Harry Reid

Harry Reid has created a fire storm of criticism by declaring that those who do not support health care reform are supporting slavery. Don't believe me? check it out. It is interesting that he hasn't checked on the definition of slavery lately. Slavery as defined in the Merriam Webster dictionary is "submission to a dominating influence or the state of a person who is a chattel of another person or group." What I find interesting is that many of the provisions in the health care "reform" bills will establish what many consider a dominating influence of our government over the state of a person. Many view the provision that you could be put in prison for lack of insurance, or fined by a tax levy to be a dominating influence by our government. Most people do not understand that a tax levy can freeze all of your assets and take all of your paycheck or income until the total debt is paid. Does this mean we will be enslaved by our government that we elected? This remark demonstrates the lack of a real education that we as a country have been missing. Rather than ideologies being discussed we are looking to "neutralize" the internet, through net neutrality legislation, thus controlling our ability to express ourselves either in both eloquent and vulgar fashions. The wonderful thing about this country has always been the right to make a public ass of yourself. Harry Reid, in this case, being a prime example. I do not think he should have to apologize for his remarks. He obviously believes in what he is saying. However, I do believe that those who voted for him should take a long look at the person for whom they voted, and the policies and the real effects of what he is trying to do in the Senate. Not just Mr. Reid, but all of our elected officials. We as a people need to take off the rose colored glasses and instead of wishful thinking begin to hold not only our officials, but ourselves accountable.

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There is only one group responsible for this mess, and it is not the democrats, or the republicans, but the American people for not holding these parties accountable rather than reelecting the same people. Albert Einstein said it best "The definition of insanity is doing the same thing over and over and expecting different results." What do we expect? That by rewarding bad behavior we will get a good result. They are all nice people, but without understanding. By bailing out people who cannot make their mortgages, and not helping those who are is rewarding bad behavior. By electing government officials because they promise money from the government demonstrates that we do not understand that they are promising to take the money from us and just give it back at a 40 percent discount. Hand your senator a dollar and he gives you back 60 cents. What about this seems to be a good idea. He even hires accountants to make sure you have all of your 60 cents.

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Slavery is real throughout the world in both economic and terms of how people live their lives. Unfortunately, Mr. Reid got it backwards.

Lehigh Pub in Bethlehem, Pa.--Couple arrested for not paying tip

I knew the folks in Pennsylvania leaned to the socialist side, but this seems to be way too far across the pond. I would expect this in Europe, but in America? A couple spent over an hour waiting for the food, had to get their own napkins and silverware, paid for the food, but did not leave a tip. They were arrested. Why? They had a party of six and the “gratuity” was included. Now, most of us do not have an issue paying a gratuity especially for “large” groups. However, what is implicit is the duty of the establishment to provide a base of service commiserate with the standard service of the restaurant. A “gratuity” is just that, a bonus for a job well done. Regardless of a pre-calculated convenience for both the patron and the establishment, if not earned, the tip should not be paid. Now I know that there are cheap skates in the world, and someone will always try to take advantage of the situation. However, most people are honest hard working individuals that like to see other hard working individuals get ahead. Waiting tables is tough, but that is also why it can be rewarding to those who do an exceptional job. My niece waits tables through school, because she can make more there than sitting behind the desk. The hours are long, and she is tired when she is done, but she is also doing well because she takes care of her customers. Why do we think that there cannot be consequences for our actions? In this case the establishment was busy. Good for them. They did not serve this particular group of customers well at all. Shame on them, and the consequence should be that there is no tip (which is above and beyond the actual cost of the meal).

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It is interesting that it was the couple that was arrested rather than the owner for wasting police time. While the amount may have been printed on the bill, it was not part of the meal. The only good news is the article named the restaurant. I think that is one I will avoid in the future.

Attention Blue-light Shoppers

“There’s no way we are ever going to make money at this”.. The two men charged with insider trading at Bear Stearns we acquitted due to lack of evidence. It is interesting that the most honest quote of the entire sub-prime fiasco was contained in a short email that did not provide sufficient evidence that these two men were trying to manipulate the market. They weren’t, and they couldn’t. What the hedge fund was trying to do was contain the damage and keep the bank afloat from the really poor decisions of those who had determined to get into the sub-prime business in the first place. We can’t blame the executives really. They are measured on how much money they generate for the bank, and in the short run sub-prime loans generated a lot of money. They got creative, they sharpened their pencils, to make a silk purse from a sow’s ear. But no matter how you polish it, when you start with droppings all you end up with are shiny droppings. Myth busters proved that you can get a shiny dung dropping with enough work. Scary. I digress. Back to sub-prime loans. The whole industry was desperate, the housing market could not sustain the growth and they needed additional revenue to continue, so they banks who had lent developers significant sums of money, decided to protect that bad investment with more of the same, by allowing people to gain access to overpriced homes and finding creative ways to get around the credit requirements. Very cool. I myself benefited from this creativity, and I am also currently paying the price for not paying enough attention to what I was doing. Heck at the time everyone was doing it, and we were all convinced that as long as things continued we would all be fine. That is a true statement. We would all be fine as long as things continued to rise. However, like our government we all made the simple mistake of not thinking, and just hoping for the best. Everyone regardless of education, intelligence, or savvy can be taken in based on information that seems right, but only under even minor scrutiny falls apart. We all trusted, but we did not verify. These two men were at the tail end of a long line of bad decisions, and rather than look to things like banking policy, the Federal Reserve and their heavy handed tactics, as well as the change in capitalization requirements, we looked to the hedge funds. Now these really need to be examined, but not by our government (we already know they wouldn’t recognize a hedge if they had to mow it), but by the stock holders of the banks, and through civil courts. The minority stockholders need to become more vocal and assertive in their right to obtain information and ensure integrity of the company. No company is too big to fail, and thus those that use hedge funds as a way to hide fraudulent activities should be banned from all securities transactions until corrected. Unfortunately, these much like the Anderson debacle, our judicial system failed to obtain correct information and understanding of the case and the ramifications of their actions. These two men were a link to the right target, but should not have been the targets.

The Times are Changing

A friend sent me two articles that on the surface seemed to be unrelated. Newspaper subscriptions are falling again, and many executives are “being lured away” from the government controlled company AIG. He wanted to know what I thought of this turn of events. It is not hard to understand, people no longer subscribe to newspapers because they no longer contain news, or information that is relevant or reliable. Most people get the newspaper for the coupons and comics, all of which we can now get on line. Don’t worry, though a bailout is coming and we can be assured that the playing field will be leveled. Net neutrality is being billed and the way to diversify the net. That is a lie. Net neutrality will be used (regardless of which administration is in place) to allow those voices that match the proper diversity message to be heard. Don’t believe me? Check out China, or Venezuela who have filtering placed upon their countries internets to “eliminate pornography, and objectionable material”. While I am not a big fan of pornography, I worry when people start trying to determine for me what is objectionable. I have the solution for porn and most other “objectionable” material. Don’t subscribe, or watch. If there is no market, then people will find some other amusements. The news that the newspapers is a trailing indicator that we no longer have a free press and when the money comes from the government, who will question those in power, when questioning can make you really uncomfortable.

Don’t believe me ask the executives at AIG who are being “lured”, ok they are taking any going offer, to work for someone other than the government. Why? Just because their salaries are being made “fair” and palatable to the American taxpayer, why would they want to leave? Aren’t they happy suffering for the rest of us? AIG and the other companies should have been allowed to fail, but then the company holding the retirement fund for congress would have been out of business. No wonder they are “too big to fail”. No the executives are finding that working for the government is not as much fun as they thought it would be, and that the politicians play for real, and they are just looking to be rich. If AIG would have failed, those executives would have been out of work for a couple of years, and then found a small regional bank or even a division of Bank of American to run. The free market and the concepts of independent people making decisions for themselves is being systematically dismantled, and replaced with a view of entitlement and comfort.

Look at why newspapers are failing. In accounting we are trained to be professionally skeptical, why not in journalism. When a congressman calls the President a liar on national television did any news organization look into why he would endanger his political career? Nope, we just ran the Rutgers, or AP write-up stating that he apologized for the outburst and the president magnanimously forgave him his error. As it turns out the congressman was right. Don’t believe me, just look it up yourself. When the bailout of AIG the mass redistribution of wealth was undertaken and these executive got a first hand view of socialism in the new America. It is interesting that every socialist country is run as a “democracy”, but not many have a say. They put up with it, because they have no choice. We will have healthcare DMV style, don’t believe me visit the UK, and why do Canadians come here for their healthcare if it is “free”. I guess you get what you pay for.

When the government provides services, who do you turn to when they are not acceptable? There is a reason that the founding fathers as President Obama so eloquently put it “if the Constitution "didn’t break free from the essential constraints that were placed by the founding fathers in the Constitution, at least as its been interpreted and [the] Warren Court interpreted in the same way, that generally the Constitution is a charter of negative liberties." The document, he argued, "Says what the states can’t do to you, says what the Federal government can’t do to you, but doesn’t say what the Federal government or State government must do on your behalf." And he is correct. Our founding fathers were very wise is putting limits on what the government can do to you, because the role of government should be what the people decide to allow the government to do, not the other way around. But don’t worry, our current congress and president have been working for a long time to change all of that, and they may succeed. Congratulations, socialists have won. Not with a bang or a battle, but by the day to day wearing away of our will, and we have let it happen, under the auspices of being open minded and not wanting to offend.

So when the government bails out the newspaper industry, remember we allowed this to happen.

The decay of the American Dream

When will we wake up? The recession--let’s call it like it is--depression is forcing many small family owned business to close. These are the businesses that we need to focus on helping to succeed. Why are they closing? Top line revenue reductions, increasing taxation, and they can’t adjust fast enough to keep things afloat. By the way, many of those put out of work will not qualify for unemployment because they were the business owners, and you guessed it, are not employees. While they paid self-employment taxes, the government does not view this group as needing help and are not victims of an oppressive employer, therefore are in control of their own destiny and can afford to be without work.

The problem is that we have it all wrong. Businesses are looking to complete tasks and they hire people to accomplish those tasks. If those tasks repeat, they extend contracts aka make a person an employee. The government also forces the issue by requiring a company to hire people if they are used to complete tasks for a period longer than six months, or if the task can be reasonably described as an ongoing task that would be completed by an employee. Most employers, especially the family owned businesses, are careful about hiring people into the business and come to view all employees as family. It’s one of the mistakes made by these businesses, but also one of their key strengths. The value of these businesses is incalculable from a societal prospective. They show families how to work together, build communities, and keep customers happy. These form a strong foundation for economic and community growth.

The companies that are “too big to fail” are rooted in 15 countries and have no loyalty except to the investors. This is how it should be. But I still assert that no company is too big or important to fail. We need a better tax code, a focus on what is important, and frankly the only thing about health care that we need is to remove government from the managing equation. A group that can’t deliver the mail without losing billions is not someone I want to manage my health in any form. The loss of these businesses is a very good indicator as to how well we are managing our own financial responsibilities.

Obviously we are failing.

Cash for clunkers

Our Government at Work

It is good to see customer service is not dead. Our government has once again extended the deadline for the cash for clunkers program. Excellent. Except for the fact that they are not extending it for you. They are "extending" the program because they have been overwhelmed with demand from dealers that cannot get through for approval. No automated system, you have to wait for someone. Very efficient. Good to know our representatives think of the details. Currently the average wait time is 30 minutes, and dealers are recommended to call back if they are disconnected. It is good to know that our government cares about us. It is the handling of programs like these that gives us all confidence in the ability of the government to be responsible and responsive to what the people need. It is also good to know that they are using our money wisely. Remember the transparency thing? We spent 3 billion of your money so that someone could get a new car. While I am sure these individuals are very happy with the new car, did you enjoy paying for it? Yes, all tax money comes from your pockets, including the interest we are paying China to hold most of our debt. Congratulations, the 3 billion will be 3.9 billion, that is 3,900,000,000. It will be interesting to see how many cars were actually purchased for that money. If you take the 3 billion assume all 4,050 was used, 740,000 cars would have been purchased, but only 625,000 were actually purchased. Meaning that 115,000 cars were not funded due to overhead for the program. That means that over 20 percent of your money was used to make sure that when you bought someone a car the rules were followed.

Remember why the program is being "extended"? The money is still being spent, and more money will be required to shut the program down. The program is being extended to allow for dealers to call in and obtain approval when the whole system has been unavailable. Bet you won't hear about that as a lead in on CNN. These things are buried on page 6, and thus most people won't see them, and others will refuse to acknowledge what they mean. Examine the actual expenditures of our federal system sometime. Programs like Amtrak has never been profitable and we sink an average of 4 billion a year into the program. Our post office is an example of the fine customer service we can expect when the Cap and Trade bills go into effect and our healthcare is managed by the government. Talk to veterans who must receive healthcare from our VA system or the Bureau of Indian Affairs to see how happy they are about their care. Take off the rose colored glasses, ask hard questions like do I really need to help pay for someone else's car?

The Depression is not over...

Yes, this is a depression. Regardless of what those trying to garner votes for various initiatives are trying to tell us. A depression is defined as a period where the GDP is reduced by 10 percent. Since we have over 10 percent unemployment (the government numbers only reflect those who qualify for unemployment benefits). These numbers do not include things like the small business that has gone under, and the owner who is now looking to recover. So the article in the LA times that "Retail sales fall 5.1% in July despite back-to-school lures" , is merely stating what a reasonable person could deduce without a lot of thought. However, it seems that people are confused. We have taxes and government encroachment at record levels, companies closing, and unemployment at the highest level since 1983, and the Market Oracle in the UK is calling these numbers Depression levels. We are decimating entire submarkets with programs like the "Cash for clunkers" which is nearly crippling the spare parts industry which has relied upon salvage to continue. With the government destroying the cars that supply the spare parts they are ensuring that we will be forced into the new models that are "green" and environmentally friendly. Much like the light bulbs that use less electricity, have only a slightly longer life span and are filled with toxic and hazardous mercury. So if we dispose of them in the landfill we pollute our water supply much more than a clean coal factory will produce carbon gases.

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So retail sales are falling why is this a shock and why are we surprised? We are not building anything, we have outsourced many of the technologically sound jobs to India, the Philippines, and Mexico, but we have kept the really important fast food jobs here. It is tough to afford designer clothes on a McDonalds paycheck. This will impact everything, not just clothing, but technology and every industry within this country. We are not creating things or even managing them, we are putting money into a mismanaged and now government controlled financial services industry, which is making 38 billion in nothing but overdraft fees. The solution is actually simple, it is just no one really wants to go through the pain. Much like diet and exercise, we need to put discipline upon our spending, and realize that life and everyday is a gift and not a right and start treating them as such. We do not need insurance to pay for all aspects of healthcare, we do not need the government to buy our cars in exchange for others that fund the general fund, we do not need a social security system. We need to start taking care of ourselves and taking the government out of the equation. The argument is that some people can't take care of themselves. True, but then we the people can figure out how to solve that problem and not pass that responsibility to another. The Bill Gates foundation has immunized more people in 1 year than the UN has in 10, for considerably less money. The difference? Someone who actually cares, and a group that exists for themselves. The government is filled with brilliant people, in a twisted and self focused system. We need to take those people and let them go back to industry and solve real problems instead of creating them.

What Branson’s sale really means...

In the course of human events people, companies, countries and the world evolves and changes. Mr. Branson’s unique rise has obviously fallen on some hard times. While the decision to sell his mobile phone company may have been to help pay for his hobbies, the decision to sell a large stake in Virgin Galactic to a cash rich group is telling about how well the US and European economies are fairing. It seems that the large amounts of cash flowing from the US and Europe into the coffers of the ruling families in Abu Dahbi and Saudi Arabia is paying dividends. You can tell how well a country, company or person is fairing based on investments in infrastructure. The poor do not invest in roads, high end hotels, clean water, bridges, or other infrastructure because they do not use those things to survive. Growth becomes how do I get through tomorrow without starving. If you want to see the contrasts, look at Africa compared to the rest of the world. Continual war, tribal focus and corruption have lead to the stagnation and death of entire peoples.

The sale of a portion of Virgin Galactic provides the needed cash flow for Branson’s empire, and allows those in Abu Dahbi to have yet another large accomplishment to show, when Branson beats all others to establishing a community in space. Mr. Branson is one of those individuals that whether you like him or not, you must admire the intrepid spirit and gumption. The fact that he sold the stake to the Middle East shows how far the US has fallen behind, not only in equity, but in though leadership and direction. We are focused on the “right” to healthcare, while the team in Abu Dabi is focused on a legacy and growth. Branson makes obtains a boatload of money, and the rest of the world looks for someone to blame for not being great, some are focused on doing the hard work necessary.

Do not look behind the curtain; you may not like what you see.

It took a lot of searching, and that should say a great deal about what this blog contains. President Obama fired the inspector general who was investigating a former Phoenix Suns player and now the mayor of Sacramento Kevin Johnson, for misappropriating funds. This would be news anytime, but the fact that the president fired Gerald Walpin while one of his friends and political ally was under investigation. Mr. Walpin is not going quietly into the good night and is firing back. Regardless of what you think is happening here, the fact that the Chief Executive fired an investigator at all is not standard procedure and I guess the president has not learned to keep his hands clean when doing dirty work. It is also interesting that this story is difficult to find except on blogs with the exception of fox news. Let’s face it, if the investigation turned up that Mr. Johnson was guilty, he would have done some jail time and lost his job. But the investigation has been stopped. Where is the replacement Inspector General? This seems to confirm rather than allay Mr. Johnson’s guilt. Who is watching the watch dog, is becoming more a concern than ever. To whom can we turn when the government is not accountable to anyone?

If the government is providing us our information, our health care, our wealth, then whom do we turn to when “they” decide to cut benefits, offer substandard service? All competition is being eliminated, we cannot get better healthcare because the government will decide what is sufficient and necessary. Where will you go if you disagree? Will you leave the country like so many Canadians are forced to do today? But where will you go Mexico? What happens when you are taxed by the number of miles you drive your gas powered car? What if it turns out that the mercury laden light bulbs cause a greater environmental hazard than the old incandescent bulbs that are no longer able to be manufactured here in the US, because they use more electricity? Who is watching those making the rules? When an IG is fired (for whatever reason), a follow-up investigation should be conducted of those involved to ensure a lack of impartiality. We have no accountability and that makes our problems larger.

The Fed finally figures out how to take the money back

If you have been following the story of the TARP money, and the government’s quandary as to how to take their money back, then you will be gratified to know that after 4 months and several large interest payments later, our government figured out how to take money back. Ironic, as taking money from others is their primary business. It is interesting that the 10 big banks given approval to return $68 billion in bailout money had to get permission to pay back the money. Most of those banks will welcome the lack of restrictions on salaries, bonuses and other payment structures that the executives missed very much. It is good that the executives from these banks have been exposed to the bad lending practices they practiced. It is also good to see them make the same mistakes that we all make in assuming that we can quickly repay a loan and not get in over our heads. I also found it ironic that it took the treasury 4 months to figure out how to take back the TARP funds, all the while charging interest. I guess the incentive just wasn’t there.

We have a systemic problem of many people who mean well, but have a profound lack of understanding. Mr. Guithner is optimistic that we have turned the corner, while expecting over 1/3 more banks failed thus far this year than all of last year. Without revenues, the banks will not be able to function and businesses will continue to fail. The Small Business Association (SBA) has many programs but they do not control the lending. They merely “facilitate” and provide the rules for guaranteeing loans from banks. As of June 10, 2009, Bank of America has not issued a single SBA loan, while being listed as a preferred lender. The government is not able to help because the rules dictate that they cannot force someone to lend, nor can they show preference, however, they can set the rules for lending. So having a great government program is only in the imagination of the legislature. The problem lies, as always, in the execution. Not enough details are provided in the program design and there is no incentive to move quickly or efficiently to bring these programs to the public. Who would we complain to anyway, the government? Which department has oversight to government abuse and corruption other than our press who has historically been biased and unable to perform even the most basic analysis of the information they provide? When non-government organizations are irresponsible we have remedies such as litigation and regulation. Who regulates the regulators? This is why government providing services is usually a bad idea. If the government wants to save money by cutting administrators of a program and no one returns calls to those trying to access a program offered, who wins? Who would we the people turn to, and how would we find help? When the wolves have become the shepherds, it is not a good time to be a sheep.

Why bankruptcy alone will not save GM or Chrysler

GM has finally declared bankruptcy, unfortunately not before it was nationalized. We have now nationalized our financial service industry and our manufacturing sectors. Welcome to the new socialist world. Read the GM White House fact sheet. The government has repeatedly declared that they do not want to run the company, except that they are dictating that more fuel efficient vehicles be made and the government of Canada is also a part owner. Congratulations, the rules have changed. I have discussed this in past entries, but I think this is the best illustration of rule changes that we have to date. The company’s bond holders have been relegated to last in line, while the common stock holders who “get a greater return because they assume a greater risk” have now been moved to the head of the line. Why? The government who “does not want to have an equity position in a company” now has one, and under the guise of shared sacrifice, appeals to our short term vision and will only extend our pain in the long term. There is no company too large to fail, and it should be painful. These lessons teach us that failure is not the end, but it does hurt and you have to be resilient enough to endure. It seems we have lost the ability to live with failure. We do not hold student’s back, because no child should be left behind. With failure comes lessons and as Henry Ford said after the first assembly line failed “Failure is the opportunity to begin again, more intelligently.” We are failing to learn from the lessons of California, GM, and a host of other examples, because there is no pain. The failure of GM is a psychological failure on a personal and organizational basis. The Unions forgot their missions to keep the company from overstepping reasonable bounds. They took out the reasonable part and went after everything they could get, and were very successful.

Why will bankruptcy not fix GM? The psychology has not changed. Frank Durant the founder of GM decided to go into the car business after his buggy business failed because of Ford. Ironic. This is why we need history. We need the destructive process to create something better. Who knows the best industry creating idea could be just waiting for enough pain to get started, but by supporting a failed company, we reward failure and suppress the very things that make success rewarding. If you look at any story worthwhile, the hero is always terrified, always an inch from death. Do you think the hero or heroine is enjoying themselves through most of the story? Is there a bailout, just in case they don’t make it? As a zen master would say it is the journey that is the reward. Unless we undertake these scary, painful and testing journeys how will we know what we are destined to accomplish? The hero of the story never really plans to go out and be terrified, but in spite of everything they keep trying and have faith they will succeed. You can only fail when you stop trying.

Growing up my father pounded the “don’t work, don’t eat” motto into my head. It has kept me going through some very tough times. Because I know I don’t have it in me to grovel enough to get the government handouts. I don’t and won’t tell a sad enough story. We have choices in life, and the government has become the great enabler of our addiction and has learned to play on our fears and sympathies. This is how our officials are elected, and why we struggle to solve problems like social security and Medicare. We are no longer willing to make the true sacrifices necessary to solve the problems. Until we fix our psychology we will always be victims and you will continue to see more GM stories. The social drama we see playing out is an example for most of our individual lives as well. We must have faith not fear and focus on what we want to accomplish and then never give up.

Trouble with GM

We all know the troubles the US automakers are having with the press. The LA Times sensational story General Motors moves to shed 1,100 dealers on May 16th was indicative of the problems within GM and with our press. GM’s woes are familiar to everyone by now. Billions in tax dollars spent to resurrect a mature company in a mature industry is generally not a good way to turn things around. Don’t get me wrong, the team at GM is industrious and committed to what they do. They also are encumbered and inhibited by the internal give and take that is indicative of all large organizations. We see this especially in the government, but it is visible in all large organizations. The bureaucracy takes over and has a life of its own. Executives cannot rise into positions of power without negotiating the bureaucracy and thus are shaped by it. GM Europe and GM North America have long been in an adversarial relationship and no one on the board or the executive team was willing or able to take on the challenges to bring the two organizations into alignment. Now that move is unnecessary as GM Europe will be spun off. The move to shed 1,100 dealers is too little too late. By not taking smaller but braver moves 5-10 years ago, the executives are taking the only options left open to them. In a maturing market, they did not start consolidating domestic dealers, and expanding overseas activities, but stayed the course right into bankruptcy. There are many books and business examples that the group could have leveraged, one of the most popular is If it Ain't Broke...Break It!: And Other Unconventional Wisdom for a Changing Business World all talk about how to initiate change and the need for reinvention within organizations. GM got comfortable and the people inside thought things would never change. Chrysler was the same except worse.

The lesson that we need to take from GM is the one Microsoft’s Bill Gates learned early on. All it takes is one new idea and if they aren’t the ones taking advantage of it then they will be out of business, and so will 1,100 dealerships. In order to avoid the same fate as GM, companies must listen to the dissenting opinions within the group. Though politically incorrect and sometimes annoying, they are also the group that brings the ideas and are willing to communicate through the clutter of platitudes and obscure language. Pay attention to the person who says we need to change how we do business, or “this doesn’t make sense”. Even if it is a training issue, the underlying cause could be an opportunity. The world admitted 4 billion additional players to the market in the last 15 years. India’s Tata now owns Jaguar and they are not encumbered by anti-trust legislation or regulatory reporting to anywhere the same degree as US companies. We have to be better, quicker, more adaptable, and much less comfortable, unless we want to be GM, a company of great people, wanting to do the right things, but not willing or maybe not able to look at the consequences of their actions.

The New Labor Market (What’s the deal?)

Americans are beginning to realize that the relationship between those who need work done and those who can do the work is changing. Notice there was no employer/employee relationship established here. The days of someone working for 30 years disappeared 20 years ago. In a study for the department of labor done in 1999, Susan Houseman correctly identified the “contingent worker”, as a trend in the market. 10 years later we are only now seeing this trend on a mass scale. Independent contractors hired to do a specific task for as long as the contractee is willing to pay. While the department of labor will force companies to classify these individuals as employees, the result is the “employee” will only have a position either until that duty can be performed by cheaper labor (off-shore) or until the business changes.

During the .com boom legislation under the Clinton administration allowed and encouraged investment in India, China, and other countries to support the technology boom here in the US. When people realized that many of these ideas, while great, were not necessarily the economic boom that they thought they were, the money dried up, but the trained talent pool did not. From an investment standpoint and for Walmart shoppers everywhere, why would you pay $40 dollars an hour for an accountant, programmer, automotive assembly line worker, or any other group when you can pay $5-10 dollars per hour and hire twice the number to achieve the same productivity? Pay less in benefits and have a larger workforce available and be able to work 24 hour a day. This becomes a very simple equation. The truth is Americans need to get serious about changing our labor laws to facilitate contract labor and enable those who will be changing jobs every 3-5 years a much more flexible framework in which to operate. This affects everything from the 401k to healthcare. Universal Healthcare as proposed will be an excessive burden to all concerned and still not address the primary issue of how individuals can tap into a privately managed healthcare industry while freeing them and employers from having to bear the burden of insurance. We have an insurance problem not a healthcare problem.

These are but a few of the issues that I will begin talking about in the next few entries.

AIG, Congress and the pot of gold

As a management story, it just doesn’t get any better than this. It has all the elements, good guys, liars, betrayal. How did we get here, and how do we put up with all of the excuses being thrown around? Most of us are feeling buyer’s remorse. We spend too much money to bail out a big bank and now we want a refund. Unfortunately, it is past the three day limit and we are not going to get a refund. Even if AIG paid all of the money back tomorrow, Congress would find some other rat hole to throw it down, all under the auspices of doing the “right” thing. What we as a people struggle with is sometimes doing nothing is the right thing. If we had not bailed out AIG, we would have had mortgages and other subprime assets on the books a while longer. They would not have been able to foreclose on homes as the staff necessary to complete those tasks would no longer be employed. The loans would have been either written down or off as part of the bankruptcy filing and the assets would have been acquired by either a Chinese, Dutch or British bank.

We keep making excuses for failure, and this is why we fail. It is not considered polite to actually say that someone failed. We all know that there are always extenuating circumstances. What we have seen over the last week has been outright lying, on the part of Geithner, Congress and AIG. The week started out that no one knew anything and by the end of the week we knew that the bonuses were actually spelled out in the deal. I actually am siding with AIG on this one, since they had the deal signed and everyone knew that these bonuses are in line with the industry and that they were within the standard compensation packages, I think the government’s team should be explaining how that language made it through in the first place. The only reason anyone said anything about this is the fact that it was leaked to the news and thus the political engine took over. Had none of this been reported then no one would have ever known. The reaction was evident in the wall street journal article “The WSJ’s Future of Finance: The Problem With Populism”. The finance community feels betrayed by the obvious playing to the gallery grandstanding that congress has engaged and Obama is trying to mitigate.

If you look back at my previous entry, I noted that the financial group bailout was done in the back room while the auto manufacturers were completed in full view with the posturing up front. Now as the details of these deals become available, people are suddenly shocked, and those involved are looking for plausible deniability. They are also looking to take the outrage and channel it into the authority to take greater liberties with the tax code and target individuals. This is a very dangerous activity. Unfortunately, most do not see the danger. By “punishing” the people who took approved bonuses (under the guise of excessive bonuses) they will establish precedence. This precedence will allow them to target any group for any reason that may be unpopular. See “AIG's Bonus Unit Now in IRS's Sights” is an example of the lengths that business go in order to minimize the tax burden, and why the tax law is currently untenable. It is very simple for Congress to initiate rules that would add penalties for some and loopholes for others. With millions of lines of legal code how would the average person understand or know was or is being taxed. As an accountant, this level of complexity guarantees that people and companies will not be able to comply. Thus making the decision as to whether or not you will break the law into which one will you least likely be caught breaking? AIG did not break any laws, they paid bonuses they were contractually obligated to pay. Whether this was a good decision or not will never be determined because of the emotional fury being spent. Things that Congress could help fix would be to allow shareholders to write-in board nominees during shareholder voting, and to hold board members liable for at least a limited amount of damages. Unfortunately, we are looking at the problem and spend little time talking about realistic solutions rather than punishing the inappropriate people. If we wanted to hold the people responsible for the AIG bonuses accountable, at least a dozen members of congress, a good delegation from the Treasury department and a number of AIG executives would all be out of jobs tomorrow. Unfortunately, most people will forget about this a week after the media stops reporting. The 24 hour news cycle keeps us so focused on the immediacy of what is happening without being able to focus on the root causes that we never complain about everything and solve nothing. But it does sell advertising time.

G.M. Lays Its Future on Washington’s Doorstep

“Danger Will Robinson! Danger!”
http://www.nytimes.com/2009/02/27/business/27auto.html?_r=2&ref=business

We need to have our own little Robby robot for just this type of warning. GM goes into bankruptcy… Let’s look at facts, they are outsourcing and off-shoring most of their labor already. How much is still an American company? More Toyota and Honda cars are manufactured here than Ford, Chrysler, and GM combined. The Unions have strangled not only GM but it’s suppliers to the point that they cannot be competitive. I was watching the Discovery Science channel and the really interesting innovations for electric and hydrogen powered vehicles was from France. France? Why are we not the leaders of innovation? Have we lost our ability to compete? Are we too far gone? We have the ability to compete again, but we need to shed our illusions and begin dealing with reality. President Obama is doing what he and his party have been espousing for many years, a highly involved government with influence and the muscle to back it up. He has maintained his election promises and is poised to expand. Let’s face facts; GM (while in general much better run than Chrysler) has placed itself on the verge of disaster. With a bloated bureaucracy and a rigid structure they reflected a government entity in many ways. New ideas had to submit a form for approval, had to pass a standards committee.

This is nothing new but merely a reflection upon an organization that has lost its focus on the primary mission. When were they going to build better faster, more fuel efficient, greener cars? They gave up the lead thinking that being the biggest meant being the best. Bill Gates at Microsoft was always accused of being paranoid; now look at Microsoft in the market.

I started to think about how much creativity 19,000,000,000 or 19 billion dollars could buy. That pays 200,000 people 95,000 dollars up front. This is only for 6 months for GM. This tells me that most of their employees are making more than 95,000 per year, and that utilities, IT and other expenses are equally high. It does not sound like a place where creativity or innovation would be allowed to flourish. There have been many books written about this danger and how the larger the organization the less productive and the more bureaucratic in nature (explains many of the issues facing our government). This bureaucracy degrades the quality and ability to generate new innovative products. Many companies have tried to institutionalize innovation such as 3M, GE, and Apple. Although, I believe Apple will struggle once Steve Jobs disappears from the scene as he is such a huge force within the company and the industry. GM does not have a Steve Jobs, they do not even have daring leadership. The GM story is about playing it safe and showing acceptable numbers, “Meeting expectations”. This is dangerous for not only companies but people. If you always take the safe and easy route you do not grow. Companies are the same way. All of the automotive companies in the US, and a few that have started down that path. Microsoft will be where GM is currently if they do not do some drastic changes, like separating the OS from and applications business. Going to war with European regulators, and the US anti-trust groups has proven that they cannot play the political game, so in order to use the 42 billion dollar war chest they either must pay dividends or go on a buying spree. Now is not the time for timidity, but for bold action that goes contrary to playing it safe. While I disagree with the use of funds I have to admire the president for taking large steps. I just hope they are not off the end of the cliff. That is the danger with large bold steps, sometimes you fail boldly and miserably. On the upside your success is written up and studied. Have faith be bold and things will work out. Do not give up on the little failures as these are really lessons for your success. The only failure is when you stop trying.

GM and Chrysler got comfortable, got lazy. Management and the board voted themselves large salaries, and the unions used that to negotiate wages far and above where the rest of the world. Because of this we are funding investments that will come under more and more pressure, and without the tough skills of bringing the company back on their own, they will continue to fail. Tata is waiting in the wind with the purchase of Jaguar to expand. India does not have anti-trust regulation and they will be happy to attend a fire sale. GM and Chrysler should take the companies into chapter 11, and reorganize if they want to survive. They may still do that, but I do not know if they will have the courage to transform themselves into companies that will be able to compete in the global market. While GM has Opal and other subsidiaries, they do not behave as a single company, nor do they play together well. Chrysler has similar issues with their subsidiaries. Instead of off-shoring the engineering groups maybe they should create global engineering groups that collaborate, not just chase the lower salaries.

Nineteen billion, enough to pay 200,000 people $95,000. We need to think about our investments. That could take us to the moon, develop hydrogen fueled vehicles, or install solar panels on every house in America. Should the tax payer save a failing company, or something that has a future? If GM and Chrysler can turn things around then they have earned the right to survive and they will be stronger, leaner, and better able to survive the future. Time to get off the laurels and get busy.

Accountability

We have heard over and over the term accountability, and that we need to hold those accountable. What does that mean? Webster’s thesaurus defines accountable as follows: “being the one who must meet an obligation or suffer the consequences for failing to do so, “the owner was held accountable for his dog’s biting of the child.” http://www.merriam-webster.com/thesaurus/accountable . Simply, one must suffer the consequences of one’s decisions and actions. Willful negligence is an action that has been used to buffer legislators and executives for decades. Where is the AIG executive team and why are they not falling under a class action lawsuit along with the board of directors who allowed the behavior? Sarbanes Oxley was a first step to try and bring any form of responsibility to corporate America. However, since the congress has never experienced fiscal or personal responsibility, they really didn’t understand how to write the legislation necessary.

In general, there is a lack of specifics throughout corporate America as well as in our government. Being accountable is not just getting all of the negative things thrown at you either. Sometimes you are not the guy for the job, and that should not be held against you. Being accountable also means taking responsibility for stepping aside when someone or something more adapted to the environment is presented. The hard part, for those who are accountable, is we often get our lives and identity imbedded into whatever we are responsible for or accountable to. Let’s be specific. For accountability to be usefully we must be able to specifically answer the “w” questions:

· Who is accountable?
· What are they accountable for? Specifically.
· When are they accountable for the actions and decisions?
· How long are they accountable for those actions and decisions?
· Where can we address problems and to whom?
· Why is it this person and not someone else?

Accountability is an individual thing, and if a group is going to be responsible, then every member of the group must be held accountable for the actions of all of its members. That is why Arthur Andersen is no longer in business. A 100 year-old company was dissolved within 30 days based on the actions of a few members. Accountability is a lonely and scary place. It means that we are judged by the content of our character and actions, not by the color of our skin, eyes or any other arbitrary criteria. This means living with the consequences of actions and decisions without a safety net. This is why leaders are those who will take on the hard jobs, make the tough decisions tempered with the understanding that part of the learning process is to make mistakes. As a culture we have problems with this attitude and the Japanese are really tough with it, just ask those samurai who failed in their assignments. There should be balance. People will make mistakes. They must in order to learn. Part of that learning process is to experience the consequences of your actions. The pain involved is a teacher. That being said, the fact that someone made a mistake should not be held against them, what should be recognized is if they learned and what they did learn from those actions.

Now what does this to do with the state we are in now? We should not be bailing out the banks. There is no company too large that we cannot survive its demise. As a company goes under, much like Bears Stern investments, there are those who will procure pieces of the company and let those that should be dissolved dissolve. This will engender the class action lawsuits and the rest to aid in the dissolution. The things that would help legislatively would be to strip some of the protection from the board and CEO’s from shareholders. Shareholders must also feel the pain of losing their investments and not forcing board changes. As a group, we have been negligent in exercising our rights to change the board of directors. I know that the Yahoo board is probably not happy at turning Microsoft down during the last round. Unless they can completely change direction, the company that truly created portals and web capabilities will be a thing of the past. If we can live without Yahoo, we can live without AIG, or Citigroup. Those people who were employed by those companies are now free to explore alternative opportunities. They may start their own companies that fill the need and void left by the large company’s demise, and become rich in the process. If we cannot change and adapt we will die and the next culture will take over.

The government bureaucracy has demonstrated consistent mediocrity in decision making. The disasters of the Katrina rescue and the subsequent rebuilding fund management. How were the billions of dollars spent? For an interesting exercise, try and find out how much was actually donated, spent and used for hurricane Katrina recovery. Then try and find out how much Homeland Security spends. We have taxation without representation and that should be a concern for everyone. The same goes for CEOs. How to you tie compensation to performance? How do you establish compensation that is fair and based upon achievable goals? How do we, as shareholders, hold the board accountable? These groups are so large and hidden behind rules, infrastructure and legislation that it is impossible to hold individuals accountable.
For instance, how does an organization hold people accountable when things breakdown? Why in 1909 during the earthquake in San Francisco did individuals get into cars and have soup kitchens and take in strangers to help while we had National Guard units turning those trying to walk out of New Orleans back into the flooded city? Why do we not ask the relevant questions of a mayor who shut down bus service the day before the hurricane hit, and the governor who turned down repeated proposals from the Army corps of engineers to fix the levy system due to lack of federal funding? With billions in federal aid, why are the levies still not fixed? Who is accountable? The answer is no one. We, as a people, generously gave but did not use our heads to ensure that the money was spent well.

Accountability and responsibility are the cornerstones of any functioning society. Oppressors and tyrants manipulate the press and people by focusing and refocusing people’s attention on grand issues that can never be addressed as they are too broad and no one can be held to task for fixing or addressing the problem. If you do not think this happens here in America, look at any news broadcast and ask yourself, who could realistically be responsible and accountable for the topic at hand? The bailout is a prime example. How much “pork” is built in? Who is going to be responsible for reporting on the billions? Will we care six months from now, when it is no longer in the news, or will it simply disappear into the nebulous rhetoric that is spewed by the left and right of the podium? Accountability takes thought, careful and judicious application tempered with understanding and the courage to actually stand-up and be accountable.

History

One cannot under estimate the power of imagination. Barack Obama has captured the hopes and dreams of a nation and a people. This can be seen in just the number of people who have come to see the first black president sworn-in. http://news.yahoo.com/s/ap/20090120/ap_on_go_pr_wh/inauguration_scene

It is truly amazing that Martin Luther King’s prediction that this event could happen in 25 years but probably in 40 years. Forty years from that prediction in 1968, Barack Obama is elected. We have truly come a long way. We do have a long way to go in order to have open and honest conversations about race, and economics, but today we have at least answered part of the dream that we are capable of judging someone by the content of their character not by the color of their skin. It is a great day, and one that will change our views of the world forever. We cannot underestimate this moment, nor should we.

Several of things come to mind as we go through this day. We have elected a man with a Middle Eastern background, who has been raised with Muslim and Christian backgrounds. There will always be those (of any race) who use race as a divisive tool, but today we know that race should no longer be a discussion as a barrier to opportunity. As my grandmother use to say “we have bigger fish to fry”, and as a country we need to focus on the right things and be ready to make choices that are not based upon feel-good politics, but reasoned approaches to solving difficult problems. Not everyone will be happy.

I hope that several things that President Obama mentioned in his speech come to pass. The most important is the cutting of programs that do not meet their objectives. He singled out several such as social security, Medicare, overall health care, and Home Land Security. With the exception of Home Land Security, these programs have been under scrutiny for over 30 years and have not been reviewed, reconditioned, or even modified. Let us hope that we can address issues such as people owning and controlling their destiny. If people make mistakes, then they must live with the consequences of their actions. This is contrary to what we the people have been seeing happen to those in leadership positions. United Airlines, the Big 3 automakers, Wall Street, all have dodged the proverbial bullet, and have not had to live with the consequences of their actions. If you or I went to the bank and took 500 dollars from the till, we would be in jail with killers and rapists. Madoff is not in jail for bilking billions, he is under “house” arrest in his 7 million dollar apartment. This is what makes people upset.

We are an amazing country, in that we can look past things that have divided us in the past and move forward with new visions. Let us continue this move forward and begin tackling the hard issues and not waiting for someone else. It is not their responsibility it is ours.

U.S. Seeks Rest of Bailout Cash

The definition of insanity

We have to be insane. We keep doing the same things over and over again and expecting different results. Maybe if we just keep dumping money that we do not have into a poorly run organization that has overpaid their executive teams for years, things will get better. In their Wall Street Journal article, Deborah Solomon and Damian Paletta write that, our president “on behalf” of the incoming president has kept alive a program that most seem to believe is a failure. http://online.wsj.com/article/SB123177778175873781.html

In my non-scientific polling and based on the results of the wall street journal poll most would give the program a failing grade. Why? The government is continuing upon its standard course of a poorly defined vision (clear ones alienate some constituents), a complete lack of accountability (someone may not get voted in next term), and a completely missing objective (other than fix the economy). Our objectives are so vague is it any wonder that we cannot seem to get our arms around the problems, and we cannot seem to make difficult choices because they are painful. Wait, isn’t what everyone is enduring now painful?

Lack of a clearly defined objective

What do you want for lunch? Most people struggle with this very simple question every day. If you really want to get confused, ask a consultant what to do for lunch and you will get 5 different options. It’s not the consultant’s fault, it is his/her job to offer options and not express strong opinions either way. If lunch is an issue, then what to do when things get a little more interesting? If there are 50 people offering 50 different solutions to your financial problem and 15 of them even sound like they could offer a solution, what do you do? The mistake is not being specific enough. The more specific something is defined the better the likelihood of a solution. We keep refusing to go below the “fix the economy”, or “fix mortgages”. Politicians are experts at redirecting us back up so they can offer solutions that are both nebulous and undefined. This method allows for when something does not go as expected it is not their fault, and if anything goes right they can take credit.

What does this have to do with the current economic and geo political situation? Everything. There are no clearly defined issues, therefore no clearly defined solutions. We wander through a morass of nebulous thinking and feel-good solutions. As long as everyone feels good about the solution then everything is fine. This is why we have not found Bin Laden, addressed a crumbling infrastructure, not funded some programs such as “no child left behind” and over funded others such as the war in Iraq. Individual members of the House and Senate are not accountable for granting themselves pay raises and only stop when they think the American people would not “feel good” about giving them a raise, like right now. The vote to not allow a raise had nothing to do with fiscal responsibility but how they feel we will feel about the situation. There is not an objective to balance the budget, control spending, or invest in industries that will take America into the future. Short term thinking and plans allow this behavior to continue.

We need clearly defined objectives; this means that we have included clearly defined measures for success. You get what you measure and compensate. People (that includes Senators, Representatives, Presidents, and business leaders) behave accordingly. Unfortunately if you measure and compensate differently, then you get what you reward. This is has been proven by behaviorists for decades. We have been rewarding our leaders on only single measures. In politics, how much money can you generate for the party committees? In business how much stock price gain? These measures are not balanced with anything. Until that changes we will continue to complain.

Lack of a well defined plan

Problem Solving 101 requires you to clearly identify the problem BEFORE the solution is contemplated. Right now there is 350 billion dollars of a solution looking for the problem. Bush and Obama are demanding that congress release those funds, but to whom? How will these funds be dispersed? How will they be accounted for? Will these funds be paid back or are they a gift? If a gift, I would like some of my money gifted back to me. I digress, the problem has not been clearly identified, and we are throwing money at an area we know is problematic and hoping that something miraculously solves our dilemma. Hope has never been a good strategy. It is a fundamental ingredient for success by providing the drive to identify the problem and a solution. The problem of the banks not lending is a banking problem. While getting to play with someone else’s money is a great thing, they are playing with our money and lending it back to us. This is smart for the bank, not so much for the American people. Where is the 50 billion that went to Bank of America? It was for loans. We could have paid off all of the mortgages between the Appalachian and Rocky Mountains. I think that would have been a better use of the money than the black hole things are flowing into today.

Let the American people figure out how to spend this money. Invest in them, pay off the mortgage, and see where the extra money is invested. I bet we start doing amazing things such as going into space, fixing the bridges and roads, or even correcting the educational crisis that is affecting millions. I am sure that it would even create a few jobs.

Lack of accountability

Obama’s choice for the Secretary of the Treasury, Timothy Geithner, has many concerned. They should be. Why would you put someone who will be heading the IRS in place who is in trouble for not paying his taxes? While I am for the abolition of the IRS as much as anyone, the arrogance in choosing the highest ranking individual to oversee the department of the Treasury reflects the lack of thought to the repercussions of the choice. At this time we need people who can think of solutions, understand the impacts of those choices, and be able to look in the mirror afterwards. At this time we are lead by committee, and no one individual (with the exception of the president) is called to task. It is always Congress (which side, the House or the Senate?), and is it one, several or all of the members? If a democrat has a good idea, must all republicans automatically reject it publicly and then vote for it as if ashamed? There are serious problems facing this country, and thus creating serious problems for all who live and work here.

The lack of accountability is prevalent in the spending bills that, by the time the pork is finished, the bill that would actually have done something positive becomes unrecognizable. We do not make projects stand on their own merit, nor do we hold those managing them to be accountable. That does not mean that if someone makes a mistake that they are immediately crucified, which is too often the case today. People make mistakes. We must be accountable to the solution as well. Did we contribute to the situation, and what is our level of accountability? The American people are responsible for the situation today. Our votes and lack of participation have allowed the current environment to flourish. We can fix it. It will be difficult and we must come together in order to affect real change. If we want control in our lives we must first take responsibility for ourselves and then hold others to the same standard.

What can we do?

Each individual must understand their role in the overall situation. I find many interesting corollaries in history that tie today to the periods before the French, American and Russian revolutions. The excessive taxation of the populous contributed to all three revolutions. These did not happen overnight and each would have been avoided with different choices by the leaders. Today, many disillusioned individuals are joining more radical parties such as the National Socialist Movement. This dangerous trend is demonstrating the key problem of letting something other than reason govern actions. These parties play on the fears of individuals with key topics much like the democratic and republic parties have done in the past.

Make a study of a particular problem that is important to you. Study it, read for 1 hour a day and gather information on that problem. At the end of a month you will know more enough about the situation to make a meaningful choice for action. Develop a personal plan for affecting others into building a group plan. Then take things one step further and assign tasks and hold people accountable for executing the plan. Lastly don’t quit. Things will go wrong, the situation will change, be willing to adapt and know when your objectives are being met. This is not rocket science, but it can be difficult. Keep on track and measure your success. We can fix everything, one step at a time.

The Financial Services Bubble Burst

First there was the .com bubble...

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First there was the .com bubble, then real estate, then our credit markets. How do all of these things relate? Simply in people's desire for the easy way to be rich without the understanding of the sacrifice necessary. Thierry Magon de la Villehuchet, who recently took his own life, understood this concept including a few others such as honor, integrity, and courage. http://www.bloomberg.com/apps/news?pid=20601087&sid=aSZkOg5o2apk&refer=home

The SEC could not have protected anyone from this...

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Unfortunately, he paid the price of not doing enough due diligence and relying upon a government agency to do the job many thought it was assigned. The SEC could not have protected anyone from this anymore than the FDA is stopping the toxic insertion of products into our foods and medicine. Remember the dog food, baby formula and lately heparin? We as the public have made two critical errors that have allowed these things to flourish. The first is we have turned our responsibility to of due diligence over to our government and thus in turn over to other governments. The second is we are no longer holding individuals accountable for their actions.

Continuous advancing returns even in down markets...

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Mr. Magon de al Villehuchet placed his faith in a flawed system, and did not do his own due investigations into the investments that made many rich. Why should he? Continuous advancing returns even in down markets. What could be better? Why are we blaming the SEC for not protecting us from our own folly? The SEC is there to only govern the reporting of results, not to ensure that fraud isn’t taking place. They have never had either the resources or the talent pool to execute that mission. In order for departments like the SEC, FDA, and EPA to adequately police an industry, the number of qualified people to execute that mission will need to substantially grow, and consequently taxes will have to be raised to cover the costs. Or we can look to people to take care of themselves as they have always done in the past. Did anyone visit the offices of the Madoff companies? Did they ask to see the products or even did they use the services to see the quality of the investment? Did they investigate any further than the meeting in the Hamptons? Of course not. As many of us do, the investors get a tip that this stock or that stock is going to do something, and they buy, not for long term gain, but for the quick return. This is the dark side of greed where we want something for nothing and end up paying the price plus interest. There is not enough government oversight possible to prevent very resourceful individuals from taking advantage of others.

These advisors trusted when they should have been skeptical...

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The one thing that must be clear is new legislation will not solve this problem. Congress believes just because there is a law that the problem is solved. The one thing that must be taken away from all of the events is the use of reason and to reduce the emotional aspects of our choices. Let's look at social security. A bankrupt program that punishes the poor, but is protected by fear. Verify death rates, poor vs. wealthy, and see who lives long enough to see retirement. Madoff played on that fear. Not being able to show a large enough return, our choice for outsourcing our thinking as well as our manufacturing and the desire for the new car combine to produce a compelling picture for the investment advisors. A guaranteed return, continually advancing profits. A sure thing. These advisors trusted when they should have been skeptical. While things are going well they do not have to look too hard. We must look at our choices about where we purchase products, what we expect of our leaders (business, government, spiritual), and understand that we will have to pay the price for our decisions. How expensive that is will truly be up to us.