Citigroup Buys Luxury Jet After Receiving Bailout

[RainMaker]

Not a big surprise. The biggest heist in the history of civilization.

http://www.streetinsider.com/Insiders+Blog/After+Receiving+Rescue+Funds,+Citigroup+(C)+Buys+A%20+$50M+Luxury+Jet/4328643.html (http://www.streetinsider.com/Insiders+Blog/After+Receiving+Rescue+Funds,+Citigroup+%28C%29+Buys+A%20+$50M+Luxury+Jet/4328643.html)

[flere-imsaho]

So glad we got away from that "buy troubled assets" idea....

Now we know why Paulson wanted indemnity for anything he did with the money....

[Eaglesfan27]

Ridiculous. In other news, over 50,000 jobs were cut today:

Bloody Monday job tally: more than 50,000 jobs lost - Jan. 26, 2009 (http://money.cnn.com/2009/01/26/news/economy/job_cuts/index.htm)

[digamma]

Without knowing more about the deal, it's pretty hard to judge this one. From the article, they agreed to purchase the plane 2 years ago. Who knows what the outs in the purchase agreement were, but it could definitely be a sound financial decision to close on the deal rather than to pay to get out of the contract.

[digamma]

Dola...that's not to say the decision to purchase the plane two years ago can't be criticized.

[Dutch]

If anything, they should cancel that and order a plane built by Americans. That $50M payday will go to a French company and it's workers. Grrr...

[Subby]

Does an American company make the jet that was purchased? If so, is this just another means of economic stimulus?

[Subby]

Note to self: always wait until Dutch has posted. ALWAYS. :mad:

[JonInMiddleGA]

Without knowing more about the deal, it's pretty hard to judge this one. From the article, they agreed to purchase the plane 2 years ago. Who knows what the outs in the purchase agreement were, but it could definitely be a sound financial decision to close on the deal rather than to pay to get out of the contract.

Good point, although I think it's kind of telling somehow that there's a contingent who I'm quite certain would rather they simply default on their agreement considering the role that has to do with the condition they're in to begin with.

[flere-imsaho]

It's been over a year (October 2007 to be specific) since it was pointed out, publically, that Citigroup had serious issues on their balance sheet and the stock price plunged for the first time. I guess it's too much to have asked them, less than a year after ordering the plane, to, considering their financial sheet situation, look for places to economize, even if it meant some sort of non-delivery penalty.

[RainMaker]

Why would they stop the delivery of the plane? They're the casino, they can't lose. Make money and buy whatever you want. Lose money and the taxpayers will give you the money to buy whatever you want.

[JediKooter]

If anything, they should cancel that and order a plane built by Americans. That $50M payday will go to a French company and it's workers. Grrr...

Great, so not only is it not an American plane they are buying, it's going to take two extra years for delivery because of the French's 30 hour work weeks.

[chesapeake]

*sigh*

I'm not saying that I would support communist guerillas running through the mansions of uber-wealthy Americans after raping and pillaging their families and estates. But these rich people need to get a clue somehow.

I'm pretty sure there are American options. Boeing makes luxury jets, albeit bigger than the Dassault jet. Isn't Gulfstream a Georgia company?

[Dutch]

*sigh*

I'm not saying that I would support communist guerillas running through the mansions of uber-wealthy Americans after raping and pillaging their families and estates. But these rich people need to get a clue somehow.

I'm pretty sure there are American options. Boeing makes luxury jets, albeit bigger than the Dassault jet. Isn't Gulfstream a Georgia company?

I believe so. And while the Dassault jet looks pretty badass, Citigroup execs should know that they sit on the inside of the plane during flight and the Gulfstream jet comes standard with the stripper pole, not the Dassault.

[Greyroofoo]

This is why i don't vote democrat

[Noop]

This is why i don't vote democrat

:popcorn:

[RainMaker]

This is why i don't vote democrat
Didn't the Republicans nationalize basically everything in this country?

[path12]

This is why i don't vote democrat

Good point. I'm sure all the Citicorp executives are liberals.

[JonInMiddleGA]

Good point. I'm sure all the Citicorp executives are liberals.

Or pragmatists.

Check out the names political contributions from CFO Gary Crittenden over the past 4 years (I just picked an exec at random out of curiosity, his was the first name that came up when I Googled "citicorp executive").

http://www.opensecrets.org/indivs/search.php?name=Crittenden%2C+Gary&state=&zip=&employ=&cand=&c2008=Y&c2006=Y&c2004=Y&sort=N&capcode=jj8sc&submit=Submit

In addition to what appear to be corporate lobbying groups for Citicorp & American Express, he made contributions to Rahm Emanuel, Chuck Hagel, Dick Durben, Richard Selby, Harry Reid, and Mitt Romney.

[Greyroofoo]

Good point. I'm sure all the Citicorp executives are liberals.

probably not, but I'm sure they loved the zillion dollar bailout the democrats passed, including both my representative John Dingell and senator Carl Levin that were up for re-election in 2008. Of course Barack voted for it as well.

[path12]

Or pragmatists.

Check out the names political contributions from CFO Gary Crittenden over the past 4 years (I just picked an exec at random out of curiosity, his was the first name that came up when I Googled "citicorp executive").

http://www.opensecrets.org/indivs/search.php?name=Crittenden%2C+Gary&state=&zip=&employ=&cand=&c2008=Y&c2006=Y&c2004=Y&sort=N&capcode=jj8sc&submit=Submit

In addition to what appear to be corporate lobbying groups for Citicorp & American Express, he made contributions to Rahm Emanuel, Chuck Hagel, Dick Durben, Richard Selby, Harry Reid, and Mitt Romney.

Fair enough -- true that most big corps play both sides of the fence. Just reacted to the initial picture in my mind of a bunch of banking executives arguing to close Gitmo and unionize.......!

[path12]

probably not, but I'm sure they loved the zillion dollar bailout the democrats passed, including both my representative John Dingell and senator Carl Levin that were up for re-election in 2008. Of course Barack voted for it as well.

Well, both sides passed it if you'll recall. We agree that Citi loved it -- who wouldn't like to fuck things up royally for years and escape any responsibility for it with an unprecedented handout and a nice bonus to boot!

I really need to figure out how to declare myself a bank.

[MrDNA]

I really need to figure out how to declare myself a bank.

Have you tried standing at the highest point in your neighborhood and yelling "I am a bank!" while beating on your chest like Tarzan? If that doesn't work, try it again - but this time while wearing a funny hat.

[Anthony]

i've found that making any declaration while you have a banana shoved in your asshole will show anyone you're dead serious.

[Galaxy]

JUST PLANE DESPICABLE - New York Post (http://www.nypost.com/seven/01262009/news/nationalnews/just_plane_despicable_152033.htm)


The NY Post article. Of course, these people are too naive to think of what the actual contract was for the jet that was purchased two years ago. Dumb move now? Sure. However, two years ago Citi was in a much better position.

[panerd]

Now they aren't going to take delivery of the jet and according to them it had nothing to do with the New York Post article. I swear these guys are so arrogant and dumb. So what posters are going to defend Citi's claim that they were probably not going to take delivery of the jet even before the expose? People defended the purchase using taxpayer money.

[flere-imsaho]

According to BusinessWeek (http://www.businessweek.com/ap/financialnews/D95VH78G0.htm), they previously decided to not take delivery of the jet, at about the same time they decided to sell some of their other jets.

According to ABC (http://abcnews.go.com/Business/Politics/story?id=6740011&page=1), they decided to not take delivery of the jet after the Obama White House called them and told them to "fix it".

:popcorn:

[Calis]

You know, I guess working in the private aircraft industry I see things differently, but people blast these companies for making these purchases and jump on the bandwagon of blasting the automakers about their private Jets, but their are tons of jobs affected by this as well, and a good majority of the private plane makers are American.

So while people rail against these "luxuries", they employ a lot of people. The entire city of Wichita is ran off these companies.

Anyway, I don't blame people for being annoyed by it. I probably would be as well if I didn't rely on it. :)

[JediKooter]

I think the problem is, it's not they are buying them, it's that they just got a bail-out because supposedly they have no money to sustain their business. Just a guess...

[KWhit]

I think the problem is, it's not they are buying them, it's that they just got a bail-out because supposedly they have no money to sustain their business. Just a guess...

Yep.

[Logan]

I was just on a conference call where we told one of our banks that we were recommending a "deny" of their TARP application to Treasury, and the Chairman asked us if they could get approved if they promised to buy a jet with the funds.

Ouch.

[Flasch186]

So glad we got away from that "buy troubled assets" idea....

Now we know why Paulson wanted indemnity for anything he did with the money....


I repeat again, worst thing they did was allow Paulson to get away from the buying bad assets which is the only reason I was for the bailout and thought it necessary. I stated than the statement about NOT buying troubled assets was the worst thing to happen and the reason we will retest and possibly bust through last yeear's lows (unless of course they actually state that theyre going to buy bad assets again, which Ive heard rumblings about).

[SportsDino]

We don't want the TARP either, the reasons you don't see the bad assets being bought:

- Banks wanted to cherry pick so that only the truly truly worthless stuff would be absorbed by the government.

- Banks/Paulson realized they could just outright throw money at various places without anyone even looking... since the fear mongering was at such a point that no one would stand in their way, and no one would punish them after they have been caught.

- Troubled assets is just one form of corruption, when they saw they could use the money in other avenues of corruption (hint mergers be one of em), its all the same to them.

My position since the start has been do not buy banks crap, although I can't say I like the uses the money has alternatively been put to either. Here is a thought, how about any third option that does not involve money being used to grease banks with pork... or even better, NOT PASSING A CLEAR MONEY GRAB BILL IN THE FIRST PLACE!

Face it, any way you play it none of that 700+ billion was heading to joe schmoe investor... from day one it was going to the pockets of fatcats, so to me whether they are buying a jet, or having resort vacations, or anything else is just a big joke. People getting outraged over the trivial and still not daring to take a serious look at what is wrong with our economy just confuses me. When there are all of three banks ten years from now and the options for consumers are really screwed for options, then you will see what the bailout bought.

If we bought TARP, you would have seen the money disappear over night. Arguably, that might actually be better than funding further destruction of our economy... so you may be right!

[Galaxy]

Now they aren't going to take delivery of the jet and according to them it had nothing to do with the New York Post article. I swear these guys are so arrogant and dumb. So what posters are going to defend Citi's claim that they were probably not going to take delivery of the jet even before the expose? People defended the purchase using taxpayer money.

No one defended the "purchase" of the jet. It was ordered over two years ago (when Citi was fat and was making money). I, at least, was saying would it make economic sense to cancel the order depending on what the contract was (and they'll have to put down a heft deposit, as well as payments in advance of taking delivery of the jet-which I'm guessing came before the bailout). In a way, would it be cheaper for Citi to purchase the jet (saving the millions of dollars in fees/deposits they paid for something they won't have) and re-sell it at some point. Of course, the media and general public really don't dig into the actual facts of the story. I'm not supporting the purchase, the use of private jets, or Wall Street's expense-account egos.

[RainMaker]

You know, I guess working in the private aircraft industry I see things differently, but people blast these companies for making these purchases and jump on the bandwagon of blasting the automakers about their private Jets, but their are tons of jobs affected by this as well, and a good majority of the private plane makers are American.

So while people rail against these "luxuries", they employ a lot of people. The entire city of Wichita is ran off these companies.

Anyway, I don't blame people for being annoyed by it. I probably would be as well if I didn't rely on it. :)

I have no problem with any company buying private jets. Heck, I would if I could. The issue is with companies who borrow billions from the government to stay in business doing it. I'm sorry, but if you have to rely on billions of taxpayer dollars to survive, it's time your guys fly coach like the rest of us.

[Buccaneer]

I have no problem with any company buying private jets. Heck, I would if I could. The issue is with companies who borrow billions from the government to stay in business doing it. I'm sorry, but if you have to rely on billions of taxpayer dollars to survive, it's time your guys fly coach like the rest of us.

I think you would be very hard pressed to name a single business or industry that has gotten billions of taxpayer dollars over the years.

[RainMaker]

I think you would be very hard pressed to name a single business or industry that has gotten billions of taxpayer dollars over the years.
FOXNews.com - U.S. Government Agrees to Massive Citigroup Bailout - Local News | News Articles | National News | US News (http://www.foxnews.com/story/0,2933,456566,00.html)

[Buccaneer]

Sorry, I forgot a key word: have NOT gotten billions...

It's funny yet sad to see so many now jumping on the bandwagon of taxpayer accountability. Where were you over the previous many decades with the billions of taxpayer dollars going to industry subsidies, corporate welfare, academic grants or Congressional pork without much accountability or public scrutiny?

[lynchjm24]

It's the ol' ropadope. Hey Congress. Hey Treasury... LOOK OVER HERE, WE ARE BUYING A NEW CORPORATE JET!!!!

The 'watchdogs' are so completely clueless they think this is oversight, while they pat themselves on the back for shaming them into refusing delivery on a jet the real damage is done behind their backs. Morons.

[JonInMiddleGA]

I think you would be very hard pressed to name a single business or industry that has gotten billions of taxpayer dollars over the years.

{raises hand}

I don't believe I've had the privilege in any of my industries, but it's a nice thought.

[Anthony]

I AM A BANK NOW GIVE ME MY BAILOUT!

and yes, i have a banana jammed up my asshole.


i tell you, the only thing that is learned from all this is history will show it absolutely pays to be a thief.

[SportsDino]

I haven't seen many backing the corporate pork crowd, it is so prevalent because the big lobby money is going for that purpose, and we keep turning a blind eye to its influence (to the point of actively obsessing about campaign dollar totals as how we identify who is going to win... dumb).

[RainMaker]

Sorry, I forgot a key word: have NOT gotten billions...

It's funny yet sad to see so many now jumping on the bandwagon of taxpayer accountability. Where were you over the previous many decades with the billions of taxpayer dollars going to industry subsidies, corporate welfare, academic grants or Congressional pork without much accountability or public scrutiny?

I've been as much a libertarian as I can over the years. It's kind of pointless though since both parties spend out the wazoo and have built the system so that no one else can play at their party.

[Buccaneer]

{raises hand}

I don't believe I've had the privilege in any of my industries, but it's a nice thought.

Telecommunications, right? Let me check CAGW.org. Well, that's a little hard to find but one would have to go beyond pork spending and look at actual FCC budgets or money thrown at GTI.

[Buccaneer]

I've been as much a libertarian as I can over the years. It's kind of pointless though since both parties spend out the wazoo and have built the system so that no one else can play at their party.

But there have been those within both parties that decry wasteful expenditures over the decades. I think the recent bailouts has opened the eyes to some of a corrupt system that has been going on for many years. One cannot affect change by giving up.

[JonInMiddleGA]

Telecommunications, right? Let me check CAGW.org. Well, that's a little hard to find but one would have to go beyond pork spending and look at actual FCC budgets or money thrown at GTI.

If you can find a case where the government has directly subsidized any client we've ever handled the advertising for then I'll eat my hat.

And if you're going to try to hold the FCC up as an example of the government subsidizing radio broadcasters then I imagine next you're going to suggest the FBI's existence subsidizes bank robbers & kidnappers because that's not a dissimilar relationship.

Sorry Bucc, but this particular dog simply doesn't hunt unless you want to ultimately count the existence of the federal government or the military as a subsidy of sorts for all industries.

[Buccaneer]

You have always been a hard pressed guy, you know?

[Passacaglia]

I.....declare.....BANKRUPTCY!!!

[sterlingice]

I was just on a conference call where we told one of our banks that we were recommending a "deny" of their TARP application to Treasury, and the Chairman asked us if they could get approved if they promised to buy a jet with the funds.

Ouch.

:D

SI

[sterlingice]

We don't want the TARP either, the reasons you don't see the bad assets being bought:

- Banks wanted to cherry pick so that only the truly truly worthless stuff would be absorbed by the government.

- Banks/Paulson realized they could just outright throw money at various places without anyone even looking... since the fear mongering was at such a point that no one would stand in their way, and no one would punish them after they have been caught.

- Troubled assets is just one form of corruption, when they saw they could use the money in other avenues of corruption (hint mergers be one of em), its all the same to them.

My position since the start has been do not buy banks crap, although I can't say I like the uses the money has alternatively been put to either. Here is a thought, how about any third option that does not involve money being used to grease banks with pork... or even better, NOT PASSING A CLEAR MONEY GRAB BILL IN THE FIRST PLACE!

Face it, any way you play it none of that 700+ billion was heading to joe schmoe investor... from day one it was going to the pockets of fatcats, so to me whether they are buying a jet, or having resort vacations, or anything else is just a big joke. People getting outraged over the trivial and still not daring to take a serious look at what is wrong with our economy just confuses me. When there are all of three banks ten years from now and the options for consumers are really screwed for options, then you will see what the bailout bought.

If we bought TARP, you would have seen the money disappear over night. Arguably, that might actually be better than funding further destruction of our economy... so you may be right!

This is an excellent post. The bolded, in particular, is important. I love how people are getting upset at the stupidest stuff in this matter- the GM execs flying to Washington, Citi buying a corporate jet, and repair work on the national Mall. It just frustrates me that people get so distracted from the really important issues with this little piddly crap.

We should be arguing more about whether it's more important that we float a loan to the auto makers and risk taxpayer money or don't float a loan and risk taxpayer and increasingly rare manufacturing jobs. We should argue whether it was a good idea to create banks that we cannot allow to fail or nationalize them or buy up bad assets or how we should have tried to stem the bleeding from financial institutions if you think TARP was an awful idea. We should be arguing about whether the new bailout's money would be better spent for the whole of the economy in tax cuts or infrastructure money.

And we do argue these things but, boy, do people get hot and bothered by the silly stuff that is immaterial. And that just distracts from the big picture and we waste so much time with the little stuff.

SI

[Dr. Sak]

I.....declare.....BANKRUPTCY!!!

GOLD!

[Logan]

This is an excellent post.

SportsDino has been on-point with damn near every financial/economy related post I've seen out of him since I remember him starting to post actively.

[JonInMiddleGA]

We should be arguing more about whether it's more important that we float a loan to the auto makers and risk taxpayer money or don't float a loan and risk taxpayer and increasingly rare manufacturing jobs. We should argue whether it was a good idea to create banks that we cannot allow to fail or nationalize them or buy up bad assets or how we should have tried to stem the bleeding from financial institutions if you think TARP was an awful idea. We should be arguing about whether the new bailout's money would be better spent for the whole of the economy in tax cuts or infrastructure money.

Why argue about them now since they're already a fait accompli? All that's left on that front is to see enough of the results to turn out the rascals who approved it.

For that matter, it seems to me that it was a done deal no matter what "we the people" thought anyway since we couldn't turn them out of office before it was approved even if we argued & reached a solid consensus that it was a lousy idea.

[flere-imsaho]

I think some stuff like the automakers flying private jets, Citi's private jet, and Thain's last-minute bonuses at Merrill Lynch are somewhat material, to be honest.

They show clearly that some people, and in this case people who are directly petitioning for bailout money, may not be taking the reality of our current economic situation seriously. They want billions of our taxpayer money, but have their actions shown that they're willing to make serious changes to make/keep their enterprises afloat as stable, going concerns?

Honestly, the actions of both Paulson and Thain strike me as those of guys most interested in getting their friends off the sinking ship first, as opposed to anything else.

[JPhillips]

There's not much I can go into, but Thain's actions are par for the course. I did some work on the defense of Dick Grasso and Thain came off as a greedy know-nothing. Of course the whole NYSE board of corporate and political bigwigs seemed corrupt to the core IMO.

[SportsDino]

Honestly, the actions of both Paulson and Thain strike me as those of guys most interested in getting their friends off the sinking ship first, as opposed to anything else.

We have a winner. Crony system at its best.

The lack of great leadership in business is a major problem. I know there is some field of politics/economics out there that describes a system where leaders are mostly interested in holding their position, rather than their duties or wealth... and how it inevitably leads to stagnation and exploitation (at least in the dictatorships/monarchies I was reading about in those articles).

Right now we have a lot of entrenched people with little talent for economic growth, and massive talent at maintaining their positions (they're connected, bought any politicians required, have an authority position and all people who are supposed to act as watchdogs of them are their lapdogs, spot rivals and squash them quickly, etc...).


What would help is a Congress that felt as if their lives were on the line if they did not solve this problem. They are so far detached from the real world, in their beauty pageant campaign systems, that I can't believe they understand there is more than just being elected.

We need people to seriously consider the state as a triage patient and stop their idiotic maneuvers to do some real work. It seems very few people are inspired to truly do great things any more, and the number that make it into business or politics is even worst.

-----

To get off the whine wagon, areas to attack:

- Infrastructure actually is a decent idea to invest in, key on the INVEST, not throw money at.

- Can't save everything. Some stuff, even some good things, will just die out. It might have been your hometown since birth, but if the one factory town shuts down, you may need to move or find something else to do. And in not all cases will you be able to do it in that town. Sorry. Same with stocks, or formerly grand companies that have been looted into bankruptcy.

- The way the public invests its money. People are not stock experts. Mutual fund experts, are clearly not experts if their fund tanked. Too many people are in a game they just do not get, and even if they do, they do not have the information to play it properly. We should never defend the public from the stock market, if we are appalled at people losing their life savings invested in stocks, we should not be stabilizing the stocks, we should be transitioning people out of stock investment into other vehicles, even if they have lower rates. Not everyone needs or deserves 12% average return, in fact....

- We need strong community level banks focusing on a very simple and old fashioned model of take deposits in, loan at higher rate, maybe play a portion of it in riskier portfolio (but not 10x leveraged held entirely in derivatives)... but in short a very boring, but stable banking system. Let the brainiac investors borrow from such banks, and then try to push the returns through the stock market to earn their margin. Everyone wants to play at the big boy table and get those historical 12% returns and such, but very few (even among the big boys) actually know where the money is really going. I think our culture promotes risky investment for no good reason other than 'well look at the market over 50 years' which has NOTHING to do with investment. That is a statistic, a logical fallacy if you start considering it a probability. There is nothing wrong with reversing the debt model such that banks owe us, and generate their profits with their expertise at picking winners, instead of inventing pennies out of thin air.

- Less big business. It requires subsidies, not just in bailouts, but often in laws that end up preventing new entrants into the market. Or we give them so much inertia that when something really great comes along we have blinders on because 'its the way we've always been doing things'. I'm not anti-big business, I hope to own one myself someday, but they do not need to be propped up by local and federal governments.

- Environmental standards. We need to raise standard of living. If people haven't realized by now that money is just paper, and polluting full steam ahead for mostly red balance sheets is pointless, then I guess we'll end up filthy, broke, and unable to breathe instead of just filthy and broke. We need to tech things up, standards will push the technology, and then the price... we will not go broke because Big Smog pulls out the job reports (guess what its bleak either way, you really think pollution controls are going to close a plant when bad business decisions are doing such a good job?). Clean technology and cleaning up the existing mess (more infrastructure/public works for ya) will make more places nice to be around, and if they are nice to be around people will want to live there and bring productive things with them. We'll spend less on medical, we'll spend less on maintenance costs, we might even decrease resource usage which will help with commodity needs.

Specific policies:
- No new corporate pork. Government builds things for the public use, and does not subsidy private incomes for the sake of private incomes.
- Strict scrutiny of public works, not 'just rush out and spend money'. Instead of a new empty stadium, or bridge no one will use, just say no, and fix a sewer system so the river is not toxic, or fix a road the right way so people do not have to replace expensive tires/shocks (there have been a rash of those at my work lately in Potholeland... er Michigan, its almost joke level absurd).
- Restructure education spending across the board. Standardize as much policy as possible at any level and outright slash administration overhead.
- No capital gains rate reduction, I don't believe it will stimulate anything, and it will just let speculators keep their profits from the massive killing that just happened. This includes me. A cut on middle incomes with the same dollar total actually will do much more to stimulate growth (if only by stabilizing the bleeding of debt service that bit more, there are many examples of banks pushing a default when renegotiating a debt would have had higher expected value overall).
- Tie business tax breaks to jobs. Variety of ways you can do this. The problem of the last few years is that all tax cuts were all much more useful for liquidating corporations than growing them, cuts in gains and dividend rates, allowing more outsourcing revenue, etc...
- Maybe directly reduce taxes on workers... no one is getting a raise these days, and probably won't until well after the recovery (wages always seem to lag mysteriously while big bonuses do not...). Help businesses by letting them keep their costs stable, but their workers still have some marginal increase over last year.
...
Really need to get in a position with real issues to deal with. Could ramble endlessly about 'would be nice' but I really need some physical numbers to sink into before I get really creative.

Maybe a fun exercise would be to open up some Congress bill (say the obama bailout) and take apart what it would really do in a thread. Maybe if I convert it into a werewolf or alright boyz thread I can trick people into reading it... :)

[Buccaneer]

Speaking of infrastructure, something I was curious about from today's report. We have 11 bridges over our interstate. 9 of them have been replaced in the past 5 years and 2 were new ones - mostly paid for by the feds through the state. Apart from military, our region do not get that much from the feds compared to other comparable areas, so why were we able to upgrade one of our key infrastructures while many other areas just let them fall into disrepair? I fully understand the greater densities of infrastructure networks, not to mention being much older, but you also have a much greater population (and tax paying) density than we do. Have the money been going to other things instead of replacing bridges and roadways?

[SportsDino]

I sadly don't know where the money went, I'm not up on my local budgets (although it wouldn't hurt me to find out how to research infrastructure investment anyway, as I'm sure it'll come in handy).

I know in the old ghetto-like region I came from that the city manages to tear up the same road over and over again each year on the same project. Seems like it would have been more cost effective to tear it up once, finish the work, and move on to the next.

Also from my experience of hoofing it to work by foot by said road during a summer a few years ago, that construction crews were noticeably absent during supposedly peak construction times (while the multi-lane road was a giant mud pit), and then swarming all over the place during periods where I assume they were getting bonus pay since the project had to be completed before winter. So I think gouging is soaking up at least a portion of my city's crappy budget, but that is all personal observation... but the detioration of the roads is now highly visible. We don't just have potholes, we have entire surfaces looking like the start of a war zone. Part of it is the weather, lot of water in the air = lot of ice, so probably that causes more cracking/damage than normal... but the budget and policy is notoriously bad around here.

The money has certainly been going to other things, those things have just happened to be black holes of uselessness. I think I looked at the state budget once and could not fathom the relative spending levels. I'll have to see if I can find a recent one and put up a link.

[RainMaker]

We have a winner. Crony system at its best.

The lack of great leadership in business is a major problem. I know there is some field of politics/economics out there that describes a system where leaders are mostly interested in holding their position, rather than their duties or wealth... and how it inevitably leads to stagnation and exploitation (at least in the dictatorships/monarchies I was reading about in those articles).

Right now we have a lot of entrenched people with little talent for economic growth, and massive talent at maintaining their positions (they're connected, bought any politicians required, have an authority position and all people who are supposed to act as watchdogs of them are their lapdogs, spot rivals and squash them quickly, etc...).


What would help is a Congress that felt as if their lives were on the line if they did not solve this problem. They are so far detached from the real world, in their beauty pageant campaign systems, that I can't believe they understand there is more than just being elected.

We need people to seriously consider the state as a triage patient and stop their idiotic maneuvers to do some real work. It seems very few people are inspired to truly do great things any more, and the number that make it into business or politics is even worst.

-----

To get off the whine wagon, areas to attack:

- Infrastructure actually is a decent idea to invest in, key on the INVEST, not throw money at.

- Can't save everything. Some stuff, even some good things, will just die out. It might have been your hometown since birth, but if the one factory town shuts down, you may need to move or find something else to do. And in not all cases will you be able to do it in that town. Sorry. Same with stocks, or formerly grand companies that have been looted into bankruptcy.

- The way the public invests its money. People are not stock experts. Mutual fund experts, are clearly not experts if their fund tanked. Too many people are in a game they just do not get, and even if they do, they do not have the information to play it properly. We should never defend the public from the stock market, if we are appalled at people losing their life savings invested in stocks, we should not be stabilizing the stocks, we should be transitioning people out of stock investment into other vehicles, even if they have lower rates. Not everyone needs or deserves 12% average return, in fact....

- We need strong community level banks focusing on a very simple and old fashioned model of take deposits in, loan at higher rate, maybe play a portion of it in riskier portfolio (but not 10x leveraged held entirely in derivatives)... but in short a very boring, but stable banking system. Let the brainiac investors borrow from such banks, and then try to push the returns through the stock market to earn their margin. Everyone wants to play at the big boy table and get those historical 12% returns and such, but very few (even among the big boys) actually know where the money is really going. I think our culture promotes risky investment for no good reason other than 'well look at the market over 50 years' which has NOTHING to do with investment. That is a statistic, a logical fallacy if you start considering it a probability. There is nothing wrong with reversing the debt model such that banks owe us, and generate their profits with their expertise at picking winners, instead of inventing pennies out of thin air.

- Less big business. It requires subsidies, not just in bailouts, but often in laws that end up preventing new entrants into the market. Or we give them so much inertia that when something really great comes along we have blinders on because 'its the way we've always been doing things'. I'm not anti-big business, I hope to own one myself someday, but they do not need to be propped up by local and federal governments.

- Environmental standards. We need to raise standard of living. If people haven't realized by now that money is just paper, and polluting full steam ahead for mostly red balance sheets is pointless, then I guess we'll end up filthy, broke, and unable to breathe instead of just filthy and broke. We need to tech things up, standards will push the technology, and then the price... we will not go broke because Big Smog pulls out the job reports (guess what its bleak either way, you really think pollution controls are going to close a plant when bad business decisions are doing such a good job?). Clean technology and cleaning up the existing mess (more infrastructure/public works for ya) will make more places nice to be around, and if they are nice to be around people will want to live there and bring productive things with them. We'll spend less on medical, we'll spend less on maintenance costs, we might even decrease resource usage which will help with commodity needs.

Specific policies:
- No new corporate pork. Government builds things for the public use, and does not subsidy private incomes for the sake of private incomes.
- Strict scrutiny of public works, not 'just rush out and spend money'. Instead of a new empty stadium, or bridge no one will use, just say no, and fix a sewer system so the river is not toxic, or fix a road the right way so people do not have to replace expensive tires/shocks (there have been a rash of those at my work lately in Potholeland... er Michigan, its almost joke level absurd).
- Restructure education spending across the board. Standardize as much policy as possible at any level and outright slash administration overhead.
- No capital gains rate reduction, I don't believe it will stimulate anything, and it will just let speculators keep their profits from the massive killing that just happened. This includes me. A cut on middle incomes with the same dollar total actually will do much more to stimulate growth (if only by stabilizing the bleeding of debt service that bit more, there are many examples of banks pushing a default when renegotiating a debt would have had higher expected value overall).
- Tie business tax breaks to jobs. Variety of ways you can do this. The problem of the last few years is that all tax cuts were all much more useful for liquidating corporations than growing them, cuts in gains and dividend rates, allowing more outsourcing revenue, etc...
- Maybe directly reduce taxes on workers... no one is getting a raise these days, and probably won't until well after the recovery (wages always seem to lag mysteriously while big bonuses do not...). Help businesses by letting them keep their costs stable, but their workers still have some marginal increase over last year.
...
Really need to get in a position with real issues to deal with. Could ramble endlessly about 'would be nice' but I really need some physical numbers to sink into before I get really creative.

Maybe a fun exercise would be to open up some Congress bill (say the obama bailout) and take apart what it would really do in a thread. Maybe if I convert it into a werewolf or alright boyz thread I can trick people into reading it... :)

This is a phenomenal post. I agree with just about everything in it.

[RainMaker]

I sadly don't know where the money went, I'm not up on my local budgets (although it wouldn't hurt me to find out how to research infrastructure investment anyway, as I'm sure it'll come in handy).

I know in the old ghetto-like region I came from that the city manages to tear up the same road over and over again each year on the same project. Seems like it would have been more cost effective to tear it up once, finish the work, and move on to the next.

Also from my experience of hoofing it to work by foot by said road during a summer a few years ago, that construction crews were noticeably absent during supposedly peak construction times (while the multi-lane road was a giant mud pit), and then swarming all over the place during periods where I assume they were getting bonus pay since the project had to be completed before winter. So I think gouging is soaking up at least a portion of my city's crappy budget, but that is all personal observation... but the detioration of the roads is now highly visible. We don't just have potholes, we have entire surfaces looking like the start of a war zone. Part of it is the weather, lot of water in the air = lot of ice, so probably that causes more cracking/damage than normal... but the budget and policy is notoriously bad around here.

The money has certainly been going to other things, those things have just happened to be black holes of uselessness. I think I looked at the state budget once and could not fathom the relative spending levels. I'll have to see if I can find a recent one and put up a link.

Well if your brother-in-law or close friend (and big political supporter) happens to own the construction company that builds the road, it suddenly becomes very important to have it torn up and repaired every year.

[gstelmack]

- We need strong community level banks focusing on a very simple and old fashioned model of take deposits in, loan at higher rate, maybe play a portion of it in riskier portfolio (but not 10x leveraged held entirely in derivatives)... but in short a very boring, but stable banking system. Let the brainiac investors borrow from such banks, and then try to push the returns through the stock market to earn their margin. Everyone wants to play at the big boy table and get those historical 12% returns and such, but very few (even among the big boys) actually know where the money is really going. I think our culture promotes risky investment for no good reason other than 'well look at the market over 50 years' which has NOTHING to do with investment. That is a statistic, a logical fallacy if you start considering it a probability. There is nothing wrong with reversing the debt model such that banks owe us, and generate their profits with their expertise at picking winners, instead of inventing pennies out of thin air.

This is key. Experts bemoan the lack of savings in this country, but when the passbook savings account went out after 9/11 (even my bank money market is only earning like 0.25% now), what were people supposed to do? You need $25K on up to even beat inflation with savings accounts, and I have no place to go with my kids' money.

You want savings, bring back the 3+% savings account that has a $500 minimum balance.

[RainMaker]

This is key. Experts bemoan the lack of savings in this country, but when the passbook savings account went out after 9/11 (even my bank money market is only earning like 0.25% now), what were people supposed to do? You need $25K on up to even beat inflation with savings accounts, and I have no place to go with my kids' money.

You want savings, bring back the 3+% savings account that has a $500 minimum balance.
Most online savings accounts were well above 3%. Up until this last year, I was getting close to 5% with HSBC. ING is always competitive too.

[JonInMiddleGA]

I think I looked at the state budget once and could not fathom the relative spending levels. I'll have to see if I can find a recent one and put up a link.

I've had that same experience trying to line item a tiny local city budget, which raises a sidebar ... if you had problems fathoming what you saw in a state budget & appear to have at least an above average grasp of what you should be seeing there, and I've had similar experiences with government budgets despite spending years working from a zero based budget system at several different companies then why on earth would we ever want the average citizen having influence on those budgets? It's like asking a 3 year old to make decisions in nuclear medicine.

[gstelmack]

Or perhaps it says that the government is making these budgets way too complex to hide the wasted / corrupt spending from even those who should be smart enough to figure it out...

[SportsDino]

I meant fathom in the sense of:
I cannot possibly understand why we spend $X on this thing in comparison to this other thing. I can interpret budgets and even wordy legislation at about a moderate level if not above the average person (and maybe even lawmaker...), though I can't claim to be an expert.

So my concerns were I thought the money was being spent stupidly, not so much I couldn't figure out roughly where it was going. Although there is a lot of wriggly words to cut through trying to interpret what some of those items may be (politicians love cheesy language and names from what i can tell).

[JonInMiddleGA]

Or perhaps it says that the government is making these budgets way too complex to hide the wasted / corrupt spending from even those who should be smart enough to figure it out...

I can't say that I've ever seen one that people who generally understood detailed budgets couldn't ultimately figure it out, once you managed to figure out who the different alphabet soup (for the feds) or euphemisms (for smaller entities) were.

Well, once you figure out those things and figure out that trying to find logic, rhyme, reason, or most of all anything resembling common sense expenditures was only chasing shadows. I've found that starting from the most absurd thing you can think of as a starting point & then working backwards just a tiny bit is one of the better ways to get to the bottom line.

And as with anything involving spending, once you figure out who is really making money on the deal then the route it takes isn't all that difficult most of the time. And it's rare to nigh on impossible to find something in a government budget that doesn't involve some person/group (typically connected in some way) getting either direct profit or at least job security from anything in the budget. Follow the money baby, it works pretty much every time.

[SportsDino]

Unraveling where the money goes is a big part of understanding most business data as well. I've found that any oversimplification you might make towards taking apart a company's value, there is some way to game it. For instance, if we go to the look at P/E ratio to make your stock buying decisions, well there are all sorts of ways to play with earnings in a short term way to throw off a ratio and make a quick buck for the CEO (i.e prepare to inflate value, announce your sale of stock, ride the wave of the inflated value causing higher price, then golden parachute before the debt numbers get reflected).

Sometimes its like taking apart a big ball of string and knots, and I assume most government setups are as bad or worst, even though they are at least in the public view. I'm sure if I ever took apart my city budget I'd probably get uncontrollable hyper rage and blow up half the city.

[JonInMiddleGA]

Unraveling where the money goes is a big part of understanding most business data as well.

Scary, as I almost made that very point in my post as well. At this point in my experience I really don't think government is much worse than the majority of corporations or anything more complicated than the average household budget.

I'm sure if I ever took apart my city budget I'd probably get uncontrollable hyper rage and blow up half the city.

Been there, wanted to do that.