President Frankenstein

Christmas is just days away. It’s a time for relaxing with family, enjoying some time away from work, and focusing on what’s positive in our lives. There’s no better time of year to look for the good inside any and everyone.

I’ve purposely avoided writing about the presidential race so far, preferring to let it settle a bit. Candidates come and go, rise and fall. It takes some time to get to know them and see them for who and what they really are. I think I’ve watched enough debates, read enough news articles, and listened to enough opinions, both “expert” and layman, to have a pretty good feel for those politicians still standing as we approach the first major milestone in the race, the January 3 Iowa Caucus. As usual, I’m not crazy about any of them. They are politicians after all. Each and every one of them has some flaws, both personal and issue-related, that I don’t like. But as I said, it’s Christmas time. A time to focus on the positive, not the negative. So with that in mind, I give you my own light-hearted look at the perfect candidate – a combination of the best qualities in each of the men and women vying for your vote.

Barack Obama – Always cool, always well spoken and calm under pressure. If words always equaled action, this guy wouldn’t still be under 50% approval ratings. As it stands of course, actions speak a lot louder than words. You’ve got to give him bonus points for knocking off Bin Laden though. I only wish he’d get us out of that God-forsaken land now that the deed is done.

Mitt Romney – Sure, he follows a religion only slightly less kooky than Scientology and he’s done so much political flip-flopping no one is sure what he really stands for, but when was the last time we had a legitimate presidential candidate that looked so… presidential? The height, the hair, the teeth, the physique. At least the man looks the part.

Ron Paul – OK, he’s 76 years old and doesn’t support the banking regulations I believe are one of this country’s biggest needs, but for anyone that wants a straight talking leader that’s serious about reducing our debt, reducing the size of our government, increasing personal liberties, and stopping the massive flow of American money into foreign lands, Ron is your guy.

Newt Gingrich – Yes, Newt is only a half-step up the personal integrity ladder from John Edwards, but there’s something to be said for experience and Newt has more of it than any other person in the race. We’re all aware of how little gets accomplished when Congress and the President are on opposite sides of an issue. If anyone can work through the labyrinth that is Congressional leverage, it’s Newt.

Rick Perry – This year’s version of George W. Like our former president, he’s a hard-headed Texan with more balls than sense, but there’s something to be said for a man that stakes his ground and sticks to his guns. You might not like what he stands for, but at least he doesn’t pretend he’s something he’s not.

Michele Bachmann – She and her husband apparently believe you can pray your way out of being gay and she tends to leave a disconcerting Sarah Palin-like aftertaste, but she’s anti-big government and wants to cut both taxes and spending so she can’t be all bad.

Rick Santorum – Virtually unknown outside his home state of Pennsylvania, where he lost his last Senate race by 17%, Rick hasn’t really improved his chances with lackluster debate performances. Nevertheless, he’s a staunch conservative with a strong anti-abortion record so if that’s your hot button issue, you might want to get to know more about him.

John Huntsman – Like Romney, Huntsman is a Mormon and considered too liberal by many of the more conservative members of the Republican party. He’s well spoken, has a solid record of reducing taxes during his one term as the governor of Utah, and has valuable foreign policy experience thanks to his term as ambassador to China under Obama before leaving that position to run against him in the current election.

Gary Johnson – Gary who? I know, many of you probably haven’t heard much if anything about this former governor of New Mexico, but he’s officially running for the Republican nomination and like Ron Paul, is really a Libertarian in disguise. He did an excellent job of cutting spending during his two terms as governor and advocated legalization of marijuana as an alternate approach to fighting the Mexican drug cartels. Due to his lack of national recognition and what appears to be a disorganized campaign, he’s only appeared alongside his fellow candidates in two of the debates so far. It is widely believed he will announce his departure from the Republican race in a scheduled December 28 press conference and run instead as a Libertarian candidate.

So there you have it, something nice about every one of our potential presidents. Sadly, we can’t combine those aspects into one candidate, but hopefully whoever does get elected will do more for 99% of us than what we’ve seen from our current president in the past three years. That would make for a Merry Christmas indeed.

His Name is Mudd

In 2010, testifying before the Financial Crisis Inquiry Commission, former Fannie Mae CEO Daniel Mudd stated "I accept responsibility for everything that happened on my watch." He was held accountable today when the SEC filed suit against him along with former Freddie Mac CEO Richard Syron and six other former top executives at the two mortgage companies for civil fraud.

The son of former TV news anchor Roger Mudd, and a Marine decorated for his combat service in Beirut, Mudd ran Fannie Mae from 2005 to 2008 during the height of the US mortgage crisis.

Mudd is accused of substantially understating Fannie’s investments in subprime mortgages, falsely inflating the value of their portfolio and therefore misleading investors. Fannie and Freddie have already cost taxpayers over $150 million in bailouts and estimates suggest that amount may more than double before the companies are again solvent. In 2007, Fannie claimed that subprime mortgages represented less than “2% of our book” and that the firm had "basically no subprime exposure" however the SEC claims Fannie had 11% of its investments in subprime mortgages for a total of $43B.

In response to the suit, Mudd stated “The government reviewed and approved the company’s disclosures during my tenure, and through the present. Now it appears that the government has negotiated a deal to hold the government, and government-appointed executives who have signed the same disclosures since my departure, blameless -- so that it can sue individuals it fired years ago.”

He has a point. No matter how much his deeds may mirror his name, it is highly unlikely that those that came after him or the members of our government that supported Fannie are blameless. Fannie and Freddie were created by Congress in order to encourage homeownership and make getting a home loan easier. Home ownership means spending money and spending money stimulates our economy. It is probable that misleading Wall Street about the nature of Fannie and Freddie’s portfolio risk was deemed the lesser evil when faced with the choice of admitting the industry’s fragile state and then losing investor confidence. In the end, of course, that fragility came to light anyway and the subsequent losses were that much worse.

For those of us that don’t run the country’s most powerful banks or hold positions of governmental authority, lying about portfolios in order to falsely gain investment dollars is typically punished with lengthy prison sentences and personal financial ruin. As an example, three days ago, Rick Young was sentenced to 25 years in prison and ordered to pay $13.2M in restitution to the investors in his fraudulent securities brokerage, Global One Group. Compared to the Wall Street titans behind Bank of America, Citigroup, AIG, Countrywide, Goldman Sachs, and others, the scope of Young’s crime was minor. While filing civil suit against men like Daniel Mudd is a good first step toward punishing those that were the culprits behind the TARP debacle, it is only a small one. These men need to face the same prison time and fines that any financial conman would, regardless of their political connections or impressive resumes. Hopefully Mudd is just one of many that will wind up before a judge in the next year or two and if our leaders are serious about preventing such crimes in the future, those men will face more than just a loss of reputation and a portion of the ill-gotten wealth they stole from the public. They'll find themselves behind bars. Only then will justice truly be done.

The Face of Justice

With all the corruption, political gamesmanship, and greed in our country today, it’s easy to believe there’s no longer such a thing as justice within the ranks of our government. I often find myself thinking this way, but recently learned of a judge that offers some hope. His name is Jed Rakoff and he’s a U.S. District Judge in the Southern District of New York.

Rakoff was nominated to the bench in 1995 by President Clinton and soon started making a name for himself as an outspoken judge that wasn’t afraid to take an unpopular stand when he felt it was right. Presiding over several large cases, a few of note include:

In 2004 he weighed in favor of the Associated Press in their suit against the U.S. Department of Defense for access to the names of and charges against the inmates at Guantanamo Bay under the Freedom of Information Act. The U.S. tried to argue that it was in the prisoners’ best interests if their identities remained a secret.

In 2009, Rakoff rejected a $33M settlement between Bank of America and the Security and Exchange Commission concerning BOA’s non-disclosed hand-out of billions of dollars in bonuses to Merrill Lynch bankers in the midst of their merger just before claiming the $27.6B annual loss that wound up leading BOA to accepting their share of the TARP bailout that I wrote about in my past posts The Bonus Culture and Wall Street Fraud. Rakoff forced them to a new trial in 2010 where he ultimately approved a $150M settlement for the case but did so only reluctantly, calling it "half-baked justice at best."

Just last month, Rakoff was the judge that handed down a $92.2M penalty to Raj Rajaratnam for insider trading. You might remember this hedge fund thief from my past post, Who is the “1%”?

And finally, Rakoff just rejected a $285M settlement between Citigroup and the SEC last week concerning betting against mortgage investments while at the same time, selling them to their investors, profiting $160M while their investors lost millions. He’s set a new trial date for July 2012 for that one. He said a settlement might undermine investors’ efforts to reclaim their losses since it allowed Citigroup to avoid admitting any liability.

As part of that decision, Rakoff stated "In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances."

That is the sort of opinion we need more of from our justice department.

After discovering Judge Rakoff, it didn’t take me long to wonder if he might not be a strong candidate for our next opening on the Supreme Court. Alas, Rakoff has taken at least one unpopular stand that I cannot agree with and that at least for me, would preclude his consideration for a spot on our highest court. In 2002, he declared the death penalty to be unconstitutional. His decision was reversed shortly thereafter by the Court of Appeals but it suggests perhaps his current spot in NY is in fact, the best one for him. I can only hope he continues in that position for years to come, doing his part to bring some measure of justice to those on Wall Street that would rob others in order to line their own pockets.

Occupy the Debate

With Herman Cain’s announcement Saturday, we’re now down to seven Republicans vying for the opportunity to challenge Barack Obama for our top office. As much as this crop of presidential candidates seems to prefer attacking our current president’s record, attacking one another’s records, or talking about issues such as not raising taxes or repealing the health care bill, none of those things is going to turn our country around. At best, a focus on those issues will maintain the status quo. So what sort of questions should we be asking these politicians in order to determine if any of them have any real solutions or if any would be a more capable Commander in Chief than the one we have now? If I controlled the next debate, my questions would look something like this.

1. The U.S. unemployment rate has not been below 5% since 2008. What steps would you take as president to reach that benchmark in your first term and specifically how would you boost employment in the manufacturing and customer service segments that have steadily migrated offshore in the past decade?
2. Congress is currently debating several bills which would provide a tax break to American corporations that repatriate profits in the hopes it will encourage job creation here in the United States. Studies have shown that the last time this was attempted in 2004, corporations simply pocketed the profits and no rise in domestic job creation was realized. Do you support any of these bills and if so, which one and why do you think its provisions will drive a different result?
3. The American deficit has now reached $15 trillion. As president, would you support a balanced budget amendment and what specific steps would you recommend for reducing government spending and by what amount or percentage? For instance, would you cut Social Security, Medicare, or Medicaid?
4. Banks judged “too big to fail” nearly destroyed our economy between 2008 and 2009, resulting in a taxpayer funded bail-out of “troubled assets” totaling over $300B. HR 1489, the Return to Prudent Banking Act of 2011, is aimed at preventing such a catastrophe from reoccurring by reviving the separation between commercial and investment banks that was first introduced by the Glass-Steagall Act in 1933. As president, would you support this act and if not, why not?
5. Despite the current economic crisis, the U.S. is spending hundreds of billions of dollars supporting Middle Eastern countries such as Iraq, Pakistan, and Afghanistan.  As president, would you dramatically reduce these spending levels and if so, by how much? If not, can you explain to the American public why their taxes are better spent on foreign citizens rather than our own?
6. The most optimistic forecasts suggest the world’s oil reserves will be depleted within the next 50 years. As president, what will you do specifically to develop alternative fuel sources for our country’s transportation and energy needs?
7. In the past 20 years, American middle class incomes have remained stagnant while the cost of a college education has risen by 130%. As president, how would you turn this trend around?
8. The flow of illegal drugs from our southern border has reached epidemic proportions and brought increased violence with it. As president, what measures would you take to stem this tide? Specifically, would you consider stationing troops along the border, building a fence across the entire border, or legalizing marijuana?