Finally, a sensible look at bailouts

Political economy is one of my passions. As a radio host and syndicated columnist I get several free books a month. They are usually unsolicited and not of much interest, every once in a while I get one that is worth reading and spreading the word on. "Too Big to Save?" by Robert Pozen is just such an example. The book's subtitle is "How to Fix the US Financial System" and it offers an agenda to do that and so much more. It offers sanity in an industry that has lost its moral compass and he provides direction going forward. His book is filled with some important facts that cannot help but wake one up to the causes of our financial crisis and how to solve such problems in the future.

Pozen is a refreshing voice on the issues surrounding the bailout. Most of the analysts of the subject have pure academic backgrounds or mere activist experiences. The former cannot have any real idea how such things happen and the latter believes everything requires more government control in order to avoid some from making a profit. Pozen has serious academic credentials. He holds degrees from Harvard and Yale. Furthermore, he is on the faculty of Harvard University. What is more important is that he has an understanding of business and the financial system. According to his website, he "is Chairman of MFS Investment Management®, which manages over $200 billion in assets for over five million investors worldwide. This represents an increase of 50% from the first half of 2004 when Bob was named to his current position."

The book is filled with common sense arguments that are built on the idea of restoring the integrity of financial institutions, rather than promoting political agendas. Furthermore, it points out several important factoids that are designed to simply make you think about where we are and how we got here.

• Up until 2008, no housing slump in any country had ever caused a worldwide financial crisis.
• Until mid-2008, the Federal Housing Administration offered loans that required just a 3 percent down payment. In spite of this low sum, many nonprofits sprung up (and funded by construction developers and home builders) to cover the cost. It was a house of cards waiting to fall.
• The stock market crash became even worse after Congress authorized the Treasury to spend billions of dollars "resolving" the financial crisis. Many rightly argue that the worse is yet to come.

Pozner's solutions to the problems surrounding the financial are refreshing and filled with common sense. The crisis we have today is rooted in "geniuses" with political, social and even profit agendas rather than sound financial principles. Pozner points to the better way:

• He argues for the restoration of loan securitization as a key to economic and housing recovery. The reason housing had never been a source of major financial catastrophe in the past is the integrity in the process, like due diligence and monetary "skin in the game" that proves one to be a worthy candidate of a home loan.
• The federal government's efforts to buy "toxic assets" are not viable and poorly designed to meet goals. A great example is the use of such for loan modifications. To date, 80 percent of all homes that experienced a modification are again in foreclosure.
• The federal government has been wild and indiscriminate in it recapitalization of financial institutions. It has bailed out many large banks that did not want the assistance, over 500 small banks that are anything but "too big too fail," and many insurance and credit card companies without explanation.
• Far reaching legislative restrictions of executive compensation have clearly made the situation worse. For example, limits on "golden parachutes" have generally increased the cost of most terminated packages. Furthermore, in order to be competitive, companies forced to have strict limits on bonuses have, instead, dramatically increased base salaries. This means the executives can enjoy higher rewards with lower performance.

Pozen's excellent book goes on to evaluate the potential restructuring of the financial industry, the importance of fair value accounting, and the huge downside government actions in the financial industry has had on taxpayers. It is an excellent book and really "must reading" for anyone interested in serious answers to our current financial crisis.

Kevin Price is a nationally syndicated columnist and host of the Price of Business on CNN Radio. Learn more about him and his activities at www.PriceofBusiness.com.

Obama's Critics are also in the White House

Criticism for the Obama Administration's economic agenda is hitting very close to home. Martin Feldstein, an advisor to the President on economic issues and Harvard University professor has become openly critical of the President's health care agenda. In a recent article in the Wall Street Journal (aptly titled "ObamaCare's Crippling Deficits"), Feldstein states that "the higher taxes, debt payments and interest rates needed to pay for health reform mean lower living standards."

Feldstein has been an advisor to both Republicans and Democrats, but is known as a proponent of huge "stimulus packages" during economic decline. In spite of this, Obama probably did not make a particularly smart choice in picking the fiercely independent Feldstein. The one time advisor to Ronald Reagan publicly warned that president of the negative implications of the deficits in the 1980s. Those deficits were nothing compared to those provided in Obama's budget. His deficits would last years after the recession is over and in spite of the massive tax increases that promises to accompany them. The Democrats correctly criticized Bush's deficits. Feldstein notes that Obama's deficits, because of its expensive health care agenda will reach $9.3 trillion -- more than twice the amount of the previous administration.

In an earlier article in the Washington Post, Feldstein noted that "For the 85 percent of Americans who already have health insurance, the Obama health plan is bad news. It means higher taxes, less health care and no protection if they lose their current insurance because of unemployment or early retirement." Feldstein also notes that the price of the program is enormous and would cost more than $1 trillion and would raise the current maximum tax rate from 35 to 45 percent.

Barack Obama has fundamentally been dishonest when it comes to the health care debate. Consistency he has been arguing that his agenda would lower cost and expand coverage. The reality is, his agenda would dramatically reduce the quality of coverage for those who currently enjoy the best health care system in the world and would be accompanied by the excessive costs so common in bureaucratically driven programs.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

The New face of Discrimination

There appears to be a new discrimination that is rampant across our country. This past week there was an arrest of an African American Professor (Henry Louis Gates) of Harvard by the Cambridge police and I found it interesting that President Obama and Governor (Deval) Patrick came out and immediately cried "racism" by law enforcement without asking a single question. They didn't ask about the protocol used by the police, they didn't ask what witnesses saw, they appeared to simply just jumped to conclusions. The reason why is because 'one of their own' had to have been mistreated, in their minds. Before you accuse me of using the "race card," I am not. I recognize that Obama, Patrick, and Gates are all African American and the arresting office was white. But that isn't what I mean. Gates and his supporters have something else in common, they are elitists.

• Patrick graduated from Harvard University for both his undergraduate degree and a law degree. Furthermore, he went to the prestigious Milton Academy.


• Obama is a graduate of Columbia University and then went on to Harvard Law School, becoming the first African American president of the Harvard Law Review.
  
• Henry Louis Gates, the man at the center of the storm, has his BA in History from Yale and a PhD in English from Cambridge University.
  

What seems to be playing a bigger role in the things these men have in common is elitism, rather than race. We don't want to miss, in this story, the poor police officer, Sgt. James Crowley, who could not be more "blue collar" in his uniform. Like most police officers today, he likely has some college experience. A couple of years of college maybe or, who knows, an undergraduate degree from a solid college some where. His academic credentials are not nearly as easy to find of those of his accusers. I do know he teaches a course on race relations at the police academy because of his years of experience and exceptional conduct in this area. Now being tarnished by a Governor and President who don't know enough about the situation and a professor who knows more than exists in the hearts of men. At least, it appears, this man.

All we have are some facts, laid out nicely by The New York Daily News. The information surrounding the case that all parties agreed on:

"Crowley, an 11-year veteran of the Cambridge Police Department, responded to a reported break-in at the renowned scholar's home last Thursday. A neighbor reported seeing two black men break into the professor's home. She was unaware the man forcing his way inside was Gates, who had locked himself out. When Crowley arrived, he told an incensed Gates he was investigating a report of a break-in and asked for his identification. 'Why? Because I'm a black man in America,' Gates responded, the police report says. Gates initially refused to hand over his ID, instead angrily accusing the officer of being a racist and 'leveling threats that he wasn't someone to mess with,' the report says. After Gates produced his Harvard University ID, he repeatedly demanded Crowley state his name, which the officer claims he had already done. Crowley said Gates continued hurling insults at him as he left the home. Crowley arrested the scholar for disorderly conduct. The charge was later dropped. 'He was arrested after following me outside the house, continuing the tirade even after being warned multiple times - probably a few more times than the average person would,' Crowley told the radio station." You can hear the entire interview here.

Comedian Bill Cosby, who has become something of a conscious to many in the African American community, commented on the controversy with three simple words, "I wasn't there." He wants both sides to simply speak the truth and the facts to be examined. He doesn't conclude that the person with the better credentials is a better person, an impression that the Governor of Massachusetts and the President of the United States seems to be conveying.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Rich Republicans and Poor Democrats

How many times have you heard about "rich Republicans" and "poor Democrats"? I am sure the answer is often; but I am also sure you are confused about what is going on in the political market place today.

First, let's look at the incomes of the two major Democrats and the presumptive nominee of the Republicans.

* Sen. John McCain made approximately $400,000 in 2007. Certainly an impressive income and not one that would make you cry "poverty".

How about the "poor" Democrats?

* Sen. Barack Obama made ten times more than McCain in '07 with over $4 million in income. Meanwhile his wife cries poverty over having to have to make "outrageous" student loan payments to their old schools -- Princeton, Columbia, and Harvard (where's the violin music when you need it?).

* Sen. Hillary Clinton, on the other hand, made a whopping five times more than Obama at approximately $20 million. I won't even try to calculate that difference with McCain.

But how much candidates make isn't the only point, is it? It is about the level of financial support they get. Surely McCain receives much more from his rich Republican buddies than either (or even both) of the Democrats? The reality is the exact opposite, McCain has raised a fraction of the $40 million that Obama raised last month or any month for a long time and Clinton consistently raises significantly more than McCain.

The debate about wealth, poverty, and politics, is really quite cloudy. I sincerely doubt that homeless and other poor people (the alleged beneficiaries of Democrat policies) are fueling their Presidential campaigns. In fact, a Fortune Magazine article implied that business was voting for Hillary. What kind of business? The big corporations that can actually afford liberal and big government policies and see such as a way of keeping smaller competitors at bay.

If people do just a little homework, their views of "rich" and "poor", "Republican" and "Democrat" could actually change.

For a copy of the free report, "Why Your Marketing Isn't Working," email Info@HoustonBusinessShow.com and put "marketing" in the subject line.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

US Troops Appear Much Smarter Than Kerry

In vintage (John) Kerry (D-MA) arrogance, the Senator told an audience "You know, education, if you make the most of it, if you study hard and you do your homework, and you make an effort to be smart, uh, you can do well. If you don’t, you get stuck in Iraq.” The natural response to that by me was "ouch." Surely the Senator will own the inappropriateness of the remarks and distance himself. After all, we can all think of individuals whom we know who are well educated and successful and decided to risk it all for their country. The most classic example is Pat Tillman, who was a successful safety for the Arizona Cardinals with a multi-year contract worth millions and who graduated with a 3.8 GPA in three and a half years from Arizona State University with a business degree. Hmm, financially successful, very smart, and a volunter who gave it all for his country. I'm sure his family, friends, and former teammates appreciate that. I personally know of college educated individuals who chose to volunteer to fight for their country when they had plenty of other options.

Kerry was immediately taken to task by the media and the Republican party. I'm sure the rest of us who would make such a stupid remark would quickly apologize. Instead, Kerry has decided to defend his behavior and now describes his remarks as a "botched joke." The "uneducated ones" wasn't the soldiers, he now explains, but the Bush administration who got us "in this situation." I remind the Senator that the President, who is the butt of many jokes because of his unique language, did graduate from Yale and went on to get an Harvard MBA. Also, Bush actually made better grades than Kerry during his college years. Furthermore, it is clear by what he said about the troops that all of our collective interpretation is exactly what he meant. This argument that those who serve in wars are not smart is as old as military history itself. This was the mantra of critics during the Vietnam War and he was one of the leaders in that anti-war effort. And wasn't true then and it isn't true now. Furthermore, those who fought now are actual volunteers, which wasn't always the case during the Vietnam war. This makes his remarks all the more hurtful, in my opinion.

Senator Kerry has been caught, red handed, taking a position that he desperately needed to apologize for and distance himself. Instead he moves from a shovel to using heavy equipment in his effort to destroy his political future. I feel confident that any and all of our troops are smarter then that.