Worse Than You Think – Part 3

The three largest automakers in the United States have clearly been deficient in their diligence and results. While there are structural and procedural differences between them what is common between General Motors, Ford, and Chrysler is an inability to produce a viable core product. The key question that absolutely has to be answered, and in full, is how these companies can credibly promise that all money loaned to them will be paid back, not only in full but with interest. If the car companies want an exceptional package to help them, their credibility and logic for requesting it must be just as excellent.

So, with that in mind, let’s examine the latest arguments from the CEOs of GM, Ford, and Chrysler. The information presented here comes from the Detroit Free Press:

First, admitting that they blundered in taking private luxury jets to Washington in their earlier visit, the executives this time promised some symbolic signs of humility, including “salaries of $1 a year and the elimination of corporate jets”. I will give them a small nod there, but also note that those steps were late and now appear to be reluctant, rather than the actions of truly concerned leaders.

Second, GM’s CEO said if they do not immediately receive what they want, as in almost twenty billion dollars before the end of the month, “the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy." That was the wrong thing to say, for many reasons, but topping the list is the sense of extortion implied in it – they are effectively saying ‘give us lots of money without getting any guarantees we’ll behave, or we’ll make sure lots and lots of innocent people get hurt.’ It does not matter if they meant it that way, it’s a threat and a stupid one. It’s also the wrong thing to say, because it highlights how badly these nimrods have bungled their companies; if they cannot keep their businesses running for more than a month if they are not babied, there is no sane reason to give them billions of tax dollars, period. And third, like their previous behavior, this statement demonstrates no sense of personal responsibility, no humility, no remorse for the damage that their poor management has done up to now. By all rights, the first condition of any assistance to these companies would be the complete and permanent replacement of their boards of directors and all chief officers (CEO, CFO, CIO, CAO, etc), on the grounds of clear dereliction of duty. But moving on for a moment, let’s look at what the companies promise to do to become successful again:

“GM's total request now tops $18 billion, with $12 billion in loans and an additional $6 billion as an emergency line of credit should the economy continue to worsen. In return, GM pledged to shed four of its U.S. brands, nine factories, up to 31,500 workers and roughly $30 billion in debt through 2012, all to make a profit excluding taxes by 2011.”

Addressing GM’s proposal for a moment, the reader might want to note that GM’s suggestions do not address any core issues – the management practices, structure of labor agreements, or the image problems for American carmakers. These proposals come down to just firing people and shutting down factories. Historically, companies that do this most often produce one of two results – they become smaller players in the industry, or they go out of business. Therefore, while reducing payroll and the number of brands may well be necessary, GM needs to do a lot more if they want to truly become competitive, and that begins with finding and addressing the real causes of their present condition.

So how did they get into this mess? There are a number of myths floating about, which need to be cleared away first:

1. The US market does not make hybrids.
Well, they were slow getting into the game, but Ford and GM make a lot of hybrid models now, more in fact that many foreign carmakers including Honda. American hybrids are not only small sedans, but also include some luxury sedans, trucks, and even a couple sports car models.

2. Detroit only builds inefficient cars.
Not true. While there are some gas hogs out there – what is the moral argument for having a Hummer, anyway – a lot of American cars get 30 mpg or better, and in many cases better than their asian counterparts. GM had some fun pointing out that their Tahoe hybrid gets better mileage than a Toyota Camry, for example. Recent tests indicate that American cars are of equal quality to most popular foreign makes, are often safer and cost less to own and maintain.

3. American cars are unpopular.
GM alone sold nine and a half million cars last year, and is the world’s largest seller of automobiles. In the United States (the largest single-country market), Ford sold almost nine hundred thousand more cars last year than Honda, and Chrysler’s US sales beat those of Nissan and Hyundai put together.

4. It was stupid for the companies to invest so heavily in trucks and SUVs.
Not at all. Historically, trucks and off-road vehicles have been the most profitable segment for the industry, which is one reason why Toyota, Honda and Nissan have been trying so long to make popular SUVs and light trucks.

Part of the problem, then, is getting down to the facts of the matter. From the earlier financial reviews of the companies, we see that the cost of making these vehicles, on average, exceeds the revenue they bring in. So, trite as it sounds, the first major plan would have to address either justifying raising prices to cover the costs and a reasonable margin, reducing costs to the point where the company makes a reasonable profit margin, or both to achieve that necessary goal. A lot of people get worked up by that word, but profit is a company’s pulse, a vital need. And for all the sophistication of modern management, it’s amazing just how many people forget the first need – if the company does not make money, it can do no good for anyone.

We’ll come back to that. For here, let’s go back and see what the executives plan to do to make their companies competitive.

“Ford's recovery blueprint said it would invest $14 billion over the next seven years to boost its vehicles' fuel efficiency, and it said it would improve the overall efficiency of its fleet by an average of 14 percent next year. And Ford is calling for a partnership among automakers, suppliers and government to develop new battery technologies.”

Well, it’s a plan, sort of. The problem is, Ford’s cars and trucks have been increasingly efficient for more than a decade now, but it’s lost ground anyway. This plan does not do anything really new, so it’s not likely to solve Ford’s long-term problems.

“GM would focus on four brands — Chevrolet, GMC, Buick and Cadillac. It would sell Saab, shrink Pontiac to a niche brand and consider selling or closing Saturn, GM President Fritz Henderson said Tuesday. GM plans to trim U.S. dealerships from 6,450 to 4,700.”

As I said earlier, this is nothing more than dumping payroll and facilities. By itself it can assure GM of nothing more than reduced revenues and the prospect of corporate death. It may be necessary to take these steps in order to drastically cut costs now, but they do nothing to address the root causes of GM’s condition.

“Chrysler said it would cut costs by slashing employee benefits and terminating its lease car program. Of the three companies, only Chrysler left open the possibility of a merger.”

Note that Chrysler has the lamest proposals of all three, doing nothing to address the costs of making their vehicles.

“All three automakers plan to meet with the United Auto Workers union today in Detroit to debate what cost savings could be wrung from the union contracts. Up for discussion was the possibility of scrapping a much-maligned jobs bank in which laid-off workers keep receiving most of their pay.”


It took a while to get there, but here we finally see a step that could make a substantive difference to the survival prospects of these companies. The question here, is whether the UAW truly understands the decision before it; if they refuse to agree to major concessions, the union could do serious and permanent harm to all of its members, and obliterate the union itself as a significant labor force.

Looking at the numbers, it appears that 640 thousand employees work at the three companies. That by itself is an interesting number, but it’s important here because if the average pay and benefits total per employee were reduced by, say, twenty thousand dollars a year, that would create savings of 12.8 billion dollars. What that means, is that even if the UAW agreed to massive pay cuts across the board, this would not bring in all the savings that the three companies say are immediately necessary to survive.

Stepping back to the basics, again, any business needs to do a number of things in order to survive. Making a profit, of course, is the first goal, but to do that you have to make a product, market it in a way that creates demand, and transact the sale to bring in the money. That works for everything from lemonade stands to car makers. Having addressed the myths before, we have to ask just why efficient, attractive, well-made cars for reasonable prices are not selling as well as their competitors. Well, some of that is a lag in image – I’m old enough to remember when Toyotas and Hondas were not very good, and they only sold because they were cheap. In 1978 there was no high-end Honda or Toyota sold in the US; it was all cheap cars all the time. And even when their cars began to improve in quality and comfort, it took a while to win over American car buyers. The domestic companies would seem to be facing the same situation now, an image problem that won’t go away in the short term, not least because these companies continue to reinforce the negative impressions. GM’s mistakes include holding on to GMAC (what, pray tell, is the rationale for a car company holding mortgages?), threatening to raise prices in 2009 after a similar claim in 2007 failed, and as I mentioned in part 1 they wrote off a slew of tax credits (39 billion dollars in all) in the tacit admission that they may never have taxable income in the forseeable future to apply them against. The combination of those three blunders would scare off just about any investor doing his homework, let alone a CPA deciding whether this is a viable business which can be expected to repay a loan in eleven figures. As for Ford, well just yesterday I mentioned that the company revisited its horrific Pinto design and coverup escapade with the incredible F150 flambe’. Nothing like torching your top model, to create similar results in your net income reports. And as for Chrysler, can anyone think of a single model from this company in the last quarter-century, where it was the clear leader? Whether cars, trucks, or SUVs, there is not one Dodge or Chrysler product which is clearly superior to the field in quality, value, or features. Yes, they made the 300, the Dodge Ram, and some of the Jeeps are pretty good, but that’s as good as they manage – even the Dodge Charger is just a ‘good’ car, not great by anyone’s definition.

And then there are the management structures. Take a look at GM’s org chart – there are fifty-two “chief” officers and “general” officers of the company, and we are not even out of the C-suite yet. Can you say ‘Peter Principle?’ Sure you can, and here is a prime example. What stands out here, is that there are ten direct reports to the CEO, all of whom have more power than a CEO at 95% of all other corporations. This alone can help explain why GM puts out so many redundant models and brands, and cannot find a way to reach a cogent, clear business plan.


The Ford org chart is no better; fifty-seven top corporate officers, many of which seem to have some less-than-vital roles. And let’s not forget that while this is ostensibly a public company, the Ford family have arranged things so that in the end, they make the calls. Nothing like having a position with lots of responsibility, but in the end no real authority, huh?


There is no org chart available for Chrysler, although from what I read in trade magazines, the ghost of Lee Iococca is as big on sprawling confusion of well-dressed mandarins, as anyone at GM or Ford. Let’s not forget that Chrysler is technically a private company, answerable much more to Cerberus and Daimler (who still hold 19% of the company) than to the public.

As harsh as it sounds, the fact is that none of the three companies in trouble has the right management team in place to deal with the problems. None of the three companies, for example, has explained where the money – if granted – would be applied, apparently hoping to just use it in general operating expenses. In fact, GM’s CEO as much as said that he wants a no-strings gift of billions of dollars to be applied directly to current payroll and accounts payable. The desire may be understandable, but this clearly does nothing to address the root causes of the crisis. And so, the only rational response is to refuse that trap. In the final analysis, so many problems exist that only a complete reorganization can possibly address them effectively.

Yet, GM’s CEO says that in the case of bankruptcy, debtor-in-possession may not be possible for GM. There are a number of reasons for that. First are the reasons put out by CEO Rick Wagoner himself:

1. The size of GM’s debt and needs would make financing very difficult, even without the current credit crisis going on;

2. Bankruptcy would be used, he says, to address legacy costs and capacity utilization, two areas where GM is already making improvements and planning ahead; and

3. There is a likelihood that the weak consumer interest in a trouble American carmaker, would collapse completely in the event of a bankruptcy.



There are additional reasons to think that GM does not want to go through bankruptcy, however, and one of the biggest I can think of went into effect in the middle of 2002. Chief officers of every public corporation in the United States sign quarterly reports confirming their personal and specific responsibility for the material accuracy of their financial statements. Where in the past an executive could claim he had no knowledge of unethical practices turned up in an audit or SEC investigation, the provisions of Sarbanes-Oxley closed off that loophole and set guards at the door. A bankruptcy for GM would mean a set of forensic audits at the minimum, and any substantive violation would lead to fines and criminal charges for everyone in the C-suite. I’d lay odds right now that there are things in GM’s numbers that no executive wants to have to explain.
So let’s be clear: It may well be that General Motors, Ford, and Chrysler are not looking at a Chapter 11 Bankruptcy and reorganization, but at liquidation and a lot of very bad legal troubles. Given the conditions discussed above, a Congress determined not to reward businesses that fail, and a public mistrust of these companies, it appears unavoidable now. And yet, there is still no solid indication that the executives at any of these three corporations is prepared to address that reality.

Worse Than You Think – Part 2

Yesterday I trashed GM pretty hard, and they deserved it. The short version for GM, is that the management is both clueless and dishonest, and if they manage to avoid heavy penalties from the SEC, it would only be because the government decided not to pick on the mentally handicapped.

Let’s move on now to Ford. Ford is just plain weird from the start, a two-tier company which on the one hand wants to be a big public corporation, but on the other refuses to allow the stockholders’ control of their own company, by keeping a level of stock in family hands, an effective oligarchy. Ford is also noteworthy for its selection of pyrotechnic vehicles, from the traditional Pinto to the more modern F150.

Looking at the 2007 Annual Report, we see that Ford received 154.4 billion dollars in revenue, on sales of 6.55 million cars and trucks, or $23,562 apiece. But the car part of the company lost 5.0 billion dollars on the year, or $763 lost per car or truck sold. Only a 1.2 billion dollar profit on its financial services made things a bit better for Ford.

The 2006 report shows a 17.0 billion dollar loss for the car and truck part of the company, and the 2005 report shows a 3.9 billion dollar loss for the car and truck part of the company – like 2007 the financial services helped the final numbers look better. The 2004 report shows a 200 million dollar loss for the car and truck divisions, so what we are seeing is a progressively poor performance as years go by. That trend has neither been effectively diagnosed nor addressed, and the fact that the board of directors at Ford is not directly accountable to stockholders. While Ford has managed not to commit apparent fraud with its books the way GM has done for half a decade, the letters to stockholders which start off every Annual Report show no sense of accountability or effective planning.

Stopping here for a moment, we can see a slight difference between GM and Ford. Ford managed to handle its financing well enough to avoid the catastrophic damage we see happening to GM, but both companies are unable to make an operating profit from their core products.

Now on to Chrysler. If the words ‘Chrysler’ and ‘Crisis’ sound similar, you may be remembering how these guys almost killed off the company before. At the end of the Carter years, Chrysler was doing pretty much what it's doing now - making cars that do not fit what the public wants, and headed full speed towards self-destruction, and therefore pleading for the government to save its sorry rear. The thing to note about that help that Chrysler got that time, was not only that it was much smaller than what they want now, it also left the company largely untouched. No management changes, no strcutural changes, it basically assumed that they were doing a good job and could be trusted not to screw up again. And here we are.

Chrysler's ownership has been a mess for several years now. This 'American' company stopped being a really American company some years ago when it became DaimlerChrysler, and was actually a foreign-owned private company until September of 2007. That's right, a company whose foreign owners dropped it like a flaming bag of turd, thinks it makes sense to ask for money from the U.S. government on the claim that it's a good investment. Anyway, looking at the 2007 numbers we see Daimler reporting that Chrysler lost $2.9 billion during the first 9 months of 2007; Chrysler denied losing that much but never released hard numbers to show how badly they actually did. Their new owners, Cerberus, are best known for cutting their investment in Chrysler by over 50% in the first half of 2008 - it appears they only dropped that much, because they could not find anyone willing to take any more of Chrysler after that. Cerberus had also been a big buyer in GMAC and they dumped that, too.

So maybe it was just one bad year? Cerberus' 2006 report shows that it was a good year for the company ... except for the 1.1 billion Euros ($2.4 billion) lost by Chrysler. Chrysler was doing all right before it, but the SUV and Jeep-heavy company started failing when gas prices began a sharp rise.

(to be continued in part 3)

Worse Than You Think – Part 1

Congress surprised me a little while back, when they decided not to bail out the ‘Big 3’ automakers, who were hoping for just about fifty billion tax dollars (25 billion already requested and they wanted to add another 25 billion just because). Given the way the press is spinning the 700 billion set aside to address the financial markets, I was worried that the Congress would just toss off another 50 billion without looking into the matter. But instead, Congress displayed an unexpected but welcome prudence, demanding that Detroit demonstrate better responsibility. I wondered just what was missing, so I started looking into the financial health of these companies. Boy howdy, these guys are in really bad shape, and more, throwing money at them won’t do a lick to change their crash course.

Before I go into these companies, I need to explain why extra money won’t help. There are a number of factors which can cause a company to fail. In the case of the financial markets, most of the banks made mistakes but in general are fundamentally sound in design and practice, so that infusions of cash and credit are sufficient to get the company back into good working order, and there is high confidence that the money spent will be repaid in full. Other causes exist for business problems which may or may not be addressed effectively with cash, but there are certain conditions which signal severe risk of failure. The three major US automakers all exhibit such indications of imminent failure, and these conditions cannot be ameliorated by simply increasing cash flow for a short time.

The first case to consider is General Motors, which was created in 1908. GM’s company profile states that the company has 266,000 employees in 35 countries, and in 2007 sold 9.37 million cars and trucks. Looking at the highlights from the 2007 Annual Report, I see that GM took in over 178 billion dollars in revenue (or around nineteen thousand dollars per car or truck sold) from sales and just under 3 billion dollars from finance and insurance services. Despite this, the company’s adjusted net income is a reported loss of 23 million dollars for 2007. But that’s not the part that worries me. The loss before a reported “change in accounting principle” for 2007 was 38.7 billion dollars, meaning these geniuses spent an average of over twenty-three thousand per car or truck manufactured, so that they lost four thousand dollars on each and every car or truck they made that year.

That line about changing the accounting principle bothered me; that’s not normal GAAP and if it happened more than once in a short span it’s a very bad sign about a company’s reporting. So I went to the next report and had a look at 2006 ...

And saw the same notation, changing a two billion dollar loss in 2006 to a reported two billion dollar profit. In 2006, GM made just about 9.2 million cars and trucks and sold them for just over 207 billion dollars, or $22,585 each. But that year it cost GM about $22,800 for each car or truck they made, so while it was not as bad as 2007, the problem was there as well – it just got worse in 2007. We know why; sales for low-mpg cars and trucks fell through the floor as gas prices shot up, while the cost of making the things still climbed. And that change in accounting principle bothered me, so I checked out the footnote they stuck on it for an explanation; it read: “A reconciliation of adjusted amounts in these Financial Highlights and in the Chairman’s Letter to Stockholders to amounts determined in accordance with accounting principles generally accepted in the United States may be found at www.gm.com/company/investor_information/, Earnings Releases, Financial Highlights”. If that does not make sense to you, you are reading it correctly, because there is no direct link to that explanation – you have to chase it down, so I did. Buried in the letter to stockholders and features, in rather fine print, GM noted that in 2007, “GM’s total adjusted net loss in 2007, excluding special items, was $23 million, reflecting a $1.1 billion loss attributed to our 49 percent stake in GMAC. While GMAC’s traditional auto financing business performed well, those results were more than offset by massive losses in GMAC’s mortgage businesses. Including special items, GM reported a loss of $38.7 billion, or $68.45 per diluted share in 2007. This loss is almost entirely attributable to the non-cash $38.3 billion special charge in the third quarter related to a non-cash valuation allowance against deferred tax assets. The valuation allowance has no impact on cash, and does not reflect a change in the company’s view of its long-term financial outlook.”

By itself that might fly. But remember, we also saw this the year before, so I looked at the 2006 version, and found this:

“Following a review of deferred income taxes and our accounting for derivatives under Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, we restated our balance sheet, stockholders’ equity and reported net income in our financial statements from 2002 through the third quarter of 2006. These adjustments had no material impact on cash flow for any of the restated periods.”

In plain English, this is what most people would call a lie. GM took a two-billion dollar loss, and spun the numbers to call it a two-billion dollar profit. They did this by changing the way they addressed their mortgage losses. I expect they thought this would be a one-time thing, but the fact it is, this change materially changed GM’s representation of their financial condition, which violates GAAP. While GM claims to have followed SFAS 133 with regard to its derivative accounting, the FASB clearly states in the summary of that Statement, “an entity that elects to apply hedge accounting is required to establish at the inception of the hedge the method it will use for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. Those methods must be consistent with the entity's approach to managing risk.” [emphasis mine]

This means there are two problems with GM’s claim – first, they did not establish this accounting at the inception of the hedging action, but after the fact, and two – this change materially changed the reported financial condition of the company, which violates the FASB’s Statement of Concepts No. 5. This ought to have provoked an SEC investigation, and I am guessing only GM’s size prevented that from happening prior to now. Certainly the action violates GAAP as I know it.

So, two accounting principle changes in as many years, both of which alter the corporation’s reported financial condition. Feeling iffy yet? Well, let’s go back to 2005 and see if they were still playing Hinky Financial Reporting then as well. And yep, there it is again. A 10.4 billion dollar loss is adjusted to show only a 3.4 billion dollar loss, because of “Hughes Electronics and Special Items", again with a footnote telling us to go hunt down the details.

Before I get to that detail, I want you to note what the executives at GM were saying after the 2005 year, before they started playing games with their 2006 and 2007 numbers: “We also have a renewed commitment to excellence and transparency in our financial reporting. The recent discovery of prior-year accounting errors has been extremely disappointing and embarrassing to all of us. Credibility is paramount, for GM as a company and for me personally. While I will not offer excuses, I do apologize on behalf of our management team, and assure you that we will strive to deserve your trust. The fact is that errors were made, and we can’t change that. What we have done is disclose our mistakes and work as diligently as we can to fix them.”

It’s, ahem, pretty obvious that GM never fixed its problems, nor did they stop covering up their poor management. In 2005, once again GM changed its numbers to make a loss look prettier, changing a 10.4 billion dollar loss into a 3.4 billion dollar loss by fooling with the books. The detail in the 2005 Annual Report advises that for 2005, GM adjusted its numbers on the basis of a stock split of a former subsidiary, Hughes Electronics: “In December 2003, GM split off Hughes by distributing Hughes common stock to the holders of GM Class H common stock in exchange for all the outstanding shares of GM Class H common stock. Simultaneously, GM sold its 19.8% retained economic interest in Hughes to The News Corporation Ltd. (News Corporation) in exchange for cash and News Corporation Preferred American Depositary Shares. As of the completion of these transactions on December 22, 2003, the results of operations, cash flows, and the assets and liabilities of Hughes were classified as discontinued operations for all periods through such date presented in GM’s consolidated financial statements.”

Note that GM’s decision to accept shares from News Corporation PADS was a voluntary act by GM, and so it is difficult to argue that the corporation should be allowed to separate those losses from its financial reporting; it’s not as if the losses really go away if you do not admit them.

I could go on. Number fudging by GM occurred in its 2004 and 2003 reports, and five straight years of changing the way you do your financial reporting should be a big red flag to any auditor, especially since there were at least three major causes for the changes. There are numerous indicators of significant financial instability and poor management (a new CEO or CFO might be surprised by bad news, but when it keeps happening it’s a sign that the guy in the seat is a bad driver), and if GM had been an ordinary company, we’d have seen a government investigation long before now.

To be continued in parts 2 and 3

Ug

4-hour Exam today, brain-dead. Post tomorrow.

Animal Edition of Jackass

There was a time, when I thought one thing that separated Man from the other animals, was Man’s incredible habit of doing the incredibly stupid on purpose. The pet rock, streaking, and the election of Barack Obama come to mind as obvious examples. But over time I have found that animals can also choose stupid things to do, for no practical reason whatsoever.

Today’s edition features Bingo & Cody, my dogs.



Bingo is a Collie, and Cody is a Black Lab. They are both intelligent, caring and gentle dogs where children are concerned ... and the exact opposite where birds are concerned. More than once, a low-flying bird has discovered how fast my dogs can be, and how high they can jump.

So I'm studying for a final exam, and I hear the dogs making a ruckus, and I go out and see ... a scene from "The Birds".

About fifty crows had apparently been migrating, and sat along the fencetop peering at the dogs. The dogs would jump at them and the birds would fly off for a while, then come back. And every so often a crow would make a low pass through the yard, as if daring the dogs to catch it.

Stupid.

Yet very popular.

Three times I saw a bird lose feathers to a jaw snap, and one bird only survived by frantically pecking at Cody to get his wing free. Yet a few seconds later, here comes another one to try his luck.

It seemed like a crow frat pledge initiation; survive the dogs, buy your pin and the tickets to the next dance, and you're in.

Sheesh.

Thanksgiving

Every other day of the year, pretty much, bloggers spend their time criticizing the world and the people running things. Today, however, is a day where we should stop and give thanks for the good things and the good people. And I have many things to be thankful for.

First, my wife Mikki. I do not write much about my family for reasons of privacy for them, but if there are any good qualities to me and accomplishments to note, she is a major part of how they came to be. My wife has worked – for years – on my rough edges and my ideals, making me a better, more diligent, and more courteous man than I would ever otherwise have been. Obviously, I am very much a work in progress, but what good I have done is largely due to my wife.

Next, my daughters. No names here because we live in a world of creeps and criminals, but there is no office or title a man can hope to receive, that ranks with being a father and doing the job properly. There is no satisfaction to match with hearing ‘I love you’ from your child. And there is no standard higher than being a good father; failing at that task brings greater consequences than anything with money or paperwork could ever do, and so all good fathers focus first and most on their duty to their families.

I am also thankful for my cancer, or rather, what it has taught me. A little less than two years ago, an oncologist told my wife that not only was PMP incurable, but also there was no effective treatment possible and I should give up and simply choose an ‘end of life’ regimen. Thank God he was wrong!

The actual turn of events has been most merciful to me. My cancer is in fact incurable; there will always be a possibility that the cells in my abdomen which now are so quiescent could abruptly turn malignant and attack my internal organs – no one knows precisely what causes such cells to metastasize, and so I live with a biological sort of grenade in my guts – but the main suspects have all been addressed, first by surgery then by a simple process of drugs and checkups every so often at MD Anderson. For over a year now the reports have been clean and promising.

But every time I go to MDA for a workup, I see many who have not been so fortunate, and for whom the cost of their battle has been much more severe than my own. Ironically, I often see that cancer is not as hard on the patient as on his/her family. I still recall the big tough guy I saw in a CT Scan waiting room, who reminded me of a construction foreman, who was going through hell waiting to find out if his wife would be okay. I have seen unmistakable stress and pain in the faces of parents who feel everything their child is going through, but who can do nothing to fight the thing that is trying to kill their child. I have seen patients go through more pain and suffering in a week at MDA than most people endure in their lives. And those are the survivors. As I wrote above, I have no hope at this time that my type of cancer can be cured, and many types of cancer are like that – you learn to deal with a different kind of reality, what you used to call ‘normal’ is gone forever. But you learn right quick not to bitch too much, because you don’t have to look far to see someone who has things a whole lot worse. There are people with only a few years left to live, who are thankful because they remember those whose time is already up.

I am even thankful for our recent election. No, I don’t like the winners, but I am grateful for a process where we get a lot of information and can freely support our chosen candidate and criticize anyone on whatever grounds we choose. Dissent is not only tolerated, it’s our tradition, and the conversation and debate continues before, through, and after the election.

I am thankful for America. The people who treat America as the same as any other country just don’t get it, and that’s not surprising, but in every meaningful sense America is what the rest of the world wants to be. That does not mean we don’t have a whole lot of work to achieve more of our own ideals, and to work at Justice and the true American Dream, but we believe those dreams are real and attainable, and we consider that everyone has the right to pursue them so long as they do not trample others in that pursuit.

I am thankful for football. That may seem a trite thing, but football as it is played in America is unique, very American, and reflects both the ideals and reality of our country. You either love it or you don’t get it.

I am also thankful for blogging. The triumphs, the blunders, the work, the discussion and the community, the new media is not just about information, but noting and encouraging the dimension that is coming of age. We are all part of it, and I am thankful for everyone here.

Absurdia

It’s been a while since I have had a thorough examination of my eyes, so this morning I went in for a full work-up. Mostly, because the Supreme Local Authority, aka my wife, said to do so.

Like most medical examinations, there is a prolonged period of waiting in the examination room, where you cannot do anything but sit and waste time, usually in a condition of relative vulnerability. In today’s case, that meant sitting with my eyes treated with three different sorts of drops, dilating them and doing who know what else. At such times, you cannot do much of anything but think, and it occurred to me that many of our nation’s leaders spend a great deal of time just waiting, themselves. Despite the hype, there are real and sometimes adamantine limits on the Congress, Courts, and President, so that each spends time waiting for the other to do something, to which he will then respond.

It also occurred to me that there are a lot of things patients have to put up with, either for very good reasons that we simply do not understand, or maybe just because that is how the doctors demand things be done and we have no choice in the matter. The political equivalent, of course, are such presumptions that it will take a long time for domestic drilling to have any effect on the economy, so it should not be done at all, or that because reforming Social Security is a difficult and complex problem, we should ignore the coming catastrophe of its collapse.

That line of absurdity is a very well-established one in Congress. Because they did not face up to his crimes when he was politically powerful, republicans this year found themselves supporting a convicted felon in the Alaska senatorial race. Because he did not address his past support of ACORN and explain the difference between his work and their attempts to commit voter registration fraud, President-elect Obama has already cemented his name to a corrupt group of unscrupulous partisans. And both parties have accepted money and support in various ways from groups that most Americans consider immoral and hypocritical.

In the end, I got a prescription and a bill, and I have to trust my doctor that his opinion will result in better health and vision in the future. In the same way, as bizarre as it seems we Americans have little choice but to pay the bill for what our government does, and hope they know what they’re doing.

The Liberal-Conservative War

Comments on this and many other blogs make clear that a war continues between people of liberal and conservative nature. The way that partisans have treated the last two presidents elected, demonstrate how harsh the judgment and rhetoric has become. Bill Clinton was blamed for all manner of offenses by conservatives, and later liberals, for his presumed liberal policies and on the other hand for ‘betraying’ liberals by working with republicans on some issues. George W. Bush, on the other hand, received even more vitriol for being conservative, or for not being a ‘real’ conservative. The extremists on either end were displeased with both presidents; they demanded a polarity which would have been impractical and unreasonable, yet they poisoned the reputations of both men out of spite. From what I can see, there has never really been a purely ‘liberal’ or ‘conservative’ President elected yet; Kennedy championed many liberal causes, yet was fiscally and militarily far more conservative than today’s liberals would tolerate. And Reagan, the definitive icon for modern conservatives, cooperated with liberals far more often than many on the Right are willing to admit, especially with regard to immigration and environmental issues.

This is not to say there is a moral equivalency between liberals and conservatives. There are many ethical and logical reasons to choose one standard over the other, and I will not go into that here, except to acknowledge that the decision is often made by serious, intelligent people who intend to follow the best possible moral course in their political foundation. Yet historically, liberals and conservatives have often been able to find common ground, and to reach mutually acceptable compromises. The modern version of each group is far less willing to even look for such accommodation, preferring to destroy the loaf rather than let the other side have even a slice, let alone half.

Some people will look at the 2008 election, as a mandate for liberal policies. I disagree, for the same reason that liberals argued that the 2004 election was not a mandate for conservative policies. As a conservative, I naturally believe that in general conservative polices are better for the country than liberal policies, and I would even go so far as to suggest that in an unbiased environment, voters will prefer a solid conservative candidate to a solid liberal. However, I recognize that moods and environments change, and that the nation in general prefers someone they consider more ‘centered’, that word changing from year to year in meaning as well as specific policy, but usually meaning that the public does not like hard shifts towards any perceived extreme.

As much as I prefer conservative policies and candidates to liberal goals, I concede that a balance of some sort is necessary. This comes from history again, where we can see that unipolar moral systems tend to devolve to individual and systemic corruption, as there is no effective check to the party or leader in power. There needs to be a counter-balance to extremist tendencies, whether or not we like the direction in general that the leadership wants to pursue. It is distinctly unhealthy, however, for disagreement in policy to become vitriolic hatred, for a different perspective to be condemned simply for expression.

Chaos and Democracy

When I was very young and first encountered History, the concept of Democracy seemed the obvious right choice to me. After all, who could argue with everyone having an equal say in matters of power and responsibility? It seemed that it was just a matter of getting evil people who had power to let go and for regular people to rule themselves.

Then I grew up. Oh, I am still a big supporter of Democracy, in so far as we mean self-governance, the duty of a man to rule his mind, heart, words and actions. That’s hard enough to do for anyone! But I am less confident that Democracy is really a functional plan in its true form, not least because it appears everyone is eager to take the power, but not carry the responsibility that comes with it. Over and over again, I run into people who want someone else to do the hard work and they only want the benefits. I first noticed this in work situations. When I worked on the floor in retail, many of my co-workers hoped for promotion to management, where they assumed they could relax and just make money off someone else’s work. I noticed many situations, especially in unions, where the more senior employees took advantage of and sometimes cheated the junior employees, and considered it their “right” to do so. Amway runs that way, I discovered, and so do many corporations. After I graduated from college and started working as a manager, I discovered that the managers were the same way – some worked hard while others schemed ways to gain money and promotion off someone else’s work. I also noticed that when it was time for hard decisions, when a crisis emerged, many people hid from participation, from the duty of making a suggestion or trying to address the problem.

This, I think, explains the popularity of kings. You get a highly visible figurehead who can take all the criticism and attention for the business of making things work. As he is one person, he cannot possibly have all the answers, and so at some point he takes on advisors to find the answers he needs, and this is where the ambitious men aim their efforts. That way, they get money and power and maybe a few honors when things go well, and they can hide and deny when things go in the sewer. You might think that just because the United States does not have a monarchy that we are different, but don’t be hasty. Presidents are often treated as the focus of attention and criticism, and many a CEO is targeted, fairly or not, when their company goes south. In the end, it’s a rare individual who is willing to take on the whole package of true leadership, and being willing to face a hostile environment of press and activists is just as tough as any medieval quest.

Setting the Bar

For the last seven plus years, democrats have refused to give President Bush credit for any of his work. Keep the nation safe from a follow-up to 9-11? Coincidence. Establish a democracy in the heart of the Middle East, and in so doing place a physical check to the aggression of Iran’s Islamic radicals and take out one of the more disgusting dictators of our time? Blame him for every death as if War is normally fought without cost or pain, and ignore the clear evidence and decisions which authorized the war. Democrats have blamed Bush for things he might have done better, along with things he could never have done better and for which no prior President was blamed, and yet they consistently refuse to grant credit for any of the many accomplishments during Bush’s terms. Democrats have paid no attention to Bush’s unprecedented work in fighting AIDS and Malaria, and in developing African countries’ infrastructure. Most Americans have never heard of PEPFAR, or that two of every three sub-Saharan African countries are governed by democratic elections, an accomplishment considered impossible by most just a few years ago. In addition to a number of clear successes, George W. Bush is also notable for being the first president in more than a decade to attempt to proactively address the Social Security crisis which will begin to hit in less than 3 years from now, and for trying to create a realistic solution to border control (Bush spent more on border security than any prior president) and immigration reform. While reasonable people may and do disagree on whether a specific action should be praised, the deliberate denigration of every action by President Bush is dishonorable, and portends problems for President Obama.

It is no secret that I consider President Bush to be one of our better presidents, easily the best of the last three men to hold that office. So I understand that many who read this article will disagree with my appraisal of W. It is not to establish his reputation that I write today, however – Time will give us the judgment in better context. It is, rather, an admonition to the democrats that they may find their tactics used against one enemy, may as effectively disable their own chosen leader. After the 2002 elections, in particular, the republicans held power to a degree remarkably similar to what the democrats expect to enjoy this coming January. But it will now be their lot to try to defend their claims and keep their promises, some promises being especially hard to make real given the wild and exaggerated standards used in their speeches and campaigning. It’s one thing to note that some voters expected Obama’s administration to pay their mortgage for them and give them money, but quite another to consider how these people will react once they realize they have been lied to by the democrats.

Barack Obama has backed off a lot of his promises, wiping them from his website and choosing far more restraint in post-election comments than he ever showed during the campaign. It’s increasingly obvious that Obama is dialing back expectations before he takes office, though it is absurd to imagine that the voters will forget everything he promises, just because he cannot possibly do what he said he would do. But they’re trying hard to spin things in the most positive light – the grudging admission that raising taxes on the people who provide jobs and doling out money to people who do not even pay taxes would both be very poor plans, is being touted as ‘leadership’ by his team, in hopes that folks will ignore that the inability to keep these basic promises means either that Obama was so naïve that he did not understand how the office works, or that he was so dishonest that he figured no one would hold him accountable for the lies. It’s quite a double-standard: Bush is blamed for ‘lies’ which were never false or else were never intended to be misleading, while Obama is praised for clearly false and misleading statements used to win the election. The bar for expectations and standards in the Obama Administration is being set, and it seems quite a low bar indeed.

The Lemming School of Crisis Response

People are beginning to get restless, waiting for clear leadership from the Congress and the incoming political leadership in Washington. Frustration is rising as it becomes increasingly obvious that our political leaders have no interest in making any sort of bold decisions. This is a sad example of groupthink, but is worse than usual due to the way political power is doled out.

In normal business situations, there is always a problem with large groups, in that individual leadership is often opposed except by the nominal head of the group. There is only a small advantage in being the individual to step forward with a plan, and a large degree of risk if your suggestion or answer proves to be a wrong one. In political committees or appointments, it’s even worse, because the benefit, being appointed to the post, has already occurred and so only negative effects appear possible in taking a risk. At best, you stay where you are, at worse you are a well-known failure and ruined for a long time. As a result, when a crisis occurs, a group of appointees or advisors is inclined to wait for instructions from their superior, or to let someone else take the lead. It’s not that such people are unintelligent or even that they do not mean well, it’s that they are conditioned and expected to wait for someone else. This is not a party-specific condition, either. The same condition exists in republican committees that could not agree to face up to the coming Social Security crisis, and democratic committees which have to decide how to protect the American financial infrastructure.

President-elect Obama promised to provide fresh, clear leadership on the issues Americans care about most. He’s already running behind the curve on setting a course, because most people in Washington will not be willing to take the first step.

Americans are Not Helpless

One of the more revealing responses to my article on bankruptcy was the following comment from Paul Hooson:

”Congress seldom has any problem spending billions for war or bombs, but when the lives of 3 million American jobs are in the balance, then the foot dragging really starts for a mere $25 billion which isn't a great deal of money.”

This is almost the quintessential liberal response to a difficult question. It ignores the topic and pursues a non-seqitur, it presents a false premise, and it assumes that people are helpless to take care of themselves. It also presents the absurd concept of ”lives of 3 million American jobs”. Jobs do not have lives, people have lives and people have jobs, and while a person cannot lose their life and just go on, just about everyone will lose a job or two or five in their lifetime, and they will move and survive, most of them will do just fine even if they lose a great job. If we start trying to protect folks from common life events simply because they are unpleasant, this will merely waste resources in yet another unrealistic adventure in government blundering.

The possibility that the three largest auto manufacturers in the United States may go out of business is troubling, but no more troubling than the failure of American steel, textile, electronics, and other manufacturing centers. The notion that the ‘Big 3’ deserve special treatment is laughable on its face, not least because the owners and management at these companies have clearly refused to take the necessary steps to make their businesses more viable. And what about the claim that the end of Ford, GM, and/or Chrysler would mean “dire” consequences for the nation? It would be difficult for many, but just as happened in so many places before, most of those workers would find new employment, and few would end up worse off in the long run. Especially since the demand for cars remains strong, and with ready-to-go factories in place and a supply infrastructure as well, it’s only a matter of fortitude and working out the math for a new super-company to emerge. Don’t think so? Hey, when I was growing up, the only choice you had for a phone was a wall-mounted landline by Bell. When I first went to college, computers were terminals physically connected to a mainframe IBM. So thinking that the top American car has to come from a company created in the early 20th Century can prove to be just as obsolete.

Bankruptcy for Detroit

I am getting the sense that Congress was never really serious about handing over 25 billion more dollars to the Three Stooges Motorcar Companies, in addition to 25 billion already requested. Not surprising, since despite several visits by auto executives to Congress in the past year, not one has made a convincing case that their companies are competitive or responsible, and therefore there is no evidence to support a belief that they would be properly accountable or trustworthy with the money. Not one executive had a plan to explain how they would become truly competitive again; it was clear to everyone that this money was not going to address the true causes of the automakers’ current crisis. There was (and is) the very real possibility that giving taxpayer money to these companies might be the worst possible course of action.

So, having slowly begun to comprehend that even D.C. is not keen on continuing to enable a very bad habit in Detroit, the automakers have begun the predictable whine and rant. In general, they are trying to make folks believe that if they do not get the money they want, they will file bankruptcy, and this would result in “dire” consequences for the nation (a word used often in the past week by the suits). Personally, I tend to bristle at extortion attempts and that is exactly what this amounts to; ”buy our lousy cars and subsidize our worthless industry, or you’ll get hurt”. Hey, I’m sure that kind of thing works great at UAW meetings, but it does not work with honest people who earn their money through ingenuity and effort. For one thing, History has killed off companies and industries with no mercy over and over again in the past (remember when we were a world power in Textiles? Remember when the dominant personal transportation was horse-drawn carriage? Anyone still pay for home ice delivery to stay cool in the summer?) Adapt or die boyo, and GM/Ford/Chrysler have not adapted to reality in our lifetimes. They have ramped up the advertising, but along the way they have managed to forget the triangle of business strategy – you cannot compete unless you offer the best price, the most desirable features, or the highest quality. LoserCars of Detroit have managed to blow opportunities and one-time advantages in all three categories. Detroit had about a two-decade window where they could have done the things they needed to do to revive their mojo, but instead they chose to stay on the same reckless course and hope they could fake out the world. Right about now, no choices are left save the desperate.

So, on to bankruptcy. For a lot of people, bankruptcy means the end of the road, and that could be the case for one or even all three of these companies. But let’s first look at the other options.

Frankly, there are a lot of reasons why it would be a very good thing for these companies to file bankruptcy. Look, the prime directive for any company, is to make a profit. That’s because no matter what good things you want to do, you cannot do them unless the company first insures its survival. And if you look at these automakers, the first thing that jumps out at any accountant is the huge debt and liability they carry. I looked through GM’s 2007 Annual Report, for instance, and despite 181 billion dollars in sales and revenue, GM lost 38.7 billion (before accounting principle changes – GM changed its accounting principles three straight years). Net revenue was down 12% from 2006. And this was 2007, before the credit crunch of 2008 hit. What happened, basically, was that GM was so loaded up with debt and long-term commitments for things like pensions and multiple brand lines and dealership locations, that even in a good year it could just tread water; when things went bad they went really bad. Straight-forward accounting for GM shows operational losses for at least four years, and again that’s before we count 2008. The basic reason GM is in a panic, is because they have no idea how to sell more cars, and they have no way to to substantially cut costs. From what has been reported, Ford and Chrysler are in the same shape. All three companies are locked into contracts with stakeholders who refuse to give an inch, even if the alternative is the company’s dissolution. The most likely reason for this, is that the creditors do not believe that these large companies would actually fail. Therefore, two sound business reasons exist for moving towards bankruptcy: If the creditors come to understand that the company is going to file for bankruptcy, it is in their best interest to work out a way to avoid bankruptcy for their customer, and if bankruptcy cannot be avoided, a reasonably objective judge and standardized process exist to provide guidance and a background.

The most desirable chapter for filing would be Chapter 11, or reorganization. Frankly, that is the minimum action needed to make these companies face up to the fact that they simply have no effective business plan. For example, what is GM’s “base” product? These guys so over-specialized that pretty much all of their vehicles are for a niche market. Sure, they have basic sedans and such, but does any of them strike you as their core product, the way the Honda Accord or Toyota Camry does? Not even close. GM does not even have a core brand line ... fuhgeddaboudit. The only fix worth talking about, involves rebuilding everything, nothing held off the table. And it looks like only a bankruptcy could make that happen.

The car execs are whining that they would not be allowed a DIP (debtor-in-possession) in a bankruptcy. To which I answer, too freaking bad. I mean, companies do not deserve favors when they file bankruptcy, what they need to do is find their humble place and go along with the court. There’s not a single top executive at any of the “Big Three” who should be pulling down a paycheck these days, and if they are just now beginning to understand the scale of consequences for their screw-ups, well change their diapers and tell ‘em to shut up and stay out of the way. If they have to file bankruptcy, they’ll get a chance to plead for DIP, and if they cannot make that case then that proves the bankruptcy was overdue anyway. Chapter 11 with a competent trustee in charge could be the best thing to happen to the industry in half a century.

But what if Chapter 11 does not work out? Well, then we look at Chapters 13 or even 7. Yes, that means the companies go away as we know them, but it also means that the parts are sorted out and someone else acquire the means to make their own major automaker. There are plenty of groups with the means to create a successful corporation for making cars and trucks, and the infrastructure would be right there. The new company (or companies) could pick from optimal factory sites and equipment, a deep talent pool for design and manufacturing, and within two or three years a truly competitive and effective auto manufacturing industry would be reborn in America. It’s happened in other countries, so it can just as easily happen here. Quality cars at good prices with solid opportunity, the only losers being those unable or unwilling to work under the new company’s terms.

That’s really what this comes down to, you see. The new company would not be much different from what we see now, except that the new company’s directors could avoid the mistakes of the past. They could avoid making open-ended commitments that would kill future generations, they could find a functional agreement with unions that made best use of the skills and pride of union workers, while avoiding either side becoming the pawn of the other. The new company could focus on a few models, well-made and suited to the customer base, instead of drowning in more than a dozen nameplates. The new company could franchise dealerships in a way that keeps its cash flow free for business, and develop new products in line with sound business principles. But it starts with tearing down the wreckage that is the current corpse of American auto making.

Why will bankruptcy work? The short version is, because we need it to work. I work with companies which have filed bankruptcy, and what happens is one of two things; the company falls completely to pieces, or it gets its act together. In the first case someone else picks up the pieces and makes them work in a new way, and in the second the company bears up under what amounts to business boot camp and it clears out the trash from its past performance. This works because of three basic forces which work together – the company remains extant in terms of its people and product, the creditors find it is in their best interest to help the company survive and succeed, and the public finds the product is worth its money. Once the shock of a bankruptcy filing eases, the people generally realize they can still make things work, but they need to be more flexible.

And what if it does not work? In the last century, there have been many automakers. Prominent names included Studebaker, Packard, Deusenberg, and Hudson. Those names died out because they could not compete, and maybe it’s time for Ford, GM, and Chrysler to join them. If they do go, rest assured that someone will fill the demand for quality American-made cars.

Verdance and Venom

Shortly after the beginning of the second millennium AD, a great desire rose among the people of Europe for worthiness and meaning in their lives, and from this rose also the demand for the celebration of Corpus Christi, and renewed reverence for the Eucharist. This time was notable not only for the fact that the people, not the Pope in Rome nor the Church establishment, moved for the establishment of the celebration, but also because this renewed hunger for worthy service led to the creation of hospitals and shelters for the poor and sick. The Knights Hospitaller and the Knights Templar were created in those days, meant to serve and protect the weak and helpless. Devotion to the ideals and precepts of Christ were renewed as never before, and sadly never since.

Yet shortly after this time a different type of devotion rose, one which effect also remains to this day. The social changes in Europe in the early 11th Century included greater attention to women, and women became notable authors and patrons of literature. And at this time also appeared a new genre of literature, the immensely popular stories of ‘courtly love’. These stories of forbidden love, usually high in sexual content and lax in moral standards, became something of the precursor to modern soap operas and movies. A common example was one Marie de France, who seems to have created the formula with the requisite conditions of true love showing up some years after marriage, the immediate abandonment of marriage vows for ‘true love’, always represented in carnal action, and of course the rejection and often death of the husband who was betrayed, usually at the hand of the new rival. The common themes of these stories were that true love was more ‘sacred’ than marriage vows, that adultery was not only allowable but the inevitable “right” course when the lady was so inclined, and that sexual bliss was the same if not better than religious devotion. Whether we are discussing the text from ‘Lanval’ or the plot from the latest ‘Desperate Housewives’, this disparagement of faithful devotion and the replacement of God with Sex has been around quite a while, yet it should be easy for the reader to recognize the dangers in such moral equivalency.

The individual must make his or her own moral choices, but it is imperative for us to be aware that the differences are often very great in consequence and meaning, and what may appear to be a fulfilling and thoroughly enjoyable part of life, may in actual fact be poison venom, a danger to be avoided all the more because it appears to be the opposite of its true nature. This is not a lesson for pointing out to others, but for self-contemplation and alignment of values.

How Credit Works

The present financial crisis boils down to one fundamental issue – the credit crunch, now gone worldwide. The short explanation of how we got here, is that credit is an easy system to understand and use, yet one where plans are far too often short-sighted. One entity provides a good or service to another, and in lieu of immediate payment terms are set up for delayed payment, usually in a set of payments and with a charge for the credit being extended. The amount of credit charges is usually determined through negotiation and careful attention to necessary goals. For example, the reason almost no one really gives 0% interest rates on credit, is because over time that would unfairly benefit the buyer. Let’s say someone buys a car and gets a deal to pay $25,000 over five years with no interest. If the buyer pays an average of $5,000 a year with no interest, then most of the money for the purchase stays in the buyer’s hands for years, and he gets the use and profit from it. If the seller had received the entire $25,000 at the time of the sale, there is a clear profit compared to receiving the same money but later, so financing or credit terms are designed to make up the money that the seller loses by not demanding full payment up front (not to mention the money lost when someone buys on credit then defaults). It’s all about risk management, accepting the possibility of bad things happening in order to increase the profits from a venture. The credit system works because of two fundamental forces – the buyer is willing to pay more over time for something, in order to be able to make payments instead of paying for it all at once, and the seller is willing to take payments over time and risk a certain amount of default in order to increase overall profitability. That simple rule applies to all credit conditions.

So what went wrong? Greed on both ends, actually. Buyers bought homes they could not afford, while sellers built high-risk ventures into mainstream investment packages, on the theory that diversifying the investments would keep the high-yield aspects while some how mitigating the risk exposure. To make matters worse, high-risk mortgage investments became politically favored in order to offer not just home ownership to low-income families, but also offer high-end properties to people who could not possibly afford them, on the expectation of best-case scenarios, or in a phrase, the absurd belief that nothing but good things will happen in the foreseeable future. ARM loans, balloon-payment mortgages, and interest-only loans came into being in recent years, all of them extremely high in risk by their nature. The culture of saving up for what you want most had long ago been abandoned for the ‘buy now, pay later’ mantra, which itself had been set aside in favor of the even more basic ’Gimme’ culture. I mention this for several reasons. First, you have to understand that in a culture catering to increasing levels of personal greed, expectations of responsible behavior become less and less practical. A generation used to getting whatever it wants in toys and social norms, has now taken control of an economy and government wherein it believes that someone else can be made to pay for whatever these people want. Second, political duty has devolved from stewardship of the nation’s welfare and a duty to those who abide by the rules of order and commonwealth, to a state where any promise necessary to retain office will be made (like ‘lowering’ taxes for 95% of Americans, including those who pay no taxes at all). And third, for the past generation those who work hard and save have been the target of many unscrupulous criminals and congressmen, who see the needs of the lazy as far greater than those of the industrious, since the ratio of honest workers to lazy bums appears to have reached the order of about 1 to 6.

So here we are, the dominoes falling and everyone suddenly realizing they are standing underneath them. What to do? The simple answer is obvious; let the consequences work their way through. But doing that would mean letting a lot of mortgages crash, and with them a lot of banks would fail. Yes, the surviving banks would be much stronger and in the end the total costs would be minimized, but who in Washington has the courage to tell about 2 million families that they would have to lose their homes, and tell three or four dozen small and a couple major banks that they are out of business for their greed and stupidity, especially when this would disproportionately affect minorities? There is simply no such political will, nor am I sure that there ever has been, for what this would require. Instead, the Congress has decided that everyone should suffer a bit in order to prevent a minority from suffering a lot.

There is also some rational basis for the bailout decision. The failure of the stock market in 1929 was a bad thing, but not especially crippling for the country. What brought the recession into a full depression was the collapse of thousands of banks and savings & loans across the country, and these fell in large part due to a collapse of confidence. We see that to some extent in every economic downturn. Bad times hit, a company worries about its condition, they buy fewer supplies, hire no new people and maybe lay off folks, who spend less because they worry about their jobs, and fewer people spending makes things worse for the companies, who lay off more people and the cycle continues until it bottoms out and someone has the nerve to start hiring folks and buying things. When banks get hit, they make fewer loans and offer less interest on deposits and that slows down the economy too. If you can’t get a car or house loan, you won’t buy even if you want to buy. So, Congress does not have reason to worry so much about the investment firms or even the car makers – sorry GM – but they do worry about the banks in general. Loans have to be made to keep the economy from getting worse, and that means liquidity issues have to be addressed.

But you cannot just give money away, or at least you should understand that doing so is extremely stupid. So, there is an argument for spending $700,000,000,000.00 if it is done wisely, but then again we are talking about Congress here. Wisely would mean an investment that offered a reasonable return, not money spent as a giveaway to reward bad behavior and foolish decisions. That’s why the “bailout” money must not be spent directly to pay for bad mortgages, and why – sorry GM – the money may not be spent on the automakers. The money may be spent in any way that is likely to result in an improvement in the economy greater than the amount contributed. That is, just as is done with small matters of credit, the actions taken should be a balance of concessions in the short term granted in order to produce superior long-term results. That is the template which ought to be used in the application of these funds.

What Now For Hillary?

I do not ordinarily ponder the fates of major democratic party figureheads, but the saga of Hillary “The Great Khan” Clinton is riveting. Not too many people now seem to recognize just how big an upset it was, when Barack Obama’s machine beat the Clinton machine. And from that upset, what can we expect now from arguably the most powerful politician on the planet without a base of operation?

Hillary Rodham first made significant news when she delivered the first commencement address to Wellesley College ever made by a student (1969). That was no accident; Rodham had accomplished many successes as a student, including organizing a two-day strike by black students after the assassination of the Reverend Martin Luther King, Jr. Rodham was featured in Life magazine that same year, in part due to criticism in her speech of Senator Edward Brooke, who had addressed the students and faculty at Wellesley immediately before Rodham. After Wellesley, Rodham went to the Yale Law School, where she was active in research, free legal service for the poor, the Yale Review of Law and Social Action, and dating a fellow student, William Jefferson Clinton. The couple became increasingly active in politics, and worked hard for the McGovern campaign in 1972. Rodham graduated from Yale with her Juris Doctor in 1973, and a year later was an advisor to the House Judiciary Committee addressing the Watergate scandal – Ms. Rodham was noted for arguing that in the event of impeachment, President Nixon should not be allowed legal counsel.

Hillary Rodham and William Clinton were married in 1975, and a year later Bill Clinton was elected Attorney General for the state of Arkansas. In 1977 Hillary Rodham Clinton joined the Rose Law Firm, specializing in patent infringement and intellectual property law. Also in 1977, President Carter appointed Hillary Clinton to the board of directors for the Legal Services Corporation (created under Nixon to provide free services to those who could not privately afford it). In 1978 Hillary Clinton became the LSC’s first female Chairperson, the same year her husband won election as Governor of Arkansas. In 1979 Clinton became a full partner at the Rose Law Firm.

During the Reagan years Hillary and Bill Clinton continued to gain influence and power. In Hillary’s case, those years spent promoting her firm and favored organizations to which Hillary belonged, such as the New World Foundation. Hillary Clinton was named to the board of directors for TCBY, Wal-Mart, and Lafarge (Clinton was the first female board member at Wal-Mart).

Hillary Clinton was a distinctive First Lady on several counts. She was the first First Lady to hold a post-graduate degree, the first to have an office in the West Wing, and of course Ms. Clinton was also the only First Lady so far to ever claim equal authority to the President. Hillary Clinton became the first First Lady to see approval numbers drop to 35 percent within the first 21 months of her husband’s term.

Following her husband’s eight years as President of the United States, Hillary Rodham Clinton was elected as a United States Senator for the state of New York. Despite statements that she was not running for President in 2004, Clinton was widely viewed as a kingmaker, and a key factor not only in John Kerry’s nomination as the Democratic Party’s candidate, but also in Al Gore’s decision not to try for the nomination himself. In January of 2007, Hillary Clinton made clear her intention to win the White House, and as late as October of 2007, Hillary Clinton was well ahead of all her rivals in the Democrats’ chase. But somehow the prize eluded her, as first Iowa then South Carolina demonstrated surprising (at the time) strength by the Obama campaign. The race became a two-person contest, then one led by Obama, then a clear victory for the no-experience orator from Illinois. Senator Obama made noises to placate Clinton’s millions of supporters, but she faded in the public attention almost to obscurity. There was talk of a subversive movement to throw the election to McCain (on the theory that Clinton would have an open field in 2012 if Obama lost in 2008), but the PUMAs turned out not to be a significant factor in the election.

With the election over and the Administration of Barack Obama about to begin, it remains to be see how Hillary Rodham Clinton will direct her considerable ability and influence. There had been some considered discussion that Clinton would make a good Vice-President for Obama, but bad blood between the two camps made this suggestion impracticable from the start. Other strategists thought Clinton could ask for the post of Senate Majority Leader, but this would allow Clinton an effective veto of her own against Obama’s policies, and so this too failed to go beyond early discussions. There is talk now about Obama making Clinton his Secretary of State, a prestigious and powerful position, but not one which any would-be executive covets. It is difficult to imagine Senator Clinton accepting a position where she takes orders from a political rival and who would have the power to fire her any time he chose. But it also raises great speculation, to consider her other options and from them deduce the path where her most likely return to glory and power would wait.

Put Away the Knives

Losing is not a good feeling. So I understand that a lot of folks are unhappy, even angry. Note to President-elect Obama; you won an impressive victory and congratulations, but there are many millions of Americans whose vote you did not win, and many more millions of people who won’t be quiet if you turn out to be just another partisan hypocrite who thinks he can fool his way into control of the government, but then ignore what America needs because he is obsessed with his own plans. With that said, however, all Americans needs to give President Obama a chance to do his job. You can say what you want when he says or does something out of line, but he has to have the chance to do the job.

I also think it’s appropriate for republicans to make peace with John McCain and Sarah Palin. Oddly, despite the fact that these two were running mates, a lot of folks love the one and hate the other – the thought seems to be that one had a chance but the other one screwed up the opportunity. I disagree. As much as I would like to have seen a republican win the White House this year, the combination of the economic crisis, the media manipulation, and the infighting among republicans made it too steep a hill to climb. So what must be done now, is for republicans to than Senator McCain and Governor Palin for their efforts, and mend our fences. Look, I was dead-set against McCain winning the GOP nomination, but I got over it and worked hard to get him elected. There are many concerns I have with how the republicans acted towards each other this year, not least their disgusting abandonment of the president after everything he has done for the party and at great personal cost, but now is the time for us to make peace with each other, for the needs of the nation are great and we cannot do well by being petty.

Is Obama A Democrat Eisenhower?

The presidential election of 2008 was the first occasion since the 1952 election, when neither the sitting president nor sitting vice-president was one of the major party nominees. It may also be notable, that in 1952 the winning candidate was not known for a long political resume, and the sitting president was going through a period of largely undeserved unpopularity. Similarities between the two situations create an opportunity for comparison.

General Eisenhower won the White House in 1952 by a comfortable margin, despite having held no federal office outside his term as a general officer of the United States Army and SHAEF. He was a popular president yet made remarkably few significant decisions, except for his principled stand for desegregation. Eisenhower won re-election in a romp, yet the GOP fared less well, never gaining control of the Senate either during the Eisenhower years nor in the generation following, and though the GOP took control of the House of Representatives in 1952, they lost it in 1954 and the democrats increased their control in each succeeding election through 1960. The popularity of President Eisenhower did not carry over to the republican candidates for the House and Senate. With the present democrats enjoying support at historically dismal levels, there is reason to believe that the American public may separate its impression of Barack Obama from the Democratic Party in general.

Wild Card Republicans

While Barack Obama undeniably ran an effective and energized campaign, it’s plain by now that the McCain campaign of 2008 was a lot like the Republicans in general during 2008 – sloppy, disorganized, and frustrated. Now that he has lost the election and the most liberal candidate in more than a generation is the President-elect, Republicans and especially Conservatives have decided to tie John to a pole and set up a firing squad. Some republicans have opted for the full inquisition and tried to go after Governor Palin, only to find out Madame Governor is no docile scapegoat, and is inclined to return fire when attacked.

The problem for republicans, and especially for conservatives, is that there is no standout leader for 2010 or 2012 (thinking about the next go for rebalancing Congress, and of course things have reached the point where someone is bound to have already started planning the 2016 campaign). That’s not to say that there are not some good people, and some potential stars waiting to be discovered or for their time to arrive. But in the main, we have known ahead of time about big-league republicans and conservatives:

George W. Bush was a major GOP player as far back as 1994. Some said he was being groomed for the White House when he first won the governorship of Texas.

George H.W. Bush was a major candidate in 1980, and no one doubted that he would be the front-runner in 1988 when Reagan finished his two terms.

Reagan’s speech to the GOP Convention in 1976 laid a strong foundation for his 1980 run, as many republicans discovered what the RNC already knew as early as 1972; that Ronald Reagan was a rock star waiting for his stage.

It’s hard to believe in these post-Watergate days, but Richard Nixon was very well-respected all the years between 1952 (when he became Ike’s veep) and 1968, a man not much liked but understood to be a formidable force in politics and campaigning. It’s not generally recognized that many successful politicians learned from Nixon’s campaign disciplines.

You get the idea. While democrats have sometimes picked up their candidates on the fly, republicans tend to pick their winners pretty far in advance. The ones that get the nod late in the process – Ford, Dole, and now McCain – do not tend to fare well in the actual election. As a result, even though there should be opportunity in 2012 for a solid candidate, it is not clear at this time just how the GOP could hope to find a clear favorite. The primary season of 2007-8 was pretty dismal, in review. Few real conservatives ran at all, and the ones that did showed surprisingly little energy for the fight. Besides McCain, who ran his primary campaign on the strength of independent and crossover-democrat support (which did not show up for him in the general election), the main contenders in the republican primaries were Mitt Romney and Rudy Giuliani, good men both of them but neither of them a true Reaganite. Thompson carried the hopes and prayers of many a conservative, but while he had the belly, he lacked fire in it.

It would seem that for 2012, the early cast of republican contenders comes in three flavors:

First, there are the 2008 contenders. Not to be mean, but if we ran McCain again, or Romney or Huckabee or Giuliani or even Thompson, we would only assure Obama’s re-election. I just do not see any of these gentlemen developing the requisite qualities which were lacking in this last election.

Second, we can look to the new generation. Certainly there is hope there, in such people as Palin, Jindal, Cantor, Putnam, Pawlenty, or Thune. But if we choose that road, we have to answer better for the onslaught of attacks that we saw leveled against Sarah Palin this time. Any of these contenders will need a lot of preparation and coaching, yet they have to remain the same pure essence of conservatism and energy that makes them attractive in the first place.

Finally, we can always hope that someone will demonstrate outstanding leadership in the House or Senate, someone as yet unknown who will make the case for conservatism in a way that we have not seen in a generation. I cannot say who that would be, and indeed at the moment I cannot imagine any of the present members of the House or Senate in that kind of heroic role, but then again, miracles can and do happen, and if we are granted one we should not overlook the grace of it.

Cosnavigieta

The Wheel of Fortune turns
I go down, demeaned;
Another is raised up;
Far too proud
Sits the king at the summit –
Let him fear ruin!
For under the axis we read
About Queen Hecuba

- Carmina Burana, c. 13th century

Reverberations

The presidential election of 2008 finished nine days ago, and by now most of the emotions have begun to settle. People for whom grace is their natural condition have returned to graceful tone, while those for whom spite and petulance is their preferred environment (sadly present to a significant degree in both major political parties) have continued to attack and defame their enemies and targets. In other words, things are returning to normal.

One thing which occurs to me in this readjustment of mood, is that while this election was important and its effects are significant, we are headed neither for a golden age nor the precipice of gotterdammerung. I am not one of those who believes that the United States shall die as the result of an Obama presidency, and I am certainly no worshipper of this modern Narcissus, nor am I so fooled by any of his dazzling promises, even the ones he has not already tried to wipe from his websites and interviews. What I see here is not so different from many times before, a lot of promises and in performance, ehhh, something less but nothing either of dreams or nightmares.

Since the election, I have been critical of the hype and propaganda from the Obama (‘God, only better’) camp, and for this have been accused of dining on ‘sour grapes’. In the actual case, I consider myself far better balanced emotionally than many, even considering some on the Left who are still inexplicably bitter and foul in their mood and behavior. But there will always be those for whom nothing is ever enough to make them act with courtesy or a gracious tone. In the matter of Obama’s election, though, I congratulate him not only on his victory but on the effectiveness of his organization and his near-total control of the media. If he can maintain that control, President Obama will be the first president since Reagan to able to use the media as a tool to help advance his agenda, rather than yet another obstacle or enemy waiting to trip him up or seek a weakness to exploit. Barack Obama also showed himself an adept student of Nixonian politics, wherein he not only played attacks on him into claims of victimization, but also played hard to his party’s fringe during the primaries, but swung hard towards the center when running his general campaign, to the point of denying statements and promises made during the primaries. Just as Nixon knew few republicans would vote for Humphrey or McGovern, Obama knew few democrats would consider voting for McCain. And just as Nixon’s campaign worked hard to get grassroots support and turnout, so too did Obama’s team sweat out the details to get all likely supporters to the polls. In many respects, this year’s election was one where democrats were energized, coordinated, and showed up to vote, while republicans were disorganized and allowed themselves to become demoralized and sat out the election.

In many ways this election is interesting, not least because of the myths which were disproven. The first myth shattered, obviously, was the ‘Bradley Effect’ – while some morons may vote for or against someone solely because of their race, it is not true to imagine that it is a major effect. The second myth, and one still floating around, is that the public really wanted democrats in control. The reason this is clearly a myth, is that despite the economic climate and the scale of Obama’s victory, the congressional and senate races did not produce the overwhelming numbers predicted. The democrats made modest gains in both chambers, so it’s not as if the republicans have rebounded in public approval (the third debunked myth). It would appear that President Obama will begin his term with fairly high public approval, but the democrats and republicans in Congress and as political parties will see little public support.

I have no doubt that President Obama will make some mistakes early in 2009, mistakes which some will claim prove him unfit for the job. But every president runs into some of that, and it’s a poor student of history who believes that when it happens again, it’s somehow the first time or proof of inadequacy. In some respects, it will be interesting to see if President Obama learns from the lessons of Presidents Bush and Clinton before him; not only that if a president does not consider his importance in relation to a policy or bill that his credibility with Congress could fail and make later work much more difficult, but also that if a president obsesses about his ‘legacy’ he may accomplish little work of substance.

Semper Paratus

Yesterday I wrote about veterans in general, but today I want to focus on my personal favorite branch of the United States Armed Forces – the U.S. Coast Guard. These guys start missions in conditions which would shut down a SEAL team, they fly into places with almost no advance information, forcing improvisation and ingenuity to be a regular part of every team leader’s regular practice. Their missions range from military (Coasties have fought in World War 2, Vietnam, and the Iraq conflict) to drug interdiction to extensive short-notice and no-notice rescue operations. A coastie therefore must not only be ready to fight, but also have medical knowledge, understand the law with regard to arrests and contraband seizure, and be able to take charge of a wide range of crisis situations.

Like the other branches of service, the USCG has an academy to train officers. But unlike West Point, Annapolis, or the Air Force Academy, having a buddy in Congress won’t help you get into the Coast Guard Academy; the Coasties take academy cadets strictly by competition. And the Coast Guard does not train for what might happen someday, somewhere – a coastie knows he will see action, over and over again lives will depend on him knowing what to do and carrying it through, and he will get less press for saving a dozen lives than a Marine gets for successfully dressing himself. Coasties head full speed into conditions that would make Rangers mess their pants, and they do it all the time. Some soldiers are tough, some are smart, some are capable, but you have to be all three to be a coastie.

Semper Paratus.

Veterans

Today is Veterans’ Day. You’ll read about it in the papers and see mentions of it on TV, but probably there will not be much else said or done about it. Politicians will lay wreaths at gravesites, and then go on about forgetting the men and women the rest of the time. The VA will continue to be underfunded, the Guard will get sent in harm’s way after training with sub-standard equipment, and congressmen thinking only of their re-elections will push for actions which look good but ignore the needs of the men in the field. Kipling is ignored by Americans just as well as the British forgot him.

There are exceptions, of course. There are businesses which grant preference to veterans when they hire, seems they like to take on men and women who know how to handle responsibility and a genuinely difficult burden, who have dealt with stress and the tough decisions in a way that makes a few business decisions no sweat at all. There are a few congressmen and senators who will actually go out to see where the men serve and meet them to find out what they need in a non-election year, the way John McCain and Joe Lieberman did. And there are some good people who have been sending letters and packages to the troops, caring everyday and not just on a calendar day.

What makes America different, is that Americans do not like war. Even our troops have no desire to do the business of war, the destruction and the killing things they would just as soon not see happen, and these soldiers are only too happy to come home to a normal life. That’s why it matters, that we respect these men and women, not just when we know the cameras are rolling and there’s political gain or cost to a gesture, but in recognition of genuine sacrifice. And when they say they want to complete the mission, to finish the job, we owe them that voice and we should respect their decision.

The war in Iraq and Afghanistan (parts of the same war, though some would lie and pretend otherwise) is controversial, not least because it requires stamina and patience, and the democrats have seen fit to use the war as a political football in more than one election. The soldiers simply want to win, finish the job, leave a stable and independent and free Iraq and Afghanistan, and come home. Anyone who wants to settle for less neither respects nor honors the troops.

War is a horrible thing, and sometimes it serves no good purpose and at other times the best of intentions carry horrific cost. But there are times where it is necessary, where there is no way for greater costs to be avoided except that our soldiers fight, often killing and sometimes dying. The horror of the cost is terrible to consider, yet we must consider it and consider it in context if we are to understand any of it. And the sad truth of it, is that many who make decisions about our troops never even try to consider the cost and its meaning.

Some people attach the moral value of a conflict to the president or party which supports it. I do not. I support the war in Iraq and Afghanistan for reasons similar to why I supported the war effort in Bosnia and in Somalia, similar to why I supported Just Cause and the invasion of Grenada, and why I thought the failed mission at Desert One was something we should all respect and try to understand. Partly because in each of those conflicts American troops were committed and we owe support to the men who went in on valid orders from their commander. Partly also because wars are not to be decided in the same way we choose the next winner of ‘American Idol’. And partly because there is a virtue to American wars, something unique that comes from the character of the men who fight under our flag and the mission of the American war effort. We fight no wars of conquest, and our soldiers change the world for the better when they remove tyrants and despots.

This day is only a symbol of a debt so large we cannot possibly repay it, but the men and women in uniform deserve better than a mattress sale and a passing insincere gesture from a politician whose mind is on his own gain ninety-nine percent of the time. Think about it, then act on it.

Veterans Day 2008

Today is the day that America remembers its veterans. I wonder how President-Elect Obama will respect and honor – oh that’s right, this is the guy whose campaign worked so hard to keep overseas military ballots from being counted this election. Continuing the fine democrat tradition of ‘loathing’ the military, donchano?

Just Something to Keep You Awake

In 1995, a man named Babrak Kamal, one of Iraq’s leading bioweapons scientists, defected to Jordan. Fearing what he would reveal, the government of Iraq admitted some of its biowar planning, particularly at the Al Hakam and Al Manal plants (which had previously been identified as vaccine making facilities). Al Hakam was a factory for manufacturing anthrax, and is estimated to have created more than twenty tons of anthrax. None of the anthrax made by the Al Hakam plant was ever recovered or destroyed, and unlike most toxins, anthrax can be stored indefinitely in powder form. The Al Manal plant was even scarier, as it manufactured botulism toxin, a poison over one hundred thousand times more toxic than Sarin. A dot of bot tox the size of the one over this i can kill between eight and fifteen people; the Al Manal plant produced over nine thousand cubic yards, at twenty times weapons-grade concentration. None of the bot tox made at the Al Manal plant was ever recovered or destroyed. What’s more, in a deal made between the UN and the Iraqi government, the Al Manal plant was neither destroyed, seized, nor closed. There is no report on what was done at Al Manal and similar plants between 1995 and 2003, when Coalition forces invaded Iraq.

Monday Trivia

In what year were biological weapons first used against the United States by a military force?

First Crisis

One sure event in every president’s first few months in office is a crisis. Some crises are predictable, like the economic depression Franklin Roosevelt had to face. But in recent years, the crises have more often been unpredictable, though just as serious. Early in George W. Bush’s first year, a US Navy surveillance aircraft collided with a Chinese PLA Navy jet in international waters. In early 1993, President Clinton was faced with a crisis in Russia, as Yeltsin all but abolished the Congress of People’s Deputies as he tried to force Russia to reform its constitution. In 1989, new President GHW Bush had to deal with the challenge of Noriega’s attempt to deny US access to the Panama Canal as reprisal for interfering with his drug trafficking. In 1981, new President Reagan had to deal with a militant and ambitious Iran. Every new president tends to find surprise problems waiting for his attention early on, serious problems which were not always apparent before his election to office. Because many of these crises come from areas where the new president is not expert, he very often must rely on the experience of appointed heads of departments and offices, and so the decision in those appointments may prove pivotal in the success of the crisis resolution.

The quality of President Obama’s early appointments may therefore be far more significant than they may first appear.