Author: David S. White

Thursday, the California Supreme Court heard the Prop 8 oral arguments.   The Court itself put on a tour de force showing of great public relations by making publically available not only all the legal briefs, court orders and case histories of the various cases brought together for this landmark contest of Constitutional law, but also televising the three hours of oral arguments, accessible in real time in streaming video (go to http://www.calchannel.com/images/tcc_live.html  and it should be archived now). 

Wrap your bad-news-weary brain around this one:  AIG’s reported earnings for the 4th Quarter of 2008, the Year that Will Live On in Financial Infamy, were far, far worse than a Giant Goose Egg – AIG lost, I repeat, LOST, $61.7 Billion in three months’ time – the single biggest quarterly loss in history, according to the NYT!  This, despite three heaping helpings of your tax dollars and mine.  Now, despite this, AIG lined up for a fourth helping of Federal BailOut dollars.  What gives?  Why do we keep giving blood transfusions when we already stand hip deep in AIG’s blood?

Well, the story is not a pretty one.  The great Federal Economic Gurus – the Bernankes and Geithners, and a legion of others behind the scenes, are scared right out of their minds right now.  What are they scared of, you might ask?  They are scared of the downside of Globalization.

It is time now to stop enriching countries who won the geographical lottery and sit atop giant pools of fossil fuels deep below, but who despise us.  What is needed is nothing less than a Manhattan Project for Alternative Energy, and it is needed right now.  Hear that, President Obama?

“”What’s in a name? That which we call a rose by any other name would smell as sweet”. – Romeo and Juliet, Act II, Scene II, William Shakespeare (1564 –1616).

Recent comments, and particularly, who made them, indicate that the idea of Nationalizing the Big Banks may be something that we are going to be living with very shortly: “This idea of nationalizing banks is not comfortable,” said Sen. Lindsey Graham (R-SC). “But I think we’ve got so many toxic assets spread throughout the banking and financial community, throughout the world, that we’re going to have to do something that no one ever envisioned a year ago, no one likes. To me, banking and housing are the root cause of this problem. . . . I would not take off the idea of nationalizing the banks.”

We here in America emphatically do not like the word: “Nationalize.” For one thing, it has come to be associated with people like Fidel Castro, whose new, post-Batista (1959- present) government nationalized property owned by some big U.S. corporations, like United Fruit’s lucrative sugar mills in Cuba’s Oriente region, and then added insult to injury by pegging compensation at low valuations, a small fraction of the full, real value, which the corporations themselves had used, in order to keep their taxes low.

Politicians explaining economics to the general populace is like having baseball stars explain theoretical physics for the masses (or, A-Rod, explaining the joys of natural foods to baseball fans). There is nothing simple or sound bite-sized, or easily understandable, about the complex tangle of interwoven threads that make up the current economic crisis – the fact that the world’s most gifted economists, people who have spent their life toiling in that vineyard, are having real trouble getting their collective arms around exactly what needs to be done to fix a painfully obviously, broken economic system, should tell us something about the presentation of economics issues for the average layperson by the average politician.

Most people are on the level of having trouble balancing their checkbooks. Indeed, dare I say in this era of on-line banking, most people don’t even balance their checkbooks anymore at all. We use calculators instead of all the fun math some of us stayed awake in class and listened to, back when, and we don’t even have to remember telephone numbers anymore because our snappy cell/PDA/smartphones remember hundreds of numbers so well that we are now totally divorced from that aspect of our memories. Is it any wonder, therefore, that, when faced with an implosion of our financial institutions and world economies, which some have compared to the Great Depression of the 30’s, that few, if any, can really follow the economics issued presented?

For those who thought that the Dow had bottomed out in the low 8000’s, last week was a real migraine. The Dow closed the week at a 6-year low. The Bear has returned just when we thought it was safe to go back into the stock market forest.

Some say it was the talk of nationalizing the big banks that frightened Wall Street out of circling around the low 8000’s. The much-reported on Dow Jones Industrial Average consists of 30 blue-chips stocks. Friday, it closed at 7365.67, down 6.2 percent for the week, but, on Thursday, it dropped past the Bear-Market low we reached on Nov. 20, 2008 and hit its 6-year low. When the Obama administration said it was of a mind to keep big banks in private ownership, the market seemed to pause its downward slide, even recovering just a tad.

The two prime candidates for Nationalization are Bank of America and Citigroup. B of A ended at just under four ITunes songs per share – $3.79; Citi, at an equally appalling number just shy of two ITunes songs per share – $1.95! These are prices that startups and old, tired, broken-down companies on the way out trade at, not the behemoth bedrocks of our financial system. And, you thought B of A was a great buy at $18 per share last Fall; congratulations if you didn’t phone that one in.

I didn’t make up that snappy new name; The Washington Post did, in calling it the largest one “in decades.” We here in California have a little different view of foreclosures than in some other states, particularly the further East you go. Here, we can pick from either what we lawyers fondly call a “Non-Judicial Foreclosure” or a “Judicial Foreclosure.” The former is something that happens via a Trustee and results in a sale, often on the steps of the County Recorder’s office or some courthouse; the latter is a lawsuit, usually seeking a deficiency judgment of dollars over and above taking back somebody’s house or other real property.

Some states, like Florida, only offer the Judicial Foreclosure route so every foreclosure has to be presided over by a Judge – Florida’s courts are so clogged with them right now that they are using a “Rocket Docket,” lawyers’ charming name for the opposite effect of ‘Justice Delayed is Justice Denied’ – it is, instead, justice at a blinding pace – hundreds of foreclosures heard by a Judge in a single court day, maybe a minute or so apiece, followed by orders resulting in formal eviction if the homeowner does not move out.

GM wants $30 Billion from Congress now – $12 Billion more than their previous request. Their stock closed at $2.15. If they don’t get it, they have threatened catastrophic (a word which, when used in the economic context, has now officially officially been beaten to death) bankruptcy to follow. The very thing which, during their last hat-in-hand visit to Washington, GM’s execs told Congress would be unthinkable, signaling the end of any consumer ever considering buying another GM car again. Crying wolf.

To “sweeten the deal,” GM has also said that it will fire 47,000 people it presently employs by the end of the year – this, out of 244,000 employees around the world– roughly one-fifth of GM’s worldwide workforce, of which some 20,000 jobs will be lost right here in the U.S., and five more plant closings, leaving more monster factories taking up miles of space to rot. And, if GM doesn’t get the $30 Billion it now wants, they predict that by the end of March, some 6 weeks from now, that’s all for GM. . . Last one out turn off the lights.

If I see one more legislator or Cable TV Talking Head wave around the foot and a half thick, flopping pile of paper which is this Stimulus Bill, I will throw my own copy through the TV screen. The creative ones flop it on the desk in front of the them, the less creative just wave it around in front of their face and exclaim on its heft. Legendary Mel Belli supposedly made his reputation as a trial lawyer years ago in a case where a man lost both a race and his leg, with a San Francisco Cable car. For the whole trial, Belli kept on the counsel table before him, his client and, most importantly, the jury, a long, butcher-paper wrapped item which looked like it might have a few bloodstains and, oh yes, a severed leg inside.

He never actually opened the package, however, and the jury, of course, showered Belli and his client with money, and we are all left to wonder what he had in the package – his laundry, perhaps? We wonder too what is really inside the Stimulus Bill as, clearly, nary a legislator actually read it before voting “Aye” or “Nay,” in the dozen hours between when it was made available and when it was voted into law, subject to President Obama’s signature; remarkable, if you think about it.