Socialized Debt and Privatized Profit

Goldman Sachs has been getting a lot of coverage lately. Just how did this giant rise up from the ashes of derivatives unscathed? How did JP Morgan and Morgan Stanley survive to thrive? A big part of the answer is credit default swap contracts.

So let's briefly revisit credit default swaps. I loan you money to buy a house. But you're a newly-minted masseuse with few clients and two kids. Plus, you're not putting any money down.

While I'm willing to bet on you (because I make a ton of money up front), I'm still worried you might bail. Or maybe I want to sell your loan to an unsuspecting pension fund in Iceland. If so, I'll need your loan to be triple-A rated.

How do I get your crappy loan highly rated so I can sell it? Or protect myself if I decide to hold it? Easy. I buy "insurance." It's called a "credit default swap," sold by outfits like AIG. If you don't pay, AIG has to cover it. With a CDS, now I can sell your loan or hold it. Whatever happens, I'm covered. I've hedged my bets.

The trouble began when mortgage defaults started happening in massive numbers. That is to say, when housing prices, surprise, surprise not, stopped rising and began falling.

AIG, the major player who'd written all this "insurance" had to cover a bunch of bad mortgages, and cover them fast. But it couldn't because it simply didn't have the money. AIG gobbled up the "premiums" on these default swaps but never set aside any reserves.

This should have never occurred. But it's happened before and the government has always stepped in and bailed the banks out. So the banks were certain the government would be there for them this time, and they were right. Still, their behavior is no less disgraceful.

Imagine walking in to a Las Vegas casino and worrying whether, when you turned in your chips, the house had enough money to cash you out. Would you stay and bet or leave?

If you did stay and bet, as Goldman and JP Morgan, et al. did, would you expect the taxpayers to cash in your chips if the casino went broke? (Now you know what "moral hazard" means.)

That scenario is precisely what occurred in our financial markets; "casino" an apt metaphor (casino credit to Dylan Ratigan who coined it). Investment banks (the gamblers, or counterparties) made bets on subprime mortgages with AIG. AIG was the casino, the "house."

When it became clear that AIG couldn't cash in the chips, gamblers started running for the door. Worse still, the gamblers who'd bet in AIG's casino were also mini-casinos themselves. They, too, had written "insurance" policies, trading credit default swaps with their fellow players.

Who held what? Who owed what to whom? How much was owed? No one knew. Counterparty panic set in and the government feared the entire financial system would collapse. Geithner, then president of the New York Federal Reserve, and Hank Paulson took over AIG's negotiations with its derivatives gamblers.

The two held a secret meeting and decided that you and I should pay off every gamble at 100 cents on the dollar in exchange for . . . nothing.

The taxpayers, Geithner and Paulson decided, would stand in the shoes of AIG and become the insurers of these bad credit default swaps. Even though the gamblers knew, or surely should have known, they were making suspect bets in a wobbly casino.

What's more, Geithner's and Paulson's unseemly and exceedingly close ties to these big banks makes their decisions in the AIG and bank bailouts all the more appalling, shocking even.

Today those banks are today posting record profits and paying themselves the highest bonuses ever.

But our children will be paying the price for the government's purchase (and guaranties) of these radioactive debts for decades to come, and not just in the form of higher taxes. There's a psychological component our children feel from this depression, too, and they'll ultimately have less access to higher education, lower wages, and fewer job opportunities.

Our children will pay because the politicians in D.C., headed up by Treasury Secretary Timothy Geithner, did things like pay AIG's gambler creditors 100% on the dollar with our money and issue blanket guarantees to the banks, while at the same time they screwed GM's creditors to the wall.

How, and under what authority, I'd like to know, did Congress and our Commander-in-Chief appoint themselves the country's top-dog bankruptcy judge?



Meanwhile our own country's bankruptcy looms. We still don't know how much we're on the hook for, because the Federal Reserve won't tell us. And since Ron Paul's "audit the Fed" bill was shot down, we probably never will. The TARP Inspector General says he's really not sure, but the absolute worst case? 23 TRILLION, give or take a few.


The bailout of AIG and the other banks was nothing more than a cash infusion from taxpayers into the casino. We covered billions on the bets of Goldman and JP Morgan and so on. And we gave them billions of dollars directly, in return for virtually nothing. They're still at the craps table, gambling our taxpayer dollars.

It's like we're casino waitresses, hoping to get by on tips while the high-rollers have been taken care of. For them, everything's been "comped" and they're making more money than ever. Hell, even their bets are comped with the taxes we're paying on our tips.

When D.C. politicians allow the banks to make unfettered bets with our money and our children's futures, we need to start paying attention. Because more bailouts are on the way.

Early commercial loan defaults are forming white caps on our next big wave to hell. And there is a credit default swap market for these mortgages, too.

Wall Street made bad gambles and our government decided that you and I should pay for their mistakes. Now it's business as usual on Wall Street while the rest of America chokes on 10.2% unemployment, record foreclosures, and more pain to come. Thousands upon thousands of dollars in increased taxes we will be forced to shoulder.

The Democrats' "stimulus" spending and bank bailouts are an unmitigated disaster yet the bailout just keeps going and going. The banks' debt has been socialized but their profits remain privatized. It's outrageous. And the bad guys are still in charge.

And all of this before we even begin to factor in the costs for cash-for-clunkers, an $8,000.00 first-time home-buyer credit, universal health care and cap and trade. But the bought-off pols in Washington tell us not to worry, that we can handle it. It's a twisted version of "Yes, we can."

I say no, we can't.

When the Dems tagged Republicans "the party of 'No,'" they did them a favor. Frugal is sexy these days, and the party of "No" is looking better and better.

One Trillion for Six Million? Shag Me, Baby!

Greetings. I'm trying to get a handle on Pelosi's new health care bill, but of course I haven't had time to read the bill in its entirety.

And, hells bells. Congress refused to make public the last version that floated around their hallowed halls. They said it was "too complicated" for us common folk to comprehend.

Of course, they're right. A public weigh-in on what the D.C. Einsteins are up to is ludicrous. Pipe down, people of the Sunday covered-dish-supper crowd; hush up, all you Fox & Jacobs and trailer-park people. Government knows best.

Besides, Pelosi's bill weighs in at some 1,990 pages. Delving into this behemoth is way too daunting a prospect. Stacked end to end, I think it's longer than my bed.

But here are some key points that give me pause:

* According to the independent Congressional Budget Office ("CBO'"), Pelosi's plan will cost $1.05 trillion.

* Pelosi says her plan will cost $894 billion.

But there's no need to get persnickety here. What's a billion among friends? $1.05T vs. $894B is close enough for government work.

* Pelosi's plan claims to cover 36 million Americans who do not now have health insurance.

Alrighty then.

The Pelosi plan will spend $1 trillion to cover 36 million people.

Let's do the math:

$1T divided by 36M equals $ X.

Now, I'm no pocket-protector-wearing Ivy-League quant. But something is wrong with this picture. Very wrong, indeed. Because X would appear to be a mighty large number.

And in fact X is a whopping $27,777.77 per newly-covered person.

But wait, keep reading. Because that $27k per head looks to be significantly higher. According to the CBO, the number of folks who will sign up is more like 6 million.

* Yep. The CBO estimates that only 2% of Americans under the age of 65 would use the "public option." (At 65 it's a moot point because you're covered by Medicare).

This two percent amounts to about six million people. $1T divided by 6 million? Is $166,666.00 per person. Good God almighty.

* Half of Pelosis's trillion dollar health care bill will allegedly be paid for by Medicare cuts. But did you know that year after year, Congress abates the statutory cuts to Medicare that are already enacted into law?

So although the law may call for cuts, Congress hasn't let the cuts go through since 2003; instead it has always suspended them. The docs have a powerful lobby.

Why should we have any confidence Congress will act differently this time?

* The other half of the $1 trillion will be paid for by taxing upper-income earners.

But guess what? You don't have to be an Ayn Rand acolyte to realize that when people are overtaxed, they stop working as hard. Or, they might hire a more expensive accountant.

* And here's a nugget for you: No state will be eligible for any federal "malpractice reform" funds under Pelosi's bill if the state's laws put any limits on attorney compensation or damage awards in malpractice cases.

This is completely nonsensical. Without capping attorney's fees or damages, what is malpractice reform then, anyway? And what about existing statutory malpractice caps? Will the states be forced to repeal them in order to get funding for alternatives to malpractice litigation?

* When Obama said "our plan" doesn't cover abortions, he wasn't referring to the plan being circulated by Congress. No, he meant his own plan -- a plan that has never been written. The point here is not where you stand on government-funded abortion. It's the Administration's slipperiness.

All I'm asking is that he speak truthfully, with no more hair-splitting, "what is the meaning of 'is'?" semantics.

* There is a serious question whether a federal requirement that every person purchase health insurance is even constitutional.

And if it is unconstitutional, what then? As Ann Althouse points out, what will we do, unravel the massive unweildy plan? At that point, all the king's horses and all the king's men couldn't put the existing system back together again.

And no, a health insurance mandate is not, despite what you've heard, the same as requiring automobile insurance. Not at all.

First of all, automobile insurance laws require that you carry insurance to pay the other guy's damages, not your own. Second, it's not actually mandatory. If you choose not to drive a car, you don't have to buy it.

Invariably the auto insurance analogy is raised by the Dems whenever some rational person points out that the penalty assessed against those who don't buy health insurance is a tax. "No! No!" they adamantly reply. "It's no different that requiring auto insurance." Ha.

This is the worst justification for mandated health insurance that I've seen yet.

* When Obama says "our plan" won't cover illegal aliens? Well, maybe, maybe not. It's not well-settled law at this point. But there's no question that children of illegal aliens who are born here must be covered by the plan, just as they have right to attend U.S. schools.

In short, the Democrats' claims are so wobbly, and sometimes so blatantly false, that I have no trust or confidence in this new 2000-page Pelosi plan.

And tempted as I am to launch into a long and boring discussion of Congress's powers under Commerce Clause, suffice it to say its powers are limited.

Instead I'll close with these must-read links:

"The Worst Bill Ever" -- an excellent and thorough editorial in today's Wall Street Journal.

Pelosi Plan Makes Millions of People Pay Fines -- a sourced analysis by the Heritage Foundation.

"We're Governed by Callous Children" by Peggy Noonan.

Weapons of Wealth Destruction

All I really want to do is post pictures of our butchered, moldering pumpkin and my fool-proof recipe for chuck roast. But I'm an obvious Betty Crocker impostor and my six faithful readers deserve better (Hi, Mom).

Nor could I bring myself to blog about this today. There just weren't enough Tums in my medicine cabinet.

So, ho, ho. Ho, hum, it's back to the economy glum.

But perhaps there is a sliver of good news. A modern-day Brooksley Born has apparently emerged in the form of Rob Johnson, of the Roosevelt Institute. There's not much I can add to this piece in Harpers, highlighted over at the eco-blog Naked Capitalism.

It's about derivatives reform or, I should say, the lack thereof. Because, knock me over with a feather, the financial services industry -- Goldman Sachs included -- is lobbying hard to prevent these exotic instruments from being posted and traded on a transparent exchange. And Congress is readily, happily pandering to them.

The kicker? These banks are using our taxpayer dollars to fund their lobbying efforts. Can you say PPIP or TARP? TALF or BARF? Here's a happy headline for you: "Banks Lobby to Screw Taxpayers Out of Billions."

Sometimes I feel like screaming, "The Red Coats are Coming! The Red Coats are Coming!" but some parent-teacher conference or school carnival always gets in the way. So I'm telling you on my midnight ride.

Recall it was derivative contracts that got Brooksley Born up in arms and ultimately thrown under the bus; it was derivatives that brought our economy to its knees.

Collateralized debt obligations and credit default swaps (called "derivatives" because they're derived from the underlying mortgage) were treated like insurance policies. Except they weren't insurance at all, they were Vegas bets. Because the issuer was never required to set aside any "reserves."

The House Oversight Committee held a hearing this month about whether these weapons of wealth destruction should be "regulated." (Warren Buffett called them "financial weapons of mass destruction" back in 2003).

The hearing proceeded with little fanfare from the press. Maybe because derivatives are sort of boring, not to mention complicated. Maybe it was because of the coinciding super-colliding Balloon Boy escapade.

But at least Harper's covered it. Here, some excerpts from the piece:

In response to complaints from Americans for Financial Reform, which represents hundreds of consumer groups and labor unions, the committee issued an invitation—the night before the hearing was held — to Rob Johnson of the Roosevelt Institute. For the committee, the last minute inclusion of Johnson — a former managing director at Bankers Trust Company and former economist at the Senate Banking Committee and Senate Budget Committee — apparently constituted sufficient balance.

Predictably, witnesses at the hearing trotted out positions urging caution in regard to the matter of reform. Derivatives and other exotic financial devices have reaped the finance industry vast profits, but for Hixson of Cargill the common man and woman would be the real losers if Congress were to act too severely. “We offer customized hedges to help bakeries manage price volatility of their flour so that their retail prices for baked goods can be as stable as possible for consumers and grocery stores,” he told the committee’s wagging heads. “We offer customized hedges to help a restaurant chain maintain stable prices on their chicken so that the company can offer consistent prices and value for their retail customers when selling chicken sandwiches.”

Johnson, who came last, offered the only serious critical viewpoint, saying that the American public had been “quite demoralized by…the bailouts that we experienced last fall.” After about five minutes of his testimony, Congresswoman Melissa Bean—another industry-funded committee member who chaired the hearing because Frank was absent—had heard enough. “I’m just going to ask you to wrap up because we’re running out of time,” she told Johnson.

Johnson gamely continued. “When I hear the testimony today that are largely financial institutions and end users, I believe that I represent a third group that comes to the table, which is the taxpayers, the working people of the United States,” he said.

“I do need a final comment,” Bean interjected seconds later.

That put an end to Johnson’s testimony. “I was just called to this hearing last night, so I will provide detailed comments on your bill and a statement for the record that will finish my comments,” he concluded.

Not surprisingly, the House Oversight Committee seems to have "lost" Johnson's remarks. They are not included, with the testimony of the industry insiders who appeared and spoke, on the committee's website. But you can go here for a link to read Johnson's testimony and what he would have said, had the committee given him the time and chance.

This conduct is incredibly from the same elected body which actively tried to exclude members of Congress from the reach of a subpoena to Countrywide that casts a pretty wide net.

You see Congress is investigating Countrywide's subprime mortgage practices and the numerous VIPs -- the "friends of Mozilo" -- who received outrageously favorable and unconscionable loan terms.

Naturally, Congress didn't want Countrywide to turn over loan documents that would reveal the sweetheart mortgage deals Countrywide gave to them. The "friends of Anthony" or "friends of Mozilo" folks are friends in high places.

But hells bells. Can we really feign surprise when Congress tries protect their own?

I'm not feigning illness either, though I wish I were. Halloween is still two days away and already, having had not one piece of candy yet, on this news I'm about to throw up.

So jump in bed and cover your head. 'Cause the TARP tax man cometh tonight.

I Kid You Not.

China has got it going on, girlfriends, let's face it. School zones are passe'. Just order the kids to salute all passing cars instead. They're so much safer that way. Heck, let's fire the crossing guards while we're at it.

So that more people can qualify, a borrower's unemployment benefits will now count as income in the government's loan modification program.

What's that? What happens when their benefits run out and they can't pay the mortgage? Oh, who cares. That's so not the point.

The Baby Einstein videos were a sham? No way! No, really. Way. Disney is handing out refunds, sans receipts!

Housework leads to more sex, so says a study reported by the WSJ. Seeing all those cheetoh particles and dirt in my Dyson vacuum canister is downright erotic. Gives me goosebumps just to turn it on. Varoom!

Women are evolving to become shorter and fatter. And I, my friends, am highly evolved.

A well-educated woman who marries a lesser-educated man has a better chance of staying married than if neither are educated. But the best combination? A well-educated woman and a man five years her senior, if neither have been through a divorce.

Yahoo hired lap dancers for its "Hack Day." But the event was held in Taiwan. And Yahoo said it was sorry. And what is "Hack Day" anyway?

The United States Supreme Court has agreed to hear Jeff Skilling's appeal in the Enron case. My prediction? He'll win. And Enron will have been another Arthur Andersen.

Can you type 80 words per minute? How about review 80 documents per hour? This is an email sent to contract lawyers at an unnamed firm.

"Please pick up the pace. They are expecting you to do about 80 docs an hour and all of you are less than half that. Changes will be made soon if this does not change asap."

Yeah. That's the firm I want working on my big-document case, for sure.

From Craigslist: Male attorney seeks legal secretary: for secretarial and paralegal work, oh, and sex . . . with him, his partner, and sometimes both of them at the same time. In fact, sex will be part of the interview process, you know, so they're sure you can handle the job.

"...[W]e've decided that as a part of the interview process you'll be required to perform sexually...I think it's necessary to see if you can do that, because it'll predict future behavior of you being able to handle it when you have the job."

This lawyer guy's got great grammar, eh? But hey, save some time, lawyer dude, and use this online dating site to screen applicants. Because if the girls are ugly? Well, then, they won't be "accepted."

Some self-help justice in the wild west: a few homeowners in California robbed some "avoid-foreclosure" scammers. And . . . kidnapped them . . . and tortured them. There's a legal defense called "justification" . . .

Adderall, anyone? The Northwest Airlines pilots say they lost track of time while working on their laptops. That's why they didn't hear the radio calls. Or spot the numerous text messages. But I still say the elephant in the living room is sex. Come on, admit it. Isn't that the first thing you thought was going on, when you heard the story?

Hit me with your best shot! The Chamber of Commerce says the White House attacks are helping the Chamber. And Fox's ratings are up 20% this year.

Hooters managers ride for The Cure. It seems fitting. They're really putting their money where their, err, never mind.

Speaking of mouths . . . we were, weren't we? When is a kiss just a kiss? What if it cost you $140k to be the winning bidder, and it's Charlize Theron you're kissing?


It's not the price that's throwing me, or the kiss for that matter. It's the dual action leg thing going on.

(Updated 10/27/09 to clarify the "kiss").

Goldman, Obama, and Rose-Colored Glasses

Say, have you heard the good news?

* unemployment is down
* housing sales are up
* the DOW is was at 10,000.

All of this good news sent a thrill up my leg as I started to uncork the champagne. A thrill, that is, until I looked into the details and discovered what is not being reported:

* continuing unemployment claims are only down because these folks have been jobless for so long their benefits have run out.

* new unemployment claims filed last month were significantly higher than expected.

* housing sales are up because the government is subsidizing home purchases in the form of a massive $8k tax credit (and oh, the ensuing fraud!).

* housing prices dropped almost 9% from last year (and 2008 was a really bad year, you may recall).

So, let's return to the whirling dervish of bonuses for a moment and sort through the press reports. You've surely seen the latest: "Obama Pay Czar Reduces Top Salaries by 90%!" and other misleading headlines.

The headlines are misleading because it's not across-the-board regulation. Instead, Obama's unconfirmed, unelected, unilaterally appointed "Pay Czar" put only seven companies in his cross-hairs: AIG, Bank of America, Citi, General Motors, GMAC, Chrysler, and Chrysler Financial.

Of course, Czar Feingberg is getting tough on the seven brothers just in the political nick of time. After all, what would those of us in the lawn-mowing, wall-papering, coffee-making classes say if Obama didn't come down like a sledge hammer on taxpayer-subsidized banks posting record profits and bonuses?

But Obama's pay czar tasering is nothing more than a sleight of hand.

Let's take a step back. Yes, Feingberg indeed imposed up to a 90% pay cut, eliminated corporate jets (for personal travel) in excess of $25k, and announced all sorts of other draconian-sounding measures. Even a new "we won't pay your country-club dues" rule. Gasp. But only for seven companies.

Still, Feinberg is a tough son of-a-gun who doesn't mind kicking a dog when he's down. He forced the savaged, ravaged Ken Lewis at B of A to cough up his entire 2009 compensation, every last penny of it. (Lewis may be heading to the gallows for failing to disclose Merrill Lynch's mounting losses to BofA shareholders, a disclosure he didn't make because Godfathers Paulson and Bernanke threatened him with near death if he dared.)

Oof. Pow. Punch! Wow.

Is your populist bloodlust satisfied yet? If not, I'm sure Obama will be happy to set up a bread-and-circuses tent in your neighborhood, to tamp down your rage and keep you entertained. You know, if you're losing interest in his pedestrian presidential "I-hate-Fox" and "Doctors-insurers-and-bankers-are-evil" wars.

Okay, so back to Feinberg's salary caps. What about Goldman Sachs and JP Morgan, two of the biggest beneficiaries of your taxpayer largesse? What's happening with their executive pay?

Umm, nothing. Both banks are recording astronomical profits for 2009 and they're set to pay bonuses substantially higher than what they paid in pre-crash 2007.

So why did Pay Czar Feinberg leave them untouched, you might reasonably wonder. After all, we did bail them out.

"Umm, well," the sophisticated bankers would scoff in reply, "we were forced to take the money and we paid back the TARP money already. We have no more ties to the taxpayer. We're footloose and fancy free."

And they'd be right. But only a little bit. While it's true that Goldman and JP paid back the TARP funds, the story doesn't end there. Besides TARP, there's TALF, PPIP and the FDIC, just to name a few. On top of TARP, we gave these guys a whole lot more in government aid, and this taxpayer "assistance" is still on the table.

Indeed, Obama pledged billions of our taxpayer dollars to creditors of Goldman (and other banks), in the form of government guarantees on their bonds. And because the U.S. government explicitly backed Goldman's bonds, Goldman was, wonder of wonders, able to raise exorbitant sums in private capital.

In effect, you and I co-signed on loans for Goldman, and JP Morgan, and Morgan Stanley, and GM . . . and oh, who have I left out? As if it mattered. But now we're in a chokehold because we, as a country, guaranteed these debts.

And we're still on the hook. While there's been no default yet, our risk is floating around out there indefinitely, firmly attached to Goldman's (and so many others') bonds. We have trillions on the line with these government guarantees for Goldman, JP Morgan, and AIG.

Who knows how it will all shake out? (We've already lost a cool $20B on our GM bailout -- and that's not counting the losses imposed on the priority #1 crammed-down bondholders and the losses incurred by the FDIC, the FDIC that just closed its 106th bank and is indisputably broke.)

If Goldman and all of its cohorts were to pay off their bonds, then we will never be bothered. But given the astronomical bonuses they've decided to pay themselves, because they can (indeed the egalitarian Goldman says its higher salaries will help all Americans prosper), and assuming prudence and good judgment are our beacons, well, then, I wouldn't rest easy just yet.

No, I wouldn't be resting at all. Because another tsunami is rising. It's called commercial real estate. With the limited media attention given to this sector, it remains Wall Street's dirty secret, for the time being. But the Wall Street bankers are acutely aware of this looming disaster.

Many of these commercial loans will come due in 2010 and 2011 and the banks simply do not have the money to refinance them. Moreoever, even if the properties are cash-flowing, most of the owners are under water, owing more on their properties than what they are worth.

But even an imprudent person can see this is a fait accompli. The other shoe will drop. Those who are truly befuddled as to why banks aren't lending have only to look at the commercial real estate market to get their answer.

And let's not forget the whole derivatives market lurking in the shadows of these commercial mortgages. Credit default swaps and collateralized debt obligations -- the same things we saw in the subprime market -- were traded on these mortgages, too. We're talking some bloody losses here. I hate to say it, but the subprime debacle may end up a mere footnote when it's all over.

And here is where I'd drop a footnote of my own: if you want a big spike in your blog traffic right now, just mention Brooksley Born.

This brave, prescient woman predicted the problems inherent problems in these CDSs and CDOs years ago and she lobbied hard to get these transactions posted on a transparent exchange. But the Wall Street/Washington band of brothers shot her down. In unison.

But let there be no mistake: commercial foreclosures will abound. It's only a matter of time. There are no green shoots, my friends, only green chutes for JP Morgan and Goldman.

But I've digressed. In short, here's what our federal government is serving up to us, ala an unelected Feinberg: a papal blessing bestowed on Goldman and JP Morgan, giving these two a major leg up on their fellow bailed-out competitors.

The "too big to fail" banks have merged and transmogrified into the "Two Bigs to Fail" banks of Goldman and JP Morgan. They are not subject to the compensation caps their competitors will labor under, nor will their bonuses be constrained. They'll easily pick off the best employees from their government-regulated competitors. (Bye, bye, death-by-a-thousand-cuts B of A).

One last thing before I push my Tide box back into the closet: don't you find it curious that Goldman's and JP's profits are so staggering, so record-breaking in the midst of this Second Depression? It's because we infused them with a sh-tload of taxpayer dollars that they then gambled on risky investments. And in the first of many rounds, this one they won.

Phew. I'm relieved. Really I am. Just imagine how much more money we'd need to print if they had rolled the dice and lost. Except I still don't understand why Obama gave them our dice to play with in the first place. Or is it die?

That the government is yet again injecting itself into private sector compensation bothers me immensely. But that is a post for another day. Still, the argument that these government-funded banks should be regulated is awfully compelling.

But if you do accept that premise -- that if you run with dogs, you'll be taken over by fleas -- then it only stands to reason that all of the bailed-out banks should regulated, and equally so.

But that sort of fair play is not in Obama's plan. No, the White House has decided to play favorites instead, dictating that some banks must cap their compensation and other perks, while a select few are allowed to roam wild and free, unfettered in their hiring and betting practices.

This seems unfair. And over-reaching. Anti-trusty. And over-governmenty.

Nonetheless, were my company among the Obama-annointeds, his presidential blessing would send a cold chill down my spine. Because this fickle administration has turned into a fair-weathered friend many many times before.

UPDATED 10/30/09 to correct Pay Czar's last name: It's Fein BERG not GOLD. Sometimes, when I'm in a total snit, and I've got Goldman on my mind, I misspell names. Sorry for any confusion.

Neighborhood Mystery

Calling all Nancy Drews!

This morning, as I sent Mr. M off on his bike-ride to school, the neighbor mom across the street and her son were out in their front yard holding up some sort of sign.

I didn't think much of it, especially since I was only wearing my glasses (it was too early for my contacts) and I couldn't make out what it said.

But this afternoon, when another mom friend and I were sitting on my front porch, I had my contacts in and I could easily read the sign.

It said, "Out of Control TEENAGER Boot Camp" followed by a website address and a phone number.

My friend and I went back inside the house for only a few minutes but when we returned, the sign had been moved more to the middle.

Of course, being a total Nancy Drew/Gladys Kravitz, out of control whack-job, I called the phone number for this boot camp. The fellow that answered -- a young-sounding teenager himself -- was cagey. Eventually, though, he saw fit to enlighten me: this teen boot camp thing is for "troubled teens." Aha.

Cutting to the chase, I asked him, "Does your therapy require that the family of the teen in boot camp put your sign in their yard?" Oops. Wrong question. He grew more agitated. "Where did you see our sign? What was the address?" he demanded. "What is this in reference to?" he wanted to know.

"This is in reference to your sign," I said, to which he replied, "Well, I'm just the operator. I don't know anything. Call back later." And then we hung up.

Within minutes, the sign-sponsoring mom came out and took a photo of the sign with her phone. A few minutes later, just as I was about to get up and snap my own picture, she came outside again and took another picture of the sign with yet a better camera.

Finally, when the coast seemed clear enough, I dispatched my fearless Mr. M to snap a picture for me. "Be cool, be subtle, don't be obvious," I called after him. Whereupon he sauntered shirtless across the street, planted himself in front of the sign, and snapped away.

This ultra-smooth reconnaissance revealed that just above the website address on the sign are the words, "Only $25.00" -- but this part is covered up with white tape, so you can't see it in the photo.

One of my neighbors speculates this may all be a harmless and witty repartee between the neighbor mom and her son, hence the mom's photography.

But after visiting the boot camp website, I'm not so sure. They seem as serious as a heart attack.

They make the boot camp in Officer and a Gentleman look like a ride at Disney World. In the FAQ section, one question is, "will my son be deprived of food and water?" Yikes.

On this boot camp website you'll find rough, gruff-looking young men clad in camouflage, striking menacing, "Uncle Sam Wants You" poses, tire and rope-climbing obstacle courses, teenage boys with shaved heads who appear on the verge of tears, and repeated references to your family's "private" insurance and how it will cover nearly all of your costs.

If this yard sign is a joke, it's a mighty peculiar one.

What say you, my Nancy Drews?

Love always,

Gladys K.

Green is in the Air, Everywhere I Look Around!

Happy days are here again, gentle readers! Gather round and draw near. For Goldman Sachs and JP Morgan are set to pay out the biggest bonuses ever. Can you feel it?

In the case of Goldman, these bonuses translate into an average of $700k per employee. Hooray!

But don't get mad. Get glad! Because Goldman, in true Walmart fashion, will donate $200 million -- or six days of its earnings -- to charity.

Shag us, baby!

And Goldman Sachs claims it "stands on its own two feet." That the government (which means YOU) is not guaranteeing its debt, in other words.

Except, umm, Goldman, can you say "10-K"?

While it is true I somewhat defended last year's AIG bonuses, my aim was to present both sides of the argument, as well as illuminate the frightening aspects of an unthinking lynch-mob mentality.

But, err, the bonuses announced last week by the big-bank, bailed-out boys seem indefensible.

"Now wait just a minute," some will say. The taxpayers benefit when these bailed-out institutions remain viable, staffed by well-paid Wall Street fat cats. We have to pay these employees big money, so goes the argument, or they will jump ship and go elsewhere.

To places like, umm, Antarctica or a deserted hedge fund in Iceland, leaving the rest of us high and dry.

Other people, like Elizabeth Warren, not surprisingly, have a different view. Rather than paraphrase her, check out the video below.

(In a completely irrelevant aside, Warren, with her melodic voice and smooth bob, reminds me of a liberal Peggy Noonan. They're both mesmerizing. And soothing. They'll make you feel good as you fall asleep.)

As you watch Warren, don't forget the big Obama cram-down forced on automobile bondholders like Chrysler. Those guys got like, maybe 20 cents on their dollar.

Goldman and JP's bondholders, on the other hand, and their creditors . . . and their stockholders . . . and their employees? Lost not a penny. Accordingly, they're happier than pigs in sh-t, wallowing in record profits. Please accept in advance my apology for this crude but true metaphor, unoriginal but so apt.

And don't forget that the government take-over of AIG ensured that every AIG derivative pseudo-insurance policy that Goldman held paid Goldman 100% on the dollar. There was not a single loss. Nice.
If the video is too dense for you, fast-forward to 4:04 and go from there.



So let's do a quick review. Recall that Obama's Treasury flat-out refuses to say where the $700 billion it took from us, the taxpayers, has gone. This fact clearly troubles Warren.

Yet you'll see her in a clumsy pivot on the subject, blaming the mysterious TARP black hole on the "system" already in place when Obama took over.

Sorry, but this argument I'm not buying. At all. She's far too clever to make it and we're far too smart to take it.

The reason Treasury doesn't want us to follow the money is because if we did, we'd lose confidence in the very stress-tested "banks" it now claims are so well capitalized. Here, feel better. Take a look at Timmy's red phone roster and the banks that are speed-dial programmed into it.

And with the FDIC completely in the red (i.e., flat BROKE, probably through 2012 -- the 99th bank was closed last week), the last thing the government needs is a run on the banks. So much better that we have a run on our currency, right? Who needs the dollar anyway.

However Warren did throw us a few good bones. For instance, her unflowery historical recounting of our government's traditional view of the middle class, as opposed to what it is now ("middle class? what middle class?") is interesting, if not infuriating.

But it's more than infuriating. It's completely debilitating to our country's morale. The Obama Administration's policy of increasing our nation's indebtedness makes it impossible for small businesses to borrow, hire, expand, much less stay afloat (a/k/a the "crowding out" theory). This insane, let's-go-into-debt-to-get-rid-of-our-debt policy decapitates our economic engine. Are there any grown-ups left in DC?

Of course we haven't seen any change. If anything, it's been change for the worse. But before you call me a nutty Limbaugh protege' let me point out that the liberal Mighty Mo has taken on the Smooth-Talking Nobel O.

Hells bells! And now even the far-left-leaning Nation is calling him the Whiner-in-Chief!

And yes, I'm whining too, damn it, while I worry with the best of 'em. Change? What change? 'Cause there ain't no change jangling in my pocket.

The 2010 mid-terms will bring about change alright. But it won't be the change Dems envision.

The change I'm imagining will be wrought by the never-ending increases in unemployment numbers . . . the steadily rising foreclosure notices (1 in 10 homeowners are in default), the food stamp statistics (more than 1 in 9 of us are on them), and, well, on and on it goes.

(Even worse, all this gloom and doom comes before the commercial real estate dam has broken. That shoe has yet to drop. Quick, somebody pour me a drink).

The other day, my beloved Maria and I were solving the world's problems. In the face of Obama's apparently anguished, Thirty-Something vacillation, the Mexicans, she said, would say "put some pants on." The English counterpart would be, "Man up, already!"

Alrighty then. I'd better stop before I really get started. Because God forbid my urgent cry come off like some TV dad who cries "boy in balloon!"