Friday, September 26, 2008

Greed

Thursday, September 25th, 2008
Baton Rouge, Louisiana

GREED IS GOOD IN LOUISIANA

The national financial crisis finds Wall Street and financial regulators scurrying for cover, and trying to find a quick fix to financial problems that have festered for years. It's puzzling that there is been nary a peep out of Louisiana officials, particularly in light of the fact that lack of regulation of the very financial institutions creating this meltdown has been part of the culture of Louisiana regulators for years. Where is the outrage by Louisiana members of Congress? And why have Louisiana legislators failed to address a number of serious financial problems right here at home?
Oh you will hear that this is a federal problem, and there is not much which Louisiana officials can do about the financial meltdown. But even though there is plenty of blame to go around, at least in other states, there is a scurrying of effort to tighten the regulatory system that in recent years has acquired a laissez-faire mindset.

So can we get a simple explanation as to exactly what happened? Here's a quick summary. In the old days (pre-1990s), if you wanted to buy a new home, you went down to your banker or savings and loan to submit a financial plan. A solid down payment was required, generally 20%, that you might have obtained by saving a little each month over a number of years. You had to show the bank or savings and loan that you had decent credit, and that you had a job. You had to have some income coming in. The financial institution would check out your credit, and if you qualified, then, and only then, did you become a homeowner. Your loan was approved.

That all changed in recent years, driven by Wall Street greed that required more churning of large blocks of money to create more fees to line their pockets. Your bank or savings and loan no longer required a down payment. And the money was cheap, often financed by state government. Banks were encouraged to loan to almost anyone, and if the loan defaulted, there always seemed to be some state or federal program to pay it off.

While the financial markets were churning and loaning all this money, they were supposed to hold something back in reserve. Loans fail. You have to have a safety net. And here' is where state and federal regulators really dropped the ball. For every $30 loaned out, there was often as little is only one dollar held back. That just was not enough. Not enough in reserve. So the economy began to slow down, a number of people lost their jobs, they could not pay their home loans, and defaults begin to take place in pretty sizable numbers. When major Wall Street firms like AIG, which has a major presence in Louisiana, began getting cash calls, they had to put up big bucks. And they just didn't have the money to put up.

Here is how companies like AIG got into trouble. They began insuring something called credit default swaps, which any way you slice it is an insurance policy. AIG was insuring against the possibility that a bank or other lender would not be able to pay on its obligations. Now I know all this sounds complicated. Simply put, AIG was selling insurance to be sure that banks or other lenders would continue financing new homeowners.

Now all these "credit default swaps” have been packaged in something called derivatives. These derivatives were bought by banks all over the world. And you know what? They were not regulated. Insurance regulators, including those in Louisiana, turned their heads, and let these insurance products be bundled and sold with no oversight.

Banks and insurance companies are supposed to have certain regulatory capital requirements. They have to have so much money on hand. They have to have funds available when it's time to pay claims. Surprisingly, these unregulated derivatives were able to be counted towards those requirements of having money available. Simply put, the derivatives were allowed by financial regulators to be bought by banks to get around their regulatory capital requirements. It was a sham. Because you just don't know what the derivatives are worth. A bank or insurance company may say the derivatives are worth $1 million, when in actuality, they end up selling for only $100,000. It's often very hard to tell just what they're worth. And that's why it's imperative the derivatives be regulated. But they, unfortunately, are not.

The New York insurance department has jumped into this financial mess big time, obviously trying to cover their you know what. They will immediately begin regulating the use of credit default swaps since they now admit that such products are insurance that should have been regulated all along. At least they have the courage to face up in New York about their failure to give proper oversight. Here is what the New York insurance commissioner said this week: "It's about the government choosing not to regulate, standing by and doing nothing. That is what is shaking up the world today."

Warren Buffett, who has always been considered one of the shrewdest financial investors and wealthiest men in America, recently called these insurance products, these credit default swaps, "financial weapons of mass destruction." Former President Bill Clinton was on the David Letterman show this week, and also laid blame at the feet of regulators, saying: "There were not enough financial reserves required, and there surely was not enough regulation."

AIG and other financial institutions have a significant presence in Louisiana. Many Louisiana homeowners are insured by AIG and its subsidiaries. A number Louisiana banks are directly tied to the bundling of these credit default swaps. If the Governor and other state officials continue to express concerns about Louisiana's image, they may want to focus in on the lack of financial regulation. It's not just a national problem. It festers right here in our own backyard

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“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.”
Gordon Gekko- “Wall Street”

Peace and Justice.
Jim Brown

Jim Brown’s column appears weekly, and is published in a number of newspapers and on websites throughout Louisiana. You can read past columns by going to Jim’s website at www.jimbrownla.com. Jim’s regular radio show on WRNO, 995fm out of New Orleans can be heard each Sunday from 11:00 am till 1:00 pm. It is streamed live, world-wide at WRNO.com.

No Bailout!

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H/T to Central La Politics

Thursday, September 18, 2008

Jindal could face new problems

Thursday, September 18th, 2008
Baton Rouge, Louisiana

WHILE NATIONAL STAR SHINES,
JINDAL COULD FACE BIG FINANCIAL PROBLEMS IN LOUISIANA

To say that Louisiana Governor Bobby Jindal’s political stock continues to rise would be an understatement. He has been regularly profiled as a future presidential candidate in a number of national publications. And on the speaking circuit, the Louisiana governor is in high demand from coast to coast. But the perilous condition of the US financial system could cause some major economic problems in Louisiana. And the financial chaos that is taking place right now might well have a direct impact on the Governor's future plans.

If you want to get an idea of how Jindal is being perceived around the rest of the country, take a gander at the latest addition of Esquire magazine. The 75th anniversary issue profiles the most influential people in the world today. A one page profile is given to such luminaries as Russian Prime Minister Vladimir Putin, Chinese Communist leader Deng Xiaoping, Bill Gates, Bill Clinton, Hezbollah Head in Lebanon Hassan Nasrallah, Oprah Winfrey, and Barack Obama. One page each. Bobby Jindal is given 10 pages.

Want to get in early and reserve the website addresses of Jindalforpresident.com or Jindal/Palin.com? You are too late. The names and others that are similar have already been bought up. And with the Louisiana recovery efforts slowing down a bit, Jindal will receive homage from Vice President Dick Cheney when he comes to Baton Rouge on October 6th to attend a Cassidy for Congress fund raiser. Then the following day, the Governor will welcome Vice Presidential candidate Sarah Palin as she travels to New Orleans for a campaign stop.

And how about Bobby Jindal and the first lady posing for their official portrait by noted artist George Rodrigue in front of Louisiana's most famous tree, the Evangeline Oak. (You can view the painting at www.JimBrownla.com.) The Governor's press office seems to be working around the clock outlining all that the Governor has been doing, and how well he's been doing it.

Enter a crisis of confidence oozing out of those high temples of capitalism on Wall Street. The potential unraveling of a number of key financial institutions is not an abstract problem. The damage hits directly home to Louisiana businesses, individual investors, and insurance policyholders. Many Louisiana energy stocks dropped in value by 10% or more, and across-the-board, numerous Louisiana companies have suffered significant losses. Thousands of Louisiana investors have seen throughout this year a significant drop in their individual stock portfolios.

And yet another big hit for both Louisiana businesses as well as homeowners could be right around the corner. The nation's largest insurance group, AIG, is teetering and in desperate need of a major financial infusion. Company officials have prevailed on the federal government to guarantee more than $85 billion in loans, something unheard of and never before done for an insurance company.

This is not just any ordinary insurance company as far as Louisiana is concerned. AIG is a major player for both businesses and homeowners throughout Louisiana. And insurance regulators have often looked away as AIG's problems have mounted. The Teachers Retirement System of Louisiana was forced to sue AIG and its top executives for over $100 million, claiming that key operatives had siphoned off millions by steering business illegally to separate private companies. Louisiana is not the only state involved, yet insurance commissioners throughout the country stood by and did little. If these regulators have done their job, Louisiana citizens would not have had to foot the bill for the Teachers retirement System having to file such a suit in the first place.

In the case of other companies like AIG, Louisiana policyholders are at a particular disadvantage. Louisiana is one of the few states that have virtually no independent consumer protection office, and numerous companies like AIG charge at will without any pre-approval process. We have witnessed following the recent Hurricanes how property deductibles, the highest in the country, have caused major disruption in the lives of thousands of Louisiana homeowners. So policyholders are at a great disadvantage, and have to, for all practical purposes, go it alone in making a decision of whether to trust the insurance they are buying.

Not only does AIG and its subsidiary companies sell insurance directly to thousands of Louisiana customers, they often act as both broker and re-insurer to back up many other insurance companies that also do business in Louisiana. Bottom line? When AIG gets in trouble, there is the potential for widespread losses both directly and indirectly by thousands of Louisiana businesses and individual policyholders.

So how is Governor Bobby Jindal affected? In the vast majority of states, insurance regulators are appointed by the governor. And in the few states that do elect their regulator, the governor has been actively involved in a host of insurance issues. A typical example is Governor Charlie Crist of Florida, who has been in the forefront of pushing legislation to reduce the cost of insurance for both homeowners and drivers all across Florida. Even though Florida, like other key southern states (Mississippi and North Carolina for example) elect their insurance regulator, the Governor is in the middle of the mix. And for obvious reasons. If insurance rates stay high and problems like AIG mount in their respective states, the governor gets the blame.

The New York Insurance Department, where AIG is located, has stood by for way too long, and has allowed AIG to fritter a way billions of dollars. And if some quick action is not taken in other states including Louisiana, then Louisiana policyholders may not get their insurance claims paid, while having to bail out, through taxes, companies like AIG who acted irresponsibly.

So there's a lesson here for Louisiana Governor Bobby Jindal. Don't stand by and allow problems facing AIG and other insurance companies to fester. Without strong regulation, these insurance problems are only going to get worse. And particularly Louisiana, the Governor needs to take the lead. This is no time to lose some of the luster off his star that in recent weeks has been burning so brightly.
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“It's just a job. Grass grows, birds fly, waves pound the sand. I just beat people up.” --Muhammad Ali

Peace and Justice.

Jim Brown
Jim Brown’s column appears weekly, and is published on a number of newspapers and websites throughout Louisiana. You can read past columns by going to Jim’s website at www.jimbrownla.com. Jim’s regular radio show on WRNO, 995fm out of New Orleans can be heard each Sunday from 11:00 am till 1:00 pm.

Thursday, September 11, 2008

Jim Brown: Jindal vs Palin

Thursday, September 11th, 2008
Baton Rouge, Louisiana

BOBBY JINDAL VS SARAH PALIN
IN 2012?

For most of us living along the Gulf Coast, national politics has not been of major concern in the past week. Our focus has been post-Gustav and pre- Ike. Many homes did not have electricity in the waning days after Gestalt’s demise, so few were able to spend any time watching the Republican National Convention in Minneapolis. Sarah who?

About the best I was able to do was to take an occasional look from my Clear Channel radio studio to catch a glimpse of my oldest kid on CNN, just to be sure she looked healthy. So last Sunday morning, with a generator riving up my small portable television set with rabbit ears, I sat back with the morning papers and listened to the Sunday morning talk shows.

Barrack Obama started off on ABC’s "This Week" with George Stephanopoulos. Talk about Mr. excitement. He rambled, hesitated, and could not been more diffident and blaze. When it came to the puzzling McCain pick of Governor Sarah Palin for Vice President, Obama was asked whether she met the minimum test of being "capable of being president?" You would have thought he would have jumped on that one. His answer? "Well, you know, I'll let you ask John McCain when he's on ABC.” Some knock out punch.

Stephanopoulos went on to ask Obama's reaction to an attack on him by former New York Mayor Rudy Giuliani at the Republican convention. "He immersed himself in Chicago machine politics,” said the former New York Mayor. Well, didn’t McCain jump full force into Arizona politics when he "chose" this state to go and run for office? All the candidates were involved in party machine politics. So how did Obama come back full force with an aggressive in-your-face answer? "It's a real puzzling thing." he said in a laid-back fashion. Some tough response.

Then it was time to look for Sarah. I had seen a lot of her on the Internet. Well, at least airbrushed photographs that had been e-mailed to me from friends across the country. I did listen to her well rehearsed acceptance speech in Minneapolis, obviously written by the McCain campaign. But I wanted to hear from the lady herself. The successes she'd had as the Alaska Governor. What she knows about foreign-policy. Is she qualified to step in as president if necessary to succeed her 72-year-old standard-bearer?

Now the other three national candidates (McCain, Obama, and Biden) all showed up for tough questioning on various Sunday news shows. But Palin was nowhere to be found. When McCain's campaign manager was asked on Fox news why she was a no-show, he made no bones about the fact that the Republican vice presidential nominee would not be available to the press "until they showed a willingness to treat her with some level of respect and deference." Respect? Deference? I can just hear Governor Bobby Jindal saying he will not be available to answer any questions until he has been given "deference" by the press.

All in all, it was a pretty bland Sunday for both political parties. The general public is just starting to get interested in the "sizing up process" of these candidates. Seems like it should be time for some straight talk, and certainly making the candidates available for questions. Hurricane coverage proved to be a lot more interesting.

Speaking of Bobby Jindal, his political star continues to rise without even attending the Republican national convention. There is almost universal agreement throughout the state that Jindal did a yeoman’s job in micromanaging both the pre storm preparation, and the post storm recovery of Gustav. And his efforts are being acknowledged across the nation.

A Sunday column in the Minneapolis Star Tribune speculated on who Republican political insiders might possibly nominate in 2012 if McCain loses this time. We're talking about President now. The two names at the top of the list? Mitt Romney and Bobby Jindal. According to the column, "Hurricane Gustav, a storm and seemed almost as kind Republicans in 2008 as Katrina was nasty and 2005, may have said another GOP governor's career are rising trajectory. Watch out for Louisiana's Bobby Jindal."

A California political consultant, John Pitney, was quoted in papers throughout the country in saying that Gustav enhanced Jindal’s chances of being the Republican presidential candidate in 2016 -- or even 2012 if McCain is not elected. "In either scenario," Pitney said, “Jindal will almost automatically be the front runner."

And conservative magazine “Politics and Critical Thinking” is already ballyhooing a Palin-Jindal ticket if McCain is elected and decides not to run for a second term. A quote from the publication stated: "If McCain does not run in 2012, where does that leave Sarah Palin? Obviously running for the Perez, but who would she run with? More than likely Governor Bobby Jindal of Louisiana."

But what if the McCain/Palin ticket looses? Would Bobby Jindal in the coming months dare venture out of Louisiana and consider building bridges for a national run in the future? For President of the United States?

Well here’s a hint. The Republican candidate for governor in the state of Washington is Dino Rossi. If you are unsure of your geography, Washington is up in the far northwest, halfway across the country. Rossi has his major fund raiser at the Bellevue Hilton Hotel in downtown Seattle next weekend. And guess who the principal speaker will be? Bobby Jindal. Hummmm.
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"It's probably not a good idea to be chewing on a toothpick if you're talking to the president, because what if he tells a funny joke and you laugh so hard you spit the toothpick out and it hits him in the face or something." Jack Hand
Peace and Justice.

Jim Brown

Jim Brown’s column appears weekly, and is published on a number of newspapers and websites throughout Louisiana. You can read past columns by going to Jim’s website at www.jimbrownla.com. Jim’s regular radio show on WRNO, 995fm out of New Orleans can be heard each Sunday from 11:00 am till 1:00 pm.

Sunday, September 7, 2008

4th District Congessional race heating up

Reprinted from My Bossier:
The race for Congress in the Fourth Congressional District remains interesting, if somewhat confusing because of the rescheduling of the September 6th primary. It is tentatively rescheduled for October 4th, with early voting scheduled for September 20th through September 27th. The open election would then be held on November 4th, the same date at the presidential election, with early voting held October 21st through October 27th. If a runoff is needed, it would be held the first Saturday in December.
The candidates are chugging ahead, with the three Republicans, Dr. John Fleming, Chris Gorman and Jeff Thompson, each attempting to establish their credentials as more conservative than the others.
Polling for the Republican Primary indicates that Dr. John Fleming is in the lead. A poll conducted by the Kitchens Group for Paul Carmouche in June showed Fleming with 27%, Gorman at 20% and Thompson 14%. The latest poll conducted at the end of July by Southern Media and Opinion Research for Fleming shows Fleming with 43%, Gorman with 17% and Thompson with 15%.
Two independents are in the race, Gerard Bowen, Jr. (whom I support) and Chester T. Kelley.

Carmouche Looms Large
On the Democratic side, four contenders are active: Paul Carmouche, John Milkovich, Willie Banks, Jr., and Artis Cash. It is being generally presupposed that Carmouche will win the nomination, and I wouldn't disagree with that. Nor would I disagree with the poll which he commissioned which shows that in the general election, he would defeat any of the three Republicans with leads ranging from 13% to 19%.
The Republicans will have a hard time painting Carmouche with liberal colors. I'm sure they will attempt to do so, as this is the usual modus operandi. In this case, it just won't work. He is well known, having served as DA in Caddo Parish for 30 years, and is generally well thought of.
None of the Republican candidates have any experience in public office, and none have the name recognition that Carmouche enjoys. The fourth district is a conservative district, not a Republican district. I suspect that most voters believe that Paul Carmouche has more truly conservative instincts and leanings than any of his Democratic or Republican opponents. Carmouche will not be controlled by the National Party and its leaders. I am not sure that the same could be said for the Republican candidates.
The race belongs to Carmouche at this point.

Thursday, September 4, 2008