Wednesday, September 24, 2008

Kudlow: Give my johns on Wall Street more cash

Below is incontrovertible proof that Lawrence Kudlow is the media's biggest Wall Street whore.  Ever.  Whatever's good for Wall Street, in Kudlow's view, is good for the economy, and therefore good for you and me.  And naturally, when Wall Street's happy, they leave bigger tips on the dresser for Kudlow.  That's the sum of Kudlow's financial knowledge and conservative ideology.  

If you can read this without throwing up in the back of your mouth, you've got a stronger stomach than I do.



By Larry Kudlow
September 23, 2008 | National Review


Honestly. A clean bill as requested by Treasury man Henry Paulson, along with John McCain's oversight board, can help fix the credit-crunch problem. It needn't be this hard.

According to the Paulson plan, distressed assets will be sold by banks through a reverse auction (the low bid wins) to various investment funds, hedgies, private-equity boys, and other banks. And taxpayers will have a strong ownership position in these asset sales. When the assets are worked out over time — as they will be once housing and the economy recover — taxpayers will actually make money on the deal

[Oh, wonderful!  See, we'll make money on this bailout!  Hooray for financial crises and bailouts!  Why didn't we think of this before?  We could have been raking it in all this time, instead of the investment banks! -- J]

This is similar to the RTC story twenty years ago, when Bill Seidman presided over similar asset sales from bankrupt S&Ls and wound up making money for Uncle Sam and his taxpayers. A long prosperity wave followed

[Yeah, remember that long, uninterrupted prosperity wave since 1988?  I mean... except for those 2 recessions and a credit crisis that destroyed the Wall Street investment banks. -- J]

In fact, industry insiders tell me the Federal Reserve and the SEC may be moving toward a five-to-seven year amortization plan for the scoring of bank losses from the sale of this distressed paper. This is very constructive. Fed head Ben Bernanke also is talking about getting rid of mark-to-market accounting and moving towards "hold to maturity." This is good.

But the credit arteries are now clogged with a terrible virus that can be removed by the Paulson rescue plan. And as the problem is solved, credit and loans will be made more available to Main Street homeowners, small businesses, and consumers of every type. Credit markets will gradually unfreeze. It can be done. A deep recession can be avoided.

And maybe along the way we can get a strong King Dollar to fight inflation and attract international investment. And perhaps, just perhaps, we can get more drilling to reduce gas prices at the pump — a big recovery tonic. And, dare I hope, maybe we even can get corporate tax reform with lower tax rates, which along with energy deregulation will spur jobs and wage growth.

But after Tuesday's Senate hearing I'm very concerned. The bells and whistles that would be attached to Paulson's plan by our Democratic friends are anti-capitalist and anti-opportunity. 

[Just to clarify, $1-2 trillion bailouts of Wall Street are pro-capitalist and pro-opportunity.  Just in case you were wondering. Now read on and absorb more of Kudlow's Wall Street wisdom, you financial ignoramuses! -- J]

Capping compensation for both the selling and purchasing institutions? What? Salaries and bonuses are no business of the government. People go to work for profits. For opportunities. It's at the heart of our free-market capitalist system.

Now, I can understand companies like AIG, Fannie, and Freddie, which effectively have been nationalized. That's different. I don't care if they all make $75,000 a year, just like the regulators. But to stretch this to the banks that are selling or buying the assets goes beyond the pale. It's France. But it's France heading toward the old Soviet Union, or at least Tsar Putin's Russia. 

[Yeah, the difference in socialistic France or Russia is, when the taypayers ante up several hundred $ billion to invest in a company, they get to OWN it.  And that's just 'nuts.' Don't believe me?  Keep reading! -- J]

And then there's the ownership question. Some Democrats want Uncle Sam to take an ownership position in all the selling and purchasing banks. This is nuts. In America, this is nothing but property confiscation. It also will sharply curb buyers of the distressed assets. 

[Yeah, giving Wall St. $ billions for nothing in return is capitalistic, because the alternative would be 'property confiscation.'  Are you getting this?  It's Economics 101, folks.  I'm embarrassed that Kudlow even has to explain this to you.  -- J]

You think Henry Kravis or Steve Schwarzman are gonna take a salary cap and lose an ownership share of the private-equity funds they themselves created and built? They shouldn't and they won't.  And these funds are crucial to the new process. The only banks that will sell in this over-regulatory environment are the absolute, near-bankruptcy turkeys. 

[No way, nuh-uh, Henry Kravis and Steve Schwarzman aren't gonna stand for that!  They'll get Bush, Paulson, and Bernanke on the phone and chew them a new a-hole if that's Congress' proposal.  Yeah, Kravis and Schwarzman will tell our President, the Fed, and Congress what's what.  They're financial geniuses.  They built their private equity funds from nothing and zero equity into huge funds with zero equity.  They're Wall St. titans!  -- J]

Meanwhile, Sen. McCain apparently has proposed that the buying and selling banks have comp-levels no higher than the top paycheck in the U.S. government, which I guess is the president's at around $400,000 a year. Hey, I've got an idea. Let's raise the chief executive's pay to $50 million. He probably earns it anyway. 

[Another genius idea for running our government more like a business, straight from Wall Street!  I mean, if we paid Bush $50 million a year, this would be following Wall Street's results-driven pay scale: the CEO who racks up the biggest debt in the company's history gets the highest salary, preferred stock options, and a generous pension.  It's only fair! -- J]

It's these congressional bells and whistles that really trouble me. And they also trouble the stock market. Stocks absolutely roared last Thursday and Friday when they got wind of Paulson's program. But Monday and Tuesday, as the new details leaked out and various Democratic senators put their ideas on the table, shares plunged big time. What does that tell you? 

[It tells me that Congress better make with the bailing-out, stop demanding conditions as if they were Mao or Stalin, and stop telling Wall Street how much to pay its financial whizzes!  -- J]

I can understand legitimate concerns about a big-government intervention and a giant $700 billion number. There's a shock effect here. But once in a while the financial center of capitalism goes into panic mode and something has to be done. 

[True, big numbers do scare you people.  But you people are dumb.  You're easily shocked by lots of zeroes after the dollar sign, but that's just because you're not rich Wall St. geniuses like Kudlow and his buddies Kravis and Schwarzman.  You simple folk will forget all about this soon enough... just in time for the next panic when 'something has to be done.' -- J]

Actually, it's a marvel that we permit government to infrequently come to the rescue of our credit system. It doesn't happen everyday. But it has been necessary going all the way back to Alexander Hamilton's original rescue of our failing debt system in the 1790s.

[Yes, it is indeed amazing that in our capitalistic, free-market, freedom-loving, pull-yourself-up-by-your-own-bootstraps country, we don't allow Big Gubument to come to the rescue of our credit system more often.  But that's just because so many people don't understand capitalism and economics, not like Kudlow and the geniuses on Wall Street do. -- J]

Understanding this history, conservatives should not panic or walk away from the Paulson assistance plan. It would be great to avoid either a deep credit-driven recession or a global banking meltdown — or both. Paulson has always viewed his rescue plan as an economic-growth tool. I think he's right. 

[See?  Doesn't that make you feel better?  This bailout is going to grow our economy.  In fact, Paulson has 'always' seen this bailout as an economic-growth tool.  Always. Ever since he was Chairman and CEO at Goldman Sachs, probably, that's what he's thought about this bailout plan.  Jeez, I'm just in awe of the brains of these guys on Wall Street always thinking 10 steps ahead! -- J]

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