Archive for October, 2008

Then and Now


By Eleanor Haas

A friend’s astrologer reported that the heavens are aligned
the way they were at the time of the American and French Revolutions.

An interesting parallel: 
toppling of the existing power structure and a redistribution of wealth
so it reaches more people.

Then it was triggered by violent upheaval.  Now the developed world has systems in place
so that we have a collapse of some financial practices and institutions with
government intervention, in effect, taking power from the handful of
super-beneficiaries of the old system and redistributing it more widely.  We also have an election coming up for which
unprecedented numbers of underdogs – young people and ethnic minorities – have
registered.  If Obama wins, we’ll have a
descendant of a race that was enslaved less than 150 years ago in the highest
office of the land and one of the most powerful in the world.

At the same time, we have the continuation of the Internet
revolution and changes in business operations, market structure and the pace of
change.  The Internet also topples the
existing power structure because it redistributes information so it reaches
more people.

Also the same time, we have violent upheavals in the

Middle
East

, which have toppled the existing power structure.

Interesting!

But the World Goes ‘Round

Music by John Kander.  Lyrics by Fred Ebb.

Sometimes you're happy, sometimes you're sad
But the world goes 'round
Sometimes you lose every nickel you had
But the world goes 'round

Sometimes your dreams get broken in pieces
But that doesn't alter a thing
Take it from me, there's still gonna be
A summer, a winter, a fall and a spring

And sometimes a friend starts treating you bad
But the world goes 'round
And sometimes your heart breaks with a deafening sound

Somebody loses and somebody wins
And one day it's kicks, then it's kicks in the shins
But the planet spins, and the world goes 'round-
But the world goes 'round
But the world goes 'round

Sometimes your dreams get broken in pieces
But that doesn't matter at all
Take it from me, there's still gonna be
A summer, a winter, a spring and a fall

And sometimes a friend starts treating you bad
But the world goes 'round
And sometimes your heart breaks with a deafening sound

Somebody loses and somebody wins
Then one day it's kicks, then it's kicks in the shins
But the planet spins, and the world goes 'round
And 'round and 'round and 'round and 'round
The world goes 'round and 'round and 'round
And 'round!
(From "New York, New York")

Political Haste Makes Fiscal Waste

By Eleanor Haas

“Without government help” is how Wells Fargo snatched
Wachovia from under Citigroup’s nose just four days after an oral agreement of
government subsidy  to enable Citigroup’s
acquisition.  How many options were
examined before Treasury’s decision to underwrite the Citigroup deal?  If Wells Fargo was in a financial position to
do a deal, how many other healthy banks are out there, ready to ride to the
rescue of troubled institutions without government help?

The core issue everyone agrees is liquidity.  Banks won’t lend..  And that’s the primary reason given for the heavily hyped
bailout bill.  Banks are required to
maintain a 12:1 cash reserve in order to lend, and mark-to-market accounting
rules mean that toxic assets have driven the value of these reserves below the
legal requirement for lending,.  What has
been considered to address this issue directly? 
Is there no rifle-shot approach short of what is now an $810 billion bailout bill
with all its add-ons?

Freddie Mac and Fannie Mae have been in trouble for a long,
long time, but suddenly they’re nationalized. 
But what about the underlying causes for the collapse?  What difference will government ownership
make if the old business policies and practices continue?

What if the bailout bill does pass today but consumer confidence
continues to plummet?  Then what?