“You just don’t understand, America is not the big dog in the hunt anymore.”
“Oh really, list for me all the nations on earth with a 14 trillion dollar economy, a navy which can reach into every corner of the planet and an air force that dominates the skies of the world.”
“We’re going down, can’t you see…things are bad all over…in fact, they’ve never been worse.”
“I’ll make you this bet: In 3 years, the US economy will be significantly larger, GDP and productivity will be increasing at a strong rate and the dollar will be quite strong. My $1,000 says so. Unless, of course, your candidate gets elected, maybe I call the bet off.” Me laughing.
Shakes his head.
“Oh, so it’s too rich for you ? I’ll make it $100. What’s wrong ? You don’t believe in the economic miracle of Obama ?”
Shakes his head.
“Okay, just make it 10 bucks. Certainly you think Barack is worth a $10 wager.”
Shakes his head again.
So went my conversation Saturday night over Italian pasta and an excellent bottle of Shiraz with my good friend, boating partner and Obama supporter. Of course, it occurs to me his real wish is for Obama to be elected to oversee the takedown of the American economy and the standard of living we all enjoy. I didn’t raise that suspicion knowing I would not get an honest answer.
I’ve lived for 56 years listening to people, Americans, Europeans and others declare the USA is collapsing, failing, spiraling, losing, etc. This nation has been declared on its deathbed since the first volley immortalized by Emerson thus:
- “By the rude bridge that arched the flood,
- Their flag to April’s breeze unfurled,
- Here once the embattled farmers stood
- And fired the shot heard round the world.”
Here is the truth of our ingenuity, strength and vitality:
Michael Clemens, of the Center for Global Development, has the facts, the figures and the story. Clemens writes here:
As for whether or not the current financial crisis will make much difference to income growth in the United States over time, have a look at the second graph below. This is the best estimate of real income per capita in the United States since 1820. Over these years we had violent financial crashes of various types, bank panics, piles of recessions and a huge depression, many foreign wars and one enormous domestic war, had a central bank and didn’t, were on the gold standard and weren’t, had governments topple in scandal and multiple leaders assassinated, and what did it all amount to in the medium to long run? In per-capita income terms: Nothing. The overall trend does not bend or shift. Every bad year was followed by a good year that returned us to trend. The US average growth rate of real per capita incomes over the last 190 years has been 1.8% a year, and the same rate over the last 10 years has been…. 1.8% a year.
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And let’s allow the finances to work freely in order to continue to grow upwards, faster, and better than all other nations.
The rest of the world had better not hope we collapse because we will take them down with us. We are the most economically advanced country in this world. We survived depressions and recessions. This is just its normal cycle of ups and downs. It takes a liberal media who wants “BO” elected President to make it look worse. If “BO” is the savior he says he is then tell us your plan and we don’t just mean “CHANGE”. Because his change maybe for the worse (which it probably is) instead of the better. People wake up, what has he shown you in his past history that shows he has the experience and qualifications to lead us out of this mess. If his handlers are doing all the work, which is probably the story, then let them tell us. “BO” can be the administer of that plan.
Here is a quick look into 3 former Fannie Mae executives who have brought down Wall Street.
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1. Franklin Raines: was a Chairman and Chief Executive Officer at Fannie Mae. Raines was forced to retire from his position with Fannie Mae when auditing discovered severe irregulaties in Fannie Mae’s accounting activities. At the time of hisdeparture The Wall Street Journal noted,
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‘ Raines, who long defended the company’s accounting despite mounting evidence that it wasn’t proper, issued a statement late Tuesday conceding that ‘mistakes were made’ and saying he would assume responsibility as he had earlier promised. News reports indicate the company was under growing pressure from regulators to shake up its management in the wake of findings that the company’s books ran afoul of generally accepted accounting principles for four years.’
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Fannie Mae had to reduce its surplus by $9 billion.
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Raines left with a ‘golden parachute valued at $240 Million in benefits.
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The Government filed suit against Raines when the depth of the accounting scandal became clear. http://housingdoom.com/2006/12/18/fannie-charges/ . The Government noted, ‘The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.’ These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the miss-stated Fannie Mae profits.
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2. Tim Howard: Was the Chief Financial Officer of Fannie Mae. Howard ‘was a strong internal proponent of using accounting strategies that would ensure a ’stable pattern of earnings’ at Fannie. In everyday English - he was cooking the books. The Government Investigation determined that, ‘Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,’
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On June 16, 2006, Rep. Richard Baker, R-La ., asked the Justice Department to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant’s income statement to achieve management pay bonuses. Investigations by federal regulators and the company’s board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004.
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Howard’s Golden Parachute was estimated at $20 Million!
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3. Jim Johnson: A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. A look at the Office of Federal Housing Enterprise Oversight’s May 2006 report on mismanagement and corruption inside Fannie Mae, and you’ll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson’s 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million.’ Johnson is currently under investigation for taking illegal loans from Countrywide while serving as CEO of Fannie Mae.
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Johnson’s Golden Parachute was estimated at $28 Million.
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WHERE ARE THEY NOW?
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1. FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor
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2. TIM HOWARD? Howard is also a Chief Economic Advisor to Obama
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3. JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama’s Vice Presidential Search Committee
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Some (many) of the people trying to talk down the prospects of the US seem to me to want to avoid any scrutiny that being out in front might bring. For example, since the US is the greatest military/political power in the world, we get endless heat from those outside (and inside) the country who can’t stand relative success. The US, for its part, is generally content to take the arrows and ignore them as best it can, despite being criticized endlessly by the ankle-biters.
This is the primary motivation of the isolationist crowd; they think that the US should just retreat to within its own borders and leave the rest of the world alone in hopes it would leave us alone. This would be tragic, since the US is the only nation or organization capable of responding to regional/continental disasters. Think FEMA is bad? What would the UN be like trying to provide hurricane aid to NO?
Way to go, TexPat!!! I’m not usually a betting person but I may stash a few $10 bills in my wallet so that I, too, will be ready to challenge the next numbnuts Obama supporter who starts a similar doom and gloom conversation with me.
Like you, I have ALWAYS been proud of this country and I KNOW we will rise to any challenge put before us.
One huge problem is with how we choose our leader. We’re having substance-free debates where inane questions are asked with no follow-up from anyone, whether the questioner, moderator, the opponent. This leads almost directly to answers that speak to the question without saying anything meaningful.
We as a country have two existential issues facing us in the near future: nuclear holocaust and an effective $53trillion (yes, with a “T”; 1 thousand billion or 1 million million) debt from obligations related to Social Security, Medicaid, Medicare, etc.
NOBODY blogs on LST like TEXPAT blogs on LST!
Great question dcgirl. LET’S ASK IZZY.
3 - Oh so these are the 3 that “brought down wall st”? Did they force the investment banks to be leveraged 30-1? no…wall st brought down wall st.
I’m the type of person who can look at 200 years of generally positive data and see little else right now but the 13 years following 1929. After the ‘29 crash, the GDP didn’t fully recover until the early 40s, and the recovery was largely catalyzed by the war effort. Contrary to popular belief, the stock market didn’t completely implode in October 1929. The DJIA lost about 40% of its value over a one month period, recovered briefly, and then continued to slowly bleed over the next several years. It finally ended up losing about 90% of its value from its record high, so most of the devaluation actually occurred during the three year period following the black days of October. To put this into perspective, from October of last year until today, the DJIA has lost 33% of its value.
Most of the ingredients that were there in ’29 are here today. I believe we are about to repeat the past, and this is just the beginning of a long downward spiral. America will still continue to produce amazing people, just as it did in the 30s, but this mess is too big for us to simply will it into submission. America will recover, but we are going to get a lot sicker before we get better, and it’s going to take a long time for us to heal.
Texpat, I’ll take that $10 bet. I hope you win – it will be the sweetest $10 I ever lost - and if you don’t, I hope you’ll be able to afford the $10 to pay me. I’ll probably need it.
#9 houdem
Maybe these three did not single-handedly bring down Wall Street, but the biggest wh**es soliciting on the corner of Wall and Pearl were Jimmy, Frankie and Timmy. Their pimps were Chris, Barney and Barack. It was a superfly scene with the girly men of the Fannies offering goodies to all the moneyboys.
11 - Come on now Tex. You are way to smart when it comes to economics to even begin make this about politics. The issues in play that have put us in the position we are in are multi-faceted. Trying to blame any singular person, event or political party is way too simplestic and a losing argument.
When it’s the Dim’s fault…blame society
Everyone caused this…
#12 houdem
I agree with conditions. I’m in a cranky mood now after Benzion’s flippant comment about my Saturday night dinner.
The key is knowing when to start buying again. I don’t think we’ve hit bottom yet.
All I know is that some people tried to get reforms passed and others actively fought those reforms, and still others just sorta did nothing. I have also seen certain people praising the former upper management of Freddie & Fannie for their brilliant leadership 2 or 3 years ago. I also know that some people have gotten very favorable mortgages and loans that can legitimately be called bribes. There is another who has had oversight responsibility over these institutions while in an intimate relationship with a senior manager of these same organizations.
We now have the people who have been the ultimate cause of these difficulties passing legislation that is double recent annual deficits to try to fix it. The very same people who can’t manage their own cafeteria.
TP, I kid because I care… you have a unique blog-voice and writing style, and I can almost always tell when I’m reading one of your posts before I even look at the byline.
“So I was perusing the five volume set of Vondropov’s “A Minor History of Constantinople” when it struck me…”
That sort of thing
#17 DB
(<:
RE: #3;
They have a solid and consistant record of bankrupting businesses. Books were cooked under Raines’ stay w/ Fannie as well. the big culprit is congress and the lack of Republican responses. So not strong enough. Never did they take this case to the public that I’m aware of. At least not the top leaders of the Republican Party.
Has anyone heard Jimmy Carter or Slick Willy defending their parts in the financial downfall that resulted from the Fannie/Freddie debacle? Jimmy has had plenty of opinions related to things there were not of his concern. One would think he would defend his actions as president to ensure every person had a house; at taxpayer expense. Clinton upped the anti to include every non-resident. Seems like we should have heard from the experts by now.
They are too busy screaming, “SELL, SELL” to their stock brokers.