Risk Rap

Rapping About a World at Risk

Healing on the Sabbath

There is a wonderful story in the New Testament from the Book of Matthew. It tells about a man Jesus discovers in a synagogue with a withered hand. The Pharisees who were the fundamentalists of their day asked if it was lawful to heal on the Sabbath? Jesus answers that it is always lawful to do the right thing on the Sabbath. Jesus understood that The Divine Healer requires us always to be mindful as to how to respond to those in need even if that means violating supposedly sacred rules to do so.

The Republican Party opposition to the economic stimulus legislation reminds me of this story from the Gospel. The passage of the recovery bill in the congress was accomplished without one affirmative vote from the GOP. Almost every Republican to the last member cited concern about the country sliding into socialism. Taking a cue from lead party shill Rush Limbaugh, the self anointed demagogue and chief has been howling about the government sponsored recovery plan. Speaking for all Republicans, Rush states that government involvement will lead to the corruption of free market enterprise, ballooning administrative bureaucracies and the sure return of the debauchery of erstwhile earmarks splayed about in an orgy of pork barrel spending sprees.

The economy like the man with the shrived hand needs healing. He cannot find work if he is not healed. The doctor is in the house and being faithful to the Hippocratic Oath is compelled to heal despite the incantations of conservative demagogues of damnable results if ideological dogmas are violated.

An interesting historical analogy steeped in realpolitik can be found in a famous statement made by Deng Xiaoping as China’s disastrous Great Leap Forward was concluding. Said Deng: “I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.” This was interpreted to mean that being productive is more important then upholding beliefs in communism or capitalism.

The leader of China at the time, Mao Tse-Tung saw this type of thinking as a great threat to his power. To consolidate his power and mitigate the threat Deng’s thinking represented, Mao launched the equally disastrous Cultural Revolution. Deng and his policies were rehabilitated years later only after the damage of the Cultural Revolution became apparent. The adoption of liberalized economic reforms and the eradication of ideological strictures has done wonders for China. Like Mao, the GOP demands ideological purity regardless of the effect. The United States has pursued the policies advocated by the GOP since the Reagan Administration. Those policies and philosophies have brought us to where we sit today. A moribund economy over dependent on a financial services industry, leverage and the availability of cheap credit.

President Obama’s recovery program is classic move taken from the Keynesian economics playbook. It offers a massive capital infusion into the economy that is funded by an increase in Federal debt and a generous tax cuts that should satiate the most rabid Reaganomic raconteur. Obama is not beholden to ideology. The Great Empiricist has proclaimed the death to all ideologies and is not beholden to the stale bread of old dogmas. Obama is willing and most able to craft solutions from tools and systemic loam to effect the cure. He might even resort to a dollop of supply-siderism and sprinkle a bitty bit of voodoo economics on the zombie republicans to get the American economy going again.

You Tube Video: Dr. John, Gris-Gris Gumbo Ya Ya

Risk: economy, politics, recession

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January 30, 2009 Posted by | economics, heal, Obama, recession, republicans, rock | , , , , , | Leave a comment

RTAs Movin On

A question confronting our nation is how do we process and come to terms with the Bush Administrations 8 years of mismanagement and abuses of power? Do we set up commissions and special hearings to root out the miscreants to get to the root of how these problems arose so we don’t repeat them? Or do we take a cue from Gerald Ford as he did with his pardon of Nixon and offer the Bushies a kind of absolution for their flagrant abuses of power, falsification and gross mismanagement so we can put this “national nightmare” behind us.   President Obama certainly thinks its the latter.   President Obama and the nation has a lot on its plate, and to till the soil of the Bush’s Administrations politicization of government we run the risk of losing focus for the task at hand to rebuild and heal our deeply wounded nation.

Obama believes we should move on. But before we sprinkle holy water on a blanket absolution for Bush’s high crimes and misdemeanors spawned by 8 years of Republican rule and excessive nationalist ideological zeal; we must offer a comment concerning the hiring practices at the much maligned Justice Department.

It is particularly disturbing to learn that the hiring practices at the Justice Department were guided by an applicants ability to demonstrate that they were an RTA, (Right Thinking American). The degree to which the Bush Administration has politicized government is striking. The Justice Department above all others needs to recuse itself from politics if it is to remain an objective arbiter in defense of our constitutional republic and the rule of law. The administration of justice needs to be conducted without prejudice or malice. It must be free from any ideological predisposition of political parties. Nazism, fascism, theocracies and other dictatorial forms of government use political ideology to administer justice unencumbered by the protections offered by constitutions and citizen bills of rights. It is the deeply held respect for the the rights of individuals that make the “great experiment” of the USA a light to the nations of the world.

Most disturbing are the anecdotal testimonies of civil servants providing insights into the extent that the Bush Administration placed the protection of political considerations over the pursuit and presentation of the truth. We are reviled by stories of the suppression of reports on global warming by the National Science and Technology Council because it would undermine Bush’s opposition to the Kyoto Accords. RTAs know that ordinary thinking Americans need protection from the truth about global warming and climate change. RTAs know that the disclosure of truth and transparency are dangers to a representative democracy.

Equally appalling were Bush’s legislative initiatives to deny equal rights to gays under the Federal Marriage Amendment. The law sought to define a marriage as exclusively the union of man and woman. RTAs know that ordinary thinking Americans need guidelines concerning acceptable life partners who can enjoy the right to marry. RTAs know that civil rights for every citizen is not in the best interest of the country.

RTAs also sought to bring an enlightened curriculum to the public schools through their control of the Department of Education. RTAs fought hard to have intelligent design added into the science textbooks of public schools to combat the pernicious liberal influence of Darwinism, evolution and the Big Bang Theory. RTAs know that ordinary thinking Americans must not concern themselves with scientific inquiries free from the context of theology and religious dogma. RTAs know that their concept of God needs to be accepted and worshiped by all Americans.

RTAs in the regulatory agencies fought hard to live by a laissez faire approach to business and commerce; thus protecting corporations from unfair and cumbersome regulations. The result, a world wide banking crisis, numerous cases of corporate governance breakdowns, environmental justice violations and obscene wealth accumulation for a very select chosen few. RTA know that the social contract first and foremost protects the powerful corporate interests. Whats good for large political contributors is most certainly in the best interests of ordinary Americans.

Most disturbing is how RTAs justified the right to use torture to extract information from the perceived enemies of the republic. RTAs know that it is right and just to use any means necessary to defend the Fatherland against terrorists and evil doers. RTAs fail to understand that America is a special place because we respect the right of individuals and the sanctity of life. If RTAs have their way, the great American Experiment will be DOA as we seek to confront the challenges of the 21st century. Thankfully like Bush, the RTAs are vacating their positions within the departments of government. They’ll be moving on to claim their great reward by putting their RTA skills to good use as lobbyists on K Street.

As a nation lets move on, but let us not forget.

You Tube Video: Bruce Cockburn, Mighty Trucks of Midnight

January 16, 2009 Posted by | Bush, Civil Rights, democracy, Federalism, government, LGBT, Obama, regulatory, republicans, rock | , , , , , , , | Leave a comment

Livin in the USA

oakland-social-unreastDon’t quote me on this, but I seem to remember some sage advise Barton Biggs offered his high net worth clientele about the coming social disintegration due to the economic meltdown. I remember him saying “to stock up your wine cellars, get liquid with your assets and find communities to live in where enhanced security services is a chief accoutrement.” He may be on to something.

Urban tensions have exploded in Oakland California this past week over the slaying of a BART commuter at the hands of a transit policemen. The unfortunate killing of the African American youth Oscar Grant occurred on New Years eve when the BART transit police were trying to control rowdy New Years revelers. The shooting has triggered a series of violent protests that are becoming more commonplace in cities of the world.

These high profile cases of police brutality are incendiary incidents that give voice to a seething urban anguish fed by economic duress, racial tensions and cultural dislocation. The police murders of a person of color give focused voice to community discontent fueled by rising unemployment, homelessness, home foreclosures, ethnic tensions and rising impoverishment unleashing a horrific display of civil disturbances that are in turn met with brutal state suppression.

Urban social unrest is becoming more commonplace in democratic nation states. The riots in Paris and Amsterdam in 2007 and the recent unrest in Athens speak of a deep dissatisfaction of the economic and cultural disenfranchisement of urban minorities and working poor. These Euro Zone riots assume a Muslim ethnic dimension. It exemplifies the cultural dislocation of Islamic youths and the failure to integrate the large Muslim immigrant community into Old World Europe. As the recession deepens ethnic unrest and class conflict will grow. Perhaps we should take Mr. Biggs’ advise and stock up the wine cellars before it becomes to dangerous for a run to the local liquor store.

You Tube News Footage: Oakland riots


You Tube Music Video: Steve Miller Band, Livin in the USA

January 8, 2009 Posted by | cities, ethnic, Muslim, race, rock, social unrest | , , , , , , , , , , , , , | Leave a comment

Centralia PA

The high water mark of the Confederacy was achieved at the Battle of Gettysburg along Cemetery Ridge on the afternoon of July 3 1863. Here the futile and costly charge led by Confederate General George Pickett ended the hopes of the secessionists to extend the war north of the Mason-Dixon Line. It also signaled the beginning end of the Confederacy and their hopes to dismantle the Union.

November 19 will mark the 145th anniversary of the Lincoln’s Gettysburg address. Lincolns speech is revered as an oratorical masterpiece. It ably conveyed a free people’s resolve and reverence for a representative democracy and the price free people’s must pay to secure the grace of liberty.

I bring this up because the great state of Pennsylvania is again a high water mark in the presidential battlefield of this historic election. Pennsylvania is the battle ground state whose electorate may decide who sits in the office of our next president. And as the candidates jaw on about Joe the Plumber, Six Packin Six Packers and the sacred patriotism of Hockey Moms, I hope voters continue to consider the environmental degradation that has visited this region too such terrible effect.

The town of Centralia is a scant 101 miles northeast of Gettysburg. Centralia was founded in 1840 and its residents have made a living mining the coal along the Reading Seam for over 100 years. Today however, Centralia is a ghost town. It had to be evacuated due to an underground fire that has been burning for 40 years fueled by the coal that once provided the miners and residents of the town its livelihood. The experts predict that the inextinguishable fire will burn for 250 years and its toxic emissions and danger of ground cave ins have made the town along Highway 61 uninhabitable.

The devastation of this environmental industrial disaster should be a prime issue in the campaigns of the candidates along with occupational safety, environmental protection, the provision of health care and jobs for these distressed areas. Unfortunately as the Bush Administration continues to allow strip miners to operate with impunity without regards to any environmental safeguards the devastation and degradation of small towns like Centralia will remain a real threat.

I ask my fellow countrymen in Pennsylvania to consider your vote and turn back the tide of ignorance to the real issues confronting our nation. Environmental degradation and ecological risk is a real threat to our livelihood and well being. Ask the former citizens of Centralia. Today’s video shows the devastation of the once small town of Centralia accompanied by great guitar work by Mr. Winter.

You tube Video: Johnny Winter Highway 61 Revisited

Risk: environmental, brownfield remediation, mining

October 27, 2008 Posted by | Bush, elections, environment, rock | , , , , , , , , , , | Leave a comment

McCain’s Know Nothings

Citizen Know Nothing

It was painful to watch Mr. McCain’s last town meeting. An older women took the microphone to speak about her fear of an Obama Presidency. She said that she read that Mr. Obama was an Arab. Mr. McCain took the microphone back from the woman before she could complete her thought. I guess she feared that Michelle Obama would change the Lincoln Room wallpaper to Arabesque patterns to match the architecture of the Grand Mosque of Cordoba and that the Whirling Dervishes would perform at all future White House events.

McCain was forced to give a Marc Anthony soliloquy. “My friends, I must say that my opponent is an honorable man. And he really is an American, Sean Hannity checked his papers. Twice.” McCain’s supporters were miffed and looked on with unbelief as their candidate went on to explain that Obama was actually a family man with two kids and a wife. His supporters shouted “say it ain’t so John. Don’t believe the lies of the liberal media that paint Obama like a regular American. We know the real truth. He doesn’t even like hockey!”

All week we have seen McCain’s supporters express their exasperation because “That One” has a lead in the polls which many fear their candidate may not be able to surmount. With incredulous unbelief they can’t understand how the America of their understanding might elect a terrorist loving closeted Muslim whose deep hatred of America will compel him to quickly raise the White Flag of surrender and preside over the destruction of the Union. Low information voters rely on demagogues to confirm their prejudices and fears with a few well placed words. Cultivating low information voters by speaking down to them with hate speech will yield low returns. So as our country struggles to confront drastic challenges and problems McCain’s Know Nothings implore him to show more courage of his convictions and go negative in his next debate to save America from an Arab President.

Sarah Palin’s masterful use of the rhetoric of division and suspicion “who is Barack Obama?” has stoked the ugly side of America’s political angst. The lipstick wearing attack dog has done her job well. She has skillfully tapped into voter sentiment that is frightened about their economic security, fed up with the self serving lies of our political leaders and furious about their powerlessness to exercise control and stop the radical changes occurring in their lives. The stasis of Bush Republicanism is being washed away in a Tsunami of world events that is accelerating the pace of change and cultural transformation. Palin promises to change our inability to arrest the changes that are overwhelming Americans. Sarah’s minions just want it to stop. They want it to go away. They want it to stay the way things always were. America is on top. God is in his heaven and all is right with the world. They will accept nothing less then our full entitlement to the birthright of our American Exceptionalism. And unlike Easu we will not sell it or be tricked out of it by a fast talking Jacob that goes by the name of Barack.

There are parallels to this story in our short and modest history as a democratic republic. The Know Nothings were a pre-republican party political movement borne in the civic turmoil of New York City. They were Nativists that distrusted the ruling democrats and hated the swelling population of Irish immigrants that was flooding America just prior to and during the Civil War. They felt “the purity of their America” was being lost and diluted by the foreign influence of its new citizens. Martin Scorsese’s “Gangs of New York” character Butcher Bill Cutting yearns to protect an idea of America that shares many of the same concerns that Barracuda Sarah incants with her divisive rhetoric.

The release of the movie American Carol will certainly add to the informed dialog about the pressing issues of the day. To me it looks like a heap of pedestrian clichéd camp. Its purpose will serve to reinforce low information voters political prejudices and misconceptions. The few clips I have seen are anything but funny and its natural audience will liken it more to a chilling documentary then comedy. It will also provide comedic cover to derail attempts for a serious examination of issues which can now be disposed of with a dismissive can’t take a joke tagline.

One reaps what one sows. Spread seeds of obfuscation and one gets confusion. Spread seeds of distrust you’ll get suspicion and division. Spread anger you will reap conflict. Pander to ignorance and you shall cull stupidity.

American politics on the down low this October 11, 2008.

You Tube Video: Shift Happens

Music Video: The Charlatans – The Only One I Know

Risk: democracy, elections, civic participation, enlightenment, civil unrest

October 11, 2008 Posted by | culture, elections, McCain, Obama, Palin, politics, rock, soundtrack | , , , , , , , , , , | 1 Comment

Tyranny of the Algo’s

These are the days when the earth stands still. The world is enthralled in paralysis over the capital market carnage and the mayhem its creating with our 401Ks, IRAs, bank solvency, corporate viability and government stability. Our life styles and future security is in double jeopardy. We feel a collective sense of economic debasement and existential dread brought upon us by unseen dematerialized security exchanges that seem intent on assaulting our humanity.

The markets have been taken over by machines. Black box robots digitally blip out buy and sell orders moving massive amounts of capital in and out of securities markets. Without emotion they are governed only by an extreme prejudice for the quantitative parameters of its algorithmic soul. The Algo’s create a risk free rate of return and a devastating toll of moral hazards that extend to all corners of the globe.

During the past few decades financial engineering has been a growing discipline within the capital market industry. Traders began to employ the use of sophisticated technologies and statistical analysis to determine how investment portfolios should be constructed and what securities and asset classes should trade to optimize performance and investment returns.

In the 1970’s Barr Rosenberg then a professor at Berkley created one of the first quantitative management tools to create, manage and trade investment portfolios. Since that time quantitative investment management has grown into an expansive science and in many respects has supplanted traditional fundamental investment analysis as the preferred methodology to manage securities and engage in capital market activities.

Algorithmic (Algo) trading is a quantitative driven investment and trading strategy that utilizes statistical analysis of markets, securities and performance attribution factors to trade and rebalance investment portfolio’s based on indicators and signals emanating from real time trading markets. Algo trading systems read the real time data streams from the capital markets and simultaneously kick off massive buy and sell orders to create investment positions that correlate to their algorithmic investment strategy.

The volatile markets are driving Algo trading platforms crazy. Yesterday volume on the NYSE were well into the billions and though we are thankful for the liquidity stat arb trading provides the Algo’s are ruling the markets by taking their commands from the volatility King VIXX and its valuation Viceroy, VWAP. Algo’s are trading the markets all day creating and taking advantage of the ebbs and flows of market valuation. But it is in the final hour of an exchanges trading day when the Algo’s like persnickety day traders close their positions in an orgy of short selling and position liquidation. For the past seven day’s these sell offs have shaved trillions of dollars in market capitalization and have seriously depleted the net wealth of millions of ordinary shareholders who believed enough in the promise of capitalism to invest hard earned life savings which are quickly being wiped out. Algo’s don’t know what terrors lurk in the minds of central bankers and regulators and are content to reload their bazookas at the beginning of each day’s trading. So they close their positions in one country and pass the book to confederate traders in other time zones to trade markets in other country’s content to spread the virus like a capital market avian flu pandemic.

The Algo’s are fully in control. They are shooting off buy and sell orders faster then a digital blip on the CBOE ticker can record. We are at the mercy of these black box leviathans that knows no allegiance to country, man or God. These black box market masters are trying to enslave us all by forcing us to pay tribute to the DE Shaws and SAC Capital Managements of the world. Are we trapped inside a diabolical matrix?

Welcome to the machine.

Music Video: Pink Floyd, Welcome to the Machine

Risk: humanity, moral hazard, distribution of wealth, market volatility

October 10, 2008 Posted by | hedge funds, rock | , , , , , , , , , | Leave a comment

Retreat to the Alamo

As the country waits for the government bailout package to become law, large banks are retreating to a new Alamo. The new Alamo will protect a club of 5 bank’s that the Fed and Treasury desperately wish to protect. The five banks are Goldman Sachs, Morgan Stanley, Citigroup, Bank of America and JP Morgan. It is upon these TBTF rocks that the American banking system will make its last stand in an Alamo fortress to weather the capital market storm.

The FDIC has arranged another marriage between Citigroup and Wachovia. Its truly a combination of weak sisters. Wachovia’s equity holders wiped out.

Hedge funds are cashing in their prime brokerage accounts. Three EU countries have acquired major stakes in Fortis Bank. Iceland an island country in the North Atlantic has nationalized its third largest bank.

New bank holding company, Morgan Stanley has just received an equity investment of $9 bn by Mitsubishi a Japanese bank that has also acquired 98% ownership in Union Bank California. The other new bank holding company, Goldman Sachs admits to a $50 bn war chest (recently augmented by Warren Buffett) in capital to make acquisitions of distressed banks assets. Once taxpayers assume ownership of the non-performing bank assets GS and other Club of 5 members will emerge from their bunker and get first pickings on a bunch of equity distressed regional and community banks at bargain basement prices. The banks are deleveraging while the Fed is asking the US taxpayers to leverage-up on more debt to fund that deleveraging.

President Bush made a statement this morning on the economic situation. W said he is ready to sign the EESA (Emergency Economic Security Act). This is an emergency situation said W. W also said he “appreciates the leadership of our legislators to come together and the true spirit of bipartisanship to serve the greater interests of our country.”

I wonder if anyone in this country knows what the word bipartisan means let alone willingly set aside parochial interest and actually practice it. This inability to come together is the result of twenty years of the fine art and practice of radical partisanship championed by Republican Rovian attack politics.

This Rovian posturing was ably demonstrated and on display for all the world to see during Friday’s debate. The Arizonian Maverick a self proclaimed champion of bipartisanship couldn’t find the courage in his Country First heart to look at Barack Obama to engage in a substantive discussion concerning this nations problems. His contempt for his opponent and his refusal have a dialog with him was truly ugly as it is despicable and exposes McCain as a Me Firster. Country be damned.

Due to a system malfunction the opening bell at the NYSE failed to ring. What kind of omen does this augur?

Music: Queen, Another One Bites the Dust

Risk: leveraging, political dialog, democracy, depression

September 29, 2008 Posted by | banking, credit crisis, EESA, rock, TARP | , , , , , | Leave a comment

GOP Scuttles EESA

The Republicans have turned their back on Wall Street and the EESA. Apparently their feelings were hurt when Nancy Pelosi gave a partisan speech that made some GOP’ers cry.

Other then Ms. Pelosi’s rhetorical fusillade that blew a gaping hole in the collective ego of the GOP, I don’t know what their real reason is other then an ideological commitment to a policy direction that has brought the banking system to the brink of collapse.

Oil is way down on the assumption of much lower demand due to an economic slowdown. Gold is going up as a safe haven for assets. The DOW is down 600 points and the yields on Treasuries continue to plunge.

Republicans can boast their populist credentials as they return to their districts for the coming election. They can blame majority party democrats who control both houses for the legislative failure. Maybe their constituencies are sufficiently capitalized to weather this economic storm.

Liquidity in the credit markets is critical. An important barometer will be lending activity of community banks. No liquidity will acutely show itself in community bank lending.

We seem to be entering a state of perpetual crisis. Anything that is perpetual in nature is not a crisis it is the usual state of things. Any condition of perpetuity is a falsehood and cannot abide.

Welcome to the new normal state of things.

Music: Rolling Stones, Gimmie Shelter

Risk: markets, banking

September 29, 2008 Posted by | EESA, politics, republicans, rock | , , , , , | Leave a comment

Paulson’s Beer Hall Putsch

Drawing by Georg Grosz

On the night John Kerry ceded the election to Bush’s second term, I can still see W smirking while his smiling brain, Karl Rove looked on with smug satisfaction. Opined Bush, “I earned some political capital and I’m gonna spend it.” Spend it he did and his administration has nearly bankrupted the trust, treasure and security of this country.

As the United States limps to the blessed close of 8 years of the Bush Administration and the rule of a party that professes a disdain for government while demonstrating a striking ineptitude for governance; American’s are left holding a massive bag of bad debts reaping the painful yields of much squandered political and economic capital.

The regime that has refused to govern has left the door unguarded. Making it possible for a clique of collective interests that has the will, intelligence, verisimilitude and motive to take the reigns of state and to guide it in a dire hour of need.

Paulson’s bank bailout might just be a bloodless putsch of financial elites led by an alumni of investment and merchant bankers and their well placed confederates. The monied interests who have enriched themselves by gorging at the public troughs creating unfathomable pools of wealth for themselves are now trying to seize the country as their grandest prize. To be sure they remain hungry for returns, crave capital preservation and see the crisis as a great investment play to enlarge their riches. They smell the stench from the stinking corpse of the US banking system and are looking to claim the opportunity of a lifetime. They will go to great lengths to achieve their objectives. They are ready to employ economic blackmail to extort a massive tribute from multiple generations of US taxpayers to finance a takeover of the banking system.

This is the triumph of state capitalism. It is a similar model utilized by China, the EU, OPEC and other countries practicing the fine art of a state managed economy. This is not socialism. If this where socialism, all American’s would be receiving stock certificates and purchase warrants in the companies the Treasury is looking to finance. That is not in the cards. China is managed by a class of technocrats embedded in a centralized political party. America will now be ruled by a class of managers employed by Americas financial services whose sole goal is to maximize shareholder returns.

Is this a grand fleecing of America? The powerful and well placed are raiding the public treasury to fix past mistakes of their making and to bankroll their next bold move. When the state assets of the former Soviet Union were privatized, a class of oligarch’s arose out of the depths of the CCCP to seize control of them. The bank bailout is an event that bears similar characteristics. In Russia the private sector took control of state assets expropriating state ownership. Our bank rescue plan will provide US Treasury assets to the private sector so they can recapitalize and buy distressed bank assets on the cheap. No doubt sometime in the future, these privateers will be lauded by our elected officials as capital market heroes who single handedly rescued America by rationalizing the banking system.

Under normal circumstances the public trust would be secured by the social compact we have entered into with our Federal Government. Tragically, our three branches of government have all failed in their fiduciary duty to protect and serve the interests of American citizens. Special interests, ideologies, privilege and the rights of the stronger has trumped and crushed the will and interest of “We the People.” We are a representative democracy; republicans all, who believe in the democratic ideal who freely give our informed consent to be governed in exchange for the protection of public interest. This trust has been grievously violated. Our consent needs to be revoked.

Chris Dodd the Senator from Connecticut emerged from a weekend meeting with his head shaking. Said Dodd on the need to bail out the banks, “they painted a picture that was absolutely frightening and devastating for America. We must do this deal.”

The monied interests are holding the promise of America hostage. They say if we don’t comply with their demands, we will not be able to send our children to school, our retirement system and social security program will collapse, interest rates will go to double digits causing a cascade of mortgage defaults and bank failures. There will be anarchy in the streets. Sovereign Wealth Funds and other well heeled global investors will liquidate their holdings in US Treasuries and place the Federal Government in default. We’ll be no better then a banana republic.

It all looks very suspicious. Hank Paulson fully in control at the US Treasury making major moves to drastically alter our nations books and ledgers. Robert Rubin, former GS Chair and current well placed executive at Citicorp is now seen escorting Barack Obama no doubt offering real time sage advice. Jon Corzine, Mike Bloomberg and Governor Paterson are all bewailing the pending doom state and city budgets will suffer. State governments all over the country are growing more concerned each day as tax revenues fall, expenditures increase and the angst of American’s grow.

I’m having a hard time with this one. If its only about writing that $1 Trillion check to acquire a bunch of worthless assets I’m down with it. It’s only funny money anyway. Whats another $1T on a Federal debt of $11T. But this rescue plan serves a special interest more then it serves the general good of the common polity. As Alexander Hamilton taught us, debtor nations cede political liberty. It is unconscionable to saddle our country with this debt burden. Doing this deal will bind future generations to cover an obligation that condemns them to a life of indentured servitude.

This is not the way of free people. There is a better way.

Music: Bertolt Brecht’s Alabama Song Performed by The Doors

Risk: Democracy, Federalism, Free Markets, Debt, managed economy, state capitalism

September 23, 2008 Posted by | Bush, credit crisis, Paulson, politics, rock, TARP | , , , , , , , , , , , , , , , , , , , , | 1 Comment

Reinventing Community Banks

Community Banks have been profoundly affected by the current crisis in the credit markets. Many will need to reposition their market focus and adopt innovative growth strategies to build its capital base and sustain profitability if they wish to remain independent.

Community banks have confronted drastic market challenges in the not to distant past. During the 90’s community banks dominance of the small and mid-size enterprise (SME) market began to erode. The dynamics of the banking industry changed rapidly. Large money center and regional banks leveraged technology, operational and balance sheet scale to provide access to inexpensive credit products bundled with cash management tools. They were armed with huge marketing budgets and became adept at selling a growing array of transaction services that met the growing sophistication and business needs of the lucrative SME market. The current banking crisis forebodes yet another drastic alteration in the structure, regulatory and businesses practices of the industry. The current banking crisis will forever alter the face and scope of community banking sector.

The challenge for the community bank will to reinvent itself. Community banks must decide who its customers are and target the market with focused precision. Community banks need to recognize its strength by leveraging its natural geographic advantages and sell products into markets that transcend local limitations. Community banks need to offer products that help SMEs manage cash flow and liquidity, make informed decisions on capital allocation initiatives, decrease cost of capital and products that facilitates transactions and fosters new customer acquisition.

Community banks must also begin to farm new liquidity pools. Securing funding sources in a world of limited liquidity will be the greatest challenge for community banks. Overcoming regulatory hurdles notwithstanding, branding community banks as a consistent, trusted and efficient delivery channel of credit products is an important ingredient for its survival. The community bank must recognize how it adds value in a complex and expanding delivery chain. The failure to secure funding sources will only accelerate balance sheet erosion that results in merging with another institution or liquidation.

The community bank must assure its funding sources, equity holders and regulators that it truly knows and understands its customer’s market and growth potential. This KYC goes deeper then determining an acceptable FICO score, Federal ID verification and passing an OFAC screen. Employing risk management and opportunity discovery exercises with SME prospects and clients are principal business drivers that provide critical disclosure information to funding sources that address risk aversion concerns.

Funding sources and other stakeholders must be secure in the knowledge that the community banker understands the peculiar risk characteristics of the SME’s strategy, business model and governance and risk management acumen to provide investors and lenders exceptional returns on investment capital and lines of credit. The banker then becomes an effective risk manager whose vigilance and considered business judgment provides a fair return to funding sources, assures regulators that capital ratios remain strong and reward shareholders with appreciating equity valuations.

Community banks are just one of the many expanding choices an SME has to provide banking and financing services. Community banks must create a compelling brand identity and articulate a differentiated value proposition with focused product marketing to regain its market dominance with SMEs.

You Tube Video: The Beatles, Money

Risk: Credit, Market, Banking, Small Business, Recession, Marketing,

May 30, 2008 Posted by | banking, credit crisis, rock, SME | , , , , , , , , | Leave a comment