THIS IS AN OUTRAGE, THE VOTE THAT'S.

It is 2:15 PM and I am watching CNN, hardly believing the news anchor: “The House rejects the $ 700 billion bailout plan”, the DOW plunges 700 points”. Wow!

This is an outrage. The citizens of the United States, I am afraid, are mad as hell and asking themselves what else can go wrong. Presumably, however, the only gentlemen not paying attention to this tragic news are those former CEOs who already pocketed tens of millions of dollars after screwing our financial system.
Believe me; like most Americans, I feel a deep disgust for the type of unscrupulous CEOs who wrecked the whole financial system and for the politicians in Washington, D.C unable to put partisan politics aside and for once act unselfishly. It has been widely said that politicians and used car salesman are not to be trusted. Now, let’s add the CEOs of commercial and and investment banks.

WOW, WHAT A SHAME!

I just read that Washington Mutual Chief Executive Alan Fishman could walk away with more than $18 million in salary, bonuses and severance after less than three weeks on the job, according to the terms of his employment agreement.

I'm speecheless.

This month of September will be forever remembered as The Nightmare Month, the month when we were savagely awakened by the fact that our country’s financial system is totally in shambles. Day after day President Bush, Secretary Paulson and Fed’d Chairman Bernake have chilled our spirit with poignant explanations into the apparent motives for the downfall of our credit markets but without yielding insights as to the true nature of the problem.

Seldom have we been so directly and dramatically in touch with the flaws of our financial system and how negatively we have been affected by such flaws. I, for one, cannot imagine how the Federal Reserve or the Treasury Department did not know in what financial conditions the failed commercial and investments banks, and other companies, were in before they ultimately collapsed. Listening to Bush, Paulson and Bernake I get the impression that they have been linked too closely to the “smart boys” of Wall Street and still associating themselves with them.

My immense distrust for politicians and even greater distrust for the Wall Street sharks is a good enough reason for me to oppose any blanket or semi-blanket approval of the bail out proposal. In fact, I would prefer no bail out package at all if in any way it will furnish the dishonest CEOs of Wall Street with another opportunity to deceive.

HZ

LET'S SEEK OUT THE "WORST AND STUPIDEST"

While another bank has gone belly up, Washington Mutual, little if any progress is being made on the President’s proposal for a bail out of the financial system. Members of the President’s own party are revolting and not backing his proposal, including Senator McCain who seems to be waiting for celestial inspiration to suggest a plan of his own.

One point of disagreement among those involved in the negotiations, and holding progress, is executive compensation at the companies that would benefit by the bail out plan. Not surprisingly, however, not a single CEO has come forward and offers to forego his Golden Parachute and other perks in order to help and speed up the process.The purpose of this article, however, is not to identify those CEOs responsible for the enormous mess that our credit and financial markets find themselves in. We all know who they are. Besides, it is the job of the Justice Department in Washington and the Attorneys General of the Fifty States to bring the crooks to justice and expose their questionable business and investment practices.

Unlike doctors who take the Hippocrates Oath, there are no sworn pledges to high ethical and moral standards that CEOs must adhere to. In addition, earning tons of money is not a crime, if honestly earned that is. Even so, being a CEO of any of the country’s largest corporations does involve ethical and moral responsibilities, responsibility to the corporation, its employees and shareholders, and responsibility to the community. Yet, it clear that to too many of Wall Street’s “brightest and best” money is not only a medium of exchange but also some sort of divinity to be worshipped. After all we live in a society where one’s standing in the community is often measured by the neighborhoods where we live, the size of our homes, the makes of our automobiles, the labels on our cloth and a whole bunch of other equally ridiculous considerations. Above all, we are judged by how much money we make instead of what we have done with our lives.

We can be fooled into believing the numerous reasons given by President Bush, Secretary Paulson and others for the collapse of our financial system. The fact remains, however, that the root of the problem is only one: the incredible greed and selfishness of the vultures of Wall Street, mostly CEOs of great abilities but who lack prudence and ethical standards. These are the leaders of the free market economy who expect and demand virtues and loyalty from their employees but whose inner satisfaction is the preservation of their Golden Parachutes.

The Fortune 500 corporations, which include all of the troubled companies causing the monumental crisis facing the U.S, are an integral part of our free enterprise system, of our free market economy. The importance of all these corporations is best exemplified by the catastrophic consequences when one these companies encounter setbacks, such as is the case of AIG. Yet, as great the magnitude of these companies is, their shares are so widely held that the companies really have no owners. As a result, Chief Executive Officers run companies at will, appoint unconditional officers and nominate friendly and loyal directors. In essence, these CEOs become surrogate owner with all the matching attributions and powers.

Lack of hands-on management of the country’s most important industrial and financial corporations by its owners, an indispensable condition to prevent imprudent decisions or dishonest behavior, has led to extraordinary abuses on the part of deceitful and money hungry CEOs, namely huge salaries, unreasonably stock options and nauseating bonuses. Such abuses don’t occur on giant companies such as Kock Industries, Bechtel, Cargill, Public, Price Waterhouse or Fidelity Investments, all privately owned corporations run by their owners, primarily.

Since we have been duped, disappointed and financially damaged by the “best and the brightest of Wall Street”, let’s seek out the “worst and stupidest” to rescue us.

Ooopps!, maybe they are in Washington, D.C already.

HZ

WHERE ARE THE IDEAS OF THE BEST AND THE BRIGHTEST OF WALL STREET?

An unmentioned solution to the financial crisis is to place the bad assets held by the troubled institutions exactly where they belong: in the hands of the shareholders of those institutions. In effect, instead of the U.S Government buying the bad assets from the troubled banks and firms, as Secretary Paulson suggest, the troubled bank and firms should themselves take the first step to solve their problem.

Let’s take the American International Group (AIG) as an example:

According to Morningstar, the Balance Sheet of AIG as of the latest quarter shows the following figures:

Total Assets $1,049..8 billion;
Total Liabilities $ 971.7 billion; and
Stockholders’ equity $ 78.1 billion.

I.- By giving the shareholders the bad assets in exchange for their equity (common and preferred stocks), AIG would greatly clean up its balance sheet and be more deserving of Government assistance – if needed. This first step can be easily accomplished by simply forming a separate entity (Newco) to hold and manage the bad assets on behalf of its shareholders (the would be ex-shareholders of AIG).

II.- Since the above step would entirely wipe out the equity of AIG, the company can easily re capitalize itself by selling, let’s say, 20% of its assets at an average profit of 15%. Under this suggested scenario the Balance Sheet of AIG would look as follows:

Total Assets: $ 801.6 billion
Total Liabilities: $ 771.7 billion
Shareholders Equity $ 30 0 billion

What did we accomplish?

1.-Thus far the government (the U.S taxpayers) hasn’t put up a dime.
2.- The bad assets of AIG went to where they belong, in the hands of its shareholders.
3.- AIG got $ 78.1 billion of bad assets out of its balance sheet, and hopefully cleaned it.
4.- By selling 20% of its assets (at a not unreasonable profit of 15%) AIG can generate a profit of $30.0 billion , which will turn into equity (this is cash that will serve as working capital) and reduced its debt by 20%, and
5.- The AIG shareholders still own the re structured company.

The above doesn’t solve AIG’s problem but leaves the company in a much better position to seek additional capital or financial assistance from the U.S Government, not to mention that by selling another $100 billion in assets the company could raise its capital by another $ 15 billion while reducing its liabilities by another 13%.

I wonder why is it that the best and the brightest of Wall Street, the captains of capitalism and enemies of government regulations and interference, haven’t develop solutions somewhat similar to the one suggested above for the institutions and companies troubled with bad assets.

I am kidding when I said that I am wondering. Of course I know that these smart guys prefer to allow for the collapse of their firms and go home with the tens of million of dollars that their Golden Parachutes require they be paid.

HZ.





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BE PREPARE TO BE ROBBED

Be prepare to Be Robbed -- It's For Your Own Good - And Yes, Resistance IS Futile
By Robert Folsom

Picture a nice home in a nice neighborhood. Two men in dark suits walk up and knock on the nice home.

Men: Hello, we're from the government, and we’re here to help. We're going to rob you for your own good.

Taxpayer: What are you talking about?!! I don't want to be robbed...

Men: Sir, we understand. But our records indicate that you are a taxpayer. Is that correct?

Taxpayer: Of course I pay taxes -- so what?

Men: So, we're robbing you. It really is for your own good. In fact, if we don't rob you, the entire banking system will collapse. You have heard the bad news about the big banking bailout, haven't you sir?

Taxpayer: Look, I don't even have very much money in the bank. Lots of people have a lot more money than I do. Why don't you go rob them?

Men: There's no need to make this about you, sir. We are going to rob everyone who pays taxes -- trust me.

Taxpayer: This isn't right. I've played by the rules for years. This is America.

Men: It is indeed, sir. And we're from the American government. And c'mon, sir -- are we supposed to believe that you never took out a sub prime loan, never leveraged your home equity into a second and third mortgage, never maxed out four separate credit cards at once, never tried to buy and flip a couple of houses for a fast buck, or that you never speculated even a little bit in the commodities market with your retirement fund?

Taxpayer: No, no, no -- I didn't do any of that stuff. Of course I've got a retirement account, it's in Treasuries, money markets and a stock index fund. I've got two kids in college. I can't afford to get robbed.

Men: We're not here to congratulate you for being a straight arrow, sir. We've come to rob you for your own good. Resistance is futile. Maybe next time you'll go along and raid the candy store when you get the chance. Lots of people did. That's pretty much why we're here to rob you -- for your own good, of course.

Taxpayer: Okay, okay... but... well, if I stop paying taxes? Will you please not rob me then?

Men: That's not a good idea, sir. If you stop paying taxes we'll throw you in jail and rob you anyway.

Taxpayer: This sucks. I'm calling a lawyer.

Men: Yes sir, I'm sure he's a taxpayer too. Let him know that if we haven't been to his house already, we will be soon.


"By manipulating the rules and its own debt-based, monopoly currency to shift the burden of debts and speculation upon the prudent and innocent, the government can foster illusions of maintained value by keeping nominal stock prices up. But this charade cannot last"

______________________________________
Commercial and investment banks were totally reckless and should be left holding the bag for the bad loans they made. Goldman Sachs, Morgan Stanley, Merrill Lynch, Bear Sterns and Lehman Brothers, to name five of those firms making the headlines now, increased their leverage limits from 12 to 1 to as much as 40 to 1 and now they are relying on us, the tax payers, to bail them out. I have a four letter word for them and most certainly is not HELP.
HZ

THOUGHTS FOR THE BRIGHTEST AND BEST

It is clear that many of Wall Street’s brightest and best never learned from the following thought provoking reflections. Surely they made millions, but they never profited from the wisdom of these beliefs:.


1.- Selfishness is the root and source of all natural and moral evils. Emmons

2.- High ethical standards bring about efficient business methods. Watts

3.- Ethical living is the indispensable condition of all that is worthwhile in the world. – Ernest Caldecott

4.- If money is all that a man makes, then he’ll be poor - poor in happiness, poor in all that makes life worth living. – Herbert N. Casson

5.- Everywhere in life the true question is not how much money we have made, but what have we done with our lives. – Carlyle

6.- Aside from the strictly moral standpoint, honesty is not only the best policy, but the only possible policy from the standpoint of business relations. The fulfillment of the pledged word is of equal necessity to the conduct of all business. If we expect and demand virtue and honor in others, the flame of both must burn brightly within ourselves and shed their light to illuminate the erstwhile dark corners of distrust and dishonesty …. The truthful answer rest for the most part within ourselves, for like begets like, Honesty begets honesty; trust, trust; and so on through the whole category of desirable practices that must govern and control the business’s affairs. James F. Bell

7.- Money is only a mechanism to be used, not a divinity to be worshipped. – Anonymous

8.- Money may be the husk of many things, but not the kernel. It brings you food, but not appetite; medicine, but not health; acquaintances, but not friends; servants, but not faithfulness; days of joy, but not peace or happiness. – Henrik Ibsen

9.- Great ability without discretion comes almost invariably to a tragic end. – Gambetta

10.- You, yourself, have got to see that there is no just interpretation of life except in terms of life’s best things. No pleasure philosophy, no sensuality, no place nor power, no material success can for a moment give such inner satisfaction as the sense of living for good purpose, for maintenance of integrity, for the preservation of self-approval. – Minot Simons

HZ

THE UNHAPPY TRUTH

We are being duped, the unthinkable is happening:

While the Outstanding Public Debt of the U.S Government stands at a whopping $ 9, 733, 146, 494, 947, .69 as of September 22, 2008 and growing at an average $2.02 billion dollars per day, President Bush and his Secretary of the Treasury, Henry Paulson, are adding another trillion dollars to the national debt in a desperate effort to bail out failed commercial and investment banks and the jobs (and extraordinary perks) of the “smart boys of Wall Street”.

Should we care?

Considering that the estimated population of the United States is 304,776,541, thus each citizen's share of this debt is currently $31,935.35 and about to increase by $ 2,000 with Bush’s rescue plan, we definitely should care. Big time!

Although we shouldn’t ignore the complexities of the financial and credit markets, it is difficult not to attribute the current financial crisis to anything or anyone other than the uncontrollable greed of the “best and the brightest of Wall Street”, those highly skilled smart guys of the investment baking world that, refusing to make money the old fashion way, invented fancy derivative securities, collateralized mortgage obligations and a bunch of other highly risky financial schemes designed to take leverage (the art of making tons of money with small amounts of money) to new highs.

Less than six months ago commercial and investment banks were falling, the state of the U.S economy was already worse than it looked, and the IRA accounts, the 401K Plans and investment accounts of millions of American were quickly sinking into meager piggy banks. Yet President Bush, Henry Paulson and John McCain were asserting, firmly and without hesitation, that the fundamentals of the U.S economy were strong, that the American workers were resilient, and that the U.S would overcome anything.

Yet, when Bush and Paulson finally admitted that the fundamentals weren’t as strong as they claimed, they quickly turned to interventionism and nationalization (the economic tools typical of socialist countries) to contain a financial crisis that was already in the making four or five years ago. They rescued Bear Stearns, they nationalized Fannie Mae and Freddie Mac and now, in an ultimate state of panic, they are intervening to purchase from the “best and the brightest of Wall Street” $ 700 billions of dollars in assets that no one in the private sector wants.

The credit markets and the financial markets are totally disrupted because of the sheer greed and avarice of the “brightest and the best of Wall Street”, those smart whiz kids that regardless of their enormous disregard for prudence are still collecting millions of dollars in bonuses and other perks while the companies they managed are rapidly sinking.

While the American Dream is fading for millions of young Americans, the U.S Government is doing absolutely nothing to identify, prosecute and punish those bastards responsible for the greatest financial crisis the U.S has experienced since the Great Depression. And, rather than providing honest and comforting answers to the hundred of thousands of people that are being left without savings and jobs, the U.S government continues to fool the American people with financial bail out plans designed to save the rich at the expense of the taxpayers

While the majority of Americans are pissed because the boundless greed and selfishness (perhaps even dishonesty in some) of the top officers and directors of the falling firms, no one in the Government describe, even partially, the real causes for the enormous failure of the U.S financial system. None of the “smart guys of Wall Street” have been held accountable, some criminally accountable, for their role in the creation of this huge and world wide financial turmoil. The auditing firms that surely should have suspected that the high yield, sexy mortgage-backed securities were poorly structured and collateralized, hasn’t been questioned either.

What does it take to figure out that a household with a medium annual income of $46,000 can’t afford the purchase of a $ 241,000 home? Those were the medium household income and medium home price, respectively, in the year 2005 when banks were financing such purchases at record pace and the investment banks were buying the mortgages as fast as they could. Worse yet, where were the regulatory agencies that are entrusted with the task of making certain that the capital structure of the fallen investment banks (and companies such as AIG and Country Wide), weren’t built like pyramids upside-down?. Is it possible that the FED didn’t notice that the capital leverage of some of these firms were 40 to 1?

Let’s face it, the great menace to capitalism is not socialism but the corruption and greed of those bastards that believe that capitalism and free enterprise means that everything and anything goes, that accumulating wealth supersedes all business models and any other moral or ethical consideration. Greed is the root of the problem, of a system of executive compensation that unfairly favors the “smart guys” to the detriment of employees and workers - even shareholders. Is not well enough that the salaries of CEOs and other top corporate officers and directors of the largest corporations are already irrationally and disgustingly high, but in top they get stock options at bargain prices and bonuses based on real and fake profits. And herein rest the imperfection of the compensation system, because corrupt CEOs will stop at nothing to fabricate fake profits, profits that in turn drive up the prices of their company’s shares. Ultimately, it all translates into huge bonuses and stock trading profits for the CEO, officers and directors. And if things go wrong, they still have the U.S Government to protect their Golden Parachutes.

I believe that there can’t be true and lasting success for capitalism and stability for the U.S economy in general, and the financial markets in particular, without adequate, well thought out and strong government regulations.

Corporate wrong doings have occurred much too often as evidenced by the following partial list of screw-ups (or bankruptcies), and we ought to learn from them:

1. Lehman Brothers Holdings Inc, Sept 15, 2008, $ 639 billion

2. Worldcom Inc, July 21, 2002, $ 103.91 billion

3. Enron Corp, Dec 2, 2001, $ 63.39 billion

4. Conseco Inc, Dec 18, 2002, $ 61.39 billion

5. Texaco Inc, April 12, 1987, $ 35.89 billion

6. Financial Corp of America, Sept 9, 1988, $ 33.86 billion

7. Refco Inc., Oct 17, 2005, $ 33.33 billion

8. Global Crossing Ltd, Jan 28, 2002, $ 30.19 billion

9. Pacific Gas and Electric Co, April 6, 2001, $29.77 billion

10. UAL Corp., Dec 9, 2002, $ 25.2 billion

11. Delta Air Lines Inc, Sept 14, 2005, $ 21.8 billion

12. Adelphia Communications, June 25, 2002, $21.5 billion

13. Mcorp, March 31, 1989, $20.23 billion
14. Mirant Corp, July 14, 2003, $19.42 billion

15. Delphi Corp, Oct 8, 2005, $16.59 billion
16. AIG , next?

Unquestionably we been duped by the “best and the brightest of Wall Street”, we are the victims of the well thought out propaganda and misinformation that have led us to believe that these “smart guys” are more intellectually capable to manage our money than we can ourselves. Yet, we are living at a time when we also learn that the “smart guys” are really not smarter than we are and thus we have been double duped.

HZ

THE RIGHT CHOICE IS AN HONEST CHOICE

Ideally, when choosing the next president of the United States, it should be significantly less important the race, religion or social status of McCain or Obama than their individual integrity, education, common sense, intelligence and good judgment.

Considering that the differences between John McCain and Barack Obama can’t be more enormously obvious in all of the above, and certainly in the I.Q and empathy for the less fortunate of each man, it is totally puzzling to me that thus far the race to the White House is so absurdly close. The reason, in my opinion, is that too many people are more afraid of having a black man as president than not enjoying financial security or reaching the American Dream. Regrettably, too many people don’t understand that in allowing their racial and religious prejudices and believes to prevail just to defeat Obama they are only defeating themselves.

John McCain is certainly deserving of our gratitude and admiration for serving his country well in times of war. But we mustn’t be misled into believing that somehow the country owes him the Presidency. Our country is filled with heroes, thousands of men and women who served the country well in various armed conflicts and who too experienced the horrors of war, but John Mc Cain seems unique in the manner in which he has taken advantage of the “hero” label. I don’t believe that he is fit to be president solely for having been captured and tortured in time of war or for having been a professional politician for the past 30 years. Sorry, but there are some of us who don’t measure valuable experience in the manner that Senator McCain does. Moreover, Senator McCain cumulative contributions and record as a senator leave much to be desired, especially during the past eight years when he voted for George W. Bush proposals over 90% of the time. The evidence shows him more as a good soldier following his leader than as the maverick senator that he portraits himself to be.

To be fair, however, none of the presidential or vice presidential candidates has the experience to be president. However, with the exception of Nelson Rockefeller as Vice President of Gerald Ford, neither did any of the previous elected presidents and vice presidents during the past 100 years. Therefore what makes a good president , and should dictate, are the combination of integrity, education, common sense, intelligence, good judgment, I.Q and empathy for the less privileged of each candidate. And if we accept such premises, then we should not be ashamed to admit that overall Obama compares more favorably versus Mc Cain as does Biden versus Mrs. Palin.

HZ