September 2008 Archives

It's The Debt Stupid

By
Rob Safuto
on September 22, 2008 5:42 PM | | Comments (0)
"In the sudden rush to blame the crooks in DC and on Wall Street, we should first take a long look in the mirror."
- Victor Davis Hanson

While Congress ponders a $700 billion bailout of financial firms I can't help but think that things could have been different today. I have long believed that America is too much in love with the concept of debt as a tool to build wealth. Today the chickens created by those beliefs are coming home to roost.

About 18 months ago I lamented America's lust for debt on another blog with a post titled, Where There Are Long Term Loans There Are Problems. I completed that post with the following statement.

"Here's the bottom line. Everyone makes choices. Sometimes we make bad choices. You can't always blame the companies that make the risky loans available. And you can't always curse the system. But somewhere there needs to be the intersection of personal responsibility and corporate consciousness that makes sense. Given the financial situation that many people are in today I have to say that we're not there yet."

The situation we're in today is a result of many aforementioned bad choices at all levels. Many citizens have accumulated too much debt, relying on risky and expensive financial products to pay for things that they can't afford. Small business owners have long been in the habit of racking up debt as a way to artificially grow their businesses. Ironically the thing that most small business owners think helped them grow, also helped them to fail as well.

Corporations have faltered as well. The financial companies that we see failing today are where they are because they bought debt with debt. Only the corporations either didn't know what they were buying or knew but simply bought more than they could afford. This turns into a vicious cycle because as the debt they bought goes bad, the people who lent the corporations money to buy the debt in turn want their money. It's a real house of cards.

Let's not leave the government out of the fools party either. The government sponsored enablers of this mess are called Freddie Mac and Fannie Mae. Bloomberg columnist Kevin Hassett weighs in with a very simple opinion that gets right to the point.

"Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves."

"The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them."

Consider the house of cards officially down. Fannie and Freddie, whose unlawful accounting wizardry is the stuff of legends, did their part to wreck the system. Aunt Fannie and Uncle Freddie bought junk debt from financial institutions so that financial institutions could buy more junk debt. We might as well call the Fan/Fred monster and the financial institutions dumb and dumber.

So how do we turn the ship around? I think step one involves taking steps to reduce the thirst for debt at all levels. Individuals should not look to credit cards, home equity loans, student loans and risky mortgages as a solution to remedy getting things they want. Businesses need to learn to build slowly and grow organically on revenue rather than loans. Financial institutions need to lend and invest in a way that considers all the risks involved. And the government needs to shut down Fannie and Freddie. The government should not be enabling private industry to take on more debt, period.

Can we turn the ship around? I really don't know. Real positive change requires discipline and a desire to learn. Real positive change also requires good teachers who can show everyone how to survive, and ultimately thrive, without using debt as a tool. The best teacher I know on this subject is a guy named Dave Ramsey. Dave sells books and seminars but you can also download the first hour of his radio show as a free podcast every day. 

I do know one thing. The proposed government bailout of lenders treats a symptom but doesn't eradicate the illness. Most people who get bailed out when their debts go bad turn right around and get back into debt. We hope that people would learn lessons. But how can people, businesses or governments learn lessons when there's always someone there to rescue them before the consequences of those mistakes are felt? 

Maybe there's a greater irony in play here. America's thirst for debt has lead to the government requiring that Americans support the people that sold and guaranteed the debt in the first place buy purchasing the bad loans. 

The situation reminds me of a quote from the movie Boiler Room where a young stock salesman says to a client something like this, "I liked this stock at $10 and I love it at $5." Well, I didn't like the debt they were selling at $10 and I hate it at $5. I say don't buy it at all.

America Votes At The Box Office

By
Rob Safuto
on September 14, 2008 11:43 AM | | Comments (0)
A few weeks ago I heard an interview with an author and screenwriter named Andrew Klavan. Mr. Klavan put forth a very interesting theory that I had never considered. Klavan was talking about how the new Batman film, The Dark Knight, contained a hidden metaphor related to George W. Bush.

Klavan's theory is a simple one. The Batman character in this most recent film is in fact modeled after our current President. I haven't seen the film but Klavan classifies the character in the movie as one who sacrifices his popularity in order to do what is necessary to fight evil. Klavan also takes note of the fact that films with similar themes (like 300) tend to do very well at the box office. 

I took a look at the U.S. box office numbers for The Dark Knight and 300. 300 grossed $210 million and The Dark Knight has grossed $514 million.I also found that Iron Man, a film directed by Jon Favreau (a known Republican) and starring Robert Downey Jr. (said to be a strong Conservative) has grossed $318 million to date.

I also checked on a few popular films that toe the Democrat party line with respect to the Iraq war to see how they fared at the box office.

Andrew Klavan makes an interesting point when it comes to the respective approaches of Democratic and Republican film makers. Democrats produce films that hit the issues head on. And Republicans wrap their films in allegory. Some would argue that the reason for the difference in box office take can be found in the fact that the Republican themed films are just simply more entertaining. 

Many people I know who have seen Michael Moore's Fahrenheit 9/11 disagreed with the premise of the film but found the film making approach to be an entertaining one. Fahrenheit 9/11 grossed $119 million at the domestic box office. Moore's next offering titled Sicko didn't fare as well, grossing $24 million at the U.S. box office. But Sicko still did better than the four anti-Iraq war movies mentioned above.

So if you wanted to make the case that people are buying into the entertainment value rather than the message you might have an argument. So why don't more Democratically oriented films go for more entertainment value. Perhaps the writers and directors are so serious that they just cant' help themselves.

I pondered writing about this topic for awhile but it wasn't till I saw the movie Juno on Friday night that I decided to do so. Juno is a very cute and heart warming film that has grossed $143 million in the United States. The movie features a very strong pro life message. The main character, Juno, is a high school age girl who gets pregnant and considers having an abortion.

Juno knows that she is too young and immature to raise a child. She actually goes to the abortion clinic. Once there she finds a friend from school picketing the clinic while shouting, "Your baby wants to be born." The scene painted inside the clinic is anything but a pretty one. Juno decides right there that she will not abort the baby.

I doubt that most people who watched the film Juno immediately thought that the movie was pushing a pro life message. But the fact is that the decision to keep the child to term was made very quickly without any resistance from friends or family to do otherwise. So I certainly feel that the performance of this film lends credence to Mr. Klavan's theory that the performance of Republican oriented films is an indicator of the true societal values in the U.S.

If this topic interests you I highly recommend that you watch this video where Mr. Klavan explains his beliefs on this topic.

The Long Road To 9/11

By
Rob Safuto
on September 11, 2008 12:52 PM | | Comments (0)

Today is a day that holds many horrible memories for many Americans. I include myself in that group. On 9/11/2001 I lost friends and acquaintances. I nearly lost a family member. Every one of my friends knew someone who was killed. In addition to people we also lost one of the most significant architectural presences in any city in the Twin Tower of the World Trade Center.

On the day the World Trade Center opened in 1973 my Mom took myself and my brothers to the observation deck. Here's a picture from that day.

Twenty eight years later I found myself with some friends from New Zealand sunning (and recovering from a hangover) in the grass in Battery Park with the towers looming behind us. The next day I hopped on a plane out of LaGuardia airport headed to Houston, TX on a business trip. The plane took a route that crossed New York Harbor and in the morning sun I admired the buildings that framed the downtown New York City skyline for me and millions of other people. It was the last time I would ever see the Twin Towers standing. The date was September 10,2001.

We all know what happened the next morning. The truth is that most people who remember what happened won't forget it. Unfortunately many people do seem to forget the circumstances that lead to 9/11/2001 in the first place.

The terrorists attacks were not an event detached from history. They were in fact the exclamation point on a long sentence spelled out over three decades by Islamic extremists hell bent on destroying western society. The United States, in our wisdom, power and righteousness should have put a period on that sentence somewhere at the start.

Unfortunately we did not. Some would say that we never saw 9/11 coming. To those people I say, "You should have opened your eyes."

1983 - Marine barracks car bombed in Beirut. 243 U.S. Marines dead.

1988 - Pan Am flight 103 blown up over Lockerbie Scotland. 259 dead.

1993 - World Trade Center bombed. Six dead, more than a thousand injured.

1993 - The battle of Mogadishu. In October U.S. Army Rangers battle forces of Somali warlord Farah Aidid. 18 U.S. troops dead, 75 wounded.

1996 - Explosion at Al-Khobar Towers military housing complex in Saudi Arabia. 19 U.S. troops dead.

1998 - U.S. Embassies in Kenya and Tanzania bombed simultaneously. 258 dead, thousands wounded.

2000 - USS Cole bombed while in port in the country of Yemen. 17 American sailors dead, 39 wounded.

Prior to 2001 there was a pattern of actions against the United States that was directly attributable to the actions of Muslim extremist groups like Al Qaeda. Knowing that this threat existed the U.S. Government chose to pursue a policy that hinged on very limited response with a focus on criminal prosecutions. The fruits of that policy turned out to be rotten as we all know.

Here are a couple of quotes from a New York Times story from December 2000 titled Two Primary Figures Emerge in Bombing of the Cole.

"The Clinton administration has been careful not to assign blame for the bombing of the Cole to Mr. bin Laden or his organization, saying that the investigators have not found a smoking gun that directly links the bombing to either the Saudi millionaire or his militant Islamic network."

 "A former counterterrorism official in the Clinton administration said it was important not to assume the White House would endorse military action against Mr. bin Laden or the Taliban if direct evidence of firm links continues to mount."

The previous quotes and many more like them were the hallmarks of President Clinton's attitude toward Islamic terrorism during his administration. I served in the U.S. Army from 1993 - 1998 and I can say that the military was well aware of the dangers of Osama Bin Laden and networks like Al Qaeda. It's a simple fact that the U.S. military was never ordered to do anything about it save blindly launching a few cruise missiles into Afghanistan. The Clinton administration preferred that Justice Department lawyers handle the work that was meant for soldiers. And you see where that got us.

There are some who charge that the U.S. is less safe today than we were before 9/11/2001. They say that we're less safe because we went to Iraq and because we went to Afghanistan. The facts prove otherwise. We were not in Iraq or Afghanistan between 1993 and 2001. Yet the attacks against our people and interests continued. Now that our Soldiers, Sailors, Airmen and Marines are deployed forward, taking the battle to the enemy we are much safer.

The Al Qaeda network has been severely degraded. Terrorist attacks, while still a threat, are way down.

On October 21, 2001 an article in the NY Times stated, "More than a month after the September terror attacks, the United States and its close allies are still intercepting communications among Osama bin Laden's associates and are convinced more attacks are coming, intelligence officials in several countries say." Later in the article it is stated, "Now the United States and its allies find themselves in a similar quandary. They know something is coming but not when or where."

Seven years later Al Qaeda has been unable to follow up with an attack that everyone else though was a foregone conclusion. It hasn't happened because the U.S. went and stayed on offense. thank you to all of those who have served and sacrificed during this time.

The Real Story Of The Bridge To Nowhere

By
Rob Safuto
on September 8, 2008 10:08 PM | | Comments (0)
The Gravina Island Bridge in Alaska, also known as "the bridge to nowhere" has suddenly become a central theme of late in the Presidential campaigns of Barack Obama and John McCain. The funny thing about it is that neither politician actually had a hand in the original project.

Talk of the bridge has been spurred by Alaska Gov. Sarah Palin's assertion that she said "No" to the bridge and told Congress that "...if we want a bridge we'll build it ourselves." That's where the battle begins anew.

The backstory is that the bridge in question was used by McCain in 2005 as a symbol of wasteful spending on earmarks. Earmarks are federal funds targeted for use at the state level that are usually slipped into larger bills. As a result many earmarks get passed without having any connection to the legislation in a particular bill.

As the NY Times reports it via a story published on 12/17/2005 titled Two Bridges To Nowhere Tumble Down in Congress,  "Congressional Republicans decided Wednesday to take a legislative wrecking ball to two Alaskan bridge projects that had demolished the party's reputation for fiscal austerity." So the funding for the project was actually killed by Congress long before Gov. Palin took office in December of 2006, or was it?

The same NY Times story goes on to state that, "The change will not save the federal government any money. Instead, the $442 million will be turned over to the state with no strings attached, allowing lawmakers and the governor there to parcel it out for transportation projects as they see fit, including the bridges should they so choose." So the bridge project was still very much alive even after Congress had supposedly "killed" it.

The project and funding was still on the table when Governor Palin took office in December of 2006. The previous Governor had, in fact, received the earmark and set aside $113 million for the project. The word is that statements made during Gov. Palin's candidacy for Governor of Alaska indicated that she supported building the Gravina Island Bridge. An Op Ed article in the Juneau Empire dated 10/29/06 states that,  "Ketchikan will support Palin because of her support of the Gravina bridge." This indicates a good possibility that at one time Gov. Palin supported the project.

But something happened between October 2006 and early 2007 after Gov. Palin took office. A letter to the Editor of the Juneau Empire dated 02/15/07 states, "Charles Fedullo, Gov. Sarah Palin's press secretary, said there is no money in Palin's capital budget for the project at this time. Palin has common sense, that's why." Later in the year another story on the Gravina Island Bridge indicates, "In September, Palin ended work on the Gravina project, acknowledging that the state no longer had a way to pay for a project that would cost hundreds of millions of dollars." 
Continue reading The Real Story Of The Bridge To Nowhere.

Who Said It?

By
Rob Safuto
on September 4, 2008 3:53 PM | | Comments (0)

“I have a really interesting political point of view, and it’s not always something I say too loud at dinner tables here, but you can’t go from a $2,000-a-night suite at La Mirage to a penitentiary and really understand it and come out a liberal. You can’t. I wouldn’t wish that experience on anyone else, but it was very, very, very educational for me and has informed my proclivities and politics ever since.”

See here.

The Importance Of Domestic Drilling

By
Rob Safuto
on September 4, 2008 12:55 PM | | Comments (0)

I've been in the energy industry for the past ten years and I want to let people know how important domestic drilling for oil and natural gas is.

Energy Security Is The Thing

Price isn't the big issue as far as I'm concerned. Energy security is the issue. Consider that even with a massive effort to convert electric power generation and transportation to sources other than fossil fuels, we will still have a considerable need (sorry Al) for fossil fuel powered resources for decades to come. So knowing that we're going to need oil and natural gas I ask this question. Where would you rather get your oil and gas from? Should it be from unstable autocracies like Saudi Arabia, Venezuela, Nigeria and Russia? Or should it be from companies right here at home? You know the answer.

You Can't Trust Them

One day any of these countries could decide to stop trading with the U.S. They would be spiting themselves if they did it but cutting off supply to the U.S. is a very powerful weapon. This could cause the price on world markets to skyrocket overnight. And it is only feasible if these other countries know for sure that we don't have the production capability to make up the difference. It could happen. For this reason alone Congress should authorize more domestic drilling.

Getting Paid Three Times

If the U.S. government did open up offshore areas and ANWR to drilling in order to protect energy security there would also be incredible economic benefits. The people of the U.S. would get paid three times for domestically exploited resources. The oil companies would pay for the land leases, which cost anywhere from $1 to $1.50 (way too low in my opinion) per acre. The oil companies would pay a 12.5% royalty on the money earned from sales of resources that they extract. And the oil and gas companies would pay taxes on their profits. This equation doesn't even take into account the increased number of jobs which lead to increased payroll taxes. Under the current scenario, the U.S. government and various states are taking in a mere fraction of what they could be getting in revenue from oil and gas companies.

Then There's The Environment

American oil and gas companies are held to very high standards with respect to environmental concerns when drilling. The other countries I mentioned don't have nearly the same environmental standards. So those people who say, "No drilling here," are really saying, "Drill somewhere else," which means that they don't care about the negative effects on the environment.

Let's Be Real

This talk of eliminating all fossil fuel consumption within ten years is a complete folly. But even if it wasn't a folly why shouldn't the U.S. ramp up to take advantage of the rising prices for oil and gas in the world markets? And it's not just the U.S. that will benefit. Many other smaller countries that are beholden to the likes of Saudi Arabia, Venezuela, Nigeria and Russia will benefit too. The world will be safer. Our economy will be stronger. And the environment will be much better off. What's wrong with that?

The choice is clear. Drill here, drill now.

Candidates Use Speechwriters?

By
Rob Safuto
on September 4, 2008 10:49 AM | | Comments (0)

The buzz from many media pundits after Governor Sarah Palin's successful speech last night was that she didn't right her speech. So the inference is that although the speech was excellent, the ideas and accomplishments weren't really Gov. Palin's because a speechwriter was involved. Could the members of the press who have advocated this position be more silly?

I guess it may be news to the many politicos who cover these campaigns that all Presidential campaigns employ speechwriters. Senator Obama's campaign employs three speechwriters as detailed in a January 20, 2008 article in the New York Times titled What Would Obama Say?

Mr. Favreau, or Favs, as everyone calls him, looks every bit his age, with a baby face and closely shorn stubble. And he leads a team of two other young speechwriters: 26-year-old Adam Frankel, who worked with John F. Kennedy’s adviser and speechwriter Theodore C. Sorensen on his memoirs, and Ben Rhodes, who, at 30, calls himself the “elder statesman” of the group and who helped write the Iraq Study Group report as an assistant to Lee H. Hamilton.

Alaska's Fiscal Importance To The U.S.

By
Rob Safuto
on September 3, 2008 12:16 PM | | Comments (0)

I just had to make this comparison between Alaska and Delaware with respect to the revenue supplied to the U.S. government from the energy industry. Because after all, Alaska is a "tiny" state.

In 2007 Federal Royalty Revenue from the State of Alaska totaled $68,310,417. In 2007 Federal Royalty Revenue from the State of Delaware totaled $0. The State of Illinois supplied $248,808 to the Federal Government.

Sarah Palin And Earmarks

By
Rob Safuto
on September 3, 2008 11:34 AM | | Comments (0)

The latest charge against Vice Presidential nominee Sarah Palin is that she is a fan of congressional earmarks. Governor Palin stated in her introduction speech that, " And I've championed reform to end the abuses of earmark spending by Congress."

Today Governor Palin is being challenged on that claim by people who are saying that she is a great supporter of congressional earmarks and the wasteful spending they represent. Maybe that's true. Maybe Sarah Palin really loves earmarks like everyone says she does. A March 2008 story in the Juneau Empire seems to indicate otherwise.

Stevens Says Earmark Attitude Is Harmful

The first line of the story says it all, "Sen. Ted Stevens says Gov. Sarah Palin is making it harder for him to get earmarks for Alaska."With respect to the Ketchikan-Gravina Island Bridge (aka the bridge to nowwhere) the story says, "Palin said the Alaska delegation, along with President Bush and the front-runners in the presidential election, have made clear earmark reform is coming. She said Stevens is "absolutely misinterpreting" her administration's position on earmarks. "You can either be proactive and be a part of the positive changes that are coming, or you can try to fight this new system that's coming in," Palin said."

Finally the story says, "Palin declared last year that her administration was going to cut back its own earmark requests submitted to the delegation. The state requested earmarks for 31 projects worth just under $200 million this year, down from last year's request of 54 projects for around $550 million."

So the fact of the matter is that under the Palin administration, earmark requests have reduced by $350 million. So it's obvious that Governor Palin understands the importance of reducing the overall burden of her state on the federal government. Gov. Palin never claimed that her state received zero earmarks from Congress under her adminstration. She did say that she has "championed reform" which the Juneau Empire story has confirmed as absolute truth.

Update: There's a similar story in the Anchorage Daily News that has a very good quote from Gov. Palin at the end of the story.

"Alaska has got to be more self-sufficient. We've got to be given the opportunity to start producing more and contributing more, providing jobs for Alaskans," she said.

Joe Biden's Greatest Hits

By
Rob Safuto
on September 3, 2008 10:55 AM | | Comments (0)

According to the New York Times...

Obama Aides Defend Bank's Pay to Biden Son "During the years that Senator Joseph R. Biden Jr. was helping the credit card industry win passage of a law making it harder for consumers to file for bankruptcy protection, his son had a consulting agreement that lasted five years with one of the largest companies pushing for the changes, aides to Senator Barack Obama’s presidential campaign acknowledged Sunday."

Biden Was Accused of Plagiarism in Law School "Senator Joseph R. Biden Jr., a Democratic Presidential candidate, was accused of plagiarism while in his first year at Syracuse University Law School, academic officials familiar with Mr. Biden's record said today."

Biden Unwraps '08 With an Oops "Senator Joseph R. Biden Jr. of Delaware, who announced his candidacy on Wednesday with the hope that he could ride his foreign policy expertise into contention for the Democratic nomination, instead spent the day struggling to explain his description of Senator Barack Obama, the Illinois Democrat running for president, as “the first mainstream African-American who is articulate and bright and clean and a nice-looking guy.”

Biden Admits Errors and Criticizes Latest Report "Senator Joseph R. Biden Jr. issued a formal statement today acknowledging that he had misstated several facts about his past last April in a campaign appearance in New Hampshire."

One other nugget...

Sen. Joe Biden Chided for 'Racist' Remark Biden's comments were captured by C-Span cameras during a June event in New Hampshire where the likely 2008 presidential candidate was once again making the rounds with voters in this important primary state. During a conversation with an Indian-American political activist, Biden said: "In Delaware, the largest growth of population is Indian-Americans, moving from India. You cannot go to a 7/11 or aDunkin' Donuts unless you have a slight Indian accent. I’m not joking."

There's more out there. A lot more. Why doesn't the media talk about it more?

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