Tuesday, October 21, 2008

Capitulation or Repudiation of Democracy

The only thing I like about rich people is their money.
-- Nancy Astor (1879 - 1964)

The problem created by this election is that there is only just so much lipstick available. But, there are plenty of pigs.
Witness the precipitous drop in the market, which will now be supported in our newfound brand of socialistic capitalism (“Disaster Capitalism) – in which what goes up must only go up. If it comes down, we have to make it go up, anyway. Even if we have to buy it to make it go up – with taxpayer’s money – our money. Yours and mine. Clearly, the natives are getting restless.
So, let’s see, President Paulson bails out his buddies at Goldman Sachs after letting his enemies lose everything at Lehman, then he engineers a $700 Billion dollar bailout Band-Aid that will be operated by a buddy at Goldman and allows fully 10 percent of that taxpayer money for golden parachutes. Not bad.
And, the first $250 Billion goes to Goldman, JPMorgan and Citigroup among others on the short list.
Wouldn’t you love to be at that party when the severance checks are handed out?

The fact is that no matter what Paulson does, no one will be able to stop this runaway train. We have Lehman's credit default swaps coming due at auction – which will identify the counterparties- and we may find out who’s behind curtain number two (could it be AIG, JPMorgan Chase or Citigroup?) which may tell us who holding another bag of $100-400 Billion in derivatives.
There’s also the hedge fund disaster - a two trillion dollar problem that has seen over $200 Billion in redemptions just this last couple of weeks.
There’s the money-market problem, which has caused the bankruptcy of an HMO and is rippling through schools and hospitals that used funds like The Reserve (which just failed) to maintain their checking account cash in order to make higher interest on the float.
Lest we not forget, pension funds are tied inextricably to Wall Street performance – across our entire nation. The merger of GM and Chrysler will be another bailout connected to that problem. The guess is that another 50 to 100 Billion will be needed there as well.

Are we finally arriving at the point of capitulation in the markets or are we witnessing the bailout of more than a few Wall Street characters who are benefiting from the carnage – yet again. A few disgruntled citizens are beginning to wonder why we want to push this form of “Democracy” on any other country – as we have in Iraq, to the tune of $3 Trillion of our dollars.

So, is this a bear rally that, like 1929 will take two years to finally reach bottom – while all of these manipulations simply protect a few insiders?
Is this capitulation (the technical term for a bottom), or is Main Street finally getting the picture and planning to repudiate these phony economic leaders like Paulson who is simply protecting his friends?

Counties, Towns and Villages across this country are already starting to head for the Chapter 11 exit – because they cannot pay salaries with no credit and failing investment accounts.
Since “all politics is local,” it is time for our leaders to grapple with the direction needed in this country. A grassroots correction in course for our Republic and the system of Democracy we believe in needs to be reviewed.

We need to stand behind our principles and regenerate our faith in our form Democracy. As with the term-limits debate currently going on – the people voted in a referendum and it needs to be respected. Not bought off.
Buying a seat in the City Council, buying the Mayor’s Office, or selling out your constituency for the promise of higher office – even buying your way into a political club for future endorsements – have all contributed to what King Paulson has now given us with the Bush imprimatur. Democracy for sale.

Wednesday, October 15, 2008

Political Class

People that are really weird can get into sensitive positions and have a tremendous impact on history.
-- Dan Quayle (1947 - )

The problem with most political writers is that many of them seem to know more about what’s going on then most of the politicians or, for that matter, nearly all of the voters. The media manipulates the effluent that dutifully seeps out from the planted PR sources and some flows down through editorial boards that get some of their orders from the publishers.
Activists, Community Board members, political junkies, political club members, and bloggers, make up most of those who are interested in what’s going on inside the Halls of Government. For want of a better nom de guerre, they comprise a Political Class.

The recent term-limits gambit playing out in the City Council and City Hall is one of those rare moments when the Political Class can stand around scratching their heads, looking at each other with a look that says, “What were they thinking?”

Here we have a Mayor who is not yet fully out of the closet, writing checks to organizations to round up support for future wars, using the golden shackles and parachutes to bind people to his every whim – which has ranged from President, Vice President, Governor and Mayor, to Charitable Organization CEO – with every flunkie in earshot ready to drop their pants at his whim – now deciding that the law has to be changed and the voters wishes can be ignored. Is this for real?
Has Christine Quinn really been struck deaf, dumb and blind – to self-destruct in public – in order to be granted an annuity in order to run for an office that would become impossible to achieve after becoming Bloomberg’s sacrificial lamb?

A friend once said, 'before we sent the boys into Iraq – they better know more than we do about what’s really going on – or, this is just a suicide run.
There’d better be WMD’s over there or this is just crazy.'

Bloomberg and Quinn better know more than we can even conceive of – and their media pals better be a lot better than what is seeping out from under the cesspool cover – or this is going to kill both of them, despite any positive work that may have been done.
Quinn rolls over and pushes through a third term for Mayor Mike just as Slushgate is (curiously) ebbing in the media, Bloomberg reverses his stance on a third term just as his second term is about to end – and all of this dirty laundry is done in public. Do they think the voters are completely stupid?

Speaking of which --- subpoenas have been floating around according to some rumors. Unconfirmed reports have been surfacing that Jimmy McManus and possibly Ray Cline among others, have gotten, or will get, papers (neither of them are targets) – and may be asked to talk about the shenanigans suspected in the Nora Anderson matter. The press has been having a field day with rumors that Anderson is not going to make it through this with her newly won job in Surrogate Court intact – due in part to Oliva – her campaign manager -- and Bernie Cohen. Election law may be the source of the problem. The D.A’s office would not comment but it is known that there’s some trouble afoot. Mr. Tingling could not be reached but one can hear the “I told you so’s” already being mouthed.

Now that Quinn has apparently shot herself in the service of a rumored Deputy Mayoral position next year if she’s forced out of the Speaker’s job – we are back to the question of whether Berman and Derr will go ahead and challenge her -- now that term limits keep her in her seat. Hoylman won’t run if Quinn runs again since they are soul mates – leaving him without a race to run after Community Board Chair, so far – as he apparently won’t run against Gerson for fear of a replay of the last time he challenged Alan. While many downtown are still waiting for Gerson to do something, anything, any credible challenger would have a chance. Pete Gleason is running. Margaret Chin is running. Menin claims that she won’t run against Alan.
Derr will absolutely run because there is no other political option for her and, despite the fact that she has no experience, if Berman does not run, almost anyone could have a shot. Quinn has damaged herself to that degree. The Council may not re-appoint her Speaker if they have their way.
But, who knows, Mike might just write them all checks. That’s the state of our democracy. Pay them off!

If voters support any of these people, the only rational response is, as Lewis Black would say, “What the fuck were they thinking?”

Tuesday, October 07, 2008

Walking Close to the Buildings

Too bad the only people who know how to run the country are busy driving cabs and cutting hair.
-- George Burns (1896 - 1996)

During the Great Depression, there were a few rules that only those who lived through it would know about. Wall Street workers in those dark days, for example, were happy to work “Scotch” weeks – when not being paid for every week of work was accepted. It was better to have half a job than lose a whole one. There were other familiar words of advice that were not a joke.
People working on “the street” were told not to venture near the curb as they walked towards Broad Street. Looking up when crossing a street was advised.

When someone went out a window after reading the latest ticker tape, the arch of the falling body took them out to the curb, away from the sidewalk closest to the building. Those times are upon us again.

The worst period in the Depression, from a stock market point of view, actually did not arrive after the first round of major drops. A period of nearly a year elapsed after the initial calamity that brought everyone and everything to its knees.
The current scenario is playing itself out on Wall Street and Main Street – no matter whether you are a real estate investor, a shopkeeper, a member of the Town Board in the Hamptons, a City Council member in Manhattan – or, even if you managed to hold on to your Lehman Brothers job when Barclay’s picked up your ticket after the Bankruptcy.

The problem with watching the gyrations on Wall Street every day is that it has little to do with what is now in the cards for every one. No matter whether we see a capitulation, as it is called when a bottom is announced by the gurus, or whether we see a rally after all of the bad news is digested.
What ensues after that is already pre-ordained. It is starting to unfold now.

Mortgages under $500,000 are extremely difficult to obtain. What used to be called super-jumbos, million dollar plus loans which fueled the sale of Hamptons properties and Manhattan condos – are history.

The Southampton Press, for example, reported that:
‘As a sign of the worsening economy, Mr. Bishop noted that on Eastern Long Island there are at least 14 multimillion-homes being built where the owner of the home has stopped construction “because he doesn’t know what’s in his future. It’s not just about the 14 homes; it’s about all the construction workers that aren’t going to have jobs as a result.
….Families are having difficulty with the daily expenses and certainly with their housing costs as home values drop. And we know that this credit crisis that we are in the midst of cannot on its own correct. It sounds dire, but there is a risk that commerce could grind to a halt,” she said.’

Even buyers with perfect credit and huge amounts of cash find the process impossible to complete IF they can find a lender with such a product. And, yes, folks, the Europeans are leaving town in order to locate their accounts before their bank fails.

Villages and Towns, as well as Counties will struggle with budgets – and some will be forced to file for bankruptcy. That includes Southampton Town, East Hampton Town and Suffolk County. Dipping into the Community Preservation Fund (where Transfer Taxes from New Yorker home purchases went to buy open land) in order to pay local government employee salaries -- is a good indication of the severity of their financial situation. It is not a glowing picture despite the hostility demonstrated towards New Yorkers and investor-landlords.

Then, as the Hamptons properties become worth less than 50% of what they were “worth” two years ago, as credit lines evaporate, as home equity credit lines are withdrawn, as credit cards are cancelled by the lenders without notice, as car loans disappear -- forcing Ford and General Motors to be bought out –and potentially resulting in the wholesale repudiation of pensions in bankruptcy court – we may awaken to see the final Panic leg on Wall Street. That’s where the buck stops. In fact, that’s where everything stops.

When the Panic Leg finally resolves itself we will have arrived at the point where Manhattan landlords provide services in order to keep their rent-paying stabilized tenants.
It’s the point where coop and condo boards send out maintenance statements that double the fees to compensate for their deadbeat members – forcing a final round of foreclosures.
It is the point where some schools close, hospitals fail, houses and apartments are abandoned and political fundraisers are cancelled for lack of attendance and lack of money.

The Federal bailout and Paulson’s protection of his buddies at Goldman Sachs have made all of this possible. Whether Paulson leaves office in January, as he previously had indicated, he has taken care of Bush, Goldman Sachs and a few other well-placed friends.
It leaves behind the following problems which must play out before we reach that point, which have still not been addressed:

Credit default swaps which Warren Buffet, himself, divested his company of years ago – total an estimated value in excess of $800 Trillion dollars. That’s an amount approaching $1 Quadrillion dollars. If that blows up, even selling apples won’t help. And, by the way, JPMorgan Chase has several Trillion dollars worth of these little beauties lying around off of its balance sheet somewhere, ready to explode at the right moment;

The Hedge Fund implosion, which was blindsided by the SEC Short sale prohibition -- triggering redemptions that threaten that entire $2 Trillion dollar industry;

The Money Market Fund problem caused by The Reserve’s “breaking the buck” which resulted in a return of only 30-40 percent of the original cash paid out due to the failure of Lehman Brothers;

The rescue packages of General Motors, Ford and Chrysler, which will cost another $100 Billion.

And, finally, the credit card debacle is slated to hit us in 2009 as American Express and Capital One (among others) play their part in another $1 Trillion dollar disaster. Of course, that amount is predicated upon those companies having told us the truth about the severity of the problem.

This comes upon the heels of our $3 Trillion dollar military expeditions in Iraq and Afghanistan. If ever the “King needs a war” -- (Iran), it’s now.

As illegal immigrants and Latinos in the Hamptons leave town due to lack of work and the unconstitutional terrorizing of women and children in their homes -- white Americans will need to double-up and triple-up in houses in order to survive. Living situations, formerly considered illegal, that have promulgated attacks on landlords and New Yorkers, will now be permitted. Many of them will be Code Enforcement police who will not be able to afford a place to live on their own. Housing violations will suddenly seem unimportant and what was once considered overcrowding – will become the norm.

In Manhattan, real estate agents who have touted the strong condo market will be looking for jobs as the “European investor” heads for his hometown to hide his devaluing Euros under the mattress.

Political ploys like Mayor Bloomberg running for a third term along with his sycophantic supplicants on the City Council – buying himself another term in office – is only the most obvious move as everything is suspended.
Cynical plays that presume to be managed for the good of the people will become more prevalent.

Morality, ethics and fair-play will be sorely tested.

Wednesday, October 01, 2008

The October Surprise

Sometimes the appropriate response to reality is to go insane.
-- Philip K. Dick (1928 - 1982)

Those of you who have been anticipating regime change in lower Manhattan will be happy to know that 2009 will be the year that all bets are off. Flowing from the national political scene down to the City Council and Mayoral elections, big changes are coming our way.

Due to the financial problems on Wall Street and the difficult economic conflagration that is now clearly coming, there will be disruptions that are unexpected. However, all of our needs will be met by those who care deeply about us.

First of all, George Bush is now expected to run for a third term as President and will be announcing his plans shortly.
Due to the fact that we are at war on two fronts, are seriously considering an attack on Iran, and are facing the challenge by worldwide terrorism, it stands to reason that the continuation of our policies with a President who is familiar with our current positions, should be supported in his plans to run for a third term. Bush is also dealing with the disruption in our financial markets and a worldwide credit meltdown. Since he is precluded from running for a third term, and since holding a referendum on the issue is deemed unnecessary, the Republican caucus will handle this mere detail.

Bush has also held discussions with other leaders who also concerned with our well being.

Locally, in view of those same economic concerns, a special session of the City Council will be asked to confirm suspension of term limits which will maintain the status quo for most City Council members as well as Mayor Bloomberg. The Mayor is scheduled to formally announce his plans tomorrow -- when he will advise us that only he can save us from the economic storm about to hit. No doubt, he and Bush come from the same school of Republican Saviours.
The current Council members, displaying their typical hubris, have no personally vested interest in promulgating this mid-session change of heart. Roughly two-thirds of the City Council who would ordinarily have been forced to leave office, will now remain seated.

Fortunately, it will also be unnecessary for people to vote on this issue.
And, while Ron Lauder, the activist politician who has previously championed the rights of voters in deciding such changes in the past, he has now seen fit to support this third-term cause. It wasn't o.k. for Rudy, but for Mikey, sure, why not? Clearly, Murdoch of Newscorp and Ross of the Related Companies (of Pier 40 fame and Doctoroff’s buddy) having seen the "green" light, as well as a precipitous drop in their stock, has indicated the right path for Hi-Rise Mike to follow.
Apparently, business leaders will soon convince the reconstituted Mayor and the amenable City Council, that a voter referendum on this issue will be unnecessary.

If we are all lucky enough to have our Dear Leaders think and plan for us in these difficult times, we will not have to worry our pretty little heads about what is best for us. They really don’t need us meddling with their plans.