Sunday, February 15, 2009

Against the Stimulus: Examples of Pork

Huge amounts of pork is the main reason I and others are against the stimulus. I have repeatedly said in prior posts that I support a stimulus bill as long as the money is used wisely. There is far too little going into infrastructure and improvements that will net a gain for society in the long term. And the infrastructure spending itself is questionable.

For example,

"For an amount for "Broadband Technology Opportunities Program", $4,700,000,000: Provided, That of the
10 funds provided under this heading, not less than
11 $4,350,000,000 shall be expended pursuant to division B
12 of this Act, of which: not less than $200,000,000 shall
13 be available for competitive grants for e:A.1)anding public
14 computer center capacity, including at community colleges
15 and public libraries; not less than $250,000,000 shall be
16 available for competitive grants for innovative programs
17 to encourage sustainable adoption of broadband service"

"For an amount for "Digital-to-Analog Converter Box
17 ProgTam" , $650,000,000, for additional coupons and re18
lated activities under the program implemented under sec19
tion 3005 of the Digital Television Transition and Public
20 Safety Act of 2005: Provided, That of the amounts pro21
vided under this heading, $90,000,000 may be for edu22
cation and outreach, including grants to organizations for
23 programs to educate vulnerable populations, including sen24
ior citizens, minority communities, people with disabilities,
25 low-income individuals, and people living in rural areas,..."

People should go read the first few pages of the text where i got the above spending from. The link is below, if the rest of the 1000 page bill is as filled with crap as I suspect it is, this does not qualify as a wise use of funds. I skipped over the first few pages which was more subsidies for farmers, and a large amount of spending seems centered on construction of government buildings and improvements to government buildings housing already bloated administrative agencies. Giving government workers a nicer workspace doesn't seem to have much long term value for ordinary citizens. And you see that millions are routinely allocated to "outreach" programs through private sources. In other words, $90 million will be used to advertise that there is money for people who want to get the digital converters. $650 million is allocated to purchasing new digital converters! I haven't mentioned either the billions for more food stamps and WIC which already has so much money that they have to advertise to encourage people to sign up for food stamps so that they can spend all the money they're currently given. Come on people, this is obvious waste.

$250,000,000 for programs that will "encourage sustainable adoption of broadband service"? Let me translate, $250,000,000 will be given away to special interests who will set up some fake program to waste the money that they don't steal. The best way to get more affordable broadband is to encourage competition, allow telephone companies like Verizon to offer DSL wherever they want instead of having to apply for licenses from States and local governments. Of course cable companies are fighting tooth and nail to prevent more competition. I found all of this just within the first few pages..., think of what the rest of the bill contains!!!

Saturday, February 7, 2009

The Road Ahead

The more I dig into this, the more I realize that there is no easy way out. Recapitalizing a worthless bank pretty much guarantees a loss for the taxpayer. The taxpayer will have to eat the losses first just to get the bank back up to $0 book value, then pump more money in to move equity into positive territory. Now the taxpayer could make that money back in the future, but that's far from assured, what's clear is that the taxpayer is "overpaying", which is why private equity doesn't step in right now.

We have to figure out a way for taxpayers to be able to make money through future profits or a future sale. However, we also don't want government to run the bank because government is terrible at running things and politics would enter into the daily operations of the bank. If only we could trust that politicians wouldn't interfere but we know they will by demanding loans to "low income" borrowers (translation: ultra-high risk subprime borrowers) and to forgive outstanding mortgages in default. That means more bad loans will be made and the nationalized bank will face insolvency again a few years down the road, the crisis will be prolonged.

That's why we have very little choice but to use taxpayer money to recapitalize the banks while still making sure they are in private hands. The government can and SHOULD demand changes to the Board, but only qualified bankers should replace those ousted, please no more political hacks like Daschle, maybe someone competent like Warren Buffet would take the job as a service to the country. The Board would decide on a new CEO, again with the sole focus on competency and profitability. That might mean financial sector employees further down the ranks would be promoted or given the CEO job. Again, there will be the usual cries of enriching Wall Street, but only people with banking experience can be expected to run a bank. Those calls will have to be ignored and Obama will have to use his golden voice to explain that to the public. Obama will lose favor with the leftist extremists who are out of touch with reality, and be called just another Bush. He will have to take the criticism for the sake of doing what's best and hopefully he will be able to articulate why only Wall Street people are being given CEO jobs. A tough task lies ahead.