Tag Archives: mortgage-derivatives debacle

Bain and Switch

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Bain and switch

No wonder the Romney campaign and helpers have been going on about ‘China’. Bain Capital, Romney’s company, has taken over an Illinois auto-parts company named Sensata Technologies and is closing it down–and shipping the jobs to China. People working at the Freeport, Ill., plant have the unenviable final task of training their Chinese replacements.

 

Sensata Technologies

A sympathetic Steelworkers Union video about the plant closing appears here. Some Sensata employees have set up a mini-camp they name ‘Bainport’, to draw attention to the move. Some of them have also participated in a Bain Workers Bus Tour.

Bainport encampment

No word yet on whether Toyota will number among customers for the sensors and thermal circuit breakers manufactured by Sensata Technologies in Asia.

In hindsight, Romney’s bringing up China at all pinpoints his own ties to China. Of course Mitt Romney would castigate the Obama administration about China. Bain Capital wanted and tried to enter into a $3 billion technology deal with a Chinese company, and the deal fell through only after national security-conscious regulators called a halt. Of course pro-Romney television ads would use ‘China’ as a talking point. A glance at the giant database LexisNexis turns up more than 3,000 hits for ‘China’ [ + ] with ‘Bain Capital’. Admittedly there are other political angles played in Romney’s flogging ‘China’. Former President George H. W. Bush went to China as ambassador. Former GOP candidate Jon Huntsman, more dignified and more plausible as a candidate than Romney himself, served as U.S. ambassador to China. Both Bush and Huntsman fall into the ‘no help’ or ‘little help’ columns, for Romney. U.S. trade with China benefits some of Romney’s business rivals as it benefits him. Still, it has always mystified me that Romney would even bring up ‘jobs’, especially in connection with ‘China’, since no sane person can claim that Romney himself has made a career of protecting other people’s jobs, of broadening the employment base, of opposing mergers and acquisitions that shrink manufacturing largely while expanding certain tiers of management slightly. The whole China talking point illustrates the Karl Rove tactic of attacking the other guy where you’re weakest yourself, the cheesy tactic of pre-emptive strike.

 

Cartoon

Incidentally, when Romney himself appeared in China, he did what his crew would call ‘apologizing for America’: Romney told Beijing university students, quote, that “America makes mistakes.” Yes, Romney the GOP nominee for the White House went to China and, in typically self-deprecating fashion, shared with students at Tsinghua University that his country, the U.S.A., “makes mistakes.” Had the candidate released his tax returns for 2006 and 2007, evidence for the trip would appear as speaker fees, under the category of earned income. The speaker appearance was only scantly reported.

 

Romney speaking engagement, Beijing

Selling one thing and then delivering another is called bait-and-switch, in business. In politics, it’s called flip-flopping–a soft accusation that lets the fraudulent off the hook.

In the 2012 election, we’ve got one candidate who killed Osama bin Laden and saved the U.S. auto industry, and another candidate whose company provably ships jobs abroad, and wrote an opinion piece titled “Let Detroit Go Bankrupt”–and polls show the race as close?

 

The Detroit headline

Obama is still ahead, as he has mostly been, pre-election–a point conspicuously not made in reporting by the national political press.

Tonight’s town-hall format debate on CNN may help, although Candy Crowley may be bent on asking President Obama the questions no one could answer, and asking Mitt Romney the questions anyone could answer. One of Crowley’s specialties is false equivalencies between ‘left’ and ‘right’. Her notion of originality probably goes to accusing Romney of being too polite. Up-ending expectations; a reversal of sorts. With luck, she will not pull that old stunt of challenging Obama to reveal national security secrets or crucial strategy–classified information–and then suggesting soft-on-terrorists when he doesn’t. That one has long been a favorite with the If-it-quacks-like-a-duck crowd.

Questions put by ‘undecided’ voters, i.e. by people waiting to vote with the majority, inherently give the advantage to Romney–who is, as Joy Reid said, basically a salesman. In the freedom of privacy, one can ignore or brush off a sales rep. It will be illuminating to see how Romney enters, how he attempts to convey I’m-the-winner-go-with-me. It would be nice to hear Romney answer questions about his campaign-trail blood-and-thunder rhetoric on foreign policy. Then there’s that matter of paying for embassy security when you’re talking about cutting the deficit. The giant LexisNexis database turns up no mentions of ’embassy security’ with Romney’s name before September 2012, by the way.

On a more superficial debate detail–it will be interesting to see whether Romney looks tan as he did in the Republican primary debates back through 2011-2012, or pale as he looked in the first presidential debate with Obama. Change of makeup? Deliberate choice, for contrast? Mere fatigue?

Romney fan t-shirt

Surely CNN cameras will not find t-shirts in the audience saying “Put the white back in the White House.” It’s unlikely that Crowley will quiz Romney on why he doesn’t quell the race-baiting in his party, though. It would be more like her to accuse the president of playing the race card by being African-American–an attitude typical of people who talk about ‘blame’ in regard to the U.S. economy.

Calling it ‘blame’ is obfuscation. The U.S. cannot afford to bury history any more than we can afford to suppress votes. We need to end the policies and practices that brought us to the brink of a second Great Depression. We need to prevent their continuance. We need to develop the financial literacy to see through false slogans about the deficit, etc. It is essential to remind the public that a Republican congress and a highly-funded movement of lobbyists across the country have opposed every positive step taken by the Obama-Biden administration. Calling the reminder ‘blame’ is bogus. Will Romney claim that he as president would have prosecuted the creators of the mortgage-derivatives crisis? He cannot claim that he would have prohibited the credit default swaps. Bain Capital even securitized franchise fees for Dunkin’ Donuts franchisers–speaking of arcane financial products.

Trump, birtherism and the GOP race 2012: The more things don’t change, part 3

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The more things don’t change, part 3

2012 from primary to election

 

The dynamic that shaped the Republican primaries is now shaping the Republican campaign for the White House: Future nominee Mitt Romney is continuing the Rick Santorum strategy of going for the leftovers.

 

Romney supporters in Tennessee

As we know, the GOP primary season from summer 2011 to May 2012 shaped up as a contest dividing the voters from more populous counties, in general, from the voters of less populous counties. The GOP primary race was never between ‘moderate’ and ‘conservative’; all the candidates except in some ways Ron Paul support the same rapacious policies. The primary race was between Romney, Newt Gingrich and Ron Paul on one hand and Santorum on the other, the fault line being metropolitan/suburban appeal versus rural appeal. Santorum took most of the less populated counties, and he took states where rural and small-town counties and congressional districts outweigh metropolitan areas and suburbs. In this metric, as previously written, Santorum had the advantage of a divided field among his opponents and the leftovers to himself. Romney, Gingrich and Paul divided the more populated areas.

 

Romney with Nikki Haley

Now Romney has the Republican electorate all to himself—an electorate dependent on voters in regions where population density is not high, where communications are not good, where newspapers are not strong, and where per capita wealth and computer literacy are most lopsidedly divided between highest and lowest. Meth lab country. ‘Safe states’? The only respectably safe state for Romney is Utah. Romney is inordinately dependent on states that gave Rick Santorum victories—Alabama, Louisiana, Mississippi, Oklahoma, Tennessee—or that would have boosted Santorum if he could have lasted longer or if he had gotten his electors/delegates on the ballot—Arkansas, Kentucky, Missouri, Texas, West Virginia.

Of the states just mentioned, Texas comes closest to being Romney territory. (Texas also comes closest of these to being Obama territory, but so far the Dems have successfully kept that secret.) As written last week, however, out-of-the-race candidates Michele Bachmann, Rick Santorum and others pulled several thousand votes in the May 29 Texas primary won by Romney. So did “Uncommitted,” on the GOP ballot: More than sixty thousand voters turned out, in an uncontested Republican primary, to vote NOT for their party’s overwhelming favorite and frontrunner, rejecting even the cachet of putting the nominee over the top.

 

Trump

Enter Donald Trump, with his version of support for Romney.

Trump’s support is hardly intended for ‘swing states’. There is no evidence that Trump has wide popular appeal in Michigan, Minnesota, Ohio, Pennsylvania, or Wisconsin. Even in Missouri he looks iffy. Trump’s ‘birth certificate’ ploy is not part of a grand strategy to soften antagonism to Romney among people who work in the automobile industry in Michigan or even in Indiana. No, Trump’s support, his ghastly pitch for birtherism, is a straight-out invitation to the most ignorant counties in the U.S. Grabbing headlines big enough to reach people who don’t read and who distrust the ‘liberal media’ so intensely they refuse to read newspapers or to watch any television news except Fox, Trump is going openly for the voters in the 91 of 95 Tennessee counties won by Santorum.

 

The brighter side of factories closing

Regrettably, automobile workers in Tennessee, Georgia and South Carolina are seldom allowed to know about Romney’s policy positions. If you want another trillion-dollar war and another trillion-dollar tax cut for speculators and hedge fund managers, Romney’s your man—video clips widely available. But the dearth of newspapers in places that need them most seals up policy discussion as though it were national secrets. The result is ongoing harm to U.S. manufacturing and to working families.

 

Back to the birthers—

Theoretically Romney came out of the Texas primary as undisputed top dog and all-round GOP winner, safely in a position to train effective opposition against the Democrats and the president for the next five months. No more press hype boosting minor opponents like Tim Pawlenty (see here and here and here). No more unappealing candidates like Bachmann, Gingrich and Santorum trying ham-handedly to swipe at Romney. Right? No more para-candidates like Rudy Giuliani, Sarah Palin and Trump to distract attention from the nominee. Uh. No more specter-candidates like Chris Christie and Jeb Bush as embarrassing reminders of how many GOPers hoped for more latecomers in the race—at least, not yet this week. No more speculation in the political press as to whether Romney will be downed by a much-hyped ‘Christian right’, Tea Party, and ‘rebellion’ in the ranks. Hm.

Theoretically Romney has massive advantages.

  • He was a primary candidate who did not flunk the one-look-from-across-a-crowded-room test.
  • He presumably has political infrastructure intact at the state level, remaining from a front-loaded primary schedule, copious early money and longstanding organization.
  • He will have unprecedented funding from everyone from Karl Rove to the Koch brothers and the Chamber of Commerce in between.
  • His campaign has five months to benefit from expensive and misleading television ads.
  • He can count on intransigence from Republicans in Congress, to prevent any legislation that would improve the condition of ordinary Americans.

And yet, and yet—he still faces, as previously written, the prospect of some voter sectors not finding a ‘top-tier’ candidate ugly enough for their tastes, and wishing they could have replaced him with someone more transparently unsavory. These are the Manchurian-candidate voters to whom Trump appeals.

If an obvious falsehood triumphs anywhere, it is most liable to triumph in wide-open stretches where mass communications are poor, where former farms produce hay and timber if they’re lucky, and where meth labs start looking like a good way to make a living. Even the most declined neighborhoods in the large industrial states do not tend to be hotbeds of birtherism. Susceptibility to Romney’s claim of being an effective manager is still found more in suburbs than in cities.

Perhaps by now we should all be used to wild claims, and used to the political press reporting wild claims as though they were substantive. Look at the way quintessential Washington insiders and career politicians typically claim to be outsiders, a new start, a fresh face—like Herman Cain, and Santorum with his lobbying career, and Gingrich with his contract with Freddie Mac. To some extent the discrepancies are aired by the national political press, though not as much as they should be and too often as though they are equally endemic to both sides in a national election.

Worse, such factual reporting as survives the filter of the national political press is jeopardized by continuous undertow from the business press. All the major GOP candidates, regardless of stylistic differences, are essentially corporate mouthpieces. Personality differences notwithstanding, the core fiscal trickle-down policy remains intact: it’s rich-get-richer. It’s always there.

They don’t put it that way, of course. The obfuscation is protected by the business press—the same commentators, analysts and journalists who failed to notice the impending mortgage-derivatives crisis and who almost unanimously supported ‘deregulation’. Still do.

It’s the same gang that keeps giving us Orwellianisms about ‘austerity’, ‘debt’, ‘energy’ and ‘jobs’ while doing everything it can to siphon off value from the many and convey it to the few, and a highly unqualified few at that.

Once again, a recent example—U.S. Treasury bills last week sold at a remarkably low rate of interest, yield, meaning that 1) U.S. Treasuries are regarded as rock-solid investment, and 2) their sale saddles the Treasury with little to no debt. But in all the hoopla about ‘the budget’, when was the last time you heard a GOPer in Congress mention the fiscal benefit of issuing U.S. Treasuries at a lower interest rate, to pay off bonds with a higher rate?

Once again, there is an analogy here to refinancing your mortgage. Most people understand the value of refinancing their mortgages if they can get a significantly lower interest rate. It would be illuminating to know which members of Congress have refinanced their houses, just to check on which members understand the same idea. Unfortunately, that information is not publicly available. Residences of congress members are exempted from financial disclosure.

Publicly, in any case, they all go the pro-corporate line of harping on ‘debt’ and ‘deficit’ anyway—except when it comes to discussing corporate debt.

 

More on Trump’s version of birtherism later

The American Economy, part 2

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The American Economy, part 2

Following up on last week’s post–

We are all inheritors of the labor movement

Another fundamental of the U.S. economy is one that we have had for more than fifty years: We are all living on a gigantic store of assets, workplace conditions and industries produced by the American labor movement from the 1930s through the 1970s. This fundamental fact remains even in the historic economic slump from the mortgage-derivatives debacle. Despite the decline of labor unions and despite even the unthinkable wealth disparity between top and bottom in our economy, our middle class is still living on residuals of wealth and productivity from the earlier labor movement. The ‘boomerang’ phenomenon—young adults moving back in with their parents, because their parents have houses with space for them to live in—is only the most obvious example. This fundamental is not just a matter of inheritance in the limited literal sense of inheriting the parental house, a car or two and whatever is left in the family’s checking and savings accounts, etc., after end-of-life medical bills. It is a matter of being able to go to work with a reasonable expectation of a paycheck, a defined workday and a defined workweek with a weekend or other days off. It includes extensive nationwide use of ports, highways, public schools and public services that we tend to take for granted. And it is a matter of successful social programs brought about by the New Deal and the fight of the labor movement on behalf of the middle class—Social Security and Medicaid, which moved America’s elderly population out of the poverty column from the middle of the twentieth century onward. And it includes an incalculable amount of intellectual capital, much being donated or at best going for under market value in the nation’s universities, mass media and publishing.

Post-war housing

The amount of wealth that the majority of ordinary people have inherited from past labor becomes clearer when one thinks about inheritance in the more limited sense, as in housing and the giant second-hand market in the U.S. The overwhelming majority of individuals post-World War II in this country did not grow up thinking of themselves as heirs and heiresses. The exceptions who did grow up thinking of themselves that way—figuring out how much they stood to inherit in due course—did not necessarily benefit from the perception. It can be a disincentive to good work. Nonetheless, the amount of wealth being quietly passed along by inheritance, one way or another, to people not yet senior-citizen age in this country is staggering. It isn’t written about much—most people don’t want to talk about it, for reasons ranging from grief and mourning to simple self-protection—but it is one of the reasons why so much of the American middle class can make ends meet even in a time when this country’s wealth inequality approaches that of Sri Lanka.

 

Two-carat diamond engagement ring

Some specific examples of inheritance in the limited sense, in order of generally ascending value:

  • House contents. Admittedly, a stack of empty plastic margarine containers for left-over food—hoarded by thrifty post-war parents to keep from having to buy that expensive Tupperware—may not look like a treasure trove. But the total cost of all the tools, kitchen and garden supplies, clothing, furniture and ‘miscellaneous household’ would mount up fast if purchased simultaneously, even in big-box discount chain stores. People who inherit a household of items keep them, give them to younger relatives, sell them–on eBay, at yard sales, or at auction–or donate them to charity. The thrift stores in metro areas burgeon with aids to social mobility for legal immigrants and others less likely to have inherited the equivalent supplies. As with yard sales, auctions and sometimes eBay, marginalized buyers are getting the most price-elastic goods at a discount. And an additional benefit of Keep using, Re-use, Recycle is, of course, that it keeps the stuff out of landfills. As in the household Tip O’Neill grew up in, described by Jimmy Breslin in How the Good Guys Finally Won, nothing goes to waste.
  • With some exceptions such as unsafe baby beds, house contents are the innocuous, Mamsie-Pepper side of inheritance. Diamonds are pretty much the obverse side of inheritance. Let’s note first that most diamonds are not very valuable. Any diamond less than a quarter of a carat should not cost much, and the price of a piece of jewelry set with many tiny diamonds—under 0.25 carat each—should reflect only a multiple of that individual price, skilled labor and the gold aside. Even with larger diamonds, the wholesale price is going to reflect the quality of the stone, meaning clarity and color (colorlessness), and the overwhelming majority of diamonds are not D-E VVS-IF; nowhere near. That said, someone with a solitaire diamond purchased more than five years ago—let alone thirty or more years ago–might have an asset, if s/he can get it graded accurately–not ‘appraised’, but graded for color, clarity, cut and weight. Two- or three-carat diamonds of top color and clarity are going for astronomical prices, bigger ones for even more. Regardless of whether diamonds are ‘the new gold’, as the New York Times recently suggested, good solitaires have near-immediate cash value. I am intrigued that seemingly few banks and other mortgage lenders have taken them in exchange for a mortgage balance. A six-figure diamond has got to be worth more than a risky outstanding loan (lender), and switching the genuine article with a good simulant or a white sapphire seems like a small price to pay for getting out of debt (borrower). Maybe it’s happening and they’re not talking about it.
  • Houses and land are among the most obvious inheritable assets, and tend to be written about the most comprehensively. Many articles are published in the business press, in consumer blogs, and elsewhere about the pitfalls in inheriting a house, the possible tax liability—not large, for most people—or about options for what to do with an inherited house. A modest house in a post-war tract development is not the immense treasure that many people may have imagined during the housing boom. But if the house is sellable at all, given condition and neighborhood, obviously it can generate cash to offset a car purchase, college tuition, etc., or to build a rainy-day fund. A bigger windfall could pay down or pay off descendants’ mortgages—nothing to sneeze at, if you value your health and would benefit from reducing stress in your life. Multiply that by a few million, and you’ve got something with real impact.
  • Life insurance policies are among the last few reasonably good deals in the private insurance market. It’s interesting how vague and moderated the ads for life insurance policies tend to be; looks as though the rest of insurance—health, disability, malpractice—has frowned down anything that would highlight contrasts. Back to inheritance—any parents who purchased life insurance policies at a reasonably young and healthy time of life managed a boon to their offspring, pretty much uncomplicated by tax or other liabilities.
  • Et cetera.

The collective amount of just the above-mentioned specific assets is virtually incalculable. On a macro scale, these assets are what enable so many in our population to survive while underemployed. Just the collective assets involved in home gardening for food production, and for home improvement, contribute significantly to the national economy. However, as mentioned, our national inherited wealth far exceeds the limited, literal kind of inheritance sketched here.

University of Michigan

We have inherited industries, farmland and natural resources including (for now) potable water. We have inherited universities, museums and a vast communications system, an immense intellectual infrastructure. We have inherited a national physical infrastructure with the potential for improvement that would also ‘put people back to work’, as candidates for office keep saying while refusing to do so.

Current mouthings of GOP politicians and their television shills about ‘jobs’ and ‘unemployment’, fed into media outlets for the election, do not acknowledge our immense inherited wealth. To do so would acknowledge the importance of American labor, and would acknowledge the necessity of regulation (law) to safeguard natural resources and human lives. No one on their side of the line points out that a country of our resources and assets has the capability, for example, to educate all its youth. Quite the contrary: When President Obama suggested that everyone who wants to go to college should be able to, Rick Santorum called him a “snob.”

This wasn’t mere campaign rhetoric, stupidity and mean-mindedness. Santorum and his ilk jumped on Obama’s case because, from the perspective of GOP candidates for office, the reminder that we have immense assets for education is dangerous. Once it is recognized that we can educate our population, after all, the inevitable question becomes why don’t we? We have more than enough resources and assets to provide for our health needs, too, and look what happens when someone tries to do so. Aside from what notable newspapers like the Washington Post did to health care reform, the supermarket tabloids are vile, even beyond their usual hysteria, in attacks on first lady Michelle Obama in the context of health–beauty or nutrition, exercise or fashion.

There is danger in the reminder that the U.S. has immense assets–for health, for nutrition, for music and the arts; for national parkland, our coasts, mountains in West Virginia, clean water in any river, lake or aquifer. You name it; if someone brings up or indirectly reminds the public how genuinely wealthy this country is, the rightwing noise machine gets hot to trot.*

 

More later

 

*An individual heartening exception: David Koch, to do him justice, recently donated $35 million to the Smithsonian Museum of Natural History. My view remains that the wingers funded by the Koch brothers mostly take from, rather than give to, the public. But this is going in the right direction.