Market Turmoil

First let’s agree that the acquisition of Merrill Lynch by Bank of America was a horrible move by one or the other. If Merrill doesn’t understand its exposure, then BoA now has an open exposure. Otherwise, why would they go running into the arms of BofA at such a turbulent point? It doesn’t bode particularly well for the industry either, when you have a maniac whacko at the top of BofA.

While President Bush sought to reassure investors that the market would recover, why would anyone believe that he has any understanding of what the market dynamics are at this point? Ben Bernanke clearly has misread the state of the economy from the outset of his stint as the Fed chairman, and he was the President’s best choice. The only person who seems to have made any sense of this at all is Secretary Paulson, who made it clear to Wall Street that the taxpayers cannot be expected to underwrite every company that would otherwise fail. But he has made no claims about understanding when and where the market will turn around. Good for him.

All of this having been said, clearly the president had to say something, and what he said was the least offensive. Had he real credibility he perhaps could have had more of an impact on prices, but that day is long past (if it ever was).

What Of Sarah Palin?

Up until today I haven’t said anything of Senator John McCain’s choice of a running mate. I have very little knowledge of Governor Sarah Palin. The press has gone into some detail about the fact that she was a beauty queen and that her 17 year old daughter is pregnant. I don’t think it is necessary to drag family into this race, when there apparently is plenty bad to say about the candidate herself. But before I go there, we should recognize at least some of the good. Getting to be governor of a state is no small achievement. Alaska is the largest state in the Union, and if you were to cut it in two, then Texas would be the third largest state.

Distance represents a serious problem for the people of Alaska, as they are isolated from the mainland of the United States and from each other. The average cost of education is well over $25,000 per student because of distance issues. These costs are offset by the revenue-sharing arrangement that Alaska has with oil companies. Governor Palin has been lauded by at least one editorial writer for putting some distance between her and the oil companies.

What’s more, she has a big fat target to run against. As I’ve written previously, I don’t think much of Senator Joseph Biden, although I do believe that he offers a humility worthy of the job, something that I suspect the governor doesn’t have, if for no other reason that she has fewer scars.

Because Alaska is so isolated its needs are unique and quite disparate from any other state. Its budget is easier to balance due to oil, and the population density perhaps the lowest in the nation. Hence, leading this state does not qualify one easily for the presidency, which is the quality one looks for in a vice president.

In addition, her questionable ethics and streak of vindictiveness, as reported by the New York Times, leaves me cold with memories of the still current administration, and President Bush, himself. We need leaders with unquestionable ethics.

By the way, here is a quick geography quiz: what are the northern most, eastern most, western most, and southern most states in the United States?

Answers in a future blog entry.

Doh Biden

Several weeks ago I wrote that Barack Obama’s choice for vice president compares with that of Spiro Agnew, and that he is a great pick if you like mediocrity, with a very undistinguished career in the Senate. The New York Times has picked up on some of Senator Biden’s less inspiring moments on the campaign trail. And now we can compare him to Dan Quayle. One wonders if Biden knows how to spell potato.

California Prison Guards Misfire

According to the Associated Press, California prison guards now want to recall Governor Arnold Schwarzenegger using the same procedure that removed the previous governor, Gray Davis. What great wrong has Arnold Schwarzenegger committed that he should deserve such an ignominious end? He didn’t give them special treatment, when he cut pay while the budget dispute there drags on.

The job of a prison guard is a miserable one, there can be no question. Some of the people who take the job aren’t far from the people their guarding in mentality. But their unions have been a huge force in California politics, with strong mobilization efforts.

By handing themselves to him on a silver platter, the unions have provided the governor exactly what he needs right now: a big target that people can dislike more than him. Not only will they succeed in their recall efforts, but by failing they will be politically neutered with their loss, making it possible for anyone to get elected without them. Now those are handcuffs worth throwing off.

Tax & Spend Administration?

Last night Secretary Paulson announced that the U.S. would seize control of Fanny & Freddy Mae, the two largest loan corporations in America. Those two are so large that they could not fail, and yet there was the distinct possibility. And so the government stepped in. The terms of the seizure are not yet clear, but it’s sure to cost tax payers a bundle, although it will surely be less than if the loan system failed.

The administration probably did the responsible thing at this point in the game, by acting to see that chaos didn’t prevail in the loan market. However, all of their protestations of keeping government small should be taken with a very very very small grain of salt, given that this administration will have spent more money and placed America in more debt than the previous two administrations combined (and perhaps the 2nd Reagan administration). Also, stricter regulation of the loan market would have prevented such silliness in the first place, proving that some regulation actually saves us money.

So when Republicans say they’re for smaller government, be sure to ask who’s paying the bill for Fanny and Freddy.