Wednesday, March 31, 2010

Too Big To Fail: Our Reality?

What do we mean "too big to fail" ? The phrase gets thrown around a lot and is the title of a book about the financial crisis that enveloped this country and the world in 2008. But, what does it mean? I am going to try to explain this idea of too big to fail and we will see if I succeed or fail.

Basically, we know that there are now just a few major banks in the United States. We don't have to name them as there are only a few of them since for many years now, banks have been merging in order to dominate their markets. The problem of a commercial bank failing became more complicated when the major banks acquired brokerage, and in particularly, investment banking divisions. These bank holding companies, that traded and took positions (traders bought and positioned millions of dollars in securities) in what came to be known as toxic securities (assets) needed cash. Other trading partners wanted those under pressure to come up with more collateral on repurchase agreements, and as confidence in each bank evaporated trading came to a halt. The Federal Reserve Bank became the only source for cash as funds with cash were reluctant to invest in commercial banks and investment banks that could possible fail.

A panic is not a pretty sight. And, when shit hits the fan, no one in the room is an expert. Even those men at the top of the Federal Government, Treasury and the Fed, did not have a clear idea what it would take to restore confidence in the system. The one thing they did know was that unlimited amounts of cash was the only thing that would keep the financial system from having a complete meltdown. The Federal Reserve Bank opened their window to not only commercial banks, but invited Goldman Sachs and Morgan Stanley, who needed cash, to come to the window. At this point, these two investment banking firms became bank holding companies for the purpose of borrowing cash from the Fed.

What we need to do now and what is politically feasible or two different things. Basically, we need to go back to when banks could not get into the investment banking and insurance business. A simple bank operation that gets into trouble can be dealt with, but when banks are permitted to enter into or acquire investment banking capabilities and insurance businesses, the situation becomes so complicated that if one fails, they all come under unbelievable pressure. Glass Steagall, that prohibited banks from entering the brokerage or investment banking business, kept a serious financial panic from rising to the level that it did in 2008. Whether those in Congress can see their way to realize this simple fact remains to be seen. The odds of going back to a simpler time are mostly likely not in the cards. As long as major banks know that they can gamble with other people's money and then get bailed out by the Federal Government, too big to fail will continue to be our reality for years to come.

Stay tuned.

Tuesday, March 30, 2010

Too Big To Fail Is Just Plain Crazy

Money talks and bullshit walks. Unfortunately, that is the way life is in America today, and it also explains some of the frustration seen today in some of the grassroots political movements. Money and the influence money can buy dictates what happens in the political-economy. The new banking regulations, unlike the old banking regulations that came out of the Great Depression - the Glass Steagall Act, will not have the power to prevent another financial crisis. The men and women in Congress do not have sufficient knowledge of money and banking, much less monetary policy in the United States, to make the kind of decisions necessary to eliminate or control the concept of "too big to fail".

Unless the President takes on the heavy lifting of banking and financial reform, we are headed back down the same road again. No one has to have psychic powers to see what is coming. A monetary system where banks can borrow freely and cheaply from the central bank, our Federal Reserve Bank, and use that money to literally gamble on the movement of securities markets around the world, can only exist for a matter of time before another Federal Government bailout is necessary.

This stuff, banking and investment banking combined, is not too hard to understand the inherent weakness in such a system or concept. Investment banking works best when the corporations are privately held and public monies are not at their disposal. Our present system of publicly traded investment banks, that double as bank holding companies and have access to the Fed window is just plain crazy. But, as I said at the beginning, money talks and bullshit walks.

Stay tuned.

Monday, March 29, 2010

New FinancialRegulations: Transparency & Accountability

Financial regulation is all the buzz in Washington as the Health Care Reform legislation has been passed and signed. But, there are so many facets of financial regulation that need to be addressed, and there are hundreds of bank lobbyists running around Washington trying to influence new legislation and get the new and necessary legislation watered down as much as possible. The question is: will they succeed?

Today, I want to briefly discuss the source of one of the biggest problems as it relates to the mortgage market. The bubble in residential mortgages was inflated and kept going because of the process of securitization of mortgages. This process of securitization permitted financial institutions, banks and mortgage brokers, to convert mortgages into bonds that could be rated by the credit rating agencies and then sold around the world. The problem does not rest with the securitization of mortgages, but rather the fact that the underwriters of these mortgaged-backed bonds pay a fee to the credit rating agencies for the credit rating. This built-in conflict of interest has not been addressed, nor has the problem of the underwriters shopping a rating been curtailed. The present credit rating system is a failure, and until it is corrected there will be little demand for mortgage-backed bonds and thus a recovery to the housing market.

But, this is only one of many issues surrounding the way business is done on Wall Street and how banks, financial advisers, brokers and fund managers treat investors both individual and institutional. We are a long way from a strictly cash economy Dorothy, and yet we are all very much still in Kansas. Without stronger regulation of the banking system from the Federal Reserve Bank, the Treasury Department and the Office of the Comptroller of the Currency, we will all continue to suffer from the present recession. In the age of electronic banking, and a keystroke can move funds around the world in a matter of seconds, stronger financial regulation is imperative. Our domestic economy, GDP - Gross Domestic Product, will not resurrect itself without more transparency and accountability.

Stay tuned.

Sunday, March 28, 2010

Butterflies And Baseball

Spring is in the air. Butterflies and baseball are just around the corner. These two shadow boxes were made from Whitman's Sampler boxes with cardboard, gesso and acrylic paint. Monday Moneythoughts will get back to discussing the political-economy. Have a safe and peaceful weekend.

Stay tuned.

Saturday, March 27, 2010

Saturday Is For Art & Israeli Literature

The above painting, Mother & Child: Level Playing Field Out The Window - Chicago Edition 2010, is my latest piece of work and is not finished. Yesterday, I put a thin coat of Raw Umber over the gold paint on the frame. The purpose of which is to tone down the gold and give it a more aged appearance. Several of the symbols, painted in black (used GOLDEN's carbon black, great stuff) around the frame deal with Chicago. They are easy to ID.

I am now reading A Tale of Love and Darkness by Amos Oz, an Israeli writer. This is an autobiography of not just one man, but of a people. People that want to know something about Jewish people, that already know the history of the Jewish People, will find that this book will give them an understanding that a history book can not. I have read a few books over my lifetime dealing with history. And, I have also read a fair amount about Jewish History going back 2,000 years. And yet, this book, a book of literature, ties together Jewish History unlike any history book is capable. I highly recommend this book to anyone that loves people, literature and history.

Stay tuned.

Friday, March 26, 2010

Health Care: Hearts In The Right Place

How does that little saying go? You can fool some of the people all of the time, but you can't fool all of the people all of the time. Well, in my opinion, the Republican Party has been able to fool a majority of the voters some of the time, but they can not fool a majority of the voters all of the time. What happens when they will be able to fool fewer and fewer voters? The truth about the Health Care Reform Bill will come out, and the majority of voters will see the truth and what is fiction. Change comes hard, but change does come, and it is that change that has leveled the playing field for families throughout history. The political-economy is not that complicated when you are trying to take care of your family, and, you see things done by your government that makes your job of providing health care for your family a reality. This has been a big frigging deal for millions of Americans. It is not perfect, as few things are the first attempt, but their hearts were in the right place.

Stay tuned.

Thursday, March 25, 2010

It's Not Perfect, But It's A Start

When you write, just as when you paint, each person that reads or views your work has their own interpretation of what you have said. It is not my intention to fight with medical doctors or anyone involved with the delivery of health care services. My interest is in those that do not have. Those children that have a pre-existing condition and do not have health care coverage are my concern. People that get sick and get dropped by their health care provider, their insurance company, are my concern. Those families that have a catastrophic illness and are forced to exhaust their financial resources and then forced to file bankruptcy and lose their home, are my concern. These issues and a few more that concern themselves with a level playing field for those with less because of their station in life, is my concern.

I respect doctors, nurses and all those that are involved with the health care industry, but I will not remain quiet while others with less than me go without. Health Care Reform is long over due, and while I have been blessed with good health all my life, and have had health insurance and cash to meet my and my family's needs, I recognize that others have not been so fortunate. This new Health Care Reform Bill may not be perfect, as few things are the first time put together, but it is a start.

Stay tuned.

Wednesday, March 24, 2010

President Obama And Health Care Reform: The New Reality

President Obama signed the Health Care Reform Bill yesterday, but the fighting is not over. Why? I am sure there are many opinions as to why the Republicans are still fighting against this piece of legislation. Now here is mine.

Naturally, we all have our on twist to interpreting historical events that we read about and current history that we see or experience, and I am no exception. For those of you who may be new to my blog, I was born in 1942, and I have lived in the United States my whole life except for the two years I was in the US Army and stationed first in Georgia and later in Korea. I have read a fair amount of American Literature dealing with race and race relations written by both black and white authors and I have listened to people talk when, in my younger days, I hitch hiked around the country. I know something about the Social and Intellectual History of the United States and I have witnessed first hand American style racism against black people.

The use of the "N" word and the spitting by protesters of the Health Care legislation, directed at black members of Congress and encouraged by the all white Republican minority members of Congress is hardly out of character for the America that I grew up in. The whole Republican Southern Strategy is based upon racism against black people in general, and the unspoken, yet deep seated belief among white men in positions of power and influence, in the inferiority of the black man. Can a black man play quarterback in the NFL was just one of many hurdles that the black man had to fly over to make the point that there is nothing a black man can't do that a white man can.

The Republican Party with its lack of diversity, except for a very few people of color, is on its way out, but they just don't know it. Once all the fear about the new legislation is put to rest, and people realize what a more level playing field looks like when it comes to health insurance, they will come to realize also that the Democrats are the party of the people and for the people. As the truth about the Health Care Reform Bill becomes known and the reality and the myths are separated, people all over the country will come to realize the great job of leadership our President has provided.

Stay tuned.

Tuesday, March 23, 2010

Health Care Reform Bill and Your Reality

Now that the Health Care Reform Bill has passed, the Republicans are talking about repealing the Bill. Well, if they get the votes, I guess they could, but I think once people get control of their thinking processes that they will realize that this Health Care Bill is not going to hurt them, but rather give them some security that they do not have, unless they are members of Congress. The purpose of health insurance is to protect people, not to make a few CEOs very wealthy. But, just as other changes were fought against, like Civil Rights, change comes hard to people because they fear what they don't know. Eliminating a pre-existing condition for children is no small issue if you have a child with a pre-existing condition. Being dropped by your health insurance provider is no small issue, it can happen and it does. Being put in bankruptcy because a member of a family has a catastrophic illness and a family's financial resources are exhausted is no small issue. These and more things are addressed in this new Health Care Bill, but it is not perfect, but it is a start. My gut tells me that when the majority of the people get to know what this Health Care Reform Bill will do, that they will prefer the future to the status quo. I look forward to watching President Obama sign this piece of legislation because I believe it is good for the vast majority of the people, and I think they will eventually realize this very soon.

Stay tuned.

Monday, March 22, 2010

Health Care Reform Passes: A New Era

All those that plan on leaving the United States now that Health Care Reform was passed by the Congress, might want to take a deep breathe and stop and think for a moment. Where are you going to go? Even Costa Rico has a universal health care system, as does Canada and all of Europe. You see, the USA was the last place a person living in a wealthy country could fail to get the treatment he or she needs because they had no money. This new system is not perfect, but neither was the first car or airplane, yet they were a start. It is about time we, as a nation, stopped playing Russian roulette with a family's financial security by seeing families lose everything because of a catastrophic illness. A country with a little compassion is a good thing. Unfortunately, the bill does not kick in for a few years, and for others it comes too late, but it is a new day, and there is reason to be hopeful that an additional twenty something million more people will have health care coverage. It has been a long time in coming, but history does not move very quickly.

Stay tuned.

Sunday, March 21, 2010

The Genius of The Republican Party

While I am not a Republican, I admire their shear genius. They know how to fight, I will say that for them. They don't concern themselves with fighting fair, they concern themselves with fighting to win. And wining is what fighting is all about.

Take the Health Care Bill that is going to be up for a vote in Congress today. The Republicans say it will destroy the country. Well, you know they maybe right, but, in my opinion, the Republican Party is on its way out. They have pedaled their brand of fear for many years. They have been against many issues that revolved around the culture wars within the United States, and now they can add Health Care reform to the long list of things the Republicans have been against. In plain English, the Republican Party today is for the status quo. Do you know what the status quo is? Are you happy with the status quo as it concerns health care? Well, if you feel or think that health care in the United States is just fine the way it is, then you are for the status quo. But, if you feel or think that the status quo as far health care is concerned is not where we should be as a country, then you are against the status quo and you should line up behind the Democrats trying to pass this piece of legislation.

The genius of the Republican Party is that they can get people to line up against their own self interest. In other words, the Republican Party can serve the poor people of this country a plate crap and tell them to eat and like it and they will. That, in my opinion, is genius! Why not protect the health insurance companies from collecting premiums and deny benefits? The CEOs of these insurance companies don't make enough money? They already have too much competition? Pre-existing conditions should not be covered? People should be dropped when they get sick and need to use their health insurance?

Yes, it is just that simple, and there are millions of simpletons out there that shovel down the crap that is put before them. Eat up you poor fools, they haven't figured out how to put a stent in your collective brains!

Stay tuned.

Saturday, March 20, 2010

Saturday Is For Art & A Bike Ride

Today is going to be a beautiful day for riding my bike, and I plan to get out there and pedal. This painting of the two sunflowers is from last year. As the warm weather is rapidly approaching, it will be time to plant some sunflower seeds soon.

Stay tuned.

Friday, March 19, 2010

Health Care Debate: What Are They Selling?

The Health Care debate in the United States continues to heat up. This morning I read how an 11 year old boy from Washington State that lost his mother to cancer has been attacked by the likes of Rush Limbaugh and Glenn Beck. Well, in my opinion, anyone and everyone who enters the battlefield of the debate on Health Care becomes a combatant. I know it isn't fair to go after an 11 year old boy, especially one who has lost his mother, but you have to realize that America in at war. No, not the wars overseas, I am talking about the cultural wars right here at home. Should we call out Homeland Security or dial 911? No, these cultural wars are part of any dynamic country of 300 million people. But, you need to look at what people are selling.

Rush Limbaugh and Glenn Beck sell fear. That's right, they sell fear to the fearful and it is big business. Just as Sonny in the movie The Apostle sold JESUS and HOLY GHOST fever to the people of his little church, Rush and Glenn are selling too. This doesn't have anything to do with health care or the reform of health care. This has everything to do with selling fear, fear of the unknown, fear of change, fear of being taken out of their comfort zone.

We live in interesting times. Our Congress, made up of people from all over this country, and yet, not one Republican can find his or her way to vote for this health care bill? There is big money in fear and there is big money promoting fear of change. People that have little are fearful of losing what they have. And having a black man pushing so hard for change, even though he is the elected president of the people of the United States of America, is just to juicy an opportunity for people that are pedaling fear to pass up.

So, it does not surprise me that an 11 year old boy who lost his mother to cancer, being brought into the battle for health care, is attacked by the likes of Rush Limbaugh and Glenn Beck. "Change is hard", President Obama has said many times. So, we just got to stay true to our beliefs and march on for health care reform.

Stay tuned.

Thursday, March 18, 2010

The Republican South & The Political-Economy

The Health Care Bill is all in the news, and I just love to hear all the Southern Republicans members of Congress talk about how the Federal Government is taking over so much of our economy (1/6). Well, it makes me smile. Why? You know how many military bases are in the southern states in the USA? Well, I am going to just mention a few. Let's see in NC there is Fort Bragg, then there is Fort Jackson in SC, and then there is Fort Gordon in Augusta, GA and Fort Benning in Columbus, GA. There is Fort Campbell in KY. And then there is Fort Hood in Texas. Take away all that government spending from those southern states and what do you think would happen to their economy? So, the Republicans are against Health Care reform and when they controlled Congress and the White House they let the insurance companies have the favored status of no real competition, but now that the Democrats want to reform the system and level the playing field, we are going socialist. Without all the Federal government's spending in the south they would not have an economy. They should keep their mouths shut or somebody will realize just how socialist the south is!

Stay tuned.

Wednesday, March 17, 2010

Happy St. Patrick's Day Everyone

I think I will give it a rest. Everyone will be too busy downing green beer to care what is going on in the political-economy. So, everyone have a safe St. Patrick's Day, but be ready to tackle my post for Thursday. Here is a piece of my artwork I have been working on and that is not finished. Enjoy.

Stay tuned.

Tuesday, March 16, 2010

What About The Credit Rating Agencies Washington?

The politicians in Washington are patching together some sort of regulations to deal with too big to fail and to protect consumers of financial services from being cheated. This is a good thing. But, the same politicians are being ever so careful as not to upset their contributors from Wall Street.

I have not read the new rules, but I have yet to hear one word about the credit rating agencies (CRAs). Without taking aim at the inherent conflict of interest that the CRAs have with the investment bankers that pay them their fee for their services, we haven't changed a thing. The ability of Wall Street to continue to work hand in glove with the CRAs to produce phony Triple-A rated bonds has not been dealt with, and unless this crime is outed and eliminated, we are right on track to go down the same disastrous road again.

The history of finance is filled with stories of phony securities. It is interesting to me that counterfeiting money is a crime, but countering bonds is not. Selling a "story bond" is as old as debt financing itself. Bond ratings were to take the guess work out of an investor or portfolio manager buying a weak debt instrument. So, a system of credit ratings was created. These credit ratings were to give the investor some idea as to the ability and willingness of the issuer of the debt to pay principal and interest in a timely fashion. Giving a bundle of mortgages a Triple-A when the mortgages were sub-prime and not deserving of that high a credit rating lead, in my opinion, to the housing bubble that followed. These mortgage-backed bonds were then sold around the world to institutional investors by the billions and was the "air" the created the housing bubble.

Congress can not ignore these simple facts about the CRAs and their role in the bond market meltdown, toxic assets and the eventual financial crisis that followed. But, let me be clear, without a change in the way business is done between the CRAs and the underwriters of bonds of structured debt, the phony Triple-A rated crap will continue. Maybe not right away, but it will come eventually.

Stay tuned.

Monday, March 15, 2010

The Unholy Alliance: Washington & Wall Street

If you failed to see 60MINUTES last night here is a link supplied to me by Butch, one of MONEYTHOUGHTS' followers.;cbsCarousel

I have read a good deal of Michael Lewis' work starting with his first book Liar's Poker from the late 1980s. I hope to get his newest book that he mentioned on 60 MINUTES last night. I did catch the show last night and enjoyed seeing someone talk about the same issues I have been writing about in my blog for the last two years. Unfortunately, as I read in the Sunday New York Times, blogging is something done mostly by women and MONEYTHOUGHTS is not exactly what women are looking for in a blog. I don't nurse and never have.

When Michael Lewis was asked what needed to be changed, the first words out of his mouth were about the credit rating agencies. He knows this and I am sure there are others out there in a position to do something, politicians, that know this too.

After listening to Michael Lewis last night and thinking about what he said, I have come to the conclusion that little is going to change until there is a seismic revolution in this country. The unholy alliance between Wall Street and the politicians in Washington maintains the status quo. Without a change in the operation of the credit rating agencies, we are all headed back down the same road to disaster again. Without serious and comprehensive reform of the capital markets and banking, the seeds for another financial panic are already in the ground and germinating.

Stay tuned.

Saturday, March 13, 2010

Saturday Is For Art

Today I am taking a break from writing about the political-economy and instead putting up four pieces of my artwork. They are all paintings except the second piece down. That piece is made out of cardboard, cereal boxes, paper mache, glue, gesso and acrylic paint. Here I am going to give a free plug for GOLDEN liquid acrylic paints in the plastic bottles, they are a little more money, but they spread and cover and they are great to work with. So, if you are not a great artist or painter, like me, try GOLDEN paints in the bottle, I know you will like them.

Now you don't have to understand these pieces to like them, nor do you have to like them if you understand them. Art is something people do. From the cave paintings of prehistoric times to the work of my "favorite" contemporary American artist, Ellsworth Kelly, (it's great work if you can get it), people create art. In some cases, their art is a reaction to the world they live in, but in others it is a reflection of what they think they should be painting, and that too can be considered a reaction to the world they live in. I am not a trained artist. By that I mean, I am not a graduate of an art school, nor do I have a degree from a college in fine art. My father was an artist, and a pretty good one at that. He painted in watercolor. I did not start painting until 1988-89. I started painting large pieces and have reduced the size of my work because of the fact that I would have run out of room. Little pieces of paper are easier to store than six feet by four feet oil on board and plywood and pine constructions. Visit and support your local art museum. A rainy day is a great day to visit your art museum.

Stay tuned.

Friday, March 12, 2010

A Semblance Of A Level Playing Field: Some Day?

There is an article today in the New York Times about Lehman Brothers and how they manipulated their accounting to hid debt on their books. I read about Lehman and their cast of bright idiots in Andrew Sorkin's book TOO BIG TO FAIL. The article concludes with the thought that while nothing criminal was done, that there may be grounds for civil action against those that managed the corporation. In other words, you can steal, just don't use a gun. I think Alan Greenspan, the former chairman of the Federal Reserve Bank, would agree with my statement that anything a bank does, short of using a gun, is OK. The actions these men, that ran Lehman, took were in my book FRAUD!!! But, I am a simple person, and I like to keep things simple because they are easier to understand that way. We should build special prisons for financial fraud in my opinion. And, until the laws are written to protect the investor, the consumer of investment products and other financial products, we are going to continue to see more crap like Lehman going under and taking people's money with them.

We do not have capitalism in this country as so many people think we do or should. What we have is a system where lobbyists extract favors in legislation to make certain people very rich at the expense of other people. In America, as elsewhere, it is the working people that suffer from the frauds that are permitted by law to continue. That is what the big fight over financial reform and better and more comprehensive regulations in Washington is all about. If the Congress levels the playing field, then consumers will have a fighting chance because those that hid debt from their balance sheet will go straight to jail and will not collect $200 billion dollars and will not pass GO. I am talking about you Wall Street bankers, those poor SOBs that only make a few million dollars a year and travel around the world in their corporate jets (a business expense).

One of these days, a lot more people are going to understand just how rigged the financial game is in favor of the bankers, and then maybe we will get the change needed, in the way business is permitted to be done on Wall Street, to bring back a semblance of a level playing field.

Stay tuned.

Thursday, March 11, 2010

Cash Money Manufactured Into Toxic Assets

Yesterday I talked about the credit rating agencies (CRAs), and I said probably 99.999% of the population does not understand the significance of the role they play in the world of investment securities. Today, I want to talk about cash. Cash like in cash money, demand deposits, money in your checking or savings account or under your mattress or in a safety deposit box or a safe in your home. Yes, that kind of cash, Federal Reserve Notes. Some may have a stash of gold coins like James Bond, but for most of us those Federal Reserve Notes will do.

From time to time, Wall Street runs short of cash, and then we all feel it. What happens? Let us start with the idea that Wall Street makes nothing. This is not true, Wall Street can through a very simple manufacturing process turn cash into trash, or as I have referred to it in the past as a bag of shit. Yes, Wall Street can take money (cash) from mutual funds, pension funds, endowments, foundations, IRAs, 401-Ks and every other form of investment fund and turn it into what we now refer to as TOXIC ASSETS. What is a toxic asset? A toxic asset is an investment security that has no marketability. A bond market meltdown is when no bond trader will give you a bid for your bonds. When you have several bond traders not willing to give bids for a class of bonds, for example the billions of dollars in mortgage-backed bonds, we have a bond market meltdown.

Right now Toyota is having a problem with the accelerators and brakes on its new cars. This kind of problem is easy to understand and sometimes see. Run away cars make good news for TV and so anyone who has seen TV in the last few days knows that Toyota is having problems in manufacturing safe cars.

Wall Street manufactures unsafe vehicles too. But these vehicles are not easily seen or understood. One of the parts that the Wall Street underwriters out source in the manufacture of their investment vehicles is the credit rating. When the credit rating is slapped on these investment vehicles without being tested, they cause the investment vehicle to freeze up and become toxic. That is how Wall Street manufactures toxic assets, and 99.999% of the population does not understand that, and the Congress is too stupid to understand it either.

Toyota should get into the business of underwriting investment vehicles because when they freeze up and become toxic, there are no good videos to run on the evening news. Quite simply, what people can't see on TV, they don't understand, and so we are going to be in for more cash strapped Wall Street firms and toxic assets in the future.

Stay tuned.

Wednesday, March 10, 2010

The Credit Rating Agency Issue Again

Today, I am back talking about the credit rating agencies and the role they play in the world of investment securities. The difficulty is not in explaining what the credit rating agencies did or their role in creating the financial crisis, but in getting people in government to understand the significance of their role and how they abused and corrupted the system they were charged with protecting with their integrity. The credit ratings they placed on billions of dollars of securities (mortgage-backed bonds), namely the Triple-A credit rating, lead to the whole mortgage debt crisis.

This is so under the radar that even those educated in finance and banking do not fully comprehend the size of the role the credit rating agencies played in the mortgage-backed bond meltdown or the credit default swap fiasco. How do you get people, charged with making the laws and regulations, to understand the role the credit rating agencies played if they have no hands-on experience dealing with these corporations?

Bond traders and bond underwriters understand what I am writing, but few outside the business really comprehend the size of the role the three largest credit rating agencies played in the disaster. In simple English, their credit ratings made the housing bubble possible and lead to the eventual meltdown of the mortgage-backed bond market. Their conflict of interest, their need to grow their own earnings by rating structured debt financing lead to the financial crisis and eventually the economic recession that followed.

A couple of States are suing the three largest credit rating agencies and it will be interesting to see what happens to them in court. No doubt they will appeal the decision all the way to the Supreme Court if the decision goes against them. Given the intellectual make up of the Supreme Court today, I would not bet which way those jug heads will go. But, the federal government needs to do something about the built-in conflict of interest credit rating agencies have with the bond underwriters that pay for the credit ratings.

And lastly, credit ratings and their acceptance, like the acceptance of money, is a very important factor in the economic recovery of the nation. If every Federal Reserve Note was suspect, and no one trusted that they were not counterfeit, What would happen to the movement of goods and services throughout the economy? The integrity of the Triple-A credit rating and its acceptance among buyers and sellers is no less important than the acceptance of our paper money - Federal Reserve Notes.

How do you get this very basic and simple truth across to the politicians that make the laws?

Stay tuned.

Tuesday, March 9, 2010

The Republican Party: Politics As Usual

The health care debate, the wars, homeland security and fighting terrorism are all in the news and shaping people's attitudes about President Obama. And, yet the big issue, the economy is the one that will mostly likely decide whether he is a one-term or a two-term president. Remember what the Clinton administration said, "it is the economy stupid." Well, it is the economy and there are a lot of stupid people out there that vote. Kentucky is the state that I pick on a lot, but they are by no means the only state that the Republican Party can persuade to vote against their own self interest.

As I have said before, I watch far too much MSNBC for my own health. Thank goodness I got off my butt and took a bike ride yesterday afternoon and got a little fresh air circulating through my body and hopefully the few brain cells that are still functioning. MSNBC either can't say what they think or they don't think. The issue of the Obama Presidency is at the heart of the Republican Party's strategy. If President Obama is a successful president, the Republican Party may be on its last leg. Why? Because they serve a very narrow base economically and as for their rhetoric, you can keep people hungry so long before they get some smarts. If the economy gets a whole lot better over the next two years, people will realize that this black president can play quarterback in the NFL. When that realization sets in, the Republican Party and their tea-bagger friends and their racist posters will disappear from the political debate, the black man will have won another round.

So, with unemployment hanging around 10% and the Republican Party in no hurry to fix it, the fight is on for the survival not of the nation, but of the Republican Party. The southern strategy that the Republican Party has ridden for over 40 years may be coming to the end of a long ugly wave. History changes slowly, it is evolutionary more often than it is revolutionary. Now that the financial crisis is over for the moment, it is politics as usual.

Sty tuned.

Monday, March 8, 2010

Monday Morning And I Don't Feel Like Writing

Here are three paintings that I am presently working on. The top piece is another attempt at Mother & Child: Level Playing Field Out The Window - Chicago edition. The painting is not finished. The second painting is another attempt at Level Playing Field on an envelope. And, the third painting is just me having fun fooling around as some of us do from time to time.

I have gone all winter without being sick, and I sure hope I will be able to get through the rest of this winter without having to take a sick day. Why am I worried about having to take a sick day? I am retired now and I get as many sick days as I need. Now where is the "Death Panel" ? I don't want those folks to catch me goofing off. For those not familiar with my blog, I am joking about "Death Panels"!!! My late wife once told me, "Fred, people don't know you're joking, they think you are serious." I repeat - I am joking about "Death Panels", I am a LIBERAL.

Stay tuned.

Sunday, March 7, 2010

Einstein's Relativity Manuscript Goes On Display

This morning I noticed as I was reading a few articles on the Internet that Albert Einstein's manuscript of his Theory of Relativity goes on display in Jerusalem. Einstein's General Theory of Relativity will be shown at the Israel Academy of Science And Humanities as part of the 50TH anniversary celebration. Click on the link to read the complete article.

Contrast this event in Israel with the fact that across the Ohio River from my home in Cincinnati, Ohio is the Creationist Museum in Northern Kentucky. Am I the only one that sees the irony in this? Jerusalem, the ancient city that is of such importance to three of the world's oldest religions, Judaism, Christianity and Islam, is the city where Einstein's papers are going on display in their entirety for the first time.

People can have faith, and should be free to practice their faith all over the world. But, bending science or using false science to justify their belief in the Bible at the expense of young minds, to me is a crime.

Stay tuned.

Saturday, March 6, 2010

To Fight Against Securities And Banking Regulations Is Damn Right Evil

I find it increasingly more difficult to believe that the Federal Government will put in place the necessary regulations to prevent another financial panic, bond market meltdown or short selling panic of the major financial institutions in this country. Too bad not every member of Congress has read TOO BIG TO FAIL by Andrew Sorkin. This book is an excellent view into the world of finance in New York and Washington during the financial panic that gripped the nation in 2008. The book shows that when fear took over, there were no experts. Everyone was scared and no one really knew what would work to stem the fears and over reactions.

Now in calmer times these same men, who were scared out of their minds that their corporations were going to go under through the short selling and the withdrawal of cash from their firms, can not put aside their greed for the good of the country's economic growth and survival. It is they, the so-called leaders, that should be at the fore front of the debate for sound regulations of the investment securities and banking industry.

They act tough now, but they know down deep inside how scared they were to losing all they had and their firms. To fight against the necessary legislation, in my opinion, is damn right evil.

Stay tuned.

LEVEL PLAYING FIELD No. 3 by F.D. Zigler, oil on board, 1995.

Friday, March 5, 2010

Smart People Should Be Able To Find A Better Way of Doing Business

I read Financial Reform Endgame by Paul Krugman the other day. The article appears in the NYT on March 1, 2010. I agree with his comments, and I would like to add my own opinions on this subject.

The men that lead the largest corporations on Wall Street, the bankers, need to realize before it is too late that change and reform are needed. Why should they come to this realization? My answer is simple: before civil behavior breaks down and violence takes over, it is on their heads that the future of Wall Street rests. Politicians will not do what is right without a clear signal from Wall Street's leaders. They need to speak up for what is right, not just for their own self interest, but for the good of the country as well.

The fraud and shell games have to stop, because if they don't, I think violence may raise its ugly head. The leaders of the Banking community can not live on the 30TH floor forever. They have to at some point come down and realize what life is like on the street level. Reform and regulation are necessary, and in the long run will be cheaper for the country. These financial panics and bailouts are not free. They put our economy under unnecessary pressures. Smart people should be able to find a better way of doing business.

Stay tuned.

Thursday, March 4, 2010

A Painting In Progress For This Thursday

They are putting in new gas lines on my street and the noise is just too much for my poor old brain to function, so, I am going to post a painting in progress and leave it at that.

Stay tuned.

Wednesday, March 3, 2010

Senator Bunning And The State of Kentucky

Kentucky is a beautiful State. I have seen a good bit of the State and I enjoy driving through Kentucky almost anytime of the year. Unfortunately, while the State has an abundance of natural beauty, it has its weaknesses too. Senator Bunning is just one of Kentucky's weaknesses that will be leaving office very soon. Senator Bunning has been in the national news lately because he has now decided that we should stop borrowing and pay for things at the Federal level as we go. There is nothing wrong with this principle of pay-go if it is uniformly applied to everyone. Where was Senator Bunning during President George W. Bush's administration when it came to pay-go? The answer is: he wasn't there. When President Obama came to office, Senator Bunning became religious and decided that now was the time to hold the line on pay-go. Yes, extending unemployment benefits and other monies for projects and working people became secondary to Senator Bunning's new found religion. Well, the good news is, Senator Bunning finally relented and the hold he had placed on the bill to extend benefits has now passed.

Kentucky deserves better, but Kentucky as a State doesn't even have good horse sense. People of Kentucky, you are being held back by your own ignorance, and that ignorance manifests itself in the most anti-intellectual monument in the State, the Creationist Museum. This monstrosity is an affront to science and the intellectual curiosity of humankind. It ties your State to a state of ignorance that only typifies the overall condition of the people of your State. Senator Bunning and the Creationist Museum belong together because they represent what holds this beautiful State in a state of economic and intellectual poverty.

Stay tuned.

Tuesday, March 2, 2010

Did The Ancient Egyptians Have An Image For A Derivative?

The ancient Egyptians used a picture writing called Hieroglyphics to communicate, and while it is believed that they used 2, 000 images, I doubt that they had an image for a derivative. Since the concept of a derivative is below the radar of so many people in the United States today, the politicians can ignore the fact that these derivatives are going to take us down again. When all the players load up on derivatives and the game of trading and swapping them is in high gear, someone will decide to let go because the circle is spinning too fast. That person who releases first, and then wants to convert his holdings into cash begins the panic. As more demand cash or collateral, the panic grows until the Federal Government steps in with a bailout and makes most of the well connected players whole. Guess what? If you don't know it now, we are riding the same train down the same tracks to the same conclusion. Enough said, how about another picture of my very own hieroglyphics? The above drawing is just another piece of my political art before I apply my acrylic paint.

Stay tuned,

Monday, March 1, 2010

DDT: Derivative Disaster Of Tomorrow

It is Monday, and while I don't want to rain on anyone's parade, I am back to talking about the mess the future for financial regulation in the United States is in.

Very few people understand what a derivative is. In fact, if the population of the United States had as much understanding of what a derivative is, as they do to what cancer is, we would have meaningful regulation from Congress coming down the pike to guard us against another financial disaster. The unregulated derivative business, the part of AIG's business that required the Federal Government to bail it out of certain bankruptcy, and bringing about a world wide financial panic, is what I am talking about. Unfortunately, after all these months since the bailout by the Federal Government, we, as a nation, are no further along to building a better regulatory environment for derivatives. In the next financial panic, there might not be enough cash, credit or confidence to backstop the crisis.

So, while Congress plays with all our lives, with their collective heads in the sand, I am telling everyone, as James Baldwin once said, it may be "the fire next time."

Stay tuned.