Friday, September 26, 2008

$20M for 17 days of work

Who wouldn't want to earn over one million dollars PER DAY? That's exactly what Alan H. Fishman, CEO of now seized bank conglomerate Washington Mutual has received for, well, doing nothing.

Fishman was brought in to run Washington Mutual exactly 17 days ago - or 17 days before their seizure by J.P. Morgan-Chase. 17 days ago, on September 8th, he received a hiring bonus of $7.5M - then upon his termination (you know, when the bank collapsed?) he was granted an "immediate" cash severance of $11.6M. Fishman also received a portion of his guaranteed annual bonus which was set at $1M - likely prorated out to the 17 days he actual worked - or almost $50,000. Include the 612,500 shares of stock Mr. Fishman was awarded - free of charge to him - by Washington Mutual on September 10th (per yahoo finance). These shares are likely to rebound, from the current price of $0.16, before all is said and done - and all thanks to the government's intervention we won't have to worry about Alan H. Fishman and his future.

And what happened before these 17 days? Who was CEO then? Well, none other than Kerry K. Killinger - who had been CEO from 2002-until 17 days ago. His compensation between 2002-2007 was $54M - but what about his severance package? Obviously, no one would ever be able to survive on the $54M earned in only 5 years - ah, but not to fret.

Mr. Killinger received a severance package worth $17.1M: a lump sum of $16.5M thanks to a clause in his employment agreement that promises him this lump sum (totaling 3 times his annual compensation) and $5.8M (worth of assets as priced at $13.61 per share) came from immediate vesting of restricted stock he had been awarded since 2002. Mr. Killinger currently owns 315,662 shares in Washington Mutual, and just like Mr. Fishman above, he will only benefit as the stock price rebounds.

I'm sure the government bailing out these corporations has good intentions, but I still can't help but feel like the rich are the only people that will benefit from the bailout. The rest of us will be left holding the bag - never mind that Mr. Fishman and Mr. Killinger combined can pay off approximately 185 - $200,000 mortgages with their severance packages alone. Mr. Fishman with the potential to pay off 100 of those mortgages by himself after only 17 days worth of work.

Suspend Capital Gains Tax to Help in Bailout?

So today I came across some rather shocking news, to say the least. Apparently, John McCain, who can't be bothered with a presidential debate while the economy is in "turmoil" (because we all know we want a president who will not multi-task), spoke up, mentioning a counter-proposal that had been offered up by some conservative House Republicans that would "suspend capital gains tax for two years and provide tax incentives to encourage firms that buy up bad debt," but McCain would not discuss specifics of the plan.

Excuse me? Suspend capital gains tax? For those of you that fail to understand what the capital gains tax is, let me spell this out for you - Warren Buffett (widely regarded as one of the premier investors of the world) bought up $5 BILLION worth of Goldman Sachs earlier this week - well, with the suspension of any kind of capital gains tax, if that Goldman Sachs stock goes up - say to a net of $6 Billion for Mr. Buffett - he could sell all his stock in the firm and earn ONE BILLION DOLLARS - TAX FREE! So basically, anything earned through investments (and keep in mind that, under current conditions, losses in investments can be offset with capital gains as well anyway - essentially, those gambling in the stock market can offset their losses and have the government pay for their losses in the markets, so long as they have capital gains to cover this loss) in the stock market will be FREE of government charge - completely TAX FREE! The absurdity of this concept cannot be understated.

So I'll say it again, excuse me? How is suspending the capital gains tax going to help ANYONE in America that is middle class and losing their homes? So is this yet another case of the rich getting richer? I cannot imagine the rationale behind this concept as incentive to help the economy - you know, all the little people that are struggling to just get by.

And it leads me back, again, to what I feel the absolute best scenario is - suspend taxes for ALL - suspend the taxes on the homes that people are fighting to continue to afford (thanks to the increases in property taxes due to the over-inflation of home values). This way, everyone benefits, not just the corporate fat cats of Wall Street. (see my earlier blog on the subject here:

If the government truly desires to help, they certainly need to do something that will benefit everyone - not just those that created this mess. No sense in letting them continue to lead extravagant lifestyles while the rest of us suffer. Some things just aren't fair - and if the government passes a bill suspending capital gains tax, then we have seriously been let down by our government - doing nothing for the people.

Tuesday, September 23, 2008

Homeland Security

I was watching the news yesterday when I heard about "Operation Virtual Shield" for the first time. For those of you that do not know what this is, it is to be a comprehensive surveillance system spanning Chicago in efforts to "protect against crime and terrorist attacks." These cameras are going to be linked to all cameras of the city - and they will be able to do such things such as being able to identify gun shots, change trajectory to get an image of where the shots came from, and alert 9-1-1.
Of course, the obvious question arises - what about the average individual's privacy? Sure, if you aren't doing anything wrong, then you don't have "any problem." The only issue I have with that argument, however, is prove it. Prove to me that just because I'm walking, going about my business as usual that I won't be harmed. Better yet, why does the government need to know that I'm walking down Madison Avenue? What does it matter to them if I pass Clark Street? Who is to say they aren't watching at all times? Who is to say they are not being voyeuristic with these new cameras?
Then, if that weren't enough, on today there is another article that claims "Homeland Security Detects Terrorist Threats by Reading Your Mind." The article goes on to say that "MALINTENT (which is the name of this new system), the brainchild of the cutting-edge Human Factors division in Homeland Security's directorate for Science and Technology, searches your body for non-verbal cues that predict whether you mean harm to your fellow passengers" (passengers, I'm assuming because this technology is to be used in airports). The article goes on to say that it will possess a series of sensors and imagers that read your body temperature, heart rate, and respiration for unconscious tells that would otherwise be invisible to the naked eye. It claims these "tells" are signals that terrorists and criminals may display prior to their crimes.
My thought on the matter is - what about those that might just have a fast heart rate? Or those that perspire because they are nervous by nature? Or what about those that have grown so paranoid to the Big Brother nature of the United States government that they display all these "symptoms of crime"? Does the government then stop this individual to interrogate him or her only to not deem their answers unacceptable and detain them? Talk about a paranoia dream come true.
And what if, for a minute we go back to Chicago and they initiate this new technology of MALINTENT into Operation Virtual Shield? What if someone is walking a great distance on a hot, humid day - and what if, that individual had just been reading something causing them to act "out of character" (like the fact their every movement is being scrutinized by the government) - will the Virtual Shield camera system focus on this individual who is perspiring with a greater heart rate - and will the police be dispatched to "further question" this individual that just so happens to be going about his daily business?
I really wish I had an answer - I really wish the government were not taking control of everything, but what I wish and what is becoming reality are two drastically different things ... frightening things, actually.

Financial Bailout

SEVEN HUNDRED BILLION DOLLARS - For those that may not quite grasp this - it is $700,000,000,000, and that's a lot of zeros.

So it will take $700B of taxpayers money to "bailout" the institutions that began this entire financial crisis to begin with, and exactly how is this fair?

Here is the rub, you and I are taxpayers - we go to work only to have our income taxes taken out of the wages we earn honestly, we go home to our homes that we are taxed on, and we go buy things with our discretionary income that are accompanied with sales tax. Then, if we get into trouble with our finances, we have to file for bankruptcy (or worse) and no one cares to help the individual. But now, all the taxes we pay is going to help the big business. It's that simple. The problem is our taxes are essentially being used to, yet again, make the rich, richer.
Martin Sullivan, former CEO of American International Group (AIG) resigned from the company in June of this year, after all of the "subprime" loans had already been issued - and what did he receive for his trouble? Nothing short of criminal - a $47 MILLION severance package. Excuse me? Here is one of the men that - at least - helped facilitate the subprime mess - and the ensuing financial collapse and bailout, and he received FORTY-SEVEN MILLION DOLLARS in an exit package to quit the company .... why are we not using his wealth to serve as means to help ease the financial burden proposed to the taxpayers?
October, 2007 - Merrill Lynch posts an eight-billion dollar loss and subsequently, CEO Stan O'Neal decides it is time to resign, himself. For all his efforts, which included the 8 billion dollar quarterly loss (quarterly loss projected out over a full year would have meant a loss of about $32 billion for the firm that year - if all held true) -so for Mr. O'Neal efforts, he was rewarded a 159 MILLION DOLLARS to leave the firm. Again, where is the outrage and why are the feds not looking at Stan O'Neal to help ease the American financial crisis?
Fannie Mae and Freddie Mac, you ask? Well, we all know their part in this debacle, but how about those CEO's that did nothing to quash the crisis at hand? Well, Dan Mudd, CEO of Fannie Mae, received $9.3 million for destroying his company - and Richard Syron, CEO of Freddie Mac, received $14.1 million - because he (deceptively I'm sure) renegotiated a clause to his contract two months prior to the collapse, knowing the company was headed for disaster ... and again, all of this is perfectly LEGAL and often practiced in the firms of Wall Street. Yet again, instead of the feds going after those who initiated and created the mortgage crisis to benefit their personal bottom lines, the taxpayer - who had little choice in the mortgage fiasco and none of the profits - are left holding the bag.

I mentioned in a July post, The Mortgage Crisis - and How to Fix It, that maybe the federal government should subsidize the local municipalities - in essence, eliminating the property tax on the public's private residencies. My plan, however, I figured would not be prudent because of the sheer amount of government spending that would be needed to subsidize such municipalities. However, in light of the proposed 700 BILLION DOLLAR bailout, I no longer think eliminating (or simply suspending - or even just easing the increases) property tax is such an absurd solution.
In my plan, everyone would benefit. Think about it - Joe Neighbor would be able to keep his home - because he could afford the mortgage all along, just not the increase of taxes (and for those that CAN'T afford the mortgage readjustment - that solution is so easy I feel stupid even needing to voice it - DON'T INCREASE IT - the bank will get the interest of the rate agreed upon, and Joe Neighbor still keeps his home). So we have Joe Neighbor benefiting from a "no-property-tax-clause", but so to will the banks - because they won't have an over-abundance of foreclosed upon homes - and they will still receive all the interest from the current homes on the market. Seems like a win-win. Also, the taxpayers will not feel as if they are "bailing out" the financial institutions that began this mess - they'll feel much better knowing their tax money is being used to HELP THEM - you know, the way the government SHOULD help the people - after all, it is a government FOR THE PEOPLE still, right?
$700,000,000,000 could be far reaching if the government used this money where it should go - to help the average person (** see below note). The bailout will do nothing but keep the wealthy, well, wealthy - and create an even bigger divide between rich and poor. Just because the banks are bailed out, that does nothing for Joe Neighbor who has lost everything (home included) due to his increase in interest rate and home property taxes - which all began because big business was greedy and told Joe Neighbor that he could afford a loan that he obviously couldn't. Sure, Joe Neighbor is partially to blame, but so are the financial institutions, and if they are going to be bailed out, then why is our friend Joe Neighbor now homeless and without a job? How is this a viable solution to a horrendous problem?
Even if you have little sympathy for Joe Neighbor, you should have less sympathy for those "smarter than that" that created this issue - the financial institutions that knowingly pushed risky loans (including such a thing as NINJA loans - No Income, No Assets, No Problem - loans). So now, instead of resetting Joe Neighbor's interest to something manageable, they (the financial institutions) have an over abundance of homes on the market and all the money in the bank. Meanwhile, even if you've made all your home payments and taxes payments on time - well, sorry for you because even you have suffered while the rich get richer - because now your home value is worth much, much less than when you purchased it. No worries though, the bank will hold your money (thanks to the government for keeping them so liquid) until you decided to sell, then they'll take your money to make up the shortfall you'll likely have when the time does come for you to sell your home.
Indeed don't worry - the rich have taken their payouts, they have sold their souls, and they have the government backing them in their endeavor - just in time to keep the rich living handsomely. We The People of the United States of America should be outraged - but instead, most are accepting the proposed bailout as the "only way." But if they weren't so greedy to begin with, none of this fiasco would have ever happened, and we'd all be living just fine in a home that is, not only cheaper (thanks to the subprime lending not inflating the value on homes), but that carries less taxes due to its cheaper state - seems the government turned a blind eye to the banks to drive home prices up, thus pushing up the taxes for many homeowners - just in time to turn around and return the favor by scratching the financial institutions backs.
I, for one, am outraged and see a more win-win-win solution if the government truly wants to step in and help, but the problem is, they need their corporate cash, and thus the every day American just trying to manage a living are forced to suffer through life - meanwhile funding the bailout that has paid ex-CEO's MILLIONS to run their company into the ground.
It must be the American dream!

Note: As of July 1, 2007 the Census Bureau estimates the total number of homes in the United States as being 127,901,934 - of which I will round up to 128 million homes. Given this, I will assume each pays taxes to a local municipality - and if the $700 billion were used to subsidize the local municipalities (based on what the municipality would receive from the property tax) then the government could pay $5,500 PER HOME in the U.S. to the local municipalities to help ease the burden on the individual tax payers that are being priced out of their homes due to the absurd nature of the property tax.
So again, if we suspend this tax, it is the best win-win situation - the homeowner (and tax payer) feels justified that their taxes and their government is helping them - and the mortgage loans on the financial institution books will continue to be paid (thanks to the homeowner having more money in their pockets to actually make their mortgage payements). I realize this may be a short term solution, but if you truly think more foreclosures won't follow due to the current proposed bailout, then I believe you to be naive - and no one can truly say if the bailout of the institutions will only turn into a short-term solution as well. But if given a one year suspension on property taxes, more people will find a way to make the mortgage payments and thus spur the economy - and those that have not been affected will have an extra (on average) $5,500 in their pockets to also put back into the economy. I don't see why the individual homeowner is being forgotten by the government during their time of need - only to watch the rich and greedy (likely borderline criminal) benefit from the financial crisis.

Side Note: So Federal Reserve Chairman Ben Bernanke warned today, as he attempted to get this bailout plan passed, saying that lawmakers risk a recession with higher unemployment and increased home foreclosures if they fail to pass the proposed plan.
Well, my question is, how is bailing out the LENDER going to help prevent the BORROWER from foreclosing? Think about that one and please let me know if this logic in any way makes sense because I'll be honest with you, I miss the point on this one. If people are going to foreclose, it doesn't matter if the financial institute has money or not, the end user (the home buyer) won't have any money to pay their mortgage with or without the financial institutions being bailed out.
Granted, it if the institutions fail, there will be increased unemployment (as those people lose their jobs - but there is no guarantee for a loss of their jobs anyway) and there will be an increase (likely) from these individuals foreclosing, but again, it doesn't help the public as a whole. And besides, some of the people within the companies that will benefit from such a bailout, are likely those same individuals that pushed the "subprime" loans - do they really deserve to be bailed out? It seems to me like more political propoganda put on by the government - everything sounds good on paper, but in reality does nothing to help the average American citizen.

Thursday, September 4, 2008

A Candid Moment, or General Politicking?

On the St. Petersburg Times' website today, there is an article in regards to Palin's daughter, Piper - age 7 - licking her hand to smooth down her brother's, Trig's, hair. The article claims:
"During Alaska Gov. Sarah Palin's speech, cameras cut to her 6-year-old daughter flattening Trig's hair, oblivious that America was watching. It was a taste of legitimacy buried in weeks of rehearsed politicking, and we ate it up."

You can view the entire article here:

It shows a youtube clip of this moment where Piper was "oblivious that America was watching" ... did anyone at the St. Petersburg Times stop to wonder A) why there was a camera on Piper to begin with and B) that just maybe this "taste of legitimacy" was merely part of the "rehearsed politicking" put on by a politician to show just how "wonderful" her family is?
Honestly, it seems to me to be politicking at its best. I would hope the only people that seem to think this was a "taste of legitimacy" are the people at the St. Petersburg Times - and hopefully they are the only people that "ate it up."
Shameful really. Although I'm sure the St. Petersburg Times has their reasoning for politicking as well. Everyone has something to gain with this - oh-so-touching - moment, but it seems it does little for the American people. Honestly, if a girl the age of 7 truly was oblivious of the camera sat out before her, does it really change your mind on how you think her mother will represent the American people as Vice President of the United States?
If it does change your opinion about Governor Sarah Palin, then America has a long way to go before they realize a legitimate president again - since seemingly the search criteria most Americans use has nothing to do with how a government official will actually represent the general public, but more to do with how well they can dupe the voters with painfully obvious "candid" moments.