Failure is Contagious...Wash your hands, Clear your mind, Start over

I appreciate as much as anyone else all of the rage associated with bonus payments paid to Sr. management within taxpayer subsidized companies. AIG is providing us with the current outrage. Each and every financial institution and auto manufacturer that has received TARP funding, has dispersed bonus payments after taking the funds. I have a record. It is true. The outrage is warranted and should have been anticipated by all of these companies who used to only have to answer to their board and shareholders, but now have a slightly larger, aggravated, wounded and unwilling group to address.

Rewarding far reaching failure is distasteful, and if you stay with me on this you’ll see that it is material to our correction and our recovery.

Some of the people who work for these “bailed out” firms who have received bonuses are not responsible for their company’s failure let alone the failure of our financial system, but unfortunately for them, they were in the wrong place at the wrong time. They should not expect bonuses at the expense of the taxpayer. They should be thankful to retain their jobs, and work toward doing them better.

One of the reasons why we are so outraged, beyond the obvious, is that in all of our national efforts to stem further financial decline, to correct and to avoid collapse, none of these public forums or gov’t appointed financial “fix it” people have addressed our resentment. The grief, worry, and resentment felt by the American people has generally been dealt with privately. AIG Bonuses opened the curtains a little, but I fear the windows of our private frustrations are about to burst open and shatter. Yes, we have heard Obama say that he understands our frustration and anger. He warns us that we will not make significant progress if our governance is strictly reactive and guided by our anger Vs proactive and guided by our drive to succeed and rebuild. His words are comprehensible. You can hardly argue with their logic and correctness, but they just are not all that instructive or reassuring.

It would have helped me tremendously if someone within a failed financial institution, “voluntarily” stood up at the public pulpit, acknowledged the widespread pain, and owned up to the failure. I would have listened to Liddy if he had bought 60 minutes of airtime to address the public. All I needed to hear in layman’s terms was this:

1. This is the business model of AIG
2. This is how we add value to our customer base
3. This is how we make money
4. This is how many businesses/consumers we touch
5. This is our size - $ value and market penetration

That should take 15 minutes…no debate or discussion warranted, simple statements of fact regarding their business.

The next 45 minutes would be more painful, but instructive and potentially calming to the general public. In the next 45 minutes he could have broadly chronicled the failure to help us understand :

1. What happened
2. How it happened
3. How to fix it. At lease how to attempt to fix it
4. How to adjust business practices, regulation, oversight, markets - so that it can never happen again

Don’t role your eyes. This financial collapse is widespread and complex but it can be traced. In his statements, I would not have expected Liddy to chronicle every detail, I am just interested in the predominant infractions that allowed the house of cards to be built, and subsequently to fall. I don’t even need him to shoulder all of the blame, I just needed him to acknowledge the risk, miscalculation and resulting massive failure .

And I will say this. I would rather have heard this explanation from a private citizen, active and scholarly regarded in the business world, than from a career government official. Through all of this, I have come to believe that George Soros is right, and has been all along, Alan Greenspan is naive and probably complicit, and Henry Paulson is a greedy, narcissistic thief.

Obviously there is plenty of blame to go around. Government contributed to this mess, so it should be leaned on to help clean it up. The problem is that the only support government has access to, is taxpayer support….and this financial mess has destroyed governments’ tax base…. All of this we know, too well…what I didn’t understand fully before this week is that there are 3 primary financial instruments and/or structures that are largely credited with our global financial demise:

CDS – Credit Default Swaps
Hedge Funds & the practice of shorting as an investment tool
Sub prime mortgages

All of these are 1. Largely unregulated, 2. Risky 3. Propelled through loss vs gain.

You are probably ahead of me on this, but I have just recently sifted though all of the divergent and widespread financial carnage to arrive at this, the core of the problem. Profoundly interesting to me is that each of these financial principals relies on failure of companies, industries, and/or markets to be profitable. We have been betting on failure. We have engaged ourselves in predicting failure and have been rewarded for failure. Not unlike the bonus activity that has so enraged us.

This is dangerous when you consider that the stock market, the cornerstone of wealth accumulation in a capitalistic society is based on the future prosperity and profits of public companies. Prosperity we can all take part in and gain from as we participate in the stock market, buying and selling shares of public companies. If we, as a majority, place bets on failure of companies, and get rewarded financially when they fail, we are creating a self fulfilling prophecy. When we short a company, we effectively loan that company money at what we believe to be an inflated share value….when the value falls to its appropriate market value, the company has to payback the difference to those that shorted it . This propels failure. Credit Default Swaps, a big business for AIG require that buyer and seller “swap” degrees of failure. If they fail less than the buyer predicts, they make money. If they fail more than predicted, money is lost. Companies that have Credit default values on their books have to maintain a certain amount of cash to back them up. If they unload some of the credit default holdings, via “CDS”, they can operate with less cash….

Are you with me here….

Everything is risky, we ignored a reasonable risk ratio, took on too much debt, miscalculated. Money was lost. The loss started to spiral, cash reserves were depleted….and here we are….Comforting isn’t it !

Surprisingly, it is somewhat comforting for me, to merely understand the journey to the fall. If we don’t understand or acknowledge how we fail, we are doomed to failure. We have got to face it, analyze it, get angry at it , and then fix it….Obama is on point in his forward, corrective persistence. His team needs to keep their heads down, their minds open and do their diligent best to fix this mess. You as an individual need to do the work to face it, try to understand it and find a way to be productive while you are uncertain and fearful.

Remember the crash has already happened. Now we are looking for some level of reassurance that this mess can actually be fixed before we all go broke. Part of our resentment is rooted in our disbelief in how it could get this bad, part of it is appropriately directed to our disgust in the greed, and the rest represents our fear. If we are honest with ourselves…and here I will speak strictly for myself, I am scared…I am hopeful but I am also afraid.

Afraid, yes. Desperate, no. I will figure out how to survive and prosper. My financial situation may change drastically, but my perspective on prosperity will stretch beyond the narrow boundary of financial security to a broad landscape of interrelationships, depth of character and just plain pleasure derived from a number of different sources, many of which will be free.

War

http://prospect.org/cs/articles?article=his_uniform_my_responsibility

Regardless of your view on any war, regardless of the side you demonstratively or passively take ... the story in the above link is profound. Not only in its sobriety but in its inescapable truth.

There are millions of families, throughout the world who are at war. Suffering. There are millions who are watching, learning and developing opinions and beliefs from the side lines. Millions more don't care. To send your son or daughter into war must be gut-wrenchingly difficult. The feeling of despair and hope mingle inside you. You have got to find and cling to the hope, otherwise the despair will kill you. Yes many of these millions are fighting with conviction. But the depth and strength of your belief system, relative to war, varies. Each has an individual tolerance. Entering a war zone is a brutal and cruel passage.

In time of war, the psychology of victory is worth understanding. If you think about war, merely as a conflict it becomes a comprehensive and multidimensional term. Conflicts vary in terms of scale and importance, as does the significance of a victory. Winning is obviously preferred and in many cases worth pursuit. However, taking the time at a "less emotional and critical" stage of a conflict to define the "win" is often neglected. Here is where we as a worldly people and a collection of nations, make a grave mistake when the conflict escalates into war. The kind of conflict that takes human lives gratuitously and violently. We make this mistake continually. In many modern and current wars the win is undefined, ambiguous and therefore out of reach. Perhaps the soldiers carry with them into the battlefield everyday, a clear vision of victory, but it is probably not the same as the overarching political vision, for which they are supposed to be fighting. Their victory on a day to day basis is to stay alive. Politically the vision of victory is often unclear, but the need to fight, as we search for the win is tolerated, accepted even.

So why, is there not a congressional mandate to define the win, before declaring war. We can't demand this of other nations, but America represents freedom, prosperity and civility. We should be leading with intellect, power and compassion, not aggravated and wounded emotions. If we wage war with the intention to win something, or eradicate something, we should be damn clear on what that something is. We should at the very least be able to recognize the win, if and when we accomplish it.

Some may fail to see the pragmatism of this kind of approach. Its importance gets lost on people, because they are angry or afraid. It seems unrealistic and naive, certainly unnatural, to think that there should or could be any other reaction but to fight, after the Japanese attack on Pearl Harbor. Facilitating freedom and democracy was enough of a reason for Americans to die in Vietnam. Retaliation for a brutal and surprise attack on American soil on 9/11/2001 of course must involve more human combat, waging of war, defending our freedom. In this situation we leaped to attack, without completely understanding who our enemy was, or where they lived. We acted on our first, highly emotional and aggravated reaction. Something you should never do when making a profound decision of any kind.

In the modern case of 9/11, would we have put ourselves into considerably more danger, if we demanded a more thorough understanding of the attack, the attackers and the strategy to defend, before we waged war? Could we have launched a "better" defense of our national security and freedoms if we had clearly identified "the win" for America? If we had done that, might "the win" have been expressed as "creating an in-penetratable boundary of sovereign nations, enabling us to protect our freedoms and our people from irrational, unpredictable attacks" Could we have accomplished this with the deployment of advanced technology to facilitate satellite protections, while funding deeper intelligence strategies to help us understand and reveal radical threats to our way of life. Could our "win" have been expressed as an internal victory. One in which America retains its greatness and might by virtue of protecting ourselves, while understanding others, instead of an external show of power that was erratic, inhumane, unproductive and ultimately senseless. What did we gain by acting irrationally? I believe that if we had just identified the win, even if we never had accomplished it, we would be in a far better and more peaceful place today, than we were on 9/11/2001.

This may feel like an oversimplification, but I submit that if the Israelis were strictly focused on their "win" to create a safe and sovereign nation for themselves, they might be more successful in attaining it. In fact many Arab nations want the same thing. Their willingness, all of them, to go to war, continually, with each other has caused a severe distraction from achieving their goals. The fight is getting in the way of their dream. The war is making safety impossible. the war is destroying their nation, both its land and its people. It is dividing their own communities. The "win" if remembered seems so out of reach that the fight has become desperate, rendering the win meaningless. That is profoundly sad. Mostly because it could be different.

History will usually teach us the value or waste of war. History will recount the battles, the territorial situations, the principles for which people were fighting, the freedoms they were defending. I wonder, if the soldiers on the field realize what history teaches us about them. The impact of the outcome. The victory, the loss is clearly defined in history. Wars are necessary, sometimes inevitable, even "good" but it is extremely uncomfortable for me to realize these virtues only after the brutal decades of suffering. As an American, I am eternally grateful for the outcome of World War II. Indebted to the leadership, soldiers, and families participating in that war. Their suffering led to my fortune. We owe the victims and heroes in current conflicts around the world a clear picture of "the win", while they are fighting for it. We should be ashamed of ourselves if we rely entirely on history to define it.

Individuals and nations are accountable. Your character is defined by what you do today. i would encourage all of us to think about how our actions impact the people around us. Be selfish in your endeavor, but compassionate in your methods, and humanitarian in your actions. Identify the win, collectively. Coexist peacefully. Pursue the dream not the fight.

A message for the GOP

Given the current temperature of the GOP, and public perception pointing to Rush Limbaugh as the leading voice, even scarier, the most influential voice of the Republican party … I just have to say this.

“You people need to calm yourselves down”!
To fuel the fire, Michael Steele called Limbaugh a mere "entertainer" who is sometimes "incendiary" and "ugly," I felt relief, The new leader of the RNC, got it right… comments for which Steele later apologized. But only fleetingly…

I do understand that you are reeling from an inarguable KO, and a complete breakdown of communication and connection with the American people, but to rally toward a guy like Rush, makes me think that you are suffering from some kind of depilatory mental disease. Bush was painful, yes, but was he and his group of cronies so despicable to drive you to a state of denial about the tremendous harm, destruction, and embarrassment he caused this country on a local, global and personal level ? The answer for me is an unequivocal yes. He is despicable. He was dishonest. He was destructive. Evil, even. But he is not, nor was he ever my guy. For me to deny he did this is ignorant, for you, the Republican party, to deny he did this is ignorant and self destructive.

Come on GOP….we democrats want to win fair and square, and we are fit to fight…we are poised to win, and to keep on winning. But the last thing we want is a forfeit…

Rush is hoping for failure. He is gaining enthusiasm among all of you, to support failure. News flash … you have failed and you brought the whole country down with you. Don’t advocate failure moving forward just because you feel somewhat comfortable in it now. Even though I am a democrat, trust me on this one … it is no good to perpetuate failure. It will be hard, perhaps impossible for this country to prosper while we are failing.

Your strategy is transparent. GOP will dissect Obama’s stimulus and corrective packages to highlight all of the failures as they occur. And there will be failures. You will attack the concepts, the theories and the plan to stimulate recovery of our dire financial state. You will focus on the flawed executions of the “stimulus” and “bail out” programs. You will equate “regulation” to nationalization or even socialism. You will point to the short term struggle as negative with no regard for the resulting long term corrections. You will accuse the democrats of instituting “bad government” while advocating for “bad people and destructive decisions within government”

If you insist on looking backward, gravitating exclusively to “free market” and “deregulation” you will be increasingly alone. Because, before the stimulus packages can visibly impact the market in a positive way, many more members of the GOP will be crossing the line, undercover, asking for government assistance. Republicans have lost their jobs, too, and if you are still working, your bonus was probably not as gratuitous as it was last year. If you are going to file for unemployment, at least do it in the open and admit that without this kind of government assistance you would be SOL. Admit that deregulation was a stimulus of a different kind, one that led to our financial melt down, and that the new, positive and necessary stimulus package, while paying you, should also reinstate some level of regulatory guidelines on businesses to act ethically, legally and prudently. Admit that deregulating lead to predatory lending, debt swapping and over weight risk ratios, within our financial institutions. Admit that deregulation did not discriminate between democrats or republicans, it allowed businesses to play a high risk, non partisan game with your money. You are less rich than you were before. Admit therefore, that deregulation failed.

C’mon republicans…Admit this.

Admit that regulation is needed. Admit that it is appropriate. Admit, even that it is good.

I am confused when I detect fear associated with regulation. This fear is real, but unfounded. It therefore needs to be addressed and taken seriously.
Lawful regulation of private sector business is synonymous to lawful regulation of communities – counties – cities – states – countries. In America, we do not live in lawless communities. We willingly abide by laws and rules of coexistence. We acknowledge and respect human rights. We do not steal, inflict harm, or swindle. Those that commit these crimes, face correction and attempted rehabilitation. Lawless communities conjure up images of Iraq, Israel, Darfur, Pakistan. Chaos, brutality, unworthy and misguided leadership emerge in lawless communities. Communities can thrive in a regulated environment that supports creativity and innovation while demanding fair treatment of its constituency. Why shouldn't public and private sector industries thrive this way as well? The answer is that they have and they will. GOP, thinkthenleap….regulation will work !

In case you have forgotten, as it may have been a long time…It is much more gratifying to win when you play a fair game. It feels completely different and much more profound than stealing a win because you were willing to cheat.