The Return of the Mack

Wow! What a great Thursday! It started with me shorting China in my personal account and making some dough. It’s not often that you can make money, feel like a patriot and know that your grandfather is smiling down on you from heaven.

And then Barack Obama got on TV and showed everyone he could be the craziest motherfucker in the room! In a stunning announcement, Obama stated that his wishy-washy attempts at financial reform are now officially going medieval. Good-bye advisers like ex-Wall Street crook Larry Summers. Hello Paul Volker!

This is your father’s father’s banker. The son of stern Protestants, Volker clocks in at 6’7 and is 82 years old. He is of an era when banks were actually in the business of lending money to real businesses. And he has tons of old school street cred. Volker hung with the Rockefellers, whipped inflation in the 70s, and called bullshit on the entire era of financial deregulation that began with Reagan. Now he has apparently won a power struggle with the compromised midget ex-banker crowd that had been advising Obama, like Robert Rubin, Summers, etc.

This is stunning news! Obama basically blew up Goldman Sachs’ business model. And the market freaked OUT. Down down over 200 points.

It is as if Obama went ballistic after Massachusetts. “You want populism? Fine! I’m burning down the prop desk at Goldman and every other investment bank! Let's see how Republicans try to position themselves now,” Obama seemed to say.

Below is an article from the WSJ regarding the return of Paul Volker. The Mack is back! And I love it.

At least for the day, the most powerful man in the U.S. financial industry and for equities markets is 82 years old, a man who ended his leadership of the Federal Reserve more than 20 years ago.

But Paul Volcker is back. Big time. Reportedly on the margins of the Obama administration even in his current role as an adviser, “the tall guy behind me,” in the words Thursday of President Barack Obama, is back on stage figuratively and literally.

As the president announced two major initiatives that would radically change the world of America’s big banks, he was flanked by Treasury Secretary Timothy Geithner and adviser Larry Summers. He also had with him two key Congressional leaders, Rep. Barney Frank (D., Mass.) and Sen. Christopher Dodd (D., Conn.).

But importantly, the president had Mr. Volcker, and he had another regulatory veteran who’s been a straight shooter unbound by ideological restraints or misplaced party fealty.

That’s William Donaldson, former head of the Securities and Exchange Commission. President Obama thanked both Mr. Volcker and Mr. Donaldson for their counsel, which, given the nature of the Obama proposals, was “old school” in more senses than simply a reference to the vast combined financial experience of both men. Agree with it or not, the “Volcker Rule,” enunciated by the president Thursday—which would keep a bank from having anything to do with investment vehicles such as hedge or private equity funds— certainly signals Mr. Volcker’s return.

It is a fascinating resurrection. Mr. Volcker himself hasn’t changed his thinking. What has changed is the environment. The heavy, popular furor as big bank profits and big bonuses are rolled out likely played a role in the new Obama plan. That plan includes flat-out limits on bank size and restrictions on industry consolidation.

Just last month Mr. Volcker was pushing the essence of what’s now the “Volcker Rule” to a group of European bankers gathered at a Wall Street Journal conference in Horsham, England. I wrote then that he sounded like a disappointed and tough school master as he dismissed the bankers’ ideas for regulatory reform as “inadequate.” Now, he’s given them a test.

That was only 12 months ago?

From "Yes we can!" to "Actually, we prefer you don't," the Obama administration finds itself on the receiving end of voters wanting change....again. The President has had a very rough first year trying unsuccessfully to get a health care bill passed, create jobs and deliver on his original message of change in Washington. And yet here we are 12 months later with no health care reform (perhaps ever), unemployment still at 10 % (really about 20%), funds and banks making money at a clip not seen since 2007 via taxpayer-provided leverage (remember how this turns out?) and the US still bogged down in two middle eastern wars. Meanwhile, China continues to gain on us and our finances both as citizens and public entities suffer.

Yeah, 12 months is short order to fix two decades worth of excess. But that doesn't change the fact that for many it actually feels we are going BACKWARDS in addressing our country's problems. I am also aware that Scott Brown's victory is just one event and things can change. But the first 12 months have confirmed some of my darkest thoughts about politics in this country. They can be roughly summed up as such:

1) Republicans are often wrong, but they are very cunning. Their message for small government is appreciated by a populace who distrusts elites, has a very short memory and is generally frightened by change. This provides wonderful cover for short term thinking, self interest and greed.

2) Democrats have wonderful ideals, but they can not deliver. Instead, their tendency to overthink and forget who their audience is usually prevents them from successfully delivering on their policy prescriptions. To paraphrase Jimmy Cliff, "the smarter they come, the harder they fall."

I'll admit these are not exactly original thoughts, but this AM they seem more like depressing facts than opinions.

Oh and 3) Yes, it is feeling like a bit like Rome in the latter years. It's not just you.

Breaking Bad in Methland

Whenever anyone tries to conjure up a “real” American or that emptiest of all signifiers, the “American people,” invariably we are supposed to picture a small town somewhere far from the coast. Sarah Palin tells us that the real America is found in the small towns, and at least she says it out loud. The mythology of small town inhabitants is that they are more selfless, ethical, hard-working, rational and honest. I learned at an early age travelling year after year that the heartland hamlets were riddled with racism, suspicion, poverty, obesity, and drugs. I never met anyone in any of those places that seemed more ethical or honest than most of the folks around me, and hell, we lived a mere 15 miles from the pinko sin capital of the world, San Francisco.

In Methland, Nick Reding examines the great myth of America’s small towns in his compelling but flawed account of the proliferation of meth in Oelwein, Iowa, a 6,000-resident farming village that is his representative drug-saturated Midwest spot nearly destroyed by speed. He focuses on several individuals and is at his best when tracking the arcs of their lives as they wrestle with how meth devastates the lives of so many in Oelwein. We meet a family doctor, a lawyer, the mayor, some dealers (including Tom Arnold’s sister, Lori, who twice becomes a Midwest meth kingpin) and couple of addicts, one of whom blows up his house and burns up most of his body. Reding delivers nuanced accounts of these people, and it is these sections that pack the most emotional power. You come to understand why selling and using speed is an attractive option as you watch the farm and meat-packing industries collapse and factory wages crumble as near-monopolies start hiring illegal immigrants at slave wages. Do you want to work at the same job you’ve had for ten years when your wages have been cut from 18 to 6 dollars an hour, or do you want to build a makeshift lab in your garage, sell some meth and make your monthly nut in just a few sales? Reding makes the conditions of these folks’ lives painful enough that the turn to drug-using and dealing makes, well, good, down-home sense. Sadly, meth is such an insidious drug that the euphoria one first experiences doesn’t last long, and while the energy it provides keeps folks working like good little Protestant drones, over time the body literally begins to waste away. The devastation that follows is heartbreaking, and Reding illustrates the suffering in all its poignancy.

Methland has larger ambitions, however, and Reding’s attempt to tie together DEA policy with FDA policy with the failures of anti-trust efforts with Mexican drug gangs with farm policy with, well, things do get disjointed. He produces interesting insights along the way, as we see how compromises in drug policy allow ephedrine to remain in Sudafed, which allows meth dealers to scour the countryside Walmarts, buying up cold medicine so they can extract the goods necessary to make the bad stuff. What he fails to do, however, is to pull it all together into a coherent narrative. The book lacks that seamless weave, and several chapters, such as a brief history of his father, appear seemingly out of nowhere. Perhaps a better editor could have brought the various strands together into a more cohesive package, as the lack of continuity and the stand-alone chapters diminish any suspense he might have built as we move through the four years of his coverage. The individual accounts are moving and he offers some explanations for how meth came to spread as fast as it did. I just wish he would have organized it differently and spent more time shaping it to maximize the story’s impact.

"God's Work"

I know I sound like a broken record, but I urge you to follow the financial industry regulation deliberations. At their core, they're about an industry's ability to act in ways deeply harmful to the public. This is about power. Who has it, and are there ever checks on that power?

Importantly, this country's financial woes are in large part a result of people like the guys on the left. Wall Street is populated by too many people who take as a matter of faith that they are free to pursue their own self interest without considering the downside to the wider public or their shareholders. Don't think about tomorrow, don't consider that you could be wrong and don't let anyone ever limit your ability to make more money. They are doing, in this guy's words "God's work."

To understand the stakes, consider the plight of our economy and the cost of the bailouts and stimulus packages caused by this type of reckless myopic mindset. The world's economy nearly collapsed. To prevent it, your children are going to be paying debt we racked up to save our economies.

Now there is news that bonuses on Wall Street are back at record levels. The markets have soared because so much public money has gone to banks who lent to speculators. Meanwhile, small/mid size businesses who do 85% of the hiring in this country creating real products and delivering real services can't get credit to finance operations. And consumers, who are paying for all of this, can't get home loans or car loans.

I keep coming back to the Matt Taibbi article in Rolling Stone. It raises key frightening questions...who does government work for? Do we live in a democracy? Is accountability something that only the little people need to worry about?

And I know that right now, another manufactured bubble is being created somewhere. And when it blows up, our kids will pay for that, too. Unless something changes.

Good Writing about Good Music

OK, so I’m seventeen years late to the party, but man, the Oxford American is one hell of a magazine. The guy at Issues pushed it on me and for once I bit, and I haven’t put the thing down or stopped listening to the double cd since. Apparently, four times a year this thing comes out and focuses on a different aspect of southern art. This time it’s soul music, and aside from a few clunkers (out of over fifty songs), the thing has me punishing the keyboard in soulseek searching for that Betty Lloyd album or that Henry Flynt material. The magazine includes essay-length pieces on each artist, and here is the shocking part: the writing is strong throughout. Hip lingo is nowhere to be found, and writers (or editors) have full command of the language. They also have a wonderfully loose definition of soul, as rockabilly, blues, gospel, country, folk and even rock artists make the cut. This will sit neatly on that end table in the music room for awhile, getting far more couch time than any of those old Mojos.

GP and the World Spins

For three days I couldn’t put down the Gram Parsons bio, Twenty Thousand Roads, and now I can’t keep my hands from yanking country sounds from the stacks, beginning with GP’s two solo albums (my faves) through Sweetheart of the Rodeo, the International Submarine Band and the Flying Burrito Brothers. Even watched that documentary, Fallen Angel, again, just to put some names with faces. I then felt compelled to wade through the piles to see how much country I actually had tucked away between all those punk sides. Let’s see, way too much Kristofferson, a couple from Willie Nelson, fifteen Charlie Rich records, five George Jones slabs, three from Porter Wagoner (get on The Bottom of the Bottle, lush), three more from Dwight Yoakam (underrated, man, these records hold up), some Johnny Paycheck, a couple of Johnny Cash records next to The Carpenters, a Waylon Jennings comp, several from Merle Haggard, one Charlie Louvin (have they reissued Satan is Real on vinyl lately?), some John Prine, several Hank collections, one Jimmy Rodgers, Bob Wills, and a bunch more I’m sure I’m forgetting as I sit here at lunch marveling at my poor judgment in food choices. I resisted Gram Parsons forever, but the solo records finally gelled and now I look at yesterday’s ears with contempt. If his whole shtick (Nudie suits, Keef love, band whore, etc.) turned you off, give GP or Grievous Angel another listen. The music emotes without telegraphing every feeling through roller coaster voice theatrics. Apparently, you can deliver genuine emotion without looking like you have to take a crap.

I’ve lost my faith in the National Book Award, but this year’s winner deserves a prize that hasn’t lost all credibility. Let the Great World Spin by Colum McCann is a modern novel that takes seriously the social world as context for individual lives, and his backdrop is New York when that French tightrope walker pulled his miracle between the Towers. McCann goes polyphonic, introducing and then revisiting a host of characters as they struggle to find meaning and love on or around the day heads turned skyward. Streetwalkers and their Irish patron saint-monk, rich cokehead artistes and their return to the past, moms who make tea and try to share the pain of losing sons to Vietnam, California computer hackers and an incipient Silicon Valley, and taggers and the origins of urban art collide in quiet and explosive ways, with that blip of a figure dancing above and reminding us how that remarkable act of creation would bookend a generation later with the creative act of destruction that would help destroy a decade. The novel does the big canvas and still touches the heart, which may not be as extraordinary as prancing across a wire in the clouds, but it’s worth an appreciative nod and maybe fourteen bucks.

Get A Real Job!

As I sat reading the upteenth article on the US credit crisis, a thought occurred to me. Is the real cause of this crisis a lack of decent jobs in the US? In other words, did Americans start borrowing so much because 1) their jobs stopped paying them wages which could support middle class lifestyles? And 2) those companies that provide the things which constitute middle class life (homes, cars, clothes, vacations) recognize this and responded by protecting their revenues and margins by simply extending a ton of credit to their poorer customers?

We now know Wall Street enabled this by packaging debt and selling it to pension funds, sovereign wealth funds and hedge funds. Investors were told that models had backed up the soundness of securitized debt. In hindsight, this claim was gibberish.

Thus, the US economy was an unsustainable and destined to blow up from too much debt, too much speculation, but most importantly too few real jobs.

I realize this isn't such an original thought. However, it doesn't seem policy makers, business leaders or the press have asked themselves, how we move forward with an economy that provides decent paying job? Instead the focus just seems to be about shoring up balance sheets and wondering what sort of forward growth rate is realistic in the "new normal."

I'm pretty sure a robust recovery will require a new industries like clean tech. But it will also require a workforce that is educated enough to finally be able to hold these post industrial jobs. For the past 20 years, many of these new jobs have gone to folks who originated from outside the US. Nothing wrong with that. There was a need for workers that couldn't be met with our own workforce, as it is.

But going forward, I think we might be able to avoid things like credit crises and the possibility of losing our status of being the world's super power, if we invest in our own people and provided incentives for real job growth and new industries. Certainly, 30 years of outsourcing jobs to low cost areas, propping up consumers with free money and letting Wall Street become the path to riches hasn't proven sustainable.