Risk Rap

Rapping About a World at Risk

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

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

Bernanke Bonds, Paulson Puts & Cox Calls

Marx made a wry observation in the opening lines to one of his historical tomes, “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like an nightmare on the brains of the living.”

So it is with us. We are experiencing a crisis that is the result of a decades long deconstruction of the United States economic, political and cultural infrastructure. It began with the dismantling of our manufacturing base. It continued with the transformation of our capital markets. The purpose of the stock markets was to facilitate capital formation for the creation of businesses and industries. Today the markets function principally for speculative investment and the enrichment purposes of monied interests. Our deconstruction accelerated with extreme political Rovian partisanship and the fear mongering and self serving righteous divisiveness incessantly screamed by the howling yodelers of Talk Radio. Finally our enlightened republic is threatened with extinction by the intentional dismantling of our public education system and the virulent attack on secular learning and civic participation.

During times like these weird things begin to happen. We need to be prepared for anything and everything. That said it is heartening to see the Fed, Treasury and SEC act with such dispatch to address the US role in the global banking crisis. An economic meltdown serves no one. The long term impact of these swift concerted actions will be profound. Undoubtedly these actions will add to the national debt. Some think it unfair to assign this burden onto the backs of future generations. Indeed this country started a revolution on the idea that taxation without representation is an intolerable injustice that cannot stand. Years from now the yet to be born will curse the long dead for their poor stewardship of our national wealth and resources and how it contributed to an extreme and unfair taxation they are forced to pay. That is of course if America does make good on its debt. Alexander Hamilton may be stirring in his grave. So this is a time out from the heat of a global market implosion. What is happening?

PROHIBITION ON SHORT SELLING: Shorting can now be considered a criminal enterprise. At present it only applies to large financial services firms. Lots of firms are clamoring to get on the you can’t short my stock list.

The new national slogan from the SEC should be “GO LONG ON AMERICA!”

REPO MAN:Global Repo Desk was created to facilitate liquidity amongst the global central banking system. London, Tokyo, Frankfurt and the other G8 central bankers are all counter parties to Bernanke’s $180 B liquidity infusion. Paulson’s putting on his old Goldman Sach’s trading cap and promises to trade us out of this bad position.

The Feds new slogan, “NO CENTRAL BANKER LEFT BEHIND!”

GOOD BANK / BAD BANK:Bernanke is using his infinite balance sheet to segregate all the bad debt from the good stuff. Its kind of like what ENRON did as it packaged all its poor debt obligations and parked them in offshore SIVs. Maybe it will work this time because unlike ENRON the Fed can print money. Lots of it.

New Slogan “BERNANKE AND PAULSON, SMARTEST GUYS IN THE ROOM.”

CORPORATE BAILOUTS: The US taxpayer is now the owner of the worlds largest insurance company. It’s $80 B capital infusion in AIG will keep this company solvent for the time being and keep the credit rating agencies from lowering AIG’s credit condition to junk. Cox has requested a copy of Lloyds of London Names List.

New Slogan: “PRAY FOR NO MORE HURRICANES, WE CAN”T AFFORD TO PAY OFF THE CLAIMS”

SHOTGUN WEDDINGS: First it was Bear Stearns and JP. Now its Merrill and B of A. Who’s next?

New Slogan: “WE DO MORE MARRIAGES THEN ELVIS AT A LAS VEGAS DRIVE THROUGH”

INFINITE BALANCE SHEET: That is what they keep saying. The Fed can do these financial gymnastics do to its access to an infinite balance sheet that can finally match infinite assets to cover infinite liabilities. Sounds like a tall order to me but i must admit it sounds pretty good from where I’m sitting today. Don’t know how it will go down with the future generations. From Bernanke’s lips to Gods ear.

New Slogan: “INFINITY, ITS MORE THEN ENOUGH TO GET IT DONE”

Bailout politics will sure to become a bloodsport. Every once in awhile you see the commentators on CNBC smugly ask about a threat to free markets and contemplating about the evolving form of capitalism. I can also hear Palin’s squeaking voice proclaiming she’s ready and offer some sage advise concerning our current plight. Palin would say that if she were so blessed to take the oath of office with her fellow Maverick John McCain, she would immediately put AIG up for sale on e-bay and return the proceeds of the sale to the American taxpayers.

Music: Temptations, Ball of Confusion

Risk: economy, market, future generations

September 19, 2008 Posted by | banking, Bernanke, Bush, Cox, credit crisis, Paulson, pop, TARP | , , , , , , , , , , , , , , , , | Leave a comment

Hamilton Mortally Wounded in Weehawken Duel

We would be greatly remiss if we failed to mark this day, the 204th anniversary of the famous duel that mortally wounded Alexander Hamilton – our inspiration and the founder of the original SUM. Alexander Hamilton was an important visionary whose actions and ideas played a pivotal role in creating America. Alexander Hamilton was a forward looking progressive force, considered the father of industrial capitalism and an author of Federalism in the United States.

Hamilton along with James Madison and John Jay wrote the Federalist Papers to outline the form, function and philosophy of a strong central government and the necessity of Federalism to assure the survival of our yet to be born republic. Arguing against Federalism was Thomas Jefferson who advocated a more decentralized government that favored state sovereignty.

Sum2 takes its name from the Society for Establishing Useful Manufactures (S.U.M.), S.U.M. was founded by Alexander Hamilton in 1793. The purpose of S.U.M was to promote useful manufacturing by using the water power generated by the Great Falls. S.U.M was the first planned industrial city in North America and should rightly be considered the cradle of industrial capitalism in North America. The area of S.U.M.’s founding was later incorporated as the City of Paterson New Jersey, which would grow to become a major industrial center from the 1800’s through World War 2. Paterson was a key munitions, textile and locomotive manufacturing center during the Civil War and thus played a pivotal role in helping preserve Alexander Hamilton’s conception of a Federalist Union of States.

Though the landscape of industrial capitalism has changed, Sum2 was founded to continue the useful and visionary work of the original S.U.M. Sum2 recognizes the strategic importance of manufacturing and will seek to build our business by creating proprietary content, innovative delivery capabilities and mission critical products to implement corporate sound practices for our clients.

How about some dueling banjos.

Risk: Federalism

July 11, 2008 Posted by | Federalism, folk, history, Sum2 | , , , , | Leave a comment