People are saying that because of the lessons learned during the Great Depression, it has been necessary to maul the American people to give trillions to incompetent bankers.
As anybody who knows me is aware, I'm not a big fan of the Bush / Obama bailouts to "save" our economy.
If this is what the economy looks like when it is "saved", I am left to wonder: what do these clowns think a bad economy looks like?
Comparisons to the Great Depression are ridiculous, though. Anybody who disagrees would have to answer one question before I'll listen to them: Do they sincerely believe that the Great Depression would have been averted if we gave 1 year loans to less than a dozen banks (a few of whom only recently became banks so they could be in line for big piles of government money), bought an insurance company, and allowed banks to borrow money at zero percent?
Of course not. This was never "Son of the Great Depression". Paulson and Giethner just played it up like that so they could steal the maximum amount of taxpayer money to give to bankers.
We ARE facing an economic problem, and there ARE some solutions in the great depression. Unfortunately, the Bush and Obama administration learned NONE of those lessons.
For instance, in the Great Depression, bankers leaped out of windows because they were ruined. In the Great Recession, they made the government cash hundreds of millions of dollars of bonus checks for them.
Which means that back then, bankers had an incentive to fix things. Industrialists all over America pledged their entire fortunes to trying to fight the depression. There was simply no way to sit on your pile of gold and watch others suffer. Everybody was in it together.
Today, they couldn't care less. They're doing great. What's your problem?
In the Great Depression, they took millions of Americans and gave them jobs producing public works that served as a foundation for prosperity for nearly a century. This gave people dignity. It gave folks good work habits. It gave folks pride. It gave them a leg-up, not a hand-out. It also gave us roads and parks and huge WPA buildings that are still standing today.
In the Great Recession, they decided the best thing to do is to pay people to stay at home... for 2 years... without working at all.
In the Great Depression, the consequences of the economic catastrophe were felt at all socioeconomic levels.
In the Great Recession, the government is making sure that only middle class and poor people suffer.
In the Great Depression, the government ensured that banks continued to lend and invest.
In the Great Recession, the government gives banks money at no cost, ensuring that banks don't have to do any actual banking in order to reap record profits.
Economists still aren't sure that any of the government programs enacted during the Great Depression helped at all. There's just as much evidence that the natural business cycle merely took a long time to recover, or that World War II, not government stimulus, is what brought the world out of the global depression.
The biggest difference, though? Back then, the government wasn't engaged in acts that were clearly morally wrong. Enhancing the financial fortunes of the very people who caused the problem? Paying people to do nothing? Setting up a "recovery" whose only real facet is the availability of free money that ensures the continued prosperity of banks, meanwhile removing any incentive that banks do anything that benefits anyone other than themselves?
If there is a way to mismanage this crisis any more than they're already doing, I'd like to see it. I fear that we are stuck with the two least capable presidents in US history at a time when it would have been nice to see somebody with some ability.
Sunday, February 28, 2010
Riding the Storm Out
The economic collapse of 2008 and subsequent great recession (or whatever history will call this thing) had one early warning sign for me in July of 2008.
Things could not have been better for me. The business I started 3 years earlier was booming. Life was good. We were taking my son to a Mudhens game with about 6 of his friends to celebrate his birthday.
Just prior to leaving, I checked my bank statement online and found that checks were bouncing left and right. The deposits I'd made from my HELOC were rescinded and there was not enough money in the bank to cover the checks I'd written.
What in the world happened? It's not that I didn't have money. I had plenty. However, I was applying to acquire a second licensed territory in my business (I'm a Servpro franchisee) and was not drawing any money out of the business so we could meet a requirement for net liquidity.
Instead of drawing money from my business, I was going to live on my HELOC for a couple of months, get the 2nd license, then pay off the HELOC.
I was astounded. I hadn't bounced a check since undergrad, 15 years before. This was something that just never happened to me.
I called Chase and they explained that they had electronically re-appraised all the properties of their HELOC owners and reduced our credit lines. Apparently they sent out some notification in the mail, which I either hadn't noticed, or hadn't received. To make matters worse, on-line, they continued to show my older, larger HELOC limit.
Of course I was furious. Mostly because I had 4 different Chase accounts and had been a customer for over a decade. I couldn't believe that they didn't have the courtesy to either send me an e-mail or pick up a phone and let me know this before they did it.
She reiterated that I wasn't singled out for this treatment. She also said that this affected over 280,000 account holders and that they couldn't contact each one, personally.
I had more than enough money to settle matters. I paid off the HELOC, and closed the other Chase accounts. It had caused us to stumble, and to not-get our 2nd territory license, but in the grand scheme of things, it wasn't the worst development in the world.
Two months later, the financial markets started to unravel.
Personally, I watched with more than a little trepidation and fear. I grew up in the 70s, and joined the Army in the early 80s, which made me a recession baby of sorts. I knew what it was like to stand in line for jobs as a bus-boy with 40+ year old men. I knew what it was like to walk into a McDonalds where they had no job openings.
Those were dark times for our country and I didn't want to see them return.
The press has documented how the government made an unprecedented intervention to save the bonuses of bankers and keep the very villains who caused this problem in piles of money.
They said it was necessary to prevent unemployment from going over 8% and to prevent liquidity from drying up.
As soon as the bankers had their multimillion dollar bonuses, unemployment went over 10% and they never made any effort, whatsoever, to provide liquidity to the broad economy.
We bailed out Wall Street, but left Main Street to suffer.
For the next year, I was stunned to see my business continue to prosper while the rest of the national, and especially the local economy tanked. We were setting sales records and adding staff every month.
Then, things must have reached a critical mass, because in mid 2009, business dropped like it had fallen off the edge of a table.
Small business, especially one like mine, requires the ability to see around corners. In this regard, I failed as a business owner.
I kept my staffing up, hoping business would return. Also, hoping not to ruin the lives of my workers, who didn't deserve any of this. I burned through all our reserve cash and tapped out all available business and personal credit.
After seeing my cash position deteriorate by six figures, I was out of money. At that point, what had appeared to be a short-term slowdown was now in its sixth month. That's not a slowdown. That's a permanent change of business condition.
I started letting people go in November. We avoided any layoffs after mid-November so as not to ruin anybody's Christmas. Besides, business frequently picked up with the bad weather.
Business stayed weak, though and layoffs continued in January and February.
Personally, I'm optimistic. My company was profitable every single year of operations. We didn't lose money because the business model became no longer viable. Nor did we lose money because our volume couldn't provide for profitable operations.
My business can make money at very low volumes. We'd have to be looking at a monumental train-wreck not to have enough volume to remain a viable business. So, we didn't lose money because we couldn't make money.
We lost money because I tried to keep people employed. Both because I felt it was my duty as a human being, and because I felt it was my duty as an entrepreneur.
However, when it came to it, the choice was to reorganize as a smaller organization or risk bankruptcy. I reorganized and we should be fine, now.
Still, I am furious. Being an entreprenuer is one of very few callings in my life. It is my chosen profession. In a largely unconventional life, it is the one conventional path I took. I graduated from the best business school I could attend (Case Western Reserve University). I paid my dues in a series of jobs in Fortune 500 companies. I earned my stripes in project management and management.
I believe in the power of business and the goodness of markets.
Which is why I'm probably MORE outraged than many at what our government has done. They have literally rewarded the very evil-doers who have caused this misery and left the rest of us to rot.
More remarkable is that not only was the Bush Administration, through Henry Paulson, the embodiment of complete and total evil, but the Obama Administration, through Tim Geithner, has decided that being an abject black-hole of humanity and morality is the right thing to do, too.
A small businessperson understands: you mess up, you pay the consequences. When I keep people on the payroll, I do it with my wallet. When I take a chance, I take a chance not only with my money, but with my very future. I gamble with my son's ability to go to the college of his choice. I gamble with modest financial resources that took me two decades to accumulate. I gamble with the stakes being a comfortable retirement in Arizona, or a retirement shopping for groceries in the cat food aisle in some desolate industrial midwestern town.
Big businesspeople? Honestly, every single bailed out firm should be out of business right now. Their shareholders should be wiped out and their employees should be jobless. Why aren't they? Because the government has stolen trillions upon trillions of dollars from the taxpayer and given it to crooks and thieves.
They took my money. Money that I paid every quarter to the IRS, whether or not it was easy, or even prudent to do. They stole it. They got rich with it.
I am left with nothing but my personal resources to keep myself and my remaining employees afloat. Not only do we have to make enough money to save ourselves, we have to make enough money so the government can take it and give it to multimillionaires who are too stupid to run a viable company.
I remember seeing people like, say, Michael Moore, protesting and losing his mind over things like the 2000 election and the wars in Iraq and Afghanistan. I'd never seen people so angry. It was as if he'd lost his mind, entirely and become a being of nothing but seething, irrational hatred.
Now, I'm starting to get it. I don't agree with his stands on those issues, but I'm starting to see that what had him so insane was that his fundamental sense of justice had just been annihilated. Everything he had believed about what is good and just and fair had been assaulted.
That is how I feel about our current financial situation and the government's solution of No Banker Left Behind combined with bread and circuses for the unwashed masses.
I didn't just believe in capitalism, I devoted my life to it. I was an acolyte in its hallowed academic halls. I became a deacon of the church in my rise to management in corporate America. I became a high priest when I funded, created and ran my own business.
I BELIEVED in capitalism and I put my money where my mouth was. I believed that capitalism was not just the best way for the wealthy to benefit, but to provide a maximization of wealth for all of society so that everybody would ultimately benefit.
Just as I BELIEVE in the United States of America as a force for everything that is good and right and fair. For that, I have walked the walk, not once, but twice in my lifetime by volunteering for military service.
Now? The United States of America has represented everything that is bad, and wrong and unfair by a complete perversion of capitalism. Because of the government, all the bad parts of capitalism (collecting wealth at the top while those at the bottom suffer) are alive and well and none of the good parts of capitalism (needing to invest in business at all levels and providing meaningful work and prosperity for everyone) is working well at all.
What will happen in the next few years? Nobody really knows. Small business is an act of faith. Despite what I have seen, I have no choice but to remain one of the faithful.
For the first time in my lifetime, though, I hate my government for what they've done. I've watched them perpetrate an unmitigated evil in the name of expediency. I just don't know what to believe anymore.
So, Michael Moore, if there's any room on the stark-raving loony bench, I'd appreciate it if you could move over and let me take a seat.
Things could not have been better for me. The business I started 3 years earlier was booming. Life was good. We were taking my son to a Mudhens game with about 6 of his friends to celebrate his birthday.
Just prior to leaving, I checked my bank statement online and found that checks were bouncing left and right. The deposits I'd made from my HELOC were rescinded and there was not enough money in the bank to cover the checks I'd written.
What in the world happened? It's not that I didn't have money. I had plenty. However, I was applying to acquire a second licensed territory in my business (I'm a Servpro franchisee) and was not drawing any money out of the business so we could meet a requirement for net liquidity.
Instead of drawing money from my business, I was going to live on my HELOC for a couple of months, get the 2nd license, then pay off the HELOC.
I was astounded. I hadn't bounced a check since undergrad, 15 years before. This was something that just never happened to me.
I called Chase and they explained that they had electronically re-appraised all the properties of their HELOC owners and reduced our credit lines. Apparently they sent out some notification in the mail, which I either hadn't noticed, or hadn't received. To make matters worse, on-line, they continued to show my older, larger HELOC limit.
Of course I was furious. Mostly because I had 4 different Chase accounts and had been a customer for over a decade. I couldn't believe that they didn't have the courtesy to either send me an e-mail or pick up a phone and let me know this before they did it.
She reiterated that I wasn't singled out for this treatment. She also said that this affected over 280,000 account holders and that they couldn't contact each one, personally.
I had more than enough money to settle matters. I paid off the HELOC, and closed the other Chase accounts. It had caused us to stumble, and to not-get our 2nd territory license, but in the grand scheme of things, it wasn't the worst development in the world.
Two months later, the financial markets started to unravel.
Personally, I watched with more than a little trepidation and fear. I grew up in the 70s, and joined the Army in the early 80s, which made me a recession baby of sorts. I knew what it was like to stand in line for jobs as a bus-boy with 40+ year old men. I knew what it was like to walk into a McDonalds where they had no job openings.
Those were dark times for our country and I didn't want to see them return.
The press has documented how the government made an unprecedented intervention to save the bonuses of bankers and keep the very villains who caused this problem in piles of money.
They said it was necessary to prevent unemployment from going over 8% and to prevent liquidity from drying up.
As soon as the bankers had their multimillion dollar bonuses, unemployment went over 10% and they never made any effort, whatsoever, to provide liquidity to the broad economy.
We bailed out Wall Street, but left Main Street to suffer.
For the next year, I was stunned to see my business continue to prosper while the rest of the national, and especially the local economy tanked. We were setting sales records and adding staff every month.
Then, things must have reached a critical mass, because in mid 2009, business dropped like it had fallen off the edge of a table.
Small business, especially one like mine, requires the ability to see around corners. In this regard, I failed as a business owner.
I kept my staffing up, hoping business would return. Also, hoping not to ruin the lives of my workers, who didn't deserve any of this. I burned through all our reserve cash and tapped out all available business and personal credit.
After seeing my cash position deteriorate by six figures, I was out of money. At that point, what had appeared to be a short-term slowdown was now in its sixth month. That's not a slowdown. That's a permanent change of business condition.
I started letting people go in November. We avoided any layoffs after mid-November so as not to ruin anybody's Christmas. Besides, business frequently picked up with the bad weather.
Business stayed weak, though and layoffs continued in January and February.
Personally, I'm optimistic. My company was profitable every single year of operations. We didn't lose money because the business model became no longer viable. Nor did we lose money because our volume couldn't provide for profitable operations.
My business can make money at very low volumes. We'd have to be looking at a monumental train-wreck not to have enough volume to remain a viable business. So, we didn't lose money because we couldn't make money.
We lost money because I tried to keep people employed. Both because I felt it was my duty as a human being, and because I felt it was my duty as an entrepreneur.
However, when it came to it, the choice was to reorganize as a smaller organization or risk bankruptcy. I reorganized and we should be fine, now.
Still, I am furious. Being an entreprenuer is one of very few callings in my life. It is my chosen profession. In a largely unconventional life, it is the one conventional path I took. I graduated from the best business school I could attend (Case Western Reserve University). I paid my dues in a series of jobs in Fortune 500 companies. I earned my stripes in project management and management.
I believe in the power of business and the goodness of markets.
Which is why I'm probably MORE outraged than many at what our government has done. They have literally rewarded the very evil-doers who have caused this misery and left the rest of us to rot.
More remarkable is that not only was the Bush Administration, through Henry Paulson, the embodiment of complete and total evil, but the Obama Administration, through Tim Geithner, has decided that being an abject black-hole of humanity and morality is the right thing to do, too.
A small businessperson understands: you mess up, you pay the consequences. When I keep people on the payroll, I do it with my wallet. When I take a chance, I take a chance not only with my money, but with my very future. I gamble with my son's ability to go to the college of his choice. I gamble with modest financial resources that took me two decades to accumulate. I gamble with the stakes being a comfortable retirement in Arizona, or a retirement shopping for groceries in the cat food aisle in some desolate industrial midwestern town.
Big businesspeople? Honestly, every single bailed out firm should be out of business right now. Their shareholders should be wiped out and their employees should be jobless. Why aren't they? Because the government has stolen trillions upon trillions of dollars from the taxpayer and given it to crooks and thieves.
They took my money. Money that I paid every quarter to the IRS, whether or not it was easy, or even prudent to do. They stole it. They got rich with it.
I am left with nothing but my personal resources to keep myself and my remaining employees afloat. Not only do we have to make enough money to save ourselves, we have to make enough money so the government can take it and give it to multimillionaires who are too stupid to run a viable company.
I remember seeing people like, say, Michael Moore, protesting and losing his mind over things like the 2000 election and the wars in Iraq and Afghanistan. I'd never seen people so angry. It was as if he'd lost his mind, entirely and become a being of nothing but seething, irrational hatred.
Now, I'm starting to get it. I don't agree with his stands on those issues, but I'm starting to see that what had him so insane was that his fundamental sense of justice had just been annihilated. Everything he had believed about what is good and just and fair had been assaulted.
That is how I feel about our current financial situation and the government's solution of No Banker Left Behind combined with bread and circuses for the unwashed masses.
I didn't just believe in capitalism, I devoted my life to it. I was an acolyte in its hallowed academic halls. I became a deacon of the church in my rise to management in corporate America. I became a high priest when I funded, created and ran my own business.
I BELIEVED in capitalism and I put my money where my mouth was. I believed that capitalism was not just the best way for the wealthy to benefit, but to provide a maximization of wealth for all of society so that everybody would ultimately benefit.
Just as I BELIEVE in the United States of America as a force for everything that is good and right and fair. For that, I have walked the walk, not once, but twice in my lifetime by volunteering for military service.
Now? The United States of America has represented everything that is bad, and wrong and unfair by a complete perversion of capitalism. Because of the government, all the bad parts of capitalism (collecting wealth at the top while those at the bottom suffer) are alive and well and none of the good parts of capitalism (needing to invest in business at all levels and providing meaningful work and prosperity for everyone) is working well at all.
What will happen in the next few years? Nobody really knows. Small business is an act of faith. Despite what I have seen, I have no choice but to remain one of the faithful.
For the first time in my lifetime, though, I hate my government for what they've done. I've watched them perpetrate an unmitigated evil in the name of expediency. I just don't know what to believe anymore.
So, Michael Moore, if there's any room on the stark-raving loony bench, I'd appreciate it if you could move over and let me take a seat.
Thursday, February 4, 2010
The AIG Bonus Debacle
Like many folks, I'm outraged about the continuing bonuses given to people in the trading unit at AIG that essentially brought on the downfall of AIG and was responsible in no small measure for the global financial collapse.
There are a lot of facets to this story, so I'm just going to share my thoughts on them.
First, the Obama administration is handling this very badly. I'm not criticizing Kenneth Feinberg, who I think is, overall, doing a good job. However, the president is expressing mock outrage at the top, yet below him, his minions have been quietly working to make sure these bonuses get paid.
Senator Dodd stripped out compensation limits from the initial TARP bill at the request of somebody in the Obama administration. We can only guess who, but my money is on Geithner.
So, at the first, the administration talked one game while playing another: act outraged, but make sure the bonuses get paid.
Geithner is also hacking everybody off by saying that if we implement this tax on the banks, that the taxpayer won't have to worry that their money is being used to pay bonuses.
What this misses is that people are angry because their fundamental sense of justice is seriously offended. People who have worked hard their entire lives are now struggling or unemployed. The economy is weak and small businesses are dropping like flies. Big businesses aren't necessarily doing so hot, either.
The problem, which apparently nobody in the Obama administration understands, is that it is morally wrong to give bonuses to the people at AIG.
I'm not talking "wrong" in some worker's manifesto sense that it's wrong for one man to make more money than another. This is America. We idolize sports and entertainment figures who make more in a year than our entire block makes in a lifetime.
It's wrong because they don't deserve it. Their company is losing money. In the rest of the country, a company that loses money means pink slips. For these clowns, it means gigantic bonuses.
It's wrong because this is the very trading unit that put AIG in peril. Bad enough that their company doesn't make money, but these guys are the very type of clowns who brought on the global economic collapse.
It's just plain wrong.
Now, it is true that this happened under Bush's watch, not Obama's. Congressional Democrats brought up the idea of compensation limits as a condition of TARP.
Hank Paulson demanded that no compensation limits be enacted. His logic? That it would be too difficult.
Too difficult? More difficult than bankruptcy?
The reality is that Paulson, like Geithner, is from the culture of Wall Street and you will notice that the one and only thing in this whole economic mess that has come through unscathed is Wall Street compensation.
So, when the Obama folks say they got dealt a crappy hand, they're right. They did.
And then they played that crappy hand as badly as possible.
At this point, the contracts expire next month. No more guaranteed bonuses at AIG for a while.
The one and only bright side to all this? Feinberg has said that he will take past bonus payments into account when setting future compensation.
I know how I'd do it. I just wonder if he has the balls. Being that he's from the Obama administration, the answer is almost certainly "no" since this administration is pretty much the nutless wonder of American politics.
I would take the top 20bonus recipients. Set their compensation to about $30,000 a year. Scare the living piss out of them. They will more than likely quit.
And they'll be quitting in the midst of a very weak employment picture. Wall Street's unemployment rate is right there with the rest of the country.
Once they're replaced and operations are hitting their stride again, I'd take the next 20. Repeat the entire process until every one of these amoral jerks who accepted a bonus has either quit or is working for $30,000 a year.
Sounds mean spirited? Sounds vindictive?
These people ruined lives. And they profited immensely from it. I defy anybody to shed a tear for somebody who just got an average of about $2 million in compensation over the past 3 years.
There are a lot of facets to this story, so I'm just going to share my thoughts on them.
First, the Obama administration is handling this very badly. I'm not criticizing Kenneth Feinberg, who I think is, overall, doing a good job. However, the president is expressing mock outrage at the top, yet below him, his minions have been quietly working to make sure these bonuses get paid.
Senator Dodd stripped out compensation limits from the initial TARP bill at the request of somebody in the Obama administration. We can only guess who, but my money is on Geithner.
So, at the first, the administration talked one game while playing another: act outraged, but make sure the bonuses get paid.
Geithner is also hacking everybody off by saying that if we implement this tax on the banks, that the taxpayer won't have to worry that their money is being used to pay bonuses.
What this misses is that people are angry because their fundamental sense of justice is seriously offended. People who have worked hard their entire lives are now struggling or unemployed. The economy is weak and small businesses are dropping like flies. Big businesses aren't necessarily doing so hot, either.
The problem, which apparently nobody in the Obama administration understands, is that it is morally wrong to give bonuses to the people at AIG.
I'm not talking "wrong" in some worker's manifesto sense that it's wrong for one man to make more money than another. This is America. We idolize sports and entertainment figures who make more in a year than our entire block makes in a lifetime.
It's wrong because they don't deserve it. Their company is losing money. In the rest of the country, a company that loses money means pink slips. For these clowns, it means gigantic bonuses.
It's wrong because this is the very trading unit that put AIG in peril. Bad enough that their company doesn't make money, but these guys are the very type of clowns who brought on the global economic collapse.
It's just plain wrong.
Now, it is true that this happened under Bush's watch, not Obama's. Congressional Democrats brought up the idea of compensation limits as a condition of TARP.
Hank Paulson demanded that no compensation limits be enacted. His logic? That it would be too difficult.
Too difficult? More difficult than bankruptcy?
The reality is that Paulson, like Geithner, is from the culture of Wall Street and you will notice that the one and only thing in this whole economic mess that has come through unscathed is Wall Street compensation.
So, when the Obama folks say they got dealt a crappy hand, they're right. They did.
And then they played that crappy hand as badly as possible.
At this point, the contracts expire next month. No more guaranteed bonuses at AIG for a while.
The one and only bright side to all this? Feinberg has said that he will take past bonus payments into account when setting future compensation.
I know how I'd do it. I just wonder if he has the balls. Being that he's from the Obama administration, the answer is almost certainly "no" since this administration is pretty much the nutless wonder of American politics.
I would take the top 20bonus recipients. Set their compensation to about $30,000 a year. Scare the living piss out of them. They will more than likely quit.
And they'll be quitting in the midst of a very weak employment picture. Wall Street's unemployment rate is right there with the rest of the country.
Once they're replaced and operations are hitting their stride again, I'd take the next 20. Repeat the entire process until every one of these amoral jerks who accepted a bonus has either quit or is working for $30,000 a year.
Sounds mean spirited? Sounds vindictive?
These people ruined lives. And they profited immensely from it. I defy anybody to shed a tear for somebody who just got an average of about $2 million in compensation over the past 3 years.
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