The state of the economy, it's safe to say, is iffy at best but, less than six months after its passage, the market for badmouthing the stimulus bill is booming.
On the left, Paul Krugman insists that a "bad employment report for June made it clear that the stimulus was, indeed, too small" and "damaged the credibility of the administration’s economic stewardship."
From right field, House Minority Whip Eric Cantor tells us "the stimulus or so-called stimulus plan that spent almost $800 billion has not worked," while economist Karl Rove proclaims that "Obama can't be trusted with numbers" as he bashes the White House for being too slow in getting the money out the door.
In the center, Warren Buffet is musing about the need for a second round of pumping money into the economy, complaining that the first was "like taking half a tablet of Viagra and having also a bunch of candy mixed in...as if everybody was putting in enough for their own constituents."
Meanwhile, Joe Biden is on a tour touting positive results here and there, as the Recovery blog announces web seminars (Webinars) to spread the good news.
In this flurry of opinionating, the prize for empty news goes to USA Today for its headlined revelation, "Billions in aid go to areas that backed Obama in '08," which undermines itself by noting:
"Investigators who track the stimulus are skeptical that political considerations could be at work. The imbalance is so pronounced--and the aid so far from complete--that it would be almost inconceivable for it to be the result of political tinkering, says Adam Hughes, the director of federal fiscal policy for the non-profit OMB Watch. 'Even if they wanted to, I don't think the administration has enough people in place yet to actually do that,' he says."
Oh.
Showing posts with label Warren Buffet. Show all posts
Showing posts with label Warren Buffet. Show all posts
Friday, July 10, 2009
Thursday, July 09, 2009
Spitzer as AIG Culprit
When a commission probes the economic meltdown, Michael Lewis' Vanity Fair piece "The Man Who Crashed the World" will serve as a rough draft of what went wrong at AIG and started the financial landslide.
In chronicling how the company built a tower of risk that tumbled around Wall Street's ears, Lewis in passing reveals the role of Eliot Spitzer, then New York Attorney General, in enabling it all.
Lewis' close questioning of "the silent, shell-shocked traders of the AIG Financial Products unit...finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the US economy, and the global financial system to their knees"--Joe Cassano, a hard-charging but relatively unsophisticated former back-room operator who drove credit default swaps to perilous heights.
When he got the job in 2001, Cassano was a pale imitation of the despotic CEO Hank Greenberg, who built AIG into an insurance powerhouse over 37 years, earning a AAA credit rating for prudence to go along with his aggressive tactics.
AIG FP’s employees, Lewis writes, "suspect that the only reason Greenberg promoted Cassano was that he saw in him a pale imitation of his own tyrannical self and felt he could control him. 'So long as Greenberg was there, it worked,' says one trader, 'because he watched everything Joe did.'"
But then in 2005 along came Spitzer, in his own relentless drive to build the reputation that led to his election as New York governor, to hound Greenberg out of AIG while treating Warren Buffet, whose General Re subsidiary was involved in the same questionable deals, with extreme deference.
After that, Lewis reports, "as one trader puts it, 'the new guys running AIG had no idea.' They thought the money machine ran on its own, and Cassano did nothing to discourage the view. By 2005, AIG FP was indeed, in effect, his company."
In building his own reputation as a white knight, Eliot Spitzer, later forced to resign for failings of his own, seems to have been instrumental in starting the avalanche that threatened to bury us all.
In chronicling how the company built a tower of risk that tumbled around Wall Street's ears, Lewis in passing reveals the role of Eliot Spitzer, then New York Attorney General, in enabling it all.
Lewis' close questioning of "the silent, shell-shocked traders of the AIG Financial Products unit...finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the US economy, and the global financial system to their knees"--Joe Cassano, a hard-charging but relatively unsophisticated former back-room operator who drove credit default swaps to perilous heights.
When he got the job in 2001, Cassano was a pale imitation of the despotic CEO Hank Greenberg, who built AIG into an insurance powerhouse over 37 years, earning a AAA credit rating for prudence to go along with his aggressive tactics.
AIG FP’s employees, Lewis writes, "suspect that the only reason Greenberg promoted Cassano was that he saw in him a pale imitation of his own tyrannical self and felt he could control him. 'So long as Greenberg was there, it worked,' says one trader, 'because he watched everything Joe did.'"
But then in 2005 along came Spitzer, in his own relentless drive to build the reputation that led to his election as New York governor, to hound Greenberg out of AIG while treating Warren Buffet, whose General Re subsidiary was involved in the same questionable deals, with extreme deference.
After that, Lewis reports, "as one trader puts it, 'the new guys running AIG had no idea.' They thought the money machine ran on its own, and Cassano did nothing to discourage the view. By 2005, AIG FP was indeed, in effect, his company."
In building his own reputation as a white knight, Eliot Spitzer, later forced to resign for failings of his own, seems to have been instrumental in starting the avalanche that threatened to bury us all.
Monday, March 02, 2009
The Melting of American Wealth
How did we get so poor so fast? Under the radar of stimulus bills and bailouts, economists are toting up the damage and super-investors like Warren Buffet are still trying to figure out what happened.
Now we learn the economy is shrinking twice as fast as originally thought--at an annualized rate of 6.2 percent in the last three months of 2008 rather than the original estimate of 3.2, making it the worst quarter since 1982.
The downward spiral, reflected in a sinking stock market, has troubled banks taking taxpayer money but hesitating to lend and nervous companies laying off workers (an expected 700,000 job losses in February) leading to deeper consumer cuts in spending that will deprive businesses of revenue and more falling behind on house, car and credit card payments, multiplying losses throughout the financial system.
Looking back at how all this happened, even the Sage of Omaha is blaming himself for doing "some dumb things" but aiming most of his scorn at derivatives devised by “a nerdy-sounding priesthood, using esoteric terms such as beta, gamma, sigma and the like...Beware of geeks bearing formulas.”
With typical Warren Buffet bluntness, he concludes, “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”
But Buffet's aw-shucks posture of earthy wisdom is too easy on himself and lesser investors who thrived in a world where manipulating money was the most prized skill of all, at the extremes allowing con artists like Bernard Madoff to bilk so-called savvy investors of billions.
Now, as the government tries to move money into the real world--agricultural subsidies from corporate farms to feeding poor children, students loans from private banks to direct Pell grants--much of the effort is still going into propping up "too big to fail" entities like AIG, the remnants of a financial system that detached itself from reality and shows few signs of finding its way back.
When the stimulus money finally starts flowing into the hands of people who work and make things or help sick people or teach children, that will be a sign that the downward spiral may finally be ending.
Now we learn the economy is shrinking twice as fast as originally thought--at an annualized rate of 6.2 percent in the last three months of 2008 rather than the original estimate of 3.2, making it the worst quarter since 1982.
The downward spiral, reflected in a sinking stock market, has troubled banks taking taxpayer money but hesitating to lend and nervous companies laying off workers (an expected 700,000 job losses in February) leading to deeper consumer cuts in spending that will deprive businesses of revenue and more falling behind on house, car and credit card payments, multiplying losses throughout the financial system.
Looking back at how all this happened, even the Sage of Omaha is blaming himself for doing "some dumb things" but aiming most of his scorn at derivatives devised by “a nerdy-sounding priesthood, using esoteric terms such as beta, gamma, sigma and the like...Beware of geeks bearing formulas.”
With typical Warren Buffet bluntness, he concludes, “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”
But Buffet's aw-shucks posture of earthy wisdom is too easy on himself and lesser investors who thrived in a world where manipulating money was the most prized skill of all, at the extremes allowing con artists like Bernard Madoff to bilk so-called savvy investors of billions.
Now, as the government tries to move money into the real world--agricultural subsidies from corporate farms to feeding poor children, students loans from private banks to direct Pell grants--much of the effort is still going into propping up "too big to fail" entities like AIG, the remnants of a financial system that detached itself from reality and shows few signs of finding its way back.
When the stimulus money finally starts flowing into the hands of people who work and make things or help sick people or teach children, that will be a sign that the downward spiral may finally be ending.
Tuesday, September 23, 2008
Warren Buffet Shows the Way
While Chris Dodd et al in Congress arm-wrestle with Henry Paulson on how to invest taxpayer money to rescue the financial system, the 78-year-old sage of Omaha is putting $5 billion into saving Goldman Sachs and getting a nice deal for the money, preferred shares and a 10 percent annual dividend, thank you very much.
Wall Street, which respects Buffet in the extreme, will undoubtedly be buoyed by his move on the theory that the master investor, unlike the bipartisan bumblers in Washington, knows what he's doing and is taking action rather than debating about it.
It might settle the impasse if the government could persuade Buffet, who has more money than he will ever need and plans to leave most of it to charity, to come to Washington and help oversee the $700 billion portfolio that taxpayers are being urged to acquire.
That would inspire confidence well beyond Wall Street.
Wall Street, which respects Buffet in the extreme, will undoubtedly be buoyed by his move on the theory that the master investor, unlike the bipartisan bumblers in Washington, knows what he's doing and is taking action rather than debating about it.
It might settle the impasse if the government could persuade Buffet, who has more money than he will ever need and plans to leave most of it to charity, to come to Washington and help oversee the $700 billion portfolio that taxpayers are being urged to acquire.
That would inspire confidence well beyond Wall Street.
Wednesday, February 27, 2008
Barbarians at the Gray Lady's Gates
The year has not started well for the New York Times. While taking fire for the John McCain story, its family ownership is under siege from hedge funds that have now accumulated over 15 percent of the company's Class A shares.
Symbolically, the attackers are led by Scott Galloway, most often seen in a charity-ball photograph dressed as a blue-faced, sword-wielding Scottish rebel from the movie "Braveheart." But Galloway and his group are digital warriors who insist they don't want to overthrow the old order, just bring it into the 21st century.
In asking for four seats on Times Company board, they wrote that "we are not pursuing a change in the dual class shareholder structure. The New York Times is a great institution controlled by the Sulzberger family and we have no illusion about, or desire to change, that fact...
"We believe a renewed focus on the core assets and the redeployment of capital to expedite the acquisition of digital assets affords the greatest shareholder appreciation and creates the appropriate platform to compete in today’s media landscape."
For their $400 million investment so far, Galloway's invaders have received little encouragement. Their four nominees for the board have been rejected in favor of new Sulzberger choices including, significantly, a close associate of Warren Buffet's.
Nothing like a Rupert Murdoch takeover of the Wall Street Journal is on the horizon, but with 97 percent of its revenue coming from paper-based properties and stock prices falling, the Company is vulnerable to such criticism, as reported by the Washington Post, that "with a market capitalization of $2.8 billion, the single most valuable asset the Times Co. owns, some analysts say, is its new midtown Manhattan headquarters, which may be worth as much as $1 billion. Some have caustically remarked that the Times Co. is now a REIT--a real estate investment trust-- with a newspaper attached."
Amid denunciations of its McCain takeout from the Right and much of the Left, all this is a reminder that the New York Times is one of the few remaining media institutions still family-controlled and being nominally run as a public trust in a time when corporate ownership and "shareholder appreciation" are the rules of the game.
For those who have spent a lifetime in journalism, all this pressure on "the newspaper of record" is a sobering reminder that the old rules in most places are long gone.
Symbolically, the attackers are led by Scott Galloway, most often seen in a charity-ball photograph dressed as a blue-faced, sword-wielding Scottish rebel from the movie "Braveheart." But Galloway and his group are digital warriors who insist they don't want to overthrow the old order, just bring it into the 21st century.
In asking for four seats on Times Company board, they wrote that "we are not pursuing a change in the dual class shareholder structure. The New York Times is a great institution controlled by the Sulzberger family and we have no illusion about, or desire to change, that fact...
"We believe a renewed focus on the core assets and the redeployment of capital to expedite the acquisition of digital assets affords the greatest shareholder appreciation and creates the appropriate platform to compete in today’s media landscape."
For their $400 million investment so far, Galloway's invaders have received little encouragement. Their four nominees for the board have been rejected in favor of new Sulzberger choices including, significantly, a close associate of Warren Buffet's.
Nothing like a Rupert Murdoch takeover of the Wall Street Journal is on the horizon, but with 97 percent of its revenue coming from paper-based properties and stock prices falling, the Company is vulnerable to such criticism, as reported by the Washington Post, that "with a market capitalization of $2.8 billion, the single most valuable asset the Times Co. owns, some analysts say, is its new midtown Manhattan headquarters, which may be worth as much as $1 billion. Some have caustically remarked that the Times Co. is now a REIT--a real estate investment trust-- with a newspaper attached."
Amid denunciations of its McCain takeout from the Right and much of the Left, all this is a reminder that the New York Times is one of the few remaining media institutions still family-controlled and being nominally run as a public trust in a time when corporate ownership and "shareholder appreciation" are the rules of the game.
For those who have spent a lifetime in journalism, all this pressure on "the newspaper of record" is a sobering reminder that the old rules in most places are long gone.
Saturday, November 17, 2007
All the Money You Could Want
Most of us go through life wishing for more money but are never faced with deciding what to do with endless amounts. A news story today suggests how much imagination it takes to deal with no limits.
After a tax scam that yielded millions, the FBI raided a modest home and garage in Washington to find a Mercedes, tons of designer shoes and luggage, silver-plated iguana figurines, 13 watches including a Rolex, 90 purses (47 from Chanel), flutes and goblets by Steuben, a Faberge egg and a silver bar cart as well as courtesy cards used by regular gamblers in half a dozen Las Vegas and Atlantic City casinos, phone bills of $1500 a month and travel receipts from all over. They filled 25 boxes with clothes and listed 414 unidentified pieces in the inventory.
But all this is only a testament to the banality of greed, a kind of Home Shopping Network vision of huge wealth. Without imagination, the woman who apparently embezzled more than $20 million from the D.C. government used it to become a glorified bag lady.
How much more complicated is it for the Warren Buffets, Bill Gateses, and Oprahs of the world, trying to do good, a Mike Bloomberg, pondering whether to buy the White House, or a Rupert Murdoch, too busy trying to acquire more power and influence to spend much actual money in his own life?
For some, it can produce deprivation by surfeit, psychological chaos (pace Paris Hilton and her ilk). For box-office actors and superstar athletes, there are booby traps of hubris and self-importance.
For politicians controlling huge amounts of other people's money, see the President and Congress squabbling over which is acting more like the teenager with an unlimited credit card.
For the rest of us, there is the iffy consolation of believing it's too much money that may actually be the root of all evil.
After a tax scam that yielded millions, the FBI raided a modest home and garage in Washington to find a Mercedes, tons of designer shoes and luggage, silver-plated iguana figurines, 13 watches including a Rolex, 90 purses (47 from Chanel), flutes and goblets by Steuben, a Faberge egg and a silver bar cart as well as courtesy cards used by regular gamblers in half a dozen Las Vegas and Atlantic City casinos, phone bills of $1500 a month and travel receipts from all over. They filled 25 boxes with clothes and listed 414 unidentified pieces in the inventory.
But all this is only a testament to the banality of greed, a kind of Home Shopping Network vision of huge wealth. Without imagination, the woman who apparently embezzled more than $20 million from the D.C. government used it to become a glorified bag lady.
How much more complicated is it for the Warren Buffets, Bill Gateses, and Oprahs of the world, trying to do good, a Mike Bloomberg, pondering whether to buy the White House, or a Rupert Murdoch, too busy trying to acquire more power and influence to spend much actual money in his own life?
For some, it can produce deprivation by surfeit, psychological chaos (pace Paris Hilton and her ilk). For box-office actors and superstar athletes, there are booby traps of hubris and self-importance.
For politicians controlling huge amounts of other people's money, see the President and Congress squabbling over which is acting more like the teenager with an unlimited credit card.
For the rest of us, there is the iffy consolation of believing it's too much money that may actually be the root of all evil.
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