Obama, Daschle, and Apology

I’ve made no secret of my support of Barack Obama, but I also posted last week about my axiety about misallocated stimulus.  Policy matters we can debate, but I hope all of you realize how impressive it is that Barack Obama has apologized for nominating former Senate Majority Leader Tom Daschle to be his secretary of Health and Human Services.

We hold our public servants to an incredibly high standard and sometimes I think it’s unfortunate that people (like me) who haven’t paid taxes on for their domestic help can’t ever participate in public life.  But Tom Daschle knew the standard and he cut corners because people like trade on their connections to build wealth after they leave public office. I certainly can understand and don’t begrudge anybody the chance to make money, but I do think Daschle should have known better if he ever wanted to return to public life.  Why did he not pay a really thorough accountant to dot his i’s and cross his t’s.  I can only guess it’s that he didn’t want to pay the taxes.  That’s the sad thing and kind of makes you struggle to believe in a guy like Daschle who tries to cut corners and then complain that Republicans are friends of big business and avaricious in their own right.

It seems its almost impossible to find a completely qualified, buttoned-up set of cabinet secretaries these days.  We’ve already lost Richardson and Daschle and nearly lost Holder.  One wonders how these kinds of stories effect a generation of 30-year-olds who have to watch every step if they ever want to hold public office.

But, to me the big takeaway from this chapter is that President Obama said, “I’m sorry.”  He was man enough to admit the mistake and he’s fixing it.  No spinning of the story.  Does anybody really believe his handlers told him to apologize?  No way.  He did it because he knows what’s right.  No matter your politics, please appreciate how rare public apologies are in this country.  We are now a country run  by somebody who trusts his own judgement on matter of conscience.

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Is Obama Already Betraying Us?

I’ve been quiet, but I’m not happy.  My finance guru Roger Ehrenberg posted this yesterday and it forced me into action.

Anybody could spend all day, every day trying to decode the stimulus plan making its way through congress.  It’s widely accepted that the country is in dire straights and could be facing double digit unemployment in the next 6-12 months.  We know urgency is critical.

But I voted for change.  I voted for the rhetoric that President Obama used in every debate: Kill poor performing government programs and use a scalpel to cut the cancer out of the federal budget.   I voted for an intellectual heavyweight who could decode the ways of Washington and use the power of the bully pulpit to get Americans to accept the dire consequences of our predicament.

This Stiumlus plan calls for large sums of money to be invested with state unemployment agencies (their coffers are dry) and extending cobra benefits.  It calls for money to flow to state education funds so that education programs that might be cut can continue.  There are various infrastructure investments around the country as the bill gets marked up to help various Congressmen and Senators.  This isn’t stimulus.  It’s an  emergency spending bill to prop up an economy teetering on the abyss.  Congress is taking out a trillion dollar credit card to buy more stuff and China is Visa.  Only this time Visa is not entirely sure they want to give us all of this credit.

What is it about this plan that radiates change?  One week into the administration, they are presenting legislation that does not call for shared sacrifice.  We’re cutting taxes and not raising them.  Shouldn’t we raise taxes on people with jobs and use the proceeds to retrain people who need jobs.

This is the Washington I grew up in — insular, myopic as inside-the-beltway as it comes.  I want to  believe in Obama’s Team of Rivals, but what if these Clintonite members of the establishment can’t bring fresh ideas and rely on the horse-trading power hungry culture that drove me out of my hometown forever.

If we are going to spend $1 trillion on stimulus and another $1 trillion on saving the financial industry then we must have new innovative strategic vision in four key areas:

1.  Education

2.  Energy

3.  Healthcare

4.  Financial Industry Regulation

These were the campaign promises.  I did not vote for the Democratic Party (I’m a lifelong registered democrat), rather I supported Barack Obama the progressive intellectual.  Supporting programs simply to keep us afloat until next year with no real overarching retooling of our governmental strategy is, and I hate to say it, better than Bush, but worse than Clinton.

I’m patient, but the sums we are investing are staggering.  We’re two weeks a way from the stimulus bill.  $350 bn in TARP 1 that has accomplished nothing is so outrageous it defies imagination.

I  always thought that the country’s dire economic condition could create the rare  political environment to push through uncommonly innovative investments in energy and education reform.  I pray (and I don’t typically  do so) that the devil is in the details of the stimulus plan and that the NYT and Politico have not uncovered the progressive agenda.

At the moment, Congresshas a bill that reminds me of  LBJ’s great society with a little Reagan tax policy thrown in for good measure.   That’s not FDR’s new deal.  That’s just the Washington that makes me want to live somewhere else.

Better Place Yes. Detroit No.

I still loathe the BIG 3 Auto CEOs today. I know that’s strong, but these guys are the Larry, Moe, and Curly of the Fortune 500.

Meanwhile John Markoff at the NYT reports that Better Place is moving into Hawaii with another sweet deal in the worst financial climate in two generations.  Because Electric cars make sense.  Renewable Energy makes sense.  Why would I believe that Detroit will crank out more fuel efficient cars with their $40bn bailout?  How do we know they wont’ be back in 6 months asking for more?  Is a Hybrid Navigator or Hummer our future?

Better Place is one part of the future.   Detroit is the entire past.  Israel, Denmark, San Francisco, Australia, and Hawaii have seen that future.  Detroit will drill for oil on 8 Mile Road, before they let electric cars into town.

GM, Ford Management Must Go

The current Venture Capital Road Trip (literally Wagoner and Mullaly are driving from Detroit to Washington in hybrids; Nardelli reserves the right to fly) reeks of prepackaged public relations.   These guys presided over huge destruction in shareholder value and been very well compensated for it.   The WSJ now reports that Ford will speed up production of Hybrids and that William Clay Ford believes Ford can be the green car company of the future.  No.  You will not get away with this. You can’t even run your own football team.

Bill Ford and Alan Mullaly had their chance and they kept pushing Broncos and Explorers down our collective throats.    GM has been told to reduce their number of brands for decades and they haven’t done it.  I guarantee you that Rick Wagoner has been driving an SUV for years.  Did anybody see the film Roger and Me (1990)?  It’s like nothing has changed at GM in a twenty years.  I will not be suckered by this staggeringly disingenuous offer to take $1 dollar in compensation next year.  Mullaly made $22mm last year.  Come on people.

My guess is that bankruptcy restructuring remains our most prudent course of action, but I will consider some kind of loan package if management is radically changed at any car company that receives federal assitance.  Collectively the big 3 have been broken strategically, culturally and financially for years.  They have lived off of financing revenues for decades.  They are an American embarrassment.

The Obama mandate is change.  We cannot allow Detroit’s car companies to receive taxpayer money without a radical restructuring of corporate governance.  This includes directors who approved compensation packages and did not push their managers to seek pre-packaged bankruptcy solutions.  Even now, Rick Wagoner maintains bankruptcy is not an option.  This is the equivalent of a startup CEO saying to his VCs, ” oh you’ll give me more money.  I’m not worried. ”  They don’t have a creative bone in their bodies.  They must, must be thrown out.

I’m so pissed off right now I can’t think straight.  A month ago, Lindzon wrote that he wanted to punch somebody at the company.  At the time, I thought that was aggressive, now I’m worried even Howard was too soft on these fuckers.  Are you kidding me with the $1 salary this week?  Two weeks ago, Mulally was asked about his compensation and he said, “I’m fine where I am.”  Guys, you need to admit you have done a terrible job.  Typically, I don’t believe in trying to recoup compensation, but if we’re doing a bailout here I think we are entitled.

Look, I’m ranting.  Elizabeth Kolbert (the best environmental journalist in America except for Michael Pollan) wrote a nice editorial in The NewYorker.  Read her here.  And while you are at it, please support and subscribe to The NewYorker.  It’s a national treasure.

Disclosure:  I am a subscriber and avid reader of The NewYorker.

If you agree, please email me or comment below.  I will move the whole discussion to the offices of Nancy Pelosi and Carl Levin to name a few.

Liveblogging Obama’s New Team

Obama now taking questions.

Some tough questions on why he chose Hilary after criticizing her on the campaign trail.  I think Obama did ok and kept it presidential. One wishes he would say, “I think we know that Hilary and I see eye to eye on most things, but campaigning is campaigning and governing is governing.”  But you can’t say stuff like that as President.

Obviously, I’m intensely biased but there’s a greater sense of leadership on things like the India crisis.  Part of it is having a greater commanded of the English language.  It matters greatly to have a President who doesn’t fear questions from the media.  The presidential rhetoric is already so focused on “rebuiling alliances” and “military and diplomacy” and “regaining American leadership in all it’s dimensions.”

“I assembled this team because I’m a strong believer in strong personalities and strong opinions.  There’s a danger in “groupthink”, but understand I will be setting policies as President.”

If there’s one thing you can say about this group  it’s that their short in physical stature, but long in professional experience.  I know Rumsfeld was small but Gates seemed like a midget next to Obama.  Napolitano is tiny, but Susan Rice barely reached the microphones.  Probably a good quality in a UN Ambassador.  But General Jones of course helps raise the average height.  He’s out of central casting

I’m listening to Hilary Clinton speak and struck by the fact that I turned the television on this morning.  Certainly nice to feel more engaged.  Obama’s vetting process appears to be overly throrough and gives us hope that the first 100 days and beyond will not be tarnished by scandal. Top line thoughts:

Clinton:  She’s impressive and has a similar temperament to Obama.  Calmer than her husband.  I think she has great gravitas and a thoughtful husband as an advisor.  I do worry that she ran an uneven and power-seeking campaign, but hopefully she realizes this is a coda to her career and is comfortable with that.

Gates:  He was brief.    Kind of a no-nonsense approach.

Holder:  Now I’m starting to feel (as I’m supposed to) that this stuff is all kind of canned.  Nice that he mentions state and local law enforcement.  Perhaps he and Napoltinao will be able to acheive better alignment among Federal/State officials and the myriad of agenices.

Napolitano:  Like the gray streak in the hair.  Like that’s she’s a state official. Hope the first order of business is to get NYC more federal funding at the expense of the states in the west who don’t need money.

Rice:  Solid, personal speech. Will she be able to improve our stature in the UN after a series of disasters?  She does not have tough acts to follow.

Jones:  Few words.  Challenging Job.  The only military man or woman on the team.

Biden:  I hope they find a way to get him involved.  His speech seems sort of after-the-fact and not that interesting.  I just want to hear Obama answer some questions.

The Decline of the Goldman Sachs Brand

This weekend Wall Street Journal ran an interview with Robert Rubin yesterday in which he was surprisingly defensive about his role at Citigroup over the past decade. Here are some highlights:

  • He passes the buck to the executives throughout the interview claiming “they did not execute properly.”
  • His $115mm in compensation (before options!) over the past 9 years was totally justified and that he could have made more money elsewhere.  Passed on his bonus last year.
  • At the outset of his engagement with the firm, he wanted no opearting authority so he could have more time to flyfish and pursue other passions in his life.
  • Nobody saw the perfect storm coming that has created the financial crisis of ’08

Meanwhile in only two short months, Hank Paulson has done serious damage to his professional reputation as he failed to stay consistent for even one of the past 10 weeks or so.  First, TARP fails to pass congress.  Then when it does it doesn’t buy bad assets, preferring direct infusions of capital and nobody knows what’s happened to that money.    Now TARP  could be used for auto companies or home mortgages or maybe to finish off the new Jets/Giants Stadium.

Rubin, Paulson, and  Jon Corzine ran GS for approximately 15+ years from the late 80’s until Paulson took over at Treasury in 2004.  Paulson was instrumental in taking GS public a move that was controversial within the firm because some partners feared that they would struggle to maintain Goldman’s high standards as a public company and would succumb to the the pressures of quarterly earnings.

It is worth noting that Goldman’s current management has performed quite well (much better than other banks) during this process.  Goldman unwound many of their toxic positions (as far as we know) a year ago.

But Rubin’s “it wasn’t me” interview and Paulson’s “deer in the headlights” leadership have weakened their reputations and, whether GS’s current leadership likes it or not, the three politicians are deeply intertwined with Goldman’s brand.

I can’t help but think that Rubin saw his role at Citigroup as a well paid consulting role — a gift for a job well done as Secretrary of Treasury from 92-98.  I have no issue with  former public officials  collecting their paydays after time well served as our public officials.  Clinton charges  tons of money for speeches and that’s his right.  But I find it  disconcerting and possibly even disingenuous that Rubin doesn’t realize that $10mm a year (cash not  including equity) is an aggressive pay package for a non-opearting executive who has presided over a 70% decline in shareholder value during his tenure.  Shouldn’t he be more apologetic?  The defensiveness in the WSJ article reads like a creative teenager who knows he bears more guilt than he cares to admit.

During the early days of the TARP crisis, I worried that Secretary Paulson was too emotionally invested in Wall Street generally and Goldman specifically to think clearly.  I’m sure his assets are managed by a blind trust, but given the decline in GS’s stock price he must have been taking huge losses of wealth.  Is it possible that Paulson’s reverence for Wall Street and concern for his wealth clouded his judgement?

Perhaps Hank Paulson will become the Bush Adminstration’s Robert McNamara — the once hawkish Defense Secretary in the Kennedy And Johnson administrations who came to grips with his own failures in the Errol Morris documentary The Fog of War.   Paulson once preached deregulation at every opportunity, but presided over  the greatest systemic collapse in modern financial history.  Will Paulson own up to his failures or will he hide behind the always-available and impossible-to-combat excuse of “Nobody knew.  Who could have known?”

Both Rubin and Paulson are towering figures in the financial industry who have accomplished much in their storied careers.  However, their resumes have been at best setback and at worst undone by the past two months in the markets.  What we need from them is the honesty and integrity that made Goldman Sachs the great brand that it was for decades.  We need them to be transparent, reflective, forthcoming and most importantly, self-aware.  This history will help us to ensure our markets recover and run in a more orderly fashion in the years to come and that we place each of them where they deserve to be in the history of American Finance.

Obama’s Internet Use Will Change World

One need look no further than changedotgov to understand how Obama and future presidents will use the Internet to communicate in a completely unfiltered way with citizens and the world’s population.  Obama uploaded his weekly radio address earlier today.  Already a 155,000 people on YouTube  have seen it on by Saturday at 5PM EST.   Remeber all of this behavior is “ondemand.”  People opting in to watch.

Meanwhile Obama is using his campaign infrastructure to continue to send his constituents his messages including today’s address.

In today’s speech, Obama says he’s going to pass progressive legislation to invest in alternative energy and national infrastructure.  The Washington lobbying machine will gear up to drive those dollars to individual states and to ensure that traditional speical interests (Oil, Auto, Teachers Union)  maintain their traditional hegemony.

Obama and his administration have a chance to seriously dampen special interest power by mobilizing his army of volunteers and millions of Americans to send emails, call congressmen and even to raise money to combat certain special interests.  The question is will Americans cotinue to engage beyond the election?  Will they stay motivated to fight for what they believe in, even when a presidential race is not on the line?