Thursday, February 26, 2009

The Alternative Universe of Alternative Energy

The alternative energy crowd are the new alchemists, who believe there's a Philosopher's stone that will turn Sun, Wind and Water into gold.

Alternative Energy Is a Giant Capital Pit, Kedrosky Says: "There's No There There"

Alternative energy is one of the key pillars of Barack Obama's budget "blueprint", formally unveiled today.

"We know the country that harnesses the power of clean, renewable energy will lead the 21st century," Obama said in his speech Tuesday night. "It is time for America to lead again."
Many green energy advocates say the annual $15 billion of related spending in Obama's plan isn't nearly enough, while critics say so-collared green-collar jobs are a myth and, regardless, won't do much to help an unemployed machinist in the Rust Belt.

Investor and blogger Paul Kedrosky of Ten Asset Management says such debates miss the broader point: Unlike during the growth of computers, when the industry coalesced around the Mac and Windows OS, there is no agreed upon alternative energy platform. As a result, nobody really knows how much money we need - or don't need - to invest in clean tech, which he says is more akin to drug discovery (biotech) vs. traditional tech.

Clean tech is "a giant capital pit" and public investors should only play at the margins, while private investors should focus on technologies like batteries for hybrid cars that play on the edge of existing, established industries, Kedrosky says.

Beyond that, "there's no there there" in clean tech investing, he says.

Lulled by Sound of Obama's Voice, Not his Words

In his speech two nights ago, Obama repeated campaign slogans, post election statements and post inaugural statements.. The only new aspect was the tone. Instead of playing Chicken Little/Cassandra and claiming "catastrophe" is at hand, he delivered his latest oratory of utopian slush with a more hopeful fervor. He omitted "catastrophe" from his vocabulary for the evening. But he mentioned "crisis" six times -- a record low. Perhaps someone told him that every time he speaks, financial markets drop.

But if he's mindful of his impact on financial markets, it's odd that he most of his pronouncements of the last few months into a single presentation. However, it was no shock in the morning when the financial markets dropped in response.

Bottom line -- instead of inspiring confidence in the places where it matters, he showed people once again that he is lost in the woods. He's got his Big Three. Energy, Healthcare and Education. In his world of scientific and financial alchemy, the sun, wind and water will supply the energy we will convert into a useful form -- and the conversion will happen in sufficient quantities and at low cost, even though today, oil and gas supply energy at a tiny fraction of the cost of these alternatives. However, he did introduce a contrivance to raise the cost of oil and gas -- for Americans. The carbon cap, which will be ignored by all developing nations and most others as well.

It's a bad sign when oil and gas are cheap but the president says we're going to use other forms of energy anyway. He's determined to increase unnecessary and pointless government spending when we can least afford it. His plan will do little to reduce the aggregate consumption of oil and gas in the US, but it will punish the users -- people who heat their homes with oil and gas, building owners who do the same, and everyone and every business that depends on oil and gas for transportation fuel. That includes airlines, shipping and trucking. Obama wants to force millions of businesses into bankruptcy because they depend on cheap fuel. What a guy.

Healthcare. Yeah. Let the government run it. Sure. The government runs the public school system. Some of it is good and a lot of it is bad. But all of it is expensive. New York City spent over $15,000 per student in the latest fiscal year. But critics say that's not enough. There's a carryover here. New York State spent $45 BILLION on Medicaid in 2006 -- the latest year for which figures are available -- and that works out to about $10,000 per person for the year. But critics say the Medicaid system needs more money. In other words, fraud is out of control and the fraudsters want more because it's so easy to rip off the system. Just imagine the possibilities for fraud in a national system? On top of that, when word gets out that illegal aliens sneaking into the US get free comprehensive healthcare instead of merely free emergency care, the caravans will form at the Mexican border and all sea lanes will be clogged with boats and leaky tubs of every description.

Education. Obama seems to think everyone should go to college. I guess that means the US will depend on unschooled people from other countries to handle all the non-intellectual work that his Stimulus Plan requires. Building all those roads and bridges and all the other stuff he has in mind takes a lot of strong backs and people able to operate tools and equipment, not calculators or word processors. He wants to give tax breaks to parents who send their kids to college. But tax breaks translate immediately into higher tuition. Obama, however, is blind to the obvious.

Meanwhile, Obama wants higher pay for teachers and new school buildings. Okay. But there's zero evidence higher pay or new buildings improve results. Results are mostly a function of the kids themselves. Those who are willing to go through the day and learn a little are the ones who benefit. But those who are disruptive impair the experience for everyone else -- and raise costs a lot. Unfortunately, there are too many of the latter.

Can schools do something about the disruptive kids? Perhaps a little. But not a lot. They bring in all the social pathologies of their lives when they come to school. But no school can reorder the lives of students when they are outside their classrooms.

If Obama had a voice like Dennis Kucinich or Robert Kennedy Jr., voters might have rejected him. Unfortunately he's got a set of pipes that lull listeners into accepting anything he says because it seems like music.

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Wednesday, February 25, 2009

Crazy Mother Love

Does it matter to this woman that her son committed murder? No. Obviously not. Killing Mark Fisher is not enough to stop a crazy mother from attempting anything to get her murderous son out of jail. That's love.

What's her reason for demanding freedom for her killer son? A juror who crossed paths with people who knew people who knew the defendant. She's claiming his presence on the jury destroyed the credibility of its verdict.

Is she claiming her son was not Fisher's killer? No. She's arguing that lawyers cheated when Jason Allo was seated on the jury. She's saying Tough Luck to Fisher's parents, that even though she knows her son killed Fisher, the game is forfeited when the voir dire process seats a juror who upsets the defendant's mother.

Any mother would hope to free a son who was convicted of a crime he did not commit. But it takes a special mother to want to free a son who is, in fact, a murderer caught and convicted for carrying out a devastating crime. A pre-meditated murder. It takes a mother totally devoid of feelings for the suffering of another family, suffering for which her son is responsible. That takes industrial strength heartlessness.


Evidence collected in a sting by a Brooklyn mom who dressed like a young blonde to compromise a juror wasn't enough to overturn her son's murder conviction, prosecutors said yesterday.

The Brooklyn DA filed papers arguing that tapes made by Doreen Giuliano were full of conflicting, unsworn statements.

Prosecutors said Giuliano prodded the juror into making the statements, but there is no indication of misconduct on his part.

Giuliano's son, John Giuca, then 20, was found guilty in Brooklyn Supreme Court of the 2003 shooting death of 19-year-old Fairfield College football player Mark Fisher.

The heartsick Giuliano hatched a plan to see if she could uncover any juror misconduct.

When she learned that juror Jason Allo, a Bensonhurst construction worker, had friends who had crossed paths with her son, she decided, "I have to move on this guy," she told Vanity Fair in an article published last year.

She began tailing Allo and created a new identity for herself. She dyed her hair blond, slimmed down at a gym and visited a tanning salon.

Then she rented an apartment in Allo's neighborhood and printed business cards with her undercover name, Dee Quinn.

Decked out in her new wardrobe of short-shorts and pushup bras, she orchestrated a meeting with Allo, and the ex-juror began to take an interest in her.

He often came to the apartment. "She was offering me wine, offering to smoke weed," he told The Associated Press after the sting.

Although Giuliano had attended her son's trial, Allo never recognized her in her new persona.
Finally in 2007, Allo told her in conversations she recorded that he didn't know Giuca directly, but had hung out with his associates and heard rumors about the Fisher killing.

He had said under oath that he didn't have any inside knowledge of the case. Allo also confessed that he read news accounts of the trial against the judge's orders.

But in yesterday's motion, prosecutors argued that Allo was recorded saying "the evidence was all there" to support the conviction.

The judge has not yet ruled on Giuca's motion to set aside the verdict.

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Tuesday, February 24, 2009

Treasury Secretary Geithner -- Master of Disaster?

Tomorrow Secretary Geithner will release some details of the Big Bank “stress test”. How will the financial doctor measure the health of the banks with more than $100 billion in assets -- the ones required to get on the treadmill? Will Secretary Geithner disappoint the markets yet again? Hopefully not. But his previous appearance was disastrous.

If we're lucky, investor concern surrounding the banks will ease a lot after details of the Geithner stress test are revealed. However, no matter what he says, the idea of a single stress test for all our largest banks is a dumb idea. Moreover, it's likely he will introduce a new capital ratio to measure bank quality, and this is another dumb idea.

Why? First, the big banks are alreadyexamined and stress-tested by their on-site examiners-in-charge. These people are in a far better position to assess each bank’s unique characteristics and evaluate each bank's inherent risk. They are on the ground with the banks and able to know and learn far more than people conducting tests from high altitudes.

Second, there's plenty to question when it comes to the new ratio Geithner might adopt. It's probably a ratio of tangible common equity to risk-weighted assets (TCE/RWA). It seems Treasury has decided to look at TCE/RWA because spooked investors are determined to view banks in the worst possible light and are obsessed with the number. As general rule, it's a bad idea for investor anxiety to drive regulatory policy.

Regulators usually avoid pulling new measures out of the air. In the 1980s, the Fed, the OCC, and the FDIC each had their own capital ratios and minimums; it took years of analysis and debate among them to decide which measures were most important. (They were Tier 1, total capital, and leverage.) It doesn’t seem to be good regulatory practice to adopt a new during the current crisis.

Thus, there's little reason to put faith in the test or the new standard Treasury plans to use. Nevertheless, here are a few thoughts:

The economic assumptions -- the “stress” in the Geithner stress test will translate into an economic forecast that includes a 10% peak in unemployment rate, a 40% decline (peak-to-trough) in U.S home prices and a recession that lasts until late this year. These are the assumptions that surfaced in the New York Times yesterday. Surprise, surprise, they are also the parameters adopted by JPMorgan Chase for its in-house stress scenario.

Maximum cumulative loss assumptions by loan category over some period -- hopefully the government will adjust these cumulative loss assumptions by institution to account for factors such as loan geography, experience, underwriting practices, pricing, and so forth. If it doesn’t, the output of the test is apt to be arbitrary.

Maximum cumulative loss forecasts will then be measured against an institution’s existing loss reserves, pre-tax, pre-provision earnings, as well as various measures of capital.

Two capital ratios will become the focus. The resulting pro forma maximum income or loss over the test period will then be used to calculate estimated stressed Tier 1 capital and TCE/RWA ratios.

The moment of judgment. For a bank to pass, it will have to show pro forma, stressed ratios above certain minimums. Those minimums are likely to be 6% for Tier 1 capital and 3% for tangible common equity to risk-weighted assets.

The fate of those that fail. If an institution fails to meet either of those two minimums, it will have to raise new capital by some deadline, perhaps April 15. It might raise new equity in a secondary offering, for example. Or, the bank might convert its existing TARP convertible- preferred into mandatory convertible preferred at an exchange ratio based on the common’s price as of a certain date. That date will be important. It's possible it will be the date Geithner first discussed the plan -- when bank stock prices were higher.

If the capital hole still unfilled, the Treasury might require an investment of new capital via a newly issued mandatory convertible preferred with even more severe operating restrictions attached. Any institution requiring the issuance of new preferred on top of the existing preferred will have to replace its CEO.

This table shows the effect that conversion of existing TARP preferred into mandatory convertible preferred would have on 2008 year-end tangible book value per share and tangible common equity to risk-weighted asset ratios of 102 large-bank TARP recipients. Obviously, a full conversion at today’s prices would deeply dilute book value per share. But for most companies, conversion would provide a big cushion to absorb losses uncovered by the stress test.

Again, assuming full conversion of the TARP preferred for all 102 companies -- which will not happen -- this group of banks would see its ratio of tangible equity to risk-weighted assets ratio settle at an average of 10.3%. The group is correctly trading at 1.1 times pro forma book values.

There's reasons for skepticism. The stress test is likely to rely too much on cumulative loss forecasts by loan category and will likely be overgeneralized and too severe. However tomorrow’s disclosure of the test’s details should be good for bank stocks. Why? Because investors are likely to gain confidence in the capital strength of our largest banks and their capacity to weather the most severe credit storms.

We shall see. We shall see. Can the disappearing Treasury Secretary reappear and undo the damage of his last national presentation? Here's hoping there are no more disappointments.

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Monday, February 16, 2009

Geithner -- Moving from Treasury to Car Salesman?

What's happening here? Ron Geithner was appointed Secretary of the Treasury despite an inability to pay all his taxes. Obama is evidently unhappy that he stuck with Geithner after several other cabinet nominees backed out after the public learned they too had tax payment embarrassments.

Then Geithner fumbled. A big game-changing fumble. He -- and Obama -- promised the nation a comprehensive plan to save the banking system. Instead Geithner bumbled and honked his way through a presentation that merely promised that someday a plan -- a plan he admitted would include its share of mistakes and missteps -- would emerge. But not yet; too soon. These things take time. Okay, and we know that. So why did he and Obama promise the unveiling of a plan last week when devising the necessarily brilliant strategy would take more time? Looks like good old-fashioned incompetence.

What to do? Fire Geithner? Replace him with Larry Summers? Aha. Give him the job of selling cars. Obama promised us a Car Czar. The title is troubling. Where did the czars live? Mother Russia. Going down the czar route suggests that US industry, like the Russian workforce, will march into a Marxist future. Thus, Obama scrapped that idea. Obama is now proposing to create a committee to oversee the Detroit Auto industry. Hmmmm. A committee. In Washington. We're starting with a central-planning committee for the auto industry. And Obama wants Geithner to head the committee. Instead of a tyrant ruling over the Detroit auto industry from a government post hundreds of miles from the factories, Obama wants to create a team of faceless bureaucrats to plan the moves of this once major domestic industry.

Meanwhile the czar concept has fared poorly in other government efforts. We've had a Drug Czar for a long time. That czar heads the Office of National Drug Control Policy, and Obama is about to appoint a new man to the post. R. Gil Kerlikowske, chief of the Seattle Police Department. He's the next person to fail in the War on Drugs. The Police Chief is best known for leaving his Glock automatic pistol in his unlocked car. It was stolen. What happened? The Seattle Police Department issued a statement saying the Chief had not violated any department policies by leaving his weapon in his car. A cop who forgets his gun? He seems well qualified for the job of Drug Czar.

Running one auto company is a full-time job. However, Obama has decided Geithner can spare the time to run all three US carmakers. With the help of a committee. Obama's conclusion that managing the three US car companies is a part time job for the US Treasury Secretary says -- loudly -- that Obama is clueless about the complexities of big enterprises in the US. This is another example of his comtemptuous look down his nose at the people who operate America's businesses.

Rather than admit he bungled this episode, Obama seems to have decided he will push Geithner aside, putting him in command of at least one "special project" that will expand from a part-time job into a full-time job. Obama now knows Geithner is in over his head. Thus, he's got to go. Unfortunately, the community organizer now serving as president is also in over his head.

Both the Drug Czar and the Car Czar are people who are expected to hold back the tide. Drug use is part of American Culture. If Washington were operating in a sane and rational manner, policies would reflect the fact that it is impossible to stop the use of drugs now classified as illegal. We need a new approach that reflects the world in which we live. The same is true for the Car Czar. The Detroit Auto Industry is heading for bankruptcy. Not extinction. Just bankruptcy. The country and the industry can withstand Chapter 11 bankruptcy filings by the three members of the domestic auto industry. But the companies, as they are currently configured, are past the point of recovery.

It's too late to save them with the series of maneuvers and tactics that management is employing. Worse, the United Auto Workers have balked at the latest changes sought by management. It seems the UAW believes that threatening management will bring customers into showrooms and put revenue on the top line. What can a Car Czar do but arrange for more taxpayer money to flow Detroit's way while unsold cars accumulate in factory lots.

To Fix Detroit, Obama Is Said to Drop Plan for ‘Car Czar’

DETROIT — President Obama has dropped the idea of appointing a single, powerful “car czar” to oversee the revamping of General Motors and Chrysler and will instead keep the politically delicate task in the hands of his most senior economic advisers, a top administration official said Sunday night.

Mr. Obama is designating the Treasury secretary, Timothy F. Geithner, and the chairman of the National Economic Council, Lawrence H. Summers, to oversee a presidential panel on the auto industry. Mr. Geithner will also supervise the $17.4 billion in loan agreements already in place with G.M. and Chrysler, said the official, who insisted on anonymity.

The official also said that Ron Bloom, a restructuring expert who has advised the labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.

The unexpected shift comes as G.M. and Chrysler race to complete broad restructuring plans they must file with the Treasury by Tuesday. The companies’ plans are required to show progress in cutting long-term costs as a condition for keeping their loans.

The administration official said the president was reserving for himself any decision on the viability of G.M. and Chrysler, both of which came close to bankruptcy before receiving federal aid two months ago.

One of President Obama’s top advisers said Sunday that the administration had not ruled out a government-backed bankruptcy as a means to overhaul the automakers.

“We’re going to need a restructuring of these companies,” the adviser, David Axelrod, said on “Meet the Press” on NBC. He added that a turnaround of the companies would “require sacrifice not just from the auto workers but also from creditors, from shareholders and the executives who run the company.”

The automakers had been expecting the appointment of a car czar to break the logjam of negotiations with the United Auto Workers over the finances of a retiree health care trust, and with bondholders about reducing the companies’ debt.

Mr. Bloom is known for bringing his Wall Street experience as an investment banker to an advisory role as the “in-house” banker for the steel workers’ union. With the auto union locking horns with bondholders in the G.M. revamping deliberations, Mr. Bloom appears to bring credibility with both the union and the debtors. Mr. Bloom could not be reached for comment Sunday night.

Another senior administration official said that Mr. Obama had considered appointing a car czar, and among those considered for the job was the private equity executive Steven Rattner. It was not clear why the administration changed course or whether Mr. Rattner would have a role on the task force.

The panel, called the Presidential Task Force on Autos, will draw officials from several agencies including the departments of Treasury, labor, transportation, commerce and energy, according to the administration official.

Many members of the task force have already been working closely with G.M. and Chrysler on the viability plans they are preparing for the government.

G.M. and Chrysler are both expected to request more loans to stay solvent during what is shaping up as another miserable year for auto sales.

Chrysler’s chairman, Robert L. Nardelli, has said his company needs another $3 billion in addition to the $4 billion loan it received in January.

G.M. originally asked for $18 billion in aid in December. G.M. has borrowed $9.4 billion so far and is scheduled to receive another $4 billion, if the Treasury is satisfied with its revamping plan.

G.M. said in a statement that it welcomed the new task force and that it looked forward to sharing its plan “to restore our company to viability and to meet the requirements of its loan agreements.”

Representatives of Chrysler could not be reached for comment on Sunday night.

The administration official who disclosed the change in Mr. Obama’s plans for oversight of the auto industry said the group would review the companies’ submissions for a week or two before responding publicly. Until then, the auto makers are expected to continue talks with the union and other stakeholders.

On Sunday afternoon, G.M. and the U.A.W. resumed discussions in Detroit about reducing the company’s labor costs, a person with direct knowledge of the talks said. This person, who spoke on condition of anonymity because the discussions are private, characterized the talks Sunday evening as “intense” but did not indicate that an agreement was imminent.

The U.A.W. had walked away from the bargaining table late Friday as the two sides clashed over how to cover retiree health care costs.

U.A.W. leaders in December agreed to help the automakers by delaying when the companies are required to make multibillion-dollar payments into a new trust fund designed to pay for retiree health coverage.

The Ford Motor Company is not taking federal aid, and therefore does not need to submit plans for approval. But Ford, which lost $14.6 billion in 2008, the most in its history, is expected to ask the U.A.W. for whatever concessions are granted to G.M. and Chrysler.

Both G.M. and Chrysler are likely to outline deep cuts in jobs, plants and models in their restructuring plans. One G.M. executive said the automaker is proposing a much smaller company with fewer brands and far fewer people.

G.M. and Chrysler recently extended buyout and early retirement offers to nearly all of their 90,600 hourly workers as they try to eliminate factory jobs and replace older workers making about $28 an hour with new hires who can be paid half as much.

G.M. announced plans last week to cut 10,000 white-collar jobs worldwide, including 3,400 in the United States. It said that salaries for those who remain on staff would be cut by as much as 10 percent through at least the end of 2009.

Over all, automakers are expected to sell between 10 million and 11 million vehicles in the United States this year, far below the 16.2 million they sold in 2007. G.M. said last week that the two-year drop is roughly equal to the capacity of 24 assembly plants.

Sunday, February 15, 2009

Obama, the New Screaming Ray Nagin

It's becoming painfully clear that Obama depends on fear to get his way. It's his big stick, his lever. Telling citizens the end is near. That's his game and people are falling for it.

His attitude exudes contempt for Americans, as though Americans are such hapless fools they will believe him no matter how preposterous his claims. As though he's thundering away, terrorizing ignorant villagers about the evil that has taken root in the land and in the people and that the only path to safety and health involves an exorcism that will cost more than anyone understands. He's bamboozling as fast as he's able. The Great Bamboozler. Welcome to the O-conomy of Obama.

Obama's Rhetoric Is the Real 'Catastrophe'

In 1932, automobile production shriveled by 90%.

President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package.

In his remarks, every gloomy statistic on the economy becomes a harbinger of doom. As he tells it, today's economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover.

This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.

Other economic statistics also dispel any analogy between today's economic woes and the Great Depression. Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter. The Congressional Budget Office projects a GDP decline of 2% in 2009. That's comparable to 1982, when GDP contracted by 1.9%. It is nothing like 1930, when GDP fell by 9%, or 1931, when GDP contracted by another 8%, or 1932, when it fell yet another 13%.

Auto production last year declined by roughly 25%. That looks good compared to 1932, when production shriveled by 90%. The failure of a couple of dozen banks in 2008 just doesn't compare to over 10,000 bank failures in 1933, or even the 3,000-plus bank (Savings & Loan) failures in 1987-88. Stockholders can take some solace from the fact that the recent stock market debacle doesn't come close to the 90% devaluation of the early 1930s.

Mr. Obama's analogies to the Great Depression are not only historically inaccurate, they're also dangerous. Repeated warnings from the White House about a coming economic apocalypse aren't likely to raise consumer and investor expectations for the future. In fact, they have contributed to the continuing decline in consumer confidence that is restraining a spending pickup. Beyond that, fearmongering can trigger a political stampede to embrace a "recovery" package that delivers a lot less than it promises. A more cool-headed assessment of the economy's woes might produce better policies.

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Muslim Cuts Off Wife's Head -- in the US

There's probably a little more to the story than the financial problems of the husband. Maybe the wife was having an affair. She seems to be very good looking and he looks as though he's been eating far too many of the sweets that are account for much of the muslim diet. His butchery reveals the worst of his temperament. A murderous mean streak. A documented history of domestic violence, say the cops.

But he cut off her head. He cut off her head. Is it possible to account for his crime as the act of a psychopath? Or did he act in a way that is consistent with his religious and cultural upbringing? Chopping off heads and limbs is part of the Islamic penal code. It seems he imported the spirit of Koranic law and carried out the sentence after convicting her of a crime -- in his mind.

He's from a culture that punishes people with traumatic amputations. It appears he believes his religious law trumps America's civil and criminal law. This is a problem.


'HAPPY' COUPLE: Muzzammil Hassan, beset by financial woe, allegedly decapitated estranged wife Aasiya.

An upstate TV exec who set up a channel promoting Muslims as peace-loving people was stressed about his failing business in the days before he allegedly chopped off his estranged wife's head, a friend of the couple said yesterday.

An order of protection barring Muzzammil Hassan, 44, from the couple's upstate home had been taken out by his wife, Aasiya, 37, less than a week before she died.

The couple was in the process of divorcing after bouts of domestic violence, her lawyer told the Buffalo News.

Hassan, who founded Bridges TV in 2004 to counter anti-Islam stereotypes following 9/11, turned himself in to cops Thursday in the Buffalo suburb of Orchard Park. Police later found his beheaded wife in the TV studios.

He was charged with murder.

"He was worried about the station's future," said Dr. Khalid Qazi, a friend of the couple and president of the Muslim Public Affairs Council of Western New York, who last spoke to the Hassans a week ago.

"He was stressed, but this has left me absolutely shocked. I still cannot believe it."

Police have still not found the weapon used in the killing, an officer said yesterday.

Bridges TV was set up with $10 million in backing from more than 50 investors. Two years ago, Hassan told Arab News magazine he needed another $5 million and was reaching out to supporters in Saudi Arabia.

Hassan, a father of four who moved to the United States from Pakistan 25 years ago, worked as a banker in Buffalo before quitting to start up the station.

The family home was empty yesterday. A police note stuck to the door five hours before Aasiya's body was found asked her to contact cops.

Nobody at the Orchard Park Police Department yesterday could explain why officers wanted to speak to her.

Qazi said the killings went against the teachings of Islam and damaged the image of Muslims that Hassan worked to promote.

"Domestic violence is despicable, and Islam condones it in no way whatever," he said.

Murders are being committed in the US every day by people of all faiths."

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Friday, February 13, 2009

The Savings & Loan Crisis vs Today

In short, the Savings & Loan Crisis occurred because Congress took the worst possible path when deciding how to "help" the S&L industry. In fact, the nature of the S&L mistake was remarkably similar to the mistake made by Congress that led us to our current crisis.

The S&L Crisis was set off by the repeal of Regulation Q. Quick history. S&Ls were created during the Depression to assist homeowners. They were given a legal advantage over commercial banks in the area of mortgage origination. However, as a trade-off for the advantage in mortgage origination, the S&Ls were not allowed to offer commercial loans. Okay. That worked. The concept was good for a few decades.

However, in the 1970s the securities markets changed and the government took a place in the mortgage business -- Fannie and Freddie. The era of Securitization began in 1977. Wall Street was able to package Ginnie Mae mortgages and sell GNMA securities tied to those pools. Thus, the operating environment for S&Ls changed. The secondary market for mortgage loans was created. Thus, the bank or S&L that originated a mortgage was able to sell the loan to another party. Meanwhile, interest rates were rising and the S&Ls began losing money. The S&L industry was in tough shape.

The leaders of the S&L industry went to Congress for relief. They got it. In fact, they got what they wished for. During Jimmy Carter's administration, Congress repealed Regulation Q, which was the law that defined the differences between S&Ls and commercial banks. Suddenly S&Ls could offer the same loans as banks.

However, one barrier remained. It was not possible for banks to buy S&Ls. Big mistake. Suddenly S&Ls were in the commercial loan business competing with banks. At the same time, builders realized it was easy to gain control of an S&L and then get loans for any project imaginable.

Oil prices were rising and fueling a huge building boom in the oil states. Both residential and commercial properties were under construction. The S&Ls were lending to the oil drillers and the home-buyers. When oil prices cracked in 1983, the S&L real estate bubble popped. Things went downhill from there.

However, Congress could have handled things in a different way. It could have removed the obstacles that stopped banks from acquiring S&Ls. If banks had been able to buy them, the economy would have escaped most of the damage.

By the way, another key change that magnified problems was the increase in coverage offered by deposit insurance. Carter raised the coverage offered by the FDIC and the FSLIC to $100,000, up from $40,000. Unscrupulous S&L managements realized the amount of assets available to them for speculative lending activities was multiplied two and one-half times. They had won the S&L lottery.

In the current crisis similar mistakes were made. The worst mistake was opening the door to underwriting loans that were extended to people with lousy credit scores, no downpayment money and poor job prospects. Who opened the door? Congress. The first step was the 1977 Community Reinvestment Act, another time-bomb from the Carter presidency.

If anyone chooses to review that process that got us where we are, the reviewer will see that all laws were met. The documents describing the various troubled securitizations were complete and drawn up as required by the SEC. Moody's, Fitch and Standard & Poors rated the securities, which were then sold to institutional investors. But it seems nobody read the prospectuses and other documents. It seems that everyone put their faith in the ratings from the Rating Agencies. Bad move.

Meanwhile, no one from the Fed, the Treasury or the SEC took a close look at these securities or the markets to which they were tied. Why? Probably because billions of dollars of tax revenue was flowing into Washington as a result, and, at the same time, home-ownership was soaring. Who would tamper with that?

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Wednesday, February 11, 2009

Geithner Drops an O-bomb

Tim Geithner shared his plan for rescuing the banking system. However, the plan he described was not a plan. Maybe it was an outline, and maybe it contained a few worthwhile ideas, but it was not a plan.

He's Obama's man at the Treasury. He's a big force in the new O-conomy. When he carries out Obama's wishes, he drops O-bombs on the O-conomy. This first one may be devastating.

Obama repeatedly hammered the concept of giving federal Stimulus money to "shovel-ready" projects. Obama told reporters Monday night that Geithner would deliver a plan that was ready to operate -- a "shovel-ready" plan, if Obama were to speak in consistent terms.

Instead, Geithner showed his timidity and his inability to tackle the chief issue forming the core of the banking recovery -- valuing the bad assets.

Geithner was petrified at the thought of the government "overpaying" for assets. He said it would take more time to develop a pricing model. After further comments, it was obvious he had no idea how to build his pricing model. He said he wanted input from everyone. Not good.

Obama has repeatedly insisted that acting now and acting fast is the only way to save the economy from catastrophe. But Geithner has shown that the people in the administration who must devise the plans are not capable, and perhaps not willing -- and rightly so -- to spit out a plan in the first weeks after the new administration has taken charge of the government.

It appears Obama is yelling most loudly at Geithner. But not directly. Obama is appearing in cities that have had more than their fair share of financial problems in the last couple of years. He's exhorting everyone to act fast to save our collective neck.

But Geithner offered some vague talk about a government/private partnership to acquire bad assets. After some reflection, it seems this plan is nothing more than a plan of creeping nationalization of the banks.

Meanwhile, the Stimulus Bill was passed. That seems to mean we have committed ourselves to spending $790 billion on a hodge-podge of projects and some tax cuts. The list of projects seem to include funding for every pet project of every politician. But it adds up to a vast expansion of government control over many industries.

Then there is Obama's messianic character. He has begun speaking as though he is delivering sermons from the mountaintop. We are in trouble.

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Monday, February 02, 2009

Everyone Should Try This

There's a new tax loophole that seems to have caught on. However, for those who haven't tried it, time may run out soon. That's how it is with good ideas. Once they get around and everyone is using them, their value disappears. This one is a marvel of simplicity. It is the height of elegance and beauty, and good manners.

Here's what you do. You decide which of your taxes you'd rather not pay, and then don't pay them. A person who does not pay his taxes faces one of two outcomes. The first, and the one most hoped for, is getting away with it. Unnoticed. The IRS is big and everyone down there is busy. They can't catch everyone who decides to omit certain tax payments.

Unfortunately, the IRS is getting better, and you never know exactly how they do what they do. Sometimes, after a few years of wondering whether a revenue agent will spot your omission, you get a notice in the mail informing you that, yes, a review of your tax return shows a certain deficiency and let's get together to balance those books.

In other words, the government may be slow, but eventually it identifies most of the people who have neglected to pay taxes. That's when taxpayers employ the new loophole.

All you have to do to get off the hook is apologize. Apologize. Profusely. Then grovel a bit and say something about being "deeply embarrassed and disappointed". Follow that by throwing in a few words about "profound regret", and you are home free.

It's true, you might have to pay up. But who cares? Especially if the apology gets you a good job, like Secretary of the Treasury or Secretary of Health. That's a fair trade. I imagine there are lots of superb candidates for top government posts if the chief qualifier is tax evasion.

Daschle apologizes for failing to pay taxes

WASHINGTON – Tom Daschle, President Barack Obama's choice to head the Health and Human Services Department, apologized Monday to the Senate panel that will decide his fate, saying he was "deeply embarrassed and disappointed" about failing to pay more than $120,000 in taxes.

Determined to salvage his nomination, Daschle wrote a letter to the top leaders of the Senate Finance Committee in which he sought to explain how he overlooked taxes on additional income for consulting work, the use of a car service and paperwork to support claims for charitable contributions.

Daschle recently filed amended tax returns for 2005-07 to report $128,203 in back taxes and $11,964 in interest.

"I am deeply embarrassed and disappointed by the errors that required me to amend my tax returns," said Daschle, the former Senate Democratic leader. "I apologize for the errors and profoundly regret that you have had to devote time to them."

In the letter dated Feb. 1 and released Monday, Daschle provided a timeline for when the errors were discovered and tax payments made. The former Senate Democratic leader is expected to answer the committee's questions when they meet in closed session on Monday.

Uncertain is whether the tax issue will stall or derail Daschle's nomination. Obama, speaking with reporters, said he "absolutely" stands by his Cabinet choice. Sen. Max Baucus, D-Mont., chairman of the committee, issued a statement supporting Daschle's confirmation.

"The ability to advance meaningful health reform is my top priority in confirming a Secretary of Health and Human Services, and I remain convinced that Senator Daschle would be an invaluable and expert partner in this effort. I am eager to move forward together," Baucus said.

Daschle and Baucus have had tussles in the past over Baucus' handling of former President George W. Bush's 2001 tax cut proposals, the Medicare prescription drug bill in 2003 and trade legislation. Baucus has shown a greater willingness to negotiate with Republicans than most Democrats.

Daschle was an early supporter of Obama's presidential bid and several of Daschle's former Capitol Hill staffers went to work for Obama after Daschle, then South Dakota senator, lost his re-election bid in 2004.

Daschle filed the amended returns after Obama announced he intended to nominate him as secretary of Health and Human Services.

Daschle explained in his apology letter that the presidential transition team flagged charitable contributions they concluded were deducted in error. When his accountant realized amended tax returns would need to be filed, he suggested addressing another matter that Daschle raised with him earlier in the year: whether the use of a car service provided by a close friend and business associate, Leo Hindery, should be reported as income.

The unreported income for that car service totaled more than $250,000 over three years.

At about the same time, Hindery's company informed Daschle's accountant of a clerical error it made on a form it provided to Daschle that he subsequently reported to the IRS. The error resulted in an additional $88,333 in unreported consulting income for 2007.

"I disclosed this information to the committee voluntarily, and paid the taxes and any interest owed promptly," Daschle wrote. "My mistakes were unintentional."

A financial disclosure form Daschle filed about a week ago shows that he made more than $200,000 in the past two years speaking to members of the health care industry that Obama wants him to reform.

The speaking fees were just a portion of the more than $5.2 million the former senator earned over the last two years as he advised health insurers and hospitals and worked in other industries such as energy and telecommunications, according to a financial statement filed with the Office of Government Ethics.

Jenny Backus, a spokeswoman for Daschle, said the money he earned in speaking fees from health care interests do not pose a conflict for the health care reform Obama wants him to lead.

"He welcomed every opportunity to make his case to the American public at large and the health industry in particular that America can't afford to ignore the health care crisis any longer," she said.

Among the health care interest groups paying Daschle for speeches were America's Health Insurance Plans, $40,000 for two speeches; CSL Behring, $30,000; the National Association of Boards of Pharmacy, $16,000; and the Principal Life Insurance Co., $15,000.

Daschle said in a letter to the Department of Health and Human Services ethics office that if he's confirmed by the Senate, he will resign as a senior policy adviser at the Washington law firm of Alston and Bird LLP. He reported earnings of more than $2 million from that firm during the past two years.

Daschle also earned more than $2 million in consulting fees from InterMedia Advisors LLC of New York, an investment firm specializing in buyouts and industry consolidation. He said he also intends to resign from that firm upon his confirmation.