Congress Is Failing America!

Congress is Failing America!
By: Rene Velez Mar. 17, 2009

In some of my commentaries I have often cited the majority of America’s congressmen are lawyers by profession. Although I have been known from time to time to make folly of how lawyers have a funny way of making simple matters a complicated bureaucracy, I could not of imagined that they were as foolish as they are collectively. At minimum I would have thought there was a sense of safety in numbers, because someone eventually comes out and says……”wait a minute this doesn’t seem right!. Our congress has been fed the hook line and sinker, they have been hood winked, hog tied, extorted, deceived, lied to and they don’t even know it. These are the people we have in a position of power and trust of our money and government. I am in disbelief and if it were not for the seriousness of the matter I would think it’s a comedy of absolute stupidity. I need to add, I am not alone on this! I think what I say here most of America is beginning to understand.

The World As It Is For You and Me

If you or I (the typical average American) is having a hard time and we find ourselves having to cover for business mistakes, losses and a poor economy, we could try to find investors and or banks to give us financial assistance. If we were in the position of AIG, if somehow we could possibly convince a bank to loan us $165 billion dollars, there would not be a bank or investor in the country worth their weight in salt, that would give us money unless there was a contract drawn up. (Of course this is very hypothetical as no one would lend us or invest in a $165 billion dollar failure) But, for this illustration the terms and conditions would say things like, no excessive compensation to owners and officers, no distributions unless approved by lender, collateral of all personal holdings and even those of your children would be at risk, a guarantor would be required, like your rich grandfather or someone who had some financial weight. The stipulations for this kind of highly speculative loan would be long and extracting of the company and its owners. You probably could not buy a company lunch unless the lender approved it. Not only is this typical for lenders to do, but regulatory agencies would require prudent legal documents for such a loan and just about any newly minted attorney would tell you….you should have that agreement in writing, recorded and all the like legal procedures complied with. The truth is we would not likely get this type of loan unless we were holding some very special wild card that would amount to a miracle card. Something like an anti-aging drug, or the cure to all known diseases. Not even a cure for cancer would warrant a $165 billion dollar nailout. Oops, bailout.

So the question is , why didn’t congress create a better loan term document for AIG? Was there perhaps a shortage of lawyers? Did no one realize that there was an expectation of performance, repayment, control and transparency and accountability. These concepts of negotiated terms are so basic to a financial transaction that if congress has not properly protected US taxpayers, I dare say it is malpractice.

The Keys to The US Treasury

I know there is some document out there with terms and all, but it would seem that whatever the legal jargon on that document is the net effect appears to be, congress gave AIG the keys to the US Treasury and has told AIG, “write yourself a check and we will square it out later.” When I was a young boy visiting my relatives in Puerto Rico, I came to the realization, the small town I lived in was indeed very small and I was by no means living in Brooklyn. On a given day my cousins and some friends decided to go on a camping adventure through the cane fields and farms in the local area. So we gathered all the equipment and I was assigned the task of going to the local “Bodega” (a small country store) to secure basic provisions. This amounted to bread, butter some hard salami and other goodies. The only issue is I had no money. My cousin said, “don’t worry just go in there get the stuff and Miguel will put it on our list.” I didn’t know who Miguel was but asked, hey how does Miguel know who I am. My cousin replied, “ you are grandpas’ grandson from New York, everybody knows who you are. Indeed people I never met and that were not related to me knew who I was in town, knew I was from New York, thought very highly of my New York lifestyle, and even called me by my first name. Surely, coming from New York that was novel but truly I never gave it too much thought. I was not brought up to think I was more special than anyone although in retrospect, I was privileged among even my immediate relatives. I went as instructed to the Bodega, was kindly greeted at the door ordered my supplies and when I was finished, I was never asked to pay. Miguel simply said to say hello to my Dad for him and wrote down our purchase in a “school composition book” and told me to have a great day! That was they way things were done in Puerto Rico in that day and age and in many Latin American countries round the world. Today, I realize I was given that honor because I was wealthy compared to many in the town. I was also very well known because of my grandfather, who was well liked and respected in the community. I was indeed privileged to have doors opened to me by people who had much less than I. Who respected accomplishments by my grandfather and father and therefore looked kindly to their children. These people knew my grandfather would not abuse his credit or repayment obligation even though my grandfather never authorized or called ahead to say, let the kids put it on my tab. The only way that happens is when you have a tight community.

Such is the case in Washington. AIG has close ties to Washington and their power and influence must have been strong enough to bypass common sense and the ordinary course of how things typically get done so that congress simply wrote down $165 billion in loans in their congressional “school composition book”. Of course it doesn’t hurt when President Bush, the Federal Reserve Chairman Bernanke and Treasury Secretary Paulson have committed themselves and the nation with the political language of “Financial Crisis”!. All, on the eve of the presidential elections. That’s the grease that makes things move quickly in D.C.

Bankruptcy By Default

When I read that congress can not do anything, about executive bonuses paid out of taxpayer bailout funds, because those agreements were already in place and that contracts can not be voided I say; “Non Sense!”. That’s the most ridiculous thing I have ever heard. Let’s have a trial by jury and see if you can find a diversified group of Americans that will agree to not voiding those contracts. Why didn’t congress force AIG to file bankruptcy in order to get the bailout? Why didn’t congress invoke the laws of bankruptcy as a condition to a government bailout? Was there not a single lawyer qualified in congress the day AIG was given the keys to the United Sates Treasury? Let’s face it this is bankruptcy by default. When the only alternative is for you to seek a government bailout with taxpayer money the jig is up. You are by all accounts more than bankrupt, you are indebted to taxpayers and the United States of America. In the case of bankruptcy, the trustee has enormous powers. They can force the return of money paid out by a company to anyone or any company. Enforce contracts and make others void. They can dispose of assets, abandon them etc. They have all kinds of tools in their arsenal of laws to fix things. Of course somehow AIG did not follow what you or I would have to do. They just went to their rich “Uncle Sam” and asked them for help. After all, they are a credible, pilar of the financial community and a model business failure to boot. You know that’s worth about $165 billion dollars. When you’re failure is that big you get special dispensation in America. The fact is they declared bankruptcy and in deed filed a petition to the United Stated Government and its taxpayers and congress does have the means to void contracts they deem unjust. Salary or not. Now can we find a decent lawyer in our congress to fight for the American public? Anyone? Let’s not forget the credibility of congress and this great nation is at stake!


True Concern for our Future

I have but the utmost belief that this country will regain better days, but it is going to cost this country dearly. In addition to regaining ground we must do a multitude of things correctly simultaneously. Therein lies my fears. Our track record in allowing this crisis to happen and to respond to it leaves me and many Americans to be gravely concerned about our nation’s ability to handle these types of crisis without further sustained injury to the economic lives of our citizens. Our democracy as great as it is, is not used to or prepared for this modus operandi. I do not believe any members of congress have ever faced this type of crisis management and many are disconnected to the realities of the vast majority of our population. Many of our citizens will continue to get hurt in this arena and there is no safety net in place. The lacking leadership in this country and many of the economic inequities that has been coming forward for the past 30 years seem to be quickly coming to a head as the economy continues to contract. I know this seems alarmist. It really is not my style.

Plan for Action / Plan For Change

Congress needs to create a special committee to study analyze and become a special economic and crisis management team to make sure taxpayer money, the presidents economic recovery plan and a multitude of national priorities are carried out efficiently and effectively. The concept of a House and Senate bi-partisan legislative process conducting business as usual simply is not enough or efficient. Like many business ventures streamlining and fast tracking plans of action need to be implemented. In some ways the logistics of warfare could be put to good use in the current economic climate and in carrying out national initiatives. I realize as a democracy we deplore this concept. As much as I hate to admit it, we could learn from how the Chinese have managed to combine political ideology with capitalism.

I would not think of changing our form of government. My comments are geared towards changing how we do things not why we do things. We have to change how we do things in order to arrive at a different outcome. I don’t think in our country’s case it is fair to look back at history and apply exactly the same tactics that have worked in the past. The world, our position in it and the pace at which our global economies react are much different today than they were in 1933 or 1974. We need to recognize this and adapt. Congress and our president needs to somehow recognize that we need to change the business of politics if we are to be able to sustain a competitive edge. If we are to survive as a leader of nations.

The Faith in Your Politcs

The Faith In Your Politics
By: Rene Velez March 9th, 2009


It seems to me that it has come to the point when we have to talk politics and faith, all in one breath. Not that this should be so surprising when, you consider that the United States, the great nation that it is, was formed over two hundred years ago in large part by many seeking religious freedom, among other things. As part of this pursuit, every political, legal and business device was employed as a means to this end. The end did come and this nation became a nation where religious tolerance became not only a way of life but also a way of politics. Our constitution protects individual’s religious beliefs not only by means of common law but also as part of our constitution.

Having said that when did it become popular or a matter of proper form that no politician should utter a word as to their convictions of faith? Somehow from the beginning of when this country was formed through the late sixties it was a safer bet to stay silent, or at least not to stir the wine, by mixing politics and religion. I think somewhere their was an unwritten rule that said; be sterile if you want to get the vote of the masses. Yet, within I would say, (I am guessing) the last 30 years politics and religion seems to be at the forefront of many a campaign. What goes on here?

I suppose that part of the issue is that religious organizations have a great deal of political clout in terms of money and votes. In addition I believe that, the poor judgments and outcomes of corporate America together with the sins of politics (no punt intended) looks towards the values and morals of faith to lend a guiding hand towards, ethics and values. Some call this the right and wrong in terms of values or the left or right in terms of politics.

God Is With You

As an observer, I read stories in the press regarding conflicts about some peoples religious freedoms over the freedoms of another. For example; should a menorah be placed at a community center if the community is mostly Christian? Is this offensive? Or should a Christmas tree and Santa Clause be erected in a ‘round about’, in front of a Jewish temple? Or perhaps , most perplexing should a sculpture of the ten commandments be in display in a county courthouse? The latter has a peculiar twist in that our legal system tends to borrow a great deal from religion as a whole. We swear in witnesses on a bible. Our basic law of torts is derived in part by the very same commandments. We utter the words “God Bless America” in full glory and most people do not raise an eyebrow. The President of the United States is sworn in with is right hand on a bible. Our money says “In God We Trust”. Curiously, now that our banking system is in intensive care, we trust less in our banks, we are cautious with anything congress does and we despise corporate America for its evil ways. Right about now, God and the moral values of religion have my attention! God help my 401K, and deliver us from all evils!

The fact of the matter is that religion is in all forms of government and politics. We never really managed to separate church and state. Technically, churches and other religious organizations are not required to file or register for tax exempt status. However, they are obligated to follow the same tax laws that apply to other tax exempt organizations. Something the IRS is now interested in since the mega churches seemed to grow overnight into large financial dynasties. Some of what they do is in fact taxable. Or from a political point of view, or twist, their vast numbers and economic and political might make them more visible.

A Calling for a Moral Compass

Strangely enough religion is in politics today and politicians are less fearful although very calculated in how they embrace religion and politics together. Why? I think America, if not the world, has a calling for values and morals in how our country is governed and how equitable representation is made possible by political candidates. The desire for a moral compass is well founded and I suspect that it will endure for some time to come. I fear though that any strict adherence or association with any religious denomination is flawed at best. In the end the tensions, conflicts and extreme positions between the idealism of any religion is a greater liability than it is a resource. I suspect that in the end voters will get tired of ‘converted politicians’ and some will burn in hell for their choices. However, this speaks volumes for the dire need for straight non-biased ethics of elected officials. In the end people don’t care what religion the political leader favors, or sympathizes, only that they carry out there roles in a capable and well informed manner. Our political moral compass will not work solely through religion, it would work better through sterile intellect and through transparency and accountability, tempered with the sense of humanity of and for the voting public. What people want are smart politicians that are knowledgeable and well rounded, who act in the furtherance of our society and not on their political futures or for the interests of big money. If my suspicions are correct politics in this country will have to change and nothing is more of a catalyst to change than a bad economy and proof positive of the shortcomings of a congress who in large part could well be proven as incapable.

Ethics and Values as Part of College Education

I have in the past made mention of the urgent need to teach ethics and values as part of business schools. As a parent raising two kids, I have often thought that ethics, values and morals should come from the home. But in an era when a new generation of have-nots, that are coming from less than educated and well rounded social circles, are in fact meeting the challenge to work their way towards a college education, we must face the fact that many have not known the best of ethics and morals from their upbringing. I don’t mean this to be a criticism in any way. What I am trying to say is that we must embrace the disadvantaged, who strive to better themselves by means of an education, and have not been privy to the models of moral and ethical values to acquire those skills. If these models are not part of their upbringing then they should be, as part of their continued education. I would also like to mention, what I say here is not limited to the disadvantaged. My personal experience in knowing many a wealthy and advantaged contemporaries, who have it all, yet lack the very same models of ethics and morals. In some cases these members of our society could be worse. Why? Because no one typically denies them access and because they grow up with a mentality of entitlement through association of money and influence. In other words, they are spoiled brats. Yes, the lack of ethics and morals is an equal opportunity vise. People without ethics and morals have no social class. (how appropriate in that last sentence has two meanings, (a) They have no class, (b) and, there is no difference between social classes).

We are in fact a divided nation on Sunday! We deny children the right to public prayer at our schools and yet we expect them to have proper values and morals. This is not to say I don’t see the point of argument related to religious freedom in schools. I wouldn’t know how to draw those boundaries of rights. But, I suspect it would look like a cross between Picasso cubism and the those melted images on a Salvadore Dali. (I really don’t know how anyone can draw up denominational boundaries and be faire) I think the best way to teach ethics and morals to our children and in our colleges and universities is simply to teach it in a sterile and non denominational context. There is a right and a wrong. This is basic. You don’t need religion for that. Where it gets complex, we need to learn to analyze. In the end we will all make mistakes, but if we must, then let’s make the mistake that benefits society as a whole and hurts society the least. There is a way to teach this, although I realize it is not easy, and somewhat philosophical.

I leave you with this one sentence which I remember and try to follow in my personal and professional life. It is in fact, I think, an admission that life is not perfect and that we often face difficult choices and that often ethics and morals are not popular, but try we must even when logic fails us and the odds are not in our favor. :

“The most difficult thing to do in life, is to do the right thing!, Even when no one expects us to do the right thing and when no one is doing the right thing, and when no one wants to do the right thing for you.”

God Bless You!, Have Faith.

It's Middle America Stupid!

It’s Middle America Stupid!
By: Rene Velez Feb. 19th, 2009


Overtime I have come to realize that all of us have to some extent a disconnect on many matters. I have one when it comes to the Hip Hop fashions today’s kids wear. I just do not see the glamour or why its “cool” to wear pants that are falling off your waist. You can’t even walk down the street without your pants falling off, much less run for the bus. Why is it that making people look at your underwear as your pants hang on the shelf of your buttocks cute, or cool. If you’re going to do that hey, just cut out the patches of cloth and let the cheeks hang out altogether. At least the pants will fit. You know there was a movie made about a designer who did that when designer jeans were the fashion.

I realize some of this is generational. When I was a teen bell bottoms were in. Man, I would not be caught dead wearing straight leg pants. The bigger the bells the cooler those pants were. But at least I wasn’t baring my anatomy. I confess, my parents had the same expression on their faces as I do now about Hip Hop fashion.


Today’s Major Economic Disconnect

As I look at all these bailouts and the focus on American big business, the more I see that our leaders truly have a disconnect about the core of Americas economic engine. To paraphrase a Clintonite expression, “It’s Middle America Stupid”! I well realize the importance of our banking system, of our automotive industry, of capital liquidity. I realize the profound ripple effects that these bailouts and government programs have in terms of the potential positive ripple effects throughout our economy. However, I also see clearly that our government does not understand, nor do they seem to know how to reach the innovative powerhouse of middle class America and the multitude of small businesses that make up a significant portion of our economy. It’s Americas middle class families that make up a significant portion of our national economy, It’s the innovation and super-efficient small businesses that have created real value in an economy where manufacturing and many industrial jobs have gone to other countries. For all the money that you may put into American big business, a large part of that will wind up spent not in our country but to overseas companies that manufacture the component parts, if not the whole product, at cheaper labor rates than is available here in the states. My feeling is that a bigger bang for the buck can be achieved by investing in the small companies that manufacture products and provide services hear in the states than to Americas big businesses. It’s these smaller scale companies that manufacture just in time components, or odd lots, or special order items, or provide valuable hands on service, that make their cost affordable and effective compared to large corporations that can only exist through economies of scale and by outsourcing production to other countries with cheap labor.

The Tie in to the Disconnect Factor

So you might ask, why money doesn’t flow to these small and mid sized companies? I should make note that when I speak of small and midsized companies I am talking about companies with 10 to 200 employees with revenues of between $5 and $25 million dollars. Although many could be called small that are in the $100 million and under. I think there are several reasons. One thing that comes to mind is that these companies have small budgets. They exist and make money because they are generally private companies (non public companies) who’s owners earn a salary and make a living but may not have much left after all operating expenses. As a consequence they do not have lobbyist and political activists working for them. They are under the radar. These companies have small voices in terms of making political waves for the political leaders who oversee their geographic region. So to the extent their inequities do not receive any response, the likelihood that an elected official may face a negative nudge on votes come re-election is a minor risk for elected officials. Of course many elected officials seek out and do have members on their staff that assist them in attracting the largest amount of support for any favors that they may be able to dole out. You can well say that it’s a way of buying votes. Our political leaders are more inclined to be sensitive towards big business and to take votes and positions in their favor because of their campaign contribution and how they can swing votes than they are for small middle American and typically non public companies. So there is a redundant disconnect factor towards small business. This disconnect comes from the limited resources of the business and from elected officials lack of interest for small to medium sized businesses.

The Economy of Scale in a Bailout


Another issue with regards to bailing out Middle America is the cost. From a business perspective most people are not aware of the billions of dollars that are spent on marketing and corporate intelligence of figuring out markets, market niche’s or even what type of gadget a consumer would purchase at say Best Buy. In fact they even know that a certain color of packing is more attractive than another depending on whether the buyer is likely to be a man or a woman.

The potential cost of figuring out which small business is worthy of a bailout or an injection of capital is enormous. In fact so much so that it generally precludes the governments ability to approach a bailout to this sector of the economy. Wallstreet, venture capitalist and private equity firms spend billions of dollars in a given year simply to find, analyze and structure financing for small to medium sized businesses. This process is so involved that even when done correctly, even spending large sums of money and employing MBA’s, attorney’s, accountants and a host of other professionals there are many failures or at best low returns to make the effort not viable. To think or suggest the government could potentially take on this task and do it better than the number of firms that do this professionally is for the most part foolish.

In order for the government to address the economic downturn on the scale that is currently the case, the best and least costly not to mention the fastest way to institute programs and policy is by starting at the top of the food chain. So big business, with lobbyist and the political influence will and do have an upper hand to being bailed out despite their sins. Not that I think this is at all fair however, it may be the best our government is geared to do.


Conclusion

This situation and the inequity of government to be for the people speaks much towards how we are trying to resolve 21st century issues using 19th and 20th century strategies. At no time in the history of the United States has there existed such a mass of economic power that has been so important towards achieving the innovative and economic objectives of our nation as there are today via small to mid sized businesses. And yet government fails to be able to represent or to harness the great potential of this vital sector of our economy. Obama won the election because he represented change and everyone wants that change. Everyone knows change is needed. But how to come about that change still eludes us. In our current condition I don’t expect that this problem will be fixed. It is more likely that small to mid sized businesses will address and fix there own problems than government coming to their aid any time soon.

Why Aren't CPA's Part of the Economic Solution?

Why Aren’t CPA’s Part of the Economic Solution?
By: Rene Velez Feb 10th, 2009


The country is a buzz about the economic downturn of one of the greatest capitalist societies in the world. People’s confidence in the Corporate world is by recent accounts at an all time low. Government credibility and its effectiveness is in doubt. Despite our congress’ ability to bring about a stimulus package to our economic conundrum by pumping money into the system, their efforts are wrought with a vision of waste, lack of knowledge and leadership and of prudent exercise of judgment. We the people have made a direct connection with the influence and power of big business and that of the associated strings attached to our political leadership. The money has gone to the wealthy despite the dire straights of the common citizen. To add insult to injury, reports of corporations conferring dynastic compensation packages to executives, purchasing corporate jets and travel and entertainment junkets to luxury destinations leaves nothing less than a bitter pill in the mouths of Middle American families.

In Iran, fanatical Muslims are chanting death to America, and rejoice on our economic hard times. Shameful, especially in that we have in large part brought this recession upon ourselves through capitalistic greed. Even our allies look to us for a solution and have spoken out against unregulated and egregious capitalism.

Psychological Economics

To a degree any potential solution or combination of solutions must involve a mind altering jolt, to snap us out of the pessimism that prevails in today’s markets. Besides sound economic policy and true leadership nothing, could create the psychological catalyst to stimulate confidence and a renewed economy as the metrics of transparency. This economic situation requires the skillful salesmanship of a change agent that can back his/her rhetoric with proof by the numbers. I dare to say, nothing short of this will bring us out of the economic tailspin we are seeing. In the end the solution to any turnaround requires all involved to buy into the plan and become part of the solution.

To this end the accounting profession should be at the forefront of offering the systems, and metrics to show the American people and the world how well or badly, the government is performing on any taxpayer money it uses to leverage us out of this hole. The country needs to see, how many banks are saved, how many jobs are rescued, how many jobs are brought back in line, who is making money, what industries are being benefited, how much money is being put into service, how is the money being placed and who owns those companies that are getting the money. How much is each state, city and local government getting, what is the amount invested today and how will that help the state, city and the citizens into the future. Can a return on investment be calculated. What thought process and qualifying factors are being used to award government contracts and funds. No profession is better able to analyze, record, interpret and report these findings than the accounting profession. In a congress where some 90% of its members are attorneys, who may be well endowed in the nature of politics and the law, few understand accountability and how to present it in a fair manor. This is, in my opinion a major flaw to the American political system.



The Sidelined Profession of Accounting

I have for many years been very critical of how the accounting profession portrays the value they render to our great nation. We as a profession have failed to educate the average person of what we do and what our responsibility is to the public, even though “public” is the middle name of our designation. We have failed to take on congress and to gain our rightful place as watchdog of government spending. While we clearly perform many services, we do report many abuses, we do know the ins and outs of the inequities of government, we are hog tied and gagged by the power and influence of Corporate America and their partners in waste and deceit, our very own elected officials. We have a Government Accountability Office (GAO) that has a role to supervise, oversee, evaluate, establish rules and systems and to report its findings to all about government activities. Yet it is essentially powerless and toothless in its ability to enforce and enact change on those it reports on. The accounting profession has direct ties to the Securities and Exchange Commission (SEC) and is subject to the promulgated laws and rules when it performs audits of public companies, yet we lack the power and authority to command changes that would safe guard wealth and the economic security of this spectacular of all capitalist nations. Although we do by and large add great value to the capitalist system by fair and standardized reporting of those companies that trade in our capital markets, as well as on government activity, we are leashed to the ministerial tasks of our profession as opposed to establishing the forum for transparency and for internal controls that make for a better capitalistic system and democracy.

The theory of Laissez faire when implemented has created a glass wall to the accounting profession in that no one wants a meddling professional accountant putting obstacles and questioning the free market forces and the flow of capital. Certainly, many know that we are not well liked when we come calling for records and explanations during an audit. But asking the tough questions with a trained mind leaning towards skepticism is in fact, what brings about value to our economy as a whole. Yet, we have a professional obligation to a certain extent be regulators with a commanding authority. By no means should the profession interfere, but we should have, a commanding voice that has the power to compel investigations and analysis of industries and trends. This is part of our implied role as watchdog. We also need to have authority with teeth to bite back when abuses are demonstrated. To bring about legal action or law enforcement when it is demonstrated and reasonably understood that there is public risk in excess of reasonable reward. Essentially this is the “whistle blower” laws on steroids.

Think of what a difference that would of made in the banking industry and in having an opportunity to evaluate removal of the Glass-Steagall Act in light of today’s economic demise of both our banking system and our investment sectors. Think of the role a more authoritative accounting profession could of played in the analysis of overleveraged banks and in evaluating the lending process and the risk shifting of high risk mortgage pools.

The profession is so poorly weighted in its importance to twenty first century economics that we are doing the great capitalist society a great deal of harm. Here too is an example of a profession that has failed to evolve from the concepts of the industrial revolution to the needs our nation faces as a global economic power with long reaching implications for American interest throughout the world. If you don’t think so read the press these days and see how many countries blame the U.S. for shameful capitalist conduct.

The Tools vs. The System

By and large the theory, tools, metrics the required understanding to all those disciplines that make our economy work are there. What is lacking is the independent, funded working system and framework to oversee, analyze and debate and report issues in a master framework that strives to bring about effectiveness and efficiency of our capitalistic society and our global economic influence.

What the United States needs is a United States Economic Development Board of Governors that takes on the role of watchdog, information gathering and analysis of fundamental economic issues and promulgates required legislative initiatives by elected officials. These promulgated initiatives shall have the following requirements:

(1) Promote economic stability.
(2) Make for efficient capital markets.
(3) Provide for efficient and effective banking.
(4) Provide for fair and balanced international trade.
(5) Create systems and controls and reporting for a transparent government.
(6) Create public private partnerships for innovation and the improvement and development of the country’s infrastructure.
(7) Create an effective and efficient government spending system
(8) All promulgated initiatives to legislators should have clear and obtainable times frames for any required laws, bills and other executive orders. It shall also impose strict time frames for completion of the tasks and the spending involved.
(9) Create a system for national healthcare, funded by corporations and government.
(10) Create a system for a national retirement system funded by corporations, individuals and government.
(11) Create a system that allows federal, state and local tax credits for qualified volunteer services rendered by individuals and corporations.

I am sure there are more critical items we could add however, in essence we need to be able to address core issues that further our social and economic interests in order to maintain our economic well being.


The Success of Autocracies in the 21st Century


Two notable authors Fareed Zakkaria and Robert Kagan in their books “The Post American World” and in “The Return of History”, respectively, make brilliant commentaries of the rise of Autocratic governments such as China and Russia. These governments are a far cry from what our government is, what it will ever be, yet they have had great success in developing their economic might with dictatorship style of governess.

Not that I cater to this form of government, yet as of late I see some sense in the current talk of U.S. nationalization of industries. Of course only the current economic situation brings mention of this, worthy of presentation for a great democracy like the U.S. What I do think is the key driver to their economic success is not the form of government at all. It’s that their form of government brings about strict initiatives that are accomplished in record times. That concerted efforts and in effect prime directives initiated at the top, are acted upon and brought to fruition in Stalin type fashion is very admirable and deserves mention. At the most innovative companies this is a key form of governess. Our liberal democracy is expensive, wasteful, time consuming and generally ineffective and adversarial towards addressing social and economic issues in today’s 21st century global climate. To say this in other terms; our government can not and is not built for business. Every time we try we wind up with $10,000 coffee pots and $100,000 toilets. We need to find the way to incorporate the autocratic decision making and initiative based methods to steer social and economic based policy into our democratic way of government. We need to isolate our legislative process to how best to pass the laws required to manage our country and leave the initiatives, measurement and evaluation from concept to implementation to an independent body that injects and mandates the important drivers into our government.

With regards to autocracies, the fact of course that their government will not succeed because they are mistrusted and mal aligned to the interests of other countries is a topic of political struggle not one of economic benefit. I don’t agree with dictatorships yet we do and should find ways to co-exist with all sovereign nations.


Conclusion

For years we have made fancy talk about bringing business based approaches to government. That was great talk then. Today in light of the capitalistic greed and fiasco that surrounds us I am not too sure we want business in our government. But more to the point business ventures in government will never work because the focus and goal of our elected officials is skewed and opposed to the better interest of our nation. An initiative driven government in a democratic structure driven by an independent body as the way to "fast track" critical reforms is something we need to discuss and the accounting profession’s skill set together with an existing value system of honesty and integrity could be a powerful force in moving this country in the right direction. The question is who among us has the fortitude and desire to venture into such waters. Maybe, our new president should consider this structure and be ring master.

The U.S. Emperor Has No Clothes!

The U.S. Emperor Has No Clothes!
(By: Rene Velez Nov. 10th, 2008)

Congratulations! We The People have cast our vote and one candidate has won a vast majority of the votes. Barack Obama is our president elect! A historic moment by all accounts. What can I say? I am speechless. Moments like these are best savored and engrained into memory as a lifetime experience. I have on this blog expressed my concerns about Mr. Obama, but I wish him well and as a citizen will stand behind him. Or at least for as long as it works. Such is politics.

I am particularly proud of this great nation. I know that this race was not supposed to be about race. But, I am not one to stay quite when the emperor has no clothes. Hey, what do ya know….he’s an African American! My fellow countrymen have wisely seen beyond race. American democracy is suddenly just a bit more genuine and legitimate. Somehow, a vote for Obama has made us a just and better example of democracy, freedom and liberty. God bless us all!


A New Face on Race

Just as Obama has won a national election, I am both fearful and excited about what it all means. After all, this is an experiment of sorts. I fear that politics may deal a heavy blow to race or, it may help us be more harmonious or homogenious. If Obama does well in politics and he is able to bring about positive change and reform, he will be not only a role model for all African Americans, but it will help all minorities. If he becomes a failed president, like our outgoing president Bush, I fear that we may loose much ground and that tensions between races could befall us. It’s important to recognize this less we all fall victim of pundits and cynicism. Obama has the potential to draw many of the new generation into politics, social and public service and, grass roots movements. Obama may spur community involvement and activism the likes of which few presidents if any have been able to accomplish.

One profound thought comes to mind. No matter the outcome, no African American should ever feel they are a second class citizen. No African American should ever hold their head down because of their race. No African American should ever state, opportunity is less available to them because of their race than to any other member of our great nation. This election does not prove that racism is dead. Not at all. What I think it does show is that, it’s not as important as many of us have thought it to be. Race is not a barrier to success. It is not a glass ceiling. This should be truly inspiring to all of us who believe that this country is great, because we are all different.

Change In a Transitional Society

Obama’s win has many implications that are still as of yet unknown. And every indication is that only history will provide us insight. He did not win because he is African American. He won on Merits. Or did he? Is it possible to say he won simply because of the overwhelming dissatisfaction with President Bush? In part the answer has to be yes. Obama represents hope. He is young charismatic and vibrant and speaks to change. Specifically, is that change for the better? No one knows for sure just yet. But listen to the news and the profound implications of so many bailouts and failures. Listen to the grinding halt of a global economy and read the fine print and in between the lines of our global markets. The U.S. is a country in transition. If Obama can carry this country with his charisma, intellect, discipline and the very same grass roots, community organizing skills, we may well be onto something. We may well have a winning President for years to come. My intuitive guess is that Obama has the potential to understand and to use the psychological forces of leadership to guide this nation. But of course, as with all presidents, will he have the right cabinet and support.

The Opposition of Partisanship

Aside from the staggering issues we all face, Obama has before him the tempest of partisanship. Reading the NY Times today, already we have republican conservatives aiming to simply make Obama’s presidency a miserable one. It would appear that Newt Gingrich is the only one who has voiced concern over taking this position. Hurrah Mr. Gingrich. The country does not need division right now. We need leadership. The republican party would be better served to head the notice, voters have given and, find a way to move towards the middle and extend a hand to a President Elect that is well supported. I should also note that any potential backlash from partisanship bickering will go a long way towards drowning out the republican party from main street politics, and further away from the White House. After such a significant loss, the republican party must acquiesce to the will of the American people and simply plan for a fight another day. Mr. Gingrich, please tell our fellow republicans they have no clothes! It ain’t pretty either.

As Strong as the Roots

Anyone who enjoys plants will tell you that a plant is only as healthy as its roots. A tree is only as strong when the wind is howling as the roots are. Obama won this presidency by applying grass roots efforts and using skills of a community organizer. I would urge our new president to stick to his knitting as he develops his legacy. Be a president of the people, voted by the people, to serve your people. It would be a strategic mishap if Obama were to take on the Washington power structure head on. There really is no need to do so. I think Obama knows this. During his victory speech I was moved by his indication that he would need public support. Obama is a leader of concensus before judgment. If the elections is any indication, we should look at how he goes about winning his constituents to predict how he will faces the many challenges before him. In many ways he might well wind up being a Bill Clinton. President Clinton often tested the water and researched the polls before adopting any position. It assured him high marks as a sitting president. Although Obama’s presidency is much different in terms of the issues he faces, Obama I assume will do much of the same, with one difference. He will build and derive his power from the people through old fashion grass roots.

Winning The Presidency via Economic Anxiety

Winning the Presidency via Economic Anxiety
(By: Rene Velez 10/15/08)

These days no matter where you turn your head the talk of the town is how bad the economy is. Driving along the city of Miami you can almost feel the fearful pause of a normally bustling city. Where the culture is often over the top on glamour, fashion and in showing your achievements through acquisition, now everyone is simply watchful of the dark clouds above us. Even in the sunny subtropical days that are common in south Florida, the mood is that of a raining day.

Judging by the news of sour profits, tight credit markets, government bailouts and that all too ugly word recession, the mood is somber at best all through out the country. If it were not for the repeated interruptions of news flashes of the presidential elections, I think some people might just be ready to jump out windows. This gloomy mood makes me ponder on the effects of our current economic situation on the elections. Not that this is new but I have some of my own thoughts on the matter.

The Art of Expression in Saying Nothing

All in all I like Obama, but I am not convinced he is capable to meet all the challenges before us. He has attracted many citizens to his side by virtue of having a gifted tongue. He is eloquent, rhythmic and able to captivate the masses. He is so god at his oratory work, I am surprised that he has not been called the coming antichrist. Not because I think he is or should be viewed that way, but his presence is somewhat unnerving. Yet for all his skill he’s not offered anything any 4 year economics student at a decent college couldn’t conjure up. Like all presidents he lacks substance in what he says. His track record as a community organizer hardly is a training ground for world politics and for being the leader of the free world. His track record on taking positions on senate votes is lackluster, mainly because he took no definitive positions on crucial votes. Although it’s not uncommon for presidential candidates not to take hard positions while campaigning, as a measured way of staying out of controversy, nothing he has said compels me to vote for him over John McCain.

Popular Support in an Economic Downturn

Lets face it, in the words of Bill Clinton; “it’s the economy stupid”. There is but one key law of physics during an election year when the economy is sour. “ The greater the economic downturn, the greater the propensity of voters to want to switch parties, candidates and to repel the forces of the current administration”. Bad news for McCain and good news for Obama. But why is it that the media doesn’t really say that. My guess is that by saying that people want “change” only because the economy is bad , is like saying that Obama really isn’t qualified. My gut feeling tells me that this race would be a lot more heated and the polls would show a much tighter race if the economy provided a more even playing field.

President by Default

Obama might very well win this election, yet he will live with the fact that the peoples choice was not because he was the better candidate but, rather because people wanted change more than they wanted him. Although this may sound like an undignified way to win the presidency, few candidates would shun the chance to win. However, in those early months as he takes the reins of power and is thrust onto the enormous problems this country faces, his choices better be as good as his oratory skills. I fear that anything short may cost him dearly in the way of political clout. I am not forgetting that we will also likely have a democrat controlled congress. In fact I will go out on a limb and say it may not matter that the democrats control congress. Judging by past performances, the democrats have a way of dividing instead of conquering political agenda. The economy, war, energy, unemployment, inflation, trade deficits, budget deficits and the like will be more than any president has had to handle in a long time. AT least since F.D.R.

Voting with Anxiety

In my mind voters are likely to vote their anxiety. In fact Wall Street may well be experiencing the ebbs and flows of an investing public voting or I should say trading their fears and uneasiness on the future with Obama. The disparity in trading values from day to day for the past few weeks is a tell tale sign of a very uneasy country. Of course many economist will argue this point with me. I should add any economist could well argue the point well against me. But I will offer you this to ponder. A large part of business is about management. And management owes a great deal to psychology. Then logically, the state of mind of a country in economic fear is to vote your anxiety.

McCain’s Timing in History

McCain’s timing is not only off given his ties to the republican party, but he has not shown the diversity and energy that would be required to roll with the punches that have been dealt him. I truly believe as a senior senator of great experience he could have derailed Obama. At minimum he could have turned on a more formidable defense by bringing to light a more comprehensive solution to today’s problems. He did not, and perhaps, he could not. It would be overwhelmingly difficult to up the stakes preceding an election and to take positions that may be contrary to your own parties decisions. Especially, at a time when the country is in such turmoil. This is the equivalent of giving a stick for your opponent to hit you. Although his timing in history is way off, the truth be told nothing convinces me more of our need for change all around. We need change in leadership, and change ideally should come from outside the current established political leadership. This is a plus for Obama.

From the Outside In

Most of my professional life, as a business manager, I have had to contend with bringing about change in business. In order to bring about efficiency and effectiveness change is often required. I have learned through many years people fear change. Change is a difficult thing. Reinventing oneself is not easy. We are after all creatures of habit. It is experience that’s helps make change agents better at what they do. It is the ability to see beyond the current situation and make those finely executed adjustments, through careful decisions that make change agents great. Therein lies my indecision with Obama. But there too begins his promise. His new vision together with the fact that he is a very intelligent and skillful politician, does not preclude effectiveness as a president. To this regard Obama is empirically a leap of faith. That is to say his track history does not precede him. Considering peoples anxiety and overwhelming discontent with congress and the current president, the general population seems to be okay with that. The notion of change coming from the outside is not only palatable, it is welcomed and sought. Obama will win simply because he has a limited amount of exposure to the establishment.

The New Political Landscape

I propose to all that we have a new political landscape. Fear, terrorism, anxiety and poor political governess will promote change and new leadership from outside the established norms of American Government. This is a periless and an exciting time in American politics. The American people will speak out in historic numbers to promote change. If we as a nation can stay charged, then we stand to bring innovation to the way we govern our nation. There is risk however. What happens if the opportunity for change and innovation goes sour? What if this transition point in American politics is trampled because of a few bad decisions and some unanticipated mishaps? What then? Will we have hope? Will the public still support change and innovation? I trust the American Public will. Innovation is a part of the American way of life whether we realize it or not. However, the most palpable driver behind the new political landscape is that the stakes are so high.


In Obama we will trust, and fear not!

Critical Mass of a Bailout

The Critical Mass of a Bailout
(by: Rene Velez September 26th, 2008)

Here is a term that as of late has a double meaning. “Critical Mass”. In business the term is used often to describe the volume of business required to get attention, show up on the radar, or to have a significant impact upon others. Looking at the current scenario of the financial crisis you come to realize that AIG, Fannie Mae, Freddie Mac and the banking industry as a whole have a significant critical mass. The White House’s desire to bail out the economy legitimizes the importance of corporate Critical Mass. Yet you might say that the Critical Mass of corporate largess now has another Critical Mass to contend with. That is the Populous Critical Mass. This is defined as those citizens, and the public at large who’s opinions and views determine the outcome of how the Corporate Critical Mass should affect them and how government, in this instance should react.
For many years now I have been envisioning a social, political and economic revolt from the middle and lower class. Is the current economic fiasco a turning point? I don’t really know. Nonetheless the related nature of why the popular view that bailing out corporate America is filled with disgust, lends credence and support for the general discontent of the American people with big business and with our government.

The Next Shoe to Drop

Maybe we are just at a turning point. Maybe people are just now starting to react. Maybe this is just the tip of an iceberg that will lead to the type of calamity that precedes the great change America needs. If this is the beginning, what else will disrupt our national and global economy in the near future? My guess is the writing is already on the wall. The airlines and their future position due to expiring fuel contracts looks bleak. I suspect a continued rise in the cost of fuel and a downsized economy could just be the straw that breaks this important logistical network. The other industry which plays a vital role in our economy is the Auto industry. Here too, the news is not good either. With sagging car sales and a lack of innovative product to counteract the consumer demand for fuel efficiency and as well as functionality and style, has already proven to undermine the major auto manufactures in the US. Will these be the next corporate bail out candidates? Perhaps.

The Differences

As for the automotive industry, perhaps a bailout is not likely, at least not from the government sector. Despite saying this I know $25 billion has been promised already. However, This is mostly a stop gap measure in order to buy time and create new platforms for the NT American auto. Most likely the bailout will be from the private investment market. Why? I suspect because although a critical part of US logistics, (and the economy) there is a ready and available foreign market that will fill any potential void, with barely an immediate impact on the demand and supply side of economics. The airline industry might be another issue. Although the same might be said of the airline industry I believe that national security might play a role in saving the airline industry, but only if there are no takers for a bailout, from the private investment sector.

Socialized Capitalism

All of this bailout talk and the government’s need to apease the general public’s demand to either be paid back or to share in the upside of a turn around situation has bolstered talk of a Socialized form of American democracy. I might add that these views are well justified. But is that really bad? Maybe we could actually do this right and pay off our national debt? Maybe this is not so bad considering how bad things really are? The real issue is that socialism is a dirty word in American democracy. It should be! For me the real fear is that government can’t do anything right without it costing the taxpayers a fortune. So any possible upside is likely to be absorbed through bureaucracy. Here in Florida, after Hurricane Andrew, insurers suffered significant losses. So much so they stopped insuring homes. The demand and need was so great that the state had to step in and become the insurer of last resort. This worked out for a while although the state was not into it for profit. Other than stabilizing the market and allowing for a period of recuperation, the state and taxpayers did not benefit. As the years past private insurers came back into the market.

The Popular Critical Mass

Is it possible that the revolt I have been thinking about will be no revolt at all, but rather a fundamental change in how we manage this country and all the mission critical goals we have before us? The popular vote sees the need for change and that the old ways of doing business and government can not continue. In fact the old way of government is coming under attack heavily these days. Free markets do work, but with diminishing rewards to the lower and middle class. These are the constituents the government is supposed to protect. But, they (the government) do so poorly simply because this has been a fickle crowd to please when it comes to re-election. The real money and backing for a political candidate’s re-election comes from big business, lobbyist and political action committees. Lou Dobbs from CNN says it best, “the best government money can but”.

The Need for Leadership

Despite all of our current concerns of economy, foreign policy, healthcare, social security, education etc. etc., this is still a great nation and a great country. So much so every politician will take his or her turn selling you this point, all while they mismanage your government and make you appreciate it.

I don’t question American ingenuity! I don’t question American hard working families! I don’t question American resolve!!! Above all I don’t question America’s commitment to generosity when the time comes for a nation such as ours to help others in greater need. I have though, for many years, come to question greatly the leadership in America.

In corporate America, greed and short term planning geared for quick profits are bringing down our sustainability. Worse, these philosophies have created corruption in corporations across our country and are undermining the working public and this country. Corporate and ethical responsibility are in my opinion at their lowest. You are more likely to have a corporate citizen do something of social value these days if it has a great deal of impact and marketing value than simply because it’s the right thing to do.

In government, the political process of re-election and or guaranteeing yourself a soft landing by means of a corporate job after your years of service, means politician’s play up to big money and influence rather than their constituents. No one wants to take a hard line position simply, because it’s good for the people. The simple truth is that our politicians are not the leaders we want them to be nor are they the leaders they should be. You can’t afford to make any waves in politics. Sadly, even when politicians do well the general public ignores them rather than standing behind them and supporting them. In these cases we as a people get what we deserve.

How do we arrive at better leaders? Training, education both at the elementary level and in higher education. We need to instill pride in public service. We need a better way to grade our political and corporate leadership. Elections alone do not work. We need perhaps, an independent board of academicians that can (a) create national strategic objectives and (b) grade how well corporate America and government perform their respective roles, and issue reports to the people of this country. Depending on the overall score and determining factors; leaders are in the worst case replaced or simply given vectors for performance. What I see are boards for varying strategic industries and for sectors of government. Will this be perfect, no. But it will give us a chance to focus, direct, and be intelligently critical towards achieving overall objectives.

I should mention that these boards have to be totally independent, with no possibility for self enrichment in the future, no ties to those being judged. As an accountant I would liken it to the type of independence accountants must have when auditing except much more pure. The idea is to form a sterile and objective basis for analysis.

The Big Bailout Problem

The bailout as presented does nothing to protect the taxpayers. It transfers the risk and exposure to the taxpayers for years to come. It gives much, too much, power to the secretary of the treasury. (An appointee) It provides for no regulation that would provide protection for a recurrence of the fundamental problem in this crisis. It fundamentally insulates and protects the wealthy and irresponsible companies that have created this mess. It is a reaction geared towards addressing , if not playing to fear and initiated by panic.

Without question I don’t like this bailout, though I think it may have some positive benefits. But this may be minimal if any. This equates to high risk.

The more I toil with this scenario the more I say, NO BAILOUT!. Let the market fail and correct itself. Not on my hard earned taxpayer dime!

I may well hurt. My 401K, IRA’s and mutual funds will take a huge hit. My home value may continue a precipitous decline. Yet I rather take that risk than strap my children with additional debt. Give me a leadership I can count on and I might risk otherwise. But seeing what I see now in corporate America and in government……..no thanks!

The Critical Mass

I can’t help but feel the republican party is not acting in the public’s interest only. Although I welcome their rejection of the bailout, I do not for a moment think it is all about what is best for the American people, despite the turn out of the critical mass against the bill. The republicans seem to instinctively fear that Obama will win this election almost by default. If this be the case a political strategy for the republican party is to do better than average in this bailout proposal and hope that in 4 years the public will be convinced they were the better bet in 2008 and in 2012.

Now more than ever the critical mass has shown its muscle and power to influence political leaders (I use the term “leader” loosely). It is the critical mass that has shown up and that will dictate how government responds and who will win another term in office. Strength in numbers.

Citizens Show Up

No one can say for sure if we as citizens are crazy for not wanting this bailout. But I am proud and delighted to see so many write into the house and to their legislators about their contempt about how the government is handling this crisis, how they allowed it to happen, and asking for alternatives.

Yes alternatives exist. Some examples are (a) increase the FDIC insured limit to $250,000 or more. (b) take a direct capital (ownership) position in failing banks that guarantee an upside to taxpayers, (c ) provide for taxpayer relief and restructuring of overvalued homes with high mortgages and adjustable rate mortgages, (d) provide regulation of the banking industry to prevent future instances of overleveraged banks, (e) pass new laws to go back to the traditional borrowing requirements that evaluate the ability to repay debt, (f) require first time home owners to undergo credit training. (g) creating private equity vulture funds to buy out bad debts from banks at discount prices.

I for one would like to try instituting policy that is geared towards regaining the public’s trust in the banking and equity markets. The economy should follow and perhaps then citizens will show up for the political bipartisan group that has what it takes to assemble and get things done!

Bailing Out Corporate America

Bailing Out Corporate America
(by: Rene Velez Sept 24th, 2008)

I have been wanting to contribute my own thoughts on the recent events of bailing out corporate America. But first I have to get some things off my chest. This is truly embarrassing but not a surprise. The level of greed in this country has reached a new level. Not to be undone is the level of in-competency our government has shown and the absolute inability of regulatory agencies to function for the public good.

Recent events show clearly how management is willing to push the numbers of corporate America to prop up earnings under a business model that is little more than a house of cards. While at the same time meeting the objectives, however unfounded, and in this case insane, that lead to lucrative executive compensation packages and golden parachutes. Clearly, not only should these executives not receive what amounts to excess compensatory packages, but I would investigate and prosecute the executives and the board, who demonstrated reckless abandon for what is now economic terrorism.

Sarbanes Oxley, has done nothing as there is no mechanism to measure and to judge the magnitude of a failed business model in light of poor management. In the case of AIG the $85 billion bailout figure will surely cost more. To think this is an insurance company, an actuarial business, who can calculate that you could extend your life expectancy another 5 years by eating a brand muffin every morning. Yet despite sophisticated mathematical models that predict probability they fell drastically short, in fact claim they were totally unaware of, predicting their eventual demise and collapse.

To think that no one dared to think that the real estate market could tank from oversupply, despite warning signs that were everywhere. To think that no one dared to question a home that increase in value 55% in two years might suddenly fall in value. To think the government truly did not know that income levels for the average American were far behind the appreciated prices of housing, To think that no one thought that the shear volume of collateralized securities could suddenly tank due to a market correction in the real estate and the credit markets. That no one in the mortgage community ever stopped to think what would happen to all those “No Document” loans that were issued with no income verification and virtually no credit worthiness.
The reality is that the securitization of mortgages transfers the risk of performance of those loans, in this case, directly to the stock market. In effect the mortgage business became a game of musical chairs, where many were left without a chair. Whatever happened to the traditional banking and mortgage model where money was earned the old fashion way? What happened to the five “C” of credit? Credit Worthiness, Collateral, Character of Borrower, Credit Risk, Cash Flow to Repay? It seems that lending model is too difficult! Why bother when you can make a mint on volume transactions and a ready market to transfer risk. The old theory of the free market has gone astray, and we should hold regulators accountable for not seeing it. Our federal government is to blame as well. The shear size of this newly created market, together with unprecedented real estate values was a clear indicator for all. A free and self correcting market was thought to allocate capital from the capital markets based on ascertainable facts based on the five “C’s” of credit. Capital is best placed where the likelihood for success and repayment were deemed to be the best. This did not work in this fiasco. Simply put, capital simply followed those who could place it the fastest and they in turn made money from packaging and issuing securitized instruments as fast as they could. The fundamental basis for proper allocation of capital was totally ignored. This neo mortgage securitization model of the mellenium was ripe for a wall street collapse. A collapse that is being compared to the calamity of the great depression.

Although a government bailout is difficult to swallow, I must admit that at some level it must be done. I have heard many say, to hell with wall street let them suffer and pay the price. The truth is that this is not about wall street loosing a lot of golden eggs, but more so the shear magnitude of the problem indicates that the golden goose is in critical condition. In this case it is the same golden goose that provides the golden eggs for all of us. So we must have government intervention to save us all. However, we must be very careful. Bernanke and Paulson both have deceived the public by not coming out sooner with the bad news. It is difficult to discern if this was negligence, incompetence or complacency. Either way they should have been sounding the alarms many months if not a year or so ago. So, we should not be so ready to react simply because now they are sounding the alarm. Some have made this quick and irrational response to a crisis similar to how we made the mistake of invading Iraq. This crisis is with us now and will be despite any government intervention so I would venture on taking some time to think through how all this works out.

The Positive Correction

The truth be told, after a significant market correction, mortgage backed securities will flush through our economy. Let us not forget, despite overvalued properties and the cost of non performing loans, these securities are collateralized and some tangible value is still there. So the bottom may not be as grim as it could be. In fact if these non performing and securities are repackaged and properly analyzed, purchased at a significant discount and held by our government, taxpayers could stand to make a profit. All this while injecting liquidity into the financial system. The question is whether our government can in effect make that work efficiently. Having said that we should look for private equity funds as well as foreign markets to invest in this venture. We should leverage our global economy so we all benefit from this process and not absorb U.S. taxpayer funds.

Punishment

We must take corrective action to teach reckless management a lesson. Corporate America should not be let off the hook. I would be very disappointed, although not surprised, if those responsible were let off easy. Government officials and regulatory agencies deserve to be held to the same standard. No lucrative compensation packages. Seek damages from management and the board. Conviction if criminal intent was involved.

Regulation

We must learn from this, create a mechanism that prevents this from happening again. This mechanism must be designed so as not to be too costly or burdensome on our capital markets, Sarbanes Oxley, does not really work, did not work here and is too costly. We can not maintain a competitive capitalist economy and compete globally with these types of regulations. There are other ways to accomplish this. If only the accounting profession was more aggressive, innovative and dared to think out of the box. It’s time for the accounting profession to show what it can do rather than taking its cues from the corporate infrastructure and government beaurucrats.
Colleges and Universities need to institute more corporate governess and ethics courses. I know that to many this seems like trying to address a cancer by prescribing an aspirin. Yet what should be evident to all is that corporate America is lacking in the fundamental precepts of how to crate value and sustain shareholder worth through true and tried methods. We seem to have a whole culture of executives who’s greed and desire to obtain quick results together with the true stresses of managing large corporations have time again yielded severe consequences in the long term. The results of many of the major critical issues of today, have a fundamental tie to short term, shortsighted management and government.
We had an oil and energy crisis in 1974, we did not learn. We did not diversify energy sources. Our auto manufacturers did not compete effectively against the Japanese. We’ve known we have an immigration policy issue for many years, we have not fixed that. We have been talking about the environment and the effects of pollution for over 40 years, we have done nothing. Healthcare is not new either. Terrorism was in someone else’s back yard so we turned the other way.

Reinventing our Government

We need to create a system so that government works for the people. Currently it does not. Our political system is geared towards and for the benefit of those with the most economic power. Those who have the most lobbyists and are behind PAC’s are those that have a stronger voice then the ultimate voters. We simply can not wait any longer for the general public, to come up to speed on the issues in order to then create a force to move our political leaders. What we can do however to is to create a system of transparency in government by creating milestones to the issues that face our nation. Initially. The agenda is simple as we have at this moment in time quite a number of issues that need immediate attention. We need to create a timetable with specific and quantifiable performance measurement standards to move this country into the 21st century. Our system of government, our capital markets, our corporate governance and our position in a global economy are being managed based on industrial era concepts and models. This simply will not get us there. We need a JFK, man on the moon, style of timetable to kick this great nation into gear. Some of the critical areas:

(1) Energy independence by energy type and source diversification.
(2) Transportation sector innovation and technology.
(3) Global economic development and restructuring trade flows.
(4) Healthcare Reform. / National Healthcare System
(5) Social Security System Overhaul.
(6) Immigration Policy Enforcement and Repatriation.
(7) Federal Government Realignment based on Critical Path Initiatives
(8) Educational System Restructuring.

For those of you who have any doubts, China has become a formidable power because of some very simple factors:

(1) Focused National Initiatives (Timetable Effectiveness)
(2) Small, Unified and Nimble Power Structure. (Efficiency)
(3) Global Market Initiatives (Assimilation into large markets)
(4) Shear mass of population. (actual productivity / vritual)
I should note that although China has mostly unskilled labor, its workforce takes great national pride in the work they do. Reminds me of days past when Americans were more unified. We could learn from the Chinese.

The Bailout

Lets not create a bailout that leaves taxpayers holding debt. Lets create a profit sharing scenario that pays our federal government for the bailout. Forget free money. All bailout funds need to be repaid in some way shape or form.
We need to create a system to make sure what we buy, hold or acquire has determinable value and or risk. This should under no circumstances be a giveaway. The government should act like any white knight who does so with a profit motive and not just for the sake of keeping the company alive.


The Real Fiasco

The darkest side of all of this is that everyone involved is to blame. Consumers took out loans they knew they could not repay. Some homeowners became homeowners but did not have the resources or earning potential to acquire a home. A sad testament to the sheer demand for housing by the masses of the working poor. Yet businesses and institutions preyed on unknowledgeable consumers who were not educated enough of finance to make better decisions. A sad truth about the financial literacy of the people from the richest nation on earth. Our regulators failed to judge the magnitude of an unjustified new capital market through securitized mortgages. Insurers failed to recognize the magnitude of risk by taking large positions on real estate driven transactions. Our government, as usual, was asleep at the wheel and reactionary til the end. The only winners are those that timed their entry and exit at the right time, and with barely a contribution to the production of tangible wealth.

Miami Florida, A Lack of Political Vision and Leadership In Transportation

Miami Florida, A Lack of Political Vision and Leadership in Transportation
By: Rene Velez Aug. 06th, 2008

Miami is the “Gateway to Central and South America!”. That has always made sense to me. It is a statement that is visionary an outward looking. Despite the fact that statement looks out from Miami we seem to have forgotten what Miami needs to be. Or at least where it should be from a public transportation point of view.

The signs to our dependence on transportation systems are all around us. Yet we have not created a vision of what transportation should be in Miami. Why is that? Just look at our seaport. The Miami Seaport hosts the largest concentration of cruise ships in the world. Just about all go to or make a brief stop in the Caribbean and continue to all points on the globe. The same seaport has experienced tremendous growth in cargo transport ships. With imports and exports that rival many of the busiest ports in the world. We are thriving and dependent on the sustained growth of this transportation system. Lets look at our airports. Miami International Airport alone is a major hub for the Caribbean and Central and South America. It too has seen tremendous growth within the last decade. Not only has a transit point or hub but it has a substantial air cargo business that also rivals with many air cargo and transportation airport anywhere in the world. I should also mention we have a sizeable aircraft maintenance and parts business that operates in South Florida. It is a point of destination for aircraft repairs and maintenance for many aircrafts. Here too we depend and thrive on air transport. A quick look to our neighbors in Ft. Lauderdale and they too have bustling seaports and airports with just as much growth. In fact they absorb a good amount of overflow that might have come into Miami.

Just as a side note, the aviation business in South Florida started many years ago when Pan Am started flying their clipper airships out of what is now the Coconut Grove Marina. Today we host a very high concentration of flight school students that come here to learn to fly and will go into commercial aviation all around the world. Further we should remember that Doral has come to be what it is due to international trade that utilizes both Miami International and the Port of Miami. All of this, in my opinion, was hard evidence the writing was on the wall we needed a transportation network long ago.


Having made clear these facts (which we have known for decades) and knowing we are the “gateway”, knowing we have a high concentration of trade, tourism, banking, transient visitors …..why is it that our political leaders simply fail to make the connection that mass public transportation is vital to our economy and sustainability? Why have we done such a poor job at establishing a reliable, timely and affordable transportation network that can be used effectively? This is not a leap of faith! This is a plain as day reality.


Not Enough Land

One excuse I have heard is that we do not have sufficient contiguous land to build an uninterrupted railway. In particular an east west which is badly needed. I suppose there is some truth to that. But I should say that if you go back to the 1960’s there probably wasn’t one then either. In all fairness I don’t think many people would of agreed that Miami would become what it is today. Be that as it may, there is no reason why a system can’t be built. Yes there will be traffic delays and there will be inconvenience and of course we will have to utilize eminent domain in order to get it done. But there is no reason it can’t get done. I know that studies have been done to have rail lines that travel east west from the turnpike to the west, along the turnpike extension and Dolphin Expressway through the airport, and either down 112 or 836 into downtown Miami. This is doable, feasible and would create a much needed link between west Dade, the Airport and downtown Miami and the Port of Miami. Wow! Someone did have the vision but it died. We need to bring this alive again.

With regards to contiguous space. I ask this. Do any of our political leaders ever look beyond their noses? We have major overhead power lines that take a large swath of “restricted use land” (as in only for power lines) that runs from about Card Sound Road to the south, just west of the Turnpike heading North/South and cuts East all the way past Ft. Lauderdale. Has anyone ever thought of using that land for a Westside North/South route for a rail line with a bus feeder system to the already existing Eastside North/South Metrorail? Here are some benefits that. You can incorporate mixed use office and retail spaces which are income generating, you have space for park and drive centers, which are income generating, you can partner with FPL because covered or underground cables will not be knocked out in hurricanes. Oh! And of course the real side benefit is that you have augmented the transportation system and just made life in Miami more affordable. I know I have missed some benefits here but I would be happy if we got what I mentioned. The only drawback is some communities may chant the old NIMBY (not in my backyard). My feeling is you can’t win them all.

The Money

Despite whatever issues there might be to developing a transportation network in Miami, the biggest problem is a lack of funds. The only reason Metrorail got built was because federal dollars were allocated towards getting that system built. So what are our politicians doing about that? Isn’t that their job to push for the needs of this growing metropolis and to explain to our federal government that this growing metropolis pays large amounts of federal income tax dollars? Do you think that Congress and all those Presidential and Senatorial wannabes don’t know that South Florida pays a big role in every major election? Despite whatever federal apathy may exist for our needs here in South Florida, our elected officials managed to get a half penny sales tax increase for transportation when many thought it would never pass. So if they managed that, why could they not muster enough courage, tenacity and vision to sell a comprehensive transportation system to the people of South Florida? The reality is that our political leadership does not have enough vision or the intestinal fortitude to lead into the future. Despite the fact that many good things are done by our leaders, they have failed miserably in this area. In fact in the most recent half penny increase, they botched the projection and sold the plan to the public without disclosing major losses that existed at the time. They failed to realize the half penny sales tax they asked for would not improve public transportation as promised but would go instead, to cover existing operating shortfalls. In my opinion that’s gross mismanagement. What recourse do we, as a community, have on this issue? If this were a public corporation, as shareholders we could take the management to court and seek damages. As citizens it seems we have less rights, even though we do in fact have an ownership stake.

Bad Timing

Today, Miami is over the barrel. There does not exist, a major metropolitan area the likes of Miami, anywhere in the United States that does not have a major public transportation system. Even those major cities that do have them today are strained by the increase in riders, due in large part to high oil and gas prices. Many major cities have already put in orders for more buses, rail cars and the like. Potentially, this deficiency could have a major impact on the future growth of this city. Nothing turns away major businesses that want to be at our “Gateway” than bad transportation issues, massive traffic, underperforming schools, overcrowding and high costs to living. We seem to have it all.

Conclusion

Normally, I ask that people get involved, vote and to write letters to our politicos. The urgency of this problem is beyond that. Nothing short of community leaders forming coalitions and committees to oversea planning and implementation will resolve this issue. Politics is a foregone idea. For those of you who doubt me on this, start going back in time a read the articles and look at the major budget changes, contractor changes, management changes, public oversight conclusions (I should say public overblindness) to building airport terminals at the Miami Airport. This will take some fist pounding, marches and national embarrassment and we also need to vote people out of office. We need to do public /private ventures to help defray the cost. (as in public funding, private management) Worst of all is, if we want this in our community, we might well have to find a way to pay for some of it ourselves. There goes another penny in sales tax! But I must say, I want to get credit for it somehow. I refuse to pay for public official incompetence.

What is wrong with Elitism?

What is wrong with Elitism?
By: Rene Velez Aug 01st, 2008.

Many years ago when studying about communism and the Russian revolution, a discussion broke out as to why the Mensheviks would not want to overthrow the Bolsheviks. Remember the Mensheviks were the lower class and the Bolsheviks were the upper class, who were in power and had more wealth. I should also add the Bolsheviks were the minority. The discussion basically said that the Mensheviks would not overthrow the Bolsheviks because the Bolsheviks were what the Mensheviks aspired to be. Namely, wealthy and in power. Ever since that day I saw a great flaw in that statement. It does not address the fact that the masses have certain basic needs and that if those needs are not met, inevitably the majority will force the minority out.

I bring this up simply because we keep hearing in the news about how the middle class continues to struggle just to make ends meet. In fact many studies show the middle class is loosing ground. And to add insult to injury the rich continue to prosper and to gain more wealth. In fact the number of billionaires continues to increase. Is there something wrong with this scenario? What’s so bad about being rich? It seems as though suddenly the whole world is turning on the super rich. My heart really pours out to these poor unfortunate few. (Not really)

Rich, a bad thing?

My feeling is; Wealth in and of itself is not bad! It’s a good thing that we have more billionaires today than yesterday. I admit it, I wish I were super rich. This means that there is more potential to create jobs, invest in capital goods and create services. This stimulates the economy and the hopes are that there will be more wealthy households. We would hope that these households would produce family members that are well educated, and in lump sum contribute to society.

There’s the Rub

There is nothing wrong with being super rich. The real issue is that with wealth comes responsibility. Or at least we hope that the super wealthy assume responsibility. The Batman series makes it a point to stress that Bruce Wayne, a billionaire, takes onto himself the responsibility of Gotham City. Not for personal gain but for the good of the people of Gotham. Why should this responsibility be born by the super rich? It should be obvious. Money yields a degree of power and influence. Most of us know this, even though I have seen many of the rich shy away from it. Many of the rich and perhaps, especially the new rich seem to want to abdicate their responsibility. It’s almost as though once they make it, they don’t want to take on responsibility. Perhaps, their definition of rich is that they have a carefree life with no responsibility. Perhaps, that is the real definition of super rich. It’s not how much money you have it’s about how little you have to worry. After all being responsible brings about a struggle and all the worries one can dream of. Who wants more problems? The truth is that being rich involves taking on a wealth of problems. In fact being super rich has its own set of problems.

The Cons

Being super rich brings about a normal tendency to adopt conspicuous consumption. We read about these things all the time. You’re so wealthy you buy extravagant and luxurious items. That 23 bedroom home with 40 bathrooms, 5 kitchens, 50 car garage, home theatre for 75, complete with an Olympic pool and tennis court. Did I mention that there are only 4 members in the family? Did I mention that most of the time the house is empty? Conspicuous consumption can be obscene, and it certainly does stir curiosity. If you ask some of the super rich, some actually live in fear. Why? They fear that their life style and wealth could actually bring them harm. I must admit, if I were super wealthy I think I might develop a certain level of paranoia. There are a lot of sick people out there. You could be killed by some mentally ill person who wants to show up on the nightly news. At best being super wealthy might bring about a certain celebrity status. This has pit falls also. The super famous, will tell you that it is extremely exhausting to have photographers popping up out of the bushes, to take a picture. Or snapping photos while you’re in the bathroom. Most people take for granted going for a walk or going to the mall. Celebrities, have to often give these small pleasures up altogether. It’s not easy being rich. It’s easy to see that security concerns, privacy and managing wealth costs money and takes up time. I once was discussing with a new client who had come into great wealth, he had to be more prudent in spending his money, investing and tracking his tax exposure. Being wealthy does by necessity require more administration than you might think. Then there are those that are simply trying to steal your money. Everybody from the landscaper to your investment manager charges you more cause you have money. Sometimes the worst culprits are the immediate family! People who are rich wind up paying more simply because…they are rich.

Being super rich has some serious down sides. Perhaps that is why many shy away from accepting responsibility.

Elitism and Indifference

Most people tend to gravitate and socialize with members of society who are like they are. It’s hard to socialize with people who are less educated and less priviledged. This may sound like elitism, but is it really? If your life revolves around meeting the super wealthy and influential, and making trips to far and distant places, and buying very expensive luxury items it’s kind of difficult to relate to Joe and Mary Workman who , work and struggle for a living. Joe and Mary work so hard to keep up and to take care of the children that planning a vacation and the associated cost are more stressful than staying at home. Joe and Mary Workman have a totally different view and set of preoccupations than the super wealthy. Does this mean that there is no connection? Absolutely not! Elitism is not because you are wealthy or because you do not often socialize with people outside of your sphere. It is because you are so out of touch that you can no longer relate to the rest of the world. Herein lies the crux of the problem. How can, the super rich, those who have power and influence best understand and contribute to society as a whole when they really don’t understand or even relate to how 98% of how the world lives. Indifference is a sign of how wealth corrupts the wealthy. You might say indifference among the super rich is a sign of becoming a victim of your own success. This is not good! You can say, indifference is the real elitism. The super rich usually pride themselves on the material things that they posses, on the high level of education they attain, and the influence they have. There is a level of status and culture that is portrayed if you are super rich. However, indifference truly is a sign of a poor education and low class. You can not truly be the upper crust if you do not understand your everyday citizen. I wonder how the politically elite fair in this scenario. Should these people really be your representative?

The Etiquette of Social Responsibility

Being truly wealthy and cultured demands Responsibility. If you loved good wines and were very wealthy you could potentially drink yourself to death on fine wines. That would not be good. It’s also not responsible. So therefore, if you are the crust of society, or at minimum, you care about society and are very wealthy, good culture and form would demand that you accept your respective level of responsibility for society. What does that mean? I does not necessarily require giving away your money! Having good etiquette in social responsibility may not cost you a fortune. Giving away your money may not necessarily be an efficient use of assets to bring about the greater good of humanity. Take Bill Gates and Warren Buffet. Both of these Mega Billionaires are more interested in using their wealth to bring about new ways of thinking to solve social problems. OF course they use money to do this, but not by just giving it away. Such basic problems as fighting diseases and feeding the hungry, providing for education. Just throwing money at these problems is not the solution. We know welfare systems typically do not work. You have to create a mechanism and a culture to provide for sustainability.

Your social responsibility lies in you doing something to influence and create a better life for those who are less fortunate. Another way to look at this is not to treat the symptom, but rather treat the root cause.


Conclusion


The true sign of wealth, influence and power is how you use your knowledge and skill to bring about changes that create and sustain your wealth and create wealth and opportunity for those below you. The latter is what I call Social Responsibility. I hope you might be asking yourself…You don’t really need money to do this. What you need is influence. Right?

Yes. Perhaps that is the greatest contribution the new generation has for us all. They may not be the super rich, but collectively they have a great deal of influence. What’s more is that they are using their influence as a group to bring about social responsibility. In fact they are telling us where we are not responsible. They are dictating to employers what they expect. They are hitting the polls and voting. They want a better government, more fuel efficient cars, public transportation and the list goes on. Perhaps there is no better sign to their determination than the number of startups by this new generation. Maybe the revolution of the Mensheviks is here again.