To: Austan Goolsbee

Would you have time to fix the “too big to fail” situation?

This truly is a worthwhile government intervention.

My suggestion would be to tweak the anti-trust laws from monopolies to oligopolies. The intent of the law is the same. Canada has 5 major national banks. The competition keeps them honest both for the “big deals” and fighting on every street corner for retail business. I don’t know how scaling up works but maybe 15 would be a good number for America. There is the issue of, how big do you have to be, for international statue. This issue really bugs Canadian bankers but they were spared the 2008 melt down.

For me, anti-trust has had a checkered record. The Standard Oil, AT&T, Alcoa, and railroad breakups seemed to fight up stream, against a current that wants to consolidate. Bigness does produce problems but we didn’t get the competitive market place we were looking for either. The battles against IBM and Microsoft seemed so right but ended in futility. Ultimately, the market place took care of them.

Two things I learned at community college.
Accounting 101 – Assets are valued at the lesser of book value or fair market value.
The Obama administration never took Accounting 101 when dealing with the housing crisis.

Electronics 102 – My instructor said “Those who can – do. Those who can’t – teach.”
What can you possibly teach - “How I screwed up in my time at government.”?
I know you were against the right wing agenda. It’s truly surprising how many believe in less tax and less government. No one advocates my desire for smart government at reasonable cost. The case for government was hurt by Geithner’s excesses in giving away money to the banks like Goldman Sachs yet failing citizens whose homes were underwater especially if they could have paid a market value mortgage. This example of bad government gives government a bad name. I believe you, like Obama, were well intentioned but didn’t seem to know how to operate the levers of power and failed to make a difference.

The press has made you out to be a real wimp - afraid to lose tenure. What’s wrong with joining the 9.1% of Americans who are unemployed? What will be sweet revenge for them, will be seeing Obama in the unemployment line-up in late November 2012. They might not understand how bad things could get if the Tea Party prevails but Geithner really did screw things up for Obama. Obama never caught on.

Why don’t you check out Peter Orszag’s head hunter- Pete’s Vice Chairman Global Banking Citi.

The Pope, the Queen and Nelson Mandela

The Pope, the Queen and Nelson Mandela walk into a pub. The pub falls awkwardly silent after four year old Mary cried out how different Mandela looked from the other two. Mandela addressed the patrons. He apologized for being the only one of the three, not to have ceremonial head gear. . . What were you thinking bro?

The Pope, the Queen and Nelson Mandela walk into a bar. Mandela: “I say, that chap Obama tried to use us as the start of a joke, but true to form, he couldn’t finish, just like he said hope and change, close Guantanamo in a year, eliminate waste from government, build an economy on solid foundations, immigration legislation by the end of the first year . . .”

O’bama: “I'm told the last three speakers here have been The Pope, Her Majesty the Queen, and Nelson Mandela, which is either a very high bar or the beginning of a very funny joke.”
There were these Presidential advisors, Geithner, Goolsbee, Jarrett and Sperling
- the beginning of a not so funny joke.

What's Irish and is spread throughout suburban America? Patio furniture.

Speaking of housing.

I wrote you in March 2009 (included in post script) offering an idea to clean up the securitized mortgage fiasco. My plan was to calculate the loss, charge it to the lenders ie banks (who would be bailed out by Tarp – unforeseen by me at the time). The write down reduces the mortgages, giving owners a market valued chance to keep their home, thus saving many deserving families. Geithner’s plan flooded the banks with money and a fool hardy plan to bailout underwater mortgages without reflecting market values. I still remember in February 2009 you said you didn’t want to pre-empt Geithner’s solution which he presented in March 2009. There was no solution – the emperor had no clothes and still doesn’t.

The housing market is a significant part of the economy and influences durable goods purchases. A loss of wealth is felt by home owners because of low market values and contributes to stalling consumer consumption.

Your government’s implementation of Tarp has not addressed the housing market. I also didn’t like the seeming give a way of tax payer money, billions in a cash advance to Goldman Sachs for the CDS, advances which AIG refused to pay and paying out 100 cents to the dollar for the CDS where the recipients were expecting no more than 60 cents to the dollar.

The situation is muddied by your selection of staff members. Wm Daley was on the Board of Fannie Mae. The New York Fed, under Geithner created the belief that housing only goes up. Tom Donilon, National Security Adviser, was at Fannie Mae. Tom Nides, at the State Department, was at Fannie Mae. Jim Johnson was the CEO of Fannie Mae, was on the selection committee for your vice presidential candidate and is currently on the board of Goldman Sachs and head of their compensation committee. Did you say you were opposed to group think?

The victims are people whose homes are under water but needn’t be if mortgages were re-aligned to market values, something Tarp was supposed to do.
Your government has been inducing inflation hoping to re-inflate the housing market to negate the low prices. You don’t care about the cost of food or gas.

Irish seven course dinner. A potatoe and a six pack.

PS
March 8, 2009 Proposal to address the securitized mortgage crisis.

The government consolidates all bundled securitized mortgages, uses a task force of Audit firms to re-value them, then re-distributes the actual mortgages back to eligible holders. The banks will properly show mortgages in their long-term assets instead of current assets when they held the securitized slices (An improper accounting shift to enhance executive bonus's). We will end up with a mortgage market true to capitalism.

Detailed explanation.

Securitized mortgages means mortgages were bundled then tranches of the bundle were sold off. Every mortgage is local so this instrument is invalid.

1)Collect all bundled mortgages.

2)Classify the Mortgages
Within each bundle is a list of mortgages.
All the mortgages must be placed on a master list.
This list must be sub-divided in the following order:
Region/city New England, Rust belt, New York, East coast,
Florida, Nevada etc
Interest rate Standard prime, escalating interest rates including subprime
Current market value divided by mortgage
Mortgagee income to mortgage amount -ability to repay

Within each region you will be able to determine three categories
Low, medium and high risk.

3)Calculate the write down.

4)Collect all holders of bundled mortgages

5)Pro-rate the write down according the portion of the bundled mortgage holding.

6)Classify holders
Banks allowed to issue Mortgages in US and those not allowed.

7)Re-distribute the gathered mortgages to the banks allowed to issue mortgages in the US.
The US government only has jurisdiction over banks allowed to issue mortgages in the US.
The other holders will get no mortgages, it's a risk they took.
If this is too severe offer silent partner relationships with the banks with title.

The redistribution will have to depend on what the data looks like.
Redistribution must be as fair as possible so should be done before a Judge (We want justice).
Ideally regions would be distributed to a regional bank but markets may have to be tranched among several banks to fairly spread the risk

31-May-2011

National Home Prices Hit New Low in 2011 Q1 According to the S&P/Case-Shiller Home Price Indices

Data through March 2011, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.

April 1, 2011

Moveout.org signed up 184,264,272 Americans to petition to move Congress and the President to Guantanamo until the National Debt hits zero. The EPA warned of a drop of 3 degrees in temperature to the climate of the Northeast because of their departure. The Army Corps of Engineers will assess if the Rotunda of the Capitol will have to be reinforced in the absence support from the hot air of politicians. When told of the move to Guantanamo, John Boehner smiled and bought a portable tanning chaise and a surfboard. Officials later informed him, that he wouldn’t be surfboarding but that he would undergo water boarding. At Guantanamo, Obama’s voice can be heard booming – “I told you guys we should have closed down this place.”

President Obama has ended government funding to the Universities who upset his basketball picks. Obama pointed out that, in other countries, their leaders have those teams executed. Fearing that 2012 may be his last year, Obama hopes to win big on wagering his final year of basketball selections.

Included in Donald Trump’s campaign for President are apartment complexes to be built over the White House and Pentagon. Trump claims that the 1600 Pennsylvania Avenue address would draw a premium. He also plans to build two story atrium greenhouses on the Mall and in Central Park, to grow tomatoes, lettuce and cucumbers to feed the locals. He and Vice-Presidential running mate Michael Bloomberg, have “shovel ready” construction projects and will use a snow shovel in their campaign slogan “We’re ready to shovel Obama out.”

The GOP has shelved plans to impeach Obama. Results of focus group studies conclude that the public will blame the GOP for the decline of America because of Joe Biden screw-ups, if Obama’s impeachment succeeded.

The CIA has reported that Russian sleeper agents have infiltrated the senior ranks of the Treasury Department and American Banks. President Medvedev has denied Russian infiltration. He said “The policy of socialism for the too big to fail banks and capitalism for blue collar Americans was a made in America policy.” The CIA alleges that Russian planted policy makers arranged the bailout of AIG and Chrysler and made sure that Tarp funds did not help ordinary Americans whose homes were underwater. It is well known that former President Putin was obsessed with restoring Russia to a world power and schemed for the demise of the US. In a twenty year plan, he plotted for the rise of oil and food prices and lower standard of living for everyday Americans. Phase two involves rising crime rates and engaging Egyptian and Tunisian revolutionaries to use Facebook to start uprisings in the US, such as class revolts reminiscent of the Watts riots.

Russia’s motives are suspicious because Russia has threatened to veto a UN resolution declaring that US politicians are committing crimes against their citizens for failing to provide basic food basket security, failed fiscal responsibility, failed energy policies and failure to address the worthless securitized mortgages on bank books - which caused the 2008 economic crisis.

Scientists are studying the DNA of Congresswoman Gabrielle Griffords, Senator John McCain and Ronald Reagan to understand how they survived gunshots and torture. It is believed that there are competitive genes that help politicians survive the blood sport of politics. They wonder if the sense of personal invincibility trumps the notion of public service. Social scientists raise concern that an invincible class of politicians will crush the elderly, disadvantaged and downtrodden.

Other scientists are studying the popularity of dark skin color among politicians. It is believed dark skin hides whether Obama or Boehner blushed with embarrassment when Bill Gates and Warren Buffet offered to pay for the first year of transition costs if the healthcare bill reduced the cost of medical treatment by 20%. Gates observed that the cost of a visit to the doctor is at least 17% more in the US than anywhere else in the world. Duh. Neither Obama nor Boehner tried to directly reduce the cost of medical treatment. Pundits can’t figure out if these men sense shame for failing to properly define the healthcare problem or rely on skin color to hide the public embarrassment of being caught out.

Legacy

I am an “I told you so” and my track record has been validated (The audacity of denying failure).

I believe, your legacy will be your failure to fix the economic disaster created by G. W. Bush. Your government has set an inflation fire that will burn like the fire in the late seventies and government was helpless to subdue. Geither has stated publicly that “governments have experience in dealing with inflation”. He maliciously omits the late seventies and the term stagflation. I have consistently said the two dangers are deflation and it’s counter-part stagflation. Your government fails to strike the balance.

It is clear that fiscal policy is to game Wall Street and devalue the dollar to generate as much inflation as possible, which diminishes the debt and deficit amounts. Instead of Tarp bailing out the mortgages underwater you are forcing hardship on everyday Americans who are foreclosing. You fudge the inflation for cost of living by removing food and gas from the measure of inflation. Your government truly provides socialism for the too big to failure banks and capitalism to the everyday American.

I feel your snickers as you read this. I am a little guy and resent your arrogance. I feel you are repressing these thoughts as the governments in Egypt and Tunisia. There will be a revolution, 144 character tweets at a time.

I told you so.

Followup to the audacity of denying failure

Dear David Plouffe

I am the author of “The audacity of denying failure.”
I’m encouraged by developments since you read it.
Bill Clinton became involved in fiscal matters.
The Treasury Department posted an email address.
There was a summit with business leaders.

I would appreciate if you went through my thoughts starting at
http://wmbrae.blogspot.com/2009_03_01_archive.html
I started politely, but now I am totally exasperated.

In the spirit of human survival, I appeal to you for a strategic reset.

I think you need good people.
Better vetting is needed to assure that the new arrivals can hit the
ground running. The only one who did well has Hilary Clinton. Obama
is the slowest when it comes to understand managing and getting things
done through people. Adequate attention must be paid on the decisions
for the replacements of Gates, Summers and Rouse. (I think Geithner
or Goolsbee should be replaced.) I think you need a Chief Operating
Officer for day to day business– Hilary Clinton or Nancy Pelosi.

I think you need a government soul.
My heroes are Jimmy Carter, Bill Clinton, Hilary Clinton, Eliot
Spitzer, Howard Dean, James Carville, Al Gore. Two of these are not
publicly digestible and two have a weakness for women. Obama has
distanced himself from the ideals of these people.
I like them because they care about main street, and they have scars
for their efforts. Young people and Latinos don’t know about them.
They are not a good political base but they make me feel good. I am
old (63).
I feel that Obama is just the high school girl who is the most popular
and doesn’t want to extend himself if it risks losing popularity.

I think you need to address the economy.
G.W. Bush scared people with the threat of terrorism. People are
genuinely concerned about the economy. Geithner and Bernake don’t
care about the value of the dollar. They treat it as if it was pixels
on a computer screen. In the 70’s my grocery bill increased each week
by $10. I wondered how it would all end. Geithner and Bernake are
taking us there. Geithner has jeopardized the value of houses. It
will soon be common knowledge that Government economic policy is
measured by a rising Dow Jones Index. The reality is that main street
has been deeply burned by the shams on Wall street. There is so
little financial security and such stupidity in the political process
when dealing with the economy.

The audacity of denying failure

Geithner has been a total failure.
The whole purpose of Tarp was to mitigate losses for the banks when forced to value the bundled mortgages sold in the $7.6 trillion market for Residential Mortgage Backed Securities. The Congressional Oversight Committee says that the entire banking system is at risk because this issue has not been dealt with.

Geithner has pressed on the gas pedal (gas = people’s money) with a heavy foot, oblivious of the amount of gas in the tank (the national debt). He has not fixed the engine (securitized mortgages in the banks) so we use more gas than we need to and we risk to have another breakdown. The cars’ owners took out insurance from AIG for engine troubles, and Geithner paid AIG to payoff the insurance policies without an engine change.

On March 8, 2009., I sent you the enclosed suggestion, I felt it was better than Geithner's plan. It turns out that step 1 was easy because all mortgages are filed with one clearing house bank. Tarp would be very convenient to mitigate the assessed losses.

It is my considered opinion that Michael Bloomberg or Mitt Romney would do a better job than you. I know that if you feel you cannot make a difference, you wouldn’t stay for the sake of staying ( a la G.W. Bush). I hope you realize that you are very close to the tipping point.
You don’t show any will to throw counter-punches.
You play the blame game, a sure sign of a loser.
You play the victim card, typical of blacks, inherited the economy and other guys don’t want to play.
You have let power go to your head
Your office forced Agriculture Secretary Tom Vilsack to fire Shirley Sherrod. A total abuse of power and display of cowardice not to own up to it.
You invite NBA players to play basketball on your birthday because of the power of your Office.
You appoint the chair of the failed Economic Recovery Advisory Board as chair of Council of Economic Advisers.
You are in an isolated bubble of group think, the very thing you said you would not do.
You promised hope and change. I think the greatest tipping point, for you to pack it in, is that you did not deliver on hope. There is less hopefulness now than when you began. You really shouldn’t have promised this.

With respect to change, I willing acknowledge the Healthcare change. I don’t concede much on financial reform. Emnual left it up to Geithner to get Congress to set up an emergency reserve fund. True to form, Geithner failed. Geithner did not listen to Volcker on tightening bank investment methods, so Volcker used his influence on Congress, to pass the Volcker rule. Volcker has no public office, Geithner is the Secretary of the Treasury and has full support of the President of the United States. You don’t understand the importance of gravitas. Maybe I should tell you, Geithner has no gravitas.

I don’t feel you have done anything for unemployed Americans in the past 4 weeks. Shame on you.
You are hapless and appear hopeless.

I told you so.

PS

You promised Guantanamo would be closed in one year, it wasn’t and we will be approaching two years.
You promised to cut waste in Government, you haven’t.
You promised to introduce immigration reform by your first year in office, you didn’t.
A failure in justice is providing KSM a fair trial. I don’t understand news reports suggesting that the White House is deciding the forum for KSM’s trial. The mere suggesting of meddling and delay is justice denied.

PPS

March 8, 2009 Proposal to address the securitized mortgage crisis.

The government consolidates all bundled securitized mortgages, uses a
task force of Audit firms to re-value them, then re-distributes the
actual mortgages back to eligible holders.
The banks will properly show mortgages in their long-term assets
instead of current assets when they held the securitized slices (An
improper accounting shift to enhance executive bonus's).
We will end up with a mortgage market true to capitalism.

Detailed explanation.

Securitized mortgages means mortgages were bundled then tranches of
the bundle were sold off. Every mortgage is local so this instrument
is invalid.

1)Collect all bundled mortgages.

2)Classify the Mortgages
Within each bundle is a list of mortgages.
All the mortgages must be placed on a master list.
This list must be sub-divided in the following order:
Region/city New England, Rust belt, New York, East coast,
Florida, Nevada etc
Interest rate Standard prime, escalating interest rates including subprime
Current market value divided by mortgage
Mortgagee income to mortgage amount -ability to repay

Within each region you will be able to determine three categories
Low, medium and high risk.

3)Calculate the write down.

4)Collect all holders of bundled mortgages

5)Pro-rate the write down according the portion of the bundled mortgage holding.

6)Classify holders
Banks allowed to issue Mortgages in US and those not allowed.

7)Re-distribute the gathered mortgages to the banks allowed to issue
mortgages in the US.
The US government only has jurisdiction over banks allowed to issue
mortgages in
the US. The other holders will get no mortgages, it's a risk they
took. If this is too severe offer silent partner relationships with
the banks with title.

The redistribution will have to depend on what the data looks like.
Redistribution must be as fair as possible so should be done before a
Judge (We want justice). Ideally regions would be distributed to a
regional bank but markets may have to be tranched among several banks
to fairly spread the risk

Last Person Standing

The Executive Branch acts as if it is above the law. I think it's wrong for Executive Branch participate in Congressional elections. Political activity by the Executive Branch should deal directly with the Executive Branch re-election. The same reasoning makes me question why the Executive Branch criticizes the Judicial Branch on it's decisions.The Executive branch should focus on the problems facing the nation, such as the Economy.

Now that we can see there is only one person left standing after a flurry of house cleaning, we know who is responsible - Valerie Jarrett.

Who else could kick out Summers, Axelrod, Gibbs et al?

Who else would appoint Austan Goolsbee?

Who would be so racially thin skinned to force Agriculture Secretary Tom Vilsack to fire Shirley Sherrod and never own up to it?

Who else would be against bringing Hilary Clinton into the White House?

Who else has an impaired provincial view to avoid problems such as securitized mortgages and too big to fail.

Please reconsider how the Cost of Living Allowance is calculated. Christina Romer understood my concern, Valerie Jarrett doesn't. At the 30,000 foot level, inflation is measured as a trend indicator, it is rising or falling. The indicator must be consistent. For the sake of consistency temporary fluctuations have to be dampened out. The items which create temporary swings are food and gas prices. The harm comes because food and gas are important for living. I have written often that the President doesn't know the price of a gallon of milk or loaf of bread. This varies by geographic region. Life on the ground shows the price of bread has quadrupled and the price of milk has tripled in the past 3 years but there is no inflation. Who is out of touch ... Valerie Jarrett.

I am nothing but an I told you so.

The problem du jour is faulty foreclosure procedures at the banks. February 2, 2010, I wrote "Geithner has pressed on the gas pedal (gas = people's money) with a heavy foot, oblivious of the amount of gas in the tank (the national debt). He has not fixed the engine (securitized mortgages in the banks) so we use more gas than we need to and we risk to have another breakdown." I got it right, Jarett still can't see it coming.