Is this what a president for the common man does?

Many of the Trump base have no idea they are voting against their economic interests. This advertised populist, common man president, fails to let folks know the following:

– in his first two hours of being president, he repealed a regulation that would have reduced homeowners insurance premiums for securing mortgages with the less than 20% down, that was scheduled to go in effect February 1, 2017. This would have helped about one million low income homeowners.

– he has hobbled the Consumer Financial Protection Bureau that was very successful, but banks and credit card companies did not like it. The CFPB penalized these companies for fraudulent and aggressive lending practices, with 95% of the fines going to cheated consumers. In short, the CFPB helps folks who are targeted.

– he eliminated a new requirement that said all investment advisors have to be fiduciaries, meaning they must put your interests ahead of their own. This was done to help investment advisors, paid by the transaction, to encourage sales that may not be in your best interests.

– he passed a tax bill that favored the elites and businesses, under the guise of helping everyone. To keep the bill down to costing only $1.5 trillion in debt, he had to have some pay higher taxes – a sneaky requirement noted that state and local tax deductions were capped at $10,000, so if you owned a house and lived in a state where income tax occurred, your tax bill may increase. Note, folks who do not itemize deductions, tended to come out ahead with the change.

– he failed to tell people (actually lying about the impact routinely) the tariffs would be paid for by consumers when importers passed along the cost. He has routinely lied saying China will pay the tariffs, but that simply is not true. Each time he said this, economists would rebut his lie.

– he also lied about an ACA change he made that increased premiums for people, saying it would only impact insurer profits. In essence, he ceased the subsidy to insurers to repay them for paying deductibles, copays, etc. for members making less than 2 1/2 times the poverty rate. Insurers honored their written commitment (Trump did not) and subsidies went up to pay for the resulting increase in premiums. BCBS of North Carolina said premiums the next year were going to increase by 0%, but with the Trump change, they went up by over 6%. The CBO said the increase in subsidies increased the deficit by $10 billion per annum and unsubsidized folk saw premium increases.

– he has advocated a COVID-19 relief bill which will prevent employees from suing employers for endangering them with COVID-19 exposure.

– finally, environmental deregulation hurts those in poverty more, as they have fewer choices as to where to live.

There is more. With his attacks on the ACA, with a pending lawsuit that would harm it, more of Trump’s base will be harmed. Plus, with his misinformation and mishandling of the COVID-19 pandemic, more people are being harmed and dying. Of all that I mentioned, his callousness and negligence in COVID-19 handling is the most prominent failure that impacts people.

So, in turn for getting protection over gun rights and attacks on abortion access, the president has largely screwed over his base and they have no idea he has.

The Fifth Risk – a must read by all legislators

Michael Lewis has authored several books that lay out a practical lens of major issues. They include “The Big Short,” “Moneyball,” “Liar’s Poker,” “The Blind Side,” and “The Undoing Project.” His latest book is called “The Fifth Risk,” and it is as much historical as it is alarming of missed risks.

The book is based on his review of largely unread briefing materials that were prepared for the incoming Trump administration by officials describing what the various departments do, their concerns, their successes, etc. Since the president was surprised he won the election and had fired his transition manager, Chris Christie, candidates to take over the various departments were not identified, much less in place. So, materials were not read and meetings went unattended. Lewis even interviewed people that prepared such reports after he read the non-confidential portions of the reports. They were more than happy to share their stories.

The above paragraph is not made to be political, it just presents a fact that the folks who eventually took over these departments missed a huge opportunity to learn how things worked from the people who oversaw the departments. As a result, our country is at risk of things that the leaders of many departments do not fully understand. And, what makes it more concerning, is many never took the time to understand or were even qualified to do so. The DOE was previously run by a nuclear physicist. After the election, until he recently resigned, it was run by a former governor without a science degree.

The book is actually a quick read, much shorter than it could have been. Yet, it is something every legislator should read, as they likely have a poor understanding of the risks at hand and what is not being done.

Lewis summarizes the general concerns of a key contributor from the Department of Energy, who greatly worries about things like exposure risk to radioactive waste product from nuclear energy that still exists and attacks on our energy production and distribution system, by saying:

The fifth risk is “the risk society runs when it falls into the habit of responding to long-term risk with short-term solutions. ‘Program management’ is not just program management. ‘Program management’ is the existential threat that you never really imagine as a risk.”

And, later he identifies the not knowing risk. “Here is where the Trump administration’s willful ignorance plays a role. If your ambition is to maximize short-term gain without the regard to the long-term cost, you are better off not knowing the cost. If you want to preserve your personal immunity to the hard problems, it’s better never to really understand those problems.”

To this point, the DOE contributor said when he saw the budget, “All the risks are science-based. You can’t gut science. If you do, you are hurting the country. If you gut the core competency of the DOE, you gut the country.”

There are so many things that these various departments do that benefit American people and industry that are misunderstood or simply not known. Could they be more efficient? Of course, and that should be the goal of any administration. Yet, these hard working people, scientists, engineers, Ph.Ds, etc. do yeomen’s work, and are ridiculed by some as the “deep state.” After speaking with many of these people, Lewis concludes the deep state are folks that actually know what they are talking about. They do not boast on themselves and get little notoriety.

One example is of a Coast Guard scientist who is the foremost authority on where people who fall over board might drift. He is actually acclaimed in other countries more than he is here, because he did not brag on his efforts. Previous to his efforts, falling over board usually meant the death of the person. Yet, he studied patterns, currents, sizes of people, what were they wearing, and other data points over years, even going on board as part of search and rescue missions. He developed an easier to use software tool that heightened the Coast Guard’s ability to pin point people. And, it is successful, but he is now retired with no obvious successor.

But, let me leave you with a final example, one of many. A business leader in rural America was bragging on getting a loan all on his own. The bank had a press conference where the leader was going to say this is how it should be done, with no government involvement. When someone from the Department of Agriculture introduced herself, he asked “what are you doing here?” She said, “we are the ones who lent you the money you are talking about.” He had no idea. Most Americans don’t, even legislators. After one complained about the Department of Agriculture sucking, she told the state official something he did not know, we invested more than $1 billion in your state last year.

I have written before about “The Invisibles.” These are the folks who show up at work each day and make things run well, without bringing attention to themselves. There are numerous examples in this book. And, when they are not allowed to do the things that are needed, we are the ones who suffer.

Help me define the best (or worst in this case) metaphor of the Trump presidency

After the most recent incredulous statement by the US president about ingesting disinfectant as a possible cure for COVID-19, I felt this Marie Antoinette moment might be a metaphor for his presidency. Yet, there are truly many contenders for such a distinction.

Below are twelve top of mind statements or actions that could be considered. Sadly, there are more to choose from. So, readers please let me know your top three, including others I may have overlooked.

1. Ingesting disinfectant – he has to tried to explain this away as sarcasm, but to see Dr. Birx trying to avoid eye contact when he asked her what she thought is telling.

2. Sharpie gate – this is when the president played meterologist and scared the state of Alabama by drawing on the map the hurricane may hit them. This was an unforced error thst aides spent a week trying to diffuse.

3. Firing Comey without telling him – for a person who liked to say “You’re fired” on TV, the president cannot bring himself to fire soneone in person. James Comey found out he was fired via TV news. But, Trump failed to tell his Communication team, so Sean Spicer was hiding in the White House bushes with staff to plan what to say.

4. First travel ban – Trump likes to use the word disaster to define anything he did not do. The first travel ban was so disastrous, it waa pulled after two days. The president failed to vet the change with various stakeholders including the people who would need to conduct the ban. So, people did not know what to do and the lines were long.

5. India/ Pakistan brokering peace deal – this faux pas did not get much air time, but the president announced in front of the Pakistani leader the India prime minister asked him to broker a peace deal between the two countries over the Kashmir conflict. Within the hour, India put out a press release saying no such request was made.

6. Tariffs paid by China – the president has said this at least a dozen times, so it may be a good candidate because of its staying power. Trump likes to say China is paying the tariffs. Economists correct him each time saying US importers pay the tariffs which are passed onto the consumers. So, we pay the tariffs.

7. Extorting Ukraine – after watching a parade of reputable public servants testify under oath at a great risk with such a vindictive president, Trump was impeached over extorting Ukraine for personal gain. He likes to focus on one phone call, but if that call was so “perfect,” why did his staff try to bury it?

8. Siding with Putin over CIA – in Helsinki, standing side by side with a man who is KGB trained on disinformation, Trump sided with Putin over the advice of his intelligence people. Senator John McCain wrote an op-ed piece to blast the president’s words as “traiterous.”

9. Pulling out of Paris Climate Change Accord – the president’s stance on climate change was my worst fear going in. So, he announced pulling out of the Paris accord on June 1, 2017, the day following Exxon shareholders voting for management to tell them what Exxon is doing to address climate change. When we exit, the US will stand alone in the world.

10. Transgender in military – the announcement to ban new transgender people in the military got the press, but the decision process is the metaphor. Per the book “Fear” by two-time Pulitzer Prize winner Bob Woodward, the president announced his decision by two tweets around 10:05 one morning saying the Joint Chiefs of Staff and he had decided to do this. Problem is they had not. The time is important as the Joint Chiefs waited downstairs to meet with the president to go over four options and the pros/ cons of each. The president was told of this and asked when would be a good time to meet. This is a key reason DOD James Mattis abruptly said that a tweet is not an order.

11. Wandering alone at G20 – this was a sad to watch as the president wandered the tables looking for someone to talk with after dinner at a G20 meeting. He finally wandered over to meet with Vladimir Putin alone, a very scary situation with a very informed leader and Trump, who does not study history or issues. Plus, it is a metaphor that he would gravitate to Putin’s table rather than an ally of our country.

12. Bragging on fixing the economy – this is the most relentless of topics and, until the virus hit, was his claim to fame. The problem is he did not fix the economy. Yes, economic growth continued under his watch, but when he was sworn in on January 20, 2017, the US GDP was in its 91st consecutive month of economic growth (that is seven plus years), the stock market had more than doubled under Obama, and unemployment was under 5%. Presidents get too much credit and blame for the economy, but for Trump to say he fixed the economy is untrue – it was not broken He has added both short term tailwinds and long term headwinds.

So, that is a dirty dozen, so to speak. I wanted to limit them twelve, so leaving off Charlottesville, his rallies, his ignoring the early warnings on COVID-19, or just his litany of routine, daily untruthfulness or beating up on the press, etc. proved difficult. Let me know your top three choices. Please feel free to add any others. It is funny, depending on how I want to focus my attention, I could pick a different three – is impact, continuity, or inanity the best measure?

The Fed needs to act independently

The Federal Reserve was set up to be a nonpartisan governing board over the money supply in the US, which impacts the economy. The president would only appoint members for Senate vetting when terms expired. The Fed is supposed to be independent from pressures from the White House.

Yet, the bull-in-the-china shop president wreaks havoc over what is supposed to be done. He acts regally in what is supposed to be a democracy with rules of governance. The Fed should not succumb to any president, but especially this one, who routinely places his self-interests above the country’s. And, that does not lead to good governance.

Presidents have little impact on the economy, only providing some headwinds and tailwinds. This president has done a little bit of both. But, he championed himself as a superior dealmaker and business person when campaigning and since elected. Yes, he has had success, but given his starting point, some financial people think he should be wealthier than he is.

He touts a $1 million loan from his father, but that is fable. An in-depth study was reported by The New York Times in the fall of 2018, that Trump’s father transferred tax free over $400 million to his son before he died. That is well north of a $1 million loan. Plus, there are Trump’s six corporate bankruptcies on failed projects. That caused US banks to stop lending to him, so he went to Deutsche Bank for money. But, there have been other failed investments – airlines, mortgage company, etc.

Trump has eagerly patted himself on the back about the economy. But, the economy was just over 7 years of economic growth and the stock market had more than doubled under his predecessor when he took office. But, as with Trump, Obama should not get too much credit for the economy either. He provided mostly tailwinds and a few headwinds. What is revealed by the stock market fall off due to global softening, falling oil prices and the coronavirus, is the president does not have much to do with the stock market. As Warren Buffett once said, if the president is going to take credit for the stock market increase, then he must take the blame for the fall.

So, the Fed would do well to ignore the president. Yes, the president is entitled to his opinion, but what has been shown over his history, is maybe his financial advice is not as sound as he (or his followers) think it is. My concerns are we are using tools that should be reserved for even tougher times. The stock and bond markets seem to be more jittery with moves like this. And, when people are staying home, traveling less and eating in, reducing interest rates may not be creating a needed salve, if less spending is occurring.

Yet, as noted earlier, what bothers me most is the president is interested in his own optics, not fixing a problem. He has and wants to trade short term gain for his benefit, at the expense of future problems. He did this with the debt and deficit and he has and will do it with the Fed. They need to tell the president, thanks but no thanks.

Here, there and everywhere

A lesser known Beatles’ song penned by Lennon/ McCartney was on the Revolver album – “Here, there and everywhere.” Using this song as a title to a potpourri post seemed appropriate. In no particular order:

A stark difference in the reactions to briefings that Russia is continuing to meddle in our elections was provided this week. Senator Bernie Sanders told Putin to back off, while the president of the United States fired the acting director of the Department of National Intelligence. Former Senator John McCain said in an editorial after Trump’s kowtowing to Trump in Helsinki, that he never thought he would witness a US president taking the word of a Russian leader over that of his own intelligence people. He still is. I have shared with multiple senators for many months that we have a national security risk in the White House. His name is Donald Trump.

Wells Fargo was fined $3 billion for their actions that led to the fraudulent creation of accounts and the failure to address these issues. They had been fined hundreds of millions earlier, but they still did not realize the severity of their screw up. Something this big is traceable to the top, whether it is explicit or implicit. Implicit means they created an environment that tolerated such bad behavior.

After yet another hate inspired mass shooting, this time in Germany, it troubles me that our leaders here are not condemning this in the harshest terms as German Chancellor Angela Merkel has done. Bigotry has to be carefully taught, so the only way to teach its counterpart is to condemn bigotry again and again as wrong. Our president fails to understand this point.

On the good side, the Taliban, Afghani and US negotiators are headed for an agreement which may end hostilities and allow for the exit of more US troops. Mistrust on all sides abounds, but let’s wish for a tangible and sustainable agreement.

Finally, from mythology, people who got too close to Medusa were either shot by arrow or turned into stone. US Attorney General is realizing now he has gotten to close to Medusa damaging his reputation. So, unless he leaves the building, he will end up being shot by the proverbial arrow or turned to proverbial stone. I guess the snakes are hiding in the combover.

Have a great rest of your weekend.

Don’t believe your eyes

Yesterday, Secretary of the Treasury Steve Mnuchin testified in front of Congress that the tax cut of December, 2017 would pay for itself before ten years. Really?

This is after the nonpartisan Congressional Budget Office said the tax cut would increase the national debt by $1.5 trillion before it was signed.

This is after we have witnessed the deficit increasing over previous projections the past two fiscal years.

This is after the president said the tax cut would increase GDP growth to 4%. It rose from 2.3% in 2017 to 2.9% in 2018, but softened to 2.1% in 2019.

This is after previous studies that said no tax cut has ever paid for itself. In fact, it is quite nervy to say it would – think of that statement. “It will pay for itself.”

It takes even more nerve to sit in front of Congress and say that it still will, now that the sugar rush has died off. Companies tended to buy back shares with the tax gain rather than invest the gain.

In short, the tax cut borrowed from our future to make a pretty good economy a little better for a little while. For Mnuchin to follow his boss’ lead and ignore facts is troubling. We have a debt and deficit problem that is being downplayed. To solve a problem, it requires admitting we have one.

Per Reuters – More foreign firms halted U.S. deals amid Trump administration scrutiny: report

Last week, Alexandra Alper of Reuters Financial News shared findings within a concerning report. The “report released by the Committee on Foreign Investment in the United States (CFIUS), shows that foreign companies abandoned roughly 14 percent of U.S. investments that were investigated by CFIUS in 2017 ‘in light of CFIUS-related national security concerns.’ The percentage in 2018 was 11 percent.

Those figures were sharply up from the period immediately before Trump took office. About 4 or 5 percent of such transactions probed by the committee were dropped annually from 2014 to 2016, the report showed. The Committee, led by the Treasury Department, reviews foreign investment in the United States for national security issues.”

I have raised this issue previously – when any entity makes it more burdensome to deal with, other entities will explore other options. The tariff wars are causing suppliers and customers to find other avenues. John Deere sales are down in the US, but up in South America as more agricultural products are being bought there.

On foreign investment, if we have companies jump through too many hoops, they will take their money elsewhere. These are headwinds to our economy and our growth has been softening.

Coupled with overall global softening, it should give us concern.

We should pay attention when people sound alarms at their own peril

It fascinates me when an old post starts getting some attention. Right now, one called “Who is Paul O’Neill and why should his opinions matter?” is getting a few looks (a link is below). In essence, O’Neill was fired as Secretary of the Treasury for voicing an opinion the President did not like.

What did he say, you ask? He said he was concerned about the debt and felt the Bush Tax Cuts were unneeded. This is after Bill Clinton handed a surplus budget to the younger Bush. It should be noted the debt is now 5 times larger.

Recently, the well respected Director of National Intelligence Dan Coats resigned under pressure as he told the inconvenient truth about Russian influence and its continuation. Like O’Neill, this clarion call should be heeded. Like with General James Mattis’ resignation last December, Coats departure is giving GOP Senators pause, yet they refuse to act.

Back in late 2007, a Texas financial analyst noticed that people who could “fog a mirror,” were getting huge mortgage loans on properties that seemed to be over-inflated in value. He did his homework and was able to get a meeting with the CFO of Bear Stearns. He told the CFO he thought Bear Stearns was over-extended with risk and was going to to go under.The CFO thanked him and the guy uttered these parting words – well, I am going to bet against you. Within the year, Bear Stearns was bought for a very discounted price before it went under.

Colin Kaepernick is a good NFL quarterback, but he has been blackballed from the league after calling attention to the unequal rights and treatment of Blacks in America. His civil protest was hyper-politicized by a hyper-political president, so he was blackballed, a term which seems apt. Yet, we have a difference in how Blacks are treated. Even further, our society is more economically unequal than it has ever been, with haves owning much greater shares. A society cannot withstand such differentiation for too long. Kaepernick’s protest should be heeded not condemned. His protest is far more emblematic of American values than a flag or anthem ever could be.

Those who are giving clarion calls should be given due consideration. There are financial analysts who have cautioned against Brexit from the outset. Those concerns have fallen on too many deaf ears. Their corollary message is even more dire – do not leave the EU without a deal. That is beyond poor stewardship. It matters not what the current PM says. Yet, if it does happen, it is only fitting that Mr. Johnson is the one trying to deal with the fallout.

Before I close, let me go back to someone who is similar to the Texas man who tried to forewarn Bear Stearns. The movie “The Big Short” highlighted one person of several who saw the housing recession coming. When his concerns fell on deaf ears, he had them create a product to pay off if he was right.  The industry laughed at him until a couple of years later they realized he was right. His clients made a fortune. The movie ends by telling us what this man is now investing in – water. While it does not get much play here, we have a global water crisis which rivals climate change as a concern. He saw it coming.

https://musingsofanoldfart.wordpress.com/2013/03/20/who-is-paul-oneill-and-why-should-his-opinions-matter/

Credit risk appraiser Moody’s buys a firm that assesses climate change risk

Even for those not very familiar with Moody’s, this headline speaks volumes about the impact of the risk of climate change on our country and planet. In a July 24, 2019 article in The New York Times by Christopher Flavelle called “Moody’s Buys Climate Data Firm, Signaling New Scrutiny of Climate Risks,” the company that measures credit risks for bond investors in companies, cities, counties, states and countries, has added to its expertise. Per Flavelle’s article

“Moody’s Corporation has purchased a controlling stake in a firm that measures the physical risks of climate change, the latest indication that global warming can threaten the creditworthiness of governments and companies around the world.

The rating agency bought a majority share in Four Twenty Seven, a California-based company that measures a range of hazards, including extreme rainfall, hurricanes, heat stress and sea level rise, and tracks their impact on 2,000 companies and 196 countries. In the US, the data covers 761 cities and more than 3,000 counties.

‘We are taking these risks very seriously,’ said Myriam Durand, global head of assessments at Moody’s Investor Service, who said the purchase would allow its credit analysts to be more precise in their review of climate-related risks. ‘You can’t mitigate what you don’t understand.’

Sudden shocks such as floods, wildfires, or storms can hurt businesses and send residents fleeing, taking away the tax revenue that government s use to pay debts. And, longer term threats – such as rising seas or higher temperatures – can make those places less desirable to live in, hurting property values and, in turn, the amount raised by taxes.”

To illustrate this risk, the same day I read a reprint of this article in The Charlotte Observer, the local paper ran a story on the town of Fair Bluff, NC which has been flooded twice in that past four years due to Hurricanes Matthew and Florence which lingered over their area. Sitting near the Lumber River, the citizens of Fair Bluff saw the river rise well beyond flood range. The previous flood of this magnitude occurred 90 years before. Sadly, the population and business is declining due to rebuilding costs. As a result, so is the tax revenue to provide services.

There is a huge financial impact of climate change on the lives and business of people and communities. Rebuilding a town that may continue to be in harms way adds to the risk and some people are choosing to relocate. And, It is not just small towns. Houston has had two major floods over the past five years, as well. Houston has felt on a larger scale what Fair Bluff has felt. Not only do the rains of the Hurricane sit over them, the rivers upstate overfill and flow toward the sea. This causes extra flooding.

So, Moody’s is improving their ability to assess repayment risk to bondholders. A city that has rebuilt or prepared poorly is at greater risk of flight of people, businesses and tax dollars. What should also be alarming to American citizens is while Moody’s is taking forward thinking action, the US government is stripping climate change reports from their websites and demoting, transferring or running off Ph.Ds who are expert in measuring and addressing climate change. In short, we are throwing away a technical advantage that could help the US and the world.

Repeating what Ms. Durand said above, “You can’t mitigate what you don’t understand.”  So, please ask all politicians what they plan to do about climate change including the US president. And, a question for those who still buy the hoax stuff, why is Moody’s spending all of that money on a hoax?

 

Mona Lisas and Mad Hatters

I have always appreciated when excellent word smithing matches up with equally marvelous music. And, the pairing need not come from one person, as Elton John and Bernie Taupin demonstrated time and again.

One of their clever songs came off John’s 1972 “Honky Cat” album. “Mona Lisas and Mad Hatters” is John’s matching Taupin’s direct lyrics about a time in New York City, when it was less safe than it is today. The story is Taupin heard a gun shot outside his hotel room and penned a song to reflect his angst. John wrote sad, but reminiscent music which he sings so well.

Here is the middle portion of the song including its famous chorus.

“This Broadway’s got
It’s got a lot of songs to sing
If I knew the tunes I might join in
I’ll go my way alone
Grow my own, my own seeds shall be sown, in New York City

Subway’s no way for a good man to go down
Rich man can ride and the hobo he can drown
And I thank the Lord for the people I have found
I thank the Lord for the people I have found

While Mona Lisas and Mad Hatters
Sons of bankers, sons of lawyers
Turn around and say good morning to the night
For unless they see the sky
But they can’t and that is why
They know not if it’s dark outside or light”

Several references stand out. The commuters of all persuasions not knowing if it is dark or light. While they may have Mona Lisa painted smiles or the hypertension of a Mad Hatter, they do feel safety in numbers or in a cadre of friends who serve as a port in the storm.

The other reference is to Broadway which offers a glitzier image of New York, a polished apple, so to speak. New York has been reborn, but there was a time when the city needed its underbelly to match the hype. It took a lot of effort through leadership and consistency but is once again quite the destination. I am reminded of the story of a paint crew who would paint over graffiti overnight, then do it again. The consistent effort was symbolic revealing more than an attention to detail,

Maybe we should update the song to reflect our Mona Lisa smiles and Mad Hatter hypertension on social media.