Archive for January 2008

Spitzer in Wonderland, Part II – By George J. Marlin

January 27, 2008

Let’s review America’s financial and economic mayhem:

  1. Financial institutions have written off $150 billion in losses and some analysts claim there could be up to $350 billion more.
  2. Year-to-Date market returns have been dismal.  The Dow is down 7.79 percent, S&P -9.38 percent, Nasdaq -14.19 percent.
  3. The Index of Leading Economic Indicators which was -0.2% in December and has declined in 4 of the last 6 readings indicates the U.S. is in a recession.
  4. The Empire State Manufacturing Index fell to 9.03 in January, from 9.80 in December. New orders tumbled 13 points to 0.04, after a 10 point decline in December. Business expectations measured by the future conditions index, were very negative, falling 15 points to 19.44.
  5. The CEO Business Confidence Survey fell to 39%, its lowest point since 2000.
  6. The Unemployment Rate has risen to 5%.
  7. Unadjusted Initial Jobless Claims increased to 547,637, the highest since 2002.
  8. The Consumer Price Index (CPI) showed consumer prices rose at an annual rate of 4.1% in December.
  9. The Producer Price Index (PPI) in December showed producer prices were 6.3% higher than the previous year.
  10. December Retail Sales (ex autos) fell 0.4%.
  11. Real Disposable Personal Income decreased in November and December -0.3% and -0.2% respectively.
  12. The S&P/Case-Shiller Home Price Index posted its 10th consecutive month of negative returns. The leading measure of home prices indicates the worst broad-based declines in home values since 1991.
  13. The National Association of Realtors reported 2007 home sales declined by 13%, and a 10-month supply of homes are currently on the market.
  14. Foreclosure rates (1.69% of mortgages) are at record levels according to the Mortgage Bankers Association. 5.6% of borrowers are 20 days past due, 1.26% are 90 days past due and 1.3% of Prime borrowers are past due.

In the wake of all this economic doom and gloom, what does Governor Spitzer do? He calls for a 5.1 percent spending increase (double the inflation index), $1.7 billion in new fees and taxes, risky one-shot revenues, record spending on education, covering 400 thousand additional children with health insurance, increasing the state work force and giving salary raises to state legislatures.

Spitzer truly lives in his own wonderland. After his presentation he even denied his budget calls for tax increases. He is a spoiled rich kid who believes he can will things.

If Governor Spitzer does not wake up to the fiscal realities and cut spending and taxes, he will be responsible for a severely damaged, if not crippled, state economy. Remember, in the recession of 1990-1991 over 20 percent of the jobs lost nationally were lost in New York. And if history repeats itself, expect people to vote with feet and scores of New York towns, villages and hamlets to turn into municipal deserts.

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On the Death Penalty – By George J. Marlin

January 20, 2008

The political tide appears to be running against the death penalty.  The New York Times reported that “for the first time in modern history of the death penalty, 60 percent of all American executions took place in Texas.”  New Jersey abolished the death penalty in December 2007; Connecticut’s Superior Court is contemplating if the death penalty discriminates against minorities; the U.S. Supreme Court is reviewing if the three drug lethal injection execution method is “cruel and unusual punishment.”  And in New York, thanks to Governor Pataki’s wanton approval of flawed death penalty legislation, the Court of Appeals in June 2004 struck down key provisions.  As a result, convicted Wendy’s restaurant mass murderer John Taylor’s death sentence was tossed out by the state’s highest court on October 24, 2007.

Many of those fighting to maintain the death penalty sentence believe they enhance their cause by arguing it is justified because it is a deterrent.  This line of reasoning, however, is flawed – the evidence is inconclusive, contradictory and fundamentally irrelevant. (more…)

Spitzer in Wonderland: The 2008 State of the State Address – By George J. Marlin

January 13, 2008

New York State is on the edge of an economic abyss.  Citibank, which will write-off about $18 billion, has announced it will lay off over 30,000 employees – most of whom work in New York.  Merrill Lynch, anticipating losses to top $15 billion, is turning to China and the Middle East to raise the capital needed to survive.  In 2007, over 40,000 people in the securities industry were fired, bonus payouts were significantly reduced and more of the same is expected in 2008.

With twenty percent of the state’s tax revenues coming from Wall Street-related enterprises one would think this spells big trouble for New York.  But these economic woes did not appear to faze Governor Spitzer when he delivered his State of the State Address last week.

Instead of announcing “the days of wine and roses” are over; instead of declaring a fiscal state of emergency; instead of calling for across the board spending cuts and a hiring freeze; Spitzer proposed increases in state spending. (more…)

Governor Spitzer and Mayor Bloomberg: New Year Observations – By George J. Marlin

January 6, 2008

1)  Is Governor Spitzer the kiss of death?  He certainly appears to be. 

Take the stalled Clinton presidential juggernaut.  Hillary was riding high in the polls and was the inevitable nominee until Spitzer unveiled his misguided plan to give drivers licenses to undocumented immigrants.  Mrs. Clinton’s campaign imploded after she delivered her Kerryesque “I was for it until I was against it” comments on the Spitzer plan.  Thanks to Spitzer, Clinton placed third in the Iowa caucuses.

Spitzer is also responsible for New York Democratic losses in last fall’s elections.  After twelve years of Governor George Pataki’s insouciant leadership, the GOP’s 2006 gubernatorial standard bearer mustered only 29 percent of the vote and the party was pronounced in extremis.  In 2007, however, Republicans bounced back and chalked up county and town election victories all over the state.  Spitzer’s extreme liberal policies, his arrogance and his inability to admit he is ever wrong, caused the comeback.  Because Spitzer was the issue in local campaigns, frightened members of his party asked him not to hit the campaign trail.  Democrats feared being sighted with the governor would cut short their political careers.

There’s more:  Citibank shareholders have incurred significant losses due to the actions of the Bully of Wall Street.  Attorney General Spitzer’s trashing of Citibank caused the ascendancy of Charles Prince.  A competent compliance lawyer, Prince, however, was not C.E.O. material.  His bad judgment is responsible for over $13 billion in bad loans.  Prince destroyed Citibank as a viable financial institution.  Hundreds of thousands of investors – including scores of senior citizens – who viewed Citibank as a safe investment vehicle have been wiped out.

Another Spitzer target, Marsh & McLennan Companies, has suffered a similar fate.  Since paying $850 million of shakedown money to Attorney General Spitzer, the company’s earnings have been weak.  On December 21, 2007 Marsh & McLennan announced the resignation of its chief executive Michael Cherkasky.  Like Citibank’s Prince, Cherkasky was a compliance specialist who failed at running this colossal insurance broker.

Spitzer was the catalyst for the financial demise of two of New York’s largest employers (Citibank – 337,000 employees, Marsh & McLennan – 55,200 employees).  As a result, tens of thousands of their New York employees may find themselves collecting unemployment insurance.

There’s a reason why Governor Spitzer’s approval rating hit a historic low – Democrats, Republicans, Independents, Conservatives, taxpayers and investors view him as the kiss of death.

2) Mayor Michael Bloomberg has been conned into attending a meeting in Oklahoma of washed-up politicians to discuss “bipartisanship” in the public square.  Participants include:

  • Republican William Brock, former Tennessee U.S. Senator who was thrown out of office by the voters after serving one term.
  • Democrat Chuck Robb, former Virginia U.S. Senator who was ejected from office in 2000.
  • Democrat Gary Hart, former Colorado U.S. Senator whose scandalous behavior destroyed his 1988 presidential ambitions.
  • Republican Christine Whitman, former New Jersey governor who was elected twice with only a plurality and left behind a fiscal mess and severely under-funded state pension and retirement health benefit systems.  An incompetent EPA director, Whitman became a national embarrassment after she said Ground Zero air was safe to breath.

And in a pathetic attempt to prove they are relevant, they have resurrected the cliché that only “bipartisan” policies will cure America’s ills.

This approach will never work because the philosophical foundations of both the left and the right are based on diametrically opposed visions of the nature of man and the role government should play in man’s life.

America’s founding fathers may have intellectually scorned the concept of political parties, but in practice quickly embraced them and the idea of partisan opposition.  No matter what the struggle – Jeffersonians versus Hamiltonians, Jacksonians versus Whigs or North versus South, and no matter what the controversy, immigration restriction, prohibition, civil rights, Vietnam, abortion or drugs – each has been settled by partisan positions.

To get attention, the political has-beens gathering in Oklahoma invited Mayor Bloomberg to be their keynote speaker.  Sadly, Bloomberg fell for their “bipartisan” blather and accepted.

Bloomberg’s appearance will generate plenty of media coverage, but like all “bipartisan” gatherings, its impact will quickly fade as Americans turn their attention to what really concerns them – the battle of partisan ideas in the political arena.