— Rep. Alfred Baldasaro, House Judicial Committee Hearing to overturn gay marriage in New Hampshire

Right now, America is enjoying its first case in a federal court to examine if state bans on same-sex marriage illegally discriminate against gay Americans. Before you refuse to read my next sentence, I’ll plead a Ron Paul clause here.

The Honorable Ron Paul is not a supporter of the Federal Marriage Amendment, which for years now has not garnered a majority to pass. He’s got a simple reason. He says the government has no role in regulating marriage. Amen, brother!

Well, he says the feds should have no role. The federal courts shouldn’t rule on it. Why that means state legislature and state courts should bother in it, I don’t see, either.

Maybe I’m blind, but there’s no article in the Constitution that says, expressly: States shall determine the Unions of its Citizens by legislative or judiciary Powers. What does come into play in Article IV is that “Full Faith and Credit shall be given in each State to public Acts, Records, and judicial Proceedings of every other State.” Further, “The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.”

To me this sounds like Tough titties, what is legal or illegal in one state must be respected by all states. But I’m no lawyer, and luckily, over the years, we’ve made a bunch of clarifying amendments to the thing. After all, maybe you don’t consider marriage a privilege.

Marriage As a Civil Right

Let’s go back to a 1967 trial for a minute. It challenged a Virginia law banning interracial marriage: Loving v. Virginia. It’s the hinge upon which the Prop 8 plaintiffs’ case works. Here’s what the chief justice for the majority Earl Warren had to say:

“The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men. Marriage is one of the ‘basic civil rights of man,’ fundamental to our very existence and survival.”

Warren’s language relies on that in the Declaration of Independence, but the decision centers on the resounding protection of the 14th Amendment — guaranteeing all citizens equal protection under the law. We saw this amendment invoked with success in Brown v. Board of Education. My civics teacher in my B-more public school crowned this case with glory. The triumph over the conundrum that “separate but equal” was inherently unequal. My teacher was black, and maybe I’d have heard something less emphatic had I lived in, hmmm, Georgia or Texas. She had a devil of a time finding us a great textbook with lots of firsthand sources.

Likewise, my high school was also a profound relief to the gay teens in my class. Now that those same friends are older, they’ve got partners who would be spouses, but very few states to marry in.

Marriage: A Sacrament

Such momentous challenges in American history should be televised (or at least posted on YouTube). Filtered only through reporters and not simply broadcast live, it can easily seem as though Satan himself appeared in the courtroom to sodomize innocent children.

If, hypothetically, your god thinks it’s a sin, just don’t join in. But two men holding a marriage certificate doesn’t cheapen your own marriage in the eyes of God, so it shouldn’t bother you either. You’ve got enough work to do just staying married to the spouse you’ve got. Give “civil union” all the legal, state, and nationally recognized rights and you’ll find far less threat to your sacred word.

Let’s run through the alleged threats to the institution of “marriage.”

I put this in quotes because divorce has rendered all points on the sanctity and permanence of said union utterly and patently false. How can something be sacred if — thanks to the state — abolishing it is only a lawyer away?

All that remains, statewise, are guarantees of property rights. A friend of mine recently split with a girlfriend of 10 years. They’d bought a house together. It occurs to me that a ring would have solved this dilemma. They’d have a bona fide legal path to tread for separation. It also occurs to me, however, if one or the other had actually mandated a ring in say, Year Two, maybe they’d have just split up right there. Marriage is as much a handy threat for discontinuing a union.

OK. OK. In a perfect world, everyone has never seen porn, waits until marriage and enjoys the bliss of commitment: hard-won toil of progressing in an institution that keeps you together long beyond the be-fruitful-and-multiply period. I’m not saying there aren’t socially strengthening benefits to be reaped from good marriages and good families.
But like a church, an institution is only as good as the people in it.

What, Me Kill Marriage?

The easiest solution (except as regards the Government Paperwork Elimination Act) is to just overturn the word “marriage” as a federal or state concept. We could do this two ways. We could cut out the regard for civic benefits in marriage entirely, which is messy. Or we could declare henceforth everyone form “domestic partnerships.” Not even your golden anniversary grandparents will be exempt from this “grandfathering” into the new thing: civil union.

What’s at stake with such a change? The definition of “citizenship.” At present, marriage confers citizenship. Marriage is a universally recognized global category that is portable between states in the union and nation-states alike. Insurance companies would be very annoyed. And state and fed employers would have even more citizens on the “gimme roster.”

Keep this in mind. One nation had to be the first to outlaw slavery. (Today’s citizens fight over whose country was really first.) Saint-Domingue (which today we call Haiti) certainly was in the head of the pack. Vermont was the first state to do so. England and Denmark followed suit. But to redefine citizenship and freemen is a process that takes, oh, several hundred years. Guess we won’t rush it with this marriage thing.

Why Do We Marry Anyway?

As I can make out, the three main things marriage concerns: procreation, property rights and fear. Of the three, civic marriage concerns itself only with the first two. We make contractual agreements in business because we assume the other party is going to protect his or her own interests insofar as he or she is able and to renege as it suits. In hostile or friendly M&As alike, the suitor usually puts in place a multimillion-dollar fee in case the company chooses a different suitor.

Just so in marriage, we like strong barriers to exit. Women like it when men have to stay when they have babies. Fathers like it because their daughters cost enough to support to maturity. Men like it because they can reap the rewards of their loins and don’t have to stay in fighting lion pride form to receive favors. God likes it because he has a bigger church that actually takes time to say “hi” and “thanks” on occasion.

How about that baby making? The defense for Prop 8 plan to argue that marriage demands the ability to make babies. However, this is stupid, as barren men and women get married all the time. They spend their free time doing things other than wiping up puke and snuffly noses and nobody gets mad at them.

Also, as Sarah Palin’s daughter handily illustrates, procreation is achieved with or without the institution of marriage (unless you’d want to bring in old legal laws now off the books about “breech of promise”). Sure, many successful men and women of past ages were bastards; among that number are a pope and a cardinal. There’s Alexander Hamilton, Billie Holiday, Leonardo da Vinci, Eva Peron and William the Conqueror. So perhaps you could safely say that a marriage doth not child make. But wouldn’t we rather two loving parents for each child, instead of the old ruse: loveless marriages for the sake of children?

Give me my property rights. When we endure the stupidity (and genius) of a spouse, when we bear his young, we’d hope to keep living in our house after he is dead. It’s only nice and natural. Besides, the kids need a place to live too. And if we’ve got a farm with cattle, sheep, goats, fields of wheat, acres of corn, we want that food and the income it produces.

Of course, thanks to government carrots like Medicare, Medicaid, and Social Security, the definition of property rights has broadened. We want our spouse’s benefits to transfer. That’s not just anyone’s free money. It’s my free money. That’s the least the government can do when my spouse dies.

Fear: We don’t want to toil alone. Believe it or no, not all gays want to marry. The more radical leftists and queer scholars are direly opposed to same-sex marriage too.

They see marriage as an instrument of domination meant to keep people content so that they don’t revolt. They see marriage as an institution correlated to capitalist structures of subordination.

But I think most people want to marry — unconsciously — because A) They are not alpha males and shemales and B) because it exhausts precious resources to “always be on the market,” e.g,. exhausts heart, bank account, beer fund, gas mileage, etc.

To get back to the core of the matter, God gave Adam a “helpmate,” as Eve is called, because it was not “good for him to be alone.” Anyone you meet on the street will agree that it is not good to be always alone.

All They Really Want: Equal Protection

For gay partners, some days, what the argument boils down to is homophobic doctors and nurses standing in the way.

On the average day, this all might seem like a question of semantics. But when you say to someone who is trying to keep you from seeing your life partner, “But we are civil partners,” it’s not the same as saying, “He is my husband and I have a federal and state right to see him, and if you stand in my way, I will sue your ass.”

According to the Government Accountability Office, there are at least 1,049 legal protections that come with marriage. Even simple things are thus far denied to folks in civil unions — where they have civil unions — like the right to take off work to care for your sick partner.

So you can ignore much of what I wrote above. The case against Prop 8 is actually far less ambitious, as can be seen in plaintiff lawyer Ted Olson’s opening statement:

During this trial, Plaintiffs and leading experts in the fields of history, psychology, economics, and political science will prove three fundamental points:

First — Marriage is vitally important in American society.

Second — By denying gay men and lesbians the right to marry, Proposition 8 works a grievous harm on the plaintiffs and other gay men and lesbians throughout California, and adds yet another chapter to the long history of discrimination they have suffered.

Third — Proposition 8 perpetrates this irreparable, immeasurable, discriminatory harm for no good reason.

As I edit this, the evidence and testimony just wrapped up. Expect Judge Vaughn R. Walker to hear closing arguments come March or April. For the record, Massachusetts has had gay marriage (as granted by Massachusetts court) since 2003.

Massachusetts still boasts the lowest divorce rate in the union. In fact, its average is near the American norm circa the heyday of 1940s morality.

The difficulty with a civil union is that you can’t take it with you. It’s not portable, it’s like getting a Holy Grail you can’t take beyond the Great Seal. One lesbian blogger touched my heart with her simple request. “As Marilyn Monroe put it, ‘Let them be miserable just like the rest of us.’”

Regards,
Samantha Buker

January 29, 2010

Is Marriage a Sacrament, a Civil Right, or Bull Crap? was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Here’s an exclusive peek at the portfolio holdings of John “The Man Who Made Too Much” Paulson. In case you missed it, this shrewd investor (no relation to Hanky Panky Paulson) made the bet of a lifetime against subprimes. His take-home pay netted out to $3-4 billion. While other funds were collapsing, 2007 handed his fund a total gain of $13 billion. So you’d expect this contrarian has something to say — because nothing cements guru status like a big win…

But is he really a contrarian? In part, he’s walking in lock step with the gangster-banksters and paper addicts. But that could be a fine bet, given that the “most powerful geek on the planet” Ben Shalom Bernanke is on Dec. 28’s Time magazine cover.

While I’m sure John Paulson agrees 100% with Paul Volker that America needs to produce more and finance less, it’s not the bet he’s willing to place dollars on.

Biggest Bet: Bank of America

Let’s talk equities for a minute. Paulson is long. Longer than he’s ever been in the history of his fund, which means he’s doing very little hedging of his bets with shorts. Instead, he’s piled into the likes of Comcast and gone non-U.S. with HeidelbergCement AG. But his largest equity bet is Bank of America.

How can this be? He sees an excellent 2012 ahead for BoA and wants to get in while it’s cheap. When it comes to providing cushion against bad loans, Paulson thinks they have more than enough cash, with the worst behind BoA as of Q2 2009. When it comes to earnings, it’s steady ahead. He sees per share proceeds at $2.79 in 2012. So he’s calling for a 2012 share price of $27.99. You could join that bet today for around $15.20 per share.

Willing to get behind him? You may be comforted by the fact that BoA paid back TARP — including the $20 billion it got for buying bundle of trouble Merrill Lynch. How’s it doing so? Some cash, but also $19.29 billion in securities are being put up for offer.

What do you get when you buy in? The biggest consumer lender in the land. And you get the largest debit card issuer. You really don’t want to know how many foreclosed houses it has on the books. And when it comes to credit cards, BoA holds the dubious distinction of highest default and delinquency rate of them all: 13%.

Discover and JP Morgan Chase, ever the optimists, see these defaults peaking early next year. Any consumer trying to pay for Christmas could tell ’em different.

Here’s another monkey wrench: Former dealmaker darling Ken Lewis no longer cuts the mustard after snapping up Mother Merrill. Head of consumer banking Brian Moynihan and chief risk officer Gregory Curl were racing neck and neck take the post. Moynihan just won out. Will Wall Street like him enough to merit a “two-handle” stock price? Anyone’s guess. We’ll suppose everyone’s happy that croniedom evades the influence of Congress and the Treasury.

But don’t take my word for it; try Dan Amoss’, head of Strategic Short Report. He read my notes and ranted away. He’s got a pretty stiff case against BoA, and I added to the arsenal.

3 Reasons Paulson Should Get Stuffed

1. Beware What Bearish Treasuries Can Do

Nobody talks about how a bear market in Treasuries could tank the banks. But a bearish Treasury outlook (which Paulson agreed to in his Q&A) spells hefty write-downs ahead for its held-to-maturity securities portfolio.

2. Don’t Underestimate the Damage of Countrywide

Don’t forget those festering Countrywide-vintage mortgages, second liens, and credit cards. The government’s Making Home Affordable program isn’t making a dent, and it’ll only delay the inevitable. Only 160,000 out of 1 million of BoA’s borrowers who were “potentially eligible” have so far qualified. The rest? Just treading water that may well swell over their heads any quarter now. About 48,000 Bank of America borrowers are among those at risk of losing their loan modifications by the end of the year. The foreclosure backlog of around 7 million should re-accelerate in 2010.

3.Who Will the Fed Sell Mortgage-Backed Securities To?

The government’s quantitative easing campaign helped banks write mortgage-backed securities back up. But when the government tries to sell and no buyers come forth…time for re-write-downs.

But here’s the thing, while Paulson may not be using shorts to protect his fund, he’s found a better vehicle to short the entire stock market. You can bet Paulson knows that Bernanke is no Volker. He’s already made 28% on his anti-Fed bet since Oct. 31.

A Paulson Position YOU Can Get Behind

Paulson showed us beautiful slides about money supply, inflation, and gold price. One after the other focused down on the rough-and-tumble economic years 1971-1974, when gold started to do great things. Here’s the easy pattern to remember: When the money supply shoots up, inflation follows up about two years later. Don’t think I have to tell you that when inflation grows, gold gains, but here’s the proof: Gold gained 67% and 72% in 1973-1974, respectively.

And Paulson’s put his money where his slides shine. Our monetary base has shot up 135% since Lehman Bros. failed, so he sees inflation ahead. And he’s starting a new gold fund come January 2010 to profit.

Regards,
Samantha Buker

December 22, 2009

How 2012 Will Love Your Portfolio was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Having just come off an IV drip-fueled recovery from pneumonia last week myself, I know it’s hard to work at full capacity even now. I’m still weak. Citigroup will be paying for its government payback by offering new shares and — surprise — taking on new debt!

Obviously one golden rule escapes Citi: “Neither a borrower nor a lender be.” Too bad that’s their business model’s backbone. Punishing shareholders with dilative offerings is their only “powerful” move. Just like collecting higher interest on their customers maxed-out credit cards, this move doesn’t equal solvency. We’d dump shares of Citi right now – our Federal Government plans to do so “sometime this year.” (Too bad they weren’t daytrading like the rest of Wall Street.)

Of course, the time for outrage was long ago… back in the go-go late 80s. Like today, it was a time between recessions. Unlike today, it was a time when the Fed Government was about to look at balancing the budget. But on Wall Street right now, banks are paying back TARP left and right and “it’s a wonderful life” once again.

We don’t believe the WSJ hooey, and look toward a “Ghost of Citi Past” to show us the true health of his former company.

Contrite Former CEO Tells All as Citizen

“I would compartmentalize the industry for the same reason you compartmentalize ships.  If you have a leak, the leak doesn’t spread and sink the whole vessel.  So generally speaking, you’d have consumer banking separate from trading bonds and equity.”

– Former Citicorp CEO, John S. Reed, on Nov. 6, 2009

Now you tell us, John?  This is not a case of better late than never. The bastard company that he stitched together with the infamous Sandy Weil is just one of many overweight passengers on our beleaguered ship of state.

Back in 1989, Sarah Bartlett for the New York Times wrote of John:

“Talking with John S. Reed, the chairman of Citicorp, is a little like standing on the bow of an ocean liner and peering into the distance through a spyglass. There, just barely visible on the horizon, is the fuzzy outline of the Citicorp of tomorrow.”

Reed boasted to her of creating “the world’s first truly global institution.” Mombasa, Bangkok, Sao Paulo, Dusseldorf… it all sounded so good, until the merry-go-globe stopped in its tracks in the credit crisis.

Today, in late 2009, Reed writes to the New York Times to apologize for his role in creating Citigroup.  His mea culpa asks pardon: “When you’re running a company, you do what you think is right for stockholders. Right now, I’m looking at this as a citizen.”

A citizen?  Wow, he must still be holding a lot of Citi stock… We’re now on equal footing with Mr. Reed, since our government Treasury now holds 34% of this accursed stock.

Now we’ve hit on the base problem of modern economics. Back in Adam Smith’s day, “citizenship” was getting a new patina: fresh blood crying, Freedom! Non-feudal economics played out as moral philosophy. Wall Street tells you its science, while it’s calculations and models constantly fail.

Our 70-yr-old talking ghost of a former global financial wunderkind, John S. Reed shows us the dilemma in black and white. Back in ’89, a few day’s before hitting 50, Reed was a greed-based, bigger-is-better economist. Even the Third World was his oyster.  Today, he’s decided to become a philosopher from his Park Avenue office.

We wonder whether this Scrooge will really pay campaign donations to those who would re-instate the Glass-Steagall Act.  Moral philosophy only chugs along into the fighting ring when plenty of money backs it.

The One-Man Bank Smack-Down

However, this would mean giving dough to one Vermont independent, Senator Bernard Sanders. (This guy is also the only conscientious objector that says: Remove Ben from his Fed Perch. 60 votes are needed this week, and Ben has no reason to quake in his Italian loafers.)

Sanders says: “If a bank is too big to fail, it’s too big to exist.” His proposal allows Treasury to come in and take a hacksaw to institutions in the financial sector. Note that the New York Times now calls this sector: “the nation’s financial system” — another sign that Wall Street’s merged darlings and bank holding companies are way too big for their bespoke britches.

So Sanders leads the charge: Break-up Citigroup. And while you have the machete out, Geithner, tackle Bank of America, JP Morgan Chase, and Wells Fargo. It should come then as no surprise that when pressed, Senator Sanders would check the box labeled “Socialist.” I’m betting that’s why he did not include government sucklings Fannie Mae and Freddie Mac on the list of break-up candidates.

Regards,
Samantha Buker

December 15, 2009

Citigroup to Repay TARP But Still on Government Dole was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

I’m OK with state-by-state action. In fact, I couldn’t have bought the last pack of cloves in Maryland at 11:55 p.m. if I had wanted to. Because Maryland was nearly two decades ahead of the curve, mandating: “It is illegal to sell, give or otherwise distribute clove cigarettes to ANY person, even if 18 years old or older.”

I had a friend in Washington, D.C., buy my first and final pack of clove cigarettes last month — as an exercise of freedom. On my regular weekend visits (albeit on a porch in Maryland), we’ve passed a single cig from mouth to mouth on his front porch with whoever happens to be there (all over age 21, in fact). We told neighbors who popped by that this was their last chance.

Jim Nelson warned you about this back in July. But now it’s here. And the law’s been beating down on smokers — with the help of Philip Morris — for years.

A few months earlier, on a misty spring day in Annapolis, my friend wanted just one cigarette for old time’s sake at the local smoke shop. The law says she can’t buy just one. Why? Because the state says that breaking up a pack to sell “loosies” helps hook the youth. The loose logic is that a kid will spend under a buck to try it out, but will draw the line at $8 packs. I call it a state-mandated dare: Betcha can’t smoke just one. Nonetheless, this fine lady did, and as parting gift gave me the balance of the pack. Those lightly minted Nat Shermans she gave me are now contraband. (And I thought I was joking when I told her that I’d ration these dear as the real currency of wartime Berlin, with Russians at the door.)

Have we gotten so that we don’t know what it means to put adult things on a higher shelf? Can a proprietor not just keep the tempting goods under lock and key? Keep making sure to ask for ID? Show me one 12-year-old who asks for a Mocha Dream cigarette.

Over the pond in the House of Lords, its version of Family Smoking Prevention is to cover all cigarettes with a screen behind the register by 2013. So now the number crunchers are hard at work, defending the small mum and dad shop around the corner. Cost of the new display that doesn’t display: £1,850 at best. Ultimate total cost: £252 million. Hasn’t anyone ever heard of a cheap black crepe pall? The pall, from the Latin for “cloak,” is a perfect solution. Or is that, in fact, too cool? Too goth to ensnare the young death-seeking teen for that holy of holy day when he or she is finally old enough to choose risk?

Lighting up Between the Bans

Like the loosie law, we note another hypocrisy: menthols — a whopping 25% of the smokers’ market — fave of black smokers in particular, remain legal when all other flavors are banished for tempting kids to light up.

When my parents were young and poor, they drank Boone’s Farm Strawberry Hill wine. Did they drink it because it tasted like apples or berries? Here’s the reason: It was cheap. In the case of cloves, we’re talking a cost of $2 more per pack on average.

Which brings us to another smoker’s casualty: Marshall McGearty in Chicago. This place did not peddle flavored cigarettes to minors. It was an elite companion to the gentleman’s shop and the cigar bar, with a ventilation system that changed the air every six minutes. In the same way that Starbucks elevated coffee, so would R.J. Reynolds’ bar do for the cigarette. Just like ordering an espresso, you could order a pack of flavored cigarettes, blended and rolled while you waited.

This little mecca was refuge for smokers kicked out of their pleasant bar habitats once Chicago’s first-phase cigarette ban clicked into place.

At the time, the president of the Tobacco Control Resource Center, Richard Daynard, wasn’t worried. He said: “I certainly would be surprised if it’s still in business five years from now. The problem is that their clientele is not this, but mainly working-class and poor people.” Wow, that almost sounds like a belief in free markets!

According to former bartender, Griffith, the pack-a-day crowd really doesn’t go in for flavors. And most smoke emporium owners would agree with him. The typical profile is be a woman, between 22-50 years old, who smokes three a day max, but mostly as an occasional treat. (In other words, me, whom Gary would characterize as a bastion of personal responsibility.) Now the place where Griffith used to work, 1553 N. Milwaukee Ave., is a Steve Madden shoe store.

But Phase 2 of the Chicago ban — not lack of interest — killed Marshall McGearty. Since the place offered smokers wine, beer, coffee, pastries and cheese, the city banned it from allowing any form of smokes.

A ban with no exceptions has the virtue of seeming more convincing. But right now, menthol flavoring skirts any Family Act violations. For how long?

Mixed Message Brought to You By Philip Morris

Menthol — which cools and smooths the taste — has been proven in studies to make the nicotine take even better for the long-term smoking life. You’re encouraged to inhale deeper. (Just ask my friend Jimmy about that.) Take this stat: 44% of smokers between 12-17 choose menthol, yet it gets off today scot-free.

Meanwhile, take cloves. At 0.09% of the total cig-pushing market, they’re no big threat. The thing is, Philip Morris USA has no clove business. And its parent, Altria, made the smart move to split its business into Philip Morris USA and Philip Morris Intl. Back in 1995, Philip Morris also started up what’s known as Project Sunrise. This ultimate focus group worked on ways to stave off the death of Big Tobacco for as long as possible. What better than to join hands with the likes of the Campaign for Tobacco Free-Kids? This bolstered the company image as cancer stick vendors with a heart, and made it champions of what other tobacco companies are calling the “Marlboro Monopoly Act of 2009.” They look about as reformed as George W. Bush to me. But they sure did secure the fastest, cheapest way to knock out free enterprise in new forms of tobacco product.

But one company knew about Philip Morris and the mixed message. It’s been in the tobacco field since 1968. This company, known for hotel chains, cineplexes and beating Mr. Ted Turner to CBS, knew when to buy. And as we all know, investing is not just at what price you buy in, it’s when you sell. And it went all cash on this business just last year.

Why Drop Your $700 Million Per Year Cash Cow?

We think these fellas exited the biz because they knew the government could take it away. (It’s the same reason why Byron King might tell you to avoid a mining stock in Venezuela.) And when your family takes up 25 pages of Federal Election Commission reports, you bet you’re going to be two steps ahead of congressional developments.

But let’s back up a second. When Larry “King of Cash” Tisch bought Lorillard Tobacco with his brother in 1968, they knew they would get plenty of cash to catapult their millionaire-making holding company, Loews, into a billion-dollar business to pass to their sons.

Lorillard is now No. 3 in U.S. tobacco because the Tisches made their mark. The brothers bought the company for $450 million. And they immediately set to work. Turns out the former execs had spent 75% of their time on 5% of the business: candy and cat food.

Today, Lorillard’s Newports make up 35% of the menthol market. And by the company’s count, over half of those smokers are black. Back in the old days, free cigarettes were passed around Congressional Black Caucus meetings. Today, the pro-smoke policy is getting murky, although Altria is the CBC’s largest PAC donor. But the Tisch family saw menthol’s days as numbered.

When the next generation of Tisches spun off Lorillard in 2008, they made a tidy $10 billion if profits — not including nearly 30 years of juicy dividends. Make 22 times your money…and then some? That’s a money-management team I want in my court.

It should not surprise that Warren Buffett and Larry Tisch were tight. But unlike Warren with his Coke, Larry did not smoke. (That’s according to a Tisch family insider interviewed by Marie Brenner for a 1996 Vanity Fair article). For anyone who likes a moral tale — or thinks our cells have a limited functional life span no matter what we inhale — we note that Larry Tisch died of cancer at a very ripe age of 80 in the hospital that bore his family name. This gastroesophageal blight took him away from his life’s work and family on Nov. 15, 2003. His brother, Bob, died of brain cancer exactly two years later on the very same date.

When the heirs of Lorillard cut off its tobacco roots at the stem, they did so because they saw richer opportunity ahead. Cash raked in on Newports went toward something America is even more addicted to: oil and gas. This long-range metamorphosis started in the 1980s when Loews picked up offshore oil rigs aplenty at scrap metal prices. Next came its biggest investment in a decade: Texas Gas in 2003.

In case you’re wondering, the Tisch family didn’t swap their shares for Lorillard stock in the spinoff. James Tisch said it wasn’t about politics, but kindly filled a 163-page prospectus with concerns about fed officials and menthol.

So are menthol’s days numbered? Is the count down to the triple digits? Hard to tell. If you want a sign that Philip Morris will hold menthol’s ground, try its June 2009 introduction of a new menthol: Blend No. 54.

Meanwhile, I’m off to find sponsors for a new FDA study…Which is more harmful to kids (or will cost more in health care spending by 2050): cigarettes or high-fructose corn syrup? Like the fellas at Loews, I want to be ahead of the curve when it comes to “sin” investments and the legislatures that nix ’em.

And if you want to know where the Marlboro Man is lassoing new market share? Try China.

Regards,
Samantha Buker

October 1, 2009

Tobacco Ban Begins was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

If you’re the average citizen, absolutely nothing changes… except maybe how you vote.

Prior to 2004 election, the terror alert code did just that. Yellow, or “Elevated” for “significant risk of terrorist attack” was upped to Orange — “High” — for “high risk of terrorist attack.”

Blue — not we’ve ever seen it — means “Guarded” or “general” risk.

We’ve gone red — “Severe” — exactly once… and then only for flights originating from England.

(That was back in August 2006. On one of those Red days, five or so Agora writers and I were just getting back from one of Bill Bonner’s famous country chateau writing retreats. I remember a 70-year-old woman getting her miniature set of gift jam jars, still in the wrapper, confiscated just before we got on board. I sacrificed a gloss lipstick in the name of national security.)

Former Whiskey bartender Greg Grillot was on that same flight. I didn’t sit next to him, but I bet he told his seatmate: “What kind of adult needs a $*&#ing color-coded fear rainbow to tell him how much to sh$*&# himself every day?”

Now that would have been a truly explosive statement for a mid-life memoir. A true turning point. Instead, our first director of the Department of Homeland Security offers us The Test of Our Times: America Under Siege … and How We Can Be Safe Again.

Tom Ridge who peddled us duct tape and plastic sheeting in case of chemical attack is now reveling in the attentions of Sean Hannity. Perhaps he missed the Sunday morning TV circuit.

Luckily, he’s not living by his pen. He’s on several company boards, collecting dough from Home Depot and Hershey, and gets extra cash consulting on homeland security.

Here at the office, we’ve been following the foibles of mainstream journalists and some of our blogging brethren. We’ll let them collect the egg on their face, thank you… We know a thing or two about book promotion, and we suspected that Tom’s “terror alert” change of tune — and the politicizing of the terror alert prior to the 2004 election leading directly to his Nov. 30, 2004 resignation — was 100% pure publicity stunt.

Bottom line is this: Either Tom Ridge is lying or he’s not.

Do we give a fig? More important to Tom, do we give a fig enough to fork over $25.99 to feel pity that he had a slight twinge of consciousness during his ground-breaking tenure in one of the most invasive, expensive government operations of all time?

If he has changed his tune from the old days, it may only be a self-preserving attempt to purge himself of villainy for the sake of his offspring. Or for fear of seeing his code-rainbow days printed up in some future leftist social studies textbook pinning him for the primary devil — instead of the underling he is.

Tastefully, this tell-all book hits stores Sept. 1 — not Sept. 11. No interviews until the debut, so we didn’t bother to ring him up for a grilling.

But here’s a more important date: Sept. 14.

That’s the day that current Homeland Security Chief Janet Napolitano could scrap the whole darn rainbow. She’s heading up the Homeland Security Advisory System Task Force on their 60-day review of the System’s effectiveness.

The Christian Science Monitor blithely states: “While Mr. Ridge didn’t say the system was broken, his revelation suggests the system is open to abuse.”

Geee, ya think? Using the threat of terror for political gain seems like a familiar tactic — OF TERRORISTS.

But here’s the thing, if you’re the main beneficiary of a newly created government post, wouldn’t you always support the idea that you (and your potential abuses) are entirely necessary. Sure there’s a little twinge of consciousness that tells you to point the finger at an Ashcroft or a Defense Secretary Rumsfeld. But you never bite the hand that feeds you until your done digesting. Forget politics. That’s people, pure and simple.

Every time you and I see a terror alert level raised, we’re supposed to feel safer. We’re supposed to be happy citizens encouraged by what goes down on Nebraska Ave. We’re supposed to be grateful for 238 remote video surveillances happening right now. We’re supposed to forget the $2 billion the Government Accountability Office says was flushed down the toilet buying dog booties, beer-brewing kits, iPods and boats. What in the name of National Security!

Most of us will never be invited to stroll down the inner bowels of Intelligence Way and we have no business on Cryptologic Court, but we are invited to take a stand.

Pen some thoughts here, if you dare: hsasreview@dhs.gov. And the Advisory System Task Force will “review” them.

Regards,
Samantha Buker

September 2, 2009

P.S.: Right now, as you sit in front of your computer, you’re facing another “yellow” alert day. But, if you’re sitting in the airport, logging in to get that one shot of Whiskey before you take flight, be warned, threat level is “Orange” for any domestic or international flight.

Tom and the Terror Alert Code: The Test of Our Rainbow was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

– Hazel Bedingfield, 79, who now travels 24 miles for her Social Security payment at her new bank

You deposit your paycheck on Friday and can’t get money out on Saturday.

But don’t worry, the FDIC will cut you a check on Monday morning.

Your county commissioner tells the evening news: “The bank failure opens up an opportunity for another bank to set up here. Until then, customers will have to find another bank in a surrounding county.”

Your bank might have been built in 1905. It may have survived two world wars and a Great Depression. It was sold in 2000 and rebranded when the new owners moved headquarters to Atlanta…you can guess the rest.

This happened to citizens in Gibson, Georgia. And it could happen to you tomorrow.

The Feds raid your bank on Friday…They escort the CEO out. Then they empty the vault.

Right now, aren’t you wondering how much longer will this go on? The short answer: about $13 billion worth of FDIC intervention. I’m wondering if that’ll be enough.

Gargantuan, unfounded suburban growth ringing ’round the Peach State’s metropolis Hotlanta takes the brunt of the blame for bank collapses left and right. Especially those construction loans. A typical example of why these failed, according to FDIC investigation: Over 75% of the loan money was handed out before a single day of on-site construction began.

But here’s a big reason: Banks invest in other banks. Some banks never see nice depositors walk up to their ATMs or get lollipops at the counter. The wholesale bank’s only clients are other banks. If some of those big-ticket clients fold, well, there goes the bank. Silverton was just such a bank, with about 1,500 client banks in 44 of the 50 states. This earned Silverton the nickname “the Mini-Federal Reserve.”

The trouble came from the chunks of real estate loans Silverton sold to other banks in “low-growth” areas: deposit-rich regions that are “loan poor.” Guess that means places that aren’t Nevada, California or Georgia. It didn’t stop Florida Community Bank from adding a stake in the now-defunct Silverton bank to its $978 million dollar asset base. And the FCB ranks among the weakest financial institutions in Florida. We are not surprised.

Even Atlanta’s Federal Home Loan Bank, as 2009 dawned, was straddling the mere 3% capital ratio that would set a regulator’s teeth on edge. (The culprit there was the unwinding private-label mortgage-backed securities.)

Now get this. The Georgia banks facing FDIC conservatorship often depend on loan advances from the Federal Home Loan Bank of Atlanta to stay afloat, and the FHLB gets paid first, before depositors — costing the FDIC even more millions — even if the collateral isn’t there to do it.

Georgia regulators OK’d any fly-by-night bank startup. After all, who didn’t want a cut from making loans to real estate developers? At the start of the housing collapse, Georgia had 334 banks. That’s more than in California, which has four times Georgia’s population. Dan Amoss, the editor of Strategic Short Report, points a finger at this failed bank and offers some advice:

“A perfect example is Integrity Bank in Georgia, which should have been shut down long before it was allowed to attract new deposits with high CD rates.

“Also, note to Whiskey readers: If your CD rates seem too good to be true, your bank may not be healthy, and you may have to deal with the hassle of not accessing your money while the bank is resolved.”

All last week, Dan and I fired e-mails back and forth about the next U.S. bank to fail: The Great Southern behemoth: Colonial BancGroup. Then, on Friday Aug. 14, it finally happened…

BB&T to Swallow Colonial Whole: What Bones Will It Spit Out?

Colonial tapped the FDIC’s matchmaking skills to shack up with BB&T. Expect this marriage to look like the 20-something who marries the wealthy old man because she can’t wait to max out his credit cards. Dan bet me last Friday that dilutive stock offerings were on the way.

Sure enough, come Monday, BB&T offered 26.6 million brand-new shares to some willing dupes.

Like the other Southern banks we’ve been talking about, Alabama-based Colonial’s arms stretched into bad places like Georgia and Florida. And here’s what helped shake Colonial’s foundation. They call it warehouse lending. That’s short-term financing that independent mortgage bankers relied on to do business. Fannie, Freddie or Ginnie did not guarantee these loans.

Back in the 2007’s warehouse-lending heyday, the market was a $200 billion business. Lately, of course, the rich well dried up, to just $25 billion in lending. Colonial held the big 25% chunk of it. So now that it has dropped out of the race, who’s left?

The other warehouse-lending trendsetters already lie in the grave. The biggest tombstones: Countrywide and WaMu. And there’s a fresh hole dug for a new occupant: Guaranty Bank of Texas, which issued the FDIC red alert last month. Finally, we have National City (acquired by PNC).

What does this tell us? If all the big enablers for these loans are shutting up shop under duress, it makes you think there could be something wrong with the product. Instead of letting the free market eat the gross error of overexuberance, the industry is lobbying Washington to give government-backed Fannie Mae, Freddie Mac and Ginnie Mae a bigger role in warehouse lending.

Don’t Let the GSEs Take Over

Let’s flash back to a nice piece of advice that still holds true for Fannie, Freddie and fast-growing Ginnie. Back in March 2002, the prescient Chris Mayer (before he joined the Agora family) wrote a missive for Mises.org called “Mortgage Market Socialization.” Take a look at this bit of prophecy:

Forgotten is the truism that periods of prosperity necessarily precede periods of crisis. Thus, caution becomes heresy and optimism becomes the new religion.

The only way to correct this problem is the same way all socialistic practices are corrected — the government’s involvement must be severed completely. Just because the GSEs have led a charmed life so far is no reason to infer that their future will always be so bright. Socialism is not dead; it is alive in institutions like the GSEs.

The longer the GSEs are able to expand as they have, the more certain it becomes that someday taxpayers will have to bear the cost of such excess. Like Russian roulette, the longer you play, the more certain it becomes that you will bear the risk for playing.

I don’t know about Congress, but I think you Shooters would be eager to put down this particular gun. We’ve already paid about $86 billion in bailouts and what’s it gotten us? But since Fannie and Freddie backs or owns more than half of the single-family mortgages — probably yours — how about we just don’t load any more bullets?

Here’s the directionless drivel from Tim Geithner, recently before the Senate Banking Committee, as reported by Bloomberg:

“Fannie Mae and Freddie Mac will remain in limbo, as the U.S. Treasury secretary said the government doesn’t have time now to deal with the future of the two mortgage-finance companies it seized in September.

“We did not believe that we could at this time — in this time frame — lay out a sensible set of reforms to guide, to determine what their future role should be. We’re going to begin a process of looking at broader options for what their future should be…

“We just didn’t think it’s an essential thing to do just now, but it is an essential thing to do.”

Doesn’t this fill you with confidence? You see, Shooters, this whole mess began at an exclusive resort island off the coast of Georgia…The ol’ Jekyll Island Club set the foundation for sopping up and propping up incompetence in 1913.

Regards,
Samantha Buker

August 21, 2009

Who Killed 21 Georgia Banks? was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Linda Traynham, our Whiskey morning glory, had us poking into HR 2454 when she mentioned Texan Rep. John Carter’s amendments to it in her recent shot.

Ron Paul is right on the money in saying this bill will “sell pollution permits to the industry as the Catholic Church used to sell indulgences to sinners.”

But the intrepid Carter was no Martin Luther. Dem House leaders barred his amendments from floor debate on June 25. Carter was bested by the 309-page amendment from California Democrat — and bill sponsor — Henry Waxman. Of course, Waxman’s folly came to a floor vote before House Members had time to read it. HR 2454 squeaked by with seven more yeas than nays.

Harry Reid expects Senate results this fall. But in the meantime, let’s take stock and follow the money trail to the bill’s real supporters.

Behind That Green Machine, Pope Goldman Is Pushing

Project Cap and Tax began with the unholy Enron. That blind Cyclops of Energy pushed hard for cap-and-trade policy before its 2001 demise. But you’ll never believe who wanted in on it next.

Insurance titan AIG. The once-proud member of USCAP.

AIG knew creating exotic “insurance” wasn’t going to stay profitable much longer. But investing in currently worthless carbon credits and tanking alternative energy companies COULD mean big-time money — if Congress wanted it.

Back in 2007, then-CEO Martin Sullivan wanted to jump in feet first, saying that AIG:

“can help shape a broad-based cap-and-trade legislative proposal, bringing to this critical endeavor a unique business perspective on the business opportunities and risks that climate change poses for our industry.”

Note that Sen. Dodd has been AIG’s donation darling since 1990 — netting $284,000 from AIG’s employees, executives and PACs. And right now, Chris Dodd can help make the Senate’s version of the cap and trade. He’s so pro-cap and tax he wants to tack on a carbon tax — above and beyond cap and trade — that he hopes will generate $50 billion annually for renewable energy research..

But in February 2009, Joe Barton (R) led to charge to cut AIG out of USCAP. He cited AIG’s use of taxpayer money to finance lobbying activities. Point for cap-and-trade critic Joe Barton! We bet GM will drop from the USCAP roster if Barton has a hand in it.

But AIG’s single biggest counterparty will pick up the slack. Goldman Sachs spent $3.5 million on climate issues alone last year.

Then on Jan. 12, 2009, former Goldman CEO Hank Paulson offered think tank Resources for the Future (whose chairman of the board is also a Goldman alum) this interview: “How Markets Can Help Address Climate Change and Other Major Environmental Problems.”

We doubt this interest is merely because Hank Paulson is a lifelong bird-watcher.

Paulson confides that he “could see at Goldman” the value of carbon credits: “to come up with a system ultimately that has got credibility or is verifiable, that when someone pays to avoid it, you know, a ton of carbon emissions, they know they’re really getting a ton of carbon emissions avoided.”

When pressed, Paulson pooh-poohed the carbon tax. He said a tax wasn’t transparent, as the cap and trade was — amid crowd hoots and howls of laughter — as he emphasized the words “fair,” “credible,” “efficient” and “transparent.”

Is this the same man who guaranteed an efficient, transparent, and, um, highly credible, unregulated credit default swaps market? Is this the same purveyor of the clarity and transparency of the Moody’s and S&P ratings on bundles of mortgages?

But where Paulson may have stepped down, a new pro-CAP man steps up.

Treasury chief of staff Mark Patterson clocked lots of time across the street from Capitol grounds. From 2005 until April 11, 2008, he lobbied for Goldman as VP of government relations. While you’d think allowing a former lobbyist to work on an issue he has lobbied for within the past two years would besmirch Obaman ethics, we’ve been assured that he “steps out” of such matters at the Treasury, like a judge stepping down from a case. Yeah, sure he does.

Goldman likes cap and trade for one big reason: Its investments depend upon it.

Follow the Money Trail to Mr. Derivative

When you ask who’s the biggest winner if the bill goes through, you’ll find the Chicago Climate Exchange (CCX), co-founded by Hank Paulson and Al Gore. Members include Amtrak, DuPont, Ford, Oakland, Chicago, and the Iowa Farm Bureau.

The whole idea is the brainchild of Richard Sandor — aka “Mr. Derivative.” He’s the guy to thank for interest rate futures, as well as earthquake futures. In the early ’90s, he pioneered the collateralized mortgage obligation(CMO). And while you might not know exactly what a CMO is, you’ve probably heard the name Kidder, Peabody — where Mr. Derivative worked. By the mid-’90s, it held 28% of the total world CMO pie on its own balance sheet. Surprise, surprise, it all blew up in 1994, forcing the 130-year-old firm to the auction block — because of toxic instruments that look an awful lot like the mortgage securities that just blew up on us in 2007.

Do you feel confident?

Goldman sure does. It owns a 10% stake in it. It also owns a 19% share in CCX’s parent: Climate Exchange Plc. It nearly doubled its holdings in January 2009.

The icing on the cake is its stake in Blue Source, a Utah-based purveyor of carbon creds. In 2005, when Paulson drew up the bank’s environmental policy and started Goldman on a stream of energy partnerships, investments and subsidiarys, he offered this comment: “We’re not making those investments to lose money.”

In 2009, Goldman got caught up in a botched IPO of its investment Changing World Technologies, which turned Butterball turkey offal into diesel — at the cost of $80 a barrel — before filing for Chapter 11. You can bet Goldman will ensure this sort of misstep doesn’t happen again.

Government-Guaranteed Price Hikes

The government “cap” is what makes this market a true racket.

As Peak Oilers know, the less and less of a dwindling resource, the higher the price you can get from the people that need it.

Capped carbon follows the same logic. We start with a high cap of carbon pollution and that’s the national limit of how much CO2 can be emitted that year. Each year, that cap shrinks a little more, and the next year even more, until we reach the “no-harm” level — which some environmentalist absurdly place at zero.

Now here’s the catch. The government divvies up the shares of emissions among businesses that produce or consume energy. (This handout may be based on history of consumption.) Say hello to a new breed of lobbyist pimping a whole new tier of Beltway bureaucracy.

The “surplus” credits will trade on exchanges like Chicago Climate Exchange or Blue Source, allowing companies to outbid each other for the leisure of producing more than the government said they could.

Each year, the government will hand out fewer and fewer emissions indulgences. Meaning there will be fewer credits to trade. And we commodity buffs know that the less there is of something, the higher the price rockets.

And the Chicago Climate Exchange will score larger and larger sums from the corporate carbon largesse. Goldman and company have everything to gain from this.

And you’ve got to ask: What exotic new derivatives can come out of this? Will institutional investors bet on futures of how much the government will lower the cap in 2025…2030? Wait, there already is a Chicago Climate Futures Exchange. Of course, it’s the wholly owned subsidiary of the Chicago Climate Exchange.

Could the coal companies purchase carbon default swaps? After all, what happens when they discover the hydropower credits they bought in Brazil didn’t quash emissions as much as anticipated?

That brings us to a big flaw: Does it really work?

Capital Abandons Its Own Carbon Purchase Scheme

The best part of this swindle? It’s hard to tell if it’s a swindle. You see, the credits fund development projects in countries like India or Brazil, for installing things like hydropower plants or rice husk-fired generators. Watchdog group International Rivers concluded that three-quarters of these projects would probably have been funded anyway, since they were already completed at time of approval.

Consider tree planting. How do you measure the carbon offset? It all changes based on soil and climate conditions, not to mention growth rate. Only when a tree has lived 100 years does it become a net carbon absorber.

Mr. Sandor doesn’t care if it works or not. He finds the debate: “quite interesting, but that’s not my business…I’m running a for-profit company.”

So why does the House of Reps think cap and trade will work? Well, it shouldn’t — based on recent experience.

It’s “Green the Capitol” campaign began with compact fluorescents. Then it switched to natgas power to keep the lights on. But the Capitol still wasn’t carbon neutral, so the House bought 24,000 metric tons of carbon offsets on the Chicago Climate Exchange. (Yep, through the same outfit owned 10% by Goldman Sachs.) But in February, after not being able to confirm that it offset any of its carbon, the House dropped all plans to “go green” with offsets.

So we have a classic case of “do as we say, not as we do” from our honorable reps.

We got the above anecdote from Ted Gayer — who worked a single year as deputy assistant secretary of economic policy at the Treasury: 2007-2008. Wonder if the unpopularity of his opinions turned him toward Georgetown professordom?

Lest we leave out another odious option, let’s talk direct carbon tax. The carbon heavies would pay a penalty for the carbon content of their products. The idea is that companies would cut emissions for the sake of avoiding the tax. But they’d probably just tuck the added cost into what you and I will pay.

So that’s our choice: A private tax collection scheme that’s government backed or yet another Fed tax that business will probably loophole its way out of.

Either way, Shooters, we’ll end up with a case of cap and stick it…and you’re holding the bag, as usual. Estimates from various sources say you could pay $175-3,300 per household because of it.

The only way to trump this system? Hope the government will hand us a set of credits for owning — but not using — our clothes dryer…and then, as we hang our clothes to dry in the free sunshine, selling our credits to the highest bidder via the Blue Source Exchange.

Of course, if you feel the need to storm your senator’s home office during the summer recess, we wish you luck.

Regards,
Samantha Buker

July 8, 2009

Cap and Trade Shenanigans with the Chicago Climate Exchange was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Maiden Lane runs right past the foot of the N.Y. Fed, and this address hosts the most poisonous assets on its balance sheet.

As any anti-Fed Reservist among you will agree, the Reserve’s balance sheet is nothing but the stomach lining of the poorly run banks…only there’s no acid (free-roaming liquidity) left to do any digesting.

Before I tell you what this costs us to hold this stuff, let’s take a look at what it is.

Meet Maiden Lane I, Maiden Lane II, and Maiden Lane III… some of the ugliest portfolios you may ever meet.

In Maiden Lane I, we’ve got the commercial and residential mortgages that JPMorgan didn’t want. That’s right, when the guv’ment colluded in the hookup, it didn’t throw the baby out with the bathwater. It rescued the baby to spare JP from being a new surrogate father dupe. JP, you see, knew enough about the Florida and California housing markets to want no part in shouldering that burden. It was already nursing too many of its own sunny-state-sour-mortgage bastards. Too bad banks aren’t more like rats, hamsters, and other rodent ilk that can just swallow the unwanted babies up.

Maiden Lane II, a wily female with a lotta curves, has more Alt-A mortgages and subprimes than she can sell. In fact, she’s in hot water with her pimp right now. We’re talking $937 million as of Dec. 31, 2008. I don’t see her working that debt off anytime soon — nor paying back the $180 million she’s already lost — no matter how many PPIP pimping sessions happen with the Wells Fargos and hedge funds hard by the ol’ Sunset Strip. The Fed says she’s worth a whopping $11.4 billion, but we expect the private market will treat the Fed like a huckster selling a kneecapped racehorse. You’re lucky to get 25 cents on the dollar for this.

The newest balance sheet abomination, little Maiden Lane III, was born on Oct. 31. The genes, if you will, are the worst recessives: asset-backed securities issued circa 2006 and commercial CDOs circa 2007. A third of this baby’s “silver spoon” worth is pure speculation grade, viz. most likely to default. All told, $26.65 billion of this $26.8 billion problem child are valued using mathematical models — not tangible market prices. We’re afraid of what will happen when this tyke hits the “terrible 2s.”

Somehow I have trouble seeing who will want to buy the bowls of porridge these Maiden Laners make. In the meantime, just cross your fingers that the principal on these things gets returned.

How Much Does It Cost You?

In just taking the sop from AIG and Bear Stearns — the cream of the failed capitalist crop — the Federal Reserve took on $74 billion in subprime and bad lease refuse. On April 23, it reported a yet-unrealized loss of $9.6 billion.

We’re not down the toilet yet, but we may have to use TARP money just to pay back our own central bank. Is this really what Mr. Treasury Secretary wanted?

Meanwhile, we who are on the hook — despite the best efforts of the Freedom of Information Act and a Bloomberg News lawsuit — are not allowed to see the names of the banks involved, the specific amounts they requested, or the “assets” the banks are offering as collateral. The only reason we know anything about AIG is that the Fed owns 80% of it.

Why aren’t we allowed to know? Not some kind of “It’s unconstitutional” argument. Simply this. The government, trying really hard to paint the pig, doesn’t want to a) trigger a bank run or b) ruffle the shareholders’ feathers one bit.

But the big thing to note here is that the Treasury is now bailing the Fed out. Meanwhile, it’ll try to distract you by drawing out this “bank industry stress test” to maximum media effect.

The Stress Test Sham

On Friday, we learned what methods the Fed regulators employed to test the top 19 banks in the United States. Meanwhile, it tells the banks privately whether the institution merited a “pass” or “fail” grade. And the regulators, despite the Obama-Geithner injunction to transparency, are asking the banks to stay on the QT and very hush-hush.

Only on May 4, will we, the Treasury shareholders, be told the results.

The whole dog-and-pony show was for us and us alone, and we’ll be the last to learn the truth. The information, they say, “could alarm depositors and investors.”

What does it matter if the stock market drops 300 points in one day or over the course of a week? Joe the average shareholder isn’t a day trader and will still be either up on a passed bank or down on a failed one. End of story.

This consolation just in from Northwestern University researchers: An upcoming article in the journal Psychological Science touts: “Denial Can Bring Marital Bliss.”

Its concluding point: “If denial paints a partner better than they really are, the relationship is bound to be satisfying, as long as no one is slapped in the face with reality.”

We’ve been slapped in the face with reality. And when the government botches its delivery of denial, like a nurse bad with the needle, we know the drawing of cash to come is really going to hurt.

How did we fall so low? Wasn’t there a time when we loved Wall Street?

When the Romance of the Street Went Sour

From our long-suffering, early-rising coffee drinker Eric Fry, over at Rude Awakening:

“Specifically, the Paulson bailouts sought to divert hundreds of billions of taxpayer dollars toward Wall Street finance companies, and to do so as secretly as possible. In the name of ‘systemic risk,’ the former Treasury secretary dispensed hundreds of billions of dollars to the likes of AIG, Citigroup, and his former employer, Goldman Sachs, without ever seeking or receiving a single vote from an elected official. Thus, as it turns out, the only system genuinely at risk during Paulson’s tenure was the American system of honest and transparent financial markets.”

Yes, Eric, that was the great problem. And this same man asked for a lighter whip to be laid on the back of Wall Street…by lobbying the rule change that let banks leverage themselves to the hilt — eating their own tripe, the same they were selling to everyone else. (We’ll leave aside his role in the Bank of America/Merrill Lynch morass, for now).

But we still don’t get at the true root of the problem until we look at another revenue stream. Because, let’s face it, what marriage doesn’t come down to finances?

This cash flow doesn’t come from the central bank. It’s the one that flows straight into political action committees and individual campaign coffers.

Federal Election Commission Pulls Back the Curtain

In a lovely snippet on the threat of a full-scale Senate probe, in the penetrating Ferdinand Pecora style of the 1930s, we found a treasure trove of good stuff already uncovered.

Consider this.

In the past 20 years of elections, who do you think came out as the biggest political contributor?

The energy companies, yesterday’s super villain?

Nope. Guess again.

How about the pharmaceutical industry?

No dice.

Financial services topped the charts.

Just looking at the past two years alone, we see sobering numbers.

The financial giants in grey bespoke largess donated $463.5 million. The energy companies, the ones Congress was just scolding when oil ran up over $100 a barrel, donated only $75.6 million.

Breaking it down to our two initial banking survivors of the subprime fallout, Citibank and Goldman Sachs, gets even fishier.

In 20 years, Goldman Sachs foisted over $30.9 million in donation dough. Citibank was almost as generous, at $25.8 million. The only company who rained down more congressional support? AT&T, which always seems to be keeping pesky antitrust cases at bay.

But use your imagination and think about it for a sec. If you’re the CFO for a large financial outfit, doesn’t $30.9 million spread out over 20 years seem like the best insurance policy you could ask for?

That’s a measly $1.545 million per year in premium.

Heck, that’s proved way more functional than AIG’s great insurance policies for Wall Street! Was not Goldman Sachs one of AIG’s biggest counterparties? Our money’s on Maiden Lane III being created especially to honor it.

Good thing Goldman Sachs is doing so well, and is ready to pay back that TARP money, eh? It may well be why it was in such a rush to be the first to give bailout money back. But you may be amused to learn that the payback date depends in part on the results of those so-secretive stress tests.

From our vantage point, GS can’t be as healthy as it appears. By changing the calendar month of reporting, it erased the reality of a $1.5 billion loss, for example. That wasn’t illegal, and it was the result of its bank holding company conversion, but it was extremely convenient — destroying any easy attempt of shareholders to compare quarters.

There has also been suggestion that Goldman’s Q1 2009 was so plump and juicy thanks to AIG transfer payments, but we’ve not yet run the fine-toothed comb over that Goldman 10-Q to qualify the speculation. However, either way you cut it, there were some big one-time hedges that paid out, but there’s no reason to think they’ll pay again.

There’s always the ever-paying hedge — or should we said hegemony — of letting the government just pick a little out of your pocket.

Regards,
Samantha Buker

April 28, 2009

Field Trip to Maiden Lane: Home at Last on the Fed’s Balance Sheet was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Is it just a simple matter of “voting all the bums out” — as a few signs advocated?

I don’t believe in man qua corporation as having a soul — and that’s a sticky snaggle for libertarian conversions in my book. We’ve got these corporations on our hands. Lots of them. And we’re saving them right now. Of course, we don’t wanna, because in the world according to Darwin, they don’t deserve it. And that’s what a couple of signs said.

Yet other than taxes, what pitchfork have we with which to attack this capital gains-loving Marie Antoinette of Manhattan? If one were to write Revelations today, one could send the Whore of Babylon with Roman corruption and kings at her breast into early retirement. The Whore of Manhattan, we’d make, with Blankfein and Vikram, sucking away.

Examine this pseudo-biblical snatch from Network and its corporate demon, Arthur Jensen:

“Am I getting through to you, Mr. Beale? You get up on your little 21-inch screen and howl about America and democracy. There is no America. There is no democracy. There is only IBM, and ITT, and AT&T, and DuPont, Dow, Union Carbide, and Exxon. Those are the nations of the world today. What do you think the Russians talk about in their councils of state, Karl Marx?…We no longer live in a world of nations and ideologies, Mr. Beale. The world is a college of corporations, inexorably determined by the immutable bylaws of business. The world is a business, Mr. Beale. It has been since man crawled out of the slime. And our children will live, Mr. Beale, to see that…perfect world…in which there’s no war or famine, oppression, or brutality. One vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock. All necessities provided, all anxieties tranquilized, all boredom amused.”

You see, tea baggers, We the People are not the Geneva-loving Rousseau’s Corsica or Poland, starting with a new constitution afresh. We have no democracy. We have only the media, chattel of the corporations that are hoping to eek one last ounce of profit from the old dead horses called newspaper and broadcast TV. Why do you think we see so much of Obama on our late night and Geithner on our sacred Sunday mornings?

How do I know that Mr. Jensen’s speech is not what pure libertarianism would look like if thrust atop this ugly, brutish state? Would I be happy there? Would I be tranquilized?

I’m thinking the best you and I can do, dear reader, is defect…make nice paper-dollar profits on the IBMs and Dows and their tiny brethren…and depart after turning it into gold. Go somewhere with cheap land…and buy cattle, sheep, goats.

After all, who among us really has the nads, the arms, or sufficient belief in mankind to rewrite the social contract of these United States?

(Hush, Texans like Rick Perry, we hear your clamor…but do we believe it?)

How the Rest of the World Sees Tea Baggers

Always ask: What do our fellow nation-states make of all this? After all, what is diplomacy but a massive PR campaign? And how will we know which country will harbor us gold-bearing exiles the best?

Here’s a headline courtesy of Agence France-Presse: “Anti-Barack Obama ‘Tea Party’ Protests Mark U.S. Tax Day.” The article juxtaposed the words “modest crowds” with “several thousands.” It admitted the protest had a “catchy theme,” but questioned the strength of the “mostly Republican forces” whose party has “been in disarray since Sen. John McCain lost the White House” — a party whose senior figures “appear lukewarm” to the tea parties.

Maybe that’s just because they have issues with verbal jokes that mix them up with “tea bagging” — the sex act — which we all laughed about the morning after. Strategically, there’s no reason for the Republicans to ignore the voice of the Ron Paul fringe, which is getting louder…they’re still doing worse than Obama in Gallup polls, and they’re up for re-election first.

We all know it’s good to ride the faux-populist express…Just look at who ran it straight up to the door of the White House last year.

I know die-hard Dems who voted Reagan into office his first year…for fiscal conservatism, and fiscal conservatism alone. Look how well that turned out! Running from one platform and party to the other is as dizzying as a dog chasing its own tail.

Americans need to stop being twits first and foremost. Posthaste, Patriot…keep your brain for yourself!

Regards,
Samantha Buker

April 21, 2009

Why Tea Won’t Work This Time was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

– Joshua Wyeth, 16-year-old participant on Dec. 16, 1773

Time to cock the ol’ tricorn hat and grab a flag!  Fling your tea bags and hoist your principles on the mast.

Right now, you’re on the hook for $42,000 — to pay off the monetary experiments of your federal government.

(If you voted Ron Paul for president and you’re not living in Texas, you may say you live in a state of taxation without representation.)

And maybe, just maybe, you were one of the thousands that gathered in various towns and cities around America to protest this hefty bill on Tax Day, April 15…in a little tradition we call “the Tea Party.”

Some say it’s not so much a tradition as it is a neo-con, Fox News-phenomena of faux-populism…Others cry from the blogosphere: Here’s the crowning demonstration of a new era of McCarthyism from a bunch of malcontents, “malcontent” being a fancy word for ne’er-do-wells leveling less dignified terms at those they see as other ne’er-do-wells: those embracing the welfare state.  When the mud starts flying, everyone comes out looking awful foolish.   But it is good to see a bonafide non-hippy-liberal-green contingent take to the streets for something.

Couldn’t make it? Here’s the Whiskey Room’s front-rail barstool view.

Southbound Go Your Sons and Daughters of Liberty

Gary Gibson and I got on the Baltimore Light Rail at 10:30 am, southbound to Glen Burnie, MD. That rendezvous point joined us with one of the four organizers of the state capital’s Tea Party, Pat.

Imagine, in the face of such nasty weather, signs streaming South to the Annapolis Harbor all the way from Route 50.  Crowds poured from church parking lots and garages.  (We noted bitterly not being able to park in Annapolis’ newest and fanciest garage: roped off ‘specially for employees of the state.)

Some 2,000 souls, we were told from the podium’s speakers, gathered on the waterfront and blocked the wooden docks of this colonially-quaint little capital.  Our count exceeded 700 for sure.

Commerce-wise, we succeeded only in blocking a few tourists from finding their way to the Starbucks — a breech clearly mended by the protestors who were cold in the pourin’ friggin’ rain and needed caffeinated reinforcement.

The protest was a little “every man for himself” – each sign was its own platform.  One man might protest the creation of the Federal Reserve.  His sign: a parade of historic personages — in yellow and red — ending with Obama’s face, writ underneath: Proudly Bailing Out Since 1913.  Another man, in camoflague poncho, simply holds up a piece of cardboard: “Global What?”

So each man and woman and child foisted up his or her own complaint, there was no overwhelming unity.  Only a couple hundred voiced the cries: “Throw the bums out!” “Cut our taxes!”

This is always encouraging…I like my demonstrations and parades a little disunited, otherwise I start to worry about Czech marches…beer hall putsches…and other sundry ugliness of humans meet ideals meet the streets.

Cut to a man in white gaiters and a kilt: “Bring back the Brits — They taxed us less!”

On the way to the harbor, the local oyster house hoisted a sign: “Somalia has nasty pirates, we have LEGISLATORS!”

Best of all were the protesting babes in arms of mothers.  Little girl of 16 months in Ma’s arms, the sign: “My Children Don’t Want to Pay for Your Toys.”

Most eloquent protestor prize: A man pulled his private historic schooner into the harbor with the help of friends.  Left on the ship, in full view of the assembled multitude, were wooden crates stenciled “TEA” — and a few more were scattered on the docks.

Another fine touch that only Annapolis could offer: a patriot in his Revolutionary garb shirking duty from state capital tours to take a stand.  His trusty mount: a Segway.  Poised high and proud, he held a flag aloft.  (We drank our morning espresso with him in the coffeeshop nearby before penetrating the dense brush of demonstration…he was delightful, and said, in parting: “See you on the other side of the breech!”)

No one voiced this aloud, but stickers wrapped round stems of umbrellas proclaimed: “Impeach Obama.”  We already wowed Europe with our stupidity in the impeachment process of Clinton…now shall we use the right as a prophylactic measure?

After braving two hours of wind and torrential rain, your hardy Whiskey & Gunpowder headed for the bar, warm Irish coffees and carried on a heated political discussion with our fine barkeep who gave Gary a free beer.

Sons of Liberty: Then and Now

For a dose of reality, let’s check back with our forefathers…the first Sons of Liberty.

Basic scenario: you had this giant trade monopoly called the British East India Company hit the American shores with cheap product that undersold all competitors: an addictive substance called tea, upon whose back the Age of Enlightenment had been borne.

The Brits assumed that no man would give up his tea, and therefore, that they’d pay the import duty…and therefore sanction the royal taxations sans representation.

Three ships, the Dartmouth, the Eleanor, and the Beaver hit Boston harbor on Dec. 8.  Eight days later, 60 Sons of Liberty split into three groups and mounted the boats waiting to unload their cargo.  These fellas were surrounded by British armed ships, but carried on splitting up crates with axes and tomahawks for three straight hours — broke up 342 crates — some 10,000 lbs. of tea.

Just think about it.  Your fledgling patriots ducked into the local blacksmith, smeared their faces in coal dust, pretended to be Mohawk Indians, and got away with it!

When they passed the house of the British Admiral, he yelled out: “Well boys, you have had a fine, pleasant evening for your Indian caper, haven’t you? But mind, you have got to pay the fiddler yet!”

Will we pay the fiddler…or just keep paying our taxes with much grumble and bah?  Frankly, this wasn’t a bona fide protest, so much as a bitchfest.  In fact, many protests incorporated the 1976 mantra: “I’m mad as hell, and I’m not going to take it anymore.”

Those words, of course, spew from apartments all over Manhattan in the film Network. A film as notable today for its zeitgeist (and the lovely actions of Ms. Faye Dunaway) as it was when my parents saw it before me.  In that movie, the “prophet” is assassinated — we hope our bourbon-gravel voice won’t be stifled the same way.

Regards,
Samantha Buker

April 20, 2009

Tax Day Tea Parties, Unite was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.