BACK HOME AGAIN...

In Indianaaaaaa! The Leader came back for the fifth time in the last year today, and said...well, nothing. Said Elkhart County had to reinvent itself. Like Detroit, like South Bend, like Michigan City, like the great swath of the rust belt here in the mid-west that has been waiting for the return of Studabaker, U.S. Steel, Bendix, Wheelebrator Fry, and the Edsel for all I know. He's still trying to fix all the wrong things, just as Mike said. And The Leader said it all from the floor of a bankrupt RV manufacturer at which location will soon be an electric motor factory. Sometime ago The Leader proclaimed that we needed electric cars and green fuel and a 37 mpg standard for all that moves on American Roads. RV's really can't do that; I wonder what the audience was thinking practically all of whom depended on that industry 'cept for those who have been doing a little Meth on the side. It was a monumental waste of time. Plane is real pretty tho--or so I am told.

On of the next big fights it seems is going to be over executive pay especially pay in the financial area. This is going to be really interesting as many of the packages, especially for the highest paid guys and gals, are spelled out in fairly tight contractual form and now the question of the sanctity of contract may well meat a real test.. I mentioned the head of Phibro, a sub of Citigroup a couple of days ago who is apparently owed something in the nature of 100 VERY LARGE for his success at trading commodities--read oil--last year. It is an outrageous amount of money but apparently only a small percentage of what he made for the corporation. Frankly, I think it is nuts for a public corporation to put itself in the position of having to pay out that much but having done so, can one really justify its non-payment to a guy with whom the corporation entered into an agreement freely and where the guy performed in precisely the manner to earn his pay? Aside from the shock stemming from the big number, this is a tough question. Of course, Citigroup being owed by the taxpayers complicates the issue. One guy getting this amount of taxpayer money? Then again, if he is making a bundle for the taxpayers, why not? Then again, could he do it without the cache of Citigroup and the U.S. Treasury? How much is that worth? Knotty questions all. We shall be watching.

I think this conundrum serves to highlight one of--and in my mind--the most important issues about which we have had a great deal of discussion. Could these numbers have ever existed if the corporations and managers involved been playing with their own money or without the imputed knowledge that at some point at sometime if all went down the gurgle tube, Uncle would be there with a life-line? I think not. It is not adequate to suggest as a leading article in the WSJ did today that the situation is somewhat different when the biggest shareholder is the taxpayer; that is clearly evident. But the de jurie ownership and support provided to a Citigroup or a Bank of America by the taxpayer is NO DIFFERENT that for J.P. Morgan or Goldman Sachs on a risk assessment if we have a reprise of 2008. And we will sports fans, we will unless we change the rules.

Speaking of B of A, our buddy Ken and his boys--new though they be--did it again. Out they went and hired Sally Krawcheck, late loser of a pissing match over at Citi to run global wealth and management...that's Merrill Lynch...and out the door went Dan Sontag who was Merrill down to his toes for the last 30 years. Ms. Krawcheck no doubt still remembers that when you called the dealers at Citi the phone was answered, "Solomon" even 10 years after the merger. She never got that to change. Bye, bye synergy and bye, bye the best of Merrill that B of A bought. When your most important assets can walk out the door at the end of every day, you better be damn sure what you do in attempting to merge cultures. There is dumb and there is DUMB. You pick it.

HERE COME THE JUDGE

Wooo-ee! Billy-Bob here! Did you our good ol' boy Ken up thar on the Hill again today talkin' about what happened when he went out and bought Merrill Lynch? Damn iffin are neighbor didn't look like a Coon up a tree with a bunch ah hound dawgs a yappin' and ascratchin down below. Cept wasn't no dawg there but this little piss-ant fella from O hi o Nama Kuncinich wit a whole bunch ah question written by some damn lawyer designed to do nuttin but get good ol' Ken on the record so that they can come after him later fo' lying to Congress bout who the hell knows what and who the hell cares. I think this Kuncinich boy--or whatever his name be--lives in Cleveland, which shows you how smart he is; All kinds of people be FROM Cleveland but hell, I don't know nobody who still LIVES there!

Anyway it seems that when our Ken be going after Merrill, the damn situation there and everywhere was goin' down faster than a man comin' out of a bedroom winda when the husband come home early. Now ever-damn-body in the world it seems wants to know what Ken knew and when did he know it. And if he knowed Merrill was riper than a two day cow paddy in August, why the hell didn't he back out? Seems that this deal had what these boys was callin' a MAC attached to it. Now I'm askin' my self what in hell does a hamburger got to do with buyin' a bank but it turns out it aint that kind of MAC. No siree, this here MAC is a Material Adverse Change Clause which I guess lets you walk away if stuff happens. So the question was why didn't you walk away Ken, but it turns out that the #1 revenuer--some boy by the name of Paulson and this here Bernanke guy plus the guy who's the head revenuer now, that be Geithner, said un uh. Seems like they said to our boy Ken: "Ken, now you listen up, you hear? It may be material and it may be adverse, but IT AIN'T MATERIALLY ADVERSE! Well, I'll tell you whats the truth; you in this business and those sorts start tellin' you to jump, I figger the onliest thing you better be thinkin' 'bout is where the hell you gonna land when you come down...IF you come down. So poor ol' Ken and his boys figgure these guys got us by the shorts so we better do what they want and they go ahead and buy the damn thing. 'Corse in a month or two they gotta write down some hellacious amount of money so they wind up with the whole world and then some pissed off to all get-out.

Well, that would be bad enough but it seems that the piss-ant and all of his buddies not only want a piece of Ken but they wants a piece of everybody else too! All of a sudden they realize that they don't know who to get 'cause the politics are a little mixed up here. Other thing be if they get this Bernanke guy they might wind up with some fella named Summers who 'parentky pisses off HALF the world jest by wakin' up in the morning. But they stay at it and ask Ken if he felt at all in-tim-a-dated by the revenuers. I'll be damned if Ken don't take a bullet right then and there!!! Didn't say he wasn't but didn't say was neither. Now I got me this Eye-talian friend who would call Ken a stand-up guy. Meebe he's right but could be that he ain't too bright either. It didn't go well fo' Ken but what saved him was that most of those boys along for the ride with the piss-ant were as thick as two fence posts and where I comes from, THAT'S THICK. Anyway I got this here friend of mine who be livin' in the mid-west somewhere and knows something 'bout this. I'm gonna give him a call and find out what he thinks happened. Damned if I can figger it out.

T.G.I.F.

I'm beaten. I have no idea what's going on. I checked with all the smart guys I know and they left me with the impression that in the capital markets things are looking a bit dicey. The 10 year is up 30% in a couple of months. My son and his wife refinanced their mortgage for 30 years at around 4.60 last month and today the rate would be over 5.00%., Seven year auction stank, the dollar is sliding against everything but the Yen, Chicago Purchasing report today was simply awful, GM is about to go into Chapter 11, Chrysler is gone, the price of oil has more than doubled in 5 months, Our Hero is crawling on his knees to the Chinese--or at least that is the perception everywhere but in D.C.--the spikey-haired dwarf sets off a big one, BiBi tells the Leader to mind his own business, Europe's economy is almost in free-fall and he DJI closes up 93 points in the last 10 minutes. I have this terrible feeling that it's Berlin and the music is from "Cabaret." Then again, what do I know.

From all reports there is a hell of a fight going on in D.C. over what the new regulatory regime is going to look like with sides being drawn up all over the place. That of course is just what we need...a political brawl when there is a bit of light at the end of the tunnel. I have to admire my favorite gal regulator, Miss Shelia and how she plays things. Jockeying for a place at the head of the table she just hammered Our Hero early in the week with one of the great backhand shots of all time in proclaiming Mr. Geithner's public/private partnership, "essentially dead" as a result of the position of the major banks being so much better that there is very little interest in any of them in participating. Next great idea, Tim? She knows how the game is played or else she is an avid reader of this Blog. Somehow, I doubt the latter. This is not a sideshow, however. Who winds up with the reins going forward is vitally important to the ongoing success of the rebuilding of the financial institutions and the financial markets. One would wish that Ms. Bair restricted herself to trying to get our good ol' boy Ken fired as she has been trying to do for the past year. Why? who knows. But it was good theater without much consequence. Last time she got involved with something serious she went off to advise the Stagecoach boys how to screw poor ol' Citibank with the take-over of the OTHER North Carolina bank. Girl is a pain.

Speaking of regulation, I've been thinking about this quite a bit and would like to share with you a couple of very unconventional thoughts next week. In the mean time, keep this thought in mind; a great deal of focus has been spent on what was done and why it went wrong--with good reason. Very little time has been spent on who did it. Ultimately, it always comes down to the people.

Have a great weekend. My tomatoes get planted tomorrow.