Sign 'O The Times

The above picture comes from Sunday's New York Times. Republic Window and Doors on the North Side of Chicago closed its doors on Friday. Except the workers haven't left. Some of them occupied the factory all weekend. Good for them.

The workers, members of Local 1110 of the United Electrical, Radio and Machine Workers of America, said they were owed vacation and severance pay and were not given the 60 days of notice generally required by federal law when companies make layoffs.

And where are the jobs going? Of course, overseas. Republic owed money to Bank of America, late of the Paulson bailout, which stopped Republic from giving its employees the back pay they were owed.

“Here the banks like Bank of America get a bailout, but workers cannot be paid?” said Leah Fried, an organizer with the union workers. “The taxpayers would like to see that bailout go toward saving jobs, not saving C.E.O.’s.”

We sure would, but I'm not going to start holding my breath. We know with whom the politicians go to dinner, and it isn't us. We need to celebrate the collective action of workers again. We need unions in this country, again. Someone has to speak for the needs of labor when the spoils are divied in Washington.

- Why did I pull the Republic story from the Times, and not the Tribune? Great question. Energizing redesign notwithstanding, the Trib sucks. I subscribe to it because I always have.

Today, the Tribune announced it was filing for bankruptcy. I still can't get over it. Sure, the paper will still run, and 'GN will remain on the airwaves, but the TRIBUNE CO. filed for BANKRUPTCY!!? The largest media company in Chicago, the owner of the Chicago Cubs, is BANKRUPT? Wow. I never thought there would be a time when the Trib didn't exist. But it is coming. The end of the newspaper era is upon us. The place where nearly every writer got started, the urban daily, will soon cease to exist. As both a writer and newspaper lover, I can't help but get a little misty.

And scared. What will replace newspapers? Who will speak truth to power?

Eliot, Be Good

Eliot Spitzer, former Emperor's Club VIP, returned from the dust heap of recent history Wednesday to write a slam dunk, right on article about the current bailout for Slate. I myself have done my best over the past few months to tell you exactly what I think about the mess, but my limited knowledge of economics makes me very much like Bambi- I can sense when something's amiss, but I can't tell you why exactly I'm running. Eliot, ex-Wall Street fighter he was, knows why it is amiss. Let's start with what's wrong with our economy:

Our trade deficit has ballooned from about $100 billion to more than $700 billion annually in the past decade, and our federal deficit now approaches $1 trillion. These twin deficits leave us at the mercy of foreign-capital inflows that may diminish as Asian nations, in particular, invest increasingly at home.

Our household savings rate has been close to zero—and even negative in some years—not permitting the long-term capital accumulation required for the investments we need; China's savings rate, by comparison, is an astonishing 30 percent of household income.

U.S. middle class income has stagnated over the past decade, while the middle class in China—granted, starting from a lower base—has seen its income growing at about 10 percent annually.

Our intellectual advantage could soon turn into a new "third deficit," as hundreds of thousands of engineers are being created annually in China.

We are realizing that the service sector—all the lawyers, investment bankers, advertising agencies, and accountants—follows its clients and wealth creation. This, not over-regulation, is the reason investment-banking activity has begun to migrate overseas.

Yes, yes! So true, especially that last one. All the white-collar yos who are out of work right now who think they have it bad? Wait until ten years from now, when most of their industries follow the money to India, China, or Europe. It was one thing when high-school guys lost their industrial jobs. Not much tear-crying by the degreed powers-that-be. But when a Burnett copywriter is serving up lattes at Starbucks? Ladies and gentlemen, there will be a symphony orchestra playing at every street corner.

Gotta get into the studio to lay down 'Brother, I'll Tell You How To Make Some Dimes'.

Spitzer goes on to state that we're propping up dinosaur industries- not just Detroit, but the lot of them. I've believed this, too. I know we need to bring money into the market because the banks are tighter than a Catholic school paycheck, but why are we putting the money into the same failed institutions?

A more sensible approach would focus not just on rescuing pre-existing financial institutions but, instead, on creating a structure for more contained and competitive ones. For years, we have accepted a theory of financial concentration—not only across all lines of previously differentiated sectors (insurance, commercial banking, investment banking, retail brokerage, etc.) but in terms of sheer size. The theory was that capital depth would permit the various entities, dubbed financial supermarkets, to compete and provide full service to customers while cross-marketing various products. That model has failed. The failure shows in gargantuan losses, bloated overhead, enormous inefficiencies, dramatic and outsized risk taken to generate returns large enough to justify the scale of the organizations, ethical abuses in cross-marketing in violation of fiduciary obligations, and now the need for major taxpayer-financed capital support for virtually every major financial institution.

Eliot, my man! So in short, prop up credit markets with new vehicles. Do NOT give money to the chuckleheads who drowned the baby and now can't find the telephone. Dude may have hired some ladies of the evening, but you know, leadership comes from strange places. This is by far the most well-reasoned piece I've read about our current plight.

You heard it here first. Eliot Spitzer. US Attorney General. 2012.

Real Numbers On The Paulson Bailout

The Paulson Bailout has now cost $4.6165 trillion dollars! Hard to wrap your head around a number that big, right? Consider- this bailout is now more expensive than the cost of World War II, adjusted for inflation (which is $3.6 trillion), PLUS the Vietnam War, adjusted for inflation ($698 billion), PLUS the S & L Crisis, adjusted for inflation ($256 billion)! And that is just from Barry Ritholtz on his The Big Picture.

Over at Bloomberg, they calculate Paulson's tab at $7.76 trillion. According to that figure, every man, woman, and child in America is on the hook for (sit down) $24,000.

Thanks Wall Street for the new student loan. Can you at least send us all a BA in Business? I think we've earned it.

Somebody better get in that recording studio and record 'China, Can You Spare A Dime?'

What pisses me off most about this crisis is that Friday evening we will all watch our idiot neighbors skulk off from dying big box stores with their BluRay players and laptops. Because we shouldn't consider that thing are going to get worse, right? No, no, NEVER stop spending.

Harumph!

The Trouble With Citigroup

Citigroup became the very latest domino to fall in '08's Great American Bank Bailout. According to today's Economist, we will guarantee $306 billion dollars of bad mortgage debt and give them $20 billion in cash in return for $27 billion dollars in rapidly dropping Citgroup stock. What a deal!

How did America's largest bank find itself in such desperate straits? Greed, lack of oversight, and...did I mention greed? According to the Times, David C. Bushnell, Citigroup's senior risk officer, was buddy-buddy with the traders he was meant to oversee.

It was common in the bank to see Mr. Bushnell waiting patiently — sometimes as long as 45 minutes — outside Mr. Barker’s office so he could drive him home to Short Hills, N.J., where both of their families lived. The two men took occasional fly-fishing trips together; one expedition left them stuck on a lake after their boat ran out of gas.

Because Mr. Bushnell had to monitor traders working for Mr. Barker’s bond desk, their friendship raised eyebrows inside the company among those concerned about its controls.

"Hey, Dave, remember that time we ran out of gas on your boat?"

"Yeah, Randy?"

"That was awesome!"

"Sure was, Randy. But not as awesome as the time I helped you take on billions in unsecured mortage debt, which would later almost cause our whole bank to collapse!"

"Yeah, that was wicked. But, hey, we still have our jobs."

And there's the rub. The good news today from the Washington Post is that the Obama Deal sounds like it will be $700 billion on infrastructure and jobs. The bad news is that tax cuts are included with that package, which will make it all the more expensive eventually. And that Obama is being advised by former Clinton Treasury Secretary Robert E. Rubin, who was (who woulda thunk it?) an 'influential director and senior advisor' at Citibank!

NO, President-elect Obama. No damaged goods. They made the mess, they do not advise on the clean-up. Or do you need to be reminded of the current Treasury Mess, Hank Paulson? Send Rubin away. Now. We're watching.

Paulson's Pot Of Gold

Shambollocks is on record as against the bailout. Open taxpayer checkbooks will not get us out of this crisis. Responsible leadership will. When Treasury Secretary Henry Paulson asked for $700 billion dollars of our money from Congress, I was more than a little skeptical. First, he wanted complete control of the money with very little oversight. Second, as a life-long employee of Goldman Sachs, he would personally profit from a government buyout of Sachs' bad debt. Third, he did not lay out a coherent vision for where the money would go.

I don't like to say I told you so, but today's New York Times reports that Paulson doesn't know what he's doing. Plan A, buying bad debt, is out the window. Plan B, creating some kind of government 'bank' which would foster lending, sounds thoroughly half-baked. The Democrats want to give money to Detroit to save the unions. President-elect Obama remains silent. One, he's not President. Two, this is a seemingly no win situation. I have an idea. Why don't we sit down and take a little time to come up with a coherent strategy between the incoming and outgoing administrations instead of playing the 'React to the Dow Jones' game? The economic teams from both sides get into a room for a week, come out and tell the American people where we're going. Even if a solid solution isn't reached, it would at least show that both parties can lead through a crisis together.

Bad money has already left the building. Let's make sure the next semis of cash that leave the Treasury have a well-thought out plan behind them. Please.

- Details on the complete lack of congressional oversight on the $700 billion (of which $290 billion is already gone) in today's Washington Post.