2010 May 27 - Thu
It is only on rare occasions where one can obtain an elegant solution having positive ramifications for
two differing economic sectors simultaneously.
These two guys are offering up an eco-friendly solution for
squeezing oil out of water.
2010 Apr 23 - Fri
Borrowing Money to make Money, Taxpayer Pays the Interest
Eric Fry, in teh Daily Reckoning, provides an interesting insight into the profitability of today's banking sector:
When it converted into a bank holding company back in 2008, Goldman became eligible to borrow
cheap money from the Fed's discount window. Morgan Stanley did the same thing. As a result, Goldman,
Morgan Stanley et al. may borrow billions of dollars from the Federal Reserve and use the
proceeds to purchase higher-yielding government securities of longer duration.
In other words, Goldman may borrow from the government at 0.75%, then loan the money back to the
government at 3% or 4%. All in a day's "trading." Not surprisingly, all the major financial
firms have been reporting blockbuster profits. Yesterday, for example, Morgan Stanley
wowed the Street by nearly doubling its expected earnings result. Bond trading provided most of t
he juice, as Morgan's fixed-income revenue more than doubled from the prior year's first quarter.
Prior to Morgan Stanley's results, Bank of America, JP Morgan Chase and, yes, Goldman Sachs, h
ad all reported record quarterly revenue from fixed-income trading. On the surface,
these monster profits would seem like good news. But this silver cloud contains a very dark
lining: without the Fed's low-cost financing, fixed-income profits will be much harder to come by.
2010 Jan 14 - Thu
Definition of a Banana Republic
In a missive from Contrarian Profits newsletter today, they drew nice intimated
an interesting parallel between a Banana Republic and a certain relatively large,
very well known country. The recipe for a Banana Republic, as described by
Justice Litle, Editorial Director, Taipan Publishing Group.
Wikipedia defines "Banana Republic" as a pejorative term for a country that is
politically unstable, dependent on limited agriculture (e.g. bananas), and
ruled by a small, self-elected, wealthy, and corrupt clique.
- out-of-control printing presses
- currency restrictions and controls
- strangling regulation and red tape
- aggressive nationalization of private assets
- extravagant social programs (bribing the poor)
- deeply corrupt financial structures (bribing the connected)
- crushing pressures on small business (extorting the middle class)
- Combine fervent promises of "hope," "change" and "revolution" in demagogue crockpot. Bring mixture to a slow rolling boil.
- As mixture firms, stir in aggressive spending plans and "revolutionary" public adjustments. Sprinkle liberally with insider connections and oligarchic financial loopholes to maintain smooth consistency. Let simmer for a full election cycle on low-heat propaganda flame.
- Pour filling into flaky self-righteous crust. Top with blatant corruption, repressed scandal and outright nationalization. Bake in fiscal suicide oven until inflation thermometer registers 30%+ and insider cronies are sufficiently enriched.*
*As with a delicate souffle, the middle class must not experience complete collapse during this phase. If this happens, you have inadvertently followed the recipe for a coup.
2009 Sep 15 - Tue
Search Engine Optimization
In my Sept 10 article regarding my experiences with the Elation DS 575E fixture, I used the phrase
'Elation Lighting Design Spot 575E' in many different places.
It took a day or two, but if you search for that phrase, you'll find it with a page rank
of 2, only second to the Elation Lighting web site itself.
Search engine optimization is what they say it is. Embedding a series of keywords in an article
multiple times does indeed help boost an article's popularity in Google's Page Rank. The problem is...
finding the correct search terms.
The whole phrase got me that second spot, but if the words are re-arranged or
some not used, then the ranking drops dramatically. If I had used various combinations,
the Page Rank would probably come out quite different.... maybe lower, but high enough in
a larger number of word search combinations.
2009 Jun 06 - Sat
The American Dream
In a recent issue of
former U.S. Comptroller General David Walker was quoted as saying:
"The American dream is not owning a house; it.s every individual having the opportunity
to achieve their full, God-given ability, and each generation having the responsibility to
leave the country better off and better-positioned than the next so that our children and
grandchildren can have a better way of life than we have."
In light of the trillion dollar budget deficits which Obama's government is attempting to
run up, Walker's warning is one of good reason.
2008 Nov 02 - Sun
The article "Why The Mortgage Crisis Happened" goes into some detail regarding
the political background of the current financial situation originating in the US and
spreading through out the world.
Some might say it was capitalism running rampant. But it looks more like the government
trying to do the socialist thing and trying to get home ownership into the hands of those
who can't/couldn't afford it. Isn't that what credit reports are for? In the words of Scott Francis: "The
Community Reinvestment Act is a freaking joke. Why should a minority have a different set of rules and credit
requirements than someone who has good credit?"
It is interesting that John McCain is painted in a positve light as knowing about the
situation and attempted to do something about it. Obama, on the other hand, is painted in a
bad light as being a perpetrator of the whole situation, and even accepted money to
perpetuate the whole fiasco. And guess who it looks like the US will have as it's next
president? Unless the undecided's all vote for McCain. Which shows my bias. But, perhaps
in some version of the future, the US may field a third political strong enough to bite the
hands of both the consumer and big business and make the decisions necessary to reduce
the size of government, the debt, and everything else. Yeah, right. Too many
According the article, business institutions needed to bury the good with the bad.
However, it seems that the bad started to infect the good in a larger degree than was
thought possible. Then (over-)leverage opened the whole festering wound. Please note that my remark
regarding over-leveraged Wall Street places a good chunk of follow on blame on the rocket scientists who
attempted to help monetize the government's problem. A commenter named Terry writes that the article fails to
"fully examine the role of the conversion of mortgages into mortgage backed securities that were improperly
rated by corrupted rating agencies and then sold into the marketplace. This, in combination with the looming
problem with credit default swaps, is a much more significant pathogen in this disease process. " Terry
indicates that this is an issue of deregulation, something of which the 'conservative commentator' doesn't
Foreclosure Myths: Can the Media Handle the Truth?, the media is suggesting that the crisis was started
through "Americans overwhelmed by circumstances beyond their control, from job losses to health problems to
personal crises like divorce which ultimately cost them their homes." "the foreclosure problems began in
mid-2006 when the nation.s unemployment rate was holding steady at a mere 4.6 percent. What triggered the
crisis were not layoffs but an end of the rise in home prices." "Starting in mid-2006, foreclosures jumped
sharply for both prime and subprime ARMs, but not for fixed-rate mortgages of any kind, including subprime
ones." "ARMs draw a different kind of buyer, one who is often intent on selling or refinancing before rates
re-set." "... buyers ... made speculative loans or were intent on
flipping their homes, and they instead walked away from their mortgages at the first sign of home
depreciation." "... purchases of homes for investment purposes that the buyer didn't intend to live in,
to a whopping 28 percent of all deals, and 22 percent in 2006."
According to the chart
Real Estate Melt
Down, making it easier to obtain sub-prime mortgages lead to an increase housing pricing
relative to the average family income. Speculation as well as the laws of supply and
demand would easily justify such a scenario.
What we end up with is a situation in which the home owners who got in early, have nice
properties to their credit. Those in late couldn't ride the gravy train and got tossed
overboard. This affects/affected builders, mortgage companies, bankers, and ultimately the
general public due to the fact that whole statue of gold was attempting to be supported
through feat of clay.
The stock market suffered as a result. Long term investors have felt this most
tellingly. However, for those who know how to play the
market in both up and down modes, are making huge sums of money through the market
volatility. I've done some manual trades on both sides and have seen some appreciation, but
I wish I was much better at seeing the possibilities.
Anyway, as a summary to the article regarding risk gone bad, in 2003 the government
knew about the issue, but due to partisan interests across the board, was unable to
History teaches that even the best minds in financial management cannot entirely eliminate
risk. This was shown quite clearly by the severe difficulties encountered by Long-Term
Capital Management several years ago. Nor do the GSE shareholders have the incentive to call
for eliminating risk. The perception of a government bailout if things go wrong surely
enhances any firm's willingness to take on risk and enjoy the associated increase in return.
The savings and loan crisis of the 1980s illustrates the adverse incentive effects that can
arise as a result of government guarantees.
A Letter to Senator Obama by Tony Batman, he makes a very enlightening remark:
In other words, whatever you tax, you get less of; whatever you subsidize, you get more of.
The implication of this remark is that we need to somehow remove subsidies and come up with more creative
mechansims for balancing the perceived inequalities in the market place.
Later in the same article, one possible solution is mentioned:
Increased taxes on the so-called 'rich' high income earners - and their businesses will affect the incomes
of those who strive to move up from lower and middle classes to become high income earners!
In follow up to my mention of subsidy elimination a few paragraphs ago, another article mentiones that
We Need Reagan + Friedman + Keynes. In summary, "during periods of crisis, sometimes you have to be a
supply-sider (tax rates), sometimes a monetarist (Fed money supply), and sometimes a Keynesian (federal
deficits).", ie, "Choose the best policies as put forth by the great economic philosophers without being too
Why The Mortgage Crisis Happened
M. Jay Wells
Obama's economic narrative of the mortgage crisis ignores the
facts. He has put free-market capitalism at the root of the current
mortgage industry debacle, denying the real history of government
interference in that market.
On September 15, with banking giant Lehman Brothers filing for
bankruptcy protection, Obama was given the opening to begin weaving
his anti-capitalist storyline. And that he did. Artfully blurring
the mortgage industry crisis with generalized tax policy, Obama
"I certainly don't fault Senator McCain for these problems,
but I do fault the economic philosophy he subscribes to. It's a
philosophy we've had for the last eight years, one that says we
should give more and more to those with the most and hope that
prosperity trickles down to everyone else."
The words were carefully chosen. That day in Colorado
marked his return to the teleprompter and a strictly refocused
campaign message intent on surreptitiously fusing the mortgage
industry woes and free-market capitalism in general. Confident the
American people are primed for his socialist brand of "change,"
Obama maintained his anti-capitalist theme, "What we have seen in
the last few days is nothing less than the final verdict on an
economic philosophy that has completely failed." According to
Obama, capitalism has been "rendered . . . a colossal
His chat with a Toledo, Ohio, plumber showcases his socialist,
"It's not that I want to punish your success. I just want to
make sure that everybody who is behind you, that they've got a
chance for success too. . . . I think when you spread the wealth
around, it's good for everybody."
He had already said as much at an April debate where he said
his plan was to "look at raising the capital gains tax for purposes
of fairness" (after having just admitted that raising the tax would
reduce revenues!). For Obama, increased federal revenue be damned,
tax increases are nonetheless necessary for redistributionist
Contrary to the Obama narrative, however, it is not
free-market capitalism at the root of the current mortgage industry
crisis, but rather the very socialism Obama hawks. The historical
record makes this fact unmistakably clear.
The Growing Government Hand
President Franklin D. Roosevelt initiated a series of "New
Deal" reform programs designed to affect the mortgage market and
homeownership. Fannie Mae, the Federal National Mortgage
Association, was established to facilitate liquidity among lending
As part of President Johnson's Great Society reform plan, much
of Fannie Mae became a private owned yet government chartered
company, a government sponsored enterprise (GSE) providing
authority to issue mortgage-backed securities (MBS). Fannie Mae
buys home mortgages in order to preserve liquidity in the secondary
mortgage market. Though private, it remained backed by the Federal
President Nixon chartered Freddie Mac, the Federal Home Loan
Mortgage Corporation, as a GSE to compete with Fannie Mae. Designed
to help grow the secondary mortgage market, Freddie Mac purchases
mortgages from lending institutions to either be securitized as MBS
and sold in the secondary market or held by Freddie Mac. At this
time the secondary market for conventional mortgages was
Sen. Proxmire (D-Wisconsin) introduced a "creeping socialism"
community reinvestment Senate bill. Opponents argued the bill would
allocate credit without regard for merits of loan applications,
thereby threatening depository institutions. Proponents countered
that it was only to ensure that lenders did not ignore good
borrowing prospects in their communities. The bill's sponsor
stressed it would neither force high-risk lending nor substitute
the views of regulators or those of banks.
President Carter, pressed by grassroots organizations --
though opposed by the banking industry, signed into law the
Community Reinvestment Act (CRA). In the years following the Act
has undergone several revisions.
To boost community development laws, CRA was a provision
designed to stem bank "redlining," the practice of drawing a red
line around low-income communities and denying lending in these
areas. The original intent of CRA was to encourage banks to foster
homeownership opportunities in these underserved communities in
which the lending institutions are chartered.
According to Section 801 of title VIII, "regulated financial
institutions are required by law to demonstrate that their deposit
facilities serve the convenience and needs [i.e., credit and
deposit services] of the communities in which they are chartered to
do business." Accordingly, "regulated financial institutions have
continuing and affirmative obligation" to meet these needs.
Moreover, the title required each "appropriate Federal financial
supervisory agency to use its authority when examining financial
institutions, to encourage such institutions."
With CRA came increased oversight of lending institutions to
ensure they were giving credit to low- and moderate-income
communities. Regulators expressed that CRA was not designed to
compel credit allocation, nor did it require risky lending
practices. Moreover, ECOA (Equal Credit Opportunity Act) and FHA,
not CRA, were in place to address discrimination in lending. But
community organization groups like the radical ACORN began efforts
to reshape CRA into government-imposition, in accord with what
"affirmative obligation" might suggest. They began pressing the
semantic open door and stretching the "discrimination" provision to
complain about enforcement of the regulations as lending
institutions resisted bad lending practices in poor minority
To deal with the savings & loan fallout of the 1980s,
Congress enacted the Financial Institutions Reform Recovery and
Enforcement Act. In a move with ominous portent, FIRREA mandated
public release of lender evaluations and performance ratings,
resulting in added pressure on the banking industry. Such public
oversight enabled bullying abuses of community organization groups
like ACORN to further influence bank lending practices.
With the mechanisms in place, the community organizing groups
began developing directed strategies to exert more and more
pressure on the lending industry in the cloak of complicity with
CRA. Community organizer Barack Obama worked closely with ACORN
activists. Employing the radical Alinsky intimidation tactics Obama
had learned and was teaching -- "direct action" -- activists
crowded bank lobbies, blocked drive-up teller lanes and
demonstrated at the homes of bankers to browbeat risky lending in
poor and minority communities. Those who resisted were accused of
racism to the media and government officials.
The agitators could now stall or hijack bank mergers by filing
complaints of non-compliance against the institutions. Lawsuits
alleging redlining and racism began flooding the court system. With
the prospect of expansions and mergers threatened, banks settled
cases and, significantly, increasingly made loans they would not
have normally made. The net effect, as ACORN litigation increased,
was that credit standards lowered.
Initially the GSEs resisted purchasing these risky mortgages
but eventually the Clinton Administration instructed them to
substantially increase the percentage of these mortgages in their
portfolios. The government-backed Fannie Mae and Freddie Mac of the
Clinton reforms became "a feeding trough," in the phrase of Peter
The poor communities and their exploitive leaders benefited
from the capitalization with a surge of homeownership, at least on
the surface. Wall Street benefited from increased sales of Fannie
Mae and Freddie Mac and guaranteed mortgage-backed securities, as
the housing market benefited from new capital channeled from Fannie
and Freddie. And the GSE heads profited, with political support in
Washington in the form of campaign contributions.
In the period 1989-2008, topping the list of recipients of
contributions from Fannie Mae and Freddie Mac is the chairman of
the Senate Banking Committee, Sen. Dodd (D-Connecticut), who
received $165,400. Second on the list is Sen. Obama (D-Illinois),
receiving $126,349 with only three years in the Senate. Rep. Frank
(D-Massachusetts), received $42,350.
Madeline Talbott, a well-known radical ACORN leader and
banking industry agitator, challenged the merger of a Chicago
thrift, Bell Federal Savings and Loan Association, who responded
that they were being bullied into irresponsible "affirmative-action
ACORN interfered with a House Banking Committee meeting for
two days protesting a move to bring CRA reform.
Enforcement of CRA was "sporadic," as the Washington Times
notes, until a Federal Reserve Bank of Boston study asserted that
there were "substantially higher denial rates for black and
Hispanic applicants than for white applicants." Co-author Lynn
Browne was approached by co-author Alicia Munnell to do the study
because "community activists were complaining that mortgage loans
were not being made in minority communities."
According to the Times, however, "the study had mishandled
statistics on minority default rates. When the errors were
accounted for, the same study showed no evidence that nonwhite
mortgage applicants were being discriminated against."
Frank Quaratiello, writing in the Boston Herald, cites Stan
Liebowitz, "My guess is that they were interested in finding a
particular result." Said Liebowitz, "Richard Syron was head of the
Boston Fed at the time. He went on to be the head of Freddie Mac.
They were looking for mortgage discrimination and they found
According to Quaratiello, Syron became Freddie Mac CEO and
chairman in 2003 and "faced increasing pressure to buy up more and
more risky mortgages, some of which the Boston Fed's guide had, in
effect, served to legitimize." Regarding Syron's total compensation
in 2007 of $18.3 million, Liebowitz reportedly quipped, "Nice
reward for presiding over unprofessional research behavior,
bankrupting Freddie Mac and crippling our financial system, all in
the name of politically correct lending."
The Chicago Tribune described the ACORN agenda as "affirmative
action lending." And, writes Kurtz, "ACORN was issuing fact
sheets bragging about relaxations of credit standards that it had
won on behalf of minorities."
Congress, enacting the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992, allowed legislation to "amend and
extend certain laws relating to housing and community development."
The Act created the Office of Federal Housing Enterprise Oversight
(OFHEO) within HUD to "ensure that Fannie Mae and Freddie Mac are
adequately capitalized and operating safely." It also "established
HUD-imposed housing goals for financing of affordable housing and
housing in central cities and other rural and underserved
Rep. Jim Leach (R-Iowa) warned about the impending danger
non-regulated GSEs posed. As the Washington Post reports, his
concern was that Congress was "hamstringing" the regulator.
Complaint was that OFHEO was a "weak regulator." Leach worried that
Fannie Mae and Freddie Mac were changing "from being agencies of
the public at large to money machines for the stockholding
Rep. Barney Frank (D-Massachusetts) countered, as the Post
reports, "the companies served a public purpose. They were in the
business of lowering the price of mortgage loans."
The Chicago Sun-Times reports an initiative led by ACORN's
Talbott with five area lenders "participating in a $55 million
national pilot program with affordable-housing group ACORN to make
mortgages for low- and moderate-income people with troubled credit
histories." Kurtz notes that the initiative included two of her
former targets, Bell Federal Savings and Avondale Federal Savings,
who had apparently capitulated under pressure.
Represented by Obama and others, Plaintiffs filed a class
action lawsuit alleging that Citibank had "intentionally
discriminated against the Plaintiffs on the basis of race with
respect to a credit transaction," calling their action "racial
discrimination and discriminatory redlining practices."
President Clinton addresses homeownership: "I think we all
agree that more Americans should own their own homes, for reasons
that are economic and tangible and reasons that are emotional and
intangible but go to the heart of what it means to harbor, to
nourish, to expand the American dream. . . . I am determined to see
that you have the opportunity and together we can make that
opportunity for the young families of our country. I am committed
to a new and unprecedented partnership between industry leaders and
community leaders and Government to recommit our Nation to the idea
of homeownership and to create more homeowners than ever
Republicans had won control of Congress and planned CRA
reforms. The Clinton Administration, however, allied with Rep.
Frank, Sen. Kennedy (D-Massachusetts) and Rep. Waters
(D-California), did an end-around by directing HUD Secretary Andrew
Cuomo to inject GSEs into the subprime mortgage market.
As Kurtz notes,"ACORN had come to Congress not only to protect
the CRA from GOP reforms but also to expand the reach of
quota-based lending to Fannie, Freddie and beyond." What resulted
was the broadening of the "acceptability of risky subprime loans
throughout the financial system, thus precipitating our current
The administration announced the bold new homeownership
strategy which included monumental loosening of credit standards
and imposition of subprime lending quotas. HUD reported that
President Clinton had committed "to increasing the homeownership
rate to 67.5 percent by the year 2000." The plan was "to reduce the
financial, information, and systemic barriers to homeownership"
which was "amplified by local partnerships at work in over 100
Kurtz concludes, "Urged on by ACORN, congressional Democrats
and the Clinton administration helped push tolerance for high-risk
loans through every sector of the banking system -- far beyond the
sort of banks originally subject to the CRA. So it was the efforts
of ACORN and its Democratic allies that first spread the subprime
virus from the CRA to Fannie and Freddie and thence to the entire
financial system. Soon, Democratic politicians and regulators
actually began to take pride in lowered credit standards as a sign
of ‘fairness' -- and the contagion spread."
Attorney General Janet Reno, with a number of bank lending
discrimination settlements already, sternly announces, "We will
tackle lending discrimination wherever it appears." With the new
policy in full force, "No loan is exempt; no bank is immune." "For
those who thumb their nose at us, I promise vigorous enforcement,"
HUD Secretary Cuomo said "GSE presence in the subprime market
could be of significant benefit to lower-income families,
minorities, and families living in underserved areas . . ."
By falsifying signatures on Fannie Mae accounting
transactions, $200 million in expenses was shifted from 1998 to
later periods, thereby triggering $27.1 million in bonuses for top
executives. James A. Johnson received $1.932 million; Franklin D.
Raines received $1.11 million; Lawrence M. Small received $1.108
million; Jamie S. Gorelick received $779,625; Timothy Howard
received $493,750; Robert J. Levin received $493,750.
HUD announced a $2.1 billion settlement with AccuBanc Mortgage
Corp. for alleged discrimination against minority loan applicants.
The funds would provide poor families with down payments and low
interest mortgages. Announcing the Accubank settlement, Secretary
Cuomo said, "discrimination isn't always that obvious. Sometimes
more subtle but in many ways more insidious, an institutionalized
discrimination that's hidden behind a smiling face."
Before the camera, Cuomo admitted the mandate amounted to
"affirmative action" lending that would result in a "higher default
rate." The institution would "take a greater risk on these
mortgages, yes; to give families mortgages who they would not have
given otherwise, yes; they would not have qualified but for this
affirmative action on the part of the bank, yes. It is by income,
and is it also by minorities? Yes. . . . With the 2.1 billion,
lending that amount in mortgages which will be a higher risk, and
I'm sure there will be a higher default rate on those mortgages
than on the rest of the portfolio."
The LA Times reports that African Americans homeownership is
increasing three times as fast as that of whites, with Latino
homeowners is growing five times as fast, attributing the growth to
breathing "the first real life into enforcement of the Community
Reinvestment Act." This breath of "life" mandated that Fannie Mae
and Freddie Mac buy mortgages with deviant down-payments and
debt-to-income ratios which allowed lenders to approve mortgages
for lower-income families that would have been denied
By now all pretense had disappeared, lending practices were
based upon concerns of discrimination in the banking system
regardless the consequences. The administration threatened to veto
a bill passed by the Senate which had "shortsightedly voted to
retrench" CRA, as the advocative Times put it.
Under pressure, Fannie Mae was resisting increased targeting,
arguing that the result would be more loan defaults. Barry Zigas,
heading Fannie Mae's low-income efforts, argued, "There is
obviously a limit beyond which [we] can't push [the banks] to
produce," the Times reported.
Fall of 1999
Treasury Secretary Lawrence Summers warned, "Debates about
systemic risk should also now include government-sponsored
enterprises, which are large and growing rapidly."
With pressure from the Clinton Administration, Fannie Mae
eased credit requirements on loans it would purchase from lenders,
making it easier for banks to lend to borrowers unqualified for
conventional loans. Raines explained that "there remain too many
borrowers whose credit is just a notch below what our underwriting
has required who have been relegated to paying significantly higher
mortgage rates in the so-called subprime market," reported the New
With this action, Fannie Mae put itself at substantial risk in
the event of an economic downturn. "From the perspective of many
people, including me, this is another thrift industry growing up
around us," warned Peter Wallison. "If they fail, the government
will have to step up and bail them out the way it stepped up and
bailed out the thrift industry." The danger was known.
A study by Freddie Mac, confirming earlier Federal Reserve and
FDIC studies, contradicts race discrimination arguments for CRA.
The study found that African-Americans with annual incomes of
$65-$75,000 have on average worse credit records than whites making
under $25,000, showing that the difficulty in qualifying was not
because of race but because of bad credit records. The Federal
Reserve Bank of Dallas accordingly entitled a paper "Red Lining or
The National Community Reinvestment Coalition instructed on
how to exploit the new CRA regulations, "Timely comments can have a
strong influence on a bank's CRA rating." NCRC asserted, "To avoid
the possibility of a denied or delayed application, lending
institutions have an incentive to make formal agreements with
community organizations." That is, the mere threat to intervene in
the CRA review process had equipped the ACORN groups for the
Moreover, ACORN had been given a compelling incentive, as CRA
allowed the organizations to collect a fee from the banks for their
services in marketing the loans. The Senate Banking Committee had
estimated that, as a result of CRA, $9.5 billion had gone to pay
for services and salaries of the organizers.
City Journal warned that the Clinton administration had turned
CRA into "a vast extortion scheme against the nation's banks,"
committing $1 trillion for mortgages and development projects, most
of it funneled through the community organizers.
Rep. Richard Baker (R-Louisiana) proposed a bill to reform
Fannie and Freddie's oversight in a House Subcommittee on Capital
Rep. Frank (D-Massachusetts) dismissed the idea, saying
concerns about the two were "overblown" and that there was "no
federal liability there whatsoever."
Treasury Undersecretary Gary Gensler testified in favor of GSE
regulation. He argued that the bill would promote private market
discipline, increase transparency and preserve market competition,
reducing the potential for subsidized competitors to distort
Fannie Mae spokesmen responded by calling the testimony
"inept," "irresponsible," and "unprofessional."
Wallison of the American Enterprise Institute testified to the
subcommittee that the bill was "a milestone in Congressional
efforts to gain control of the Government Sponsored Enterprises."
He added that the "political courage and stamina that was required
to introduce this bill and to continue to press it forward cannot
be overstated." He emphasized that the bill was only an "interim
step in the necessary process of dismantling the GSEs and
eliminating both their threat to the taxpayers and to the private
financial sector of our economy."
Wallison explained why Fannie and Freddie "pose a serious
problem for both the public and private sectors." First, they
contain an inherent contradiction. "It is a shareholder-owned
company, with the fiduciary obligation to maximize profits, and a
government-chartered and empowered agency with a public mission. It
should be obvious that it cannot achieve both objectives. If it
maximizes profits, it will fail to perform its government mission
to its full potential. If it performs its government mission fully,
it will fail to maximize profits."
He sounded an alarm on a "vicious and dangerous cycle."
"Fannie and Freddie must grow in order to maintain their
profitability and hence their high stock prices, but there is no
countervailing check on their growth - no effective competition, no
required government approvals, and no fear in the financial markets
that there is any risk associated with financing this growth.
Moreover, their fiduciary obligations to their shareholders require
them to exploit their subsidy to the fullest extent possible. These
are agencies that are - in the fullest sense of the phrase - out of
Congressional Democrats and GSE representatives vigorously
attacked any such criticism. "We think that the statements evidence
a contempt for the nation's housing and mortgage markets," rebuffed
Sharon McHale, Freddie Mac spokeswoman. Congressional Democrats and
GSE representatives prevailed.
Fred L. Smith Jr., writing in Investor's Business Daily,
recalls testifying before the House Financial Services Committee
that GSE "special privileges create a serious hazard to the market,
to taxpayers [and] to the economy." He warned that these GSEs were
"strange organizations, neither private-sector fish nor
political-sector fowl" and that "as a result, no one is quite sure
how these entities should be evaluated or held accountable." These
new debt portfolios "will certainly increase the likelihood of a
Rep. Paul Kanjorski (D-Pennsylvania): "Mr. Smith, that is
almost a fallacious argument," adding that rapid growth of GSE debt
holdings was nothing to worry about as it simply reflected
"inflation and the growth of population. "Everything,
proportionately, is that much larger."
Rep. Marge Roukema (R-New Jersey): "very few banks or S&Ls
could, even in this day and age, even now, meet the stress-testing
requirements which Fannie and Freddie are required to meet."
Rep. Carolyn Maloney (D-New York) regarding the Treasury
Department line of credit: "It is really symbolic, it is obsolete,
it has never been used." "Would you explain why it would be
important to repeal something that seems to be of little
Smith: "as long as the pipeline is there, it is like it is
very expandable. . . . It is only $2 billion today. It could be
$200 billion tomorrow."
Because of Democrat obfuscation, Smith's "tomorrow" arrived in
2008 when Treasury Secretary Henry Paulson put Fannie and Freddie
Fiscal Year 2002 Budget declares that the size of Fannie Mae
and Freddie Mac is "a potential problem," because "financial
trouble of a large GSE could cause strong repercussions in
financial markets, affecting Federally insured entities and
economic activity," says a White House release.
Subcommittee hearing on a bill proposed by Rep. Baker to
transfer supervisory and regulatory authority over Fannie Mae and
Freddie Mac to the Board of Governors of the Federal Reserve System
and abolish the OFHEO.
Rep. Paul Kanjorski (D-Pennsylvania) responded
"This bill would dramatically restructure the current regulatory
system for Fannie Mae and Freddie Mac. In my opinion, it also
represents a solution in search of a problem. Nearly a decade ago,
Congress created a rational, reasonable, and responsive system for
supervising GSE activities, and that system with two regulators is
operating increasingly effectively. H.R. 1409 would unfortunately
interrupt this continual progress."
Business Week interview with Fannie Mae Vice-Chairman Jamie
Gorelick about the prospects for the coming year:
Gorelick: "we are expecting a very, very strong 2002."
Gorelick: "We believe we are managed safely. . . . Fannie Mae
is among the handful of top-quality institutions. . . . . And we
have consistently exceeded every standard that the examiners have
set for us."
In an OMB Prompt Letter to OFHEO, the President calls for the
disclosure and corporate governance principles contained in his
10-point plan for corporate responsibility to apply to Fannie Mae
and Freddie Mac.
OFHEO reports that "although investors perceive an implicit
Federal guarantee of [GSE] obligations . . . the government has
provided no explicit legal backing for them," warning that
unexpected problems at a GSE could immediately spread into
financial sectors beyond the housing market, according to a White
Rep. Richard Baker (R-Louisiana), chairman of the House
Financial Services subcommittee with GSE oversight over Fannie Mae
and Freddie Mac, was informed by OFHEO "on the salaries paid to
executives at both companies," according to the Washington Post.
Reportedly, "Fannie Mae threatened to sue Baker if he released it,
he recalled. Fearing the expense of a court battle, he kept the
data secret for a year." "The political arrogance exhibited in
their heyday, there has never been before or since a private entity
that exerted that kind of political power," he said.
Freddie Mac reported it had understated its profits by $6.9
billion. OFHEO director Armando Falcon Jr. requested that the White
House audit Fannie Mae.
Sens. Chuck Hagel (R-Nebraska), Elizabeth Dole (R-North
Carolina) and John Sununu (R-New Hampshire) introduced legislation
to address Regulation of Fannie Mae and Freddie Mac. The bill was
blocked by Democrats.
In an interview with Ron Insana for CNN Money, Rep. Baker
, "I have concerns that if appropriate resources aren't
allocated for internal risk management, the consequences will be
far more severe than just a real estate slowdown. The losses would
fall quickly through the capital these companies have and down to
shareholders and taxpayers. These companies have some of the lowest
capital margins of any financial institution in the nation, yet, at
the same time, they are two of the largest. The concern is that if
something doesn't work out the way they predict, the American
taxpayer could be called on to pay off the debt in some sort of
The New York Times reports that the Administration recommended
"the most significant regulatory overhaul in the housing finance
industry since the savings and loan crisis a decade ago," calling
for new supervision of Fannie Mae and Freddie Mac by the Treasury
Department. Reportedly, Congressional Democrats "fear that tighter
regulation of the companies could sharply reduce their commitment
to financing low-income and affordable housing."
Treasury Secretary John Snow testifies that Congress
enact "legislation to create a new Federal agency to regulate and
supervise the financial activities of our housing-related
government sponsored enterprises" and set prudent and appropriate
minimum capital adequacy requirements, says a White House
Rep. Barney Frank (D-Massachusetts): "I do not think we are
facing any kind of a crisis. That is, in my view, the two
government sponsored enterprises we are talking about here, Fannie
Mae and Freddie Mac, are not in a crisis. . . . I do not think at
this point there is a problem with a threat to the Treasury. . . .
I believe that we, as the Federal Government, have probably done
too little rather than too much to push them to meet the goals of
affordable housing and to set reasonable goals.
Rep. Barney Frank (D-Massachusetts): "These two entities -
Fannie Mae and Freddie Mac - are not facing any kind of financial
crisis. . . . The more people exaggerate these problems, the more
pressure there is on these companies, the less we will see in terms
of affordable housing."
Rep. Melvin Watt (D-North Carolina): "I don't see much other
than a shell game going on here, moving something from one agency
to another and in the process weakening the bargaining power of
poorer families and their ability to get affordable housing."
Fannie Mae discloses $1.2 billion accounting error.
Council of the Economic Advisers Chairman Greg Mankiw warned,
"The enormous size of the mortgage-backed securities market means
that any problems at the GSEs matter for the financial system as a
whole. This risk is a systemic issue also because the debt
obligations of the housing GSEs are widely held by other financial
institutions. The importance of GSE debt in the portfolios of other
financial entities means that even a small mistake in GSE risk
management could have ripple effects throughout the financial
system," from a White House release.
Mankiw explains that any "legislation to reform GSE regulation
should empower the new regulator with sufficient strength and
credibility to reduce systemic risk." To reduce the potential for
systemic instability, the regulator would have "broad authority to
set both risk-based and minimum capital standards" and
"receivership powers necessary to wind down the affairs of a
troubled GSE," says a White House release.
Fiscal Year 2005 Budget again highlights the risk posed by the
explosive growth of the GSEs and their low levels of required
capital, and called for creation of a new, world-class regulator:
"The Administration has determined that the safety and soundness
regulators of the housing GSEs lack sufficient power and stature to
meet their responsibilities, and therefore . . . should be replaced
with a new strengthened regulator," reports a White House
Mankiw cautions Congress to "not take [the financial market's]
strength for granted." Again, the call from the Administration was
to reduce this risk by "ensuring that the housing GSEs are overseen
by an effective regulator," says a White House release.
Deputy Secretary of Treasury Samuel Bodman spotlights the risk
posed by the GSEs and called for reform, saying "We do not have a
world-class system of supervision of the housing government
sponsored enterprises (GSEs), even though the importance of the
housing financial system that the GSEs serve demands the best in
supervision to ensure the long-term vitality of that system.
Therefore, the Administration has called for a new, first class,
regulatory supervisor for the three housing GSEs: Fannie Mae,
Freddie Mac, and the Federal Home Loan Banking System," the White
OFHEO reported that Fannie Mae and CEO Raines had manipulated
its accounting to overstate its profits. Congress and the Bush
administration sought strong new regulation and authority to put
the GSEs under conservatorship if necessary. As the Washington Post
reports, Fannie Mae and Freddie Mac responded by orchestrating a
major campaign "by traditional allies including real estate agents,
home builders and mortgage lenders. Fannie Mae ran radio and
television ads ahead of a key Senate committee meeting, depicting a
Latino couple who fretted that if the bill passed, mortgage rates
would go up." Again, GSE pressure prevailed.
Rep. Baker again warned about the coming crisis in the Wall
Street Journal: "Then there's the lesson of a company,
Frankenstein-like, seemingly grown so powerful that it can
intimidate and arrogantly flout all accountability to the very
government that created it."
Baker adds, "Although their bonds bear the disclaimer
‘not backed by the full faith and credit of the U.S.
government,' the market does not believe it and looks right past
the companies' risk strategies to the taxpayers' pockets."
In a subcommittee testimony, Democrats vehemently reject
regulation of Fannie Mae in the face of dire warning of a Fannie
Mae oversight report. A few of them, Black Caucus members in
particular, are very angry at the OFHEO Director as they attempt to
defend Fannie Mae and protect their CRA extortion racket.
Chairman Baker (R-Louisiana): "It is indeed a very troubling
report, but it is a report of extraordinary importance not only to
those who wish to own a home, but as to the taxpayers of this
country who would pay the cost of the clean up of an enterprise
failure. . . . The analysis makes clear that more resources must be
brought to bear to ensure the highest standards of conduct are not
only required, but more importantly, they are actually met."
Rep. Maxine Waters (D-California): "Through nearly a dozen
hearings where, frankly, we were trying to fix something that
Rep. Maxine Waters (D-California): "Mr. Chairman, we do not
have a crisis at Freddie Mac, and particularly at Fannie Mae, under
the outstanding leadership of Mr. Frank Raines."
Rep. Gregory Meeks (D-New York): "And as well as the fact that
I'm just pissed off at OFHEO, because if it wasn't for you I don't
think that we'd be here in the first place, and now the problem
that we have and that we're faced with is: maybe some individuals
who wanted to do away with GSEs in the first place, you've given
them an excuse to try to have this forum so that we can talk about
it and maybe change the, uh, the direction and the mission of what
the GSEs had, which they've done a tremendous job. There's been
nothing that was indicated that's wrong, you know, with uh Fannie
Mae. Freddie Mac has come up on its own. And the question that then
presents is the competence that, that, that, that your agency has,
uh, with reference to, uh, uh, deciding and regulating these GSEs.
Uh, and so, uh, I wish I could sit here and say that I'm not upset
with you, but I am very upset because, you know, what you do is
give, you know, maybe giving any reason to, as Mr. Gonzales said,
to give someone a heart surgery when they really don't need
Rep. Ed Royce (R-California): "In addition to our important
oversight role in this committee, I hope that we will move swiftly
to create a new regulatory structure for Fannie Mae, for Freddie
Mac, and the federal home loan banks."
Rep. Lacy Clay (D-Missouri): "This hearing is about the
political lynching of Franklin Raines."
Rep. Ed Royce (R-California): "There is a very simple
solution. Congress must create a new regulator with powers at least
equal to those of other financial regulators, such as the OCC or
Rep. Gregory Meeks (D-New York): "What would make you, why
should I have confidence? Why should anyone have confidence, and
uh, in, in you as a regulator at this point?"
Armando Falcon, OFHEO Director: "Sir, Congressman, OFHEO did
not improperly apply accounting rules. Freddie Mac did. OFHEO did
not fail to manage earnings properly. Freddie Mac did. So this
isn't about the agency engaging in improper conduct. It's about
Rep. Christopher Shays (R-Connecticut): "And we passed
Sarbanes-Oxley, which was a very tough response to that, and then I
realized that Fannie Mae and Freddie Mac wouldn't even come under
it. They weren't under the ‘34 act, they weren't under the
‘33 act, they play by their own rules, and I and I'm tempted
to ask how many people in this room are on the payroll of Fannie
Mae, because what they do is they basically hire every lobbyist
they can possibly hire. They hire some people to lobby and they
hire some people not to lobby so that the opposition can't hire
Rep. Artur Davis (D-Alabama): "So the concern that I have is
you're making very specific, what you have correctly acknowledged,
broad and categorical judgments about the management of this
institution, about the willfulness of practices that may or may not
be in controversy. You've imputed various motives to the people
running the organization. You went to the board and put a 48-hour
ultimatum on them without having any specific regulatory authority
to put that kind of ultimatum on ‘em. Uh, that sounds like
some kind of an invisible line has been crossed."
Rep. Christopher Shays (R-Connecticut): "Fannie Mae has
manipulated, in my judgment, OFHEO for years. And for OFHEO to
finally come out with a report as strong as it is, tells me that's
got to be the minimum not the maximum."
Rep. Barney Frank (D-Massachusetts): "Uh, I, this, you, you,
you seem to me saying, ‘Well, these are in areas which could
raise safety and soundness problems.' I don't see anything in your
report that raises safety and soundness problems."
Rep. Maxine Waters (D-California): "Under the outstanding
leadership of Mr. Frank Raines, everything in the 1992 Act has
worked just fine. In fact, the GSEs have exceeded their housing
goals. What we need to do today is to focus on the regulator, and
this must be done in a manner so as not to impede their affordable
housing mission, a mission that has seen innovation flourish from
desktop underwriting to 100% loans."
Rep. Lacy Clay (D-Missouri): "I find this to be inconsistent
and a and a rush to judgment. I get the feeling that the markets
are not worried about the safety and soundness of Fannie Mae as
OFHEO says that it is, but of course the markets are not
Rep. Barney Frank (D-Massachusetts): "But I have seen nothing
in here that suggests that the safety and soundness are at issue,
and I think it serves us badly to raise safety and soundness as
kind of a general shibboleth when it does not seem to me to be an
Rep. Don Manzullo (R-Illinois): "Mr. Raines, 1.1 million bonus
and a $526,000 salary. Jamie Gorelick, $779,000 bonus on a salary
of 567,000. This is, what you state on page eleven is nothing less
Rep. Don Manzullo (R-Illinois): "The 1998 earnings per share
number turned out to be $3.23 and 9 mills, a result that Fannie Mae
met the EPS maximum payout goal right down to the penny."
Rep. Don Manzullo (R-Illinois): "Fannie Mae understood the
rules and simply chose not to follow them that if Fannie Mae had
followed the practices, there wouldn't have been a bonus that
Rep. Christopher Shays (R-Connecticut): "And you have about 3%
of your portfolio set aside. If a bank gets below 4%, they are in
deep trouble. So I just want you to explain to me why I shouldn't
be satisfied with 3%?"
Franklin Raines, Fannie Mae CEO: "Because banks don't, there
aren't any banks who only have multifamily and single-family
Franklin Raines, Fannie Mae CEO: "These assets are so riskless
that their capital for holding them should be under 2%."
January 2005-July 2006
Sen. Chuck Hagel (R-Nebraska), co-sponsored by Sens. Sununu
and Dole and later Sen. McCain, re-introduced legislation to
address GSE regulation.
"The bill prohibited the GSEs from holding portfolios, and
gave their regulator prudential authority (such as setting capital
requirements) roughly equivalent to a bank regulator. In light of
the current financial crisis, this bill was probably the most
important piece of financial regulation before Congress in 2005 and
2006," reports the Wall Street Journal.
Greenspan testified that the size of GSE portfolios "poses a
risk to the global financial system. It would be difficult, if not
impossible, to bail out the lenders [GSEs] . . . should one get
into financial trouble." He added, "If we fail to strengthen GSE
regulation, we increase the possibility of insolvency and crisis .
. . We put at risk our ability to preserve safe and sound financial
markets in the United States, a key ingredient of support for
Greenspan warned that if the GSEs "continue to grow, continue
to have the low capital that they have, continue to engage in the
dynamic hedging of their portfolios, which they need to do for
interest rate risk aversion, they potentially create ever-growing
potential systemic risk down the road . . . We are placing the
total financial system of the future at a substantial risk."
Bloomberg writes, "If that bill had become law, then the world
today would be different. . . . But the bill didn't become law, for
a simple reason: Democrats opposed it on a party-line vote in the
committee, signaling that this would be a partisan issue.
Republicans, tied in knots by the tight Democratic opposition,
couldn't even get the Senate to vote on the matter. That such a
reckless political stand could have been taken by the Democrats was
obscene even then."
Treasury Secretary John Snow again calls for GSE reform,
"Events that have transpired since I testified before this
Committee in 2003 reinforce concerns over the systemic risks posed
by the GSEs and further highlight the need for real GSE reform to
ensure that our housing finance system remains a strong and vibrant
source of funding for expanding homeownership opportunities in
America. . . . Half-measures will only exacerbate the risks to our
financial system," from a White House release.
At AEI Online, Wallison warned that "allowing Fannie and
Freddie to continue on their present course is simply to create
risks for the taxpayers, and to the economy generally, in order to
improve the profits of their shareholders and the compensation of
their managements. It is a classic case of socializing the risk
while privatizing the profit."
Chairman Greenspan, in a letter to Sens. Sununu, Hagel and
Dole, warned that the GSE practice of buying their own MBS "creates
substantial systemic risk while yielding negligible additional
benefits for homeowners, renters, or mortgage originators." He
stated, ". . . the GSEs and their government regulator need
specific and unambiguous Congressional guidance about the intended
purpose and functions of Fannie's and Freddie's investment
Sens. Sununu and Hagel introduced an amendment to a Lobbying
Reform Bill directing GAO to study GSE lobbying and requiring HUD
to audit the GSEs annually.
After years of Democrats blocking the legislation, Sens.
Hagel, Sununu, Dole and McCain write a letter to Majority Leader
William Frist and Chairman Richard Shelby expressing demanding that
GSE regulatory reform be "enacted this year" to avoid "the enormous
risk that Fannie Mae and Freddie Mac pose to the Housing market,
the overall financial system, and the economy as a whole."
Sen. McCain (R-Arizona) addressed the Senate, "Mr. President,
this week Fannie Mae's regulator reported that the company's
quarterly reports of profit growth over the past few years were
‘illusions deliberately and systematically created' by the
company's senior management. . . . Fannie Mae used its political
power to lobby Congress in an effort to interfere with the
regulator's examination of the company's accounting problems. . . .
OFHEO's report solidifies my view that the GSEs need to be reformed
McCain stressed, "If Congress does not act, American taxpayers
will continue to be exposed to the enormous risk that Fannie Mae
and Freddie Mac pose to the housing market, the overall financial
system, and the economy as a whole. I urge my colleagues to support
swift action on this GSE reform legislation."
Sens. Sununu, Hagel, Dole, and Mel Martinez (R-Florida)
re-introduced legislation to improve GSE oversight.
In "A Nightmare Grows Darker," the New York Times writes that
the "democratization of credit" is "turning the American dream of
homeownership into a nightmare for many borrowers." The "newfangled
mortgage loans" called "affordability loans" "represent 60 percent
President Bush: "These institutions provide liquidity in the
mortgage market that benefits millions of homeowners, and it is
vital they operate safely and operate soundly. So I've called on
Congress to pass legislation that strengthens independent
regulation of the GSEs . . . the United States Senate needs to pass
this legislation soon."
The housing bubble began to burst, bad mortgages began to
default, and finally the Fannie Mae and Freddie Mac portfolios were
revealed to be what they were, in collapse. And the testimony is
evident as to why. As Wallison noted, "Fannie and Freddie were, I
would say, the poster children for corporate welfare."
Rep. Arthur Davis, whose testimony is found above in October
2004, now admits Democrats were in error: "Like a lot of my
Democratic colleagues I was too slow to appreciate the recklessness
of Fannie and Freddie. I defended their efforts to encourage
affordable homeownership when in retrospect I should have heeded
the concerns raised by their regulator in 2004. Frankly, I wish my
Democratic colleagues would admit when it comes to Fannie and
Freddie, we were wrong."
The narrative is of another socialist experiment failed, this
time a massive federal effort, imperiling the whole US banking
industry. Facing this economic disaster, will an informed American
people put their trust Obama's socialist ideology to bring remedy?
To do so is to trust in an acetylene torch to put out the
2008 May 21 - Wed
Confusion by Committee
In reading Rob Weir's
An Antic Dispoition blog today, he has a very cogent observation regarding
I have a theory concerning committees. A committee may have different states, like water has
gas, liquid or solid phases, depending on temperate and pressure. The same committee,
depending on external circumstances of time and pressure will enter well-defined states that
determine its effectiveness. If a committee works in a deliberate mode, where issues are
freely discussed, objections heard, and consensus is sought, then the committee will make
slow progress, but the decisions of the committee will collectively be smarter than its
smartest member. However, if a committee refuses to deliberate and instead merely votes on
things without discussion, then it will be as dumb as its dumbest members. Voting dulls the
edge of expertise. But discussion among experts socializes that expertise. This should be
obvious. If you put a bunch of smart people in a room and don't let them think or talk, then
don't expect smart things to happen as if the mere exhalation of their breath brings forth
improvements to the standard.
The quotation stems from his observations regarding the committee which was stick
handling Microsoft's OOXML standard through the fast track process. Sometimes committees,
when doing things properly, can be better than the sum of the parts, but without proper
communication and time allotments, can turn out to be no better than the weakest link.
2007 Oct 21 - Sun
The Cluetrain Manifesto
Today I was introduced to
The Cluetrain Manifesto: The End of Business as Usual
through a NANOG posting in response to someone's quote:
I think you greatly underestimate how customers react to the truth.
A few easily reachable quotes from the full online text:
The connectedness of the Web is transforming what's inside and outside your business -- your market and your employees.
We are not seats or eyeballs or end users or consumers. We are human beings -- and our reach exceeds your grasp. Deal
Facebook is probably one of many excellent examples of how humans interact, and companies are having a hard time
trying to make those sites work for themselves. hmph. Perhaps when companies learn that they are made up of humans who
share and interact, maybe good things can happen.
I'm thinking that many a great open source company has learned to share what could be classified as the family jewels,
and thus have profited immensely from embracing the way humans naturaly interact.
2007 Oct 06 - Sat
New Ideas -- For The Market Place, not the Existing Business Model
Dare Obasanjo wrote a nice blog entry summarizing some key ideas from Marc Andreessen
and Clayton Christensen. In his entry entitled
Stupid Things Big Companies Do, he had a great exerpt that confirmed
that companies need to diversify their business models, offered up a key irony, and ended
by providing a possible solution:
People come up with lots of new ideas, but nothing happens. They get very
disillusioned. Never does an idea pop out of a person's head as a completely fleshed-out
business plan. It has to go through a process that will get approved and funded. You're
not two weeks into the process until you realize, "gosh, the sales force is not going to
sell this thing," and you change the economics. Then two weeks later, marketing says they
won't support it because it doesn't fit the brand, so we've got to change the whole
All those forces act to make the idea conform to the company's existing business model,
not to the marketplace. And that's the rub. So the senior managers today, thirsty for
innovation, stand at the outlet of this pipe, see the dribbling out of me-too innovation
after me-too innovation, and they scream up to the back end, "Hey, you guys, get more
innovative! We need more and better innovative ideas!" But that's not the problem. The
problem is this shaping process that conforms all these innovative ideas to the current
business model of the company.
2007 Sep 13 - Thu
Snow Squall Inn
If you happen to be the Wiscasset, Maine area, and need a place to stay, try out
Snow Squall Inn. My good friend
Melanie and her husband Paul own and operate the 7 room Bed & Breakfast. I hope to see
them in October and check out their place.
2007 Aug 05 - Sun
Shopping by Night Owls
I'm not sure who dreamed this one up, here is a good one:
While shopping on the Internet has always been a 24-hour ordeal, some retailers are starting to realize the potential of
offering online-only discounts when their stores are closed. Traditional stores like Sears (SHLD), Kohl's (KSS) and Dick's
Sporting Goods (DKS) are offering online-only discounts between midnight and dawn. [Reference
Do they want people not to go to their stores?