Libertarian Leanings

The Christmas Bounce Is Over

Ah, whatever became of the Christmas spirit.  Over the Christmas holidays voters, with an inspiring outpour of political generosity, boosted President Barack Obama's Presidential Approval Index to the dizzying height of Minus-Twelve.  It was short-lived, though.

Date	Presidential Approval Index	Strongly Approve	Strongly Disapprove	Total Approve	Total Disapprove
12/29/2011	-18	22%	40%	45%	55%
12/28/2011	-18	23%	41%	45%	54%
12/27/2011	-12	26%	38%	47%	52%
12/26/2011	No Polling
12/25/2011	No Polling
12/24/2011	No Polling
12/23/2011	-13	25%	38%	47%	51%
12/22/2011	-14	23%	37%	49%	50%
12/21/2011	-18	21%	39%	47%	51%
12/20/2011	-18	21%	39%	47%	51%

Obama's latest foray into political gamesmanship, in which he berated House Republicans for approving his own proposal to extend the payroll tax holiday for a year instead of the Senate-approved two months, apparently hasn't panned out all that well.  Media gloating over the presumed Republican snafu has simmered down some, as Obama's approval has settled back to his pre-Christmas -18, which was itself an improvement over his dismal performance throughout the fall.

Meanwhile, out in Iowa, Mitt Romney has taken a lead in the questionably relevant Iowa Caucuses. 

CLINTON, Iowa -- A new poll of Iowa voters shows former Massachusetts Gov. Mitt Romney surging to the lead in the Hawkeye State as former House Speaker Newt Gingrich plummets and former Sen. Rick Santorum finally catches some momentum.

Romney leads in the CNN poll of 452 Republicans who are likely to caucus on Jan. 3, with 25 percent, ahead of Rep. Ron Paul (R-Texas), who is in second with 22 percent.

The poll was conducted by CNN from Dec. 21 to 27.

It's hard to take the Caucuses seriously when a candidate like Ron Paul can hold second in the polling at 22%.  That said, a strong showing by Romney in Iowa followed by a convincing Romney win in New Hampshire will, in my view, all but lock up the Republican nomination.  Romney's momentum, plus his 45% - 39% lead over Obama in Rasmussen polling, puts him in position to run the table on the rest of the Republican field.

Thursday, December 29, 2011

Mitt Romney has now jumped to his biggest lead ever over President Obama in a hypothetical Election 2012 matchup. It’s also the biggest lead a named Republican candidate has held over the incumbent in Rasmussen Reports surveying to date.

Romney even beats out the generic Republican candidate who only leads Obama by 1%, 45% to 44%.

And it's unlikely that President Obama will get any help when congress reconvenes in January.  The first order of business there will be the extension, yet again, of the payroll tax holiday.  For Democrats this presents the mouth-watering opportunity to demagogue the tax fairness issue and push, yet again, for a millionaire surtax.  The outcome is likely to be successive two-month extensions of the payroll tax as Democrats repeatedly fail to push the surtax through.  Get ready for a continuation of progressive class warfare rhetoric for at least another two months. 

Seems odd that it hasn't occurred to them yet.  It isn't working.  But what are you going to do?  It's all they've got left, the Democrats.  (Look for 2013 to be another year of progressive soul searching, "Why aren't we able to get our message across?  What's the matter with America?")

Further, Obama is unlikely to help himself.  As part of his winning legislation to extend the payroll tax holiday, he will also have to make a decision on the Keystone Pipeline.  And though the pipleline project will create tens of thousands of jobs, many of them union jobs, Obama will not be able to support it.  He cannot support anything that threatens to reduce the cost of conventional energy sources relative to green energy.  He'll axe the pipeline project, shooting himself, and America, in the foot.

There go energy independence, economic growth, job creation, rising federal revenues, and a host of other benefits we would expect from such a boost in domestic energy production — at least temporarily.  On the upside, there goes Obama's presidency, as well.

Status Quo: Corruption

A Washington Post article dated Christmas Day, a day when people were certain to be busy with other things, tells the story about how politics took precedence in Obama administration decisions surrounding Solyndra.  That's the solar panel company that got over a half billion dollars in Department of Energy loans and then went bankrupt. 

The documents reviewed by The Post, which began examining the clean-technology program a year ago, provide a detailed look inside the day-to-day workings of the upper levels of the Obama administration. They also give an unprecedented glimpse into high-level maneuvering by politically connected clean-technology investors.

They show that as Solyndra tottered, officials discussed the political fallout from its troubles, the “optics” in Washington and the impact that the company’s failure could have on the president’s prospects for a second term. Rarely, if ever, was there discussion of the impact that Solyndra’s collapse would have on laid-off workers or on the development of clean-energy technology.

“What’s so troubling is that politics seems to be the dominant factor,” said Ryan Alexander, president of Taxpayers for Common Sense, a nonpartisan watchdog group. “They’re not talking about what the taxpayers are losing; they’re not talking about the failure of the technology, whether we bet on the wrong horse. What they are talking about is ‘How are we going to manage this politically?’ ”

It was apparently a given that with administrative support green technology could only flourish.  It didn't, though, and now come the questions.  Who made the decision to give Solyndra a half billion dollars, only to see the firm go belly up in less than two years?  Was improper political influence brought to bear?

“Everything disclosed . . . affirms what we said on day one: This was a merit-based decision made by expert staffers at the Department of Energy,” White House spokesman Eric Schultz said in a statement.

We're in that familiar place, where administration officials assure us that even though it looks pretty bad, nothing unethical happened.  Maybe it would be better if it did.  At least then we could believe that there might be a smidgeon of competence among the expert staffers at the Department of Energy.  As it stands we now have to wonder what exactly are their areas of expertise that they were able to find merit in the Solyndra deal.  That's our best case scenario — administration officials, elected and appointed, are merely incompetent. 

Realistically speaking we have thinly disguised corruption, White House honesty that's really only technical in nature.  It's crony capitalism at its worst, with the Obama Department of Energy having become so politicized as to engage in electioneering for the 2010 mid-terms.  In a bid to save Democratic congressional seats, the Obama Department of Energy all but dictated a delay in Solyndra's layoff announcements.

In late 2010, Solyndra board member Steve Mitchell told his associates that Energy Department officials had conceded that additional financing was necessary yet said in private meetings that they lacked the political muscle to deliver it. “The DOE really thinks politically before it thinks economically,” Mitchell concluded. A spokesman for Mitchell said he would have no comment for this article. An Energy Department spokesman said that all decisions regarding the loan were based on merit.

Solyndra eventually realized that it had to lay off workers to stay afloat — no small step for a company that the president had backed to create jobs in a recession. But ­records indicate that the Energy Department urged company officials to delay the move until after the contentious November 2010 midterm elections, which imperiled Democratic control of Congress.

Despite the effect that timing might have on workers, one e-mail among company investors ended the discussion by asserting: “No announcement till after elections at doe request.” An Energy Department spokesman did not respond to requests for comment for this article.

The norm with the Obama administration is taking care of their friends.  George Kaiser, a political contributer who raised hundreds of thousands for the Obama campaign, is the connection between the Obama administration and Solyndra.  Kaiser denies that he lobbied the administration on behalf of the failing company, and in the technical sense what he says is probably true.

...emails released by the committee clearly show that Kaiser and Levit did not support asking the White House to intervene or agree to lobby on behalf of Solyndra.

“I question the assumption that WH is the path to pursue when both of your issues are with DOE,” Kaiser states to Mitchell in an Oct. 6, 2010, email.

The same day, Levit wrote to Mitchell and Kaiser that Solyndra’s lobbyists, not Kaiser, should be the ones lobbying the White House.

“I’d rather consult with them for them to do this than have this come from us. ... George may feel differently but I think it’s real tricky,” Levit’s email states.

Kaiser clearly recognized the problems it could pose if he discussed Solyndra with White House officials.

Kaiser did no lobbying himself because It made so much more sense to have paid lobbyists lobby the White House.  Real tricky.  Also real tricky: George Kaiser could claim that he had none of his own money riding on Solyndra.  He would not benefit personally from any federal loans to the company.  But back in September Muniland reported that it was really the George Kaiser Family Foundation that had the stake in Solyndra, not Kaiser himself.  As if that makes a difference.

Two of Solyndra’s largest investors are Argonaut Ventures I, L.L.C. and the GKFF Investment Company, LLC. Both firms are represented on the Solyndra board of directors by Steven R. Mitchell (see Solyndra S-1 page 119). Both are investment vehicles of the George Kaiser Family Foundation of Tulsa, Oklahoma.

George Kaiser was a bundler for President Barack Obama in 2008 election. The Daily Caller has done an excellent job of establishing that Mr. Kaiser visited the White House 16 of the 20 times that Solyndra investors or management visited there. From the Daily Caller (emphasis mine):

According to White House visitor logs, between March 12, 2009, and April 14, 2011, Solyndra officials and investors made no fewer than 20 trips to the West Wing. In the week before the administration awarded Solyndra with the first-ever alternative energy loan guarantee on March 20, four separate visits were logged.

George Kaiser, who has in the past been labeled a major Solyndra investor as well as a Obama donor, made three visits to the White House on March 12, 2009, and one on March 13. Kaiser has denied any direct involvement in the Solyndra deal and through a statement from his foundation said he “did not participate in any discussions with the U.S. government regarding the loan.”

George Kaiser alleges that he didn’t discuss Solyndra with any White House officials but his investment vehicles were very hot for Solyndra. I went back into Solyndra’s IPO filing and totaled up the amount of funding Kaiser’s investment businesses gave Solyndra. Over 9 rounds of financing it invested approximately $337 million, or 48% of all equity raised for the business. Although Kaiser, through Argonaut and GKFF Investment Company, LLC, did not participate in the initial two private financing rounds, they dominated the following funding rounds and were the major venture capital investors in the firm.

By dumping this Solyndra story on Christmas Day, perhaps the Washington Post is hoping it will disappear down the memory hole.  It doesn't seem likely.  It must be hell to be a Washington Post editor these days, trying desperately to shape news that already has a shape of its own. 

Nothing left to do but manage the timing.  According to the URL this story was ready to go nearly two weeks ago: http://www.washingtonpost.com/solyndra-politics-infused-obama-energy-programs/2011/12/14/gIQA4HllHP_story_4.html.  Delay til Christmas.  Best they could do. 

Though not impossible, it's going to be pretty tough for the professional journalists at the Washington Post to get their man elected.  It's because we can see the promise of Barack Obama, and we know what we can expect from this most transparently corrupt of administrations for the next four years.  Business as usual in the Obama administration means helping progressive political organizations with federal dollars.  It means leveraging administration departments for partisan purposes.  I have little doubt that congress has made it all perfectly legal as long rules are followed.  Like George Kaiser making certain never to say the words "Solyndra" or "loan" while lobbying Obama.  But it's really corruption.  We've been watching it ramp up for three years and we've really had enough.

Telling Us What We Already Know

The Wall Street Journal expects the SEC lawsuit against against six former Fannie Mae and Freddie Mac executives will show that those two companies were central to the housing crisis, contrary to popular progressive fiction.

Far from being peripheral to the housing crisis, the SEC lawsuit shows that Fan and Fred were at the very heart of it. Private lenders made many mistakes, but they could never have done as much harm if Fan and Fred weren't providing tens of billions in taxpayer-subsidized liquidity to lend on easy terms to borrowers who couldn't pay it back.

We knew that, but it won't hurt to hear it again.

Another "Not Romney" Begins To Fade

The latest Rasmussen poll from Iowa was released today showing Mitt Romney in the lead.

Iowa: Romney 23%, Gingrich 20%, Paul 18%

Thursday, December 12, 2011

For the fifth straight survey, the GOP field has a new frontrunner in Iowa.

On this first release video, Scott Rasmussen reveals Mitt Romney as the new frontrunner in the Iowa Caucus.

I think what we've been witnessing over the last several months — what with a new front runner every few weeks — is the hope in Republican hearts for more substantial reform succumbing to the dread that Barack Obama will be re-elected.  Each "not Romney" front runner stokes the fires of our hope.  But then there is the fatal gaffe or a past indiscretion comes to light and fear takes over.  Fear that we won't be able to stop Obama from dragging America into stagnation and mediocrity.  Fear that the American way of life will be crushed under the weight of an ever more intrusive federal government, a government whose resources are devoted more and more to insulating the governing class from the voters who put them in office.

I'm settling in behind Mitt.  This is no time for Republican or Libertarian purity and no time for tossing away the good in a futile quest for the perfect.  Mitt Romney isn't perfect, but he will be very good for America.  But most important, Obama, Pelosi, and Reid must be stopped. 

Unemployment And Obama

Ed Morrissey compiled some devestating employment statistics after DNC Chair Debbie Wasserman Schultz ridiculously declared that unemployment has not gone up on Obama's watch.

Here are a few facts that seem to have gotten past Wasserman Shultz as the head of a major political party, and as a member of Congress:

• Jobless rate in January 2009: 7.8%.  Jobless rate in November 2011: 8.6%.
• Number of employed in January 2009, in thousands: 133,563.  In November 2011: 131,708
• Civilian participation rate in January 2009: 65.7%.  In November 2011: 64.0%
• Unemployment level in January 2009, in thousands: 11,984.  In November 2011: 13,303
• Number of people not in labor force, January 2009, in thousands: 80,554.  In November 2011: 86,558

The number of jobs has declined almost 2 million during Obama’s term even without accounting for the 3 million-plus working-age adults who joined the population while Obama has been President, while the number of people not in the labor force has risen by six million.

This is the first president in my lifetime who makes it his policy to actively block job creation.

How Things Work

Bill Frezza explains the difference between Crony Capitalists and Market Capitalists.

By setting nominal corporate tax rates high while marketing tax breaks to specific companies and industries, Congress assures itself a steady stream of campaign contributions from companies looking to lighten their tax load. While there is no shame in reducing one's tax burden from 35% to a more globally competitive 20%, is it any wonder that people get sore when some extremely profitable corporations manage to get their tax burden down to nearly 0%?

Market Capitalists do not go to Washington. They strive to please customers, not politicians.

Whitman's Committee to Re-Elect

Does Christine Todd Whitman hope to get Barack Obama re-elected?  I think the answer to that could be, yes.

Former New Jersey Gov. Christie Todd Whitman, who is leading a group to draft a third-party presidential candidate, is encouraging Jon Huntsman to make an independent bid for the White House.

“I would hope he would do it, frankly. He’s someone that I would support,” Whitman said Friday in an interview with POLITICO.

Whitman serves on the board of directors of an outfit called Americans Elect which seeks to bypass the political parties and put the presidential nominating power directly in the hands of the people.  It sounds great in theory, but the practical effect of a third party bid by Jon Huntsman would be to syphon votes from the eventual Republican nominee. Barack Obama would be the one to benfit most.

Not to mention that Hunstman is still in the hunt for the Republican nod, though his chances don't look all that good.  Whitman agrees.

Whitman, a Republican, said a third-party effort by Huntsman is the way to go because she believes it’s unlikely he has much of shot at the GOP nomination. “I don’t see that kind of traction unless he can pull off a surprise in New Hampshire, where independents are allowed to vote,” she said.

Could Whitman have so little regard for Huntsman that she believes his third party candidacy would have no impact on the general election, and that Obama will be defeated anyway?   Who knows.  In any case this is not the year for a serious third party bid.

On Derivatives And Farming

There's been an interesting twist in the fallout from Jon Corzine's "mismanagement" at MF Global.  Corzine is the former Democratic governor of New Jersey who, after losing his re-election bid to Republican Chris Christy, took over as CEO at MF Global.  Eighteen months later MF Global declared bankruptcy, reporting a "material shortfall" in client funds.  The shortfall may be as much a $1.2 billion.

Regulators currently suspect that MF Global — at the time run by Jon S. Corzine, the former Democratic governor of New Jersey — improperly used customer money for its own purposes in the days before filing for Chapter 11 protection on Oct. 31.

Investigators are considering two possible situations. One is that MF Global used the money to meet trading partners’ demands for extra cash, which could come back. The other is that it was used to cover trading losses, which would mean that the money cannot be recovered.

MF Global’s management, however, has maintained that some of the money is still sitting at clearinghouses and banks, according to a person close to the company. Though they have not disputed that some of the money is gone, these executives think that other funds were trapped after the firm rapidly unwound more than half of its trading book as it was collapsing.

No one at MF Global, including its former chief executive, Mr. Corzine, has been accused of wrongdoing.

I can't say I'd be surprised if it turns out no one accused of anything.  But I digress.  The MF Global collapse illustrates that derivatives are actually quite useful in the real world, and they affect people far away from Wall Street.  The MF Global bankruptcy filing has client funds tied up, and Kansas cattle rancher Tim Rietzke is livid.

"I would be hedging some feeder cattle right now, but I'm not going to do it. I'm leaving them exposed to the cash market and I don't like that," Rietzke said.

Rietzke may reside far from the trading pit in Chicago, but he and thousands of other ranchers and farmers across the country are at the heart of futures trading.

With billions of their dollars locked up by MF Global's October 31 bankruptcy filing, they are a key voice in determining if and when the futures business regains its poise and reputation.

"I have no confidence in the market, because it could happen at any other brokerage," Rietzke told Reuters from his 8,000 acre ranch near the southwest Kansas town of Coldwater.

"Derivative" is a dirty word these days.  There's a lot of political hay that can be made disparaging derivatives and vilifying traders who deal in them.  

Though these often-risky bets were blamed by many for helping fuel the credit crunch and the downfall of Lehman Brothers and AIG, it seems that Wall Street has yet to learn its lesson.

U.S. commercial banks earned $5.2 billion trading derivatives in the second quarter of 2009, a 225 percent increase from the same period last year, according to the Treasury Department.

But for farmers and ranchers, and others on Main Street, derivatives are a way of mitigating risk.

I'm reminded of the Steinbeck novel, East of Eden, that was made into a movie starring James Dean in 1955.  It's the story of Cain and Able set in California with Dean playing the part of Cain, renamed Caleb in Steinbeck's yarn.  Caleb is not his father's favorite, but he tries.  His most ambitiuous scheme to win his father's love involved a investment partnership in which he hoped to make enough money to cover business losses that his father had incurred.

Caleb's plan is to make his father's money back, capitalizing on World War I by selling beans grown in the Salinas Valley to nations in Europe for a considerable premium. He succeeds beyond his wildest expectations and wraps up a gift of $15,000 in cash which he plans to give Adam Trask at Thanksgiving.

Aaron returns from Stanford for the holiday. There is tension in the air, because Aaron has not yet told their father that he intends to drop out of college. Rather than let Aaron steal the moment, Caleb gives Adam the money at dinner, expecting his father to be proud of him.

But Adam refuses to accept it. Instead, he tells Caleb to give it back to the poor farmers he exploited. Adam explains by saying,

I would have been so happy if you could have given me — well, what your brother has — pride in the thing he's doing, gladness in his progress. Money, even clean money, doesn't stack up with that.

How very Hollywood.  Guaranteeing farmers a predictable return on their crops is OK so long as you don't make too much money on it.  It's a popular narrative for today's Democrats too, one they hope they will deflect another electoral drubbing like the one they suffered in 2010.  In fact they're so invested in it that they've gone and thrown their lot in with Occupy Wall Street, and now almost anybody that makes any money is part of the contemptible "1%" — the ones Democrats reflexively accuse of welshing on their fair share in taxes. 

Democrats and the Occupiers are embodied in Adam, Caleb's father.  In Adam's eyes Caleb robbed the farmers of a big payday when he gambled on the future price of beans and won.   But in real life most farmers, ranchers, and many investors are willing to give up the colossal upside in exchange for protection against loss.  It's what options (derivatives) are all about.

For instance, there is a fairly common options hedging strategy that protects against a ruinous drop in the price of a stock or a commodity.  You buy a "put" option with a strike price at a level that is as low as you are willing to let your investment to fall.  Buying the put option gives you a guaranteed minimum price and protects you if the stock price goes below it.  If the price of your stock takes a plunge, you exercise the option.

But options cost money.  Buying put options will eat into your investment, so you offset the cost of the put by selling a "call."  The call option will have a strike price that provides a reasonable but not astronomical gain.  Setting the call strike price too high won't get you enough to substantially offset the cost of your put.  When the price of your stock takes off, the buyer of the call exercises his option and buys your stock at the strike price, giving you a reasonable but limited return on your investment.  The caller gets the colossal upside if there is one.  But then, he paid for it.

When Jon Corzine left the governor's mansion New Jersey was in a fiscal crisis.  Enter Chris Christy who took on the public sector unions, drastically cut state spending, and began setting New Jersey's fiscal house in order.  We see now that Corzine has left quite a trail.  After eighteen months with Corzine at the helm MF Global has declared bankruptcy.  They can't find $1.2 billion in client funds, and that's even having impact on the agricultural sector.

Corzine is a poster boy for the Democrats.  It's his sad misfortune to have graduated from governorship of New Jersey to MF Global, instead of going back to national Democratic politics where mismanagement is hardly ever punished.   The politically inclined Corzine bet the firm on European government bonds to the tune of $11.5 billion. 

At multiple meetings, Corzine reassured directors that the trades would work out, said the person, who asked not to be identified because the discussions were private. Corzine said the European countries he selected wouldn’t default before the bonds matured, and that the market was mis-pricing the debt, according to the person. Underpinning Corzine’s view was the euro zone’s European Financial Stability Facility, which could backstop government short-term debt through June 30, 2013.

It might have worked had Corzine invested only the MF Global funds, but he went for the leverage and made his bets on margin.  In other words, he borrowed the money to invest. 

The deal began to unravel in August when the Financial Industry Regulatory Authority told MF Global to add capital to its U.S. brokerage to back the trades. Then on Oct. 24, Moody’s Investors Service downgraded MF Global to one level above junk status, citing its ongoing inability to meet earnings targets and concern that it wasn’t sufficiently managing risk. The next day, MF Global reported its worst-ever quarterly loss.

...

“If MF Global had bought the same trade without leverage, there would have been no issue,” Galper said in an interview.

If client funds can't be located there may be other consequences in store.  How very much like our Democratic friends in congress, and the president too.  Spending money they don't have is not only not a problem, they'll tell you that it's downright patriotic.  They say they are creating jobs, but so far the only jobs created have been in reliably Democratic constituencies.  Non-union and non-green need not apply.

Just as Corzine's highly leveraged bet was intended to reverse the sinking fortunes of MF Global, Obama and the Democrats went on a spending binge, betting that it would lock in progressive majorities for a generation and restore the sinking fortunes of the Democratic party.

At least the Democrats can claim they have a solution: Tax the rich.  Too bad there aren't enough rich to go around.  No such luck for Corzine.  He has to locate the $1 billion-plus in still missing client funds.