Monday, January 18, 2010


Capitalism/Free Enterprise System

The Free Enterprise economic system is not a game of ‘keep away’ played as a child. Free Enterprise is a game designed to keep the system running while making a profit. If the means to a profit eventually destroys the system, then this means is immoral to use. Morality is actually subjective as used by people and the legal system only covers a small portion of business practices. A sense of responsibility has been absent in the past, either that or a blissful ignorance or indifference to the consequences of the business model deemed to earn a profit. Ms. Bair indicated that compensation practices be linked to FDIC insurance rates, as an insurance hazard that promotes risky investments. Is it really true that investment houses funneling investors’ money into mortgage ‘products’ bet against success and collected insurance money when the mortgage ‘products’ failed while the investors they counseled lost their cash? And what about dividend payments? Are these boards and executives feathering their own nest using tax money and the capital invested by others? Many questions remain to be answered.

Of course the excesses produce regulation and restrictions. Yet they still want more derivatives and other investments that produce nothing but commissions for a few, very expensive people. These derivatives and hedges should be relegated to organized gambling in Nevada or let the Indians handle them.

Formerly known as killing the goose that lays the golden egg, this destructive behavior
must be discouraged, in favor of a less phenomenally profitable enterprise that makes a good living and keeps work going. The short term profit taking model should be analyzed carefully before implementation, as to whether the economy will be perpetuated in a healthy condition after the profit taking. Is that so much to ask on a moral level or must the government create regulation? The answer lies before us.

Now the investment banks that were intensely subsidized for a short time are hugely profitable and plan to pay themselves large sums for handling the government money. Unemployment is about 10%, social services are strained, the real estate market overbuilt and foreclosures rising. Local governments talk more taxes and insurance is in danger of becoming a mandated racket, while layoffs continue.

Can all this be blamed on the mortgage bubble? Easy money and no oversight pumped up real estate values so the securities sold by the investment banks would be worth more and they could make more mortgage ‘products’ for their clients while betting that these same securities would be worthless, collecting on insurance paid by the Feds through the ‘too big to fail’ authorization. Clients sold these ‘securities’ lost out as the foreclosure rate surfaced and the lack of loan oversight became a national scandal. Is buying insurance on something you know to be questionable or even worthless a crime? Fraud? Claw back that money.

Populism aside, people feel ripped off, gasoline prices are creeping up and the President is talking taxes on the investment bank bubble. Unbridled capitalism does become Darwinism as the available resources become controlled by a few manipulative individuals. Better yet, if these ‘new entrepreneurs’ can make up their own investment games without oversight, force the government to pick up the losses and come out of it with huge sums to divvy up, just like the train robbers of old, they think they won the game of keep away.

A brief return to the social unrest of the 20th century in the United States in my memory and knowledge of history tells me that the economy is often cause of unrest as manifested by bitter elections, corruption, recession, fewer jobs, riots and more regulation. The phenomena of bus rides past AIG mansions, rumors that Goldman Sachs people find it easier to get a firearms permit, or that GS people had swine flu shots before anyone else fan populist flames. I thank the media for publicizing the outrageous ripoffs and giant payoffs. I hope our Legislators order a full investigation of the ‘too big to fail’ authorizations. If they do not, expect them to be voted out. Difficult for incumbents in times like these.

Responsible capitalism? Is that possible? Regulated responsible capitalism? Foresight and careful decisions will perpetuate our civilization and allow free enterprise to function within a framework of sustainability in this new environment of 2010.

Saturday, January 09, 2010

Tucson City Council

Recall of City Council 2010

What do I think of the recall?

What caused the recall?

A lack of focus in Rio Nuevo contributed to public distrust. One project should be the focus until that project is completed and paid for. Squandering money on consultants resulted in a few benefiting hugely from Rio Nuevo while few jobs were created. Most of the money was skimmed off by those in the know before the job benefits actually reached the people. As for the public structures to be created with this money in Rio Nuevo, they do not exist, the money is gone and the fund encumbered for $80,000,000. We see a very few benefitting at the expense of the rest of us as the city staggers under a mountain of debt service. And there are no new museums or parade grounds for the people to enjoy.

I think an investigation and the ongoing audit will determine where the money went, what it was spent on and who got it. How about a list of people/enterprises that received Rio Nuevo money, in order of amount? This is public information. Let the audit begin when the first Rio Nuevo crew was ousted and the new regime took over.

Insular attitudes, insider mentalities, a lack of long term planning, lack of focus in Rio Nuevo, too much debt, and high unemployment have resulted in a negative public attitude. Recalls are a sign of public unrest and competition for scarce resources. The Rio Nuevo money was a rare opportunity for this community that has come to just another credit line to be obligated with nothing to show for the money. Too many people were cut out of the deal. Too much in the hands of too few. A few jobs for some very expensive people. Free land for select individuals. Rent subsidy for some and not others.

The ‘discovery’ of the $32,000,000 budget deficit just after the election left some people wondering if this information were withheld in an attempt to influence the election.

And now after all this public debt and the recession, we cannot afford more taxes and fees. With the city scrounging in our pockets for money and high unemployment rates, citizens need relief. The recall interests people because the city is insolvent and the Council raised fees and might be considering raising taxes.