Obama's Motto: Screw The Law, The Wealthy &Tradition!

Michael Milken and his prostate doctor draw upon some medical metaphors. The father of leverage advises it is time to stop the government's tourniquet because the bleeding has begun to ebb. (See 1 below.)

Ne'eman on Iran and why Khamenei has only one route. (See 2 below.)

Sen. Tom Coburn is an MD (general practitioner) and GOP Sen. from Okla.
and recognized as 'the conscience' of the US Senate. He is well respected on
both 'sides of the aisle' & probably one of the few senators to actually read
these 'bail-out' bills. This is from his speech in the Senate.

Sen. Coburn, suggests the nation needs to re-examine its direction and Congress needs to start prescribing remedies that work. Coburn is right, of course, but he might as well go to Israel and talk to The Wall because our nation's politicians are driven by too much self-interest and narrow convictions that they are right in what they think.

Read what he writes but first get a barf bag!

Sent to me by a very objective friend who is a centrist. (See 3 below.)


Sent to me by a long time friend, director of many public amd private companies and a fellow memo reader. What this letter states is obvious. Obama does not care a fig about contractucal obligations and investors and certainly is a fraud when it comes to stopping government waste (See 3 below.).

The second leg on the stool of why government is the 'Judicative' leg which means we cannot conduct commerce without contracts and those contractual obligations must be enforced by a free, impartial and reliable judicial system. (See 4 below.)

Hope all fathers had a happy day, their kids appreciate what they tried to do for them (those few fathers that hung around) and their wives to whom they remained faithful - that number is also shrinking.

I cleaned out the garage and did other chores that we have been deferring for good reason. My wife bought me a humming bird feeder so I can watch those winged marvels from my study while I depress the world with my memos and dump on Liberals - now calling themselves Progressives and Islamist terrorists - now calling themslves progressive freedom fighters.

Dick

1) Illness as Economic Metaphor: The first rule, as always, is do no harm
By MICHAEL MILKEN and JONATHAN SIMONS


Global corporations have raised nearly $2 trillion in public and private markets this year, a clear sign the economy has begun to heal.

This process shouldn't surprise investors any more than it would surprise a critical-care doctor that the immune system plays a key role in restoring a patient's health. As the chairman of an economic think tank and a physician respectively, we see a remarkable alignment between treatment regimens for sick economies and sick people. In both cases, it's important at some point to let the patient's immune system carry the load of recovery. Overtreatment is bad medicine.

Before the 1970s, our economy's "immune system" resided in financial institutions, especially banks and insurance companies. Companies looked to these institutions for capital that could restore growth and create jobs whenever the economy got sick. Beginning with the 1974-75 recession, however, capital markets took over the healing function; equity and bond markets provided the "antibodies" that corporate America could depend on to fight off the infection of recession.

Economies that lack the crucial immune-system component of a corporate bond market tend to suffer longer, deeper recessions. The most obvious case in point is Japan, whose banks struggled to recapitalize in the 1990s.

The Treasury's recent stress tests have again highlighted the capital needs of financial institutions -- and it is time to let them fill their needs in the capital markets. The fact that non-investment-grade companies (Harrah's Entertainment, Warner Music Group, MGM Mirage, Rite Aid and Ford Motor Credit) are now paying down bank debt with funds raised in those markets shows the capacity of our financial immune system to help the economic patient recover.

Other similarities between human and economic medicine are revealing. Grave illness is often more life-threatening when it follows years of bad habits -- overeating, drinking to excess, failing to exercise, and abusing substances that create dependence. The recent economic boom reflected a similar lack of discipline -- overindulging on credit, leveraging assets to excess, failing to maintain enough equity in the capital structure, and disregarding the consequences of dependence on foreign oil.

When doctors tell patients to adopt healthier habits following a heart attack, the patients have no one to blame but themselves if they fail to comply. And when markets tell companies it's time to deleverage following an economic downturn, the companies have no one to blame but themselves if they fail to change their balance sheets.

Consider someone rushed into an emergency room in severe cardiac distress. After starting acute life-support measures, doctors still apply the rule stated by Galen of Pergamum more than 1,800 years ago: primum non nocere, or "First, do no harm." Treatment interventions are selected carefully from a battery of technologies and potent drugs while recognizing that any one of them, or a combination, could hurt the patient if misapplied or given in the wrong dosage. Economic interventions require no less care.

The attending physician makes a preliminary diagnosis: patient in shock; condition critical; blood not flowing through the body (low cardiac output). Last fall, the Treasury and the Fed diagnosed their patient: in shock; condition critical; money not flowing through the economy.

Priority one is to stabilize the patient using the "A/B/C" mnemonic -- Airway/Breathing/Circulation. If necessary, provide oxygen through a respirator and stabilize the heart rhythm. When markets went into freefall, "A/B/C" was AIG/Banks/Credit markets. "Oxygen" included the Commercial Paper Funding Facility and other Federal Reserve tools. The Troubled Asset Relief Program was one of several Treasury interventions designed to stabilize the economy's rhythm.

With the patient stabilized, additional measures may be started: cardiac-performance stimulus, blood transfusions and antibiotics. Economic measures include the stimulus package and industry-bailout transfusions. Anticoagulants are sometimes used to prevent clots and help the body's peripheral circulation. The "anticoagulants" of Fed liquidity expansion, increased loan guarantees for small business, and a tax credit for first-time home buyers help the economy's peripheral circulation.

The intensive-care attending physician coordinates other specialists and creates a treatment plan. The goal is to keep all systems -- heart, lungs, kidneys, brain -- in balance. The optimal blood-pressure stimulus, for example, could impair the kidneys, which filter out toxic material.

When the economy was moved into intensive care following the Lehman Brothers failure last September, government officials coordinated other specialists and created a treatment plan. The goal was to keep all systems -- capital markets, banks, insurers, government-sponsored enterprises -- in balance. The optimal intervention with only one policy lever could impair the process of filtering out toxic assets.

Before leaving the hospital, a patient often gets a stress test to assess health, determine the right medication, and plan rehabilitation. Following their stress test, major financial institutions have started rehabilitation by going to the capital markets.

Some of the analogies we've drawn are a stretch. But here's one that matches perfectly: When the body begins to recover, doctors gradually withdraw external support and make sure the patient doesn't become addicted to medication.

Our economic doctors should permit America's uniquely effective immune system to take over as companies and financial institutions deleverage their balance sheets. With people and with capitalism, the tincture of time is often the best medicine.

Mr. Milken is chairman of the Milken Institute. Dr. Simons is president of the Prostate Cancer Foundation.


2) Violent Repression Only Route for Khamenei
By Yisrael Ne'eman



What began as an election between two factions within the Iranian power elite is now a major showdown pitting reformists led by presidential candidate Mir Hossein Mousavi against the ultra conservative vested interests of the Supreme Council leader Ayatollah Ali Khamenei and President Mahmoud Ahmedinejad the incumbent and declared winner of the June 12 elections.


Despite the official news blackout there is never ending commentary as riots sweep through Iran . Two questions remain: What do the reformists truly want? And what will be the government response as the situation gets increasingly out of hand?


Certainly Mousavi is dedicated to an Iranian Islamic republic. The reforms he envisioned and in particular women's rights are seen by the ultra-conservatives as threatening not only their power but as the first step in the downfall of the Iranian Islamist revolution of
1979. By allowing Mousavi to run in the elections the supreme leader Ayatollah Khamenei opened the "safety valve" to allow for an airing of complaints without considering what happens when the valve explodes and the reformist opposition actually wins the elections. Alleged vote rigging gave Ahmedinejad 63% of the vote with Mousavi receiving only 34%. Reformist supporters claim the figures should be reversed.


How much reform Mousavi's supporters demand is unclear. It is known that the candidate himself is a strong supporter of the Islamist regime including its belligerency to the West and the continuing efforts to gain nuclear weapons despite his domestic agenda. But what do the student demonstrators truly demand? Full open democratic elections including secular candidacy for all representative offices? Such demands may surface and undermine the foundations of the Iranian Islamic Republic should the protests continue and become more violent, step by step. Mousavi and like minded members of the reformers who come out of the original Khomeini revolution of thirty years ago may be swept aside by more radical popular demands.


On Friday Ayatollah Khamenei demanded an end to the opposition protests, threatening dire consequences – and no one listened. Compromise is now out of the question. Should the Supreme Council allow the demonstrations to continue, their absolutist Islamist rule representing "the Will of Allah" will be called into question. They gave less than a finger to popular discontent and now are being forced not only to concede an arm (new elections) but the whole body (regime overthrow) which could include the sweeping aside of Mousavi himself.


To stay in power Khamenei, Ahmedinejad, the Supreme Council and the hard line Islamists must use the maximum force necessary to break the demonstrations. Syria's Hafez el-Assad did so in 1982 when he crushed the Moslem Brotherhood revolt in Hama where at least 20,000 were killed (although some reports go as high as 38,000) as he sent tanks into the streets and flattened entire neighborhoods. Using the same Stalinist approach Saddam Hussein massacred hundreds of thousands of Kurds and Shiites before he was overthrown by the Americans, twenty years ago Chinese security forces attacked demonstrators in Tiananmen and in the recent past the generals have retained control in Myanmar over the protests of Buddhist monks and the general population


Or one can allow for a "velvet revolution" as seen recently in the Ukraine or Georgia - modeled on the fall of communism in Eastern Europe 20 years ago. For the Iranian regime there are no middle roads as "rising expectations" have soared out of control. Their "mistake" was in setting in motion the process of letting the voice of the people be heard. Non-religious democratic factors may begin to challenge not only the ultra-conservatives but also the reformers from within their own camp. Such it was in 1979 but then these non-Islamist factions were crushed within a year or so.


Khamenei and Ahmedinejad cannot allow for democracy unless they want to be out of a job (remember Mikhail Gorbochov and the fall of the Soviet Union ?). In the dilemma between facilitating an opening to democracy or re-solidifying the Islamic republic they have no choice but to insist on the latter. Hence one should expect massive repression against the demonstrators and their leaders. Khamenei can reign in the protests by arresting Mousavi and his cohorts while repressing the demonstrations with lethal force well beyond the necessary as a message to anyone else who may think in democratic terms.


The Supreme Council knows a tipping point is being reached and within a short time there will be no point of return. For them not to crush the demonstrations is becoming
tantamount to suicide.

3) Sen. Coburn's comments:

"We are going in exactly the wrong direction. We ought to be standing on the principles that made this country great. There ought to be a review of every program in the Federal Government that is not effective, that is not efficient, that is wasteful or fraudulent, and we ought to get rid of it right now. We ought to say, you're gone, to be able to pay for a real stimulus plan that might, in fact, have some impact.



I would be remiss if I didn't remind everybody that next week we are going to hear from the Obama administration wanting another $500 billion. Outside of this, they are going to want another $500 billion to handle the banking system. Still not fixing the real disease-the pneumonia-we are going to treat the fever or treat the cough, but we are not going to treat the real disease.

Until we treat the real disease, this is pure waste. It is worse than pure waste. It is morally reprehensible, because it steals the future of the next two generations.

I am going to wind up here and finish, but I wanted to spend some time to make sure the American people know what is in this bill. I think once they know what is in this bill, they would reject it out of hand.

Let me read for my colleagues some of the things that are in this bill..

The biggest earmark in history is in this bill. There is $2 billion in this bill to build a coal plant with zero emissions. That would be great, maybe, if we had the technology, but the greatest brains in the world sitting at MIT say we don't have the technology yet to do that. Why would we build a $2 billion power plant we don't have the technology for that we know will come back and ask for another $2 billion and another $2 billion and another $2 billion when we could build a demonstration project that might cost $150 million or $200 million? There is nothing wrong with having coal-fired plants that don't produce pollution; I am not against that. Even the Washington Post said the technology isn't there. It is a boondoggle. Why would we do that?

We eliminated tonight a $246 million payback for the large movie studios in Hollywood .

We are going to spend 88 Million to study whether we ought to buy a new ice breaker for the Coast Guard. You know what. The Coast Guard needs a new ice breaker. Why do we need to spend $88 million? They have two ice breakers now that they could retrofit and fix and come up with equivalent to what they needed to and not spend the $1 billion they are going to come back and ask for, for another ice breaker, so why would we spend $88 million doing that?

We are going to spend $448 million to build the Department of Homeland Security a new building. We have $1.3 trillion worth of empty buildings right now, and because it has been blocked in Congress we can't sell them, we can't raze them, we can't do anything, but we are going to spend money on a new building here in Washington .

We are going to spend another $248 million for new furniture for that building; a quarter of a billion dollars for new furniture. What about the furniture the Department of Homeland Security has now? These are tough times. Should we be buying new furniture? How about using what we have? That is what a family would do. They would use what they have. They wouldn't go out and spend $248 million on furniture.



How about buying $600 million worth of hybrid vehicles? Do you know what I would say? Right now times are tough; I would rather Americans have new cars than Federal employees have new cars. What is wrong with the cars we have? Dumping $600 million worth of used vehicles on the used vehicle market right now is one of the worst things we could do. Instead, we are going to spend $600 million buying new cars for Federal employees..

There is $400 million in here to prevent STDs .. I have a lot of experience on that. I have delivered 4,000 babies. We don't need to spend $400 million on STDs. What we need to do is properly educate about the infection rates and the effectiveness of methods of prevention. That doesn't take a penny more. You can write that on one piece of paper and teach every kid in this country, but we don't need to spend $400 million on it. It is not a priority.



How about $1.4 billion for rural waste disposal programs? That might even be somewhat stimulative. New sewers. That might create jobs.

How about $150 million for a Smithsonian museum? Tell me how that helps get us out of a recession. Tell me how that is a priority. Would the average American think that is a priority that we ought to be mortgaging our kids' future to spend another $150 million at the Smithsonian?

How about $1 billion for the 2010 census? So everybody knows, the census is so poorly managed that the census this year is going to cost twice-in 2010 is going to cost twice what it cost 10 years ago, and we wasted $800 million on a contract because it was no-bid that didn't perform. Nobody got fired, no competitive bidding, and we blew $800 million.

We have $75 million for smoking cessation activities, which probably is a great idea, but we just passed a bill-the SCHIP bill-that we need to get 21 million more Americans smoking to be able to pay for that bill. That doesn't make sense.

How about $200 million for public computer centers at community colleges? Since when is a community college in my State a recipient of Federal largesse? Is that our responsibility? I mean, did we talk with Dell and Hewlett-Packard and say, How do we make you all do better? Is there not a market force that could make that better?

Will we actually buy on a true competitive bid? No, because there is nothing that requires competitive bidding in anything in this bill. There is nothing that requires it. It is one of the things President Obama said he was going to mandate the Federal Government, but there is no competitive bidding in this bill at all.

We have $10 million to inspect canals in urban areas. Well, that will put 10 or 15 people to work. Is that a priority for us right now?

There is $6 billion to turn Federal buildings into green buildings. That is a priority, versus somebody getting a job outside of Washington , a job that actually produces something, that actually increases wealth?

How about $500 million for State and local fire stations? Where do you find in the Constitution us paying for local fire stations within our realm of prerogatives? None of it is competitively bid - not a grant program.

Next is $1.2 billion for youth activities. Who does that employ? What does that mean?

How about $88 million for renovating the public health service building? You know, if we could sell half of the $1.3 trillion worth of properties we have, we could take care of every Federal building requirement and backlog we have.

Then there's $412 million for CDC buildings and property. We spent billions on a new center and headquarters for CDC. Is that a priority? Building another Government building instead of - if we are going to spend $412 million on building buildings, let's build one that will produce something, one that will give us something.

How about $850 million for that most "efficient'' Amtrak that hasn't made any money since 1976 and continues to have $2 billion or $3 billion a year in subsidies?

Here is one of my favorites: $75 million to construct a new "security training'' facility for State Department security officers, and we have four other facilities already available to train them. But it is not theirs. They want theirs. By the way, it is going to be in West Virginia ... I wonder how that got there? So we are going to build a new training facility that duplicates four others that we already have that could easily do what we need to do. But because we have a stimulus package, we are going to add in oink pork.

How about $200 million in funding for a lease-not buying, but a lease of alternative energy vehicles on military installations?

We are going to bail out the States on Medicaid. Total all of the health programs in this, and we are going to transfer $150 billion out of the private sector and we are going to move it to the Federal Government. You talk about back dooring national health care. Henry Waxman has to be smiling big today. He wants a single-payer Government-run health care system. We are going to move another $150 billion to the Federal Government from the private sector.

We are going to eliminate fees on loans from the Small Business Administration. You know what that does? That pushes productive capital to unproductive projects. It is exactly the wrong thing to do.

Then there is $160 million to the Job Corps Program-but not for 20 jobs and not to put more people in the Job Corps but to construct or repair buildings.

We are going to spend $524 million for information technology upgrades that the Appropriations Committee claims will create 388 jobs. If you do the math on that, that is $1.5 million a job. Don't you love the efficiency of Washington thinking?

We are going to create $79 billion in additional money for the States, a "slush fund,'' to bail out States and provide millions of dollars for education costs. How many of you think that will ever go away? Once the State education programs get $79 billion over 2 years, do you think that will ever go away? The cry and hue of taking our money away - even though it was a stimulus and supposed to be limited, it will never go away. So we will continue putting that forward until our kids have grand kids of their own.

There is about $47 billion for a variety of energy programs that are primarily focused on renewable energy. I am fine with spending that. But we ought to get something for it. There ought to be metrics. There are no metrics. It is pie in the sky, saying we will throw some money at it.

Let me conclude by saying we are at a seminal moment in our country. We will either start living within the confines of realism and responsibility or we will blow it and we will create the downfall of the greatest Nation that ever lived. This bill is the start of that downfall. To abandon a market-oriented society and transfer it to a Soviet-style, government-centered, bureaucratic-run and mandated program, that is the thing that will put the stake in the heart of freedom in this country.

I hope the American people know what is in this bill. I am doing everything I can to make sure they know. But more important, I hope somebody is listening who will treat the pneumonia we are faced with today, which is the housing and mortgage markets. It doesn't matter how much money we spend in this bill. It is doomed to failure unless we fix that problem first. Failing that, we will go down in history as the Congress that undermined the future and vitality of this country. Let it not be so."

4) Unafraid In Greenwich Connecticut
By Clifford S. Asness: Managing and Founding Principal AQR Capital Management, LLC

The President has just harshly castigated hedge fund managers for being unwilling to take his administration’s bid for their Chrysler bonds. He called them “speculators” who were “refusing to sacrifice like everyone else” and who wanted “to hold out for the prospect of an unjustified taxpayer-funded bailout.”

The responses of hedge fund managers have been, appropriately, outrage, but generally have been anonymous for fear of going on the record against a powerful President (an exception, though still in the form of a “group letter”, was the superb note from “The Committee of Chrysler Non-TARP Lenders” some of the points of which I echo here, and a relatively few firms, like Oppenheimer, that have publicly defended themselves). Furthermore, one by one the managers and banks are said to be caving to the President’s wishes out of justifiable fear.

I run an approximately twenty billion dollar money management firm that offers hedge funds as well as public mutual funds and unhedged traditional investments. My company is not involved in the Chrysler situation, but I am still aghast at the President’s comments (of course these are my own views not those of my company). Furthermore, for some reason I was not born with the common sense to keep it to myself, though my title should more accurately be called “Not Afraid Enough” as I am indeed fearful writing this… It’s really a bad idea to speak out. Angering the President is a mistake and, my views will annoy half my clients. I hope my clients will understand that I’m entitled to my voice and to speak it loudly, just as they are in this great country. I hope they will also like that I do not think I have the right to intentionally “sacrifice” their money without their permission.

Here’s a shock. When hedge funds, pension funds, mutual funds, and individuals, including very sweet grandmothers, lend their money they expect to get it back. However, they know, or should know, they take the risk of not being paid back. But if such a bad event happens it usually does not result in a complete loss. A firm in bankruptcy still has assets. It’s not always a pretty process. Bankruptcy court is about figuring out how to most fairly divvy up the remaining assets based on who is owed what and whose contracts come first. The process already has built-in partial protections for employees and pensions, and can set lenders’ contracts aside in order to help the company survive, all of which are the rules of the game lenders know before they lend. But, without this recovery process nobody would lend to risky borrowers. Essentially, lenders accept less than shareholders (means bonds return less than stocks) in good times only because they get more than shareholders in bad times.

The above is how it works in America , or how it’s supposed to work. The President and his team sought to avoid having Chrysler go through this process, proposing their own plan for re-organizing the company and partially paying off Chrysler’s creditors. Some bond holders thought this plan unfair. Specifically, they thought it unfairly favored the United Auto Workers, and unfairly paid bondholders less than they would get in bankruptcy court. So, they said no to the plan and decided, as is their right, to take their chances in the bankruptcy process. But, as his quotes above show, the President thought they were being unpatriotic or worse.

Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice”, they are stealing. Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That’s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could “share in the sacrifice”, you would not be happy.

Let’s quickly review a few side issues.

The President’s attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to “sacrifice” some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.

Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won’t work because of this irresponsible hectoring.

Last but not least, the President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along. The hedge funds were singled out only because they are unpopular, not because they behaved any differently from any other ethical manager of other people’s money. The President’s comments here are backwards and libelous. Yet, somehow I don’t think the hedge funds will be following ACORN’s lead and trucking in a bunch of paid professional protestors soon. Hedge funds really don't need a community organizer.

This is America . We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.

I am ready for my “personalized” tax rate now.