An Explanation of the Carry Trade & how Banks are Looting Taxpayer Money
Since the President is finally heating up the rhetoric on big banks and their looting of taxpayer money I thought I’d do a post explaining how the banks are using the Federal Reserve to essentially steal your money. The President, and others, are focused in on the $200+ billion hole still left from the $750 Billion TARP bailout. While it is important that taxpayers be paid back in full for this, it is also important that taxpayers understand that this was only the tip of the iceberg in regards to the financial sector bailout.
I’m not going to go into the details of all the various programs being used to bail out these institutions but I do want to focus on what I believe is the most important – the easy monetary policy being used by the fed. It’s what helped cause the current crisis and it will likely be the cause of the next one as well.
Friday’s Stuff Worth Reading
- Simon Johnson calls Ben Bernanke’s reappointment “ A Colossal Failure of Governance“.
- Marshall Auerback, basically the opposite of a card-carrying member of the GOP, slams Obama on his inability to deal with the financial crisis and reform of financial sector.
It’s important for people to know that there are many serious and well-respected economists out there that don’t support Ben Bernanke. Johnson probably tops that list, and Obama would do well to fire Geihtner and replace him with Johnson.
I’ve been using the term “Clinton retreads” for years now so it’s always funny to see the term pop up in other writings. I’m going to blockquote a chunk of this post below the fold because I think it’s that good.
“Victory” for Bipartisanship
During Obama’s State of the Union address I continued to chuckle every time he mentioned working together or bipartisanship. This utopian dream of both parties singing kumbaya as they solve the country’s problems is pure fantasyland I said. But alas, within 48 hours I was reminded that both parties can work together. See, what I should’ve remembered is that anything both parties agree on is probably terrible for the country as a whole and that is the type of decision they are most likely to make.
I really am starting to believe that if both parties can’t agree on something then it’s probably something worth considering and vice-versa. It’s kind of like this scene from Seinfeld where George decides that every decision he’s ever made has been wrong and he’s going to do the opposite from now on:
The bipartisanship I’m speaking of is the renomination of Ben Bernanke which passed the Senate yesterday by a vote of 70-30. Nobody in a position of authority now was more responsible for the financial crisis than he was. The Federal Reserve, and Bernanke in particular, was the last to understand the depth and breadth of the current crisis. How anyone could take this guy seriously after his embarrassing failures is beyond me. And what’s more is that he (like Treasury Secretary Tim Geithner) doesn’t even acknowledge that he had any part in the financial crisis.
As long as Bernanke is in charge there can be no serious reform of the financial industry and what this means is that you can bet your life that there will be another disastrous meltdown directly attributable to his failures. But hey, as least our politicians worked together to pass some legislation - Obama must be so proud…
2nd post about Councilman Vogt’s recent idea
A couple of days ago I posted about at idea from Allen County Council member Darren Vogt that was discussed in the local newspapers.
Councilman Vogt left a comment on the above post and stated that “Hey Mike, you have the facts all wrong call me so you can get them and then you can evaluate the plan. If you don’t like it after that you can repost the facts and let others decide what they think. Thanks, Darren.”
Councilman Vogt then gave me a call at work and we discussed the topic for about 20 minutes yesterday.
After reviewing my post I do not see any facts that I got wrong; however, there may be some items in the post that are up for debate and that is the purpose of this blog. It is also possible that there are items that the media has been reporting wrong concerning the additional GM jobs. That being said, Councilman Vogt made a couple of interesting comments to me on the phone and I want to revisit my prior post.
I think the first point of contention is whether the additional 700 GM jobs in Fort Wayne are permanent or temporary. I feel they are temporary based on past local media reports and the direction I personally think the domestic auto industry and are economy in general are headed. Councilman Vogt feels that these jobs may not be temporary. I think only time will tell.
I next stated in my prior post that “The vast majority of workers are expected to come here from Pontiac Michigan. These GM employees will have a lot of seniority and they will likely have deep roots in Pontiac Michigan.” In my phone conversation with Council Vogt he said that he has talked to a local GM official and that the “first wave” of the transplanted GM employees would have 15-20 years of seniority. He felt that my post exaggerated the employees seniority and their likelihood of moving permanently to Fort Wayne. Once again, only time will tell. I have to admit that I personally guessed that the GM employees would have 15 - 30 years of seniority; however, I still feel that the majority of these workers will not move to Fort Wayne; at least not until they are certain the Fort Wayne jobs are permanent.
Councilman Vogt also felt that everyone should better understand the source of the funds he wants to use to bribe incentivize GM workers to purchase a house in Allen County. I found this part of our conversation to be quite interesting. The fund that he wants to use has about $765,000 in it and is a fund that gets money from companies who receive tax abatements in Allen County. Apparently when a company gets a tax abatement from Allen County they have an option to voluntarily contribute either 10% of the abated amount or 20% of the abated amount or 0% of the abated amount into a fund. The money from this fund has apparently never been spent and apparently has no restrictions on its use. Councilman Vogt told me he felt that County Council would likely only use this fund for “economic development.”
Rather than bribe incentivize a few GM workers to purchase a house in Allen County I have a much better idea for Councilman Vogt.
Refund the money to the taxpayers or if you insist on spending it on Economic Development then split it evenly among all of the businesses in Allen County who are creating jobs and not receiving any Government incentives to create new jobs. I think County Council show stop subsidizing a few businesses to the detriment of the rest of us.
Next Councilman Vogt took exception to the fact that I posted “The County is broke and struggling to make its budget work.” I have looked at the amount of debt the County is servicing and I can promise Councilman Vogt that the Allen County Council is going to struggle to create a budget that will work in the next couple of years especially considering the recent economic downturn and the fact that Fort Wayne has annexed some of the wealthier portions that used to generate tax revenue for the County. Add to that the recent actions of Fort Wayne Mayor Tom Henry and the future loss of rental income the County currently receives from the City for office space and Allen County is in for a rough time fiscally. I will agree with him that Allen County is in a better financial situation than many other Government entities; however, I truly feel that the Allen County budget is going to be very strained in the next couple of years and that the money in this fund could be better used!
I truly appreciate the fact that Councilman Vogt took the time to contact me and explain his point of view. I do not agree with his plan at all; however, I respect him greatly for being willing to call me and discuss it. We need more elected officials who are willing to defend their ideas and I am impressed that Councilman Vogt called me to “discuss” the issue.
Councilman Vogt if you have a rebuttal to this I would be happy to post your rebuttal in its entirety without comment so that your views can be expressed on this blog! Just email it to me via this blog! I will post it within 24 hours!
Mike
Henry Administration drops the ball, again
When Mayor Tom Henry first unveiled his grand plan to purchase a building for City Government his proposal estimated that the renovation costs would be 7.3 million dollars. When City Council approved the purchase they were told renovation costs would be approximately 7.3 million dollars.
A couple of weeks ago the architects revised the renovations costs up to more than 11 million dollars.
Based on its performance to date I expect the Henry Administration to make large errors like this; however, I certainly hope that our City Council takes exception to this and provides some oversight on this matter.
It is completely unreasonable that the renovation cost estimate has increased by over 50% before anything has even been done.
I sure hope there is a strong candidate to vote for in the upcoming Mayors race because I really do not want to have to vote for Mayor Henry.
Mike
Allen County Council member Vogt has got to be kidding me
I read the evening newspaper today and was appalled by an article.
GM will temporarily (for a couple of years supposedly) employ 700 additional workers. The vast majority of workers are expected to come here from Pontiac Michigan. These GM employees will have a lot of seniority and they will likely have deep roots in Pontiac Michigan.
Councilman Vogt is a Republican and he has come up with one of the dumbest ideas I have heard in several weeks.
Per the article “He suggested council establish a program under which employees of GM and other companies that have received tax abatements could receive a bonus for buying a home in Allen County. Vogt said a “mini-grant” of $1,000 or so could be paid for from a $760,000 fund created by contributions from companies granted tax breaks in exchange for local investment.”
This is absurd on many levels:
- First off I oppose tax abatements in the first place. Instead Government should lower the tax rates for everyone instead of choosing a favorite few large companies and allowing them to pay lower taxes than the rest of us.
- The County is broke and struggling to make its budget work. Bribing people to buy a home is a complete waste of taxpayer dollars.
- The workers coming here from Pontiac Michigan are temporary workers. Even if they buy a house they will likely turn around and sell it in a couple of years.
- Program like this are unfair to the hundreds of thousands of people who have purchased a home in Allen County without being bribed by County Council. This is another example of special treatment for a few people that ends up harming the rest of us.
I hope this proposal is soundly defeated by our County Council.
Mike
Massachusetts Senate race
Tomorrow is the special election to elect a replacement for Democratic Senator Ted Kennedy. Massachusetts is an extremely liberal state; in fact, it is so liberal that President Obama won this state by 26 points. Another intersting fact is that there are 3 registered Democrats for each registered Republican in the state.
Republican Scott Brown is running against Democrat Martha Coakley.
The polls are currently showing that Scott Brown is in the lead. President Obama stayed out of the race until yesterday.
Special elections are notoriously hard to poll; however, it looks like Scott Brown has a better than even chance of beating Martha Coakley.
If Scott Brown wins the Democrats will lose their 60 votes in the US Senate and the Republicans will regain the ability to fillibuster.
I think that if Scott Brown does actually win the special election the National Democratic Party; and many Democratic members of Congress, are going to go into panic mode; as well they should.
If Scott Brown wins it could well be a precursor to a massive electoral drubbing if Democrats do not get their act together.
Mike Sylvester
Prediction two made on this blog on 11/8/2008
My second prediction made on 11/8/08 is listed below in italics:
Many conservatives, especially in talk radio, are warning that the Democrats will bring back the “Fairness Doctrine.” I think that some Democrats will try to bring this terrible law back into effect; however, I feel they will be soundly defeated (as they should be).
My second prediction was also dead on. Conservatives in talk radio keep trying to convince their supporters that the “Fairness Doctrine” will be re-implemented; however, I do not think it will be.
A few Democrats have talked about bringing back the “Fairness Doctrine”; however, they are a minority. The Democrats have made no effort to re-implement this unconstitutional policy.
So far I am 2 for 2 on the predictions I made over a year ago.
Mike
Prediction one made on this blog 11/8/2008
On 11/8/8 I made 27 predictions about what the first two years of the Obama Administration would bring. We are now twelve months into the Obama Administration and my predictions are eerily accurate… This was a popular post with 71 comments. Reading the post and comments are worth your time.
Prediction 1 from the 11/8/8 post, my prediction from 11/8/2008 is in italics)
1. Obama has promised to pull our combat troops out of Iraq within 16 months from taking office. I applaud this plan and I agree with it. That being said Obama will NOT keep this promise. I feel that he will pull some troops out of Iraq. We currently have 146,000 troops in Iraq. Obama will have been President for 16 months in May of 2010. May 20th, 2010 I predict we will have 80,000 troops in Iraq. This will really anger the peace wing of the Democratic Party.
I nailed this one in a big way. I am quite proud of this prediction and I flat out nailed it. Back in 2008 I repeatedly made this prediction on this blog and those on the left told me I was wrong.
Consider that right now we have 130,000 troops in Iraq. Worse yet we have 114,000 Department of Defense Contractors in Iraq.
The only portion of my prediction that is not true is that the peace wing of the Democratic Party has been hypocritically silent. The peace wing of the Democratic Party was very vocal about former President Bush and how wrong the Iraq war was; however, now that Democrats have had control of both the House and Senate for three years and the Presidency for one year these Democrats are hypocritically silent.
I was against going into Iraq when President Bush invaded Iraq. Once we were in Iraq I wanted to pull our of Iraq over a 12 - 18 month period. My views on this conflict have not changed. They have been constant no matter which Party was in charge.
That being said ,for some reason many Democrats have changed their views now that they are on power.
Those people are cowardly hypocrites.
Mike
Guest post from “L”
Executive Board Destroying the Three Rivers Festival
Dear Editor,
I am writing this in hopes that the title sponsor of Fort Wayne’s premier summer event will step in and help with a growing problem that a select few of us on the board are seeing. Our fear is that if measures aren’t taken to radically change the structure of the board, irreparable damage will ensue.
There is a divide on the board on how we should operate and those few that see it the same as I do feel that certain individuals believe that it has to be their way or the highway. This is why we weren’t able to keep staff long term. The executive director, who didn’t even get the opportunity to run a festival, was just fired today.
I genuinely feel sorry for any staff there as they work very hard and only get criticized by those who have no vision. I honestly believe that there are members of our executive board who literally want to see this festival fail. For several years, the festival has lost money. This is common knowledge. What isn’t publically known is that the executive board and finance committee allowed it to happen by not curtailing the former Executive director when he spent enormous amounts of money on unnecessary items, thus putting us in the red.
They did hire a new E.D. last year, but in the midst allowed the sponsorship position to sit vacant thus forcing all of the work onto the E.D. and they cuffed her ability to make changes. So, the answer is naturally to fire her?
The real problem is that these same individuals that allowed us to go into the red are still on the board, and are not helping to bring in funds and are now pointing fingers at others.
There are now discussions of canceling this year’s festival. The problem I see with this is that when/if it does resume in 2011, the same individuals will be back and nothing will have changed.
I hope the Fort Wayne Newspapers will see that a few bad apples are spoiling the bunch. I wonder if those on the Executive board that have the loudest voice understand that they are the problem and if they don’t put their ego aside or step down, the will ruin it for the rest of us.
I write this anonymously as often anyone who goes against the grain is ostracized/attacked.
Regards,
L
