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Tuesday, November 25, 2008

Snakes On A Plane

In part two of the Bailout Blues entry entitled, “Bailout, Bailout, Wall Street Let the Bear Out” I wanted to focus solely on the three numb nuts from the auto industry. It seems someone forgot to invite them to the bailout party and now they want their share. Years of fat paychecks and reliance on high priced oil has led to a decline in auto sales. GM turned resources away from fuel efficient models and funneled them into redesigned trucks and SUVs. Oil went up and sales went down. With that went profits as well. Instead of hacking away at the top (like Executive salaries), they start by laying people off at the bottom and cutting back production. The only thing they did get lucky on was fixing their underfunded pension problems from the earlier part of the decade to produce a surplus. But now, that surplus may be needed to keep them afloat.

This past week, Moe, Larry, and Curly....(actually, it’s more like Shemp since Nardelli just showed up last year) went to Washington to ask for some of the bailout funds. While people travel everyday by commercial airlines and pay high ticket prices and baggage check fees for around $800, these three yahoos decide to use their corporate jets to fly to D.C for about $20,000. I’m sorry, but did anybody bother to tell them why they needed the money or did they just figure they felt left out? When I was in college there were a lot of pan handlers out on the main road through campus. They’d stand there and ask for change as you walked by to class or the bar. On occasion, I did offer up a few bucks, but they failed to realize that they were asking college kids. We have no money. And while they did that, they wore $150 Nikes. Hey, pal, you might want to look the part. If they (The Big Three D-bags) expected to be taken seriously, they should have carpooled to D.C. driving a hybrid. So, onto Washington, pinky ring adorned hands out, looking for cash and finally someone cowboys up.

"You traveled in a private jet? I'm not an opponent of private flights by any means, but the fact that you flew in on your own private jet at tens of thousands itself dollars of cost just for you to make your way to Washington is a bit arrogant before you ask the taxpayers for money."

Rep. Patrick McHenry said what everyone else was thinking. Then, others got in on the act and pretty much blasted the CEO’s hollow pleas for money wrapped up in a snappy commercial for their autos. Then David Scott volleyed this non sequitur, the Titanic’s biggest problem wasn’t the collision with the iceberg. I can only imagine the room got silent for a second and then everyone kind of nodded and understood the analogy. Mouthpieces for the auto makers pleaded that they had already done everything they could to stave off bankruptcy. At that moment, the deafening sound of an alarm went off and Wagoner reached into his pocket to push the “alarm off” button on the key ring to his jet.

This time, the snakes can walk

Here’s my favorite part. To lessen the already glaring injustice of having three multimillionaires show up on private jets asking for a handout they were asked if they would be willing to take a salary cut leaving them with $1.00 a year. I’d love to see the W2 forms on that. Wagoner said he didn’t have a position on that at the time. Mulally understood the sentiment but said he’s fine where he’s at financially. Nardelli said he would. Oh, wait. He already did that a year ago. So, it’s not like he’s going to lose anything more. In fact, don’t feel bad for the guy, he got a severance package from his previous company, Home Depot to the tune of over $200 million dollars. Even though his current total compensation is a mystery beyond the $1.00 salary, I’m sure he was given other forms of compensation. For that matter, none of the big three CEOs make more than $2 million dollars in annual base salary. They make more than 50% of their total compensation from bonuses and other sources. Wagoner totals just over $14 million and Mulally rakes in the most with $21 million. In my best Belloq voice, “I’m sure he’s very comfortable up there. That’s right, isn’t it. He’s very comfortable up there."

Look, I understand that as a CEO you have a very prestigious and high ranking position in a company. You’re the boss. With that position comes a pretty decent pay grade. But that doesn’t give you the right to be a douche bag and lay off hard workers and steal the pensions of those who have worked for a company for 30 plus years. That’s employee loyalty. CEO’s come and go at a fraction of that time. They seem to come in, puff out their chest, take the golden parachutes and jump out of the plane. Let me clue you in to what a real CEO or founder of a company does when his company is in financial trouble. The company I work for started in the home of our founder. He wanted to develop devices to help patients tolerate treatment better. After he got up and running as an established company he found himself in some tough times. He and a few of his backers managed to forgo their own salaries just to make sure they made payroll. He cared that much about the people to take his pay and give it to his employees and to pay his bills in order to keep the doors open. For 32 years the company stayed in business. Some companies decide, in times of financial crisis, that it is best practice to reduce the work force. I know that the founder of a fledgling private company and the CEO of a multi billion dollar company are two different things but it seems to me that if you take care of your infrastructure and keep the foundation solid, growth can occur without weakening the base. If you over inflate the top, the tower falls over. This is why I'd never do well as a business major.

Now, if it wasn’t for the failing economy’s dependency on the auto industry, I’d say let them fail. I'm not even talking about the buying of cars, but the auto industry employs so many people and that is a lot of jobs to eliminate putting unneeded stress on an already growing unemployment rate. But, just like the housing and credit market, it has to work from the bottom up. The consumer has to purchase a car to help shore up the company. Again, there isn't enough bailout money in the world to give each and every individual, in America, over the age of 16 a check to go buy a car. I don't have any suggestions other than the obvious. Get rid of the Big Three's paychecks, bonuses, and other compensation and funnel that into the companies as operating capital, payroll, benefits, pensions, and restructure the companies. It's a long road to recovery but when three jack asses go to Washington on a private plane, why should the blue collar and middle class car owner give them anymore money when they don't even want to drive.

Update 12/16/08
My fellow blogger over at The Blathering posted avery good and hillarious argument towards giving the auto industry bailout funds. Of course, it was disguised in the form of a post about crushing on Jon Stewart, however, I still admit she has a point.

Monday, November 24, 2008

Bailout, Bailout, Wall Street Let the Bear Out

Hey, did you hear? There is a financial crisis going on in the world. Unless you’ve been living under a rock or in an Amish community you probably know that we are smack dab in the middle of a global financial situation that is heading for FUBAR status. Now, I am by no means a financial wizard or a political genius. Funny how I always add that disclaimer before railing something, but it’s true. I do not claim to have all the answers. I just interpret what I feel is going on and twist it by the pop culture teat until it cries, "Uncle." Then I twist some more.

I’m not going to go into a complete history of what’s been going on, nor am I going to point fingers of blame at any Presidential administration. There is enough blame to go around on both sides of the coin. You know the economy must be really bad when Days of Our Lives has to fire Deidre Hall and Drake Hogestyn just to be able to stay on the air for 18 more months. Even fictional television is feeling the burden.

The reality is that we have failed to learn from history and are now forced to repeat it. In another 20 years, we’ll probably do the same thing. Look at the current economical situation in terms of a scene from The Matrix Reloaded where Neo reaches The Architect and finds out that he is the eventuality of an anomaly. The economy functions in a state being where, if it were Utopian, by nature, it would ultimately fail. If it (we) were allowed a choice in matter we would accept it, provided we were given just that, a choice. Granted, the small amount of those who chose to reject it will ultimately grow and eventually the system will crash, reboot, and start all over again. Everything is cyclical.

"Whoa! The Economy is complicated."

The fact that it takes decades at a time is unnoticed and therefore ignored. When it does happen, everybody goes nuts and declares it to bet the biggest disaster since the last time it happened. The benchmark appears to be The Great Depression. Perhaps the geniuses that came up the name for the current situation should have gone with a comparative term such as The Greater Depression instead of the more diluted and less romanticized terms, Global Financial Crisis of 2008, The Sub-Prime Mortgage Crisis, or Emergency Economic Stabilization Act of 2008.

However, what’s past is prologue. We’re not going to dissect what caused the issue. We’re here to dissect the continually prolonging of the solution. Unfortunately, we can’t go the same route as The Great Depression in terms of fixing the issue. We’re already at war in two countries. The EESA of 08 or Bailout, Rescue, whatever was supposed to purchase “toxic”(….ooh I like that word) mortgage backed securities in an effort reduce uncertainty of the solvency of financial institutions and restore confidence in the credit markets. In other words. The government takes a crap load of money and pays for the mistake supposedly in an effort to give Wall Street a chance to shore up their holdings. Let me ask you this. If you have a friend who is an addict, do you give them access to their vice? “Sure, Bob. I’m glad you admitted that you have a drinking problem. Why not join me in a glass of champagne to celebrate your first step towards sobriety?” Then Bob goes out and kills three people and a dog while driving home loaded. Oh, and Bob decided to stop at three more bars on the way home. Bob is AIG. Yeah, purportedly by the end of October, AIG spent nearly $90 billion of the $123 billion in bailout money. Almost $1 million dollars of whatever money they had was spent on lavish trips to England, Phoenix, and California for retreats of various kinds. Now, all of a sudden, they’re walking up to the front of the lunch line, bowl in hand saying, “Please, Sir, I want some more.” Apparently, AIG handles money the way a compulsive gambler handles flipping a coin. They don’t flip the coin. They put the coin on black 22 at the roulette table.

So, with major financial institutions failing, merging, failing, partying, etc. we sit idly by and wait for the problem to just go away as if we can reboot a computer. Unfortunately, the problem is the blue screen of death and attempts to reboot the economy have been unsuccessful. Now, while it is obvious that Wall Street has a problem with managing money, so do we. It's not that I don't believe that trickle up economics or other euphemisms for giving the money to the people won't work. It's just that I, like so many other people have been digging holes that need to be filled. We get money from the government in the form of stimulus checks that are supposed to be used to go out and by goods and services and yet we spend it on debt reduction. Actually, in this case, that might help. Regardless, there have been numerous chain emails and other discussions around the water cooler about giving the $700 billion to the American people. This won't work either.

If you look at the U.S. population as of 2008, it stands at roughly, 305 million. For argument's sake, let's say that 200 million people own a mortgage or have substantial debt above $50,000. If you take that $700 billion dollars and divide it by 200 million, you only get $3500 before taxes. I don't see anyone paying off a mortgage with that much, unless you are a thimble and your mortgages consist of Boardwalk and Park Place. If you slice it another way, take a $100,000 mortgage and divide that into $700 billion. You would only be able to help 7 million people before you run out of cash.As bad as Wall Street is with money, the general lynch mob is equally bad at math. They are tired of Government screwing up the country and letting us take the fall. Well, guess what? We elected them.

So, what can we do? Personally, as much as I would love to have the Government give me a slice of the bailout humble pie, I'm not in that group of people who are foreclosing on a house or been affected by job layoffs...yet. So, giving me the money to pay off my mortgage doesn't solve the issue. While a lot of folks are in foreclosures because their banks got greedy, a lot of them got there themselves. They either were duped into a deceptive mortgage arrangement or figured that with the banks just giving away money, they could buy huge, half million, dollar homes and have no trouble paying them off in thirty years. Unfortunately, the banks and the economy couldn't wait that long. There's no way to fix this by giving us the money. However, I would have taken an approach much like I would have done had we, as individuals, received the money. Instead of just writing a blank check to these companies. Give them vouchers for operating capital. Make sure they use that money and restructure their balance sheet (aka bankruptcy) so that the money still had went towards becoming solvent, like paying pensions and employee salaries.

If the government had some mythical pot of gold that could be used to give the American people the money instead, I would still expect there to be two kinds of vouchers. One goes to paying a mortgage and only a mortgage. The other would go towards economic stimulus. It could be in the form of a voucher to buy a vehicle and help the auto industry. While, I'm not going to complain when President-Elect Obama pushes through another stimulus package, I believe if their intent is to have us spend the money on goods and services then they should have issued us the checks before the end of October. That way, we would have money to be used for shopping through the end of the year. Think of it like a book of coupons you get at McDonald's or the movie theater. Within the booklet you have several coupons that are good for the purchase of different types of food and drink. If you wait until after the holidays when Obama takes office, a lot of the damage will be done. Regardless of how much they promise stimulus checks in the New Year, the stores are hurting now and people are leery of loading up a credit card now when the banks and credit institutions are hurting. If you miss a payment, the penalties can be severe.

Well, that's my thoughts in a nutshell. For a lot of us this is a scary time where we are stuck banging our heads against the wall while Wall Street tells us they're pregnant. We're just trying to do the math in our heads in hopes that we weren't the one responsible. And while we resign ourselves to having to grow and learn responsibility, Wall Street is out there drinking and smoking with a baby bump. For the rest the country, everything is just status quo. If you're really savvy you can take huge advantages of the situation in terms of buying a car and shopping. Prices will go down, gas has gone down, and auto dealers are hurting for business. If Warren Buffet can afford to play the game with millions of dollars on Wall Street, why can't Mongo the Middle Class mensch play the game on Main Street. So, hang in there, things will eventually start to look up. Just don't hope for the best, prepare yourself for the long haul. After all, "Hope, it is the quintessential human delusion, simultaneously the source of your greatest strength, and your greatest weakness. "

Monday, November 17, 2008

Playing House of Cards

Christmas is right around the corner and my daughter has one gift already bought for her. It's a kitchen set for her to play house. The miniature set of cabinetry and appliances is one step away from the building permit that will be required to erect a scaled down version of a home in the backyard. If I were any sort of carpenter, I'd have the ability to build her the ultimate dream house. It would be the kind of place that any kid would be proud to put on the annual Christmas Play House Holiday Home Tour hosted by the imaginary historical society. If we're lucky, we can get a home loan without having to jump through many hoops. The imaginary world may not be facing a financial crisis, but kids are savvy enough to know that when their parents are sitting down at the table with receipts and a calculator, they're not planning a big blowout vacation to Disney World anytime soon.

Recently, I reconnected with an old high school friend of mine on Facebook. In between saving the rain forests and making flair for the masses we got into a conversation about our childhoods. She, the daughter of a dentist, and I, the son of an Insurance Agent, both grew up in middle class suburbia. Every year they went to Florida for Christmas and I wished I could. Yet, I never went without the essentials, and on occasion we took a family vacation at the beach. While, the contrast in our lives may have seemed great, the end result was the same. We both knew nothing of what our parents had to do in order to give us those lives.

Now, we both have spouses and children and mortgages and everything that comes with it. In the middle of all this we, like many other Americans face the doom and gloom of the current financial crisis with uncertainty and trepidation. While I can't speak for her I can tell you that there are times I wonder if I'm not scared enough for my solvency. I'm sure my wife can worry enough for both of us, but I don't seem to be too afraid of the next down day on the Dow. Why? Because I didn't get in over my head when the glass ceiling was as vaulted as the half million dollar homes bought and sold on the sub prime mortgage market.

I spent a month jumping through hoops to get a first time home buyer's loan from the state in order to secure a lower interest rate. I have a 30 year mortgage at a fixed rate of 4.55%. We bought our house in 2004 at the height of the housing boom. Left and right people were getting those pie in the sky brick homes in tightly spaced, treeless, housing plans where you measure success not only by the size of your bank account but by the height of the grass on your lawn and the rules governing it. While salivating sellers were being lead around by Realtors touting over inflated listing prices and blinded buyers were convinced that they could afford any price based on the mythical mortgages offered, I was looking at a middle of the road price tag on what could be a starter home without the structural deficiencies that would be beguile a budding buyer. In short, I went vanilla.

Vanilla's not so bad, looking back now. My mortgage gets paid every month on time with no worries and by my calculations, I'd be paying the same, if not more, in rent for my townhouse where I previously resided. We have one car payment and are slowly chipping away at one credit card that has followed us around since our engagement. I'd say vanilla tastes pretty good about now.

In terms of employment, I'm still on the fence with that one. I want to believe that my job is secure, but I see the signs on the wall. It may not be tomorrow or next week, but eventually my position may be eliminated. The problem with being owned by a bigger corporation, based in another country, is that even though we meet or exceed market expectations for 20+ continuous quarters doesn't mean we don't have to suffer when the economy tanks. Workforce reductions and spending freezes affect us all and I'm still actively searching for another job. But the work is there and it's keeping me busy, which is probably a good thing when "The Bobs" finally come around.

The trick has been not to show signs of weakness, anywhere. I'm the sole income stream. I'm one half of the decision team. The world can come crumbling down around me and I have to remain calm for my wife, and more importantly, my daughter. She's still too young to comprehend any of the issues going on in the world but she picks up on stress and negativity very well. It was that conversation about my childhood that got me thinking. Perhaps things weren't that great. Perhaps my parents were just real good at hiding the truth. In the 80's we had that little problem called the S&L scandal and the economy tanked in August on Black Monday. If everything is indeed cyclical, we should have seen this coming back around. I had no clue what happened but heard from friends and saw on the news that the economy was in trouble. Maybe my parents' vanilla lifestyle kept us out of danger or maybe they just hid the problems and managed their finances in such a way that we rode out the worst with little effect.

Regardless of how things happened, I went about my business playing video games and baseball with my friends. Now, 20 years later I'm in the same boat as my parents were. Yet, here I am making sure that my daughter's second Christmas is one for the books. She'll have her kitchen play set and they'll be no need for her to reenact the struggles of the middle class around her small kitchen table with her Winnie the Pooh filling in for Suze Orman and Rabbit, the collection agent, calling her on her PlaySkool phone, looking for delinquent credit card payments. I intend for her to not worry about the issues we face as adults. She's a kid and needs to be a kid for as long as possible. Childhood doesn't last long enough and is only a fraction of our lifespan. Besides, if she's really hell bent on helping out, we'll set up a Snoopy Snow Cone Starbucks and she can make biscotti with her Easy Bake Oven. We'll even put put out a tip jar to help dear old Dad pay for her convertible power wheels. It's the least we can do to help the cause.

Tuesday, November 4, 2008

10 Movies to Watch on Election Day

For those of us tired of the elections, tired of the campaigns, I offer you a break from the norm with 10 films to watch while you wait for the results.

Independence Day (1996)
A rather odd choice, huh? Think about it, though. You have a likable President is faced with a crisis of unimaginable proportions. Instead of being nations at war we are a world faced with extinction. There's no need for UN inspectors, tribunals, or linking one group to another with more twists and turns than the Magic Bullet's path. We know who the enemy is. The White House blows up, the Cabinet and the First Lady die. A Mac Powerbook turns superior alien technology into Windows Vista. Anarchy and chaos ensue all to be wrapped up in 2 hours with Will Smith and Jeff Goldblum saving the day.

You’re Not Elected Charlie Brown (1972)
Some politicians run on a platform of change or reform, Linus Van Pelt runs on the platform of The Great Pumpkin. Whether you believe your candidate should have a strong faith based campaign or not, you cannot deny Linus’ commitment to the issues. You also cannot deny that people in power really don’t have any when it comes down to it.

Man of the Year (2006)
If you think the current President is funny wait till you meet Tom Dobbs. Robin Williams plays a Jon Stewart/Bill Maher faux news figure who has a lot of opinions about the government. On the suggestion from his audience to run for President he gathers tremendous support, but he fails to rely on his humor and instead tries to run on the issues. How dare he? When he’s invited to the debate he breaks every rule and turns the process into parody winning over America. An improbable scenario has Dobbs on the ballot in 13 states. 13 states, that if won, give him enough electoral votes to win the election. Comedy turns to conspiracy as Laura Linney plays a propeller head with insight onto how the election really was won and soon she’s on the run for her life as she tries to give Dobbs the bad news.

The Candidate (1972)
If you think your vote doesn’t count, you’ll like this flick. Robert Redford’s character, Bill McKay, is tapped to go through the motions in a senate race against an unbeatable Republican. While McKay is told to just go out and say whatever he wants, he uses the forum to get out his message to anybody who will listen. Along the way he begins to be manipulated and becomes what he loathes, a politician.

Election (1999)
Who says Washington is the only place for crooks and liars. Check out any local high school and you’ll find a seedy underbelly, especially this high school in the suburbs of Omaha. There’s sex and corruption and scandal all before the lunch bell as Reese Witherspoon plays a character so twisted and vile she makes Ann Coulter look like Jessica Simpson.

Recount (2008)
The election of 2000 was supposed to last a day, yet it wasn’t finalized until more than a month later when the Supreme Court ruled against Florida’s recount. If you ever wanted to go back and rethink what you thought about the election 8 years ago, now you have your chance. Grab your hanging Chad, your popular vote, and commiserate with all those who wondered what might have been.

Wag the Dog (1997)
Hey! Look over here. Ignore that sex scandal. Look at this shiny war over here. Oooh! Ahhhh! Awwww, there’s a young girl carrying her dog through the rubble. And what a catchy song to encapsulate the nation’s emotions. Hollywood is tapped to distract the public and help keep public opinion in the black. Similarities to both the Gulf War and the Clinton Sex Scandal are intentional as well as Dustin Hoffman’s uncanny take on Robert Evans.

All The President’s Men (1976)
We’ll bring it down a notch with a pot boiler, non-fiction style. Woodward and Bernstein follow the money during the Watergate break-in and the revelation that Nixon was a crook. Don’t think for a second that the government is new to shady deals and misinformation. They nearly wrote the book. Excellent film with top notch performances by Robert Redford and Dustin Hoffman.

V for Vendetta (2006)
All the financial woes and worries about security, home and abroad, can make for depressing conversation. Why not blow it all up while wearing a mask and spouting Iambic Pentameter with a bunch of V’s? The Wachowski Brothers’ film about a dystopian totalitarian state where the government rules all and considers anyone not with them a terrorist. While the movie pits a terrorist as a protagonist one has to remember that Americans were terrorists during the Revolutionary War.

Mr. Smith Goes to Washington (1939)
And if you want to actually feel good about government and politics this Capra classic pits Jimmy Stewart against the machine. First rule about shady politics, if you’re going to hire someone you intend to use as puppet, don’t give him something to do to keep him busy. He’s liable to come up with good ideas that directly conflict with your own and will ultimately expose you for the crooks that you are.

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