December 18, 2008

Could It Be ….. Recovery? If So, Hurry Up Already

Filed under: Economy,Taxes & Government — Tom @ 12:29 pm

I’m starting to like this 78-day presidential transition period more and more. That’s because in another 30 days or so, the economy might (emphasis might) generate sufficiently convincing evidence that it’s fixing itself.

Of course it’s way too early to tell now, but there are some positive signs below the press’s non-stop topside gloom and doom:

  • The Fed’s interest rate reduction, which will be its last (unless banks want to pay us to borrow money), has brought about mortgage rate reductions. That has in turn led to what looks to be a flock of refi applications. At a minimum, most of these will lower monthly payments and free up monthly cash flow. Many others will be cash-out refis where the cash received at settlement will be used to make major puchases or pay down other debt. The idea that there has been some kind of “freeze” on credit to worthy borrowers has struck me as absurd for the three months. The reported activity proves just how absurd.
  • Gas prices have of course plummeted even beyond what I last noted, generating a stimulus, if you will, of available money to the tune of roughly $140 or so a month per vehicle driven 1,500 or more miles a month. Gas for a 25 mpg vehicle driven that far costs under $100 a month at $1.60 a gallon, vs. $240 a month at $4. That’s effectively an annual increase in after-tax pay of over $1,600 or so per year.
  • Prices are otherwise under control, or declining just a bit; in fact, you could argue that the Fed’s cut earlier this week overdid it. Uncle Sam’s Consumer Price Index drop of 1.7% masked the ex-food and energy, which came in at a big fat zero. I don’t think that the CPI picked up the full extent of the energy price decline, which means we could see another flat to negative number in December.
  • All of this plays out in Uncle Sam’s Real Earnings Report, which tells us that “Real average weekly earnings rose by 2.3 percent from October to November after seasonal adjustment, according to preliminary data released (Tuesday). This gain stemmed from a 0.4 percent increase in average hourly earnings and a 2.1 percent decrease in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). A 0.3 percent decrease in average weekly hours partially offset these positive influences.” 2.3% is a historically big one-month number.
  • This is a less-negative instead of a positive news story, but Christmas shopping season news may end up not being as bad as originally thought (which probably explains why you haven’t heard it) — “America’s Research Group said it now expects retail sales to drop by 2.8 percent, compared with its earlier expectation of a decline of 3.5 percent.” Talk about unintended consequences — You’ll see at the link that the store lefties love to hate is benefiting from this, and to an extraordinary extent. The anecdotal evidence I heard and have seen is that the malls are very, very crowded; the extent of open wallets may of course be another matter.

Other things to look for in the coming few weeks that would bode well:

  • ISM’s Indices — with November’s Manufacturing at 36.2% and Non Manufacturing at 37.3%, you would think they’re as low as they can go. Good news, such as it is, would be that they somehow recover to above 42% or so — which ISM paradoxically sees as contracting (50% or above means expansion) but nevertheless not recessionary.
  • An upside (really less downside) surprise in the jobs lost figures when they are released on January 9.
  • The Department of Labor’s January 9 revision to its total population estimates from the Census Bureau. If it shows, as I suspect it will, a slowdown in the growth of the adult population, it will indicate that the reported unemployment rate, though it is never officially revised, might have been overstated for much of the year. If this happens, I think it will be because the Bureau gets surprised by the reduced level of net immigration. Again if this happens and if it’s big enough to matter, it has the potential to be a psychological boost.

All of this is important because if the POR (Pelosi-Obama-Reid) economy is shown to be recovering in spite of the Terrible Triumvirate’s attempts to talk it down and/or wreck it in the name of electoral success, the air will or should go out of the idea that a massive, $850 billion New Deal redo is necessary. The New Deal’s public works spending spree didn’t work to lift the economy. Japan’s similar efforts in the 1990s kept that country in stagnation for over a decade. There’s no good reason to expect that an ObamaDeal will work.

Obama has already signaled that he’s going to leave tax rates alone for the time being. I don’t seem him going back on that until a recovery is firmly established.

They’re in a big hurry to pass their spending spree, with Pelosi and Reid promising to have it ready for signature within two weeks of Obama’s inauguration — which is why I’m relieved that he has to wait until January 21 to get in.

In the meantime, “Go Economy Go.”

Now if we can just stop the GM-Chrysler bailout, or force the binding admissions detailed here on P-O-R, the Big Three’s CEOs, and the UAW. …..

NYT Runs Interference for Obama on Rick Warren Inauguration Invocation Selection

Barack Obama has selected Rick Warren to deliver the invocation at the president-elect’s inauguration.

Based on yesterday’s New York Times story about this and other inauguration decisions, you would think that complaints about Warren’s selection represent a mere tempest in a teapot. The Times devoted all of one sentence (bolded) to the controversy:

Barack Obama has selected the Rev. Rick Warren, the evangelical pastor and author of “The Purpose Driven Life,” to deliver the invocation at his inauguration, a role that positions Mr. Warren to succeed Billy Graham as the nation’s pre-eminent minister and reflects the generational changes in the evangelical Christian movement.

….. The choice of Mr. Warren, pastor of a megachurch in Orange County, Calif., is an olive branch to conservative Christian evangelicals. Mr. Warren is an outspoken opponent of abortion and same-sex marriage — litmus-test issues for Christian conservatives. In fact, his selection set off a round of criticism by gay rights groups angered by his support for California’s ban on same-sex marriages.

But Mr. Warren has also been one of the most prominent evangelical leaders calling for Christians to expand their agenda and confront global problems like poverty, AIDS, climate change and genocide in Darfur.

Mr. Warren flaunted his clout this year when he managed to draw both John McCain and Barack Obama to his Saddleback Church for a forum in which he interviewed them on stage about faith issues. He has sometimes angered the older generation of conservative evangelical leaders aligned with the Republican Party, as when he invited Mr. Obama to speak about AIDS at an earlier event at his church.

The Times, in essence, seems to be telling readers who despise Warren to chill.

Many are not in the mood, as Ben Smith and Nia-Malika Henderson at Politico duly noted yesterday, while they were sure to include a quote that ripped into our current president (bolds are mine):

….. (Warren’s) support for the California constitutional amendment to ban same-sex marriage that drew the most heated criticism from Democrats Wednesday.

“Your invitation to Reverend Rick Warren to deliver the invocation at your inauguration is a genuine blow to LGBT Americans,” the president of Human Rights Campaign, Joe Solomonese, wrote Obama Wednesday. “[W]e feel a deep level of disrespect when one of architects and promoters of an anti-gay agenda is given the prominence and the pulpit of your historic nomination.”

The rapid, angry reaction from a range of gay activists comes as the gay rights movement looks for an opportunity to flex its political muscle. Last summer gay groups complained, but were rebuffed by Obama, when an “ex-gay” singer led Obama’s rallies in South Carolina. And many were shocked last month when voters approved the California ban.

….. The editor of the Washington Blade, Kevin Naff, called the choice “Obama’s first big mistake.”

“His presence on the inauguration stand is a slap in the faces of the millions of GLBT voters who so enthusiastically supported him,” Naff wrote, referring to gay, lesbian, bisexual and transgendered people. “This tone-deafness to our concerns must not be tolerated. We have just endured eight years of endless assaults on our dignity and equality from a president beholden to bigoted conservative Christians. The election was supposed to have ended that era. It appears otherwise.”

John Hawkins at Right Wing News has a roundup of some of the very harsh criticisms coming from the leftosphere.

During the Clinton Era, the Times’s excuse-making for Clinton’s failures to advance the far-left’s environmental, trade-restricting, and gay-rights agendas were legion, and were somewhat successful in muting opponents’ objections. Whether the current financially weakened and credibility-challenged Times can consistently do the same for Obama in the era of blogs, Twitter, and the raging nutroots is a very open question.

Another very obvious item the Times “somehow” missed is Barack Obama’s answer to Rick Warren’s question at the “flaunted” Saddleback presidential interview. Warren asked, in a discussion of abortion and life, when a baby’s human rights begin. Obama, as you can see in this video, hemmed and hawed before finally saying that it’s “above my pay grade.” It may or may not prove effective, but the Times is clearly going to do its best to cover for its man as long as it can.

Cross-posted at

RIP …..

Filed under: General — Tom @ 9:00 am

Paul Weyrich.

Update, 3:30 p.m.: Brent Bozell at NewsBusters has written a brief tribute.

Madoff Upate: If It Sounds Too Good to Be True …..

Well, my speculation that irregularities involving Bernard Madoff go back only a few years was incorrect. It was a guess borne of overconfidence in securities industry oversight — not regulations, which as written are more than adequate, but oversight, which is carrying out the regs.

A Wall Street Journal editorial today notes that:

Since at least 1992, when the SEC sued two accountants peddling Madoff investments while promising sky-high returns, the commission missed opportunities to dig deeper into his operations. In 1999, trader Harry Markopolos wrote that “Madoff Securities is the world’s largest Ponzi Scheme,” in a letter to the SEC. More recently, multiple SEC inquiries and exams in 2005 and 2007 found only minor infractions.

A front-page WSJ article today (subscriber-only unless you include the search engine portion of the URL) goes over what Markopolos did to try to reverse-engineer Madoff’s performance (he and others he consulted couldn’t). In 2001, Madoff supposedly had $12 billion in assets; how much of that was fictitious is apparently unknown. When he was arrested last week, the estimate was up to $50 billion. It’s clear that mostly federal but also state regulators (paging New York’s Eliot Spitzer, whose main interests were ruining others and certain extracurricular activities) should have paid more attention to Markopolos and others, and, even if people such as Markopolos weren’t raising red flags, better exercising the oversight work they have been charged to do.

(Side analogy: People should have paid more attention to mostly-GOP senators and congressmen who were warning about debacles at Fannie Mae and Freddie Mac — also clear failures of oversight — that dwarf what Madoff did.)

The Journal’s editorial notes that the SEC’s budget has tripled since 1999, but it would appear that its effectiveness hasn’t.

Madoff’s “accounting firm” (which is really “one guy“)? I wrote on Monday that if the vast majority of the losses aren’t very recent, “the CPA firm (Friehling & Horowitz) could actually be off the hook. Otherwise, they’re in fatally serious trouble.”

It’s even worse than that, as the firm, i.e., Friehling, has told the American Institute of CPAs for 15 years that it, i.e., he, doesn’t perform audits.

The next line of defense is professional peer review by another CPA firm. But if you don’t do audits, you don’t have to enroll; or if you’re enrolled, as F&H was, you don’t have to be reviewed if you don’t do audits, as this technical language-laced January 2008 guidance from the AICPA states:

(Question) Does My Firm Have to Enroll in a Peer Review Program if the only engagements it performs are Compilations issued with Engagement Letters and without a Report as detailed in SSARSNo. 8? (i.e., not reports that express an opinion on financial statements — Ed.)

(Answer) Under the AICPA bylaws, firms (or individuals in certain situations) are only required to enroll in an Institute-approved practice monitoring program when the engagements they perform are within the scope of the AICPA’s practice-monitoring standards and issue reports purporting to be in accordance with AICPA professional standards.

….. For firms already enrolled (and that stay enrolled) in the AICPA Peer Review Program, these engagements currently would fall within the scope of peer review and would require a firm to undergo a peer review.

So in theory, the AICPA could have forced F&H to go through peer review. But because of the accounting standards compliance workload involved and liability exposure, probably thousands of firms who are in the program who used to do audits or other “attest engagements” don’t do them any more. So how are you going to catch someone who says they aren’t doing audits when they (supposedly) are (or are at least putting their names on audit opinions)?

New York’s legislature has just passed a law making peer review mandatory for CPA firms doing business in the state (if you’re looking for a regulatory failure, that’s it; guess who was Attorney General and seen as a great regulator for most of the past 10 years, and “somehow” didn’t get around to this?). But there isn’t a peer review procedure for “prove that you don’t do audits” when someone says they don’t, and it could be that even under New York’s new law that another F&H could still opt out with the same excuse it used on the AICPA.

That leads back to the SEC, the regulators who presumably got the audit reports but didn’t exercise adequate oversight, even when warned for years by Markopolos and others. It also leads back to other investment firms who used Madoff, very few of whom appear to have asked of F&H, “Who are these guys?”

The Journal editorial’s conclusion, while valid, is quite a bit less than satisfying:

There’s a lesson here for investors and Congress. Instead of shoveling more money and power to the regulators who already had plenty of both, let’s take care not to overregulate the people who actually warned about Mr. Madoff’s miracle returns. Law enforcement is useful in punishing wrongdoers after the fact, which will deter some crooks. But expecting the SEC to prevent a determined and crafty con man from separating investors from their money is no more sensible than putting your life savings with a Bernard Madoff.

Their point is that the supposed security provided by regulators is not an excuse to avoid doing your own due diligence and listening to warning signs, including this one: If it sounds to good to be true, it almost definitely is. But regulators who didn’t exercise the oversight expected of them shouldn’t be getting off the hook.


UPDATE: You can’t play the “affinity warning” enough, and this Robert Cass column in today’s WSJ goes there quite well, with another “the regulators won’t save you” caution –

The Madoff tale is striking in part because it is like stealing from family. Yet frauds that prey on people who share bonds of religion or ethnicity, who travel in the same circles, are quite common.

….. In each case, the perpetrator relied on the fact that being from the same community provided a reason to trust the sales pitch, to believe it was plausible that someone from the same background would give you a deal that, if offered by someone without such ties, would sound too good to be true.

….. Predictably, the Madoff story has prompted speculation about potential new regulations that might be imposed to head off future problems. Politicians and pundits have called for the adoption of new rules for securities markets in general and hedge funds in particular, even though Mr. Madoff didn’t run a hedge fund and there is no shortage of existing securities rules that were violated by his reported conduct. (Keeping two sets of books suggests his own recognition of that.)

Latest Pajamas Media Column (‘The Right Way to Bail Out the Auto Industry’) Is Up

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 6:09 am

It’s here.

It will go up at BizzyBlog on Saturday morning (link won’t work until then) after the blackout expires.

The subheadline: “Let Detroit get its money — but only after Democrats, the Big Three, and the UAW admit their failures.”

One of the required admissions of POR Economy architects Nancy Pelosi, Barack Obama, and Harry Reid is that their energy-starvation and tax-hiking advocacy, combined with their decades-in-the-making housing and mortgage-lending industry crackups, both of which can be laid at their party’s feet, “have caused sales at the Big Three automakers, which had already been falling at double-digit rates on a year-over-year basis (12% to 22% in May), to decline calamitously (30% to 47% in November), gravely damaging the companies’ already difficult positions and leading two of them to the brink of bankruptcy.”

I’m sure the column will be popular in Washington and Detroit (/sarc).

Things I’d Like to Post About Today ….. (121808, Morning)

Filed under: TILTpatBIDHAT — Tom @ 6:04 am

….. But I Don’t Have Any Time For:

  • Helen Jones-Kelly has resigned (HT Maggie Thurber) as head of Ohio’s Department of Job and Family Services. She had been due to return to work shortly after her one-month suspension for her against-policy and likely illegal authorization of computer database checks into Joe the Plumber in October during the presidential election campaign. That’s one down, and at least the three others mentioned in this previous post (including but not limited to Doug Thompson, Fred Williams, and Carri Brown) to go. They all should have been fired on the spot when the related Ohio Inspector General’s report was released. Update, 8:30 a.m.Allah at Hot Air noted that Thompson has been fired, and that Williams has resigned effective January 31. My cynical side says that they all have great but less visible futures ahead of them at the Democratic National Committee.
  • From the “Even a Stopped Clock Is Right Twice a Day” Dept. — Jennifer Rubin at Pajamas Media has a radio show transcript of Al Sharpton coming out against the totally misnamed Employee Free Choice Act, which would end the secret ballot in most union authorization elections. Previous posts opposing this betrayal of FDR’s legacy are here, here, and here.
  • The Barack Obama Punk Presidential counter went back to zero Tuesday when he told a Chicago Tribune reporter not to “waste” his question when the reporter asked about the Blagojevich situation. That’s more polite Punk for “Don’t you dare question me.” Can you imagine how much grief George W. Bush would be getting from the media if he had said that?
  • Time’s totally predictable Person/Punk of the Year issue had a really ignorant sentence in its “Fond Farewell” to Charlton Heston — “Offscreen, Heston was a figure of epic contradictions. In the ’60s he marched with Martin Luther King; in the ’90s he headed the National Rifle Association.” There’s nothing contradictory about that. Though King didn’t own a gun during the 1960s, he did own one until early 1956 (see final paragraphs at the link). His reasons not to involved his role “as one of the leaders of a nonviolent movement” and in no way represented a repudiation of basic self-defense for everyday people.
  • I think Time’s biggest omission in its Person/Punk of the Year lists — he’s not in the “Runners-up” or even the “People Who Mattered” — is General David Petraeus. Al Qaeda wasn’t considered defeated in Baghdad until early July. The Associated Press didn’t acknowledge that U.S. and Iraq forces were “winning the war” until late July. This isn’t supposed to be “People of the Last Three Months.”