Camelot 2 or "Briga-Doom!"

We have been overstored for years. It worked as long as the economy was humming and customers could indebt themselves. The music has now stopped, the band has gone home. New commercial reality is about to hit the skids according to this report. (See 1 and 1a below.)


Just as I have written "media and press" mia culpas are starting to surface as members of the "fourth estate" look inward. Is the foundation is being laid so they can distance themselves from Obama as they seek to restore their credibility? Like U.S, autmakers, who made lousy cars in the 70's and lost customer loyalty, the press and media have lost a share of audience and are not likely to get it back because they proved their objectivity cannot be trusted.

Once customers have flown the coop they are hard to retrieve!(See 2 below.)

Oh well! This is your government! Best money can buy! (See 3 below.)

Strassel makes my point - don't hire whom you can't fire! (See 4 below.)

It shouldn't take Pelosi much longer to figure how to save Rangel and herself from unwanted grief. Rangel is as slick as they come and it is doubtful he will get more than a wrist slap.

Comment from a fellow memo reader: When a Repblican missteps,he resigns,is tried and goes to jail.If it happens to a Democrat(bums like Rangel,Jefferson and more)they scream racism and they go merrily on their way.I would like to see the day come
when all this p,c. crap is over. Come to think of it,I won't live to be
120. (See 5 below.)

Karl Rove has been very objective in his analysis of and advice to Obama. (See 6 below.)

Tom Friedman writes about stupidity on Wall Street. He could spend the same time writing about his own profession. (See 7 below.)

Victor Davis Hanson gets it off his chest.(See 8 below.)

Now I would like to get a few thoughts off my own chest.

a)The Obama's have every right to send their children to a private school. What I find so hypocritical is that the president-elect won't allow the same for children of his own race. Education is their only way out of the trap and sending "wealth distribution" checks is the wrong message and policy. The D.C. schools expend over 20% more per pupil than the nation as a whole and yet they have one of the worst educational track records. Why does Obama oppose Choice? Because it flies in the face of his NEA Union friends - plain and simple.

If he really cared about his own message of "change" he would do for the children of this nation, and particularly the black children, what he has done for his own.

b) Robert Rubin was on the Board of Citigroup and urged they get into trading that eventually crippled them. He also was a partner in Goldman Sachs. Many of the people Obama has selected for his economic team were trained by or were disciples of Rubin. Seems everything Rubin has touched of late or was associated with has blown up.

The press has tagged Obama's economic team "The Dream Team." If this "Dream Team" implements the themes and policies Obama campaigned on instead of having Camelot 2 we will have Briga-doom!

c) If Obama really wants to increase employment in the private sector he should start by firing among the federal bureaucracy. He could being with closing the Departments of Education and Energy. Cutting government would go a long way towards setting us on the right track.

d) Obama chastises auto executives for coming with their hat in hand and no clear program of how they will spend the money, yet he has informed us he will be asking for some 1/2 trillion and has not given much detail how he will spread this largess. We have an inkling and the only thing concrete is that he will use a lot of it building infrastructure etc. If he really believes this is how to get people back to work he is more naive than I thought him to be.

If he wants to get the economy jump started he would be wise to eliminate double taxation on dividends, reduce the corporate tax rate and/or simplify the entire tax code and come up with either a two tier tax rate, allow only two deductions - one for interest on one home and the other for charitable contributions and then set a $20,000/family exemption or got to a VAT tax approach. Personally I prefer the former concept. Government revenue from taxes should not constitute more than 17% of GDP.



Dick


1) Meltdown far from over, new mortgage crisis looms

Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.

"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

That's bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.

But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.

"It's a toxic drug and nobody knows how bad it's going to be," said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.

Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.

Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.

Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.

California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.

The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won't write mortgages as long as investors won't purchase them.

"Credit markets have seized up," corporate securities lawyer Michael Gambro said. "People are not willing to take risks. They're not buying anything."

That drives down investments already on the books. Insurance companies are seeing their stock prices fall on fears they are too invested in commercial mortgages.

"The system has never been tested for a deep recession," said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.

One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.

"He's created havoc in the marketplace by changing the rules," Rosen said. "It was the stupidest statement on Earth."

The Securities and Exchange Commission is considering another option that might ease the crisis, one that would change accounting rules so banks don't have to declare huge losses whenever the market declines.

But the only surefire remedy is for the economy to stabilize, for businesses to start expanding and for investors to trust the market again. Until then, Tross said, "There's going to be a lot of pain going forward."

1a) By Palash R. Ghosh


Investors reacted enthusiastically on Monday to news of a proposed $20 billion

government bailout of Citigroup (C). The stock market surged, as Citi shares

skyrocketed 57.8%, while the S&P Financials sector soared 18.8%, its greatest

single-day performance ever.

But fundamentally, nothing has really improved for Citigroup, or the financial

services sector as a whole.

In fact, things are likely to worsen into next year. And, more importantly,

haven't we already been through this routine with American International Group

(AIG) and others?

Market psychology is a funny thing. It is usually driven by two emotions

(namely fear or greed) and has little to do with fundamentals. Sentiment may

drive a short-term rally, but that can run out of gas pretty quickly. On the

other hand, given the immense amount of bad news in financial markets these

days, an external event like this bailout may actually move investors off the

sidelines.

There is not much rhyme and reason with market psychology.

Katie Stockton, chief market technician at MKM Partners, said Citigroup's

bailout pumped up market psychology largely because we are already in an

extremely oversold market.

"The market has needed a positive catalyst (or series of catalysts) in order

to mount a significant relief rally," she said.

"Because the market was so oversold ahead of the Citigroup news, it's fair to

say it contributed to improvement in sentiment. Oversold markets tend to be

more welcoming and responsive to positive news."

Gregg Fisher, president and chief investment officer of Gerstein Fisher, a New

York investment advisory firm, believes psychology and sentiment can be

significant factors on market performance and shouldn't be ignored.

"The market's value has been fluctuating by something like $1 trillion daily,"

he said. "The underlying values of those companies are certainly not changing

that much. Much of this price volatility is being driven by psychology - fear

and greed."

In the short run, good news results in more confidence, which can lead to more

good news, Fisher added. "It creates a feedback loop," he said.

"It can also work similarly on the downside. It may not be logical or

rational, but psychology - which includes the interpretation of external events

- can impact investors and share prices."

Indeed, we find ourselves in a manic depressive market. Huge swings have

become the norm and market psychology seems to turn on the proverbial dime.

On Monday, the government bailout seemed to provide relief to the market. The

following day, as most shares came back to earth, perhaps some investors

realized that things are even worse than they initially thought if the

government has to inject such tremendous amounts of money into top-tier

financial institutions.

Clifford Michaels, president of Institutional Investment Advisors, a New York

money management and financial planning firm, takes a dim view of the bailouts.

"It makes me concerned that huge dominant companies like AIG and Citigroup

even need to get bailed out," he said. "Even worse, when we see AIG having to

repeatedly return to the well, that sends a really bad signal."

In fact, AIG shares have slumped almost 22% since news of its $85 billion

bailout.

"We are seeing acts of Fed intervention practically every few weeks, almost

like it has become a trend," Michaels said. "In this type of environment - of

repeated governmental involvement - investor psychology shifts from positive to

neutral and then goes negative."

Still, Michaels noted that even some of his more conservative clients have

responded favorably to the government's bailouts of both AIG and Citigroup, on

the presumption that these companies' woes have ended.

"They see only upside for these stocks now," he said.

"They are seeking to speculate on these companies, and that has nothing to do

with fundamentals."

Others take a more philosophical view.

"We use news stories to explain the ups and downs of the stock market because

we are a cause and effect society," said Joseph "Big Joe" Clark , managing

partner at Financial Enhancement Group. "But the bottom line is that money

managers are afraid to be caught with cash if the market blasts off. Investors

waiting for cheap entry points are afraid to miss the bottom every time the

market soars. The fear of America is to the downside, but the fear of asset

managers is missing the upside."

Michaels concedes that Citigroup is too large and complex to be allowed to

fail, what with its tentacles spread all across the globe.

"If Citigroup collapsed, investor confidence would take a decisive move

downward," he said. "But this bailout - a lifeline, if you will - doesn't solve

their problems. All it does is gives them more time to put their house in

order. And hopefully they have a sense of urgency about it."

2) By Jon Friedman





I'm starting to feel a little guilty about the media's treatment of

President-elect Barack Obama, and I may not be the only one.



Chalk it up to a phenomenon I'd like to call "Obama-remorse." You know how you

feel buyer's remorse after you've spent a lot of dough on some big-ticket item,

only to realize that you might have made a mistake? Well, it's going to happen

to the president-elect as well.



Perhaps this sort of recognition prompted Washington Post media writer Howard

Kurtz to do an incisive piece called "A Giddy Sense of Boosterism" on Nov. 17.

As Kurtz noted, the media have tripped over themselves to celebrate and cash in

on Obama's victory.



NBC News is preparing a DVD called "Yes, We Can: The Barack Obama Story." ABC

and USA Today are racing to publish a book on the election. HBO is readying a

documentary on the campaign, too.



As I see it, the media are having second thoughts about their performance over

the past year.



First, they gave Sen. Hillary Clinton the cold shoulder and all but rolled out

a red carpet for Obama during the Democratic primary season. Perhaps Amy

Poehler's eerily spot-on send-up of Clinton on "Saturday Night Live" helped

reduce the New York senator to a caricature, making it even easier for the

reporters to consign her to a complementary role.



Once Clinton was dispatched, they lavished favorable attention on Obama, as

his opponent, Republican Sen. John McCain, was forced to watch from the

shadows.



Yes, I'm thrilled that he won the election, underscoring the American ideal

that we live in a forward-thinking democracy, where any man or woman can rise

to the highest office in the land. And I'm proud that even Obama's staunchest

foes - particularly the man he defeated, John McCain - seem to be willing to

accept his victory and pledge to help him turn around the economy and cure the

nation's other ills.



Adulation Express



But I also feel guilty because I know that the media's Adulation Express,

never to be confused with McCain's old Straight Talk Express, is going to hit a

few speed bumps before it inexorably grinds to a halt.



It's inevitable. Look at what happened to Sarah Palin, McCain's running mate.



When McCain first nominated her, she could do no wrong in the media's eyes.

She was hailed for her aw-shucks demeanor, in contrast to the inveterate

Beltway sharpies, and for her unlikely ascent to such a big job. (I suspect

that Tina Fey's brilliant impersonation of her on "SNL" owed as much to Palin's

newness as it did to Fey's uncanny ability to look and sound like the governor

of Alaska . Most "SNL" viewers had no frame of reference for Palin, other than

her speech at the Republican National Convention, so Fey didn't have to worry

about competing with a hardened image of Palin.)



It's inevitable, too, that Obama will eventually have his turn under the

microscope. When the media start picking apart some of his Cabinet choices or

his pronouncements on the state of the economy or his declarations about Iraq ,

he may be surprised to find the afterglow of his stunning victory turning sour

so fast.

3) A Washington, DC airport ticket agent offers some examples of why our
country is in trouble- ( I wish we had names so we know who NOT to re-elect! )

1. I had a New Hampshire Congresswoman ask for an aisle seat so that her
hair wouldn't get messed up by being near the window. (On an airplane?!)

2. I got a call from a candidate's staffer, who wanted to go to Capetown. I
started to explain the length of the flight and the passport information,
and then she interrupted me with, 'I'm not trying to make you look stupid, but
Capetown is in Massachusetts ...' Without trying to make her look stupid,
I calmly explained, 'Cape Cod is in Massachusetts, Capetown is in Africa. Her
response - click.

3. A senior Vermont Congressman called, furious about a Florida package we
did. I asked what was wrong with the vacation in Orlando .. He said he was
expecting an ocean-view room. I tried to explain that's not possible, since
Orlando is in the middle of the state. He replied, 'Don't lie to me, I
looked on the map and Florida is a very thin state!' (OMG)


4. I got a call from a lawmaker's wife who asked, 'Is it possible to see
England from Canada?' I said, 'No.' She said, 'But they look so close on the
map.' (OMG, again!)

5. An aide for a cabinet member once called and asked if he could rent a
car in Dallas. I pulled up the reservation and noticed he had only a 1-hour
layover in Dallas. When I asked him why he wanted to rent a car, he said,
'I heard Dallas was a big airport, and we will need a car to drive between
gates to save time.' (Aghhhh)

6. An Illinois Congresswoman called last week. She needed to know how it
was possible that her flight from Detroit left at 8:30 am and got to Chicago at
8:33 am. I explained that Michigan was an hour ahead of Illinois, but she
couldn't understand the concept of time zones. Finally, I told her the plane
went fast, and she bought that.

7. A New York lawmaker called and asked, 'Do airlines put your physical
description on your bag so they know whose luggage belongs to whom?' I said,
'No, why do you ask?' She said, 'Well, when I checked in with the airline, they put a tag on my luggage that said (FAT). I am a little overweight, but I think that's very rude. After putting her on hold for a minute while I looked into it (I was laughing). I came back and explained the city code for Fresno, CA is (FAT - Fresno Air Terminal), and the airline was just putting the destination tag on her luggage.

8. A Senator's aide called to inquire about a trip package to Hawaii...
After going over all the cost info, she asked, 'Would it be cheaper to fly to
California, and then take the train to Hawaii ?'

9. I just got off the phone with a freshman Congressman who asked, 'How do
I know which plane to get on?' I asked him what exactly he meant, to which he
replied, 'I was told my flight number is 823, but none of these planes have
numbers on them.'


10. A lady Senator called and said, 'I need to fly to Pepsi-Cola, Florida .
Do I have to get on one of those little computer planes?' I asked if she
meant fly to Pensacola, Fl. on a commuter plane. She said, 'Yeah, whatever,
smarty!'

11. A senior Senator called and had a question about the documents he needed
in order to fly to China. After a lengthy discussion about passports, I
reminded him that he needed a visa. 'Oh, no I don't. I've been to China many
times and never had to have one of those.' I double-checked and sure enough,
his stay required a visa. When I told him this he said, 'Look, I've been to
China four times and every time they have accepted my American Express!'

12. A New Mexico Congresswoman called to make reservations. 'I want to I go
from Chicago to Rhino, New York ', she said. I was at a loss for words.
Finally, I said, 'Are you sure that's the name of the town?' 'Yes, what
flights do you have?' replied the lady. After some searching, I came back
with, 'I'm sorry, ma'am, I've looked up every airport code in the country
and can't find a Rhino anywhere.' The lady retorted, 'Oh, don't be silly!
Everyone knows where it is. Check your map!' So I scoured a map of the
state of New York and finally offered, 'You don't mean Buffalo, do you?' The
reply? 'Whatever! I knew it was a big animal.'


Now you know why the Government is in the shape that it's in and who is
causing it to happen.

4) Hillary of State How much will this cost the Obama administration?
By KIMBERLEY A. STRASSEL

One rule of employee relations? Never hire someone you can't afford to fire. Barack Obama's offer to let Hillary Clinton be secretary of state has already been marked down as a brilliant co-option of his former rival. But nothing comes for free, and the question is just how big a price Mr. Obama will pay in the end.


For now, he is getting only praise for his surprise pick. The move fits neatly into the media narrative that Mr. Obama is drafting a team that will challenge his thinking. It's also being described as a gesture that could heal party wounds and mollify Clinton supporters Mr. Obama never won to his side.

The actual motivation? Short term, Mr. Obama understands his real struggles are going to be in the Senate, where he will need 60 votes. Left there with nothing but a potential future run against Mr. Obama, Mrs. Clinton would be tempted to use her position to highlight her differences with the sitting president. Even as a junior senator, she could gum up his works. Mr. Obama does not need that.

The job at State all but eliminates this threat. As the nation's top diplomat, Mrs. Clinton will be barred, both by law and by custom, from partisan politics. She'll have to dismantle her extensive political operation, and end the patronage that has earned her continued loyalty.

There's arguably also not enough time for Mrs. Clinton to make her mark as secretary of state, and find a reason to break with her boss, and piece back together her empire, and get into a presidential race. They both know that in taking this cabinet post, Mrs. Clinton is clearing herself from Mr. Obama's political path.

Having lived with, up close, the Clinton political threat, Mr. Obama might be forgiven for agreeing to just about anything to forestall a repeat. But no one should forget that this is Mrs. Clinton we are talking about -- with all her ambitions, all her frustrations, all her family relations and all her past. The price of neutralizing Mrs. Clinton as an outside rival, by bringing her inside, could make today's bailouts look cheap.

The early media pronouncement is that Mr. Obama is getting, for this post of top diplomat, a woman with great "experience." Oh, how short memories are. Mrs. Clinton staked her early primary claim on foreign policy. So determined was she to out-tough Mr. Obama that she walked into wild exaggerations -- Bosnian sniper fire and Northern Ireland peace, to name a few.

Egged on by former Clintonite Gregory Craig (Mr. Obama's newly picked White House general counsel), the media reported on just how little "experience" she'd had as the former first lady. Mrs. Clinton worked hard on foreign policy in the Senate, but it still remains far from clear how talented she'll prove at this job. Mr. Obama is taking a flyer on one of his bigger promises -- that of changing American foreign policy.

His onetime rival will also have plenty of leeway to go rogue. The State Department is traditionally hard to rein in, and Mrs. Clinton has insisted she also be free of traditional constraints. She's demanded the right to staff her department with her own people. And while national security advisers are often more powerful than secretaries of state, she wants the ability to circumvent that position and go directly to Mr. Obama.

This is the stuff ugly internal disputes are made of.

As for the issues, there are plenty on which the rivals disagreed in the primaries, from how tough to be on Iran to how strongly to stand with Israel. And let's not forget any differences between Mr. Obama and Bill Clinton -- since no matter how many promises to the contrary, he will be co-secretary of state.

Speaking of Bill, Mr. Obama famously noted during the primary that it was time to move beyond the Clinton era. Instead, he's dragging that baggage back into the White House living room. The Obama team is combing through the hundreds of thousands of donors to Mr. Clinton's foundation. Those papers surely contain compromising conflicts. There was good reason the Clintons have always refused to make that information public.

Mr. Obama can now sit on those documents, renege on his pledges to be one of the most "transparent" presidencies in history, and endure the rightful outrage that will follow. Or he can release them, and guarantee a feeding frenzy. Either option will prove an unpleasant side story to his more pressing policy concerns. And that's just the immediate issue. There are also the 1990s Clinton documents, which remain under wraps at the Clinton library, but not forever.

Having made the grand gesture, Mr. Obama can now only get rid of Mrs. Clinton at risk of another party rift. The president-elect now owns Mrs. Clinton's past, and future, behavior. That could turn out to be some deal.

5) Rangel Probe Will Be Done in Weeks, Pelosi Says

House Speaker Nancy Pelosi said the far-reaching ethics investigation of Rep. Charles Rangel (D) will conclude by early next year.

Pelosi issued a statement late Wednesday saying she has been assured that the report by the House ethics committee will be completed before this session of Congress ends Jan. 3.

"I look forward to reviewing the report at that time," said Pelosi, who has resisted calls from Republicans to remove Rangel from his powerful position as chairman of the tax-writing Ways and Means Committee.

Her announcement puts a deadline on an investigation that could have dragged on for many more months, considering how many issues surrounding the personal finances and ethics of the long-serving lawmaker have now been brought before the committee.

Rangel is under scrutiny for not paying taxes on income from a Dominican Republic beach house he owns. The ethics panel is also looking at his living arrangements in New York for three rent-stabilized apartments, as well as his effort to drum up donors for a college center named in his honor.

Fundraising for the Rangel Center was the subject of new reports this week that a businessman pledged $1 million to the effort while seeking Rangel's help in blocking a change in tax laws that would have cost his company millions more.


The lawmaker, who has been in Congress for nearly 40 years, denied any improprieties in seeking to protect the company's offshore tax shelter, saying: "At no time -- ever -- did I entertain, promote, or secure a tax break or any special favor for anyone as an inducement or reward for a contribution" to the Rangel Center.

He has also denied anything untoward in his use of the New York apartments.

As for his personal tax issues, Rangel has paid more than $10,000 owed in back taxes but insisted he never intentionally dodged any taxes.

6) Thanksgiving Cheer From Obama
By KARL ROVE

When President-elect Barack Obama's economic transition team met this month, everyone was there -- inflation fighters, business leaders, union firebrands and leftist economists -- creating confusion about where the new administration was headed.

Mr. Obama's announcement of his economic team on Monday provided surprisingly positive clarity. He picked as Treasury Secretary Tim Geithner, the respected, soft-spoken New York Fed president. Mr. Geithner has been a key player with Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke in confronting the financial crisis. Every major decision in the rescue effort came only after the three agreed.

The National Economic Council director-designee, Larry Summers, is another solid pick. Mr. Summers has been an advocate for trade liberalization, he was the Clinton administration's negotiator for the financial deregulation known as Gramm-Leach-Bliley, and he even attempted to rein in Fannie Mae and Freddie Mac in the 1990s.

Mr. Obama also named a respected monetary expert -- Christina Romer -- to head up his Council of Economic Advisors. On Tuesday he selected a first-rate thinker, Peter Orszag, to be director of the White House's Office of Management and Budget.

The only troubling personnel note was Melody Barnes as Domestic Policy Council director. Putting a former aide to Ted Kennedy in charge of health policy after tapping universal health-care advocate Tom Daschle to be Health and Human Services secretary sends a clear signal that Mr. Obama didn't mean it when his campaign ads said he wouldn't run to the "extremes" with government-run health care.

He did not reduce confusion on a Detroit bailout by saying he supported a "sustainable auto industry." America already has that in 69 foreign-owned auto plants that employ 92,700 Americans. The question is this: Does Mr. Obama want a sustainable U.S.-owned auto industry? If so, will he require changes in the Big Three's management, labor agreements and cost structure in return for aid? All he'd say Monday was that the industry needed to develop a plan.

And despite the president-elect's declaration Monday that "we have a consensus, which is pretty rare, between conservative and liberal economists," there is no agreement about the elements of a stimulus package.

Stanford economist Michael Boskin reminds us that conservatives favor permanent, or long-lived, measures to revive the economy -- incentives like lower income-tax rates, actions to speed recovery of capital costs like bonus depreciation, and steps with an immediate effect on job creation such as cuts in corporate tax rates.

So far, Mr. Obama has only offered unspecified subsidies for "green jobs" and infrastructure spending. Politicians like infrastructure spending because it gives them something concrete to point to. But though Japan spent $516 billion on infrastructure in the 1990s, it didn't stimulate their economy. What makes Mr. Obama think it will work in America? The reason infrastructure is a poor stimulant is that there is a long lag time between project approval and when dollars actually get spent, even for projects on the drawing board.

Mr. Obama suggests that giving consumers up to $500 (his "tax cut for 95% of Americans") will stimulate consumption. Congressional Democrats have demanded rebates like this for people who don't pay income taxes in every stimulus package -- with negligible results. As Harvard economist Martin Feldstein pointed out in these pages in August, a mere 10% to 20% of this year's rebate was spent.

During the campaign, Mr. Obama defined madness as "doing the same things over and over again and expecting something different." He should take those words to heart in preparing his stimulus package

Mr. Obama has less than a month to work out the dimensions of the stimulus and auto legislation he wants passed before his Jan. 20 inauguration. If he continues to hesitate, Congress will give him a mish-mash of spending, rebates, subsidies and pork that won't create the 2.5 million jobs in two years he promises. Congress is hard to stop from budgetary excesses in ordinary times. And these are not ordinary times.

After hearing Mr. Obama's campaign attacks on "the swelling budget deficit," it is jarring to hear him now suggest the deficit will need to be larger to accommodate more spending. He has to be mindful that voters have not been prepared for the numbers now being thrown around.

But, overall, Monday's announcement of Mr. Obama's economic team was reassuring. He's generally surrounded himself with intelligent, mainstream advisers. Investors, workers and business owners can only hope that, over time, this new administration's economic policies bear more of their market-oriented imprint.

5) All Fall Down
By THOMAS L. FRIEDMAN

I spent Sunday afternoon brooding over a great piece of Times reporting by Eric Dash and Julie Creswell about Citigroup. Maybe brooding isn’t the right word. The front-page article, entitled “Citigroup Pays for a Rush to Risk,” actually left me totally disgusted.

Why? Because in searing detail it exposed — using Citigroup as Exhibit A — how some of our country’s best-paid bankers were overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye. But it wasn’t only the bankers. This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.

So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.

Citigroup was involved in, and made money from, almost every link in that chain. And the bank’s executives, including, sad to see, the former Treasury Secretary Robert Rubin, were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank’s risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it.

These are the people whom taxpayers bailed out on Monday to the tune of what could be more than $300 billion. We probably had no choice. Just letting Citigroup melt down could have been catastrophic. But when the government throws together a bailout that could end up being hundreds of billions of dollars in 48 hours, you can bet there will be unintended consequences — many, many, many.

Also check out Michael Lewis’s superb essay, “The End of Wall Street’s Boom,” on Portfolio.com. Lewis, who first chronicled Wall Street’s excesses in “Liar’s Poker,” profiles some of the decent people on Wall Street who tried to expose the credit binge — including Meredith Whitney, a little known banking analyst who declared, over a year ago, that “Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust,” wrote Lewis.

“This woman wasn’t saying that Wall Street bankers were corrupt,” he added. “She was saying they were stupid. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale... For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.”

Lewis also tracked down Steve Eisman, the hedge fund investor who early on saw through the subprime mortgages and shorted the companies engaged in them, like Long Beach Financial, owned by Washington Mutual.

“Long Beach Financial,” wrote Lewis, “was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, Calif., a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.”

Lewis continued: Eisman knew that subprime lenders could be disreputable. “What he underestimated was the total unabashed complicity of the upper class of American capitalism... ‘We always asked the same question,’ says Eisman. ‘Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.’ He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S.& P. couldn’t say; its model for home prices had no ability to accept a negative number. ‘They were just assuming home prices would keep going up,’ Eisman says.”

That’s how we got here — a near total breakdown of responsibility at every link in our financial chain, and now we either bail out the people who brought us here or risk a total systemic crash. These are the wages of our sins. I used to say our kids will pay dearly for this. But actually, it’s our problem. For the next few years we’re all going to be working harder for less money and fewer government services — if we’re lucky.

8) THINKING RIGHT: TEN RANDOM, POLITICALLY INCORRECT THOUGHTS
ByVictor Davis Hanson




1. Four years of high-school Latin would dramatically arrest the decline in American education. In particular, such instruction would do more for minority youths than all the ‘role model’ diversity sermons on Harriet Tubman, Malcolm X, Montezuma, and Caesar Chavez put together. Nothing so enriches the vocabulary, so instructs about English grammar and syntax, so creates a discipline of the mind, an elegance of expression, and serves as a gateway to the thinking and values of Western civilization as mastery of a page of Virgil or Livy (except perhaps Sophocles’s Antigone in Greek or Thucydides’ dialogue at Melos). After some 20 years of teaching mostly minority youth Greek, Latin, and ancient history and literature in translation (1984-2004), I came to the unfortunate conclusion that ethnic studies, women studies—indeed, anything “studies”— were perhaps the fruits of some evil plot dreamed up by illiberal white separatists to ensure that poor minority students in the public schools and universities were offered only a third-rate education.



2. Hollywood is going the way of Detroit. The actors are programmed and pretty rather than interesting looking and unique. They, of course, are overpaid (they do to films what Lehman Brothers’ execs did to stocks), mediocre, and politicized. The producers and directors are rarely talented, mostly unoriginal—and likewise politicized. A pack-mentality rules. Do one movie on a comic superhero—and suddenly we get ten, all worse than the first. One noble lion cartoon movie earns us eagle, penguin and most of Noah’s Arc sequels. Now see poorer remakes of movies that were never good to begin with. I doubt we will ever see again a Western like Shane, the Searchers, High Noon, or the Wild Bunch. If one wishes to see a fine film, they are now usually foreign, such as Das Boot or Breaker Morant. Watching any recent war movie (e.g., Iraq as the Rape of Nanking) is as if someone put uniforms on student protestors and told them to consult their professors for the impromptu script.



3. All the old media brands of our youth have been tarnished and all but discredited. No one picks up Harpers or Atlantic expecting to read a disinterested story on politics or culture. (I pass on their inane accounts of ‘getaways’ and food.) The New York Times and Washington Post are as likely to have op-eds as news stories on the front page. Newsweek and Time became organs for paint-by-numbers Obamism, teased with People Magazine-like gossip pieces (at least, their editors still cared enough to seem hurt when charged with overt bias). NBC, ABC, and CBS would now make a Chet Huntley or Eric Sevareid turn over in his grave. A Keith Olbermann would not have been allowed to do commercials in the 1950s. Strangely, the media has offered up fashionably liberal politics coupled with metrosexual elite tastes in fashions, clothes, housing, food, and the good life, as if there were no contradictions between the two. No wonder media is so enthralled with the cool Obama and his wife. Both embody the new nexus between Eurosocialism in the abstract and the hip aristocratic life in the concrete.



4. After the junk bond meltdown, the S&L debacle, and now the financial panic, in just a few years the financial community destroyed the ancient wisdom: deal in personal trust; your word is your bond; avoid extremes; treat the money you invest for others as something sacred; don’t take any more perks than you would wish others to take; don’t borrow what you couldn’t suddenly pay back; imagine the worse case financial scenario and expect it very may well happen; the wealthier you become the more humble you should act. And for what did our new Jay Goulds do all this? A 20,000 square-foot mansion instead of the old 6,000 sq. ft. expansive house? A Gulfstream in lieu of first class commercial? You milk your company, cash in your stock bonuses, enjoy your $50 million cash pile, and then get what—a Rolex instead of a reliable Timex? A Maserati for a Mercedes, a gold bathroom spout in preference to brushed pewter? The extra splurge was marginal and hardly worth the stain of avarice on one’s immortal soul.



5. California is now a valuable touchstone to the country, a warning of what not to do. Rarely has a single generation inherited so much natural wealth and bounty from the investment and hard work of those more noble now resting in our cemeteries—and squandered that gift within a generation. Compare the vast gulf from old Governor Pat Brown to Gray Davis or Arnold Schwarzenegger. We did not invest in many dams, canals, rails, and airports (though we use them all to excess); we sued each other rather than planned; wrote impact statements rather than left behind infrastructure; we redistributed, indulged, blamed, and so managed all at once to create a state with about the highest income and sales taxes and the worst schools, roads, hospitals, and airports. A walk through downtown San Francisco, a stroll up the Fresno downtown mall, a drive along highway 101 (yes, in many places it is still a four-lane, pot-holed highway), an afternoon at LAX, a glance at the catalogue of Cal State Monterey, a visit to the park in Parlier—all that would make our forefathers weep. We can’t build a new nuclear plant; can’t drill a new offshore oil well; can’t build an all-weather road across the Sierra; can’t build a few tracts of new affordable houses in the Bay Area; can’t build a dam for a water-short state; and can’t create even a mediocre passenger rail system. Everything else—well, we do that well.



6. Something has happened to the generic American male accent. Maybe it is urbanization; perhaps it is now an affectation to sound precise and caring with a patina of intellectual authority; perhaps it is the fashion culture of the metrosexual; maybe it is the influence of the gay community in arts and popular culture. Maybe the ubiquitous new intonation comes from the scarcity of salty old jobs in construction, farming, or fishing. But increasingly to meet a young American male about 25 is to hear a particular nasal stress, a much higher tone than one heard 40 years ago, and, to be frank, to listen to a precious voice often nearly indistinguishable from the female. How indeed could one make Westerns these days, when there simply is not anyone left who sounds like John Wayne, Richard Boone, Robert Duvall, or Gary Cooper much less a Struther Martin, Jack Palance, L.Q. Jones, or Ben Johnson? I watched the movie Twelve O’clock High the other day, and Gregory Peck and Dean Jagger sounded liked they were from another planet. I confess over the last year, I have been interviewed a half-dozen times on the phone, and had no idea at first whether a male or female was asking the questions. All this sounds absurd, but I think upon reflection readers my age (55) will attest they have had the same experience. In the old days, I remember only that I first heard a variant of this accent with the old Paul Lynde character actor in one of the Flubber movies; now young men sound closer to his camp than to a Jack Palance or Alan Ladd.



7. We have given political eccentricity a bad name. There used to be all sorts of classy individualists, liberal and conservative alike, like Everett Dirksen, J. William Fulbright, Margaret Chase Smith, or Sam Ervin; today we simply see the obnoxious who claim to be eccentric like a Barbara Boxer, Al Franken, Barney Frank, or Harry Reid. The loss is detectable even in diction and manner; Dirksen was no angel, but he was witty, charming, insightful; Frank is no angel, but he merely rants and pontificates. Watch the You Tube exchange between Harvard Law Graduate Frank and Harvard Law Graduate Rains as they arrogantly dismiss their trillion-dollar Fannie/Freddie meltdown in the making. I suppose it is the difference between the Age of Belief and the Age of Nihilism.



8. Do not farm. There is only loss. To the degree that anyone makes money farming, it is a question of a vertically-integrated enterprise making more in shipping, marketing, selling, packing, and brokering than it loses on the other end in growing. No exceptions. Food prices stay high, commodity prices stay low. That is all ye need to know. Try it and see.



9. As I wrote earlier, the shrill Left is increasingly far more vicious these days than the conservative fringe, and about like the crude Right of the 1950s. Why? I am not exactly sure, other than the generic notion that utopians often believe that their anointed ends justify brutal means. Maybe it is that the Right already had its Reformation when Buckley and others purged the extremists—the Birchers, the neo-Confederates, racialists, the fluoride-in-the-water conspiracists, anti-Semites, and assorted nuts—from the conservative ranks in a way the Left has never done with the 1960s radicals that now reappear in the form of Michael Moore, Bill Ayers, Cindy Sheehan, Moveon.org, the Daily Kos, etc. Not many Democrats excommunicated Moveon.org for its General Betray-Us ad. Most lined up to see the premier of Moore’s mythodrama. Barack Obama could subsidize a Rev. Wright or email a post-9/11 Bill Ayers in a way no conservative would even dare speak to a David Duke or Timothy McVeigh—and what Wright said was not all that different from what Duke spouts. What separated Ayers from McVeigh was chance; had the stars aligned, the Weathermen would have killed hundreds as they planned.



10. The K-12 public education system is essentially wrecked. No longer can any professor expect an incoming college freshman to know what Okinawa, John Quincy Adams, Shiloh, the Parthenon, the Reformation, John Locke, the Second Amendment, or the Pythagorean Theorem is. An entire American culture, the West itself, its ideas and experiences, have simply vanished on the altar of therapy. This upcoming generation knows instead not to judge anyone by absolute standards (but not why so); to remember to say that its own Western culture is no different from, or indeed far worse than, the alternatives; that race, class, and gender are, well, important in some vague sense; that global warming is manmade and very soon will kill us all; that we must have hope and change of some undefined sort; that AIDs is no more a homosexual- than a heterosexual-prone disease; and that the following things and people for some reason must be bad, or at least must in public company be said to be bad (in no particular order): Wal-Mart, cowboys, the Vietnam War, oil companies, coal plants, nuclear power, George Bush, chemicals, leather, guns, states like Utah and Kansas, Sarah Palin, vans and SUVs.



Well, with that done—I feel much better













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