox seems more laden with opinion.

But back to Steward’s displeasure with how Cramer and/or CNBC didn’t uncover the financial messes and report on them before they happened. I find myself wondering with all the government agencies, news agencies, auditors, etc. out there, that someone like Bernie Madoff could have gotten away with what he did, and how the banks were allowed to get into so much trouble. You would think 60 Minutes would have picked up on it, but even that show has gone somewhat soft. There aren’t really any hard hitting investigative reporters any more, if there are, they are probably being quashed by the corporate machines who worry more about their own liability and profits. I point my fingers at people like financial auditors and government agencies whose job it is to ferret out wrongdoing and corruptionon. But I suppose even Jon Stewart can’t hold anyone accountable unless someone else flushes out the story first.

Cramer isn't the only one who deserves to be called out. I have to give him credit, though, for showing up face to face with Stewart and taking his lumps. Most people would not have had the guts to do it. Of course, both Stewart and Cramer know that this will mean ratings for both of them, so both of them come out winners in this feud.

All Original Text Content © unless otherwise noted

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Friday, March 6, 2009

Jon Stewart Skewers Whiner Rick Santelli and CNBC

This is a case where someone needs to be reminded to be careful what you ask for - you just might get it, and you may not like what they get.

In February, Rick Santelli, who is one of the "expert" talking heads that CNBC brings on daily (he's at the Chicago Mercantile), went on an on-air rampaging rant about the Obama administration’s handling of the mortgage crisis and recommended bailout. About a minute into his rant (video below), after enlisting the support of the traders around him, who seemed to be booing the Obama plan in support of Santelli, Santelli looks to the camera and asks, “ President Obama are you listening?”

Well, someone in the White House heard him. Of course, the rant was covered and promoted ad nauseam on CNBC and NBC, so it was hard to miss. So, there should have been no surprise to Santelli when White House Press Secretary Robert Gibbs came back at Santelli and took him to task for his comments (vdeio below) and provided their own response.

Why, then, is Santelli so shocked that Gibbs mentioned him by name? When Santelli appeared on the Today Show at the end of February, Santelli was upset that Gibbs and the White House singled him out, and had previously commented that he was “threatened" by them. I happened to be watching that Today Show segment at that time, and I admit my jaw dropped that Santelli seemed upset that after he’d asked if President Obama was listening, he had the nerve to be surprised that the White House acknowledged that they had heard him – and they wanted to add their own two cents. I actually was thrilled that Matt Lauer took Santelli to task for his ludicrous allegation of a White House "threat". Lauer did it in a very frontal way, which is unusual for him.

But the icing on the cake was when Jon Stewart decided to jump into the fray after Santelli canceled an appearance on the Jon Stewart show. Stewart not only skewered Santelli, but the whole of CNBC. Stewart's take was dead on the money, and absolutely hilarious. Now, I watch CNBC occasion, I happen to enjoy watching Jim Cramer, but I have to admit that I know to take what these "experts" say with a grain of salt, especially considering the circumstances of the collapse of the economy in the last few months. Jim Cramer had been very open regarding his bad call about Bear Stearns (Stewart mentions it in his segment), admitting that the CEO clearly was lying to him in an interview that he (Cramer) had with the CEO right before Bear Stearns went belly up. I think every financial news network called the stability of many companies incorrectly, not just CNBC.

I applaud Jon Stewart for putting the whole Santelli and CNBC thing together in such a way that puts Santelli to shame. So the lesson for Santelli is – if you can’t take the consequences for what you say, then keep your mouth shut.

Here are all the related videos in case you’re interested in watching. The Stewart video is tops on the list, and if you watch any one of this, that’s the one to see. The videos progress on the list in a reverse order from when they actually appeared.

Jon Stewart Skewers Rick Santelli and CNBC

Today Show Video – Lauer Gives Santelli a Smackdown

Robert Gibbs and the White House Response

Original Santelli Rant

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Thursday, March 5, 2009

What Have They Done To Tilex Soap Scum Remover?

Left - old Tilex, Right - new Tilex

Every now and then, something completely unimportant annoys the living daylights out of me. Today it is Tilex Soap Scum Remover. Yes, I know with the economic crisis going on, this is a silly thing to be upset about. But, like my blog post in last December when I wrote about stealth price increases when companies reduce the quantity of a product , there is another problem out there of which consumers should be aware. It’s when a company changes the formula of a product and it’s nothing like what it used to be.

Case in point –Tilex Soap Scum Remover. I have used this product for years, it works well, it foams up nicely, and it leaves a nice CLEAN fragrance. I am very sensitive to fragrances, so when I find something that leaves a clean scent that is not too perfumed, I am very happy.

This past week, while shopping in Wal-Mart, I had to get another bottle of Tilex. I scan the shelf, and find the familiar bottle…but wait! It looks the same, but it isn’t. The words “soap scum remover” have been replaced with the words “bathroom cleaner.” The label also said “dissolves soap scum on contact,” so I assumed they just changed the label to market it as a general bathroom cleaner. My mistake.

When I went to use it, it was clear that some major change was made to this product. The ‘thick foam” that the old label touted was gone, instead I got a thin misty spray – despite the fact that I had the nozzle on the foam setting. And the clean fragrance? Gone, replaced with a heavily perfumed scent, nothing like the original. The new bottle still has the words “lemon scent” on it, but the text is much smaller. I can tell you that it smells nothing like lemon. I don’t think the product works as well, either.

I don’t recall noticing a change in the price of Tilex, but it doesn’t really matter at this point because I won’t be buying it any more. Somehow, I feel as if I have been betrayed – I paid for one product and got something completely unlike what it was before. There should have been something on the label that said “new formula” or something. I may have still purchased it, but not felt as duped into buying it.

So my messages to consumer is to BE WARY. Any packaging change or label change may mean that the product you once knew and loved has been changed, and/or you’re paying the same price for something that probably cost the company less to make. By the way, Tilex is a Clorox Company, so now other Clorox products may be off my list as well.

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Monday, March 2, 2009

Rush Limbaugh: Put a Sock in It!

I try not to watch Fox (Faux) News. But I was "forced" to do so on early Sunday morning in order to get an update of the news. By the way, don’t watch Fox for news because you really don’t get news. I didn’t watch the show too long, because they were too busy lathering high praise on Rush Limbaugh, and deciding what they wanted to deep fry on the show. Of course, that was after they lathered a lot of praise on themselves, with Clayton Morris , one of the weekend morning hosts, being one of the most self centered people on television. He can’t seem to go one minute without bringing the focus back on himself. He wanted to deep fry his tie, and he must have mentioned this 10 times in one half hour. I don't recall getting any news.

But I digress.

On Saturday, Rush gave a speech at CPAC (Conservative Political Action Conference) and put out a rallying call to his fellow Republicans. If I heard correctly, the speech was supposed to last about 20 minutes, but Rush went on for 90 minutes. (That’s the definition of a blowhard in my dictionary.) I listened to part of the coverage of Rush’s speech and all I heard were the rantings of a bitter man whose party lost the big prize in the presidential election. He’s so upset about it that he seems to want the president to fail. He denied this, though, and in his speech, Rush addressed this issue by saying, "This notion that I want the president to fail, this shows you the problem we've got. This is nothing more than common sense and to not be able to say it? Why in the world do I want what we just described: rampant government growth, wealth that is not being created yet is being spent? What is in this, what is possibly in this that any of us want to succeed? Did the Democrats want the war of Iraq to fail? Well, They certainly did. And they not only wanted the war in Iraq to fail they proclaimed it a failure.... They hoped George Bush failed. So what is so strange about being honest and saying I want Barack Obama to fail if his mission is to restructure and reform this country so that capitalism and individual liberty are not its foundation?"

Rush forgets the key fact that President Obama inherited the economic mess that we are in today. He hasn’t even been in office for 60 days. It was the Bush administration that let the economy spin out of control, and the Bush administration that began the bank bailouts. Now with banks even teetering further, taking other industries and jobs with it, there really aren’t any easy choices to make. In Rush’s case, I didn’t hear him offer any alternative plan, and as far as I know, he doesn’t have one except to say that he doesn’t think Obama’s is the right one. Personally, I have some minor issues with the stimulus plan, but I also know that something needs to be done to jump-start the economy, and fast. I don’t profess to be an expert in economics, so at some point I have to have some trust in our leadership that they have a general idea of what they are doing.

If the Republican Party is trying to re-invent itself in order to capture more voters in the next presidential election, people like Rush Limbaugh aren’t the ones to do it. He may very well appeal to a subset of conservatives, but the Limbaugh-style rhetoric isn’t what voters responded to in the last presidential election. Somehow, I think that many Republican leaders also wish that Rush would just zip it for a while. Rush is perfectly free to say what he wants – but he has to remember one thing – the American people are free to tune him right out.

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