American Elephants


The Marvelous Michael Ramirez, Once More. by The Elephant's Child

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MF Global And The Mystery of the Missing Money by The Elephant's Child

For those who haven’t been following the ins and outs and ups and downs of Wall Street, the bankruptcy of MF Global Holdings Ltd. may be a bit of a mystery. The firm’s roots go back for more than 200 years, but by 2010 it was struggling.

When Jon Corzine, a Democrat, was defeated in his bid to be re-elected as governor of New Jersey by Republican Chris Christie; a MF Global shareholder and close friend persuaded Mr. Corzine to run the company.  Mr. Corzine was intrigued by the opportunity to turn the struggling firm around.  Mr. Corzine had been an aggressive bond trading star at Goldman Sachs in the 70s, and eventually climbed to become CEO of that firm. He ran for the Senate from New Jersey, and subsequently became governor of New Jersey.

Mr. Corzine arrived at MF Global with a plan to move the firm to become a full-fledged banking firm, a big change for the company.  He moved quickly to cut hundreds of employees, and hired 1.200 new traders.  He encouraged traders to make larger bets, and increased the emphasis on higher-risk products like mortgage-backed securities and stock-index derivatives.

To address the short-term pressures, Mr. Corzine turned to a quick fix, investing in high-yielding European sovereign bonds structured as a “repurchase to maturity” which meant that the firm could book profits on the trade up front, and keep the risk off the balance sheet.  He was confident that European leaders would not allow default.  He got the quick jolt he wanted with about $39 million in revenue from the European trade.

As Mr. Corzine continued to accumulate the bonds, some in the firm became nervous. Eventually the European bet had grown to $6 billion. In August and September MF Global’s shares dropped by more than 40% as worries about Europe’s financial stability  hammered financial stocks.  On October 31, the company filed for bankruptcy as rescue efforts failed, and only about 500 employees remain.

According to the bankruptcy trustee of MF Global’s brokerage unit, an estimated $1.2 billion in customer funds remains missing, and nobody knows where the money went. Brokerages are required by law to separate customer assets and the firm’s assets. The shortfall has snarled the finances of thousands of traders, farmers and commodities customers. Mr. Corzine and other executives face increasing probes from regulators, Congress and law-enforcement officials into the firm’s demise.

Meanwhile, back in New Jersey, Chris Christie is struggling to put the state of New Jersey’s house back in financial order. Mr. Corzine has been one of Barack Obama’s  most successful “bundlers” raising Wall Street money for the president’s campaign. He was high on the list for Secretary of the Treasury, but that job went to tax-avoider Tim Geithner. All very interesting.



The Top Ten Worst Federal Regulations of 2011 by The Elephant's Child

Seems like everybody takes the week between Christmas and New Years off. Certainly all the talk-radio hosts have substitutes in, columnists efforts turn to lists of the best or worst of the year — whether it’s movies, books, music, scientific ideas or recipes — there will be a list. Which leads one to suspect that the lists are pre-enumerated while the list-maker enjoys a week on the slopes or in the sun.  It’s not as if the world grinds to a halt, stuff still happens, but there’s a sense that things just aren’t back to normal.

The lists are useful, however, to remind you of the follies of the past year. We are so deluged with constant information that it affects our attention spans. Important things happen, but we can hardly give it our full attention before something else happens and the important thing is forgotten as we move on to the next. I don’t think that this is good for us.

One that caught my eye was Heritage’s list of the Top 10 Worst Federal Rules of 2011. Government churns out more than 3.500 rules in a year, dozens of them associated with ObamaCare, Dodd-Frank, or the regulation gushing EPA.  Even careful rules will produce unintended consequences, but 2011 seems to be a bit of a standout in regulatory blunders.

  1. The Dim Bulbs Rule: Did Congress know that jobs created by this bill would all be in China? Did they know about the haz-mat regulations?  Did they understand that the substitute bulbs do not give effective light? Congress inserted a provision that banned the  use of funds to enforce the regulation, but it remains in force.
  2. The ObamaCare Mandate: Lots of court rulings on the individual mandate, the Supreme Court has accepted the case and allotted extra time. Never before ha the federal government attempted to force all Americans to buy a product or a service. Vast regulatory overreach.
  3. Nationalization of Internet Networks Rule: Regulations that took effect Nov. 1,  effectively declared the broadband networks to be government-regulated utilities. The FCC imposed the “network neutrality” rule despite explicit opposition from Congress and a federal court ruling against it.
  4. The Equine Equality Rule: Hotels, restaurants, airlines and the like are required to modify their policies and procedures to accommodate miniature   horses as “service animals” as an alternative to dogs for those who are allergic or observant Muslims.
  5. The Potato Rule: No more than one cup per week of potatoes. (forget french fries) Substitute more dark green, orange and dry bean varieties. The cafeteria mandate will affect more than 98,000 elementary and secondary schools at a cost exceeding $3.4 billion in the next four years, and the kids are revolting.
  6. Power Blackout Rule: See previous post. The EPA regulation will not only raise your power bill, but the industry is warning that blackouts are likely.
  7.  Credit Card Nonsense: Dodd-Frank requires the Fed to regulate the fees that financial institutions can charge retailers for processing credit or debit card purchases.  The loss of revenue — more than $6 billion — is prompting banks to hike fees on other services.
  8. Plumbing Police Rule: Department of Energy is tightening the water efficiency standards on urinals. the Energy Conservation Program for Consumer Products Other Than Automobiles puts toilets, faucets, showers, refrigerators, freezers, air conditioners, water heaters, furnaces, dishwashers, washing machines, dryers, ovens, ranges, pool heaters, television sets and anything that Secretary Chu thinks uses too much energy or water or whatever. They will decide how many urinals are required for every facility.  Find that one in the Constitution!
  9. EPA Boiler MACT Rule: Covers emissions from some 200,000 boilers nationwide at an estimated cost of $9,5 billion. These boilers burn assorted fuels to produce steam to generate electricity or produce heat. Vast protests from 21 governors, 100 members of Congress. EPA postponed, but the regulations remain on the books.
  10. Favors for Unions Rule: Government contractors must give first preference in hiring to workers of the company that lost the contract. Tens of thousands of companies affected, compliance costs in tens of millions — ultimately a cost to taxpayers. This ensures that a non-unionized contractor cannot replace a unionized one.


Your Power Bill Is Going to Skyrocket! by The Elephant's Child

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The Environmental Protection Agency recently issued 946 pages of new rules requiring that U.S. power plants sharply reduce (already low) emissions of mercury and 83 other air pollutants.  EPA Administrator Lisa Jackson claims that, while the regulations will cost electricity producers $10.9 billion annually, they weil save 17,000 lives and generate up to $140 billion in health benefits.

Dr. Willie Soon and Paul Driessen point out that there is no factual basis for these assertions.  “To make this case, the EPA systematically cherry-picked supportive studies (many of them dated) and ignored the extensive evidence and clinical studies that contradict its regulatory agenda, which is to punish hydrocarbon use and close down coal-fired power plants.”

This article is the most devastating takedown of the very arrogant and out-of-control EPA that I have seen. Those of us who cannot readily call scientific facts to mind are left gullible in the extreme. If the EPA claims that their actions are necessary to protect human health and life, we are unable to refute their claims except by our growing suspicions of the reliability of the agency.

I know that Ms. Jackson claimed that these regulations would prevent large numbers of cases of asthma. Yet physicians readily admit that they have no idea of the cause of asthma. They know how to treat the disease, but where it comes from or how it starts is a mystery. So you know she’s lying right off the bat, it’s just a matter of how much.

Mercury, the element at the basis of these regulations, has always existed naturally in the Earth’s environment.  The latest government, university and independent studies show that America’s coal-burning power plants emit an estimated 41 to 48 tons of mercury each year. Wow!  Tons.  But wait — U.S. forest fires emit at least 44 tons a year, cremation of human remains discharges 26 tons per year globally.  Chinese power plants eject 400 tons per year. Volcanoes, subsea vents, geysers and other sources spew out 9,000-10,000 tons per year. All these emissions enter the global atmosphere and become part of the U.S. air mass.

One half of our electricity is produced by coal-fired power plants, and in some states 70-98% of electricity.  All together U.S. power plants account for less than 0.5% of all the mercury in all the air that Americans breathe. Eliminating every molecule of that would still leave 99.5 % of mercury in the atmosphere, harming no one.  But perhaps you missed that number in the first paragraph.

The regulations will cost electricity producers $10.9 billion annually.

And what will that do to your power bill? If these regulations have no effect on health, and they do not, then why?  The Obama administration has made no secret of the fact that they want to penalize hydrocarbon use in order to force Americans to move to the use of unreliable and costly “renewable” energy.

President Obama has said repeatedly that he wants to bankrupt the coal industry, making coal-based electricity prices “skyrocket.” That is why Obama has wasted such huge amounts of taxpayer dollars subsidizing solar plants, battery factories, wind farms, turbine plants, $102,000 luxury hybrid electric cars, and high-speed trains to nowhere. Solar energy is too diffuse.  Wind energy is too intermittent. They will produce a small amount of energy at very high cost. It was all a green pipe-dream.

Do read the whole article. It is an excellent exposé of this out-of-control agency.  If we don’t understand what they are doing, we have no defense against their machinations, and no clear understanding of why this election is so important.

ADDENDUM: Look carefully at that pretty pie chart.  President Obama wants to bankrupt that big blue sector of our electricity producing utilities, so that we are forced to depend on the little purple sector and make it grow. Energy experts doubt the possibility that sector can grow significantly, nor ever produce the dependable, cheap energy we need. Result: blackouts, brownouts and soaring energy costs.



Woopsie! by The Elephant's Child

Just when the news about Chevy Volts’ having a minor habit of catching fire died down, Bloomberg reports that the very expensive, very high-profile, very highly subsidized Fisker Karma luxury extended-range hybrid’s battery manufacturer has revealed a “potential safety issue”  in the cooling system of the batteries that it makes for the car. The uncomfortable subtext in the news is the $529 million loan from the U.S. Department of Energy that subsidizes the assembly of the very expensive, very high-profile cars in Finland, creating many new jobs in that country — not ours.

A123 Systems, a leading producer of Lithium-Ion batteries that supplies Daimler and General Motors in addition to Fisker, said that hose clamps connecting parts of the Karma battery pack’s internal cooling system were not aligned properly, creating a the potential for leakage of the coolant, which might cause overheating and also possibly short-circuit the batteries, causing a fire.

Because current Li-Ion batteries are flammable, battery temperature control and cooling is a critical process. Concerns over EV fire safety were raised when a crash-tested Volt later caught fire in a NHTSA facility. Short circuits caused by leaking battery coolant is suspected to be the cause. While GM uses a different battery supplier, LG Chem, for the Volt, A123 will be the battery vendor for the EV version of the Chevy Spark subcompact, to go on sale in 2013.

The luxury hybrid car company has shipped 225 of the $102,000 Karmas to Fisker dealers. The only one I know of that they sold went to Leonardo DiCaprio.  I just don’t quite grasp why taxpayers are subsidizing a $102,000 car. Though if I’d just bought one, I might be a little irritated if it caught on fire.

ADDENDUM: Fisker and the NHTSA have just announced a recall for 239 Karmas.
Within the high-voltage battery, certain hose clamps may have been positioned incorrectly during assembly. if positioned incorrectly, the battery compartment cover could interfere with the hose clamps, potentially causing a coolant leak from the cooling hoses.
Consequence: If coolant enters the battery compartment, an electrical short could occur possibly resulting in a fire
.
So if you have one of the new Karmas in your garage, you might want to get in touch with your dealer.



The Rules Are Bad, Badly Written, And Devastating In Their Impact. by The Elephant's Child

You will often hear the complaint that there is no difference between the two political parties, a complaint that merely shows that the complainers aren’t paying attention.  Liberals, or Progressives as they choose to be called now, want to bring about an improved world by exerting more control over American citizens.  Conservatives want to remove unneeded regulation. Our current regulatory code tops 165,000 pages, with more regulations coming every day.  The Wall Street Journal reports today that “independent students of regulation say the quality of the many rules they’re putting out seems to be at all-time lows.”

Regulatory quality isn’t the same as content—though bad rules are usually badly written, as seems to be the case here. Rather, quality refers to a deliberative process: defining the problem; measuring costs, benefits and risks; weighing alternatives, making trade-offs, avoiding duplication; and giving the public opportunity to comment. If all goes well a quality rule will promote or at least not impair “economic growth, innovation, competitiveness and job creation,” as Mr. Obama’s January 2011 executive order on regulation had it.

A growing body of evidence suggests that the Obama administration is ignoring the basic due diligence practices that have been commonly accepted by whichever party is in power. Each regulation in the Affordable Care Act that cost over $100 million a year has been analyzed by scholars at the Mercatus Center at George Mason University.  They found the “federal government used a fast-track process of regulatory analysis that failed to comply with its own standards, and produced poorly substantiated claims about the act’s benefits and costs” that included a bias that assumed benefits would perform well, and costs would decline.

So you have rules that are assumed will perform well, and somehow cost less than expected. They got grades that were not just bad grades, they receive Fs on the regulatory curve, lower than the scores of the rules that HHS was putting out in 2009.

Here’s an example from physician Scott Gottlieb of the American Enterprise Institute:

Under the Patient Protection and Affordable Care Act (PPACA), a previously obscure government advisory body has acquired vast authority to decide which health care services Americans will have access to. The United States Preventive Services Task Force (USPSTF) was created in 1984 as a government advisor with the mission of assessing the clinical utility of preventive health measures such as screening tests and issuing nonbinding recommendations about which measures doctors should incorporate into routine medical care.

PPACA gives the USPSTF’s recommendations the force of law, making them de facto mandates on which preventive services private health plans and public programs such as Medicare must pay for. Services that do not make the USPSTF grade are unlikely to be covered at all. The USPSTF was not designed to wield this kind of sweeping and binding authority. It does not maintain the transparency, deliberative process, appeal process, or requirements for public notice and comment that are hallmarks of sound regulatory policymaking.

The Preventative Services Task Force now wields great power to decide what health services doctors should provide, yet has few checks on its sweeping authority. Doctors may go to school for years to learn how to best care for patients, but a bunch of bureaucrats in Washington will decide what they can do and what they can’t.  Cost is sure to become a major factor. In 2009 this agency decided that women age 40 to 49 should not get routine mammograms.  The USPSTF was weighing the benefit of breast cancer screening against the burden of allowing some additional cancers to go undetected. Physicians had championed earlier, more widespread screening, and the new analysis seemed callous and poorly conceived. Their advice may even conflict with the Center for Disease Control.  Now it has recommended against routine screening for prostrate cancer with a widely used blood test.

Progressives are conflicted. On the one hand, they want to add all sorts of services that seem “nice,” and raise the costs off medicine dramatically, yet the entire thrust of the healthcare program becomes one of controlling costs. Questionable statistics will rule over individual patient needs.

The supposed reason for the passage of ObamaCare was the skyrocketing costs of health care. Yet ObamaCare is dramatically raising costs even before it goes fully into effect. The main reason behind the increases in the cost of health care was the effect of government regulation — mandates imposed by Washington.

Medicine, says Dr, Gottlieb, is undergoing industrialization, where doctors are becoming owned commodities of large hospitals and health plans. In the 1997 Balanced Budget Act to cut the deficit, the Clinton administration and the Republican Congress capped total payments to doctors and implemented a system of price controls for their services. Once the work of physicians was priced by a fixed government schedule instead of rewarding the quality of their service, the only way for doctors to increase their income was to increase the volume of patients they saw and reduce the level of service — enter the 15 minute office visit.

President Obama has chosen to blame the medical insurance industry and rich doctors and big hospitals for the high cost of health care, and insisted that he could add another 46 million uninsured to the government insured rolls and yet somehow make health care cost less.  An estimated 10 million of those are illegals, the number who simply choose not to have insurance is unknown.

We had the best health care system with the best outcomes in the world. Democrats have passionately wanted single-payer government controlled health care for years. Not, as they attempt to claim because they are compassionate, but because if the citizens depend on the government for their health care, then they will reelect that government in perpetuity and return them to power. What we will get is increasingly poor care, doctors and hospitals who are forced to make cost their guideline rather than patient care.



Why Are Rich Liberals Such Hypocrites? by The Elephant's Child

Even some very rich leftists — those proverbial millionaires and billionaires — whom Obama claims are not paying their fair share, want President Obama to raise taxes on the rich. If you want to know why rich liberals are not just hypocrites, but wrong as well, read this post from economist Daniel Mitchell that tries to teach President Obama about the Laffer Curve.  If this doesn’t make  you giggle, you have no sense of humor.




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