SEC Decision Raises the Bar For Corporate (Issuer) Disclosure on Sustainability Risks — Another Huge Step in Bringing ESG Reporting to Mainstream Investment Management and Financial Analysis…

Friday, January 29 2010 — An important shoe dropped this week – this one, a size 15 or more – in the rising and accelerating importance of ESG & Sustainability corporate key performance indicators and related factors to investment management and financial analysis, as well as for corporate senior executives, boards, and management specialists (e.g., investor relations officers, legal counsel, corporate secretaries, ESH managers, marketing officers).

 

On January 27, 2010 the SEC Commissioners approved an “Interpretive Release” (guidance) on existing disclosure requirements related to business risk on the issue of climate change. (The vote was 3-2 along political party lines.)

 

Note that despite the scare headlines from some pundits, the SEC did not make statements on, recognize, or endorse positions (pro or con) on climate change. It did not create new legal requirements or modify existing requirements. It did not refine the definitions of materiality to include “climate change” or “global warming.”

 

The SEC decision, says Chair Mary Schapiro, “…will help public companies in determining what does and does not need to be disclosed…will provide clarity and enhance the consistency of disclosure…the discussions, debates and decisions taking place in the USA and elsewhere on this topic have implications under our existing, long-standing disclosure rules…”

 

Four critical areas were addressed by the Commission:

 

  • The Impact of Legislation and Regulation (disclosure issue: how will these affect the company? Investors? Stakeholders?)
  • The Impact of International Accords (the EU already has “carbon” regulations; in the USA “Cap & Trade” legislation is being considered by the federal government and a number of states have regulatory regimes; global accords could soon follow – key disclosure issue: how would/do these affect the company? What should investors know?)
  • Indirect Consequences of Regulation Business Trends (disclosure: what legal, technological, political and scientific developments may create new risks or opportunities for the company? Remember the Chinese symbol for crisis is also for opportunity – leading-edge companies will move ahead with Sustainability disclosure.)

Physical Impacts of Climate Change (disclosure focus: the company should evaluate the actual or potential material impacts of environmental matters on their business. Note that the SEC has mandated certain environmental disclosure over the past 30 years.)
The request to the SEC to consider the guidance for public companies came from investors – Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk (INCR) led the campaign for broadening climate change-related disclosure by public companies (INCR is a network of 80 institutions with USD$8 trillion AUM). Commenting on the SEC decision, she said:

 

“Today’s vote is a clarion call about the vast risks and opportunities climate change poses for US companies – and the urgency for integrating into investment decision-making…”

 

More than a dozen investors managing $1 trillion+ AUM requested the formal guidance along with Ceres and the Environmental Defense Fund in 2007, amplifying the request with supplemental filings in 2008 and again in 2009. (Note:  EDF is typical of the “influencers” that we are profiling in INSIGHTS-edge if they are not asset owners or managers or ESG financial researchers or coalitions of investors.)

 

One of the signatory member institutions is CalPers, the largest state pension fund in the USA ($200+ billion AUM).  CEO Anne Stausboll said this about the SEC decision:  “We’re glad SEC is stepping up to the plate to protect investors…ensuring that investors are getting timely, material information on climate-related impacts, including regulatory and physical impacts, is absolutely essential…investors have a fundamental right to know which companies are well positioned for the future – and which are not…”

 

You can learn more (and watch the Commission meeting) at:
http://www.sec.gov/news/press/2010/2010-15.htm

 

Other shoes dropping – clunk! — In December 2009 the SEC Commission approved new rules to enhance the information that shareowners receive related to risk, executive compensation and corporate governance matters.  “Good governance is a system in which those who manage a company – officers and directors – are effectively accountable for their decisions and performance…but accountability is impossible without transparency,” Chairman Schapiro said.  The Commission also beefed up rules related to disclosure and information about present and nominated candidates for the board.

 

Cluck:  On September 22, 2009 the US Environmental Protection Agency issued the Final Mandatory Reporting of Greenhouse Gases Rule – this requires annual reporting of GhG emissions by large sources and suppliers in the USA emitting 25,000 metric tons or more per year.  ESG and Sustainability aggregators such as Trucost provide these data to analysts, investors, regulators and others. (Gases covered by the Rule include: carbon dioxide, nitrous oxide, hydro fluorocarbons, per fluorocarbons, sulfur hexafluoride, and other gases.)  This action followed a US Supreme Court ruling that GhGs are air pollutants covered by the Clean Air Act, which USEPA and the states enforce.

 

Clunk:  On December 7, 2009 the USEPA Administrator signed two finding regarding GhGs – six Greenhouse Gases were determined to threaten public health; and, “well-mixed” GhGs from new motor cars and new engines contribute to GhG pollution which threatens the public health.  The latter a prerequisite to finalizing the EPA’s proposed emission standards for light-duty vehicles.

 

Connecting the dots for you:  There is a large and growing universe of Sustainability and ESG (Environmental – Social – Governance key corporate performance indicators) research and advisory organizations that provide analytics and services to asset owners and managers.  These organizations are now influencing literally trillions’ of dollars in AUM.  A growing number of mainstream investors, including US Public Sector retirement funds, Sovereign Wealth Investors, Sustainable and Responsible Investor (SRI), high-wealth individuals, and others, are adopting ESG and Sustainability investment guidelines.

 

Recent events underscore the importance of the need for senior corporate management and boards – and especially function managers — to get up-to-speed and ahead of the curve on ESG and Sustainability reporting.  The SEC action this week and the previous actions by USEPA will have profound effects on the corporate disclosure – now and in the future.  That’s why we developed the Institute’s  INSIGHTS-edge as a tool for corporate managers, investment managers, analysts, advocates, and stakeholders.

THE BIG STORY OF 2010: PUBLIC RAGE AGAINST BANKERS AND WALL STREET

The Big Story – today it’s the terrible loss of life and widespread injuries in Haiti following the earthquake.  For much of 2010, as in other years, there will be a number of Big Stories that briefly dominate the news and pass by as the 24/7 news cycle moves on to other stories.  But one Big Story that at times dominate the news and [that] will be covered almost continuously will be about Wall Street and the rage that the American People feel towards the investment bankers, commercial bankers, brokers – everyone who did “this” to them (our neighbors), to us, to the nation.

 

Think of RAGE this way:  At its root it is about the apparent lack of Responsibility and Accountability [effective Governance] and Ethical behavior on the part of Wall Street leadership brought the economy to the brink of financial disaster.  We may have moved back from the edge of that steep cliff – some of us, anyway – but there are still 7 million plus Americans who have lost jobs; millions more are underemployed or have quit looking for a job; 3 million home mortgages have been foreclosed; small business is being starved for capital; and now, commercial real estate is following the disaster that occurred in the resident real estate market…need we go on?

 

And who is to blame?  In the minds of many Americans, Wall Street leadership.  Government regulators who took their eye off the ball are a close second. If you define the public as voters, constituents, investors, employees, borrowers, homeowners, public officials, entrepreneurs – then all have been impacted by the risky and at times reckless behavior of the leaders of the nation’s largest financial services organizations.  The rising public outrage is finally being heard loud and clear in the halls of congress and in the White House. (We have been hearing in conversations with family members and friends and business associates – where is the public outrage? It’s here.)

 

Here are some of the reasons why Wall Street will continue to be the Big Story long into 2010:

 

  • The Financial Crisis Inquiry Commission hearings are getting underway.  The first chieftains of finance were in Washington today being questioned by members of Congress.  There will be much, much more drama to come in these proceedings, which will continue out to year-end when a report is due. C-Span and the financial and news channels will have much content to share through the months of 2010.
  • Once the commission’s report is out at year-end, as in the case of the September 11 Commission, we will be hearing about the findings for a long time to come.  Short term, the answers to questions raised – and the long introductions to the questions by lawmakers (speeches, really) will be the stuff of The Big Story all through 2010.
  • The public rage will fuel the debate about the appropriate measures needed to effectively regulate Wall Street firms, commercial banks, and other market players (like hedge funds and derivative instruments).  There is comprehensive draft legislation moving through the Congress and fierce lobbying by financial firms is underway as well.
  • President Obama and members of Congress are proposing special taxes on the big banks that received government funds as the crisis deepened (a number of firms have paid the funds back) – the $120 billion number of the starting point (the amount the US government is said to have lost in the rescue effort to date).
  • The Big Story within this Big Story:  2010 Wall Street bonuses.  Buckle your seatbelts – with big banks (those “too big to fail”, and receiving federal funds with almost no strings attached) are about to announce the bonuses paid to their leaders, and to the rank & file.  The numbers will be in the tens of billions – because the banks are reporting profits once again. (Thanks to government aid, critics say – but that will be another part of The Big Story.)  The President and Congress have talked up a possible 50% tax on the bonuses paid by banks that received federal funds.  Wall Street firms will not understand the rage at the grassroots level as struggling families hear about multi-million dollar payouts at banks that were on the brink of failure (or so it was presented as rationale by the Bush Administration for the rushed bailout) now flush with cash for bonuses.
  • There will be many lawsuits filed (in addition to those working through the system right now) against Wall Street organizations – public employees’ pension funds are among the prominent plaintiffs, aided by the state attorneys general.  The crisis commission revelations are sure to fuel a number of these legal actions.

That’s a beginning list of why The Big Story of 2010 promises to be a long string of stories about what happened and why in 2007-2009.  And who did what to whom.

 

Remember the public rage – RAGE – this is about the failure of Responsibility (to stockholders and stakeholders, as fiduciaries), Accountability (to employees, stockholders, customers, various stakeholders, and to the nation), lack of effective Governance (and oversight) by boards and executives, and un-Ethical behavior by a number of capital market players.  (Some large investment bankers now stand accused of marketing Collateralized Debt Obligations to investor-customers while themselves shorting the same instruments – one more element of The Big Story coming to light as emails are surfacing).

 

We’ll stop here with the thought expressed by Sir Winston Churchill as events during WW II seemed to be turning in favor of the western allies in November 1942  “Now this is not the end.  It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” When we look back, we may see the Big Story of 2010 as the beginning of real changes in the capital markets and in financial services regulation.

 

Again paraphrasing the Great Orator, WC:  “Never have so few done so much damage to so many in such a short period of time.”  Stay Tuned to The Big Story in 2010 – underlying all, the public outrage at what and how much has been done to the many by the few.

 

THE CONFESSION – FINALLY, MARK MCGWIRE “FESSES UP” THE NEXT CHAPTER COULD BE REDEMPTION…OF A SORT

Say it ain’t so, Joe.”

Back in the 1919 baseball World Series players on the losing Chicago White Sox team were accused of throwing the game and “fixing” the outcome so that the Cincinnati Reds would win.  Among the players accused was “Shoeless” Joe Jackson, who was later said to have admitted taking part in the conspiracy.  (He was suspended from Major League Baseball the following season and the incident mars an otherwise admirable lifetime record in baseball.)

 

This may be myth or factual, but media reports at the time said that Jackson testified before a grand jury in 1920 and admitted taking part but in a trial was acquitted with the other accused players. Leaving the court house, a large group of youngsters awaited…one approached Joe Jackson – obviously a fan – and supposedly asked if the accusations were true.  (News reports said he asked, “It ain’t true, is it, Joe?”  And Jackson answered in the affirmative and then walked by.)

 

Over time this became a favorite of sports writers who would pose the question – “Say it ain’t so, Joe” – whenever a star player was accused in this scandal or that.

 

Now we know it is true – for one baseball star who, over the years was the idol of many youngsters.  After years of denying the rumors of charges that he took steroids, Mark McGwire finally stepped forward to admit that he took steroids in the years that he was a major leaguer.  “I wanted to tell the truth,” he said.  “I decided to take the hit.  I’ve been taking hits for five years and it doesn’t feel good…”

 

Appearing before Congress, Mark McGwire denied taking steroids.  He said the same thing on CBS “60 Minutes.” He has said he didn’t take the drugs in answer to media inquiries.  Now that he is returning to baseball, it was time to come clean.

 

There will always be **** (asterisks) in people’s minds and recollections if not in official records about the fantastic records that player McGwire set, including the shattering of New YorkYankee star Roger Maris’s record for home runs in a single season.  We learned that McGwire has apologized to Roger’s widow as part of his taking responsibility for his actions.

 

Among the personal costs to Mark McGwire:  He will most likely never receive the votes to enter the Baseball Hall of Fame.   There are other costs, for sure, including the self-inflicted wounds on his own fame and reputation.

 

Who knows what other damage has been inflicted on countless young athletes…those who hungered after the same kind of fame and recognition that Mark McGwire achieved…and who may have followed his example to take steroids to boost performance?  If the current chapter in the Mark McGwire story conveys the importance of personal accountability to aspiring young players in all sports, centered on the painful confession and owning up to responsibility that will be a huge contribution to amateur and professional sports.  It’s painful for all to watch, but better late than never (the confession and acceptance of responsibility).

 

In the same newspaper I read all about the tearful confession, there was a disturbing story of a young (high school) wrestler hospitalized after a near-fatal overdose of an unknown drug.  We don’t know yet what caused his collapse…and it’s not fair to speculate.  But when we hear of an athlete falling ill…don’t we wonder…and remember the Mark McGwire story?

 

Drug use among our young people is now an epidemic.  In addition to the coaching and training in the art of our competitive sports, it is absolutely imperative that the adults in charge stress personal accountability and that young athletes have to avoid the use of drugs to enhance performance.  (As well as drugs for recreation and escape from the pressures of everyday life.)

 

For the next chapter in the Mark McGwire story:  How about the role of special youth advisor…criss-crossing the country with his new team, visiting high schools, even junior highs, to spread the message:  Don’t do drugs – look at what happened to me.  It can happen to you.  The medals and awards and glory are not worth it in the end.

 

Redemption, forgiveness, overcoming adversity.  It used to be the American Way. It can be again … if we all try.  Your thoughts?

BEING ACCOUNTABLE – THE WARTIME PRESIDENT, BARACK OBAMA

President Barack Obama (#44) followed the advice of predecessor Harry S Truman (#33) this week; he took responsibility for the screw-ups related to the Flight 253 attack.  As President Truman proclaimed – always evident by the plaque on his desk:  “The Buck Stops Here.”  Plain speaking Harry, from the Show-Me State (Missouri), over the course of his presidency (just about 8 years) made many difficult decisions and stood tall in the face of frequent criticism.

 

President Obama ordered a thorough probe of the mishaps, mistakes, oversights, and system failures that allowed a Nigerian national to climb aboard the Northwest/Delta flight (Amsterdam-Detroit) that he would try to bring down over the territory of the United States of America.  Clearly, an act of war in the War on Terror in which this nation has been engaged for several decades (September 11th; embassy attacks in Africa; embassy bombed in Lebanon; US Marines attacked in Lebanon; USS Cole attacked in Yemen…and on and on…).

 

And President Obama began to acknowledge that we are at war with combatants who are not representing specific nation-states but organized and just as deadly as when armies march under national banners.  “We are at war,” reported The Wall Street Journal quoting President Obama, “at war with Al-Qaeda.”  We applaud him on standing tall and being a symbol of accountability – so sorely needed in America in these times when other leaders use weasel-words to squirm out of responsibility.

 

Becoming president on the death of the war time president, Franklin Roosevelt, President Truman would write that he remembered…”Now the lightning had struck, and events beyond anyone’s control had taken command.  America had lost a great leader, and I was faced with a terrible responsibility…”

 

President Truman swung into action, guiding the grieving nation to end WW II; approved the use of two nuclear bombs to end the war in the Pacific; faced down Soviet Russia on many fronts in the early days of the Cold War (including the Berlin Airlift, an act that challenged the Russians directly in Germany); reacted immediately to the North Korean invasion of South Korea with a US – UN military response; fired an insubordinate hero, General Douglas MacArthur; with General George Marshall launched the Marshall Plan to rebuild war-torn Europe…and more.  The buck did indeed stop right there at his desk.

And so to this war, this wartime president.  When the facts are known, and remedies clear, President Obama should make the necessary adjustments and bring homeland security – defense – to the level needed to protect our nation.  Some hard choices will have to be made.  Fiefdoms overcome; barriers to cooperation broken down; heads knocked together.  That’s what you try to do in wartime.

 

You also ask everyone to make sacrifices on behalf of the nation, for the general welfare.  President Roosevelt demanded that in WW II.  When wartime corporate profiteers were exposed – by Senator Harry Truman and his committee before he became VP – President Roosevelt and the Congress moved to adopt excess profit measures (for a time, income taxes were at 90% for the high earners) and clawed back ill-gained profits once the war was underway (1942).

 

When the armed forces needed materiel, rationing was introduced at home.  Homemakers turned in their pots & pans to be recycled for the Arsenal of Democracy.  President Roosevelt frequently took his message to the American People on “Fireside” radio chats. He told the nation as the build up for war was underway (May 1941) that … “Your government has the right to expect that all citizens take part in the common work of our common defense…”

 

Adding, “This is no time for capital to make, or be allowed to retain, excess profits…”

Maybe those kinds of measures, realistically adjusted to 21st Century society, should be considered by the Administration.

 

We could start by taxing the overly-generous (and certainly the most obscene) bonuses of the financial sector organizations that received “war time” financial rescue by the federal government.  About those risk-prone financial organizations deemed too big to fail – what sacrifices are they committed to make in this wartime environment?

 

As the WW II wartime president said in 1941 (repeating the words of the signers of the Declaration of Independence):  “With a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes, and our sacred honor…”

 

We are all in this together, right?  What do you think?

Accountability Does Matter in Getting to the Bottom of the Screwups in the Attempted Attack on the US at Christmas Time — Who Did What / Or Didn’t Do What / And What Lessons We Can Learn From That

We’re back blogging today – a Happy New Year 2010 to all.  We resume this running commentary on matters of accountability (hence, the title of the column) after a break in 2009 when we tended to other business.  This diversion included writing/editing the Perspectives & Insights newsletter which you can read on our INSIGHTS-edge platform.  My colleagues urge me to be brief – it’s the Web, not a book chapter – and so I will try my best to be on point and to the point…and more Blogger-like than long form essayist.  I may wander from this promise with longer pieces when the muse within stirs.

 

* * * * * * * *

 

In Michael Moore’s film on the September 11, 2001 attacks on the United States – “Fahrenheit 9/11” — then-President George W. Bush is shown sitting in a Florida classroom which he was visiting at the time…staring down as if confused or bewildered on hearing the news of the first planes crashing into the World Trade Center…sitting for a l-o-n-g period (seven minutes, Mr. Moore tells us in the movie).  Then the president left the school (to wander the skies, it is portrayed) and very slowly the resources of the federal government began to react to the terrible damage being inflicted on this nation by a gang of terrorists.

 

Over the next decade literally hundreds of billions of dollars would be invested in homeland security, in the intelligence services, the armed conflict in the Middle East – and let’s be clear, the War on Terrorism was clearly described as such by President Bush – and yet very simple things seem to be still going wrong.

 

December 2009:  A Nigerian national disappears from his family and shows up in Yemen where he is trained in terror tactics.  Strange emails from him compel his father (a brave man) to go to the US Embassy to report his son’s changed behavior and potentially-threatening behavior.  The son travels with a US visa (issued by the State Department) with inadequate documentation, buys a one way ticket with cash and checks no luggage.  He slips through the security system and after a long journey on approach to the Detroit, Michigan airport he attempts to damage the plane and bring it down.  Alert passengers spring into action and the threat is addressed.

 

The current President of the United States was even slower that his predecessor in [publicly] responding to the event.  Finally, from his Hawaii vacation, President Barack Obama commented publicly…sounding more like a constitutional law professor (which he once was) than the Commander in Chief (which he most certainly now is) as an armed attack was attempted on US soil, or in US airspace to be more exact.  Where was the indignation and call to action? Only later did he begin to sound more like a war-time president – which this writer believes he is – to demand accountability of the leaders of agencies under his supervision.

 

(See The Washington Post story on this – “Obama Addresses Airline Security in Low Key Fashion” – days after the attack —

 

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/27/AR2009122702070.html

 

Michael Moore owes President Bush an apology, it seems to me, for the movie director’s depiction of the president as diffident, or dis-engaged.  Or maybe he’s got another movie planned in which the current president will be accurately depicted in his slow-to-respond mode.  Fair is fair, right?

 

A few days ago Federal Reserve Chairman Ben Bernancke made an important speech and admitted that the Fed could have done more to attempt to prevent the capital market crisis which destroyed many personal investment portfolios.  Hindsight is 20/20, someone once observed.

 

As the chairman was urging the Congress to grant the central bank more authority to deal with future crises, the question is asked, “If the Fed missed this bubble, how will it see the next one?”  We can ask the same question of those in charge of homeland security, right up to the front door of 1600 Pennsylvania Avenue.  (We are promised answers to these and many other questions by the Commander in Chief…soon.)

 

In referring to the failure of Fed Chairman Ben Bernanke and his colleagues in not taking action before the market meltdown, The New York Times economics commentator John Leonhardt wrote:

 

“He and his colleagues fell victim to the same weakness that bedeviled the engineers of the Challenger space shuttle, the planners of the Vietnam and Iraq wars, and the airline pilots who have made tragic cockpit errors.  They didn’t adequately question their own assumptions.  It’s an entirely human mistake…”

 

Mr. Leonhardt could have added the current crisis atmosphere that follows the attempt to down the Detroit-bound airliner.  Today, Umar Farouk Abdulmuttalab was indicted for attempted murder (and other charges) for the Christmas Day attack on board Flight 253 (with its 278 souls on board).

 

Having been involved in literally scores of crisis or critical issues over my career, experience has taught me that both President Bush (#43) and President Obama and Chairman Alan Greenspan and his successor were behaving like so many CEOs and leaders of various types of institutions.  It is very, very hard to think outside the box and imagine the worse-case scenarios that seem to occur in real life all too frequently in our time.  Pick up a copy of the 9/11 Commission report and read the official findings of that terrible day in American history.  Reads like something penned by a novelist with over-active imagination who kept dreaming up one impossible literary device after another for his book…except that it is all true life events being described.  Failing to comprehend the events that were unfolding, many people in responsible positions were paralyzed and failed to act decisively.

 

What lessons are to be learned from this most recent event…the Christmas Day Flight 253 attack…what went wrong…how…who should be held accountable?  Stay tuned.

 

Continuing the comparisons of #43 and #44…where President Bush was long ridiculed for his comment in the wake of the feeble response of FEMA to the events in New Orleans…”heck of a job, Brownie…”  We now have, The system worked! This from the Secretary of Homeland Security (who was speaking on behalf of the administration). We could ask: on what planet Janet?

 

Partisan politics aside – when serious threats to the nation arise — accountability does matter – so we must apply the lessons learned in serious situations like the Christmas Day attempted attack on our nation.

 

 

(end)

They Don’t Get It! They Don’t Get It! Get It? They Don’t… Get It!; Got it? THEY don’t get it!

The headlines and the story lines and the snappy quotes and the overall gist of the stories and drumbeats of stories that we are reading and hearing and seeing these days have a running (and very disturbing) theme:  The leaders don’t get it!  They…just don’t…get…it!  Scary.  Scary times we live in.

 

You see, certain of the elites and the privileged and the Masters of the Capital Markets have had it all their way for so long. It’s hard to give that life up.  Just ask Bernie Madoff, sleeping tonight on his government-provided bed.  Even though throughout this country the villagers are gathering, and their torches are being lit…too many in power still don’t get it.  That life?  It’s over.  Hard to accept.  So is the carnage left behind by the Masters of Wall Street for the rest of us.

 

Some developments can be seen in clear light but the effects kick in much later.

 

“This” started a long time ago.  This is what we wrote in winter 1993 in our newsletter, advice to clients and colleagues:

 

“Recent events in the board room and the resulting dramatic headlines have sent a wake up call to senior executives and boards of directors throughout America’s corporations. If you company has not yet been involved in internal or external corporate governance issues, it’s time to analyze the current public debate and prepare for your involvement in the latest movement to sweep the corporate world. This is not a short-term phenomenon.

 

“Sooner or later, virtually every publicly-owned corporation in the United States will be involved in the broadening corporate governance debate now underway in earnest; corporate governance issues could eventually affect the careers of countless numbers of senior corporate officers.

 

“Broad-based shareholder activism is a relatively new movement – embryonic, according to a prominent activist – beginning to seriously affect the way that CEOs run their companies and the way boards and CEOs get along.  The times are changing.”

 

The signs of change?  We wrote about runaway executive pay, the board’s proper role in oversight, growing pension fund activism, the public’s attention being engaged in a variety of corporate issues, an often angry business press zeroing in, the personal attacks on CEOs mounting, the activists shareholder movement going global, and environmental organizations moving into synch with shareholder activists to target companies.  All very evident, no crystal ball needed.

 

But the good times rolled on, didn’t they!

 

But the good times were rolling on, as the 1992-93 economic recovery kicked in.  Fed Chairman Alan Greenspan wasn’t going to take the punch bowl away from the joyous parties going on.  Cheap credit was the key to making everyone happy.  Hands-off the brakes.  Sometimes that’s the price of being re-nominated for what can be the best job in town…sometimes.  Oh, he did bury the “irrational exuberance” warning in a speech to a group of nodding economists in 1996…but who of us really heard that obscure warning?

 

So we rolled on, merrily along…we briefly skirted disaster with the meltdown of the hedge fund Long Term Capital Management, for which the Fed Maestro (as he was lovingly called by Wall Street) rescued in 1999 (a measly $4 or $5 billion was needed from the Fed friends), sending the signal – “it’s still party time!” – throughout the canyons of Lower Manhattan. Total losses were $4.6 billion. Warnings were ignored then…and later.

 

The other watchdogs looking out for our interests?  Leaders in the Senate and House – who were supposed to be protecting our interests – conspired with Wall Street Wizards to disassemble the 7-decades long protective barriers between Wall Street brokers and investment bankers and traditional bankers (the Glass-Steagall Act), allowing the thundering herd to crash into the bank vaults to steal away your money.

 

Oh, the language they used – creating powerful, diversified financial services giants to compete with the world’s bestgiving the consumer more choice… modernizing the banking system (take that old fogeys!).  Well, take a look at the poster child of all this — Citigroup – does it meet those definitions today?  That’s what repeal of Glass-Steagall by Gramm-Leach-Bliley did for us back in 1999.

 

Count your blessings:  we did dodge a big bullet.  The Wizards and Elites and some of their Capital Hill cronies – and that fellow in the White House — wanted your Social Security accounts “privatized” so that you could use “your own money” to buy the junk being peddled by Wall Street for your retirement future!  More choice for the consumer!

 


There goes Enron – but not the lessons of bad behaviors

 

At the beginning of this decade Fortune magazine’s 7th ranked American corporation imploded just about overnight.  Poof! There went Enron.  And with it, Arthur Anderson, one of the world’s largest accounting firms. This was eight years after my observations…that things were changing for Corporate America and Wall Street…and this was not short-term.  Some pretty awful lessons came out of Enron and WorldCom and Global Crossing and other failed firms.  That were applied by the Wizards and Elites and Masters of Finance.

 

The heart of Enron’s collapse was the practice of moving the company’s mounting debts and obligations off the balance sheet and into “SPE’s” – arcane accounting devices that, as “special purpose entities,” could hide the bad news so the company could trumpet the good news…all good all the time.  Until the music stopped – this was a kind of Corporate Ponzi scheme, and it collapsed.  (Enron lenders had strict covenants that were triggered as the share price slid downward.)

 

In the wake of Enron and WorldCom came outrage, fulminating, posturing and then the Sarbanes-Oxley legislation.  For the record, this was a very good thing that President George W. Bush got behind – give him some credit.

 

Some good things came out of SOX reforms and renewed White Collar crime enforcement, but as we have seen, SOX didn’t go far enough.  And once the walls came down between the bank finances and the Wall Street Wizard’s schemes, all hell was bound to break loose.

 

You see, the Wizards and Elites and Masters saw a big opportunity:  move bad stuff on a massive scale out of the balance sheets of large corporations (the bank holding companies and diversified financial firms) and into “packages” of mortgages — and sell them everywhere to everyone.

 

Once, banks held mortgages in their portfolios and earned profits in the process.  Risk was a paramount concern – would the loan be repaid? Could the borrower afford the monthly payment?  Was their credit good?  After Enron – again, the bad lessons learned – the new diversified financial giants (with everything under one roof) began to move billions of dollars in mortgages in their portfolios into securitized (love that word) packages and then sold them to institutional investors – probably your pension fund holds much of this junk.

 

And the game moved into high gear

 

Enablers such as the big credit risk agencies happily slapped Grade A ratings on the packages – for a fat fee, thank you – how soon do you need the Triple A label?  And then the Wizards marketed these to foreign central banks, US pension funds, university endowments, foundations, mutual funds, hedge funds, and more of the eager buyers.

 

This is the junk that has gummed up the world’s financial system.  The “securitized” and “collateralized” packages of mortgages, and credit card debt, and student loans, and car loans, now sit gathering dust on the shelves in far too many institutional investor offices… there is no market for same.  The auction markets for trading this stuff like baseball cards locked up a year ago.  No one can sell the CDOs and CMO sets.

 

See the lessons?  Move the bad stuff off your books at the bank or the mortgage company or the car loan company and transfer the risk to someone else.  (The problem at Enron was that the company guaranteed and was directly responsible for the debt of their shadowy SPE units – the bad stuff came back)  Move enough of this stuff so the whole capital market gets gummed up.  Make sure the problems to come are huge – so that we are too big to fail.  If we do flirt with failure run to the Protects in Washington to get bailed out (remember that “Get Out of Jail Free” card in Monopoly?).  Hey, we have shoveled enough money into their campaigns to ask for the favors needed.

 

I guess it took 15 or even 20 years for the mess that was seeded in the 1990s to blow up on all of us. We are all paying the price for the Wizards’ and the Elites’ and Masters’ arrogance, their disregard for the rest of us (ignoring their fiduciary duties as they did), and their outright stupidity in too many cases.

 

The AIG debacle – the shame of the Wizards who brought us the mess

 

Well, not all of us are paying the price. As we write this, incredibly, unbelievably, American Insurance Group (AIG), the company in many ways right at the center of the scams of the past decades or so, is paying out obscene bonuses to the people in the very unit (at least half of the money, anyway) that brought us, well, what looks very much like some kinds of fraud executed on the most massive scale possible.

 

Things weren’t as advertised.  Things that were promised were not possible to deliver. “Securitized” didn’t mean secure.  “Collateralized” weren’t backed by real collateral.  Things were not as rosy as promised – sounds to me like some kinds of fraud.

 

The federal government – you, me – now own 80% of this failed company. Oops, I mean AIG, this company deemed “too big to fail”. (See the lessons of Enron?) We have invested some $400 billions of taxpayer dollars and Federal Reserve dollars into AIG. To “retain” the Wizards who created and marketed the toxic junk that clogs and paralyzes our domestic and the global financial systems, barrels of cash had to be doled out.  (Huh?  Yes, to retain the leaders of the failed unit, we must lavish cash on them now. It’s contractual, you know!)

So, the first of a total of $450 million in checks were doled recently to AIG managers.  New York State Attorney General Andrew Cuomo is demanding answers, including the list of those people receiving checks.  Several dozens got millions in payouts. US Senator Charles Schumer is threatening to tax all of the money to claw buck from the 73 employees who got $1 million or more – “if you don’t return it on your own, we will do it for you…”

 

One of the games played in all of this was for insurance firms to issue “insurance” on “credit default swaps,” transactions that really weren’t insurance and weren’t really good for assuring safety…in case the packages of junk failed. Which they did.  At least until now. Insurance?  Well, we didn’t actually sell insurance (which would come under state insurance regulation)…that’s the kind of game played.  Who pays – you and me, pals of mine!

 

There’s more, much more to come. Today’s New York Post full page headline screams it out:  “NOT SO FAST YOU GREEDY BASTARDS …Feds plan 100% tax on AIG bonuses…”

 

So how about those lessons out of Enron and WorldCom et al:  Much of what went on in leading to the market meltdown sounds like fraud.  In so many ways.  What forecasts of future profits enticed even sophisticated investors to invest in exotic instruments by the Wizards?  Calling state and federal prosecutors:  The People are angry and demanding action. The torches are being lit. You have some of the tools, thanks for Sarbanes-Oxley.  You have the US Justice Department’s expert White Collar crime unit (formed after Enron, with 700 convictions under their belt now).

 

Solutions – get tough, prosecutors

 

We have a soon-to-be-vacant Caribbean island hideaway on the shores of the azure blue Caribbean waters which the Wizards and Elites and Masters have often flown over in their private jets (usually at shareholder expense) en route to posh hideaways and resorts.  It’s a very safe place – guarded by US Marines.  It’s US territory.  Guantanoma Bay.  Wonderful healthcare available, according to “Sicko” filmmaker Michael Moore – better than many of the laid off Americans receive.  Great place for white crime fraudsters, right? When we run out of room at Gitmo we can use some of the stimulus money to expand other federal lockups in various states, right?  (Put people back to work building these facilities, and later for watching over the Wizards.)

 

Be assured of this:  What we have known as “Wall Street” and much of the financial services sector will not be the same as in the party years of the last decade or two.  As our president said we are not going back to business as usual and the same old same old on Wall Street in some parts of the corporate sector.

 

And to show you the magninmous response of the Street’s poster boy, AIG: The CEO of AIG has asked the top employees in the troubled division to “give back the bonuses.” Anyone getting $100,000 or more should return “at least half” – some have already returned all.  And then this warning to us from AIG:  There is at least still $1.6 trillion – that’s “T” – on the AIG books that could blow up the American economy, the world economy, the 2009 stimulus package, and more.  Too big to fail – it works!

 

That’s it for now.  Gotta calm down after watching the cable news, hearing about the AIG issues, learning more about the Madoff scam, and pondering the thumb-in-the-eye given by Wall Street Wizards to our new president…leave it with this.

Numbers – They Do Add Up – And The Federal Government’s Treasury Is Still Putting Big Bailout

What ever happened to the fabled free market of these United States of America?  What ever is left of it is in free fall these days. What happened to our trumpeting of fiscal conservatism?  (Neither political party now has a grip on fiscal restraint.) What happened to the promise of “smaller government,” harking back to the Great Communicator?  What is happening right now to our system of governance…of government…of corporations?  What does the current financial meltdown say about the state of accountability among our nation’s leaders?  Help – we need to escape all this!

 

Every Friday night my wife and I do escape – we settle in and tune to the CBS TV Network show, “Numb3rs,” a neat and lively crime drama with its finely etched and likeable characters –“Charley-the-Numbers-Guru,” his brother Don, the savvy FBI agent in Southern California and a supporting cast portraying brave and bright people. At the program’s opening a slate appears with numbers fading in and out – “4,000 bank robberies, 500 suspects, 50 abandoned get-away cars, 2 prime suspects,” and so on.  This sets the viewer up for what is to come and gives you at least a hint of what the writers have in store.

 

Alas, as I watch the TV news programs, read the dailies, scan Web sites, and read the news, commentary and research that is gathered for our Accountability Central Web platform, I have no such reference points for what is to come in the pouring out of cash from the federal treasury or the Federal Reserve.  Numbers, numbers, and more numbers – become numbing to watch and to digest.  Where does this end?

 

“Information overload,” some experts call the daily onslaught of informative – content, in today’s media world. Waves of information wash over us even when we are tuning out the bad news, chattering heads on cable TV, radio news broadcasts, and more.

 

This is what has been on my mind in recent days:

 

The federal government’s fund for purchasing toxic assets from banks and other financial service firms was approved by the 110th Congress – in a mad dash to line up support “before the financial system melted down” – at $700 billion. That’s “B,” which looks like this:  $700,000,000,000.  Think of each billion as one thousand million US dollars. (One million is only $1,000,000.) If the 300 million people in America got a check instead, it would be $2500 (each).  So far so good, sounds manageable.  But wait….

 

 

$380 billion of this was committed (under President George Bush) to the TARP bailout and channeled to a variety of purposes, but mainly to buy “toxic assets” from the banks that granted mortgages.  Assets purchased: Well, “0,” as the government mavens changed their minds after Congress responded to the panic and approved the $700B. .

 

$146 billion did immediately go out the Treasury Department’s door to financial services companies (including hundreds of major, regional and local area banks). These are the stuff of the sensational headlines.

 

$320 billion – that is what President Barack Obama technically had left in the TARP as he began his presidency and jump-started his rescue programs.  What to do with this remaining money? Stay Tuned – the news is fast in coming.

 

$50 billion – that’s what President Obama will direct to [today’s announced] the Homeowner Stability Initiative, to rescue 4 to 5 million residential mortgages issued by the now-nationalized Freddie Mac and Fannie Mae “government-sponsored entities,” which together account for millions of home mortgages.  Nothing for speculators, he said.

 

$1.6 trillion – that is what the Federal Reserve System originally committed as “buyer of last resort” to strengthen the free-falling commercial paper market; the total market sector is valued at about $1.6 trillion – and the Fed has invested $249 billion in these efforts so far.  And still the credit markets seem to be seized up – trust is gone for now.  Does this mean money to channel to the credit markers?  Access to credit is seriously affected, affecting all areas of the American and global economies.. “Zero Dollars” is what many US business owners have received in credit so far.

 

$600 billion for support of the Federal Home Loan Banks – these are independent entities (12 regional banks around the country) created in the 1930s for expanding and assuring access to home ownership, and each is owned by the commercial banks and related entities but operated as quasi-public sector entities.  $217 billion has been paid out so far.

 

$600 billion – start with $50 billion, which is what the Treasury Department committed to guarantee money market accounts; the Fed has added its weight to bring the fund to a grand total of $600 billion, of which $14 billion has been disbursed.

 

$53 billion – what the Federal Reserve has designated as a rescue package to buy up toxic securities that the bright lights at the nation’s largest insurance company – AIG – stuffed in their investment portfolios. To back up the claims which might be paid out. So far $43 billion has been paid out. Oh yes, the AIG brass has curtailed those expensive parties – for now.

 

The New York Times has given us excellent recaps of the Federal government’s commitments since the meltdown of the financial markets and banking and financial services sectors in midyear 2008:

 

  • $4.6 trillion – committed total of federal support.  $1.1 trillion – paid out so far.
  • $2.4 trillion – government lending commitments – $657 billion – paid out so far.
  • $1.8 trillion – government as insurer of last resort – $267 billion – paid out so far.
  • Total:  $8.8 trillion (so far!)

 

Keep in mind:  the total value of all goods and services produced in the USA, the Gross Domestic Product, in February is $14.5 trillion (says the Finance Forecast Center data).

 

Moody’s “Economy.com” top economist said recently…America will never again be like it was…

 

What does this mean to us…what do these numbers mean?  At the personal level, lots of lost sleep, anxious daytime moments, plenty of worrying about “numbers” – our salaries, mortgage and car payments, college tuition, medical insurance, medical expenses (uncovered like your deductible, which increases every year), energy costs, and more.  But like the CBS Network show, the Numbers roll on…   Consider:

 

$29 billion – you remember Bear Stearns, once the high-flying investment bank / brokerage that went wild with marketing mortgage-backed securities to eager institutional and other investors?  Down it went — and fast. Well, the Treasury, Federal Reserve and other Wall Street power brokers maneuvered in the wee hours so that JPMorgan Chase could buy the remnants of B-S – with $29 billion committed by the Fed to sweeten the deal.  (Chase is a bank; the Fed can help out with guarantees.) A few other numbers for you:  The share price of B-S went from $171 per share to $60 and then to $10 or less at then end…in literally the blink of your eye. Hundreds of employees lost their retirement, 401-k, savings, etc.  There was $18 billion in cash reserves that disappeared in a blink. Thanks, bosses – you really knew what risk management wasn’t!

 

$11 billion – current deficit of the Pension Benefit Guaranty Corporation (PBGC) for this year, at least right now. This is the government agency that picks up the fallen pension funds of corporations that go bust or can’t pay the pensions of retirees.  PBGC says it has $63 billion in money available (owed out to millions of pensioners of defunct corporate employer plans); the agency projects its obligations are $74 billion (in future years, for the plans in house today).  29,000 – the number of corporate plans the PBGC has had to take over since it was created in 1974 – during the serious economic downturn of 1973-1975 – which was nothing like what is being experienced today.

 

$50 billion – estimated missing dollars from Bernard Madoff’s fantastic scheme, lost by at least 14,000 investors.  Does this count the millions of dollars in checks for family and friends found in his Third Avenue office?  No matter…

 

$40+ billion – the current estimate of the State of California’s deficit for the current fiscal year. This is the world’s 10th largest economy – when California is in trouble, what can we expect of other states’ finances?  Think of 20,000 – the number of Golden State (state) workers expected to be laid off now.  When California is in such serious trouble, what about the other states?  The shortfalls in revenue for the states are estimated to be $250 billion to $300 billion over the next 3 years (according to the National Governors Association).  New York State says it will be at least $15 billion short this year; part of the cause is the evaporation of all those big bonuses in Wall Street. What the Money Gods giveth they can taketh away – at least while they are being bailed out by the American People.

 

$3 billion – at least, short-term, in lost wages, expected as General Motors and Chrysler ask the federal government to continue helping them survive. (50,000 jobs will be cut by the Detroit automakers.) GM got $17 billion so far and both companies now are asking for $21 billion more from the government. GM will need at least $30 billion more from the Feds by 2011.  At least.

 

400,000 – not dollars, but jobs recently lost just in the State of MichiganPoof – gone!  Thanks to the merciless hollowing out of American industrial might by too many bosses in this generation of short-sighted corporate leaders, Michigan has the unhappy distinction of being #1 in the unemployed.  Ohio, another industrial powerhouse, is not far behind.  But while these jobs were steadily disappearing, back in New York City…

 

$18 billion – that was the payout to employees of Wall Street firms in bonuses at year-end.  Sadly this was just under half of the prior year’s record payout.   For the record some bosses at companies receiving government help have slashed their own salaries and curtailed bonuses.

 

$4 to 5 billion – hey, it was a good year – this is the estimated amount that John Thain, head of Merrill Lynch paid out in bonuses to the staff in December as the organization was failing and being sold to Bank of America. What were they thinking?  Well, that was not the end of it – according to Investment News, the top Merrill revenue producers are getting a signing bonus of $1 million (per) to stay with the new owners (BofA), plus up to 75% of the annual revenues they recently generated for their former firm.  Well why not – Mr. Thain made a reported $23 million, including his $750,000 salary, a $15 million sign on bonus, and more. (Thain waved his estimated $10 million 2008 bonus after the M-L board got their backs up.)

 

$28 billion – purchase price of Merrill Lynch paid by Bank of America. Losses racked up by M-L under Thain’s brief but personally rewarding stewardship:  $24 billion. Hmmm…

 

$1.22 million – hey, this is what it takes if you are a Master of Wall Street and you want your office decorated in a style befitting your position. While he negotiated away the venerable Merrill Lynch organization after it dabbled too much in risky securities like the rest of Wall Street, John Thain hired famed decorator Michael SmithCNBC’s Charley Gasparino reported this:  $800,000 of M-L money o Smith for his talents, which included ordering curtains for $28,000; a “Roman Shade” for $11,000; a $15,000 sofa; six dining room chairs for $37,000; an at least one area rug for $86,000.  Poor John Thain – embarrassed by this, he wrote a check out to pay for his gilt-edged office. And you thought you had it rough when you looked at your Bank of America and Merrill-Lynch stock prices in your IRA!  Don’t worry about decorator Smith:  He’s been hired to decorate the White House digs for the Obama family.  So reports Gasparino!

 

Enough!  I gotta tune in to Charlie Eppes (played by David Krumholtz) and brother Don (Rob Morrow) – maybe they can help me understand the numbers. Or at least escape the information overload!

 

Notes:

 

To track the federal dollar flow: “Adding Up the Government’s Total Bailout Tab”

 

February 4, 2009 – The New York Times

 

http://www.nytimes.com/interactive/2009/02/04/business/20090205-bailout-totals-graphic.html

 

 

And, “Tracking the $700 Billion Bailout” (charting the allocations)

 

February 18, 2009 – The New York Times

 

http://projects.nytimes.com/creditcrisis/recipients/table

 

 

And if you, too, need numbers relief, “Numb3rs” is at:

 

http://www.cbs.com/primetime/numb3rs/

 

 

Author’s note:  The bewildering array of numbers presented here is, to the best of my ability to count (millions, billions, trillions – I get mixed up at times.)  If you have corrections to the above numbers, please send them to me so that I can correct this post for the record.

 

Today’s Fairy Tales: And With A Wave Of The Prince’s Magic Wand, Poof! The Corporate Jets Turn Into Pumpkins

Once Upon a Time…you remember, don’t you, that timeless and universal fairy tale story opening from your childhood days?  In a far-away land…Gathered ‘round the grown up reader, we kids would look up at the big open book with all the neat color  pictures that she or he would show us at a given moment in the reading.  And here is the beautiful princess kissing the frog…

 

We’re grown ups now, living in a land and a time far, far away from our childhoods, but from time-to-time we still believe in fairy tales.  Or at the least the childhood fairy tales and fables remain so embedded in our consciousness that we can call them up instantly and recall our favorite lines. Let’s hit the instant recall button today, shall we?

 

It’s true that at least some folks among us have been living real fairy tale lives, at least until recently, working and living amidst grand splendor; we could especially find them in plush, well-appointed investment banking offices and brokerage shops and in the fabulous wealthy hedge fund-land.  Then one day the Big Bad Ogres stumbled out of the dark forest to take away their bowls of porridge and bags of gold and those splendid silver winged carriages that whisked them hither and yon.  And even their precious $86,000 office rugs, can you believe that!

 

Who took what from whom may be open to debate, of course.  In the View of Wall Street’s Elite Few, it was a grand party while it lasted, and alas, that party is over, at least for now.  For the many in the land who feel that they had their bowl of gruel taken away — unfairly, by distant unseen forces in moneyland, beyond their control and even their understanding…well, it was the shadowy “they” [that] have taken away their bowls – and a lot more with it.

 

Some day we may look back at these wondrous and magical days of 2009 and the tales we’ll tell of the special times that late 20th Century and early C-21 folks lived in.

 

They’ll say or write that in a land far, far away from here “…there lived a mighty leader who waved his magical wand and ‘poof,’ he could turn sleek, silver-clad, high-flying corporate jets into pumpkins – and even make them disappear entirely!  He could wave the wand and wipe away the fabled corporate names embellishing grand sports stadiums!”  His throne, they’ll recall, was called “The Bully Pulpit,” named by an earlier Prince of the People who lived in the same place a century earlier.  That earlier prince also renamed the President’s House, calling it “The White House.” A mighty dragon slayer, they both were. (Numbers 26 and 44, some also called them.)

 

This prince #44 was raised up with great enthusiasm and fervor by the people of the land in 2008 and they called him “Prince of the People” and he used his Bully Pulpit wisely and well.  And he was a grand speaker, often attacking the greedy Lords of the Land who stood accused of stealing many, many porridge bowls from the people of the land.  And of distant lands as well, the lands of Sinbad-the-Sailor and the folks in Hans Christian Andersen tales, and more.

 

Here in 2009 when we think of fairy tales, we are reminded of the most creative artistic genius of the 20th Century – Walter Elias Disney – who mined the old fairy tales of Europe for his studio’s parade of animated movie hits:  Snow White and the Seven Dwarfs; Cinderella; Bambi; Dumbo (and the old Italian tale of Pinocchio with the nose that grew with lies), and more. The images he created are everlasting.

 

Where Uncle Walt cleaned up the telling of the old stories and gave us happy endings in those fairy tales of wondrous and far off lands, in our times the media and popular culture mavens told us tales celebrating the fairy tale lives of the contemporary Great and often, the Greedy:  think of our fascination with Lifestyles of the Rich and Famous.

 

Alas, in a sign of the times, this week’s New York Times brought the sad news of the demise of some those tellers-of-tales of the most fortunate — the company publishing magazine titles Trader Monthly, Dealmaker, Private Air, and Corporate Leader…is no more.  No more we will read tales and gossip and news of the fortunate, or follow Trader Monthly magazine’s advice to the Wall Street Elite: See It / Make It / Spend It – on higher end real estate, cars, fashion, liquor, and gadgets. (In the words of the editors, “The ideal reader is 29 years old, making $400,000 a year and spending all of it!”  (Doubledown Media’s company Web site is gone – you see, even tellers of fairy tales can vanish overnight.)

 

Postscript to this story: One on-line wag asked: Does this mean that Marie Antoinette’s magazine “CAKE” won’t be published anymore either?

 

In These Extraordinary Times”

 

The future Uncle Walt creating his 21st Century fairy tales – about living in these extraordinary times, the Prince of the People early in his rule hath declared — can tune into this apt metaphor for the early years of the 21st Century boom and bust:  In an internal email to employees, as was the custom leaked to Bloggers, the media Dealmaker’s company CEO allegedly wrote:  “These are unprecedented times. The combination of the media depression, the Wall Street implosion and credit slowdown were collectively too much for our company – probably for any company in our shoes – to overcome.” Goodbye.  No more fairy tales for now.

 

Maybe the red slippers of Dorothy in the Land of Oz would have helped?  In the Emerald City – otherwise known until summer of 2008 as downtown Manhattan – the elites may forever go on telling the tales of the fabulous Emerald City they once knew and cherished…and helped destroy in their narcissism and worship of the lucre. (Remember him gazing at himself in the pond?  He fell in and drowned.)  “Poof” – things can go away like that in real life, too!

 

And to so to February 2009 and Day 17:

 

Do magic wands actually work? Well…sometimes…and we’ll see.  If they are waved energetically from the Bully Pulpit at the Kingdoms of the Elite, high-flying corporate jets have disappeared.  Bags of gold – think of these in modern terms as executive compensation – are right now being taken away from the elites at organizations that have received gifts from the bountiful treasuries of the Land of the People. You remember, those who crowned the Prince of The People to save them.

 

Methinks that the rising fury of the people is still underestimated by some in the kingdom, however.  Think of the scenes in the 1931 horror move classic, “Frankenstein,” with the villagers at the gates of Dr. Frankenstein’s castle – torches in hand.  The metaphoric village crowd with their torches are at the gates of the White House and Congress these days. We should not underestimate the anger and fury of the American people as their 401-k go “poof” and their jobs disappear at a wand’s wave by the employers of the land.

 

Of course, as in fairy tales, life can be hard and magical tricks difficult to pull off. We’re reminded of what then-US Senator Hillary Rodham Clinton said on February 24, 2008 on the campaign trail at Rhode Island College in Providence Rhode Island (speaking of healthcare reform) – as she proclaimed lyrically to great applause…

 

“Let’s get everybody together – let’s get unified

 

The sky will open

 

The light will come down

 

Celestial choirs will be singing

 

Everyone will know we can do the right thing

 

And the world will be perfect…”

 

She had no illusions, she said, about how hard [reform] would be: You will not wave the magic wand…and have the special interests disappear…

 

And as we think of the missing billions in the bags of gold entrusted to Bernard Madoff by thousands of trusting souls, with new lists of the suckered playing out in the media day-by-day, we recall the fable of the child crying out in his wisdom what everyone really knew but were afraid to say. Think back to the fable, “The Emperor’s New Clothes,” by Hans Christian Anderson (1837).

 

In this tale the emperor hires two swindlers to make him a fine suit of clothes, of grand cloth, which will be invisible to anyone too stupid or unfit for his position.  The emperor buys this scam, and then goes around naked, and everyone in the kingdom looks on — believing? Wanting to believe?  Because everyone else believed?  Because everyone knew someone who they said believed? And then the child cries out. “But he has nothing on!”  The crowd knows it – but it still felt right to the emperor who rides on continuing to believe that he is clothed. He wanted to believe! Sound familiar?

 

In our adulthood, we came to understand that the old fairy tales had audiences of both young and old, and were often important lessons to be imparted, usually scary at times, and usually containing life’s brutal lessons.  But we wanna believe, and that’s what makes them so powerful to each of us.

 

Which brings to mind Frank Sinatra’s most requested hit song (with slight paraphrasing):

 

 

“Fairy tales can come true,

 

It can happen to you

 

…if you’re brave at heart!”

 

 

“For it’s hard, you will find,

 

To be narrow of mind,

 

If you’re brave at heart…”

 

 

Well, children – and grown ups of all ages:  Welcome to February 2009 and the waving-of-the-many-wands quite bravely from the Bully Pulpit in the White House and even the Grand Halls atop The Fabled City on the Hill. Let’s hope some of this magic works – in time to save the kingdom!  The question is: When we wake up will we have returned to the splendid colors of the Land of Oz…or to the black and white drabness of Kansas?

 

Do Stay Tuned!

 

Foot notes:

 

(You can read more about Doubledown Media at Folio Magazine — http://www.foliomag.com/2009/breaking-doubledown-media-shuts-down

 

You can see Senator Hillary Clinton’s campaign video – she was directly addressing her primary competitor’s (Senator Barack Obama) positions on reforming healthcare.

 

“Now I could stand up here and say, ‘Let’s just get everybody together. Let’s get unified. The sky will open. The lights will come down. Celestial choirs will be singing and everyone will know we should do the right thing and the world will be perfect.’

 

“Maybe I’ve just lived a little long, but I have no illusions about how hard this is going to be. You are not going to wave a magic wand and have the special interests disappear,” she said.   Read whole blog post at:  http://www.swamppolitics.com/news/politics/blog/2008/02/clinton_raps_obamas_celestial.html

 

See the video at: See the video at: http://www.youtube.com/watch?v=a1ckrEeHDRY

 

Thanks to Wikipedia for this:  “The Emperor’s New Clothes” – by Hans Christian Anderson (1837) http://en.wikipedia.org/wiki/The_Emperor’s_New_Clothes

 

About Frank Sinatra’s song: “Young at Heart”
The songwriters were Carolyn Leigh and Johnny Richards
Copyright © 1954 by Cherio Corp / Renewed by June’s Tunes All Rights Reserved

 

Welcome The New Era Of Responsibility! And Accountability…

 

President Barack Obama’s inaugural pageant was quite something, wasn’t it?  The long-awaited official [peaceful] turnover of the reins of government occurred at precisely 12:00 noon, and President George W. Bush, #43 was now a former chief executive officer and commander-in-chief.  President Barack Obama is now #44.  His inaugural speech was closely watched by everyone, everywhere, it seems to us.

 

Thousands of television, radio and Internet channels carried his words live to far distant corners of the world, including the village in Kenya where his father lived and some of his family now live. But the key audience was here in the United States – he was speaking to American legislators, judges, regulators, social advocates and activists, ordinary citizens, bankers, business owners, corporate executives, corporate board members, heads of social agencies, tens of millions of children watching from school settings, chattering media pundits, journalists, immigrants with legal status and otherwise, and many more of us.

 

We asked this week in a prior column

 

(From January 18 — What shall we call this [era]?  We had the Square Deal for the Common Man (Teddy Roosevelt), and our grandparents welcomed the New Deal in the depths of the Great Depression (Franklin Roosevelt) and cheered the New Frontier of John Kennedy and the Best and the Brightest (of his generation).  Lyndon Johnson brought us the Great Society (at least for a while) and Ronald Reagan brought us Morning in America.  The outgoing George W. Bush promised Compassionate Conservatism.)

 

Now we have our answer:  Welcome to the New Era of Responsibility!  And as we see things through our prism, the Age of Accountability – as in personal and collective and institutional accountability to ourselves, to others and to the common good.

 

We will be parsing the president’s words and phrases and the context of many of his remarks in the days and weeks ahead.  Especially so as he issues executive orders, send draft legislation to Capitol Hill, instructs cabinet members on policy, and creates policy on critical issues, in his wonderful style of consensus building, grants media interviews and conducts press briefings. What does he mean – what does he want? What does he want us to do?

 

For now, let’s savor the words that launched this most remarkable of presidencies, with all of its important historical hinge points and “first times ever that…” references that we will hear over and over again.

 

As he challenged us to service to the nation —

 

Challenges [that the nation faces]…know this, American, they will be met.

 

Whether we face gathering clouds or raging storms (reminiscent of Franklin Roosevelt in the 1930s or Abraham Lincoln in the 1860s.)

 

Our enduring spirit…

 

Greatness must be earned (over and over again, as a people and a nation)

 

We must set out to do the work of remaking America…

 

All are equal, all are free, all are deserving of equal opportunity…

 

It’s not the size of government, but what it does…(It’s not whether government is too big or too small but whether it works…)

 

The ground has shifted beneath us…

 

[Speaking of government] We will be held to account…and must be transparent…

 

American ideals must once again excite the rest of the world…

 

We extend our hand [to foreign leaders] if you will unclench your first…

 

There must be fair plan…embody a spirit of service…be selfless…

 

[On responsibility…accountability] this is the price and promise of citizenship…

 

# # #

 

The above is what we heard extemporaneously today as we listened to words, phrases, and context.  This is a serious man – we will now await his actions. After all – January 21st is Day Two – when the real work begins.  Good luck, Mr. President, and to Vice President Joe Biden…and to all of us in the United States of America … … and the nations of the world.  Stay Tuned!

 

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You can read the exact words on line, on the White House Web site, or in the dailies on Wednesday, of course. (Yes, #44 is now in charge of the White House site: http://www.whitehouse.gov/ Go there and read his first official proclamation – January 20th as a “National Day of Renewal and Reconciliation.”  This is a most amazing Web site, in the spirit of the new president’s campaigning, election and inaugural.

 

As the new administration promises…

 

THE JOURNEY TO WASHINGTON: THE NEW PRESIDENT AND VP; TAKE THE TRAIN TO THE START OF A NEW ERA

What shall we call this?  We had the Square Deal for the Common Man (Teddy Roosevelt), and our grandparents welcomed the New Deal in the depths of the Great Depression (Franklin Roosevelt) and cheered the New Frontier of John Kennedy and the Best and the Brightest (of his generation).  Lyndon Johnson brought us the Great Society (at least for a while) and Ronald Reagan brought us Morning in America.  The outgoing George W. Bush promised Compassionate Conservatism.

 

Yesterday we watched the train carrying President-elect Barack Obama and VP-electJoe Biden and their families, friends, aides, supporters and security personnel as it traveled from Philadelphia through Wilmington and Baltimore to Washington’s Union Station.  This was the train ride to glory.  The event brought to mind certain train journeys of the past, such as President Harry Truman’swhistle-stop tours across the country to rally his flagging fortunes – and to be re elected by a whisker in 1948.  Yesterday’s trip was deliberately cast in the spirit of Abraham Lincoln’s spring 1861 inaugural train ride.

 

Hope Rides the Rails

 

What great hopes ride along the rails this day with our incoming leaders – the economy is in the worst shape its been in for decades; the US Treasury is handing out billions in life support funds for once-mighty financial institutions and manufacturers; we are engaged in two wars in the Middle East, lasting longer than all of WW II for our country; 40 million of us have no medical insurance; 500,000 jobs disappeared just in December, and 2.5 million in all in 2008; there doesn’t seem to be much in the way of “a plan” today to reverse much of this – shall I stop here?

 

The election of November 2008 will be remembered as the start of a movement, or the culmination in the rising of a grassroots movement when Americans from all backgrounds decided on their own and collectively to try to right the course of the nation, to take back the power levers of government from leaders who they believed had largely failed in their responsibilities and accountability to the rest of us, and worked to try to restore a government of, by and for The People.

 

Sure, there were 48 percent or so of the voters who didn’t vote for Barack Obama, and many are still believe that he is under qualified and unprepared to be the nation’s chief executive officer and commander-in-chief.  But the Voice of the People has been heard and the new administration is about to begin its work.

 

The capital city was ablaze in red, white and blue lights when the special train arrived, symbolically following part of the route of President-elect Abraham Lincoln’s journey to Washington a century-and-a-half earlier.  (President-elect Lincoln’s trip took 12 days. President-elect Obama flew from Ohio to Philadelphia; his train trip was 7 hours.)

 

Tomorrow (Monday) the nation will celebrate the birthday of theReverend Doctor Martin Luther King, Jr.  He would have been 80 years old.  Cut down by an assassin when he was but 39, Dr. King is honored for his courageous work in advancing social and economic justice and civil rights for minorities.  What would he been thinking today as the nation is about to witness a change of power from an old line traditional WASP family member (President George W. Bush) to Barack Obama, an American of mixed ancestry or middle class means — and who everyone is calling the first African-American to be elected President of the United States!

 

Great Rhetoric – Now Comes the Hard Work

 

Great phrases were sung out into the air along this ride by the incoming president – promising a government that will be accountableto the people!  This a new beginning  …  Lifting our spirits up …  Promises of a better day ahead … we all look forward to a better day!  A new Day of Independence is here …we can perfect our Union in the process… We all hope so!

 

The well-known New York newspaper writer and columnist, Jimmy Breslin, started out as a daily sports writer and moved to feature writing, columnist, book author, and more.  He regularly brought his readers Big Stories from a different perspective, that of a bystander whose Common Man nature often spoke for the rest of us – for We, the People (looking on at the big story).

 

As the train rolled on along the Atlantic seaboard, through the great historic cities, past small rural towns, through the stations of commuter towns, I thought about Jimmy Breslin’s approach. This was a big story, and there were also big stories there in the background, in plain sight.

 

When I ride the Amtrak lines back and forth between Washington and New York, I am always struck by stretches of abandoned factories alongside the tracks where American workers once proudly turned out goods that other Americans and people around the world then purchased and used.  Literally mile-upon-mile there are vacant, boarded up cathedrals of industry that once provided jobs for local people, often located within walking distance of worker housing (city row housing, for example).  Jobs that provided entry to the middle class and in a generation or two, beyond.

 

Where Are All the Workers?

 

Where did all the workers go? I wonder about that.  What are their children and grandchildren doing now that the work has been outsourced and sent abroad?  Their efforts made technologically obsolete?   “Too expensive” to be done here?  Are they the people we’ll put back to work?  From the train you can see the outlines of once-proud neighborhoods of many US towns and cities.  The empty factory complex, sprawling across acres of land.  Huge parking lots.  Rail spurs that brought raw materials in and finished goods out.  (Plenty of weeds growing hereabouts.)  Rows of worker housing nearby.  Small shops abound, or did.  Churches everywhere. Parks, playgrounds.  America-the-Blighted now, with factories boarded up.

 

Too many abandoned houses are plainly in sight from the train en route to/from the capital cities of New York (money and media) and Washington (government and politics).  What do foreign leaders and visitors think of us when they see this evidence of a throw-away society?  (Including tossing out our human assets in business.)  How many houses with families gone are the result of recent subprime loans and predatory lending practices?  How many jobs were sent overseas because the Masters of Wizardry on Wall Street encouraged large publicly-owned corporations to abandon and send away their precious human assets? (Jobs cut = Wall Street cheers/Main Street jeers.)

 

Did You See What I See?

 

As our new president rolled along this route, which his VP knows very well from 36 years of daily commuting between Wilmington, Delaware and Washington’s Union Station just across from Capitol Hill, did he survey the scene as Jimmy Breslin might have…from the perspective of the Common Man who may be feeling abandoned by the elite forces that have changed his or her life and that of the family?  Did he see all the abandoned homes?  Factories?  Neighborhoods in abject states of decay? Crumbling city infrastructure?  Schools in bad condition?

 

We hope so.  The revival of this great country will depend on putting millions of people back to work – productively.  Earning good wages.Promises to keep, as VP-elect Joe Biden told his hometown crowd in Wilmington.  There’s more:  the schools of the cities and towns passed need help. Too many poor kids do not have access to a quality education as their more affluent suburban neighbors do (in better funded public schools and private schools).  After so many advances, we are once again creating a permanent underclass – which has dangerous implications for all of us in the long run.

 

As the whistle blew and the inaugural train rolled on, observation car platform decked out in bunting of red-white-blue, as cheering crowds lined the route, as Obama and Biden cheerily waved back, as fellow passengers peered out of the windows…did they notice these remaining relics of abandoned dreams littering the railroad right-of-way?  And I hope they remember those scenes as they grip the metaphoric levers of government power and literally have in their hands the ability to try to reverse the hollowing out of American industrial jobs of the recent decades, and take steps for the relief of the embattled poor and now-struggling middle class — and start the rebuilding and reinvestments of American cities and towns and rural communities.  Good luck, guys!  Good luck to all of us.

 

Great train ride, too. Please, President Obama and VP Biden — remember the joys of the trip as the capital items and operating budget allocations are discussed for what’s left of America’s great rail road systems.  One sure answer to the energy crisis is the revival and rebuilding of the great rail network that once criss-crossed the whole of these United States.

 

The comments are those of the Author and reflect only his views - Not those of any organization.

 

Contents - By Governance & Accountability Institute, Inc 2007 - Please credit author and Accountability-Central.com if you use this content.