Is the Governator Strong Enough to Lift California’s Budget?

A little something for my Cali readers.

from KCBS:

As Gov. Arnold Schwarzenegger pushes for a swift agreement to fill California’s $24 billion budget deficit, he is also pushing several ideas for reforming state government, including a state constitutional convention.

In an exclusive interview with KCBS, the governor said there must be a fundamental reform of state government from top-to-bottom, but California has not had a constitutional convention since the 19th century. The Governor says that having another convention is an idea whose time has come once again.

“Everyone who has looked at [the state’s governmental system], not just Californians but people from the outside of California, looks at it and says we have a dysfunctional system.”

The idea of holding a constitutional convention is being pushed by the Bay Area Council, a local business group.

The governor says also he wants to see changes made to the initiative process.

“It’s outdated. One has to revisit it again, and kind of bring it up to date so you don’t have to go to the people for every little thing.”

A dysfunctional system eh? The same state that brought us the twinkie defense, LA riots, rolling blackouts, and an election featuring a liberal Greek blogger, porn mogul, porn actress, washed up child actor, and a watermelon smashing prop comic is dysfunctional? Well that sounds like state governing as usual.

Joking aside, I’m not entirely sure what Schwartzenegger hopes to accomplish. You need more power to do what exactly? More of nothing? This is nothing but a diversionary tactic, slight of hand so no one realizes Arnold has no frigging clue how to fix the mess he’s in.

A Done Deal – US Treasury to increase ownership in Citigroup

We can stop saying if, and even when, in regards to the government takeover of Citigroup holdings. The government will now control 36% of Citigroup. This deal is considered a test model for more bank takeovers.

from NY Times

In its most daring bid yet to stabilize Citigroup, one of the nation’s largest and most troubled financial institutions, the Treasury Department announced on Friday that it would vastly increase its ownership of the struggling company.

After two multibillion-dollar lifelines failed to shore up Citigroup, the government will increase its stake in the company to 36 percent from 8 percent.

As part of the deal, Citi will shake up its board so that it has a majority of independent directors, Richard Parsons, the bank’s chairman, said in a statement. The change had been something federal regulators had already been pursuing, according to people close to the deal.

Under the deal, Citibank said that it would offer to exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share, a 32 percent premium over Thursday’s closing price.

The government will match this exchange up to a maximum of $25 billion of its preferred stock at the same price. In its statement, the Treasury Department said the dollar-for-dollar match was intended to strengthen Citigroup’s capital base.

The government of Singapore Investment Corporation, Saudi Prince Walid bin Talal, Capital Research Global Investors and Capital World Investors have already agreed to participate in the exchange, Citibank said in a statement. Existing shareholders will own about 26 percent of the outstanding shares.

Citibank also said that it would record a goodwill impairment charge of about $9.6 billion write-down because of deterioration in the financial markets.

The transaction, which does not involve putting more government cash into the bank, will not increase the amount of Treasury’s investment in Citigroup, the Treasury said. The portion of the preferred securities that are not converted to common shares will be placed into new trust preferred securities, Citi said, with an 8 percent annual return.

The bank will also suspend dividends on its preferred shares and its common stock.

“This securities exchange has one goal — to increase our tangible common equity,” Citi’s chief executive, Vikram Pandit, said. “This transaction — which requires no additional investment from U.S. taxpayers — does not change Citi’s strategy, operations or governance. Our clients and partners will not be affected and will continue to receive the high level of service they expect from Citi around the world.”

The Obama administration deliberately stopped short of securing a majority or controlling interest in Citigroup, but will probably come under intense pressure to take a much larger role in shaping the bank’s direction. Taxpayers, after pumping more than $45 billion into the bank, will now become Citigroup’s single largest shareholder.

The move is one of the most drastic steps federal officials have taken to prevent the collapse of an institution deemed “too big too fail,” as its downfall could send shockwaves through the global markets. The government also took a major ownership stake in the American International Group, and seized control of Fannie Mae and Freddie Mac last September. So far, none of those deals have worked out well.

The administration has tried to keep the banks in private hands and tried to stamp out talk of nationalization. But Citigroup’s plunging share price and its desperate need for capital made it almost inevitable the government would have to raise its stake.

The deal is expected to serve as a model for other financial institutions. Other major banks could find themselves in a similar position in the coming weeks if a new “stress test” shows they do not have sufficient capital, or the right amount of common stock, to appease regulators. Administration officials say they will convert the government’s existing preferred stock investments into common shares and, if necessary, make additional investments to stabilize the banks.

The Citigroup deal tries to address a potential shortfall of common stock, which investors and regulators now demand. With the conversion of preferred shares to common shares, the government’s stake will rise to 36 percent from 8 percent, giving taxpayers more risk, but more potential for profit if the company recovers.

I guess all those nationalization debates on the blogosphere are moot at this point. Its happening people.

Shanghi Hillary – Cilton’s adventures in China

Secretary of State Hillary Clinton has been in China chit chatting about a variety of issues, namely that China save our economic asses.

from ABC News

“I appreciate greatly the Chinese government’s continuing confidence in United States treasuries. I think this is well-grounded confidence,” she said. “We have every reason to believe that the United States and China will recover, and together we will help lead the world recovery.”

I worry a great deal about becoming even more indebted to China. They own so much of our infrastructure. We owe a lot to them in loans. Should they ever call us on that we’d be absolutely screwed. They’d be shooting themselves in the foot by destroying such a integral trading partner. So if they ever did ask for repayment in full I’d imagine Armageddon would not be far off.

Clinton also discussed environmental policy with the Chinese.

from NY Times

“When we were industrializing and growing, we didn’t know any better; neither did Europe,” Mrs. Clinton said. “Now we’re smart enough to figure out how to have the right kind of growth.”

With China being the leading producer of carbon dioxide this is both an ambitious goal and a necessary one. Considering the flow of the jet stream, we have a huge interest in China’s air pollution. Just as midwestern factories led to poor air quality here in New England, China’s grimy air floats right over here.

Human rights groups however are none too pleased with Clinton’s priorities. Even though Clinton stated that human rights issues in China were part of long term goals, they would not be the focus of this trip. Clinton rightly stated that human rights issues”can’t interfere with the global economic crisis, the global climate change crisis and the security crises.” Human Rights Watch wrote a letter. Amnesty International wagged a stern finger of disappointment.

Human rights watches are integral. Someone should be paying attention to abuses here and abroad. I must ask though, are these people so narrowly focuses on their work that they are missing the big picture. Before the economic is back on track we can’t worry about other Chinese offenses. It should be clear to all these people that the economy is a priority above all others. If the economy collapses these rights workers will be on the streets just like the rest of us. Think of the rights abuses that will occur then. But of course they aren’t. They can’t seem to take their blinders off long enough to see city bus barring down on them as they cross the street.

Clearly these human rights organization understand nothing about how foreign policy works. There is black and there is white. There is abuse. Stop it. Why can’t Hillary see that? What Hillary thankfully knows is that you don’t spit in the face of the person your holding your hand out to. Say you are in dire need of some cash. You lost your job and the repo man is eyeing your car. You go to your friend looking for help. Once at their house you say, “I can’t believe you let your kids watch those violent cartoons, let alone any TV period. What’s the matter with you? Don’t you know you’re destroying your kids brain! By the way I need some money.” Do you think you’d get that money?

Neither does Hillary.

I Wanna Riot – Protests sweep Europe. Is America next?

Protests sparked by the current economic downturn are popping up all over Europe. Not all of them are peaceful either.

Rioting in Iceland forced the resignation of the country’s Prime Minister last Tuesday. Police arrested 20 of the 2,000 protesters after the crowd began throwing smoke bombs, attempted to break windows at parliament, and hurled snow and ice at the PM’s car. Police used mace to break up the crowd.

Greek farmers lifted roadblocks Friday that had been in place for over ten days. The farmers set the blocks up to call the Greek government’s attention to the lack of action on falling agricultural prices. “The farmers returned to their farms and houses and the biggest protest in the agricultural sector so far ended in the best possible way,” said the Greek Agricultural Minister.

Lithuania, Latvia, and Bulgaria erupted in protest last week. 14 were injured in the Lithuanian capital as actions turned violent. Looting and destruction resulted from demonstrations in Riga, Latvia’s capital. Store windows and police vehicles were smashed by rioters. Over 100 were arrested.

Union strikes have spilled over into France and Britain. Despite the disruption of services in France, things have staid peaceful in both France and Britain.

Should we be worried in the US? If things get worse before they get better, which isn’t unlikely, would citizens take to the streets. Some are already saying Europe is facing a “Revolution Winter”. A few say we might not be far behind. “It’s amazing that people aren’t more angry here,” Mark Weisbrot, co-director of the Center for Economic and Policy Research. “Our government is still looking out more for the banks and the people who caused the mess than the people who are being victimized.”

Americans tend to protest in a more constructive way. Americans are calling their representatives, emailing, and using netroots programs to get their views straight to those with the power to make the changes. Most of us recognize that this whole thing is in the government’s hands at this point. Preventing them from working on this thing wont help anyone right now. Alarmists out there would like you to think riots will flame up across the country tomorrow. They wont and saying they will wont help. Band together and help your neighbors. We’ve gone through hardships before and we’ll make it through this one.

The Libertarians Were Going To Come Save Us, But They Thought We Should Learn How To Fix The Economy Ourselves.

Libertarianism…I figured someone would bring that up eventually, other than the fine folks at Reason Magazine that is. Oh that delightful belief that we can solve everything by doing nothing. Well, I read an article the other day stating that libertarianism, mostly its tenant of little to no government regulation, will provide a viable and needed alternative to what the “big government” Obama administration plans to attempt. While I certainly agree Libertarianism has its time and place to be useful, now is neither. Wasn’t 8 years of Bush style Libertarian polices enough?

Bush was no Libertarian you say. On matters such as wiretapping of US citizens, LGBT rights, and stem cell research, the Bush administration operated in a hands on matter to understate the issue. When Bush applied a little Libertarianism the results were utter failure.

Concerning Iraq, the Bush administration favored using contractors rather than government military personal for many positions. A Libertarian would argue here that this would be favorable. Opening the market to many different bidders should allow the government to have the job for the best price by the best workers. That didn’t happen. Companies gouged the government, going way over schedule and way over budget. The government has found much of the building contractors are doing to be well below standards. And of course there is the whole Haliburton mess. KBR, which was a subsidy of Hal, has $2.7 Billion in undocumented spending. They supplied our fighting men and women with unsafe drinking water and faulty electrical work that led to troop deaths. KBR still operates in Iraq. Who picks up the tab? I’m sure you can guess.

How about health care? According to a recent article in the Atlantic in 2000 there were 39.8 million Americans without health insurance. By 2007 the number had swollen to 45.7 million. Health care premiums rose from $6,438 per year to $12,680 per year from 2000 to 2008. Could this have all stemmed from the Libertarian approach to letting the markets sort out health care the Bush administration took?

“Perhaps the most puzzling abdication was the GOP failure to do anything at all on health care. The window for saving private health care from government encroachment is closing, and both business and workers are feeling the pinch from rising costs. Yet Republicans failed to make health-care savings accounts more attractive, failed to let business associations offer their own health plans, and failed even to bring to a vote Arizona Congressman John Shadegg’s bill to avoid costly state mandates by letting health insurance be marketed across state boundaries.”

They missed their chance to fix health care without “big government” stepping in. By taking such an extreme hands off approach to health care, the Bush administration pretty much secured the need for government to step in and solve the issue.

Of course we can’t forget the current economic crisis; really how can we forget. While a few hard right free market groups will slap your mouth if they hear you blame deregulation for the crisis, most will agree that deregulation or at least a lack of regulation is at least partly to blame. The government did not prevent the sale of the toxic mortgages which started this whole mess. When the bubble was about to burst the Federal Reserve did not react accordingly. Had Fed Chair Alan Greenspan only identified the bubble the public perception of the housing market would have altered and the crisis would have been averted or at least contained. Lack of regulation on mortgage qualifications, loan risk assessments, and predatory lending ultimately pushed the crisis over the edge.

Now, here we are living the results of the Bush administrations Libertarian policies. Do you still think that is what he need right now? If you do I just have one more thing to say. Katrina.

The Libertarians Were Going To Come Save Us, But They Thought We Should Learn How To Fix The Economy Ourselves.

Libertarianism…I figured someone would bring that up eventually, other than the fine folks at Reason Magazine that is. Oh that delightful belief that we can solve everything by doing nothing. Well, I read an article the other day stating that libertarianism, mostly its tenant of little to no government regulation, will provide a viable and needed alternative to what the “big government” Obama administration plans to attempt. While I certainly agree Libertarianism has its time and place to be useful, now is neither. Wasn’t 8 years of Bush style Libertarian polices enough?

Bush was no Libertarian you say. On matters such as wiretapping of US citizens, LGBT rights, and stem cell research, the Bush administration operated in a hands on matter to understate the issue. When Bush applied a little Libertarianism the results were utter failure.

Concerning Iraq, the Bush administration favored using contractors rather than government military personal for many positions. A Libertarian would argue here that this would be favorable. Opening the market to many different bidders should allow the government to have the job for the best price by the best workers. That didn’t happen. Companies gouged the government, going way over schedule and way over budget. The government has found much of the building contractors are doing to be well below standards. And of course there is the whole Haliburton mess. KBR, which was a subsidy of Hal, has $2.7 Billion in undocumented spending. They supplied our fighting men and women with unsafe drinking water and faulty electrical work that led to troop deaths. KBR still operates in Iraq. Who picks up the tab? I’m sure you can guess.

How about health care? According to a recent article in the Atlantic in 2000 there were 39.8 million Americans without health insurance. By 2007 the number had swollen to 45.7 million. Health care premiums rose from $6,438 per year to $12,680 per year from 2000 to 2008. Could this have all stemmed from the Libertarian approach to letting the markets sort out health care the Bush administration took?

“Perhaps the most puzzling abdication was the GOP failure to do anything at all on health care. The window for saving private health care from government encroachment is closing, and both business and workers are feeling the pinch from rising costs. Yet Republicans failed to make health-care savings accounts more attractive, failed to let business associations offer their own health plans, and failed even to bring to a vote Arizona Congressman John Shadegg’s bill to avoid costly state mandates by letting health insurance be marketed across state boundaries.”

They missed their chance to fix health care without “big government” stepping in. By taking such an extreme hands off approach to health care, the Bush administration pretty much secured the need for government to step in and solve the issue.

Of course we can’t forget the current economic crisis; really how can we forget. While a few hard right free market groups will slap your mouth if they hear you blame deregulation for the crisis, most will agree that deregulation or at least a lack of regulation is at least partly to blame. The government did not prevent the sale of the toxic mortgages which started this whole mess. When the bubble was about to burst the Federal Reserve did not react accordingly. Had Fed Chair Alan Greenspan only identified the bubble the public perception of the housing market would have altered and the crisis would have been averted or at least contained. Lack of regulation on mortgage qualifications, loan risk assessments, and predatory lending ultimately pushed the crisis over the edge.

Now, here we are living the results of the Bush administrations Libertarian policies. Do you still think that is what he need right now? If you do I just have one more thing to say. Katrina.