Monthly Archives: August 2012

Look! Shiny!

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Anything to distract attention and to change the subject from the topics at hand.  Democratic Presidential Candidate Barack Obama is so reluctant to talk about his performance with the economy these last three-plus years, to talk about his performance with job creation, to talk about foreign policy, or to propose concrete solutions to these problems that he’s back to dragging this red herring.

He’s had his campaign manager, Jim Messina, resurrect Reid-esque nonsense by sending a letter to Matt Rhoades, of the Romney campaign, asking pretty please for just five years’ worth of Republican Presidential Candidate Mitt Romney’s tax returns, against a legal requirement of two years’ worth of such records.  And if Governor Romney will only do that much, Messina promises that Obama will make no more demands or comments on the matter.  Real decent of him to make such an offer.  And real evasive.

Which Party is the More Worthy?

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One party trusts Americans to make our own decisions, to see to our own prosperity, to honor our own obligations.  This party wants to see a smaller government that is less intrusive into our business’ and our private affairs, wants to reform, and so to preserve the principles underlying, Social Security and Medicare—including privatizing significant portions of them, trusting us to make our own decisions wisely—wants to foster an economic environment that restores our equality of opportunity so that, in the Theodore Roosevelt’s words, each American can “show the best that there is in him.”

The other party says we Americans are not able to make the right decisions; we need government to see to our prosperity for us, to assume responsibility in our place.  This is the party of affirmative action, insisting that some of us must be carefully sheltered and nurtured (and based on the color of our skin and not on the content of our character) because the best that there is in us just isn’t good enough.  This is the party of wealth redistribution because some Americans are inherently incapable of working toward our own, in John Adams’ terms, “safety and happiness;” we cannot make wise decisions on our own accord.  This is the party that says government must take our wealth and redistribute it in particular ways to particular groups of us because the party does not believe we can—or will—honor our own duty to take care of those around us who are less fortunate.

Federal Waste, Climate Change, and Federal Outsourcing

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Fox News ran an article late last week concerning the State Department’s own Office of the Inspector General’s report concerning State’s handling of taxpayer funding of activities in support of the climate change meme—in other countries, yet.  The OIG audit itself can be read here, and the auditors’ list of State programs sampled can be seen here.

What the OIG found in State’s Bureau of Oceans and International Environmental and Scientific Affairs and its Office of Global Change (OES/EGC), “the nerve center of the Obama administration’s international climate change policy,” was…interesting.  The findings, which included aggregate overspending of some $214 million over the period 2006-2010 that was the subject of the OIG audit, included these:

  • 7 of 19 program totaling $34 million in grants had no particular plans for results monitoring.  Thus, as OIG wrote, “…[State] may not always have reasonable assurance that federal funds were spent in accordance with the grant award; that the grant recipient performed program activities as dictated in the grant award; and that the program’s indicators, goals and objectives were achieved.”
  • [G]rant oversight officers failed to provide written reviews of compliance with State Department reporting standards….
  • [V]isits to climate change sites were rare, and then little effort went into actual examination.  [R]eports “typically summarized meetings held with grantee officials where only the statuses of the programs were discussed.”
  • Requirements that grant recipients submit quarterly financial statements seemed routinely to be ignored.  [A] recipient in Hyderabad, India, who got two separate grants totaling $1.1 million continued to receive funding, even though reporting requirements were not followed.
  • Indeed, reporting requirements for detailed results were not included in any of the seven grants examined by OIG.

Regardless of what anyone might think of the idiocy of spending taxpayer money on the chimera of man-caused global warming, here is a potful of that money being shipped overseas for…well, just because, apparently, given the interest in oversight shown here.  At least, had that money been spent at home, there might have been one or two domestic jobs created or saved, instead of those jobs being outsourced.

Why Did the PRC Buy These Businesses?

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The Wall Street Journal‘s Joseph Sternberg ran an op-ed the other day wondering whether the People’s Republic of China might be playing a risky game of “greater fool” in buying up failed or failing companies in the expectation of finding a greater fool to whom to sell these, later.

Mr Sternberg makes some interesting points, and his piece should be read in its entirety.  But I think he may be misreading the PRC on this; I think he’s making the same mistake here that the Obama administration is making about Iran and the usefulness of sanctions: each thinks these others—the PRC and Iran—think like we do.

They do not.  Their pain buttons are not the same as ours, their goals are not the same as ours, and so their motivations cannot possibly be like ours.  Sternberg cites two of the PRC purchases—the car battery maker, A123, and the Canadian oil and gas company, Nexen, for each of which the PRC paid large premiums, as his examples of the potential for the PRC finding itself at the end of the greater fool chain.

These are, indeed, useful examples for Sternberg’s points; consider, though, an alternative set of goals for the PRC’s acquisitions.  The PRC bought a controlling stake in A123 not for the car battery technology, but for the battery technology.  The PRC has, for instance, a burgeoning space program.  They have a desire to expand, generally and massively, into the solar power realm for a variety of reasons, and power storage is critical to both.

The PRC bought a controlling stake in Nexen, not because they think they can manage the company better than the incumbents but for Nexen’s Canadian oil and gas assets.  Recall that the PRC also has a burgeoning physical industry and transportation functionality that need copious quantities of oil.  Also, oil that the PRC controls is oil that the US does not.  Hormuz need not be the only bottleneck in our access to oil.

A Modest Proposal for Financial Law

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Standard Chartered PLC agreed to pay a $340 million “fine” for improper financial transactions amounting to $250 billion, a fine of just a tad over 1% of that total.  Judge Jed Rakoff, of the United States Federal District, refused to sanction a proposed settlement between the SEC and Citigroup Global Markets of a $160 million “fine” for an improperly handled billion dollar CDO fund, arguing in part that there was no basis for a punitive settlement when there was no allegation or admission of a wrongdoing.

It is, in fact, routine for supposedly misbehaving financial entities and their Federal regulators to negotiate such chump change fines, whether or not actual wrongdoing is conceded or alleged.  This disconnect between the sanction and the (phantom) misbehavior generally is not the result of cronyism; all the players are, say I, fundamentally honest.  No, such settlements are driven by the complexity of our financial laws, of which Dodd-Frank is only the latest addition.  The defendant financial institution usually finds it cheaper to pay the government’s vig than to defend itself, even when innocent, and the government usually finds it cheaper to charge only a taste and make no demand for admission of wrongdoing than to prosecute a case.

As a result of this unnecessary complexity, the government simply continues to hector the financial institutions and the financials simply continue to misbehave (my remark about honesty not withstanding) with the settlements just part of the cost of doing business.

Accordingly, a modest proposal.  Get rid of the financial laws and the regulations.  Replace them with a few simple laws (which, in their simplicity will need no implementing regulations) to the effect of honoring freely signed contracts, the products sold having to be openly and clearly described, all parties to the contracts, and their roles, having to be clearly and openly described.  There might be one or two others, but you get the idea.

Then get serious about cases.  If these laws are violated, hale the miscreants into court and go for serious penalties.  No more “negotiating” pocket money payments.  That’s like negotiating with Willie Sutton over his “community service.”  $250 billion in illegal trades ought to get that much as the floor of a fine.  If that puts the misbehaving company out of business, I suggest that a criminal organization won’t be missed.