I was reading a recent blog from one of the Infamous Stringdusters about the current leg of their tour, Montana and environs. I may mention to Andy when I next see him that this does not sound much like work to me. MySpace.com Blogs - The Infamous Stringdusters MySpace Blog
1. WSJ Article On How Jeffrey Peek Destroyed CIT: The in depth article in the weekend WSJ is instructive on how Jeffrey Peek destroyed CIT with his Wall Street financial wizardry. CIT was founded in 1908, had survived the Great Depression and several recessions but finally met its match by hiring a Master of Disaster in 2004, and former sage at Merrill Lynch to shake up the tried and true ways with "financial innovations" like subprime loans. Peek was not one to stay in the sleepy confines of Livingston, New Jersey and moved the head honchos to what the WSJ described as a "glitzy" office building in Manhattan. Debt was increased by over twofold in a few years, as Peek found new ways for CIT to lose boatloads of money while criticizing the ingrained culture that he found at CIT as being "too cautious". If there was a lesson to be learned from this debacle, I would say be forewarned about hiring a Master of Disaster to run your business, or at least be wary of chucking the tried and true ways, which have proven their worth for decades, for the latest Wall Street financial alchemy and "innovation" like lending money to people who can not afford to pay it back.
I do suspect, however, that the government is underestimating now the potential adverse fallout from a CIT bankruptcy. It does appear that there is far too much optimism that other banking institutions will provide the necessary credit to CIT's small business customers.
2. Democrats Are Doing Whatever They Can to Rejuvenate the GOP With Their Tax Hikes on Small Businesses: Nancy and Harry are basking in the glow of Democrat power, remembering the bygone days when the Democrats could do whatever they wanted to do. But the 2010 mid-term election is not that far away, and some of the blue dog democrats who represent districts chock full of small businesses are starting to think twice about the direction Obama is trying to take them on healthcare "reform". I saw that John Tanner, a Democrat Congressman representing a rural West Tennessee district, voted against the plan in committee.
The House plan requires employers with annual payrolls over $250,000 to pay 72.5% of the premium costs for full time employees and 65% for families. If they fail to do that, then the employer will be fined up to 8% of wages for those employer's with payrolls over $400,000. Those with payrolls between $250,000 to $400,000 would pay a smaller penalty. There would be a tax credit for those employers with less than 25 employees of up to 50% of the premium costs, which would be dependent on the size of the employer and average wages. Maybe I misjudge things at times, but I do believe that this issue alone will be sufficient without more to reverse many of the Democrat gains from the past election. When you add to that gift to the GOP the increase in utility bills caused by a cap and trade bill, and a few more items, the Dems are already well underway to reversing their current good fortune, without any help from the GOP representatives who are just content in voting no in mass. So, maybe the best strategy for the GOP now is too make sure the Democrats have enough rope to hang themselves.
The House plan also has a penalty for individuals for not buying health insurance, about 2.5% of their gross income. I have previously discussed the surtax starting on individuals at $280,000 in adjusted gross income, which raised the prospect of small business owners have to pay twice for health care of their employees. The surtax would increase if the government was unable to achieve projected cost savings, and I would consider that to be a foregone conclusion. I saw a story in the Washington Post that money is pouring into the coffers of GOP Senate candidates.
Notwithstanding a commercial that I keep seeing, which states unequivocally that the Democrats' plan is the only way to reign in medical costs, the CBO has already made it clear that the cost savings are illusory.
The tax increases and the penalties on small businesses are not illusory.
The Director of the CBO just testified that there is nothing in this Democrat plan that would "reduce the trajectory of federal spending by a significant amount". ABC News This statement is being treated by Obama as if it did not exist.
In fact, this expensive new program is being sold as a way to save money. Fiction has a way of becoming unassailable fact. It is imperative to keep a straight face, and look sincere, when spouting nonsense. Just assert, in a most earnest fashion, as true what is false and call whatever you favor "reform."
I am also curious about the tax hikes in the "reform" plan for healthcare. Are those tax hikes in addition to those that are part of Obama's budget?
And, I would like to propose a worthwhile constitutional amendment, as a means to redress one of my pet grievances against all politicians. My modest proposal is simply to amend the Constitution to say that any use of the word "reform" by any politician is grounds for impeachment, just add a phrase to that effect at the end of Article II, Section 4 after treason, bribery, and other high crimes and misdemeanors.
And what exactly is being done to fund the unfunded social security and medicare liabilities for the baby boom generation, at a time when the nation is running trillion dollar deficits?
3. Money Market Rates: Vanguard Prime money market funds has 117.6 billion in assets earning .24%. Vanguard - Prime Money Market Fund - Overview Are we scared of own shadows now? More funds are stashed in Fidelity Cash Reserves. Barron's Online - F
4. Michael Lewis Article in Vanity Fair on the Masters of Disaster at AIG: I have discussed on many occasions the Masters of Disasters at AIG's Financial Products Unit in London. Lewis got into the heart of that unit with some interviews, and confirmed what I already knew. This unit, with a few outrageously compensated individuals, bore a great deal of responsibility for the growth of subprime lending, and the eventual disasters connected with this irresponsible extensions of credit.
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