September, 2012 Political Class Insanity - Part 3: More Dodd-Frank Failures, Americans Subsidizing Cars They Cannot Afford, Amtrak Food Waste, And More

Today is the final of a three part series on the latest insanity from the American political class over the past month or so. So far we have reviewed how people associated with Solyndra were more focused working on how to get more taxpayer money from Washington than they were in putting together a viable company, how employees at GSA were living the good life with high bonuses and high salaries that were totally out of line with their job responsibilities, how California keeps finding money it thought it had already spent and more.

Today will take a look at some the smaller, but still annoying, cases of politicians acting foolishly. The good news is that tomorrow we will run our first ever post of politicians actually doing some sane and reasonable things that do not waste money and do not detract from our freedom. A small glimpse of hope for our future.

However, we have to first slog through the last part of this month's insanity, lunacy, and idiocy from the American political class:

- According to a New York Times article that was summarized in the August 17, 2012 issue of The Week magazine, Amtrak lost $834 million on its food and beverage services over the past ten years or about $83 million a year, or almost a quarter million dollars a day, 365 days a year. Amazing that any organization, even a government organization, can lose so much money so quickly just on food and drinks.

The article blamed the astronomical losses on poor management, waste, and employee theft. Despite being in the train management industry for decades, it is apparent that the political class and the government agencies it operates have learned nothing on how to be efficient and effective. Imagine how much they lose every year on the non-food components of operating a train system. Then imagine how much they would lose if they ever went ahead with their ill conceived and unnecessary high speed train pipe dream.

- As we have discussed many times in this blog, the criminal collapse of the financial services firm, MF Global, is the poster child for how poorly the Dodd-Frank financials services industry reform legislation was written. The collapse of MF Global was one of the biggest bankruptcies in the history of the country and Dodd-Frank's components that were supposed to identify these types of crises before they occurred failed miserably.

Additionally, according to an article in the June 22, 2012 issue of The Week magazine, the bankruptcy trustee charged with trying to recoup the $1.6 billion of customer wealth that was lost has issued a preliminary report. The report indicates that CEO and former prominent member of the political class, Jon Corzine, and other company officers will be implicated in the loss of that customer wealth. It appears that these thieves "willfully used segregated customer accounts to cover its own shortfalls."

Failed legislation and a former politician involved in shady financial dealings. No surprises here.

- We have previously discussed the political cronyism and the insanity involving the Obama administration and Tesla Motors. Tesla recently announced that it had begun production on its first model, Model S. It is a $97,000 all electric sports car. An article in the July 27, 2012 issue of The Week magazine reviewed how stylish and easy to handle the car is, with the ability of the car to go 265 miles on a single battery charge.

The article also reviewed the insanity of the whole subsidy program for Tesla, a program that received a $465 million taxpayer funded loan. Several things wrong with this program:

• First, why should average taxpayers shell out their tax dollars to fund the development of expensive cars that they will never be able to afford?
• Why should average taxpayers shell out their tax dollars to fund the car rebates given to the likely wealthy purchasers of all-electric vehicles like Tesla vehicles?
• Remember, Tesla executives and financial backers have also been heavy contributors to Obama's and other Democrats' election campaigns. This fact might explain the previous two points.
• The article goes on to explain that the follow up Tesla model will cost $50,000, also far beyond what the average taxpayer and subsidiser of the Tesla loan guarantee can afford.
• The article states that production and sales of Tesla autos MIGHT get to only 8,000 a year.
• Let's say they can get to 8,000 a year. This 8,000 a year run rate is only about .05% of the market for total cars sales in the U.S. every year, hardly worth risking half a billion dollars of taxpayer wealth.

Stupid, cronyism program where taxpayer wealth is taken from the poor and middle class and funneled to what the article calls "another six figure toy from President Obama to his rich west coast friends." Well said.

- The June, 2012 AARP bulletin contained an article that reviewed the latest analysis from Pew Center. According to the Pew research, 1.8 million Americans who are on our voter rolls will not be able to vote this November. Why? They are dead.

These 1.8 million records are part of a larger pool of 24 million inaccurate or out-of-date voter records. This comes out to one out of every eight people on our voter roles. Disgraceful. Another example of where the political class and the government entities it operates have learned nothing over the decades and centuries on how to do their jobs effectively and correctly.

Despite this national embarrassment, Attorney General Eric Holder and the Obama administration have been hassling and trying to block numerous states from the simple act of fixing what is wrong. One part of the government is trying to fix what it broke while another part of the government is trying to prevent the fixing to be done. Insanity.

- In another recent example of why Dodd-Frank is a disaster, an article from the July 30, 2012 issue of Business Week reviewed the rise and fall of the Peregrine Financial Group in Cedar Falls, Iowa. For nearly twenty years, the management of Peregrine had appeared to be a very successful investment company.

In reality, however, the management had actually been running a scam, a scam that had allowed the owner, Russell Wasendorf, to skim $200 million from his customers. The deal finally came unraveled this year but not before Wasendorf had unsuccessfully tried to kill himself.

The suicide note found next to his body contained the confession that he had used fake documents and bogus account statements over the twenty years to carry out his fraud. He was able to avoid detection from both industry overseers and the SEC by using a post office box that he doctored up to look like the address of a bank branch and he confessed to using simple tools like Photoshop, EXCEL, scanners,  and regular printers to doctor up the necessary documents.

When the Feds finally got access to his accounts, they found that Peregrine only had of $6.3 million of real wealth while the fake documents showed that the scam was presenting $221.7 million on hand. Another embarrassment for Dodd-Frank, the SEC, whose annual $13 billion budget does not appear to be worth what we are paying it, other state and Federal regulatory entities, and the political class which cannot seem to do anything right.

- According to a CNNMoney.com article that was summarized in the June 22, 2012 issue of The Week magazine, the average American family's net worth dropped almost 40% from 2007 to 2010, according to the Federal Reserve Board. The loss in dollars went from $126,400 to $77,300.

This drop wiped out 18 years worth of financial gain by the average American family. Coincidentally, the Democrats took over both the House and Senate in Congress in the beginning of 2007 and the Presidency in early 2008. Just saying.

- Just when you think you have identified all of the stupid spending items in the Obama economic stimulus plan, you find another boneheaded waste of money. According to government records analyzed by the Taxpayers Protection Alliance, the Obama administration gave MSNBC almost half a million dollars worth of advertising money to hype the false success of the stimulus program.

Given that MSNBC is usually nothing more than a PR extension of the Obama political machine, this appears to be nothing more than a political payoff for favorable coverage on the TV network. It certainly cannot be construed as a worthwhile use of taxpayer money, hyping one's own failures. How much better use could half a million dollars been put to helping out unemployed Americans from a job training perspective rather than idiotic TV advertising?

- Reason magazine is always a great source for political class insanity. The latest issue had the following gems of idiocy:

1) This past May there was a grisly assault in Miami of one man against another that is too graphic to describe here. The attacker was reportedly on a synthetic stimulant known as "bath salts." The political class was so taken back by the attack and the bath salts report that for once in their lives jumped into action. Legislation quickly was written and approved that would ban the sale of the chemicals that go into typical bath salt production.

However, the day after the ban legislation passed the final Congressional hurdles, the Miami area medical examiner came out with the toxicology tests of the attacker. It seems that the attacker had not a trace of bath salts or any other drug in his body with the exception of marijuana. Thus, even when the political class acts quickly, they still act foolishly, using misinformation and, as always, never understanding root causes of a problem.

2) Jacob Clark was recently summoned for jury duty for the second time in the past seven years. No big deal except for the fact that Jacob is nine years old. The first time he was called for duty was when he was two years old. Still do not think we have a voter registration problem?

3) Tim Morris of Virginia recently got a voter registration form for his dog Mozart. Not only is Mozart a dog who should not be allowed to vote, Mozart has the double embarrassment of having been dead for two years. Still do not think we have a voter registration problem?

These instances of political class insanity would be funny if they were not so serious and wasteful. We have gotten to a point where government has gotten so large and so unwieldy that it cannot help but trip over itself, resulting in the idiocy we report on every month.

That is why Step 1 from "Love My Country, Loathe My Government" is so important. Step 1 would reduce Federal government spending by 10% a year for five years. Not only would such a plan get us to a balanced budget, it would also force politicians to focus on far fewer but far more important issues. Hopefully, this focus would resolve some major issues without the embarrassing missteps we have reviewed over the past three days.

As promised, tomorrow we will issue our first "Political Class" SANITY post where we actually congratulate politicians for doing some things right. The examples are small in statue and small in number but we have to start somewhere.



We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Dodd-Frank Financial Services Industry Reform Legislation - Falling Apart Already

The Obama administration likes to point to two pieces of legislation that it has helped pass as success stories. Many times in this blog we have proven in numerous different ways how one of those pieces of legislation, Obama Care, is a financial, economic, employment, logical, and health care disaster.

The second major piece of legislation is the Dodd-Frank Financial Services Industry Reform legislation. This piece of legislation was cobbled together as a result of the Great Recession and bank bailout activity from several years ago in what looks like a vain attempt to prevent the similar set of circumstances coming together in the future to cause another economic downturn. This legislation was almost as long (thousands of pages) and almost as complicated as Obama Care and unfortunately, it looks like it will be just as cumbersome and ineffective in its goals, based on four early indicators:

1) The first indicator of failure was the relatively sudden bankruptcy of MF Global, a major financial services industry player, that had been headed up by Jon Corzine, former U.S. Senator and former Governor of New Jersey. Previous to entering politics, Mr. Corzine had been the head of Goldman Sachs, one of the major banking institutions in the world. His experience in both the industry and in Washington should have made him savvy about Dodd-Frank like very few others in this country, what it was intended to do and how it intended to do it.

It is my understanding that three of the attributes of  Dodd-Frank was that the law was supposed to provide transparency in the bookkeeping of a company, it was supposed to provide advanced warning if a major financial company was getting into trouble, and provide an orderly way for that troubled company to dissolve itself without causing undue harm to its clients or the market. Since I believe that MF Global was the 8th largest bankruptcy in the history of this country, it certainly was big enough to fall under the auspices of Dodd-Frank's regulations.

However, the legislation did none of that relative to MF Global. There was no warning/transparency prior to the the company folding, very few in government or the industry saw it coming before it happened. There was no orderly dissolution of the company. And worst of all, and the biggest failure of Dodd-Frank, there is a Federal criminal investigation underway since over $1 billion of client money is missing and may have been illegally invested on behalf of the company, not the clients. Dodd-Frank provided no warning or insight to this misbehavior.

2) The second warning of failure of this legislation comes from news reports from a few months ago. Late last year, in an article in the November 11, 2011 issue of The Week magazine, it was reported that although the Dodd-Frank financial reform bill was signed into law 15 months prior to November, the government agencies responsible for writing the required regulations of the law had missed more than 75% of the law's implementation deadlines. What good is passing any kind of legislation, even bad legislation like Dodd-Frank, if it is never implemented?

3) Another article from The Week, this one from the April 6, 2012 issue, pointed out that Dodd-Frank was written so poorly that there was enough wiggle room that foreign banks with U.S. subsidiaries could simply "redefine" themselves and escape all of the legislation's requirements. Germany's Deutsche Bank sidestepped the regulations on Dodd-Frank's minimum capital cushions by switching its U.S. branch's legal classification from "bankholding company" to "domestic entity - other." Barclay's of Britain did a similar move, a move that allows the banks to avoid having to pump billions of dollars of extra capital into their U.S. subsidiaries.

There are two major problems with Dodd-Frank in this area. First, it is not much of a law if a company can simply say it is something else to avoid the burdens of the law. Second, by allowing foreign banks to easily escape the burden of the regulations so easily, it will put our own banks at a marketplace competitive disadvantage. They will have to tie up this capital to fulfill this domestic law while foreign competitor banks simply snap their fingers, change their name, and avoid the same burden.

4) However, the most damning indictment of this legislation comes from within the Federal government's financial community, someone who should know what they are talking about. In a recent Bloomberg Television interview, Federal Reserve Bank of Richmond President Jeffrey Lacker said a major part of the Dodd-Frank legislation, the so-called Volcker Rule, which restricts proprietary trading at banks and which is scheduled for enactment in July, may be “impossible” to implement.  Fabulous, according to an expert in the field, not only is the legislation bad, it may also be "impossible" to implement.

The Volcker rule is named for its original champion, former Fed Chairman Paul Volcker. Its purpose is aimed at reducing the odds that banks will make risky investments with their own capital and put depositors’ money at risk.

However, Lacker said the rule is bad for any number of reasons:

1. This was not a major cause of the financial and economic meltdown in 2008 so it should not be the high priority for implementation is getting today.
2. He is quoted in the interview as stating the rule is “fairly difficult if not impossible to implement in a way that is at all reasonable”  and that 'said it would be “high on the list” of things he would change if he could.'
3. He feels that the Federal government's financial entities should be working on other parts of Dodd-Frank that help prevent future taxpayer bank bailouts rather than waste resources trying to figure out how to implement the Volcker rule.
4. The article reporting on this interview pointed out that while the rules and regulations for the Volcker rule are supposed to be in place by July 21, 2012, even Fed Chairman Ben Bernanke has already stated that the rules and guidelines for the implementation of the Volcker rule will not be in place. Great, we passed a law, we will miss the deadline for implementing how to administer a major piece of that law but we will proceed with its requirements anyway. Is there any doubt why businesses are cautious when it comes to expanding when there is so much uncertainty coming out of Washington on so many issues?

Not quite a great piece of legislation. It failed its first major test by not foreseeing or working relative to the MF Global bankruptcy and potential criminal behavior involving over a $1 billion.

It failed a major test in that more than a year after it passed, the Federal government bureaucracy could not get 75% of the required rule making work done.

It failed to protect U.S. banks from unfair competition by allowing foreign banks to avoid the burdens of the law by simply renaming themselves.

And it failed the sanity test by installing the Volcker Rule that fails to address the major issues of the Great Recession, a rule that will not be implemented by its self imposed deadline and a rule that might never be enforceable or any good to begin with.

But the best description of the Volcker rule came from another government financial insider when former Federal Deposit Insurance Corp. Chairman Sheila Bair testified in front of Senate lawmakers. She stated that the Volcker rule is so complicated that regulators "should consider starting over." Maybe that is good advice for the whole Dodd-Frank legislation, given its major shortfalls and non-existent benefits so far: start over.



"We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

How Is That Financial Industry Reform Process Working Out?

Back in 2008, the following agencies of the Federal government failed to see the oncoming disaster known as a Great Recession, a recession that grew out of risky, shady, possibly illegal, and stupid financial activities of banks and other financial institutions:

• SEC
• FDIC
• HUD
• FHA
• Fannie Mae
• Freddie Mac
• Treasury Department
• Federal Reserve Board
• Senate banking committees
• Senate financial industry committees
• House Of Representatives banking committees
• House Of Representatives financial industry committees

None of these government agencies foresaw or acted to avert or minimize the impact of the recession. We all know the economic stress and pain this oversight caused just about every American.

As a result, the political class belatedly jumped into action with the Dodd-Frank Financial Industry Reform legislation. Although the horses were out of the economic gate, the politicians rushed in late to build and create new gate. As always, a dollar short and a day late.

But they did act so I guess they should get some credit for that. Unfortunately, there was not much meat on the bone of the legislation, once it was passed. The legislation was very general and non-specific and left the hard work of financial industry reform to various organizations of the executive branch.  That is where the actual government reform regulations would be written.

However, as we reported earlier this week, 75% of those regulations that should have already been written already have not made their expected deadlines  Thus, financial reform is very much work in progress, or work far behind schedule.

That may explain why the biggest financial business crash since the Great Recession, which recently happened, collapsed almost immediately, seemingly minutes before anyone realized it was going to collapse. Very reminiscent of Lehman Brothers, Bear Sterns, and others back in 2008, healthy companies one day, extinct companies the next day.

As before, no one in the list of suspects in the list above seemed to know MF Global was going over the edge. Could it be the delayed implementation of Dodd-Frank left the country and the industry no better off than three years ago? Details of the collapse were summarized in an article in the November 18, 2011 issue of The Week magazine, "Were The Rules Too Lax For MF Global?":

• Jon Corzine, former U.S. Senator, former chairman of Goldman Sachs, and former Governor of New Jersey took over MF Global last year.
• According to Daniel Wagner of the Associated Press, Corzine "set out to create a mini-Goldman Sachs but ended up creating a mini-Lehman Brothers" when MF Global collapsed.
• Not only did the company collapse, but the FBI is investigating whether or not Corzine and MF Global illegally co-mingled the firm's money with the money of the clients whose investments they were managing, with a reported $600 million of client money now missing.
• Jay Hancock writing in the Baltimore Sun called the regulators "negligent and clueless," stating MF Global made the same type of risky, irrational decisions on investments that helped cause the Great Recession.
• Francesco Guerra, writing in the Wall Street Journal, called for the formation of a "lead regulator" to replace the "crazy quilt of watchdogs" for non-bank financial institutions." Since there were at least four government regulators who were supposed to be keeping a watchful on firms like MF Global, and just like the run up to the Great Recession, none of the four saw the collapse coming until it was too late and $600 million went missing.
• The article concludes that the political class has been so busy just worrying about he handful of very large banks that they have been negligent in covering other financial institutions. I guess that Dodd -Frank reform bill was not as comprehensive as we were led to believe.
• Adam Ahmed writing in the New York Times claims some effort and potential rules were actually proposed for smaller companies like MF Global but they were thwarted by an influential opponent to these rules, the one and only Jon Corzine. The Times article claims that Corzine "personally pressed regulators to halt their plans" for this type of oversight. Corzine's argument won out, the additional oversight never took place, and now clients are potentially out $600 million.

So let's review:

1. A former member of the political class still has enough pull to get his way on lax oversight, a way that crashed a company and possibly lost hundreds of millions of client dollars of investment.
2. The rest of the current political class is so worried about only a handful of large institutions that this type of behavior goes unseen and not paid attention to until it is too late.
3. At least four government agencies are so inept, even after the lessons of the Great Recession, that they failed again to foresee a major financial collapse before it happened and ordinary American investors get screwed.
4. Risky Wall Street behavior still goes on despite the lessons learned from the Great Recession.

Or were no lessons learned? According to Alexandra Alper, writing for Reuters, even if the the Dodd-Frank legislation was on schedule for implementation, as opposed to being 75% behind schedule, it would not have made any difference in preventing an MF Global collapse since the main parts of the law would not have applied and MF Global was too small for the Federal Reserve to care about. Little solace to those who lost money within the $600 million mystery.

You get tired of saying it, but this is just another example of why Step 39 from "Love My Country, Loathe My Government" is so important. Step 39 would impose term limits on every Federal government politician. This is just another example of how our sitting politicians are just so ineffective in everything they do and everything they touch. There is no follow through to make sure laws get implemented in the proper way, no one ever seems to be accountable in the Federal government bureaucracy or the political class.

Tragedies and collapses are not seen ahead of time. Situations fall through gigantic cracks. Disasters are repeated over and over, costing American taxpayers and investors dearly. Even when they do try to fix something, e.g. Dodd-Frank, the effort is not comprehensive, not strategic, not effective, and in this case, not even completed on time.

And worse of all, the political class continues to take care of itself and its own members, in this case allowing Corzine to override some basic safeguards that may have prevented another financial institution collapse. Personal enrichment of themselves vs. doing the right thing for America. Sound familiar? Seems we have been writing about this disturbing trait often lately.

Thus, the answer to the question posed by today's title, "how is that financial industry reform process working out" Answer: not very well, at the cost of upwards of $600 million.



Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available, at http://www.loathemygovernment.com .It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respectfreedom for both yourselves and others everyday.
Please visit the following sites for freedom:

http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com/