Lehman Sisters

Soooooo... what a week. As a bankruptcy lawyer I should have been really excited about what was happening. After all I make my living off of distress. Peoples distress, businesses distress, economic distress. Turmoil, diving markets, skittish people and a more skittish press leading the charge. I should be full of energy and verve but... I found it hard to work on Monday.
Now to be fair my Niece had gotten married over the weekend and my brothers office flooded badly on Sunday but I was in no way prepared for Lehman Brothers, AIG and Merrill Lynch all being threatened with extinction. It was mind numbing. On so many different levels.

Lehman Brother is in Chapter 11 and is selling off it’s good assets so that the rest can be picked over. No one knows what that means for people who had accounts with them and or investments or bonds in the company itself. Everyone knows it is not good but for all practical purposes Lehman Brothers is gone. Likely someone will buy the name and attempt to put it to work somewhere down the line as people keep trying to do with the ghost of the Napster franchise. But gone, over a weekend! Why... because they were so highly leveraged. But we will get to that later.

Merrill Lynch is gone. Swallowed up by Bank of America (which ate Countrywide earlier in the crisis) leaving what would appear to be a monolith but I am thinking it might be the case of a monster swallowing all it can, only to find it was sick to start with (see the rising credit card default rates to get a feeling for how sick). It is almost like BOA is trying to get to the “too big to let fail” status. Which brings us to AIG.

Before I got involved with and insurance defense firm, i had no idea who AIG was. i knew that they were run by one of the notorious Greenbergs (Hank I think). I say notorious because the family has had an eye for a buck and such great instincts throughout the years so as to be legendary. Hank Greenberg probably is thanking his lucky stars (and Elliot Spitzer) that he was forced out but anyway, I knew about AIG. They insure everyone. And when you say, “well they do not insure me, All State insures me”, I need to tell you, that AIG insures ALl State. They insured EVERYTHING. No risk was too big or too nuanced for them to earn a fee on. It would be like if I took out an insurance policy to cover my loses at the craps table. And they were brilliant at it, until they got to insuring the bad bets of people like Lehman and Merrill. They had been backing the shooter at the table for a number of years and the shooter was hot.

The shooter was in course everyone from the investment banks to small timers in town flipping houses and the bet was not a craps bet (which at least has ascertainable odds) but instead was real estate. Because one of the truisms of life thus far has been that real estate always goes up. Right? Well for fans of dollar cost averaging and history, real estate does always go up, they are not making any more of it. The stock market has also historically always gone up but the key is that you have to be in for the long run. My financial advisor is one of my best friends and he trained my wife and I a long time that you do not try and time the market and you have to have an excellent understanding of your own appetite for risk. This has been very good and valuable advise.

So, if these people all bet on real estate, then what is the problem? All they need to do is hunker down and the price of real estate will rise again and all those bad bets they made on the pass line will become good. Right? Well wrong. Very wrong. VERY, VERY WRONG! I see two reasons that the logic is wrong even though it is very logical. They are:

1. Leverage (which is brought on by)

2. The pressure for profits NOW.

I have represented a lot of real estate developers over the past few years. they were bright, intelligent and entrepreneurial and somehow, several years ago we got to a point where if you were not fully invested, meaning if all your assets were not at work then you were a dummy. That is not by itself a bad premise. I have a good German Lutheran disposition which favors this type of industry. No, where it got screwed up was because in order to maximize those working assets, everyone borrowed every cent that they good. That is leverage. Going back to the craps analogy, what these developers did, and what a lot of Americans did on their homes, and Lehman certainly did, well, these craps players visited the loan sharks and gambled on the bet that real estate prices would continue to go up. And up. And up.

Now a good shooter keeps some chips below the table so he can ride out a few sevens, but what our economy was doing was winning bets and then rolling everything forward on the next roll of the dice. None of these developers or investors had any spare powder dry, and when the seven s started coming, they found a way to borrow more and double down. THAT is leverage. But why take this leveraged risk?? It had to be scary. I know it was scary for the real estate developers and many (most) have paid a price with business and personal bankruptcies. But if your the head of Lehman, or Merrill or AIG... not so scary.

1. The money is not yours

2. Your bonus is tied to your stock price, your short term stock price.

3. There is an excellent chance you will be gone before the chickens come home to roost; and (this is everyone’s favorite part of the story)

4. If the 7’s keep coming up, you get fired and get a huge severance package (See Fanny and Freddy CEO’s).
What a Country!

I do love my country and I have a healthy respect (if not a love) for free market capitalism. I know that Obama and Mc Cain are going to fix the system, regulate it better, get back the bonus money, blah blah blah. The problem is not the system and the answer unfortunately is not going to be more regulation. The answer needs to come from a lot deeper in our country. We need to redefine what being a success is. It is not a new Mercedes, although I would love one. if our leaders are going to help us they are going to rally us to redefine our American Values, our Christian values.
But that is a lot to expect. Too much to expect in fact. And in the mean time there is going to be financial turmoil and pain and loses of savings and changes in life style and... all manner of other painful shit. I do not have any answers but this is... more then a little frightening.

STEPFORD VEEP?

Sooooo... I have been pretty good about this Sarah Palin thing. Between work, family, a little school and...oh the apparent collapse of our monetary system I have had plenty going on. Too much to add much needed comment on this dire, dire threat to...well to be fair to everything.

Sarah Palin is, I have decided, the Stepford Veep. She at any point might be capable of talking about cookie recipes and how much she loves the “first dude” her husband, “the world champion snow machine racer”. We have not seen her family since the beginning which is fine but they have kept a tight, tight lid on her and for good reason. She is a VERY limited talent and very limited intellect.

She would rock a school board and clearly rocked a small town and then amidst the moral collapse of Alaska rocked “The Largest State In The Union” (population about 670,000. She has appeared with Mc Cain supposedly because he “likes the crowds she draws” but really because she cannot hack it alone. her two solo appearances with fairly kind hosts have been embarrassing between her not knowing answers on one hand and not answering questions on the other. They have tried to school her but it is a lot to be brought up to date about your lifetime of American history and politics in a week or two.
She does not play that well among anyone but the solid, Christian Democratic base that Mc Cain used to so enjoy fighting and made people like me like him. This sidling up to them has “energized” that base but seriously, where would they go. And she will alienate almost everyone else. She cannot do anything else. I saw her on Fox and she just kept babbling that she and Mc Cain as a team would be ready to serve and ready and they were ready and would be ready and I thought she was going to short circuit and her head was going to explode. Which frankly was as good as she got.

She looks ill prepared. She seems preachy, judgmental and mean. She looks like she will be a massive divider of our country which is already massively divided by the Bush administration. All in all, she seems like my perfect nightmare. the good news is that unless America cannot elect a black man, she is the death nell of the Mc Cain ticket. Imagine a 72 year old president with her being a heartbeat, his cancerous old heartbeat, away from ultimate power.

The problem she has among others is that the way she has carried herself and carried the attack and stuck to her guns despite of the facts (Bridge to nowhere) and promised to cooperate with an investigation she is now stonewalling (troopergate) it is too easy to see her as an angry, vengeful, hateful chief executive. Who DO we want answering the phone at 3:00 A.M. when there is an emergency? Not her. She would nuke them in a heartbeat and have no understanding what it even meant. And her husband. Who is he anyway? The first dude? I get the feeling he will not be going to the Alaska Oil fields for 6 months and i also guess he will not be the primary care giver for Trig and the girls. Where is he?

So ask yourself, why won’t they let her out of the box? they say it is because the media, the liberal media, the mainstream media, the devils tool media will not treat her with the correct deference and respect. Every person needs respect but we expect the media to tell us about this person and to show her to us. That is what the media does. And do you think they are going to deferential like Putin might be. They should show us what she has got if she is “ready to lead”.

While the economy thrashes and they try and make this personal, the American public is going to start truly suffering. And the republicans are on their way out, unless all those nice liberal white folks cannot really vote for a black man. In that case I will be truly, truly scared and i will say a prayer for John Mc Cain’s health every night. because if they are keeping this tight a lid on her, she must be much worse then even I imagine.

Our old friends at the Onion had this.

http://www.theonion.com/content/infograph/rumors_swirl_around_palin

I do believe she will be the butt of every joke. If they love her so much in Alaska, then help me. Send her back.

et tu Palin?

So I originally thought Sarah Palin was an interesting if kind of boring and pandering choice for V.P. Before Cheney V.P.’s did not matter at all and were window dressing at best. The daughter thing should not be an issue. It has nothing to do with her ability to lead but after thinking about it most of the day...

I am thinking she is going to be turned into a bad joke. Seriously, what is a mother of 5 doing running for President? How does that represent traditional conservative American values? I know she is a gun toting, moose hunting former hockey mom but how does that represent traditional American values? Seriously, if I had a 6 month old baby at home, moreover one with Down Syndrome, I would evaluate what my need was to reform Alaska in light of the needs of my family. The Evangelical conservatives which hijacked my old Republican Party have been touting that family matters MOST and family values matter MOST and here is a beauty queen, who left her family to become a career politician. Her husband is supposedly busy in either the oil fields or his commercial fishing business so who is taking care of the home?

She has kind of a squeaky voice. She was runner up for Ms. Alaska. And lets talk about Alaska. It is not even a real State. They have 639,000 or so people there. There are about 387,000 people in the City of St. Louis. The City itself. Not the surrounding counties and municipal area but just the City. Would we like Mayor Slay to be President on the basis of his command of the City of St. Louis Police? There are 2.8 million people in the metropolitan area of St. Louis. Over four times more people live in our metropolitan area then the whole State of Alaska. 670,000 people with a shit-load of oil money. How hard can it be? The Mc Cain spin that she is prepared to lead because of her time as commander in chief of the Alaska National Guard is laughable. I am not saying Obama has such experience but he did not define the argument and then go out and pick up a good looking young mother of 5 from a State that should be part of Canada. She has five children. Perfect for V.P. She has named them Track, Bristol, Willow, Piper and Trig. That is what most people would name their five kids here in the midwest. It stinks of our values and makes us relate to her in the same way my wife, a conservative, Republican Christian could relate to any moose hunting, hockey mom with 5 kids and a pregnant 17 year old spending all her time away from her family running for office and having kids. And perhaps she will have some more.

Sooooo... I am thinking this could Mc Cain, or at least his candidacy.

The “trooper-gate” thing does not bother me. if my sister was in an ugly custody battle I would not hesitate to try and get her husband fired if i thought it was best for my sister and her kids. That is human nature. But nominating the former Miss Alaska with 5 kids and an infant with down syndrome does raise a question of where her traditional family values are. Her husband owns a commercial fishing business. Shouldn't someone be at home with 4 minor children? Perhaps...a parent.

She was a Catholic, then a Pentecostal, now non denominational. So that at least is stable. While switching her religious affiliations 3 times she has at least been able to remain a life long member of the NRA.

I would assume we have heard all the problems she has and to be fair, these are not real problems. It is only the Vice Presidential nominee but seriously, if her choices make some conservative people uncomfortable and if we question her judgment.

I am going to leave her alone at this point but, I do not think other people will. Perhaps she will give a brilliant speech at the convention and have everyone rally around her. I noticed that for the last two days she has disappeared and hired a team of lawyers for trooper-gate. Not encouraging.

LABOR DAY!

Labor Day? Who would of thunk that I would even live to see another Labor Day. In theory it is a really good idea. A three day weekend to commemorate the end of summer but seriously, sometime in the last 10 years or so summer started to end at the end of July. Why is that? I do not know but kids started to go back to school earlier and earlier. I think they did it so the semester could end before Christmas break but... that seems like a really crappy reason. I miss summer running from the first of June to the end of August. So Labor day is just... kind of odd.

The kids have been back at college or at high school for 2-3 weeks already. I have been working (though based on my hours my partners do not think I am working) like summer was never here. It was not a bad summer. I had two weeks away from work up in Michigan (lovely) but as the summer officially wraps up I cannot help but think of missed opportunities and personal and... national disappointments.

*****

I watched Obama’s speech and it served yet another purpose for me. It was a fine speech but I fell asleep less then half way through. I feel stupid about it but I really did have some unbelievably messianic (small m) hopes for him. I was disappointed by the Biden choice but really thought that he would light it up in front of 80,000 people and give e a speech for the ages. That is not what he did. It was a great speech but... it will not be remembered and it did not transcend anything....again. I am still going to vote for him. I still want to have someone who might be able to replace judges with some that are not young, smart, Nazis.

****

Mc Cain appoints a woman Governor from Alaska. She too is as far to the right as you can get and will play well to the base that Mc Cain has been pandering to since he sold his soul to the Bushies. It is a brave play and bold. She is young, she is pretty, and likely will appeal to some of Hillary’s hard core followers who did not embrace Obama...right? Wrong. Very wrong. Just like abortion is the ONLY issue for that Bush coalition it is the ONLY issue running the other way for Hillary’s gals. They could not even hold their nose and vote for her and the idea that a 40 something women will be President if Mc Cain croaks will frighten a lot of people too.

On that note, it will not frighten me. This EXPERIENCE issue has been bogus one from the start. you do not train to be President. The job is too massive and you either can lead and surround yourself with quality people to help govern, or as we have seen you can grab your dads craziest old friends and let them run your government, your economy and your war. That worked out well. At least Obama will not be bringing his dad’s tribal chief buddies from Kenya in as his cabinet... at least I think he won’t.

****

So we get a day off on Monday. I will go to work anyway. Laboring on Labor Day. Does that make any sense?

****

Wow. A little late breaking news. Sarah Palin’s 17 year old daughter Bristol... 5 months pregnant. This should be a huge non story and obama did the right thing and said it had nothing to do with the election and reminded everyone that his mom had him when he was 18. It is hard to believe that Mc Cain new about it. Was he waiting for the right time to disclose? This is going to be distracting. The idea that somehow it is great news and she is brave to let her daughter have the baby is troubling. It is just a sad story all around but if your not a conservative and you you do not personalize it... it is kind of funny. I do not know anything about “trooper-gate” but where does Mc Cain find all these good looking, energetic young female supporters?