Why amateur executives are dangerous

To understand why Obama presidency is a failure,  one should read this post by an insider in the atomic energy field. Taking an individual who has no executive experience and putting him in charge of the single biggest administrative institution in the entire world is simply asking for failure.  The story told in this article is one of many examples of CEO incompetency in our current administration.  Reading this post explains why Obama should never have been elected POTUS in the first place.

A perspective on politicians and the revolving door

This post by the author of the "naked capitalism" blogspot provides an interesting  perspective on the well-known revolving door phenomenon whereby politicians leave office, voluntarily or not, and either join or setup lobbying firms
to "help" special interests i.e., corporations, institutions, wealthy individuals, get what they want from their contacts still in government.  This virtuous circle has been going on since the administrative state became so large and intrusive that these interests required specialized "help" to navigate the regulatory maze. Many, many politicians went to Washington DC with little or no wealth and left millionaires many times over, if indeed they ever bothered to leave.  What's interesting about this post, apart from the subject and perspective, is the author's background.  Matt Stoller has been a Democrat Party inside operative for much of his young career and yet his primary example of abusers in this system is none other than Bill Clinton.  

Bill Clinton’s $80 Million Payday, or Why Politicians Don’t Care That Much About Reelection

“There was a kind of inflection point during the five-year period between 1997 and 2003 — the late Clinton and/or early Bush administration — when all the rules just went away. You went from a period, a regime, where people did have at least some concern about going to jail, to a point where everything is legal, and derivatives couldn’t be regulated at all and nobody went to jail for anything. And looking back I would say that this period definitely started under Clinton. You absolutely cannot blame this on George W. Bush.” – Charles Ferguson of Inside Job

“I never had any money until I got out of the White House, you know, but I’ve done reasonably well since then.” Bill Clinton

On December 21, 2000, President Bill Clinton signed a bill called the Commodities Futures Modernization Act. This law ensured that derivatives could not be regulated, setting the stage for the financial crisis.  Just two months later, on February 5, 2001, Clinton received  $125,000 from Morgan Stanley, in the form of a payment for a speech Clinton gave for the company in New York City.  A few weeks later, Credit Suisse also hired Clinton for a speech, at a $125,000 speaking fee, also in New York.  It turns out, Bill Clinton could make a lot of money, for not very much work.

Today, Clinton is worth something on the order of $80 million (probably much more, but we don’t really know), and these speeches have become a lucrative and consistent revenue stream for his family. Clinton spends his time offering policy advice, writing books, stumping for political candidates, and running a global foundation.  He’s now a vegan. He makes money from books. But the speaking fee money stream keeps coming in, year after year, in larger and larger amounts.

Most activists and political operatives are under a delusion about American politics, which goes as follows.  Politicians will do *anything* to get reelected, and they will pander, beg, borrow, lie, cheat and steal, just to stay in office.  It’s all about their job.

This is 100% wrong.  The dirty secret of American politics is that, for most politicians, getting elected is just not that important.  What matters is post-election employment.  It’s all about staying in the elite political class, which means being respected in a dense network of corporate-funded think tanks, high-powered law firms, banks, defense contractors, prestigious universities, and corporations.  If you run a campaign based on populist themes, that’s a threat to your post-election employment prospects.  This is why rising Democratic star and Newark Mayor Corey Booker reacted so strongly against criticism of private equity – he’s looking out for a potential client after his political career is over, or perhaps, during interludes between offices.   Running as a vague populist is manageable, as long as you’re lying to voters.  If you actually go after powerful interests while in office, then you better win, because if you don’t, you’ll have basically nowhere to go.  And if you lose, but you were a team player, then you’ll have plenty of money and opportunity.  The most lucrative scenario is to win and be a team player, which is what Bill and Hillary Clinton did.  The Clinton’s are the best at the political game – it’s not a coincidence that deregulation accelerated in the late 1990s, as Clinton and his whole team began thinking about their post-Presidential prospects.

Corruption used to be more overt.  Lyndon Johnson made money while in office, by illicitly garnering lucrative FCC licenses.  It was the first neoliberal President, Jimmy Carter, who began the post-career payoff trend in the Democratic Party.  In 1978, Archer Daniels Midland CEO Dwayne Andreas convinced Carter to back ethanol subsidies.  After Carter lost to Reagan, he faced financial problems, as his peanut warehouse had been mismanaged and was going bankrupt.  AMD stepped in, overpaying for the property.  But Carter wasn’t nearly as skilled as Clinton, because he didn’t stay in the club.

Over the course of the next ten years after his Presidency, Clinton brought in roughly $8-10 million a year in speaking fees.  In 2004, Clinton got $250,000 from Citigroup and $150,000 from Deutsche Bank.  Goldman paid him $300,000 for two speeches, one in Paris.  As the bubble peaked, in 2006, Clinton got $150,000 paydays each from Citigroup (twice), Lehman Brothers, the Mortgage Bankers Association, and the National Association of Realtors.  In 2007, it was Goldman again, twice, Lehman, Citigroup, and Merrill Lynch.  He didn’t just reap speaking fee cash from the financial services sector – corporate titans like Oracle and outsourcing specialist Cisco paid up, as did many Israel-focused groups, Middle Eastern interests, and universities.  Does this explain the finance-friendly, oil-friendly and Israel First-friendly policies pursued by the State Department under Hillary Clinton?  Who knows?  But if you could legally deliver millions in cash to the husband of a high-level political official, it wouldn’t hurt your policy goals.

Speaking fee money isn’t just money, it is easy money.  In one appearance, for one hour, Clinton can make $125,000 to $500,000.  At an hourly rate, that’s between $250 million to $1 billion annually.  It isn’t the case that Clinton is a billionaire, but it is the case that Clinton can, whenever he wants, make money as quickly and as easily as a billionaire.  He is awash in cash, and cash is useful.  Cash finances his lifestyle.  Cash helped backstop his wife’s Presidential campaign when it was on the ropes.

And these speaking fees aren’t the only money Clinton got, it’s just the easiest cash to find because of disclosure laws.  Apparently, Clinton’s firm apparently had a paid $100k+ a month consulting relationship with MF Global, and Clinton and Tony Blair have teamed up to help hedge funds raise money.  His daughter worked for a giant hedge fund and political ally (Avenue Capital).  And Clinton has unusual relationships with billionaires and Dubai-based investors.

Bill and Hillary Clinton are the best at what they do, but they aren’t the only ones who do it.  In fact, this is what politics is increasingly about, not elections, but staying in the club.  Erskine Bowles, former White House Chief of Staff, lost two Senate elections.  But he’s on the board of Facebook and Morgan Stanley, as well as authoring the highly influential Simpson-Bowles plan to gut Social Security and Medicare.  Tom Daschle, who lost a Senate race in 2004, is a millionaire who in large part crafted Obama’s health care plan.  Former Senator Judd Gregg is now at Goldman Sachs.  Current Chicago Mayor Rahm Emanuel made $12 million in between his stint at the Clinton White House which ended in 2000 and his election to Congress in 2002.  Former Congressman Harold Ford, now at Morgan Stanley, is routinely on TV making political claims.  Larry Summers is on the board of the high-flying start-up Square.  Meanwhile, Russ Feingold, a Senator who did go after Wall Street, is a professor in the Midwest.  Eliot Spitzer is a struggling TV host and writer.

In other words, Barack Obama and his franchise are emulating the Clinton’s, and are speaking not to voters, but to potential post-election patrons.  That’s what their policy goals are organized around.  So when you hear someone talking about how politicians just want to be reelected, roll your eyes.  When you hear an argument about the best message or policy framework to use for reelection, stop listening.  That’s not what politicians really care about.  Elections in many ways are just like regular season games in basketball – they are worth winning, but it’s not worth risking an injury.  The reason Obama won’t prosecute bankers, or run anything but a very mild sort of populism, is because he’s not really talking to voters.  He just wants to be slightly more appealing than Romney.  He’s really talking to the people who made Bill and Hillary Clinton a very wealthy couple, his future prospective clients.  We don’t call it bribery, but that’s what it is.  Bill Clinton made a lot of money when he signed the bill deregulating derivatives and repealed Glass-Steagall.  The payout just came later, in the form of speaking fees from elite banks and their allies.

Ironically, Clinton has come to express regret about deregulating derivatives.  He has not given the money back.

Enough with the big bank wild bets

In a conversation yesterday with an extremely knowledgeable and financially sophisticated friend (former CEO of a major public company and former Board of Directors member of a very major big bank) we discussed the JPMorgan bank's 2 billion dollars derivative write off (with at least another 1 billion to come).  We agreed on a few "solutions" to the problem of out-of-control derivative programs.  One, cut down on the amount of leverage banks can utilize in making these bets because the huge profits they can make from them are driven by leverage.  Two, break up the biggest banks into smaller banks, and three, let the banks fail when they get in trouble.  The very idea that these banks can make these huge bets is predicated on the premise they are "too big to fail" and consequently will be back stopped by the lender of last resort, the Federal Reserve System and/or the Federal Government.  The "moral hazard" that results from the de facto privatization of profits and socialization of losses is by any reasonable standards not acceptable and what's more is readily avoidable.  It was my friend's contention that the profits that result from these highly leveraged bets are such that the bankers simply cannot resist making them, no matter the risk involved, especially since they know they will be bailed out in the end should things go wrong  After all who can resist tens of millions of dollar bonuses derived from bets placed with other people's money.  This can be and should be fixed with a few strokes of a regulatory pen and no one would suffer except the beneficiairies of these outlandish mostly sure bets.  The current system is crony capitalism at its worst.

Media bias big time

Media bias on the part of the MSM (Wapo, NYTimes, CBS, NBC, ABC and farm teams like the LATimes and others) is noticeably on parade these days as the presidential campaign heats up.   For starters Brent Bozell notes the virtual blackout of news reporting on the landmark law suit brought by Notre Dame and the Catholic Church against the administration over the matter of Obamacare and the requirement that insurance plans must now include free coverage for contraception, i.e., birth control pills.  Since the Catholic Church is opposed to contraception, at least "artificial" contraception, it goes without saying it would oppose a government mandate requiring same.  The announcement of this rather major development, to say the least, garnered 19 seconds of coverage on one of the networks, and nothing on all the others.  In other words the MSM is ignoring this news because it could represent a serious challenge to the Democrat Party's signature legislative accomplishment during the reign of Obama and any news that could pose a negative for The One's reelection simply did not happen.  Another look at this same dynamic at work, in another guise, is Chris (Tingles) Matthew's excoriation of Cory Booker's apostasy on Sunday's Meet The Press round table during which he disassociated himself from the Democrat Party major talking point on the subject of Mitt Romney and Bain Capital's role in the capitalist system in America.  Seems Booker finds nothing wrong with those roles and accordingly disassociated himself from the party line which is they are exploitative. In the real world  the role of private equity capital is the application of Schumpeter's theory of "creative destruction" which is another way of saying get rid of the dead wood so that new life can thrive.  It's not, per se, that Matthews objects to Schumpeter's theory, although given his socialist world view he undoubtedly does, what he clearly objects to is Cory Booker's rejection of this central talking point of the party's campaign, like, "how dare he think for himself".  This deviant behavior is even more reprehensible in Booker's case because he's black and dares to stray from the Democrat Party plantation on which all blacks are supposed to shut up and do and think whatever the Party thinks is best for them.  Clearly Matthew doesn't know much about Booker's history as Mayor of Newark, N.J. where he has embraced the pro business and pro family philosophy that attracks and promotes employment in the private sector in this mostly black community.  In other words he's for and has strenuously promoted lower taxes, limited government and less regulations, personal responsibility, in tact stable families, all policies that have put Newark on a clear path to economic recovery in a city that  for decades was decaying under democrat policies.  Apparently the voters in Newark like Booker's approach since they continue to reelect him to office.